Dario Ovidio Schettini v Nicola Silvestri
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lewison,Lord Justice Peter Jackson,Lord Justice Newey |
| Judgment Date | 07 March 2019 |
| Neutral Citation | [2019] EWCA Civ 349 |
| Court | Court of Appeal (Civil Division) |
| Date | 07 March 2019 |
| Docket Number | Case No: A3/2018/3114 |
[2019] EWCA Civ 349
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE BUSINESS AND PROPERTY COURTS,
CHANCERY DIVISION
His Honour Judge Pelling Q.C (sitting as a Judge of the High Court)
BL-2018-001844
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Lewison
Lord Justice Peter Jackson
and
Lord Justice Newey
Case No: A3/2018/3114
Mr Niraj Modha (instructed by Shortlands Law Firm Ltd) for the Appellant
Mr Nicholas Trompeter (instructed by Hughmans Solicitors LLP) for the Respondents
Hearing date: 28 February 2019
APPROVED JUDGMENT
Avv Schettini is an Italian lawyer who practises in Rome. He claims to be entitled to an order for specific performance of an agreement to transfer the share capital in Cleofour1 Ltd: a company that owns a flat in London. The share capital in the company is owned by Sig del Buono. Avv Schettini applied for an interim injunction preventing any disposal of or dealing with the flat, or the shares in the company. HHJ Kramer granted an injunction to that effect on an application made without notice. On the return day, Avv Schettini applied to continue the injunction. At the same time, the defendants applied to discharge Judge Kramer's order both on the ground of material nondisclosure; and on the additional ground that the application without notice had been made in breach of CPR Part 25.2 (2)(b), Part 25.3 (3) and PD 25A para 3.4.
Following a two day hearing, HHJ Pelling QC discharged the order made by Judge Kramer on the ground of material non-disclosure. He did not need to deal with the alleged breaches of the CPR and the Practice Direction. He was prepared to re-grant the injunction; but only on condition that Avv Schettini undertook to fortify his cross-undertaking in damages to the extent of £100,000. Avv Schettini gave the undertaking; but now seeks to appeal against it on the ground that the judge should not have required him to give it as the price of the injunction.
The judge's consideration of the fortification in his judgment is relatively brief. He said:
“[28] In relation to damages being an adequate remedy for the third and fourth defendants in the event that the claimant fails at trial, I consider that as things presently stand, they would not be, given the limited evidence of assets available to meet such a claim and the limited value of those assets. It is at least realistically arguable that the scope of a cross-undertaking extends to cover the costs of and occasioned by applications for injunctive relief such as this and any additional costs incurred by the parties in varying its terms or applying for it to be discharged if circumstances change and/or in connection with the policing of the injunction.
[29] The respondents' costs of the application to date exceed £100,000. They submit and I agree that the claimant should be required to fortify the cross-undertaking by providing a fund of £100,000 if an injunction is to be granted. It is not suggested that the third and fourth defendants would be at risk of any other losses since they maintained that they do not intend to sell or rent out the property but, nonetheless, the costs issue I have mentioned justifies fortification as I have mentioned.”
At the end of his judgment he said:
“[43] The order will be granted subject to the provision of appropriate security in relation to the cross-undertaking in damages within a fixed future period. Provisionally, though I will hear counsel on the point, I consider that the most practical way in which security can be provided is by an undertaking from the claimant within a fixed future period to pay £100,000 to the claimant's solicitors to be held by the claimant's solicitors in their client account, coupled with an undertaking by the claimant not to seek to withdraw those sums without further order and an undertaking by the claimant's solicitors not to deal with the sums so credited other than in accordance with the orders of the court.”
It is clear from this process of reasoning that fortification was required solely on account of future costs to be incurred by the third and fourth defendants in connection with the injunction.
Avv Schettini's complaint is three-fold. First, he says, that the effect of the requirement to fortify his cross-undertaking is tantamount to an order for security for costs. Because he is resident in the EU, such an order could not have been made under CPR Part 25. Second, he says, the amount of £100,000 is excessive, and was arrived at without going through the three-stage process required by Energy Venture Partners Ltd v Malabu Oil and Gas Ltd [2014] EWCA Civ 1295, [2015] 1 WLR 2309. Third, it is said on his behalf that he is unable to comply with the undertaking, with the consequence that his action will be stifled.
