Coral Reef Ltd v Silverbond Enterprises Ltd and Another
| Jurisdiction | England & Wales |
| Judge | Master Matthews |
| Judgment Date | 20 April 2016 |
| Neutral Citation | [2016] EWHC 874 (Ch) |
| Docket Number | Case No: HC-2015-004539 |
| Court | Chancery Division |
| Date | 20 April 2016 |
[2016] EWHC 874 (Ch)
Master Matthews
Case No: HC-2015-004539
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Romie Tager QC ( Henry Webb on 20 April 2016) (instructed by McFaddens LLP) for the Claimant
David Head QC (instructed by Dentons UKMEA LLP) for the Defendants
Hearing date: 4 March 2016
Introduction
This is my judgment on an application by the Defendants, made by notice dated 22 January 2016, for security for their costs of the claim brought by the Claimant against them. The application was heard on 4 March 2016, when David Head QC (instructed by Dentons UKMEA LLP) appeared for the Defendants and Romie Tager QC (instructed by McFaddens LLP) appeared for the Claimant. For the Claimant, this was a change of representation from the earlier hearing before me on 3 February 2016, when I gave case management directions. At the end of the hearing, I invited certain written submissions, which were supplied to me on 11 and 14 March 2016. I refer further to these below.
The application is made in the context of a claim concerning the beneficial ownership of 9.99% of the issued shares in the First Defendant, a company registered in England and Wales. It is very valuable. It runs a casino business in the Hilton Hotel in Park Lane, London W1. The Second Defendant is a company registered in Latvia, whose shares are owned by a Latvian businessman, Vasily Melniks, and which since 24 July 2013 has been the sole registered owner of the shares in the First Defendant. The Second Defendant acquired the shares in the First Defendant in tranches from a Mr Yoram Yossifoff, understood to be the previous owner of those shares.
The Claimant is a private company incorporated in Hong Kong in 2008, with a paid-up share capital of HK$1. According to a filed Annual Return of 30 January 2015, the sole director and sole listed shareholder are two named persons, each with an Israeli address. It is not known whether either of these persons is beneficially interested in this company, and there is apparently no Hong Kong regulatory requirement that the beneficial ownership be made public. The company claims a 9.99% shareholding in the First Defendant on the basis of an alleged allotment of shares pursuant to the terms of a subscription letter dated 18 December 2012, recorded in signed minutes of the company's board of directors and in other documents. The Claimant's case is that it agreed to pay a total of £2.6m for its stake, of which £1.1m had been paid. The Defendants do not admit the authenticity or provenance of the various documents relied on, or the time and circumstances in which they were executed. In any event they deny that the Claimant has any beneficial interest or any right to rectification of the company's register of members.
Procedure
The claim was commenced on 2 September 2015 by Part 8 claim form in the Central London County Court, seeking summary rectification of the share register of the First Defendant under s 125 of the Companies Act 2006. Since the claim was both fact-intensive and highly controversial, this was an unusual way to proceed with such a claim, and, given the value, an unusual venue in which to do it. The Defendants applied to transfer the proceedings to the High Court, Chancery Division, and on 21 October 2015 DJ Hart so transferred them, directing that they continue under CPR Part 7 with statements of case.
The matter first came before me on 3 February 2016, when I gave case management directions leading to the trial of the claim over 7 days in early 2017. One matter that was not substantively dealt with on 3 February was security for costs. The Defendants had first raised this issue with the Claimant in correspondence on 14 December 2015, inviting the Claimant either to provide information as to its finances, or agree in principle to give security. No substantive response was received. Unsatisfied in either respect, therefore, on 22 January 2016 the Defendants issued an application notice which included an application for security. It was supported by a witness statement from their solicitor, Mr Thomas Leyland.
The Claimant's then solicitors, David Cooper & Co, in correspondence made a number of points in response to the application. These included that the Claimant was "capable financially", although evidence was not immediately available, that its main asset was a property in Costa Rica, that it owned other substantial assets in Costa Rica, and that its other assets were precious stones. All of this, it was said, would cover any possible costs liability.
