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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Caterpillar (NI) Ltd v John Holt & Company (Liverpool) Ltd [2013] EWCA Civ 779 (13 June 2013) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2013/779.html Cite as: [2013] EWCA Civ 779

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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(MISTER JUSTICE POPPLEWELL)

		Royal Courts of Justice Strand London WC2A 2LL
		13 June 2013

Lord Justice Tomlinson:

1. There are before the court a series of applications in relation to a pending appeal which is due to be heard on Wednesday, 10 July this year. It is an appeal for the bringing of which I myself gave permission at the end of January this year.
2. There are two related actions which I take into account in the exercise of my discretion, in that it is accepted that were it not for the existence of an anti set-off provision in the contract pursuant to which some generators were supplied by the respondent ("Wilson") to the appellant ("Holt"), the claim brought by Holt against Wilson in the action which has been known as "Holt 1" would be capable of operating as an equitable set-off against the claim which is the subject of proceedings which are currently before me.
3. The appeal relates to the proper construction of a reservation of title clause in the contract of supply, to which I have referred, and also the anti set-off provision to which I have just made reference.
4. The position is that the respondents obtained summary judgment on their claim for the price of the generators from Popplewell J, as a result of which they obtained an order in their favour on 6 September last year in the sum of a little over $13 million inclusive of contractual interest. However, the judge imposed a stay on that order pending any application for permission to appeal, and although he thought it appropriate that the unsuccessful defendants should pay £180,000 on account of the claimant's costs, he likewise imposed a stay upon that order. That enables Mr Cogley for Holt to point out, as is undoubtedly the case, that this is not a situation in which there has been any failure by Holt to pay any amount ordered by the court. On the other hand, the position is, as Mr Hollander rightly reminds me, that this is the first occasion on which the appropriateness of a stay has been considered inter partes because the judge simply imposed a stay pending an application for permission to appeal. Moore-Bick LJ, when refusing permission to appeal, nonetheless continued the stay pending any renewal of the application, and when I granted permission to appeal, I likewise continued the stay, although it was brought to my attention that the respondents had in the interim attempted to lodge with the court an application, one purpose of which was to ensure that there should not be a stay on the judgment pending appeal, but had been stymied in their attempt by the Civil Appeals Office. However that may be, the principal application before the court now is for security for costs of the appeal.
5. I say straightaway that I do not propose to grant security for costs in relation to the costs which have already been incurred in the course of the proceedings below, but I am considering only the application for security for costs of the appeal properly so called.
6. As to that, there are a number of factors to be taken into account. The first is that the application is, objectively speaking, made relatively late in the sense that it is now only a little over three weeks until the hearing of the appeal. That is not the fault of the appellants. Nor, in one sense, is it the fault of the respondents, for the respondents, as I have already indicated, on 26 November, that is to say in between the refusal of permission to appeal by Moore-Bick LJ and the renewed oral application, attempted to issue this application for security for costs, and indeed a further application seeking to make any grant of permission to appeal conditional upon a payment of a sum towards the judgment debt, but were frustrated in that attempt by the Deputy Master of the Court of Appeal. What is said is that the appellants, as experienced litigators -- at any rate their lawyers as experienced litigators -- should have pressed the Civil Appeals Office to place the matter before a judge of the court and should have pointed out that the provisions to which the Deputy Master of the court had referred in her direction related to the making of submissions in opposition to the grant of permission to appeal, rather than to the circumstances in which it may be appropriate for a prospective respondent party to seek security for costs or other protective orders in anticipation of the grant of permission to appeal.
7. It is pointed out that the notes to CPR 25.15 make clear that there may be circumstances in which it is entirely appropriate for respondents to issue applications of the sort that the respondents here sought to issue in which case the relevant jurisdiction of the court to grant the relief is to be found not in order 25, but in order 3.
8. That argument, so far as it goes, as put forward by the appellants, is fair enough, although it does expect of the respondent party a course of conduct which involves questioning the unequivocal advice given to it by an officer of the court.
9. I have to take into account, therefore, that the position has been reached through conduct of the respondents which is not really blameworthy or culpable, that we are now considering this application for security only just over three weeks before the appeal is to be heard.