The first question that arises is whether Avv Schettini is entitled to appeal at all. There are two aspects to this question: one general and one particular to this case.
A cross-undertaking in damages is generally regarded as the “ price” of an interim injunction, granted at a time when the court is not in a position to adjudicate on the rights and wrongs of the underlying dispute. As Cotton LJ explained in Tucker v New Brunswick Trading Co of London (1890) 44 Ch D 249:
“… we cannot impose on the plaintiff any undertaking which he has not given. If a defendant applies for an undertaking, the plaintiff may decline to take any order. The court only makes the undertaking a condition of granting an injunction; if the plaintiff refuses to give it the court can refuse the injunction, but it cannot compel the plaintiff to give an undertaking.”
This has consequences for the right to appeal. The relevant jurisdiction of the Court of Appeal is that set out in section 16 of the Senior Courts Act 1981, namely:
“… jurisdiction to hear and determine appeals from any judgment or order of the High Court.”
In Birch v Birch [2017] UKSC 53, [2017] 1 WLR 2959 Lord Wilson explained at [5]:
“An undertaking is a solemn promise which a litigant volunteers to the court. A court has no power to impose any variation of the terms of a voluntary promise. A litigant who wishes to cease to be bound by her (or his) undertaking should apply for “release” from it (or “discharge” of it); and often she will accompany her application for release with an offer of a further undertaking in different terms. The court may decide to accept the further undertaking and, in the light of it, to grant the application for release. Equally the court may indicate that it will grant the application for release only on condition that she is willing to give a further undertaking or one in terms different from those of a further undertaking currently on offer. In either event the court's power is only to grant or refuse the application for release; and, although exercise of its power may result in something which looks like a variation of an undertaking, it is the product of a different process of reasoning.”
Lord Wilson went on to consider the circumstances in which a litigant could be released from an undertaking. Having considered a number of cases in this court he said at [11]:
“It is, I suppose, inconsistent with the admitted existence of a discretionary jurisdiction to say that it can never be exercised unless a particular fact, such as a significant change of circumstances, is established. If a discretionary jurisdiction is shackled in that way, the result is, instead, that the jurisdiction does not even exist unless the fact is established. For all practical purposes, however, the Court of Appeal in the Mid Suffolk case gave valuable guidance. I summarise it as being that, unless there has been a significant change of circumstances since the undertaking was given, grounds for release from it seem hard to conceive.” (Emphasis added)
Neither the fact that Mrs Birch could not have been compelled to give an undertaking that differed from the one that she did give; nor the inability of the court to vary an undertaking once given precluded the Supreme Court from entertaining her appeal from this court. The explanation must be that the court treated her application for variation as being an application for release from the undertaking coupled with the offer of a new one.
In Bell Davies Trading Ltd v Secretary of State for Trade and Industry [2004] EWCA (Civ) 1066, [2005] BCC 564 solvent companies gave undertakings in order to avoid a winding up order on public interest grounds. This court entertained their appeal against the undertakings because they had been given “under the threat of orders, which, on their case, the judge would have been wrong to make”.
However, as Mummery LJ explained at [104]:
“In general, if a party gives an undertaking to the court, he is not entitled to appeal against the undertaking. As in the case of a consent order, an undertaking is a voluntary litigation act analogous to entering into an agreement with the other party. It is a voluntary promise made to the court, not a coercive order made by the court. A typical case is an undertaking to the court by a defendant on an application for an interim injunction, in order to avoid the making of an injunction or other order against him. An undertaking is voluntary, even when it is given under the threat of an order in the same terms or of a more drastic order. If the party subsequently wishes to be released from the undertaking or to have it varied, an appeal does not usually lie against the undertaking, for the defendant would be appealing against a litigation decision that he, and not the judge, had made. The normal procedure would be for the party, who had given the undertaking, to...
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