Greenwich Ltd (Plaintiff) v National Westminster Bank Plc and Others
| Jurisdiction | England & Wales |
| Judgment Date | 15 March 1999 |
| Judgment citation (vLex) | [1999] EWHC J0312-9 |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | CH 1997 G No. 0117 |
| Date | 15 March 1999 |
[1999] EWHC J0312-9
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MANCHESTER DISTRICT REGISTRY
The Hon. Mr Justice Blackburne
Vice-Chancellor of The County Palatine of Lancaster
In The Leeds Crown Court
CH 1997 G No. 0117
Michael Booth instructed by Tickle Hall Cross for the Plaintiff
Angharad Start instructed by Wilde Sapte for the First Defendant
This is the official judgment of the court and I direct that no further note or transcript be made.
Hearing dates: 12 March 1999 to 15 March 1999
The Hon Mr Justice Blackburne
DATED: 31 March 1999
Greenwich Limited v National Westminster Bank plc & ors
The first defendant, National Westminster Bank plc ("the Bank") , applies for security for its costs of the action. Its summons seeks security on alternative grounds: (1) on the ground that the plaintiff is resident abroad for the purposes of Order 23 rule 1; (2) pursuant to section 726(1) of the Companies Act 1985 on the ground that the plaintiff will be unable to meet its costs if it is successful in its defence.
The plaintiff's claim is for damages (including exemplary damages) for misrepresentations which it says were fraudulently, alternatively negligently, made arising out of the sale to the plaintiff by the Bank in May 1995 of premises known as Brookmead Industrial Park, Telford Drive, Stafford. The industrial park was mortgaged to the Bank. On 6 March 1991 the second and third defendants were appointed by the Bank as receivers of the park under the terms of the Bank's mortgage. On 4 May 1995 contracts were exchanged between the plaintiff and the Bank for the sale of the park to the plaintiff. The Bank contracted to sell as unpaid mortgagee. The sale was completed on 9 June 1995. The plaintiff claims that, in the course of its negotiations to purchase the park, various misrepresentations were made to it (directly or indirectly) by the second and third defendants as agents for the Bank. The misrepresentations are said to relate to the structural condition, and in particular the floor loadings, of a part of the units comprising the park. It is said that the misrepresentations were made fraudulently and that the Bank is as much liable in fraud to the plaintiff as are the receivers, who were joined as second and third defendants to the action in June 1998 and against whom similar claims are made. The plaintiff has not particularised its losses but, before me, Mr Booth on behalf of the plaintiff indicated that they lay between £300,000 and £500,000 to which interest falls to be added.
The plaintiff is a Manx company. Practically nothing is known about it. The most recent company search carried out for the Bank only three or so weeks ago discloses that the plaintiff was incorporated in January 1995, has its registered office at an address in Douglas, Isle of Man, has no "non-residential declaration" in force as regards the Isle of Man and has an issued share capital of only £2. Its two shareholders are both Isle of Man corporations, one at least of which is a nominee company. There are no filed accounts. There is no publicly available information to indicate what assets it holds or what its liabilities are. Its register of charges discloses a debenture in favour of TSB Bank plc dated 26 October 1995 containing a fixed legal charge over the industrial park and a fixed and floating charge over the plaintiff's other assets. The search, and also an earlier search, in evidence before the court contain statements that there is a nil indebtedness of the plaintiff in respect of its registered charges. This is in conflict with a statement by the plaintiff's solicitor, made on 3 September 1998, that "the amount outstanding to the mortgagee on [the industrial park] as at 6 August 1998 was £1,434,643". This figure was disclosed in support of a contention that there is a "substantial equity" available in that property. The amount of the plaintiff's other liabilities is unknown to the Bank. In the absence of any accounts, the plaintiff's financial position is unknown to and unascertainable by the Bank. The current value of the industrial park is unknown and the extent, therefore, of any available equity in it impossible to state.
