URE Energy Ltd v Notting Hill Genesis
| Jurisdiction | England & Wales |
| Judge | Christopher Hancock |
| Judgment Date | 08 October 2021 |
| Neutral Citation | [2021] EWHC 2695 (Comm) |
| Docket Number | Case No: CL-2020-000686 |
| Court | Queen's Bench Division (Commercial Court) |
[2021] EWHC 2695 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Christopher Hancock
SITTING AS A JUDGE OF THE HIGH COURT
Case No: CL-2020-000686
Hugh Sims QC and James Wibberley (instructed by Burges Salmon) for the Claimant.
David Lord QC and Daria Gleyze (instructed by Devonshires) for the Defendant.
Hearing dates: 14 May 2021
Approved Judgment
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Christopher Hancock SITTING AS A JUDGE OF THE HIGH COURT
Christopher Hancock QC:
Introduction and background.
This is an application for security for costs, dated 16 March 2021, whereby the Defendant seeks an order that the Claimant provide security for the Defendant's costs up to and including the CCMC, in the sum of £100,000.
The claim arises from a contract dated 29 September 2017 (“the Contract”) under which the Claimant was required to supply electricity to the Defendant over a four-year period at fixed rates. The Contract had initially been a tender process for a long term contract (“the Long-Term Contract”), with the Claimant being the only bidder. However, the Defendant's procurement terms provided that the Defendant did not bind itself to enter into any contract with the selected bidder.
As the Long-Term Contract was only outlined in the broadest terms in the tender, it could not be entered into immediately. Therefore, the parties entered into the Contract so that the Claimant could start supplying energy to the Defendant.
The Contract was originally entered into between the Claimant and a housing provider called Genesis Housing Association Limited (“Genesis”). In July 2017, some 3 months before the tender processes, it is asserted by the Defendant that it had been publicly announced that Genesis would merge with Notting Hill Housing (another housing provider), to form what is now the Defendant (“the Amalgamation”).
The Defendant contends that the progress and details of the Amalgamation discussions were made public in the following months, with an email dated 22 March 2018 being circulated to the contractors of Genesis to inform them that the Amalgamation would be effective on 4 April 2018 and inviting them to discuss any concerns or issues they had with it. The email confirmed that, upon Amalgamation, all contracts would be transferred over to the new entity, namely the Defendant. The Defendant asserts that the Claimant received the email and raised no objections.
The Contract provided that the Defendant would make monthly payments in arrears to the Claimant for the energy provided. There is a dispute between the parties as to whether this provision was varied to require payments in advance. In any event, it is common ground that, throughout the term of the Contract, the Defendant did make payments in advance to the Claimant.
As of August 2017, it is asserted that the Claimant confirmed that the Defendant had credits of £93,507.77 due to overpayments to the Claimant. It is also asserted that as of 12 October 2018, the Claimant confirmed the Defendant's calculation that the Defendant's “exposure” (being credits with the Claimant plus payments made by the Defendant on account) was £256,802.90.
In or around September 2018, Mr Jameson, previously procurement director, left his employment with the Defendant, and a Mr Carey, Head of Corporate and Professional Services, took an active role in relation to the Contract and the negotiations of the Long-Term Contract. Mr Carey sought to enforce payment in arrears as per the original terms of the Contract, asked that the overpayments under the Contract be credited back to the Defendant and terminated the Long-Term Contract negotiations.
Termination of the Contract.
By letter dated 31 October 2018, Mr Ensor on behalf of the Claimant purported to terminate the Contract with immediate effect, by reason of the termination of the Long-Term Contract negotiations, which the Defendant asserts that Mr Ensor attributed to the change in personnel following the Amalgamation. Mr Ensor also mentioned alleged difficulties in accessing meters (which it said put the Defendant in breach of clause 6.3) but linked those to the Amalgamation as well. Mr Ensor sought £3.9 million in liquidated damages under clause 10.5 of the Contract.
By letter dated 2 November 2018, the Claimant purported to withdraw its letter of termination of 31 October 2018 and instead requested that the Defendant remedy the alleged breach of clause 6.3 within 10 days.
