C T Bowring & Company (Insurance) Ltd v Corsi & Partners Ltd
| Jurisdiction | England & Wales |
| Judge | SIR MICHAEL KERR,LORD JUSTICE DILLON |
| Judgment Date | 16 June 1994 |
| Judgment citation (vLex) | [1994] EWCA Civ J0616-5 |
| Docket Number | No. QBCMI 94/0276/B |
| Court | Court of Appeal (Civil Division) |
| Date | 16 June 1994 |
[1994] EWCA Civ J0616-5
(Mr. Justice Waller)
Before: Lord Justice Dillon Lord Justice Millett and Sir Michael Kerr
No. QBCMI 94/0276/B
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
(ON APPEAL FROM THE HIGH COURT OF JUSTICE)
(QUEEN'S BENCH DIVISION)
MR. S. GEE QC (instructed by Messrs. Clyde & Co., London) appeared on behalf of the Appellant.
MR. A. FLETCHER (instructed by Messrs. Norton Rose, London) appeared on behalf of the Respondent.
DILLON L.J.:— This is an appeal, pursuant to leave granted by Beldam and Saville LJJ, by the Plaintiff in this action C.T. Bowring & Co (Insurance) Ltd against an Order of Waller J made on the 7th October 1993. By that Order the Judge dismissed an application by the Plaintiff that the Defendant in the action, Corsi & Partners Ltd —which is the respondent to the appeal —should provide security for costs in circumstances to which I shall come.
That application by the Plaintiff had been made by a summons in the action dated the 23rd July 1993, which, in the original form and as it stood when it was before the Judge, sought "that the Defendant give security for the Plaintiff's costs in relation to the Defendant's application for an enquiry into damages to the satisfaction of the Judge on the ground that there is reason to believe that the Defendant will be unable to pay the Plaintiff's costs if the Plaintiff is successful in its defence of the Defendant's application for an enquiry ( s. 726 Companies Act 1985) and that in default by the Defendant in providing any security so ordered, the Defendant's said application be struck out."
At the end of the argument in this Court Mr Gee Q.C. for the Plaintiff sought leave to amend the Summons to raise alternatives which had been canvassed in the course of the argument in this Court. His formulation of the amendments he seeks makes the relief sought in the existing summons paragraph 1 and adds after the reference to the Companies Act 1985 the words "and under RSC Order 23 Rule 1(1)(b) on the grounds that the Defendant is a nominal Plaintiff for the purposes of that Rule." There is then added to the Summons a new paragraph 2 as follows:-
"2.The Defendant's application by Summons dated 28th August 1992 for an enquiry as to damages be stayed unless the Defendant do provide security for costs in such amount as the Court may determine and/or upon such other terms as may be prescribed by the Court on the grounds that there is jurisdiction to make such order under the inherent jurisdiction of the Court and/or by reason of the fact that the undertaking in damages has been furnished to the Court, and in the circumstances of the case the said application for an enquiry is an abuse of the process of the Court and/or in the circumstances of the case it is just that such an order be made."
Despite the objections to paragraph 2 of Mr Fletcher on behalf of the Defendant —which were to the general effect that, if the Plaintiff wanted to put forward arguments not covered by the summons of the 23rd July 1993 as actually issued, the Plaintiff should issue a fresh summons returnable before a Judge at first instance and to be dealt with at his discretion —I would allow the summons to be amended as now asked, so that this Court can deal so far as necessary with all the issues of law which have been argued before us. So far as the facts are concerned, we can only consider the issues on the evidence which is now before us; there is no application to admit further evidence.
An application for security for costs as against a defendant in an action (otherwise than in respect of costs of a counterclaim) is, at the least, unusual. But it is not necessary to go into the facts of the case or the history of the litigation in any great detail.
The Writ was issued as long ago as the 3rd December 1985. In anticipation, the Plaintiff obtained a Mareva injunction against the Defendant from Leggatt J on the 2nd December 1985, and the Plaintiff had, of course, as the price of obtaining the injunction, to give to the Court the usual cross-undertaking in damages viz. an undertaking to abide by any Order the Court might make as to damages in case the Court should thereafter be of the opinion that the Defendant shall have sustained any loss by reason of the injunction which the Plaintiff ought to pay.
