Chequepoint SARL v McClelland and Another
| Jurisdiction | England & Wales |
| Judge | THE LORD CHIEF JUSTICE,LORD JUSTICE ALDOUS,LORD JUSTICE PHILLIPS |
| Judgment Date | 05 June 1996 |
| Judgment citation (vLex) | [1996] EWCA Civ J0605-3 |
| Docket Number | QBEN1 96/0534/0155–6/E |
| Court | Court of Appeal (Civil Division) |
| Date | 05 June 1996 |
[1996] EWCA Civ J0605-3
The Lord Chief Justice of England
(Lord Bingham of Cornhill)
Lord Justice Aldous
Lord Justice Phillips
QBEN1 96/0534/0155–6/E
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
(MR JUSTICE MORLAND)
Royal Courts of Justice
Strand
London WC2
MR M CRAN QC and MR F RANDOLPH (Instructed by Sprecher Grier, London WC1V 6LS) appeared on behalf of the Appellant
MR D VAUGHAN QC (Instructed by Freshfields, London EC4Y 1HS) appeared on behalf of the Respondents
There are before the court two appeals by the plaintiff in this action. Both appeals are against orders for security for costs made by Morland J. The first of those orders was made on 26 January 1996 and followed an earlier ruling on 21 December 1995, which was an order made under Order 23 rule 1(1)(a) of the Rules of the Supreme Court, on the grounds that the plaintiff was a company ordinarily resident out of the jurisdiction and that there was reason to believe that it would be unable to pay the first defendant's costs if the first defendant was successful in his defence. The judge refused leave to appeal against that order, but the Court of Appeal granted leave to appeal on 6 February 1996. Accordingly, the matter comes before this court as an appeal with leave of this court.
The second order was made on 2 April 1996 after the Court of Appeal had given leave to appeal against the first order and as a result of observations made by the court in the course of a hearing at which leave was given. This second order was made under Order 23 rule 1(1)(b) of the Rules of the Supreme Court on the ground that the plaintiff, not being a plaintiff suing in a representative capacity was a nominal plaintiff suing for the benefit of some other person, and there was reason to believe that it would be unable to pay the costs of the defendant if ordered to do so. Since an appeal against his first order was already pending, the judge gave leave to appeal against this second order. He helpfully endeavoured to ensure that the two appeals would come before the Court of Appeal at the same time.
It is unnecessary to go into the facts in any detail. On 28 October 1993 a writ was issued in the name of four plaintiffs of which only one remains active. The effective plaintiff which remains is Chequepoint SARL, a company incorporated under the laws of France. That company has undergone two changes of name since the issue of proceedings. It is described in the evidence as an associated company to Chequepoint, but no longer a Chequepoint operating company. It appears that there is a group of companies bearing the "Chequepoint" name, the moving spirit behind them being a Mr Grovit.
The business of the group involves the operation of bureaux de change in France and elsewhere. The first defendant, Mr McClelland, worked for the Chequepoint group of companies for a time. On 27 September 1989 an article was published in the newspaper, France Soir, which made reference to Chequepoint by name. The effect of the article is conveyed by its title which, in translation, is "A Parisian Bureau de Change Launders Drug Money".
In the action the plaintiff complained against the first defendant that the article was defamatory, that the first defendant had republished the article to a Mr Dubocq, and that Mr Dubocq had republished the article by exhibiting it in a shop window in Spain in circumstances which made the defendants liable for that republication. On the face of the article, it would appear to be defamatory of the plaintiff. It is noteworthy that although a number of defences have been pleaded, they include no plea of justification. It would, therefore, appear that the article was libellous. That is consistent with the conduct of the newspaper which retracted the article and apologised for it.
Relations between the parties to these proceedings are as bad as they could be. This is evidently one of several actions initiated by companies connected with Mr Grovit against the first defendant. Most, or all, of those actions appear so far to have been fruitless. The first defendant complains that the litigation has been driven by a vindictive desire to destroy him, his business and his family. On the other hand, it is said that there have been prosecutions and the evidence is littered with allegations of bad faith and misbehaviour. If even a part of what both parties say is true, this is without doubt a very sorry story. It is plain that the factual issues between the parties cannot possibly be resolved on affidavit. It is, therefore, desirable that this court should confine itself very strictly to the issues which fall for decision.
