Harris v Wallis
| Jurisdiction | England & Wales |
| Judgment Date | 10 March 2006 |
| Neutral Citation | [2006] EWHC 630 (Ch) |
| Docket Number | No: HC05C01268 |
| Court | Chancery Division |
| Date | 10 March 2006 |
[2006] EWHC 630 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Sir Francis Ferris
No: HC05C01268
MR. M. WARWICK (instructed by Jeffrey Green Russell) appeared on behalf of the Appellant.
MR. A. SUTCLIFFE QC and MR. J. GAVAGHAN (instructed by Herbert Smith) appeared on behalf of the Respondent.
(As approved by the Judge)
MR. JUSTICE FERRIS:
I have before me appeals by the claimant, Patrick Harris, against two orders of Master Moncaster, relating to the giving of security by Mr. Harris for the costs of the defendant, Leonard Wallis. The first order appealed from is dated 12 th January 2006; by it, Master Moncaster ordered that the claimant should give security for the defendant's costs up until the exchange of witness statements, in the sum of £130,000, plus VAT, a total of £152,750. This security was to be provided by 4.00 p.m. on Friday, 9 th February 2006. If it was not so provided, there was to be judgment for the defendant, with costs to be paid by the claimant. Master Moncaster refused permission to appeal, but the claimant made an application to this court for permission to appeal. This application was granted by Kitchin J. on 10 th February 2006.
The second order appealed from was made by Master Moncaster on 9 th February 2006. At the time when the application for the order came before the master, the claimant had not provided the required security and if he continued in this failure, judgment would have been given against him at 4.00 p.m. that day. He therefore applied for the time for giving security to be extended until seven days after the application for permission to appeal had been refused or, if permission was given, until seven days after determination of the appeal. Master Moncaster refused this application.
A major consideration in his decision was that the trial has been fixed to commence in a window of five days starting on 25 th April 2006, with a time estimate of five days. The master was much impressed by the fact that, as he saw it, if time was extended as sought by the claimant, the defendant would be faced with a choice between vacating the trial date and halting preparations for trial and continuing to prepare for trial without the protection of the security which the master had ordered. Although Master Moncaster refused the application for a stay, the master considered that, as a practical matter, he ought to grant a short extension in the time limit, which would otherwise have expired at 4.00 p.m. on the day which he gave his decision. He therefore extended the time for compliance until 15 th February 2006.
Master Moncaster refused permission to appeal against his second order but, as in the case of the first order, Kitchin J. gave permission to appeal on 10 th February 2006. Mr. Justice Kitchin also extended the time for giving security until seven days after the determination of the appeal.
The action in which these applications were made is one of some complexity, and the claimant's pleadings have been the subject of considerable objection. These objections may not yet have been fully resolved but they are not the subject of these appeals and I say no more about them. Generally, the claimant's claim is for a share of profit on a property transaction in east London. An account is sought, together with an order that, pending completion of the account, the defendant should pay the claimant the sum of £2.2m.
The application for security for costs was founded upon para.(g) in CPR.25.13( 2). CPR.25.13 provides, so far as material, as follows:
"1. The court may make an order for security for costs under r.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) one or more of the conditions in para.2 applies."
Then there is an alternative to that, which I need not read. Then: "2. The conditions are …" then various paragraphs are set out, (a) to (g) inclusive. I need only refer to paras.(d) and (g). (d) reads:
"The claimant has changed his address since the claim was commenced, with a view to evading the consequences of the litigation."
Paragraph (g) provides: "The claimant has taken steps in relation to his assets that would make it difficult to enforce an order for costs against him."
The application was supported by a witness statement of the defendant, which, amongst other things, referred to correspondence in which the claimant's solicitors had defiantly refused to give particulars of the claimant's assets, although these were said to be "not inconsiderable". They had also declined to give any other relevant information about the claimant's affairs. I need not trouble further with this witness statement because for the purposes of the application for security, it was largely overtaken by some remarkable evidence given by the claimant himself. This evidence is contained in a witness statement signed by the claimant on 8 th January 2006. I read, first, paras.2 to 6 in which the claimant said this:
"2. The basis for the defendant's application is revealed at para.84 of his witness statement dated 6 th December 2005. After referring to me, the defendant states: 'His solicitor has described the claimant as having amassed a not inconsiderable fortune but no part of that fortune is in the claimant's own name. He does not even appear to possess a bank account.'
3. I agree that I do not have a bank account. I also agree that I hold no assets of significance in my own name. However, I deny that these matters justify the making of an order for security for costs. As I explain below, for many years prior to my dealings with the defendant, I organised my affairs so that my assets were held by third parties on my behalf. I believe that there are many individuals who organise their affairs so that their assets are held expressly or impliedly on trust for them. This is what I have done. I strongly contend that there is no legitimate basis for me being ordered to provide security for costs.
…..
…..
6. I recognise the importance of using professional advice and, therefore, during my working life, I have used advisors such as solicitors and accountants. I have relied upon professional assistance to organise my business affairs and to look after my assets. I have not sought to hide the fact that my assets are held by third parties, namely the members of my immediate family."
Later on, in para.9, the claimant said:
"I note that in paras.14 and 15 of his statement, the defendant comments upon my not inconsiderable assets. Rightly, he does not deny that I own such assets; rather his complaint seems to be that all those assets are held in the names of third parties. Barring assets of low value, the defendant's description is correct. However, this is nothing to do with my claim against the defendant. I unequivocally state that I have taken no step to make it difficult for the defendant to enforce any order for costs. The handling of my assets is the same now as it was in 1994 and before."
In his argument before me on behalf of the claimant, Mr. Warwick considered the practice and rules of the court in respect of security for costs from very early days. I do not propose in this judgment to mention anything before the revision of the Rules of the Supreme Court which took place in 1962. By O.23 in that revision, the rules were, in effect, codified. Order 23, r.1(1) specified a number of instances, defined in paras.(a) to (d), which, if established, resulted in the court having a discretion to order a plaintiff to give security for the defendant's costs. These rules remained substantially unchanged until the Rules of the Supreme Court were replaced by the Civil Procedure Rules in 1998.
When the Civil Procedure Rules were introduced, security for costs was dealt with by CPR.25.13. The fact that the court must not order security for costs in any of the cases where security is permissible unless it is just to do so, was emphasised by placing this requirement at the beginning of the rule, in CPR.25.13(1). The court thus continues to have (as it always has had) a discretion to grant or refuse an order for security for costs. The conditions in which the discretion arise were specified in CPR.25.13(2). There were certain linguistic changes but, generally speaking, the paragraphs of CPR.25.13(2) reproduced the same conditions as are set out in paras.(a) to (d) in the Rules of the Supreme Court O. 23, r.1(1). The conditions were altered by the Civil Procedure (Amendment) Rules 2000 which came into force on 2 nd May 2000. For present purposes it will suffice to state that the effect of the amendment was to add a new para.(g) to the conditions previously set out in CPR.25.13(2). This paragraph was in the terms which I have already read.
The first appeal before me concerns the scope of para.(g). The master took what may be described as a broad and literal view of this paragraph. His reasoning appears in para.5 and 6 of his judgment. Having set out the substance of the claimant's witness statement, he continued:
"I should have thought, myself, that such a state of affairs was really a paradigm case which one might expect to come within the new jurisdiction to make an order for costs because steps that had been taken in relation to a claimant's assets will make it difficult to enforce an order for costs against him. In a case —no doubt a very unusual case such as this —where a claimant admits or asserts that his assets are held in the name of a nominee, that seems to me almost of itself to show that he has taken steps in relation to his...
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