This is the judgment of the court.
Introduction
1. This is an appeal by K. & Co (“K.”), the first defendant in the action,
against an order made by Miss Elizabeth Gloster. QC, sitting as a Deputy
High Court Judge in the Chancery Division, on 19 February 2001. By
her order, the judge dismissed K.’s application that the claimant in the
action, Mr H. D. de B., give security for its costs of the action. The judge
concluded that on the true construction of the relevant provisions of the
Civil Procedure Rules (“the CPR”) the court had no jurisdiction to make
the order sought. In the light of that conclusion further questions as to
whether the discretion to order security for costs should be exercised, and
if so on what terms, did not arise.
2. Notwithstanding that Mr de B. is ordinarily resident in the United
States, the judge concluded that there was no jurisdiction to order
security for costs against him since he currently had assets in Holland
and in Switzerland, which states are respectively parties to the Brussels
Conventions and the Lugano Convention (as defined in section 1(1) of
the Civil Jurisdiction and Judgments Act 1982). There is no material
difference for present purposes between the provisions of the Brussels
Conventions and those of the Lugano Convention. For convenience we will
refer hereafter to the Brussels Conventions and the Lugano Convention
as “the Conventions”, and to states parties to the Conventions or either
of them as “Convention states”. The judge held that the fact that Mr de B.
had assets in a Convention state meant that the court had no jurisdiction
to order him to give security for costs.
3. The judge gave permission to appeal against her dismissal of the
application for security for costs, but refused permission to appeal against
her dismissal of two further applications made by K.. K. applied for
permission to appeal against the dismissal of the other applications, but
permission was refused by J. P. LJ on the papers on 23 May 2001 and the
application for permission has not been renewed.
4. K. appears on this appeal by Mr P. M. of counsel; Mr de B. by Mr P. S. of
counsel. Both counsel appeared before the judge.
The background to the dispute
5. K. is a firm of solicitors. The principal of the firm is Mr N. K.. The
second defendant in the action, Mr R. K.-B., is a former solicitor who
acted at the material time (1991) as consultant to K.. On 9 December
1998 Mr K.-B. was ordered to be struck off the roll of solicitors for serious
misconduct arising out of the transactions which have given rise to the
present dispute. Mr de B. is a Dutch national who lives in Florida. He is a
real estate dealer and managing director of a company which carries on
business in real estate.
6. In her judgment, the judge summarised the background to, and nature
of, the dispute as follows:
“In July 1991, Mr de B. and several other individuals, described in the
Statement of Claim as ‘the Associates’, agreed to act together as brokers
in seeking to introduce a buyer for letters of credit to the value of US
$300 million which were purportedly being issued [by] a self-styled Polish
bank, Banque pour le D. du C. (‘D.bank’). However, the genuineness of
the letters of credit is in issue, and [K.] allege that the whole transaction
was a prime bank instrument fraud. Indeed, the Law Society Disciplinary
Tribunal concluded that, on the face of it, the purported transaction bore
every hallmark of a prime bank instrument fraud. I would agree with
this view. As now accepted by [Mr de B.] in his Reply, D.bank was not
registered with the Polish authorities as a banking institution and there is
no reference to any such bank in leading bank directories.
Mr de B.’s case is that, in about September 1991 it was agreed between
the Associates and [K.] that [K.] would act for the Associates in the sale
of letters of credit and would share any commission to be paid as a result
of brokering the transaction. [K.] sought various buyers of the letters of
credit on behalf of the Associates and found a so-called ‘T. Group’ whose
representative was a Mr V. C. who was based in Tunis. Mr K.-B. went
with a Mr H. (both of whom, together with [K.], were to share in the
commission) to Tunis in September 1991 with the aim of executing the
sale of the letters of credit to the T. Group.
Mr de B. alleges that Mr K.-B. and [K.] have misappropriated $250,000
belonging to him in the following circumstances. Mr de B. claims that
on 31 October 1991 he transferred the sum of 374,210 Swiss francs
(equivalent to US$250,000) to the credit of an account of Mr K.-B. ....
in Tunis. This transfer was made in response to a letter dated 18th
October 1991 in which Mr K.-B. requested the Associates to remit to him
in Tunisia the sum of $250,000. Mr de B. alleges that in this letter and
orally Mr K.-B. and Mr K. assured him that the money was in effect to
indicate bona fides on the part of the seller and that it would be returned
without use within a matter of days. Mr de B. claims that, on the same
day that he transferred his money to Mr K.-B., the latter transferred
the sum of 291,600 Swiss francs (equivalent to US$200,000) to Mr C..