By letter dated 7 November 2018, the Claimant's solicitors notified the Defendant that the Contract would terminate in any event at 4 pm on 14 November 2018 by reason of the Amalgamation, which they said had not been approved by the Claimant in advance. As a result, the Claimant's solicitors demanded £3.9 million as liquidated damages under clause 10.5 of the Contract. The Claimant's solicitors also mentioned the alleged breach of clause 6.3 and reminded the Defendant that it was given 10 days to remedy it (which at that stage had not expired).
By letter dated 14 November 2018 (sent after 4 pm), the Defendant indicated that the Claimant's purported termination was in repudiatory breach of contract, as, among others, the Claimant had affirmed the Contract following the Amalgamation. The Defendant purported to accept the Claimant's repudiation of the Contract.
The Claimant issued the present proceedings on 19 October 2020, with Particulars of Claim dated 19 February 2021.
The provisions of CPR Part 25.
CPR 25.13(1) provides for a two-stage test: (i) a jurisdictional stage and (ii) a discretionary element.
“(1) The court may make an order for security for costs under 25.12 if—
(a) it is satisfied, having regard to all the circumstances of the case, that it just to make such an order; and
(b) (i) one or more of the conditions in paragraph (2) applies; or
(ii) an enactment permits the court to require security for costs.”
The Application seeks an order for security for costs under CPR 25.13(2)(c), namely where “ the claimant is a company or other body (whether incorporated inside or outside Great Britain) and there is reason to believe that it will be unable to pay the defendant's costs if ordered to do so”.
Jurisdiction.
In SARPD Oil v Addax Energy [2016] EWCA Civ 120, the Court of Appeal referred to the earlier decision in Jirehouse Capital v Beller [2009] 1 WLR 751 and commented that:-
“13. It follows that it is not sufficient for the court to be left in doubt about a claimant's ability to pay the defendant's costs if the claimant loses. Nor it is sufficient as the first instance judge in Jirehouse had done to paraphrase the wording of the rule by saying that there was a sufficient danger that the claimants would not be able to pay such costs. The court must simply have reason to believe that the claimant will not be able to pay them.
14. That is, as Arden LJ said, a matter of evaluation ….”
Mr Sims QC, for the Claimant, did not seek to challenge this statement of general principle, which I accept. The insolvency or impecuniosity of the Claimant was not disputed. By 31 July 2019 it had negative funds in excess of £1m, and it has ceased to trade and may need to enter into a CVA to preserve its position pending resolution of this claim. In these circumstances, Mr Sims QC was content to accept, before me, that, despite the existence of an ATE insurance, of which I will say more later, I had jurisdiction to order security. He reserved the right to revisit this if the matter came before the Court on a further application. Mr Lord QC was prepared to proceed on this basis.
Discretion.
It follows that the issue before me is whether, as a matter of discretion, I should order security. In this regard, the Claimant submits that I should not, since:
1) The claim has merit, and the Court should not seek to conduct a mini-trial at this stage;
2) The Claimant has taken out an ATE insurance, and this gives the Defendant sufficient security, particularly since the insurers have agreed in principle to make the cover available to the Defendant;
3) The Claimant's shareholders are not prepared to fund the litigation and funding cannot be procured so that the claim will be stifled if an order is made;
4) The Claimant's financial situation has been caused by the Defendant's wrongdoing;
5) The Defendant has a counterclaim based on essentially the same facts and it would be unjust to allow the counterclaim to continue without security whilst requiring security from the claimant.
The Defendant submits that I should order security, since:
1) The claim is not made bona fide;
2) The claim has no reasonable prospect of success;
3) There has been no payment in;
4) There has been no admission of liability;
5) The ATE insurance does not have anti-avoidance provisions and thus does not give adequate security;
6) The unwillingness of shareholders and others to fund the litigation militates in favour of the grant of security;
7) It is clearly not the case that the Claimant's financial situation is due to the Defendant since the Claimant has always been insolvent;
8) The Defendant is willing to agree to discontinue its counterclaim if the claim does not proceed.
This latter list of relevant factors is essentially based on the decision of the Court of Appeal in Sir Lindsay Parkinson & Co v. Triplan [1973] QB 609. I deal with each of these...
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