Summit Navigation Ltd v Generali Romania Asigurare Reasigurare SA
| Jurisdiction | England & Wales |
| Judge | Mr Justice Leggatt |
| Judgment Date | 21 February 2014 |
| Neutral Citation | [2014] EWHC 398 (Comm) |
| Docket Number | Case No: 2012 FOLIO 467 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 21 February 2014 |
[2014] EWHC 398 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Leggatt
Case No: 2012 FOLIO 467
James Watthey (instructed by Hughes & Dorman) for the Claimants
Jason Evans-Tovey (instructed by Cubism Law) for the Defendants
Hearing date: 14 February 2014
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
The decision of the Court of Appeal in Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1537, [2013] 6 Costs LR 1008, on the effect of the new CPR 3.9, has rightly been described as a "game changer": see Michael Wilson & Partners Ltd v Sinclair [2013] EWCA Civ 1732, per Lewison LJ. It is important for litigants to understand, however, how the rules of the game have been changed and how they have not. The defendants in this case have sought to rely on Mitchell to turn to their tactical advantage a short delay by the claimants in providing security for costs which in itself had no material impact on the efficient conduct of the litigation. They have argued that the consequence of the claimants' default should be that the action remains permanently stayed.
Unlike the claimants' default itself, the defendants' response to it has had a very serious impact on the litigation. The whole timetable for the proceedings has been derailed, significant costs have been incurred and court time has been wasted to the detriment of other court users. In other words, the reliance placed on Mitchell in this case has had the very consequences which the new approach enunciated by the Court of Appeal in Mitchell is intended to avoid.
In the hope of discouraging other litigants from making similar arguments to those made by the defendants in this case, with similar disruptive consequences, I said at the end of the hearing that I would put in writing my reasons for the orders which I then made. This judgment gives those reasons.
Procedural history
The first claimant is a Maltese company which owned the vessel "Beril", and the second claimant is Turkish company which managed the vessel. They claim in this action under a policy of marine insurance issued by the defendants in respect of damage to the vessel's hull and machinery. The amount at stake is modest by the standards of commercial claims being some US$500,000.
The action was begun in March 2012. In March 2013 the claimants were ordered to and did provide security for the defendants' costs in a sum of £25,000 by procuring a bond from a company called Amtrust Europe Ltd which insured the claimants for their potential costs liability up to that amount.
After statements of case had been served, directions for the future conduct of the action were agreed and embodied in an order made by consent on 11 October 2013. That order set out a timetable for disclosure, service of witness statements, exchange of experts' reports and other steps leading to a trial which was fixed to start on 7 July 2014.
The defendants applied for further security for their costs, which the claimants agreed to provide by a further consent order dated 26 November 2013. It is here that the trouble began. The Commercial Court Guide in addressing security for costs in Appendix 16, paragraph 6, states:
"It is not usually convenient or appropriate to order an automatic stay of the proceedings pending the provision of the security. It leads to delay and may disrupt the preparation of the case for trial, or other hearing. Experience has shown that it is usually better to give the claimant (or other relevant party) a reasonable time within which to provide security and the other party liberty to apply to the court in the event of default. This enables the court to put the claimant to his election and then, if appropriate, to dismiss the case."
The wisdom of the experience referred to in the Guide is demonstrated by the history of the present case.
The relevant terms of the consent order dated 26 November 2013 were as follows:
"IT IS ORDERED that:
1. By 4pm on 5 December 2013, the Claimants provide further security for the Defendants' costs of the claim in the sum of £100,000 by one of the following methods:
1.1 Payment into Court or
1.2 Delivery to the Defendants' solicitors of a bond in the sum of £125,000 in terms identical save as to amount to that of Amtrust Europe Ltd dated 11 March 2013 ("the Existing Bond") whereupon the Existing Bond will cease to have effect and the Defendants' solicitors will return it to the Claimants' solicitors.
