Marine Blast Ltd v Targe Towing Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE MANCE,Lord Justice Mance,Lord Justice Peter Gibson |
| Judgment Date | 26 March 2004 |
| Neutral Citation | [2003] EWCA Civ 1940,[2004] EWCA Civ 346 |
| Docket Number | Case No: B2/2003/1335 & 1737,2003/1335 |
| Court | Court of Appeal (Civil Division) |
| Date | 26 March 2004 |
[2003] EWCA Civ 1940
Lord Justice Mance
2003/1335
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CENTRAL LONDON COUNTY COURT
(HIS HONOUR JUDGE HALLGARTEN QC)
Royal Courts of Justice
Strand
London, WC2
MR. A. PARSONS (instructed by Messrs Holman Fenwick Willan, London, EC3) appeared on behalf of the Applicant.
MR. S. CROALL (instructed by Messrs BPE, Cheltenham) appeared on behalf of the Appellants.
This is an application for security for costs of the appeal, made somewhat late in the day, although not a great deal has been made of that in oral submissions before me. It is made pursuant to CPR 25.13(2)(c) on the basis that the appellant is a company in respect of which there is reason to believe that it will be unable to pay the defendants' costs if ordered to do so. In those circumstances, that condition being satisfied, the court has jurisdiction under subparagraph (1) to make an order for security for costs if it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order.
The main argument has been whether that condition is satisfied, although questions of discretion have also been touched on, particularly by the applicant (the respondent to the appeal) in anticipation of argument being directed to that issue. In the event, the main contention was whether the condition was satisfied. I take account of the points made in the skeletons on discretion.
It was suggested by the applicant that the prospects of the appellants' appeal were slight and that that should incline the court more readily to make an order for security. This is a case which falls within the classic mould of a case where, permission having been given, it cannot be said that there is no real prospect of success. As far as I am in a position to judge the merits, it seems to me that this is a well arguable appeal and that any further assessment of the merits would be inappropriate. I approach this application by the respondent on that basis.
Leaving other questions going to discretion aside and reverting to the condition which I have read out, a good deal of information has been put before the court, but I have to say that it is very far from complete. That is in large measure, if not entirely, the fault of the appellants, the respondents to this application, since they have not filed any accounts in respect of any period subsequent to 30th September 2001. The accounts filed in respect of that period consist solely of balance sheets since they have an exemption as a small company in respect of the provision of any profit and loss account. Recently, in order to attempt to address the absence of information, they have produced from Browne & Murphy, chartered and certified accountants, who were the auditors who certified their 2001 accounts, a statement of affairs as at 30th November 2003. This is on one sheet of paper. In answer to adverse comments on that, Browne & Murphy have faxed a letter, saying that they prepared it:
"We have prepared the document from financial information and documents supplied by Marine Glass Ltd [that is the appellants, the respondents to this application]. We confirm that the statement of affairs is accurate and reflects the financial position of Marine Glass Limited on 30th November 2003."
It is accepted by counsel, Mr Parsons, for Marine Glass Limited, that all that they can have meant by the confirmation that the statement of affairs is accurate is that it corresponds with the financial information and documents supplied by their clients. In other words, the statement is not an audited document. It depends entirely upon the reliability of the information provided by the company's management, and the documents, whatever they might be, also provided.
When one looks at the statement it shows a changed position from the position as at 30th September 2001. It is right to say that the balance sheet at 30th September 2001 showed an improved position in relation to the position as at 30th September 2000. Net assets had increased from £76,000 to £355,000. The statement as of 30th November makes it clear, however, that these balance sheet figures are based, as regards fixed assets, on book value. The statement at 30th November 2003 indicates that the book value as at 31st July 2002 is taken. There is no information in any of the balance sheets as to what those fixed assets consist of. They may well include the company's vessel or vessels. What their market value might be is a different question, depending on market conditions, and is one about which there is no clear information.
A second notable change is that, although the company now has a current account containing 87,000 euros, whereas two years ago at 30th September 2001 the bank was owed £34,000, it also has very considerably increased debtors. The debtors are 740,000 euros as against some IR£279,000 two years ago. Why that great increase in debtors has taken place is unclear. Some of it may be accounted for by the fact that the guarantee put up to secure the claim in these proceedings and costs, in an amount of originally IR£175,000, was apparently put up by a debtor, who presumably withheld payment of a corresponding amount of any liability on his part to Marine Glass Limited. That cannot account for anything like the whole increase. Therefore, the current statement of affairs is dependent on the quality and reliability of the debts. As regards current liabilities, they total 614,000 euros according to the statement, including 139,000 due to the VAT authorities and the loan account of 380,000. In total they have decreased somewhat compared to the liabilities of IR£590,000 shown in the balance sheet at 30th September 2001.
It is relevant to point out that at least the debt to the VAT authorities and possibly also the loan account will either be preferential or secured. That could mean that in any financial crisis the bank current account was not available.
The fact that there is a loan account of 380,000 euros is somewhat puzzling in the light of the recent statement by Mr Radford, the company's solicitor, made on 3rd December 2003, referring to the level of indebtedness that Marine Glass has recently repaid. However, it may be that that means that Marine Glass took out a loan in order to pay off some of the creditors who were shown in previous accounts. That could link up with some of the other points made on the application, namely that Marine Glass has over the years had a number of judgments, all on the face of them quite small, entered against it, which it has allowed to remain on the record. One reason why they may have remained on the record was that they were unsatisfied. There are now documents showing that they have all been paid off but the date of payment off is known only in the case of one of them. That was paid off in 1997. The rest, from the documents produced, may have been paid off more recently, except for a German debt which falls into a different category. Marine Glass explained that they regarded it as a liability of a vendor on a vessel. It does not seem to have been pursued against them. They regard it as settled, presumably by the vendor. The others are of some even if relatively minor interest. They show a casual attitude, even if that casual attitude only extends to leaving the judgments registered and not getting them removed from the register. There is a possibility that some of the judgments were not paid off until recently. I bear in mind about the less rigorous enforcement of the law which is said to exist in that regard in Eire.
The other point that can be made on the accounts and the statement of affairs is that they do not address the current litigation. It seems clear that no contingent liability is included in the accounts in respect of the principal sum claimed in this litigation, or in respect of interest on it, or in respect of outstanding costs. Some costs to the tune of about £31,000 have been met out of the bank guarantee, reducing the current value in English pounds to around £120,000. The principal sum is £90,000. On that interest is claimed and the costs of the trial are put at just over £60,000, although that is challenged as unreasonable by the appellants, the respondents to this application. On the face of it, it seems to me that the guarantee is not in any way likely to cover liabilities, leaving aside the costs of this appeal, if the appeal fails and the claim is made good.
There are also some relevant statements made in the course of these proceedings to date. Counsel before the judge below, speaking admittedly of a claim relating to costs put at £81,000 —that was the costs below, said that any such requirement to pay any such sum would have an adverse impact on the appellants, the respondents to the appeal. More recently, in the appellants' solicitor's letter of 22nd May 2003, there was a reference to a risk of the appeal being stifled if the appellant company had to pay a sum in respect of appeal costs anticipated as being in the region of £20,000.
I have to ask myself, in the light of all the evidence, including that which I have read, whether the condition is satisfied that there is reason to believe that the company will be unable to pay the defendants' costs if ordered to do so. I think it is right to stress the words "reason to believe" and the words "will be unable to pay". It seems to me that there is indeed reason to believe that it will be unable to pay. This is not an...
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