Dar International FEF Company v Aon Ltd

This is an application for security in respect of costs, not of the appeal (which is by defendants against whom judgment was given below) but in respect of the defendants' costs of the proceedings below. The defendants, who are the appellants in this court, make the application in order to secure their costs below in the event that they should succeed in this appeal. It is therefore an unusual application which raises two main points: firstly, jurisdiction, and secondly, discretion.

There was security for the defendants' costs of the proceedings below. It was put up in the form of a letter of guarantee from Arab Bank PLC issued 4 September 2002 and expiring 4 September 2003. It was to pay on first demand:

"… within 14 days such sums as may be agreed in writing to be due to you, or as may be awarded to you by a final judgment or final interim costs order of the Courts of England and Wales in respect of your costs of defending [the claimant's] claim in the proceedings …"

But, as I say, it was expressed only to be valid until September 4 2003, and "expires in full and automatically if your written request for payment and your written confirmation are not in our possession on or before that date". The security was put up pursuant to an order of Thomas J dated 26 April 2002. The jurisdictional basis for that order consisted in CPR 25.13 para. 2(a), namely that the claimant was resident out of the jurisdiction and not resident in a Brussels or Lugano Convention or Regulation State as defined in the Civil Jurisdiction and Judgments Act 1982 section 1(3).

The claimant, DAR International FEF Co, is an overseas entity described by its owner at trial as a "shell company". It is registered in Saudi Arabia. The security put up under the bank guarantee was originally £22,000, but was subsequently increased by agreement to £59,000. The correspondence shows that the parties discussed and had in mind by the 12-month period, a period sufficient to cover the anticipated trial date. In the event, a draft judgment in favour of the claimant was handed down within the 12-month period. In July 2003 there was some toing and froing relating to the scope of the issues which the judge had or had not covered, and there was a further hearing at the end of July leading to a letter from the judge towards the end of August in which he indicated that he did not propose to add anything to his draft judgment and enclosed a draft order under which the claimant succeeded and would obtain an order for the costs of the proceedings in its favour. The judgment was only finalised at a hearing attended only by solicitors on 16 September 2003, shortly after the lapse of security.

The question of security was raised with the judge at that hearing and the solicitor for the claimant asked for the security to be reinstated. The judge refused this at that stage, but said that the application could be renewed to him or the Court of Appeal if permission to appeal was given. Permission to appeal has been given by Longmore LJ on 29 October 2003, and the appellant, the defendant below, now therefore applies to this court for security in respect of the costs below.

The appellant submits that the same factors apply which led to an order for security for below, that is the difficulty of enforcement, and the additional risk of getting nothing from an overseas "shell" company. Those are, no doubt, the factors which led the judge on 16 September 2003 to accede to an application to stay the payment of the judgment sum and the order for costs of the proceedings below made in favour of the successful claimant.

I turn, therefore, to the two aspects of the application. As to jurisdiction, it is said by Mr Drake, on behalf of the respondent, that this court only has jurisdiction over the costs of the appeal. Section 15 of the Supreme Court Act 1981 defines this court's jurisdiction, so far as is presently material, by conferring on it the authority and jurisdiction of the court below "for all purposes of and incidental to" the hearing of any appeal. Mr Drake submits that a grant of security in respect of the costs below cannot be for the purposes of or incidental to the hearing of the appeal. He also says that it cannot be "in relation to an appeal" within the meaning of CPR 52.10, which is the rule reflecting the same subject matter...