I turn to the first order made on 26 January 1996 on the grounds of the impecuniosity of the plaintiff. The rule under which the order was made, Order 23 rule 1(1)(a), provides:
"Where, on the application of a defendant to an action or other proceeding in the High Court, it appears to the Court—
(a) that the plaintiff is ordinarily resident out of the jurisdiction….
Then if, having regard to all the circumstances of the case, the Court thinks it just to do so, it may order the plaintiff to give such security for the defendant's costs of the action or other proceeding as it thinks just."
The argument advanced on the plaintiff's behalf may be summarised in a series of steps, although I should make plain that the summary is mine and not that of Mr Cran who very expertly advanced the argument on behalf of the plaintiff.
1. The plaintiff is a French company.
2. France is a member of the European Community and party to the Brussels Convention.
3. It is contrary to Community law for any member state to discriminate on grounds of nationality against the nationals of another member state.
4. Although Order 23 rule 1(1)(a) is expressed in terms of ordinary residence and not nationality, its effect is to discriminate against foreign nationals.
5. Order 23 rule 1(1)(a) is contrary to Community law in so far as it permits security to be ordered against a plaintiff resident in a member state of the European Community party to the Convention on grounds of nationality or residence.
6. The exercise of discretion to order security against a European Community company on grounds of impecuniosity is necessarily discriminatory because such an order could not be made against a European Community company ordinarily resident in England.
In advancing that series of submissions, Mr Cran places particular reliance on three sources. The first of those sources is Mund & Fester v Hatrex Internationaal Transport, ( Case C-398/92), [1994] ECR 1-467. That is a decision of the European Court of Justice construing an article of the German Civil Procedure Code relating to the seizure of goods. The second source relied upon is a decision of this court, Fitzgerald v Williams [1996] 2 WLR 447 in which Mund & Fester was applied to the somewhat different subject matter of security for costs. Thirdly, reliance was placed on section 726(1) of the Companies Act 1985 which reproduced the effect of sections which have been in force for very many years and enable the English court to order security against an English company where
"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."
Mr Cran, on behalf of the plaintiff, pointed out that Parliament had restricted the jurisdiction to order security under section 726(1) to English companies. He argued that Parliament could have extended that jurisdiction to foreign companies ordinarily resident here had it intended to do so, but relied strongly on the fact that Parliament had not done so. The crux of his argument was that it would be illegitimate for the court to do what Parliament had chosen not to do and, in effect, to rely on section 726, combined with Order 23 rule 1(1)(a), so as to order security against an impecunious foreign company.
The essence of the first defendant's argument in reply may also be briefly summarised. There is no dispute that the plaintiff is a French company. There is, of course, no dispute that France is a member of the European Community and party to the Brussels Convention, and there is no dispute that it is contrary to Community law for any member state to discriminate on grounds of nationality against the nationals of another member state.
The defendants would modify the way in which I have expressed step 4 a little so as to make it plain that Order 23 rule 1(1)(a) may have the effect of discriminating against foreign nationals. Mr Vaughan, who represents the first defendant, would not accept that it necessarily did so.
So far as step 5 is concerned, again Mr Vaughan would wish to emphasise that it would be contrary to Community law if, and to the extent that, security were ordered on the grounds of nationality or residence alone. It is on step 6 that the major issue between the parties is joined.
The first question which, as it seems to me, has to be answered is: "Does Community law require Order 23 rule 1(1)(a) to be treated as void and of no effect in so far as it permits orders to be made against nationals ordinarily resident in European Community States party to the Convention, or does Community law only govern the exercise of discretion under that rule?"
In considering that question, it is relevant to refer to the very recent decision of this court in Fitzgerald v Williams where, although the facts were...
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