The Mareva injunction was discharged by consent on the 30th January 1986. The inquiry as to damages, in respect of the costs of which, and of obtaining which, the Plaintiff seeks security, is the inquiry which the Defendant seeks as to damages under the cross-undertaking routinely given by the Plaintiff to the Court when the Mareva injunction was granted.
The substance of the Plaintiff's claim in the action was for balances alleged to be due from the Defendant to the Plaintiff in respect of insurance and reinsurance business placed either in the Italian market by the Plaintiff as producing broker thorough the Defendant as placing broker or in the London market by the Defendant as producing broker through the Plaintiff as placing broker.
It is said for the Plaintiff (though this we have not been concerned to check) that of the total principal sum claimed, some £600,000 in aggregate had been repaid by the Defendant to the Plaintiff by December 1986, while the balance was extinguished by set-off of cross-claims by the Defendant against an associated company of the Plaintiff. The action has never come on for formal trial, but all that remains in it is a claim by the Plaintiff, which has not been vigorously pursued, for interest on the principal sums repaid, plus costs.
Although the Mareva was only in force for just under two months, the damages claimed by the Defendant as a result of its imposition amount to no less than £3.75m. It is not uncommon for defendants claiming damages under a cross-undertaking, whether in relation to a Mareva injunction or a more traditional interlocutory injunction prohibiting some act, to put forward apparently exorbitant claims, as if, had the injunction not been granted, they would have enjoyed the Midas touch and achieved economic success not remotely within their reach before or since.
Apart however from disputing the amount of damages claimed by the Defendant under the cross-undertaking, the Plaintiff asserts that this is not an appropriate case for any inquiry as to damages to be ordered. It is not a case in which the Mareva has been set aside by the Court as improperly or inappropriately granted, nor is it a case in which the Court has rejected the Plaintiff's claims in support of which the Mareva was obtained. The first stage, therefore, for the costs of which the Plaintiff seeks security, is the determination whether there should be any inquiry as to damages at all. To determine this first stage a hearing has been fixed for the 11th July 1994, with an estimated duration of 5 days. If an inquiry were to be ordered, the Plaintiff would also claim security for the costs of the inquiry.
It is clear from the decision of this Court in Cheltenham and Gloucester Building Society v Ricketts [1993] 1 WLR 1545 that whether or not a cross-undertaking in damages should be enforced by an Order for an inquiry is a matter for the discretion of the Court to be exercised on equitable principles. The factors to be considered may be various but in some cases the conduct of the defendant may be a reason why an inquiry should not be ordered.
Section 726 of the Companies Act 1985 , which is the only authority for awarding security for costs relied on in the summons of the 23rd July 1993 as issued, provides as follows:-
"726(1) Where in England and Wales a limited company is plaintiff in an action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the company will be unable to pay the defendant's costs if successful in his defence, require sufficient security to be given for those costs, and may stay all proceedings until the security is given."
Subsection (2) applies to Scotland.
In the present case we are not concerned with whether or not the Defendant will if unsuccessful be able to pay the Plaintiff's costs of its application for the inquiry as to damages, or the Plaintiff's costs of the inquiry, if ordered. Before the Judge, the case did not reach that stage; he held that the Defendant was a defendant and not a plaintiff and so it cannot be ordered to provide security for the Plaintiff's costs.
The earliest legislative antecedent of section 726 is section 24 of the Joint Stock Companies Act 1857 which provided:-
"Where a Limited Company is Plaintiff or Pursuer in any Action Suit or other legal Proceeding any Judge having Jurisdiction in the Matter may, if it be proved to his satisfaction that there is Reason to believe that if the Defendant be successful in his Defence the Assets of the Company will be insufficient to pay his Costs, require sufficient Security to be given for such Costs, and may stay all Proceedings until such Security be given."
Similarly worded sections appeared in the successive Companies Acts of 1862, 1908, 1929 and 1948. With the passage of time, the word "suit" was dropped as obsolete.
Section 24 of the 1857 Act represented an innovation, and it and its successors represent even now the only established exception to the general rule of practice that a party who desires to litigate a claim shall not be prevented by the Court from doing so, at any rate at first instance, on the grounds of his poverty and consequent inability to...
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