Mr de B. claims this transfer was pursuant to a declaration by Mr K.-B.
on 19th October 1991 to remit to Mr C. US$200,000 by way of penalty
for non-performance by D.bank. Mr de B. claims that the remaining US
$50,000 was at a later date transferred to Mr K.-B. and that none of
the money has been returned to him; in other words, that Mr K.-B. has
misappropriated Mr de B.’s money.
Mr de B. further alleges that at all material times Mr K.-B. acted with the
authority of [K.] and that [K.] expressly authorised Mr K.-B. to act on
their behalf in relation to the letters of credit. Mr de B. therefore claims to
be entitled in restitution to the return of $250,000 by [K.] and/or Mr K.-B.
as money had and received.
[K.] claims by way of defence that, in relation to the transaction involving
$250,000, Mr K.-B. acted on his own behalf and not on behalf of the firm.
[K.] maintains that the whole nature of the transaction had changed, and
that a letter dated 18th October 1991, which was faxed to the Associates,
indicated that any ostensible authority which Mr K.-B. had had from [K.]
was terminated.
[K.] further claim that Mr de B. was involved in a fraudulent and unlawful
design in that Mr de B. and the Associates sought to obtain substantial
funds by selling the letters of credit, when he knew that D.bank was
not bona fide and that the letters of credit were bogus and worthless.
[K.] further contends that Mr de B. pressed on with what he must
have appreciated was a fraudulent transaction in order to obtain very
substantial funds on the basis of false instruments. ...... In short, [K.]
contends that [Mr de B.] was an active participant in the fraudulent
scheme to obtain funds by means of discounting false bank instruments
and that the deposit of the sum for which he now makes a claim formed a
step in an attempt to implement the fraud.
The exact nature of Mr K.-B.’s defence is unclear from his pleaded
defence. It appears that he also alleges that Mr de B. was involved in a
fraudulent scheme.”
7. The writ was issued on 28 October 1997, shortly before the expiry of
the limitation period. On 28 March 2000, following close of pleadings,
Master Bowles gave directions for a case management conference. By
an application notice dated 30 June 2000 K. applied for an order that Mr
de B. give security for its costs. The sum sought by way of security was
£130,000, representing K.’s estimated costs to the end of the trial. On
2 November 2000 Master Bowles directed that K.’s application be listed
with the case management conference. The case management conference
was held before the judge, and led to the order dismissing the application
against which K. now appeals.
8. In his evidence in opposition to the application Mr de B. disclosed that
he had a right to an interest in the estate of a deceased person which
was in course of being administered in Holland by executors appointed
there, and that he currently owned cash and equities held by UBS Bank in
Switzerland. The situs of Mr de B.’s interest in the unadministered estate
in Holland may have been open to question, but the judge regarded this
as immaterial in the light of evidence that his assets in Switzerland were
worth about £177,000. The judge was accordingly content to proceed
on the footing that the Swiss assets were of sufficient value to meet any
order for costs which might be made in favour of K..
9. In the course of the hearing of this appeal Mr S. told us that the
current net value of Mr de B.’s assets in Switzerland was only some
US$28,753. He based this assertion on a statement provided by UBS.
However, in a Note which he has sent to us since the hearing he informs
us that the current value of the Swiss assets is of the order of £162,000.
In his Note Mr S. explains the reason for the error, as follows:
“It has been revealed that the UBS statement failed to include a
substantial asset valued at US$195,000, namely 13,000 shares in A.
Technology Inc at US$15 per share .... and that the true value of his
assets held by UBS in Switzerland is, therefore, in fact of the order of
US$223,753, which at the current rate of exchange .... is equivalent to
£162,022.45.”
10. Annexed to Mr Saini’s Note is a copy of a fax dated 31 July 2001 from
UBS to Mr Michael Cohn, Mr de B.’s solicitor. The fax reads as follows (so
far as material):
“Enclosed you will find a copy of the delivery receipt .... referring to
13,000 shares [in] A. Technology Inc. and we confirm that we hold the
certificate for these shares on behalf of Mr H. D. de B.
We need the form called ‘Irrevocable Stock or Bond Power’ signed
by Mr H. D. de B. to book this stock into the UBS Custody Account.
Unfortunately this form has not been signed and returned by Mr H. D.
de B. and it is for this reason that the stock was not included in the
statement of assets as per July 26, 2001.
Please be informed that we hold the stocks in our file but will not be able
to sell or even transfer them unless receipt of the form ‘Irrevocable Stock
or Bond Power’. Should the form not be signed at the time we will return
the share certificate [to] the client’s correspondence address.
We are able to confirm that the market value of the above stock on July
27 was USD 15 per share and that the above stock was included in the
amount of CHF 446,800.- in our letter to Mr H. D. de B. dated October 31,
2000.”
