Parsdome Holdings Ltd v Plastic Energy Global S.L.

Hearing date: 22 October 2024

Approved Judgment

This judgment was handed down remotely at 10.30am on 29 October 2024 by circulation to the parties or their representatives by e-mail and by release to the National Archives (see eg https://www.bailii.org/ew/cases/EWCA/Civ/2022/1169.html).

This appeal from the order of Foxton J dated 14 February 2024 raises a short point as to the time at which an order requiring payment into court as security for costs is to be treated as satisfied. It arises in the following circumstances.

At the hearing of the appeal we announced our decision to dismiss the appeal, with reasons to follow. These are my reasons.

The claimant (and appellant) Parsdome Holdings Ltd (“Parsdome”) commenced proceedings against the defendant (and respondent) Plastic Energy Global S.L. (“Plastic Energy”) in November 2021, alleging that Plastic Energy induced it to enter into a deed of novation of a convertible loan agreement by fraudulent misrepresentations.

Parsdome is incorporated in the British Virgin Islands. Its owner and director is Mr Matias Rojas (“Mr Rojas”). It has not provided details of its financial position, but – as the judge noted – by 2023 it appeared that its financial position was becoming more challenging, a conclusion reinforced by its solicitors coming off the record in January 2024 and Mr Rojas' confirmation to the judge that financial pressures led him to seek to meet the court's orders for security for costs rather than continue to incur legal expenses.

Orders (by consent) were made against Parsdome for the provision of security for costs in 2022, which were complied with. The current issue arises out of two orders for security for costs made in late 2023 and early 2024.

The first is an order of Andrew Baker J dated 10 November 2023 (the “Baker J Order”). This required Parsdome to “provide security for the Defendant's costs for the period up to and including exchange of witness statements by paying the sum of £343,000 into the Court Funds Office or by providing a first-class London bank guarantee in the same amount”, by 5 December 2023.

Parsdome sought to comply with the Baker J Order by sending a cheque to the Court Funds Office (the “CFO”), but it breached the order in four respects. First, the cheque was received after the deadline. Second, the cheque was for a sum in US dollars, not sterling as required by the order. Third, it was for the wrong amount. Fourth, as it was rejected by the CFO, no payment was ever made by this cheque as it never cleared.

The second is an order of Calver J, sealed on 15 January 2024 (the “Calver J Order”). Plastic Energy, while reserving its rights in respect of the breaches of the Baker J Order, agreed the terms of a consent order with Parsdome, to permit payment of the security by cheque in a foreign currency, and to increase the amount of security. This was to cater for the work that Plastic Energy's legal team was required to do in preparation for the trial due to commence on 26 February 2024. The terms of the consent order took a while to be agreed (largely due to delays in Parsdome's solicitors obtaining instructions from Mr Rojas). The Calver J Order required payment of a further sum of £939,500 to provide security for Plastic Energy's costs up to and including trial. By paragraph 3, Parsdome was required to satisfy both the security ordered by Baker J and the further security, “by way of a payment of an equivalent sum of £1,282,500 into the [CFO] (whether by way of cheque or bank transfer) by 4pm (UK) on the date 7 days after the date on which the Court seals this Order and provides the same to the Claimant's solicitors”. That date was, in the event, 22 January 2024. The order also provided that Parsdome was permitted to make the payment in a foreign currency (US dollars).

The evidence before Foxton J indicated that Parsdome breached the Calver J Order in that, as the CFO had confirmed, no cheque was received by it at all. It is unclear why this was. In any event, as the cheque was only posted from Guatemala on 22 January 2024, it could never have been received by the CFO (even if it had not gone missing) by the deadline. In addition, the Form 100 supplied by Parsdome was rejected by the CFO, because it did not contain a “wet” signature.

On 5 February 2024, in view of these breaches, Plastic Energy issued an application to strike out the claim, pursuant to CPR 3.4(2)(c).