Although the Bank's summons is brought under both Order 23 rule 1 and section 726, it is common ground that section 726 does not apply: it applies only to companies incorporated in Great Britain. It does not therefore extend to companies, such as the plaintiff, which are incorporated in the Isle of Man. Acknowledging this, Miss Start, who appears for the bank, has disclaimed any intention of grounding the Bank's application on that provision. Instead she has relied simply on Order 23, rule 1(1) (a) . That rule, so far as material, provides that:
"1(1) 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 14;
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 security for the defendant's costs of the action or other proceeding as it thinks just."
Miss Start said that the position here is perfectly straightforward. Given the plaintiff's residence out of the jurisdiction, the almost total absence of information about the plaintiff and, in particular, what if any available equity there is in the industrial park which is the plaintiff's only known asset, the appropriate, indeed the almost inevitable, course is to order security. The only question, she submitted, is the amount that should be ordered. She submitted that this is not a case where the court can or should embark on a detailed investigation of the merits of the plaintiff's claim or the Bank's defence to it. She accepted that the plaintiff's claim was (for security of cost purposes only) arguable but submitted that it cannot "clearly be demonstrated one way or another that there is a very high degree of probability of success or failure" (see Porzelack KG v Porzelack (United Kingdom) Limited [1987] 1WLR 420) .
Mr Booth submitted that, although not a part of the United Kingdom, the Isle of Man is part of the British Isles and, as such, is to be treated as subject to what he described as "the ordinary rules of comity" with the result, he submitted, that Order 23 rule 1 applies but only where and to the same extent that section 726 would so that, for all practical purposes, the Bank's summons is to be treated as an application under that section. I call this the "comity argument". He also submitted that the same result arises as a matter of Community law. This, he submitted, is because, for the purposes of the application of the principle of non-discrimination, the Treaty provisions are applicable to the Isle of Man effectively as if it were a member state. I call this the "Community law argument". It follows, he submitted, that on either basis the Bank's application is to be approached as if it were a section 726 application. The significance of this, he submitted, is that an applicant for security under that section must show, by credible testimony, that there is reason to believe that the plaintiff company against which the order is sought will not, as opposed simply to may not, be able to pay the applicant's cost if successful in its defence. He submitted that the Bank has failed to adduce the necessary evidence to discharge this burden.
Over and above these matters, he was anxious, at one stage, to seek to persuade me that the plaintiff's claim was particularly strong and that I should therefore dismiss the application in any event.
Having carefully read the pleadings and Mr Booth's skeleton argument, I am of the view that it is quite impossible, at this stage, to say that the claim has a high probability of success. I am persuaded by Miss Start that I should approach this application on the basis that the plaintiff's claim is (for security of cost purposes only) arguable without seeking to estimate its chances of success.
I am also of the view, for the reasons set out below, that Mr Booth's comity and Community law arguments fail. Before coming to Mr Booth's submissions on these matters, it is necessary to say something about the constitutional status of the Isle of Man. What follows is largely taken from the opinion of Advocate-General Jacobs in DHSS (Isle of Man) v Barr & anr [1991] 3 CMLR 325 at pages 331 to 332, the accuracy of which I have no reason to doubt.
The Isle of Man is a part neither of Great Britain nor of the United Kingdom. Nor is it a colony. It is sometimes described as a dependency of the British Crown, although that description has no precise legal significance. It has its own legislature (Tynwald) and its own administrative, fiscal and legal system. Final appeals from Manx courts lie to the Judicial Committee of the Privy Council. The Royal Assent is required to Acts of Tynwald which, in contrast to the position in the United Kingdom, may be withheld on the advice of the United Kingdom Home Secretary. It seems, however, that the Assent has only rarely been withheld. The island is not represented in the United Kingdom Parliament although, in the view of the Royal Commission on the Constitution (1973) command 5460, Parliament has unlimited power to legislate for it without its consent. United Kingdom Acts do not, however, automatically extend to the island but only where they are expressly stated to apply or do so by necessary implication.
The United Kingdom Government is responsible for the island's international relations and for its defence. Because of the former, and in order to prevent the EC Treaty becoming applicable in its entirety to...
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