The provisions of the Civil Procedure Rules relating to security for costs
11. The provisions of the CPR relating to security for costs are to be found
in Section II of Part 25 of the CPR, which comprises rules 25.12 to 25.15
inclusive. Rule 25.14 (security for costs other than from the claimant) and
rule 25.15 (security for costs of an appeal) are not material for present
purposes. Rules 25.12 and 25.13 provide as follows (so far as material):
“25.12 – (1) A defendant to any claim may apply under this Section of
this Part for security for his costs of the proceedings.
......
(2) .....
(3) Where the court makes an order for security for costs, it will –
(a) determine the amount of the security; and
(b) direct –
(i) the manner in which; and
(ii) the time in which the security must be given.
25.13 – (1) The court may make an order for security for costs under rule
25.12 if –
(a) it is satisfied, having regard to all the circumstances of the case, that
it is just to make such an order; and
(b) (i) one of more of the conditions in paragraph (2) applies, or
(ii) .....
(2) The conditions are –
(a) the claimant is an individual –
(i) who is ordinarily resident out of the jurisdiction; and
(ii) is not a person against whom a claim can be enforced under the
Brussels Conventions or the Lugano Convention, as defined in section 1(1)
of the Civil Jurisdiction and Judgments Act 1982;
.......
(f) the claimant is acting as a nominal claimant .... and there is reason to
believe that he will be unable to pay the defendant’s costs if ordered to do
so;
(g) the claimant has taken steps in relation to his assets that would make
it difficult to enforce an order for costs against him.” (Our italics.)
The issues on this appeal
12. The primary issue on this appeal is as to the true meaning and
effect of the words in italics in rule 25.13(2)(a)(ii). More particularly, the
primary issue is whether an individual claimant who currently has assets
in a Convention state is “a person against whom a claim can be enforced”
under the Conventions, with the consequence that there is no jurisdiction
under the CPR to make an order that he give security for costs. We refer
to this issue hereafter as “the jurisdiction issue”.
13. By a Respondent’s Notice, Mr de B. seeks to uphold the judge’s order
on the footing that, if (contrary to his primary submission) the judge had
jurisdiction to order security, she ought as a matter of discretion to have
declined to exercise that jurisdiction in the circumstances of the instant
case. Thus, if the jurisdiction issue is resolved in favour of K. further
issues arise as to whether, as a matter of discretion, security should be
ordered, and if so on what terms. We refer hereafter to these issues
compendiously as “the discretion issue”.
The judgment of Miss Elizabeth Gloster QC
14. Having set out the background to the matter in the passage which I
have quoted, the judge considered what approach she should adopt to
the merits of the claim against K. and of K.’s defence. She expressed her
conclusion on that question as follows (in paragraph 17 of her judgment):
“In my judgment, and despite the persuasive attempts of Mr M. to
persuade me to do so, it is not appropriate for me .... to make any
prima facie determination as to the underlying merits or otherwise of the
claim or [of K.’s] defence. There are clearly real and substantial issues
which have to be resolved at trial as to the respective knowledge and
roles of both parties. I am not in a position, and it is not appropriate for
me, to make any determination in relation to these matters, even on a
provisional basis, at this stage, and I do not propose to do so.”
15. The judge then turned to the application for security for costs,
identifying the first issue for decision as being whether the court had
jurisdiction to make the order sought, given that Mr de B. currently had
assets in a Convention state (i.e. the jurisdiction issue). She pointed out
that, whether or not Mr de B.’s right to an interest in the estate being
administered in the Netherlands was properly to be regarded as located
in the Netherlands, the existence of assets in Switzerland sufficed to raise
the jurisdiction issue.
16. After summarising each side’s arguments on the jurisdiction issue, the
judge turned to the authorities as to security for costs as they stood prior
to the introduction of the CPR, under the former Rules of the Supreme
Court. She referred to a number of authorities, including the Court of
Appeal decision in Fitzgerald v. Williams [1996] QB 657. In that case the
question arose whether and in what circumstances the court should order
security for costs against plaintiffs who were ordinarily resident in Ireland.
The relevant provision of the Rules of the Supreme Court was Order 23
rule 1(1)(a), which provided as follows:
“Where, on the application of a defendant to an action or other
proceeding in the High Court, it appears to the court – (a) that the
plaintiff is ordinarily resident out of the jurisdiction .... then if, having
regard to all the circumstances of the case, the court thinks it just to
do so, it may order the plaintiff to give such security for the defendant’s
costs of the action or other proceeding as it thinks just.”
17. For the Irish plaintiffs it was contended that since the Republic of
Ireland was a state party to the Brussels Conventions, their right to
protection against discrimination on grounds of nationality conferred by
articles 6 and 220 of the EC treaty required the court to disapply rule
1(1)(a). The judge at first instance concluded that rule 1(1)(a) did not
contravene article 6, and ordered the Irish plaintiffs to give security.