10. Turning to the substance of the matter, until 36 hours ago it appeared to be accepted, and indeed it is still accepted, that the criteria for imposing security for costs or making an order for security for costs are here satisfied in that the appellant is a limited company and there is reason to believe that it would be unable to pay the costs of the other parties to the appeal should its appeal be unsuccessful. I say that that appeared to be accepted until 36 hours ago simply because late on Tuesday evening of this week, it now being Thursday, the appellants served the third witness statement of Mr David Parmley, who is a director of the appellant company, who has previously made witness statements in this matter. On a fair reading of that witness statement, which was the reading which Mr Hollander not surprisingly applied to it, it appeared to be said that Holt had disposed of its shareholding in the Nigerian company, PLC, raising 200 million Naira, and that those sale proceeds would be utilised in their entirety in meeting the current legal costs of both Holt and PLC in connection with the litigation with the respondents.
11. That not unnaturally was read as indicating that, bearing in mind the sort of costs to be anticipated from now on, there would be a substantial balance which could be applied in order to put up security for costs in the sort of sum that was being sought, which was either £100,000, or £280,000, depending on whether the previously incurred costs were taken into account. Furthermore, the witness statement indicated that the PLC company, in Nigeria, in which until the share sale Holt had a majority interest, had sold certain properties, the proceeds of which were £540,000, half of which was expected to be made available to be applied towards both Holt's and PLC's current legal costs which Mr Hollander suggested had precisely the same connotation as when used earlier in the witness statement.
12. As Mr Hollander pointed out, that witness statement raised a number of obvious questions: the identity of the purchaser of the shares, the obvious question as to whether or not it was a sale to a connected party or whether the shares had simply been parked, or whether they had in fact been effectively used as security for a loan. No indication was given as to the date of the sale, and furthermore a question arose as to why it was thought appropriate both that Holt should use the proceeds of the sale of its interest in PLC to fund the legal costs of PLC in which it would have no further interest, and likewise why PLC apparently would think it appropriate to use the proceeds of the sale of its properties to fund costs to be incurred by Holt in circumstances where there was no enduring relationship between the parties.
13. In the course of the hearing today, as it happens after the short adjournment, Mr Cogley QC for the appellant has explained on the basis of instructions that both the court and Mr Hollander had been labouring under a misapprehension as to the financial position as set out in Mr Parmley's third witness statement. What is now said and what Mr Cogley undertakes to incorporate in a further witness statement which is to be sworn, served and prepared by Mr Parmley is in fact that both the proceeds of the sale of the shares and indeed the proceeds of the sales of the Nigerian property have already, subject to one point, been earmarked or used, as the case may be, in order to pay the legal costs which have already been incurred in the litigation with the respondents, so that there is in fact, or will be if the 50 per cent of the property's proceeds is recovered as expected, no balance available in order to meet ongoing costs, with the exception that £172,000 is apparently in Holt's solicitor's client account and being held for the costs of this hearing, costs of the appeal and costs of a 2 to 3 day CMC fixed for 7 July in Holt 1, the action in which Holt claims $50 million-odd against the respondents for breach of the distributorship agreement. The upshot of all that is that what is now said is that the sale of the shares and the sale of the property, whilst it has released a sum of money which enables the appellants to fund their own costs of the appeal and the other hearings to which I have referred, leaves no amount over from which security for costs could be posted.
14. It does not really need emphasising that the manner in which this evidence or these instructions have come forward is really very, very unsatisfactory, as is in all the circumstances the bare assertion that a sale has been made of the shareholding without producing any documents in support in order to corroborate what is said.
15. On instructions Mr Cogley has told me that the sale was in fact a fire sale, and that it was a sale to a broker in Nigeria, and furthermore that it was a sale at a substantial discount to the apparent market price as it appears from various reports, market documents, Bloomberg printouts to which I have been referred. I do of course bear in mind Mr Parmley's earlier evidence that there is no market for shares of this sort, and I recognise that published prices of this sort often need to be taken with a pinch of salt. Nonetheless, on the face of it, this is a disposal of the shares at a very, very considerable discount to what was published as their value, and that is a matter which requires some further explanation which the appellants cannot expect either their opponents or this court simply to accept at face value.
