Meridian International Services Ltd v Richardson and Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice Rimer,The Chancellor |
| Judgment Date | 04 June 2008 |
| Neutral Citation | [2008] EWCA Civ 609,[2008] EWCA Civ 490 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2007/2655,Case No: A3/2007/ 2655(B) |
| Date | 04 June 2008 |
[2008] EWCA Civ 490
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
(MR ROBERT HAM QC)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Rimer
Case No: A3/2007/ 2655(B)
Mr Richard Davis (instructed by Wright Hassall LLP) appeared on behalf of the Respondent.
Mr James St Ville (instructed by Wedlake Saint) appeared on behalf of the Appellant.
(As approved)
These are proceedings in which Meridian International Services Limited (“Meridian”) is the claimant and the three defendants are Ian Richardson, IP Enterprises Limited and Peter Aldersley. The trial of Meridian's claim came before Mr Robert Ham QC over seven days in July 2007. Mr Ham was sitting as a deputy judge of the Chancery Division. On 2 November 2007 the judge made orders dismissing the claim, for delivery up and for an enquiry as to damages in favour of the defendants. He also ordered Meridian to pay the defendants' costs of the claim and counterclaim, part of which was to be assessed on the indemnity basis, and ordered Meridian to pay £80,000 on account of that liability within 21 days. The enquiry as to damages was later settled by a consent order dated 20 December 2007 under which Meridian was to pay the defendants' £30,000 in three equal instalments over the following three months. That order awarded the defendants the costs of the enquiry.
I gave Meridian permission to appeal on 29 January 2008. On 4 March the defendants —now the respondents to the appeal —issued the application now before me for security for their costs of the appeal. The evidence in support is that of Iain Colville of Wright Hassall LLP, the respondents' solicitors. The assertion that Meridian will be unable to pay the respondents' costs if unsuccessful in the appeal is not in issue. It is a company of which John Bobeckyj is the sole shareholder and a shadow director.
Mr Colville explained that in the court below Meridian, as claimant, gave security for £40,000 by way of a personal guarantee from Mr Bobeckyj and a bank guarantee from the Bank of Scotland. That security was limited to the costs of the proceedings below. It was provided pursuant to a consent order of 29 June 2007 and against a background of evidence that Meridian's internally prepared management accounts for the year ended September 2006 showed net income of just over £4,000 and an unsubstantiated projection of earnings of £403,000 for the year ending September 2007. Meridian has never filed any statutory accounts, the first set of accounts that it ought to have filed being overdue since 1 July 2007. Meridian's position since the filing of that evidence is that it has had to meet its own costs of the trial in July 2007; it has paid the interim sum of £80,000 on account of the costs ordered by the judge; it has paid the £30,000 damages; and it has had to incur the costs of launching its appeal.
The present application has provoked some discussion about the security currently in place pursuant to the June 2007 order. The respondents' trial costs amounted to some £180,000. After giving credit for the £80,000 already paid, the sum of £38,000 is said to be due, albeit subject to a detailed assessment. In addition, the respondents claim costs of some £12,900 plus VAT by way of costs of the consequential enquiry as to damages, although these costs are also subject to a detailed assessment. The respondents' position is that, even after such assessments, they are likely to be entitled to recover costs of more than £40,000 from Meridian, that being the amount of the security. Mr Bobeckyj, who has made a late witness statement, does not accept that the outcome of such assessments will be that the respondents will recover as much as they assert, and his position is that they are likely to recover no more than about £8,750. I am in no position to assess the merits of the different positions as to that. Some complaint is made by Meridian that the respondents have still not proceeded with the detailed assessment of their costs below. Their explanation for not doing so is the launching of Meridian's appeal. They say that it is not surprising that they should wish to await its outcome before seeking a detailed assessment; and the fact of the pending appeal makes it practically impossible to part with their files for costs assessment purposes.