2. In the event that such security is not provided by the said date the action be stayed."
On 28 November 2013 the claimants' solicitors sent to the defendants' solicitors the form of a proposed bond seeking their approval of the wording. The bond was drafted as a deed to secure the claimants' liability for costs in a sum of £100,000 in addition to the £25,000 secured under the existing bond. The defendants' solicitors refused to accept the proposed wording on the basis that the consent order provided for a single new bond in the sum of £125,000 and not an additional bond for a further £100,000.
On 3 December 2013 the claimants' solicitors sent an email to confirm that the underwriters would issue a new bond for the full amount subject to it being exchanged for the old one. On the same day the defendants' solicitors agreed a procedure for such an exchange.
On 4 December 2013 the claimants' solicitor, Mr Dorman, was told by the brokers that the new bond would be issued on the following day (5 December) and that arrangements would be made by the brokers direct with the defendants' solicitors to effect an exchange of the new deed for the old one on that day. However, this did not happen. The brokers have since informed Mr Dorman that they were unable to get the underwriter's signature on the new deed on 5 December or until the morning of 6 December 2013.
The claimants thus failed to comply with paragraph 1 of the order dated 26 November 2013, which required the new bond to be delivered by 4pm on 5 December 2013. At 9.28am on 6 December 2013 the defendants' solicitor, Mr Stockler, sent an email to record that fact and point out that the action was now stayed.
Mr Dorman sent an email back at 9.56am to say that he understood that the signature on the deed was still required but would be obtained that day. That email was followed five minutes later by a further email from Mr Dorman timed at 10.01am stating that he had just been advised that the signature to the deed had been obtained and it was ready for exchange. He said that the broker would attend Mr Stockler's offices to exchange the new deed for the old one and would be in contact directly to arrange a convenient time.
Mr Stockler's response (sent at 10.08am) said:
"The action is stayed. If you wish to have the stay lifted, you will no doubt take your own advice on how, if at all, this can be achieved. For our part, we can tell you now that, should your client make an application for relief from sanctions pursuant to CPR 3.9, that application will be resisted. No doubt you will be aware of the recent Court of Appeal decision in Mitchell v News Group Newspapers."
In a further email sent a few minutes later Mr Stockler made it clear that:
"We do not intend to exchange the bond unless and until the stay on proceedings has been lifted."
In subsequent email correspondence the claimants' solicitors asked the defendants' solicitors to reconsider their position and to agree to the lifting of the stay in return for the delivery of the new bond. Those requests were refused. In these circumstances the claimants issued an application dated 9 December 2013 for an order declaring that the action was no longer stayed by virtue of the claimants having made security available to the defendants or, alternatively, an order that the stay of the proceedings be lifted.
The defendants responded by issuing an application of their own on 13 December 2013 for an order that the action be stayed pursuant to CPR 58.14 on the ground that the claimants had failed to comply with part of the order for directions dated 11 October 2013 which provided for disclosure of ship's papers. That may be thought a surprising application to make in circumstances where the defendants were maintaining that the action was already stayed. It has, however, been relied on by the defendants as an alternative basis for not lifting the stay.
The defendants' arguments
In outline, the arguments advanced by Mr Evans-Tovey on behalf of the defendants were as follows:
i) The failure of the claimants to provide security in compliance with paragraph 1 of the order had the consequence that, pursuant to paragraph 2, the action became automatically stayed.
ii) To lift the stay would require an order of the court.
iii) The claimants' application for such an order is an application for relief from a sanction falling under CPR 3.9.
iv) Accordingly, the Mitchell principles must be applied.
v) Applying those principles, the claimants' default was not trivial and there was no good reason for it.
vi) In these circumstances, the claimants' application should be refused and the action should remain permanently stayed.
vii) Alternatively, if the court would otherwise be prepared to lift the stay, it should not do so and an order should be made staying the proceedings under CPR 58.14 on account of the claimants' alleged failure to comply with the order for...
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