On 13 February 2024, Mr Rojas submitted a “position statement”, in which he proposed a “constructive solution”. This involved cancelling the cheque sent on 22 January 2024, and issuing a new cheque (which he had already requested to happen) to be sent from Guatemala to his address in London, so that he could forward it with the accompanying documents to the CFO.

On the morning of 14 February 2024, Mr Rojas emailed the court, enclosing a photo of a re-issued cheque, together with a photo of the DHL envelope within which it was sent, both dated 13 February 2024. He indicated that this would be received at his London address on 16 February, and that he would then courier it to the CFO.

Before Foxton J on 14 February 2024, at which point the trial was due to start in 12 days time, no cleared funds had been received. Parsdome had provided no evidence that there were sufficient funds in the bank account on which the cheque had been drawn. The best that Mr Rojas was able to say to Foxton J was that the CFO had indicated that it may take six to eight weeks for the cheque to clear, assuming there were funds in the account.

In addition, Parsdome had failed to pay the trial fee (which itself would lead to the trial being struck out under CPR 3.7A1(7)).

In addressing Plastic Energy's application, Foxton J applied the three-stage test from Denton v T H White Limited [2014] EWCA Civ 906; [2014] 1 WLR 3926: (1) was the breach serious? (2) was there a reasonable excuse? (3) would it be just, in all the circumstances, to impose a sanction for breach? To that he added the further consideration, since it was an application to strike-out, whether doing so would be proportionate.

He concluded that the breaches were serious. It was two months since the Baker J Order, and 12 days before the start of trial, but no security had been provided at all. In reaching this conclusion, he took into account that, in his assessment, payment into the CFO requires cleared funds, not merely the presentation of a cheque which may take a long time to clear, or which may never clear. He concluded that there was no satisfactory excuse and that it would be unjust, in the circumstances, to impose no sanction. He declined, however, to strike out the claim immediately. Instead, he gave Parsdome a brief opportunity to comply, ordering that unless it provided security – by way of cleared funds paid to the CFO – by 4pm on 20 February 2024, the action would be struck out.

Shortly after the hearing on 14 February 2024, however, Mr Rojas brought to Foxton J's attention the decision of the Court of Appeal in ENE Kos 1 Ltd v Petroleo Brasilieiro SA [2009] EWCA Civ 1127 (“ ENE Kos”). In that case it was held that (1) payment by cheque is made at all only if cleared funds are received by the payee; but (2) the effective date for payment of a cheque in purported compliance with an order to pay funds into court is the date on which the cheque is received by the CFO, and not the date on which cleared funds are received.

Foxton J acknowledged that, in light of that decision, which was neither cited to him nor referred to in the White Book, part of his reasoning for making the order of 14 February 2024 was wrong.

He noted, however, that (in contrast to the facts of this case) in ENE Kos the cheque was drawn on an account of London solicitors who confirmed they had already been put in funds by their client, and that the cheque had cleared before the issue of alleged non-compliance came before the court.

He also noted the observations of Arden LJ in ENE Kos (at §51–54) to the effect that the circumstances of a particular case may make it just for the court to craft a special form of order, such as requiring cleared funds to be received by a particular date. One such circumstance which she envisaged was an order to pay money into court for security for costs, where it would be unfair to the opposing party to require them to incur substantial costs at a time when the cheque by which payment into court was made was in the process of being cleared. That, Foxton J noted, was exactly the position before him. Plastic Energy would have been required to incur substantial costs in the immediate pre-trial period for a trial starting in a matter of days, without any security because the cheque by which the security was purportedly paid would not clear, if at all, until after the trial.

In those circumstances, he concluded that his order of 14 February 2024 was the only order which met the justice of the case. He therefore refused to stay the order. He delayed consideration of permission to appeal until after the deadline had passed for the receipt of cleared funds. He directed Parsdome to provide evidence confirming (1) the availability of...