As regards the respondents' costs of the appeal, in February 2008 the respondents entered into conditional fee agreements with their solicitors and with leading and junior counsel. Notice of that was serviced on Meridian on 3 March. Mr Colville's assessment of the respondents' costs of the appeal already incurred and to be incurred (including success fees) is £105,610.74 plus VAT, a figure shown by a draft bill prepared by 4 March. The success fees provide for an uplift of 33% on the base costs. The respondents ask for security in the sum of £75,000. That represents 71% of the total costs estimate.
On 10 March Meridian's solicitors, Wedlake Saint, proposed that the existing £40,000 security provided pursuant to the June 2007 order should be extended to cover the respondents' costs of the appeal. By that I understand them to have offered no more than that any surplus on that guarantee should be available to meet those costs. They also raised criticisms of the size of the respondents' estimated bill, including the costs already incurred. On 12 March Wright Hassall rejected the offered security. On 18 March Wedlake Saint offered a guarantee of £40,000 for the costs of the appeal. That was plainly in addition to the existing £40,000 security. Their letter suggests —wrongly, according to my understanding —that that is what they had offered on 10 March. The £40,000 offer of 18 March was repeated on 26 March. It was rejected on 8 April and again on 18 April.
The only issue before me is, as I have said, not whether any, but how much, security should be provided. Under CPR Part 25.13(1)(a) I can only make an order for security if I am satisfied that it is just in all the circumstances of the case to make such an order. That goes to the amount of any security order as well as to whether any security at all should be ordered. In his skeleton argument for Meridian, Mr St Ville submitted that it would be just to order security for costs in a figure of between £21,000 and £30,000 and no more. In his oral argument, however, he made it clear that the £40,000 offer, earlier made by Meridian, has not been withdrawn.
The appeal is estimated to last between one and two days. It was originally going to raise an issue as to the express terms of the arrangements between the parties, but in March the parties agreed that it would be confined to an issue as to whether the parties' relevant relationship included certain alleged implied terms. The base rates claimed in the respondents' bill amount to some £79,000. The success fees account for an additional 33%, or £26,000, taking the total bill to the £105,000 figure. Mr St Ville does not criticise the 33% uplift as being in principle unreasonable in the context of the issues in this appeal, but he does make the point that Meridian has no knowledge of the circumstances in which the respondents themselves might become personally liable to pay that success fee, since the CFAs have not been disclosed and nor is that contingency explained in Mr Colville's evidence. He says that in these circumstances it would be unjust for Meridian to have to provide security in respect of the success fee element of the bill, although he does not submit that it would be unjust for it to have to provide security for the base element of the respondents' costs in an amount that the court adjudges fair.
In making this submission, Mr St Ville relied on the decision of this court in Hollins v Russell [2003] 1 WLR 2487, in particular on paragraphs 71 and 80, in which the court indicated that, in costs proceedings, a receiving party seeking to rely on CFAs should, as a matter of fairness, ordinarily be put to his election as to whether to produce the CFA, perhaps redacting parts of it. The point he made is that, if that is a matter of fairness in costs proceedings, it must be a matter of like fairness in an application for security. The court cannot, it is said, make a fair assessment of the amount of security without being informed of the essential provisions of the CFAs. It is on this basis that Mr St Ville submits that the court should be cautious about providing security for the success fee element of the bills.
For the respondents, Mr Davis submitted that, whatever may be the practice in costs proceedings on a detailed assessment, the like considerations do not apply on an application for security for costs. I did not understand him to submit that Mr Colville's evidence makes clear the circumstances in which the respondents will become liable to pay the success fees to their lawyers. His point was a more general one that the respondents are not at this stage seeking any order for payment of any such success fee. They are merely seeking security for their costs and, if they are ultimately successful on the appeal, the indemnity principle will prevent them from recovering any more costs than they have to pay.
Mr St Ville also says that Meridian's position on the present application has been made worse by the respondents' failure to commence a detailed assessment of their costs below within the three-month period, since this has prevented it from...
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