16. As I have indicated to Mr Cogley, the court might have taken the view that it would simply proceed on the basis of the evidence of Mr Parmley in his third witness statement and take that at face value. In all of the circumstances, I am not persuaded that that is appropriate, but nonetheless I cannot overemphasise that the manner in which this information has been put before the court does not comply with what is ordinarily required by way of full and frank disclosure, and that is a matter which I take into account in the overall exercise of my discretion.
17. So also I take into account the fact that although at various stages of the litigation it has been said that the Holt company is unable to find funds to meet legal costs, nonetheless on every occasion it has been able to secure representation by well-known solicitors and by counsel from leading chambers in London, and it is apparent that when Mr Hollander submits that it is simply unreal to think that an order for security for costs if made in the sort of sum sought would stifle the appeal, that submission is well-founded.
18. It is clear to me, in fact it is well-known and Mr Hollander has reminded me of the passages in the authorities such as Hammond Suddard Solicitors v Agrichem International Holdings Limited [2001] EWCA Civ 2065 and Keary Developments Ltd v Tarmac Construction Ltd [1995] 3 All ER 534, that it is legitimate for the court to have regard to the reality that there stands behind this company directors and possibly other backers, persons who have a financial interest in the company, who would be likely to find it in their interests to put the company in funds in order to enable it to bring the appeal which it wishes to bring. I do not overlook of course that Mr Parmley has said on more than one occasion that the directors are unwilling to put up any funds or further funds with a view to assisting the company, but in all the circumstances, and having regard, as I say, to the wholly unclear picture which is now painted, I do not take that assurance at face value. In any event, the position has not yet developed to the stage in which any of the directors or other interested parties have had to contemplate what might be the consequences if they do not put up the relevant funds.
19. I am quite satisfied that an order for security of costs in the sum of £75,000 is not something which is going to stifle the bringing of this appeal. I regard the suggestion that it might, on the basis of all the material I have seen, as simply laughable. The appellants have been able to fund these two sets of related litigation on a lavish scale for some considerable time, and it is apparent that further sums are becoming available and have become available, which have been used in order to defray the costs so far incurred, and even to put aside, as it were, a war chest for the bringing of the appeal, although not, it is said, sufficient to meet any adverse costs order that may be made against the company.
20. Looking at the matter in the round, having regard to the purpose of an application for security for costs and the authorities to which I have been referred, I am quite satisfied that it is appropriate that I should make an order that the appellants put up security in a form which will be discussed in the sum of £75,000 for the respondents' costs of the appeal. The normal period within which that is done is 21 days. 21 days from today would expire on Thursday, 4 July, which would leave only three clear days between then and the hearing date for the appeal. Mr Hollander has suggested that, as was done in the Hammond Suddard case, I should indicate at this stage that the sanction for failing to post security for costs within the required time will be that the appeal should be struck out. If I were to take that course I would feel obliged to extend the time within which the money was to be posted, at any rate so as to give to the appellants 21 days as from tomorrow, or at any rate 21 days so as to expire on Friday the 5th rather than Thursday the 4th, bearing in mind that it is already 4.40pm on Thursday, 13th June, but in the circumstances, I am not persuaded that it is appropriate that I should at this stage, for the first time of asking as it were, impose the sanction of striking out.
21. Agrichem was, as Mr Cogley has pointed out, a very different sort of case in which the relevant party was incorporated in an overseas tax haven and was in breach of its existing obligations to make payments pursuant to orders of the court. Neither of those considerations applies here.
22. In the circumstances, therefore, I propose simply to direct that the sanction for failure to put up security by close of business on Thursday, 4 July will be that the appeal will be stayed. Naturally the parties will have liberty to apply in relation to that, and I need perhaps say no more than that.
23. I should just formally indicate that Mr Hollander has an outstanding application that I should impose a condition upon the bringing of the appeal and require the payment of a proportion of the judgment sum, and indeed although I think he has not very vigorously pursued it, he has an application that, in any event, the existing stay on execution of the judgment should be lifted. I do not propose to take either course largely because of the proximity of the hearing date of the appeal, although it must be obvious that in the event that the appellants fail to put up security for the costs of the appeal within 21 days, an application for the lifting of the stay of execution thereafter might look very different and have very different prospects of success.

Order: Appeal allowed