The matter was raised at the case management conference on 3 February. The Claimant's then solicitor represented it, as its then counsel was unable to do so. The Defendants were represented, as on 4 March, by Mr Head QC and his instructing solicitors. At that hearing the solicitor asked for more time to obtain valuation reports in relation to the Claimant's assets and to make inquiries as to how security might be provided. I directed that the application be heard on 4 March 2016, and gave further directions. These were that the Claimant should inform the Defendants by 12 February of its position in relation to security, that it should serve any evidence on which it relies by 23 February, and that the Defendants should serve any evidence in reply by 1 March.
At the same time I directed that the Claimant should preserve certain documents important to the claim which the Claimant had previously acknowledged that it held and which it would be prepared to produce to the Defendants.
On 11 February 2016 the Claimant changed solicitors from David Cooper & Co to McFaddens LLP, and thereafter Mr Tager QC was instructed. They did not inform the Defendants of the Claimant's position in relation to security until 18 February, following an extension of time agreed by the Defendants (explaining the lateness by reference to the change of solicitors), but did serve evidence in the form of a witness statement from its solicitor Mr Max Eppel on 23 February. The Defendants served a further witness statement in reply from Mr Leyland on 1 March. Although not provided for in my directions, the Claimant served a short further witness statement from Mr Timothy Eppel on 3 March.
I record here that no application was made on either side for cross-examination on witness statements. What that means in practice is that I cannot reject any written evidence as being untrue, unless on the basis of all the evidence before me I consider that that written evidence is simply incredible. At the hearing, I was not invited to reject any of the written evidence on that basis.
I should also record that it appears that in correspondence since 3 February 2016 the Claimant has now said that it does not have the documents directed by me to be retained, but that some or all of them are or may be in the hands of a third party firm of solicitors.
The law
Security for costs in the present case is governed by CPR rules 25.13 and 25.14, which read as follows:
" 25.12
(1) A defendant to any claim may apply under this Section of this Part for security for his costs of the proceedings.
(Part 3 provides for the court to order payment of sums into court in other circumstances. Rule 20.3 provides for this Section of this Part to apply to Part 20 claims)
(2) An application for security for costs must be supported by written evidence.
(3) Where the court makes an order for security for costs, it will –
(a) determine the amount of security; and
(b) direct –
(i) the manner in which; and
(ii) the time within which
the security must be given.
25.13
(1) The court may make an order for security for costs under rule 25.12 if –
(a) it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order; and
(b)
(i) one or more of the conditions in paragraph (2) applies, or
(ii) an enactment permits the court to require security for costs.
(2) The conditions are –
(a) the claimant is –
(i) resident out of the jurisdiction; but
(ii) not resident in a Brussels Contracting State, a State bound by the Lugano Convention, a State bound by the 2005 Hague Convention or a Regulation State, as defined in section 1(3) of the Civil Jurisdiction and Judgments Act 1982;
(c) the claimant is a company or other body (whether incorporated inside or outside Great Britain) and there is reason to believe that it will be unable to pay the defendant's costs if ordered to do so;
(d) the claimant has changed his address since the claim was commenced with a view to evading the consequences of the litigation;
(e) the claimant failed to give his address in the claim form, or gave an incorrect address in that form;
(f) the claimant is acting as a nominal claimant, other than as a representative claimant under Part 19, and there is reason to believe that he will be unable to pay the defendant's costs if ordered to do so;
(g) the claimant has taken steps in relation to his assets that would make it difficult to enforce an order for costs against him.
(Rule 3.4 allows the court to strike out a statement of case and Part 24 for it to give summary judgment)"
These rules are derived from the equivalent rules under the previous procedural code, the RSC. Many of the relevant authorities were decided under the RSC, but are treated as being still authoritative under the CPR, so far as the rules do not provide differently. So for example in Keary Developments v Tarmac Construction [1995] 3 All ER 534, Peter Gibson LJ (with whom Butler-Sloss LJ agreed) said this:
"The relevant principles are, in my judgment, the following.
1. As was established by this court in Sir Lindsay Parkinson & Co Ltd v...
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