The Court of Appeal allowed their appeal, holding that rule 1(1)(a)
was covertly discriminatory on the ground of nationality. The leading
judgment was given by Sir Thomas Bingham MR, with whom Waite and
Otton LJJ agreed. In the course of his judgment Sir Thomas Bingham MR
referred to the decision of the European Court in Mund & Fester v. Hatrex
Internationaal Transport [1994] ECR 1-467. At p.674d of the report, he
said this:
“(iii) Is the rule discriminatory?
The rule plainly empowers the court to make orders against plaintiffs
ordinarily resident out of the jurisdiction which it could not make
against plaintiffs ordinarily resident within it. ... It therefore involves
discrimination in the sense used by the European Court of Justice in the
Mund case, in that different plaintiffs are treated differently.
(iv) Is that discrimination based on nationality?
On its face, the discrimination for which the rule provides is based on
ordinary residence not nationality. A British national ordinarily resident
abroad may be required to give security, a foreign national ordinarily
resident within the jurisdiction may not. But there is a close analogy with
the Mund case: just as most German judgments to be enforced outside
Germany would not be against Germans, so most plaintiffs in England
ordinarily resident outside the jurisdiction would not be British. Just as
paragraph 917(2) [of the German Code of Civil Procedure] was held to
be covertly discriminatory on grounds of nationality, so must the same
conclusion follow in relation to the rule.”
18. Later in his judgment, at page 675c, Sir Thomas Bingham MR said
this:
“The answer compelled by the Mund case in my view is: the English court
should never exercise its discretion under the rule to order security to
be given by an individual plaintiff who is a national of and resident in
another member state party to the [Brussels] Convention, at any rate in
the absence of very cogent evidence of substantial difficulty in enforcing a
judgment in that other member state.”
19. The judge in the instant case went on to observe that by parity of
reasoning the same constraint applied to claimants who were ordinarily
resident in states parties to the Lugano Convention, which contained a
non-discrimination provision in similar terms.
20. The judge then turned to the relevant provisions of the CPR, and in
particular to rule 25.13(2)(a)(ii), remarking that, apart from an obiter
comment by Mr Ian Hunter QC sitting as a Deputy High Court Judge in
Bunzl v. Martin Bunzl International Ltd (2000) 150 New LJ 1076, the
instant case appeared to be the first case in which the proper construction
of the rule had been considered.
21. The judge continued as follows:
“29. The language of subpara. (a)(ii) requires the court to identify
whether the claimant against whom security is sought is a person of a
particular type. If he is a person of a particular type, i.e. a person against
whom a claim can be enforced under the Brussels Conventions or the
Lugano Convention, then the condition in para. (2)(a) is not satisfied and
therefore security cannot be awarded on that ground.
30. The first point to make is that the language of the subparagraph does
not describe persons by reference to residence in a Convention State,
nor by reference to nationality of a Convention State. If the draftsman
had so intended, he clearly could have described a person by reference
to his residence. Residence, or, rather, ordinary residence, is a concept
invoked in subpara. (2)(a)(i). On the contrary, as I have said, the only
requirement specified under subparagraph (2)(a)(ii) which has the result
that the condition in subpara. (2)(a)(ii) is not satisfied is that a claim can
be enforced ‘against such a person’ under the Brussels Conventions or the
Lugano Convention.”
22. The judge then turned to the meaning of the word “claim”, concluding
(in paragraph 32) that:
“ .... the natural construction of the words taken in context is that ‘claim’
is referring to an order for costs in the current proceedings against
the claimant, rather than a hypothetical claim for an unascertained
amount which can be enforced against a claimant, whether because he is
ordinarily resident in a Convention State or because he has assets in such
state.”
23. The judge acknowledged, however, that the alternative construction
was feasible.
24. Then, after recording that it was common ground (a) that, under
the Conventions, a judgment obtained in one Convention state could
be enforced in another Convention state by means of execution against
assets of the judgment debtor situated in the latter state, and (b) that, on
the facts of the instant case, a judgment obtained in the United Kingdom
could be enforced against assets of Mr de B. which were situated in
Switzerland, the judge identified the critical issue as being whether such
enforcement would constitute the enforcement of a claim against Mr de B.
within the meaning of rule 25.13(2)(a)(ii).
25. The judge concluded that it would do so, for five reasons. Her first
reason was that in her judgment the language of the Conventions
themselves clearly envisages that the enforcement in a Convention state
of a judgment obtained in another Convention state is enforcement of
a judgment “against” a person, albeit that person is not domiciled or
ordinarily resident in the state in which enforcement is effected. Her
second reason was that had the intention been to adopt a residence-
based exclusion as opposed to an enforceability-based exclusion, the
draftsman could easily have achieved that end by express language. Her
third reason was that notwithstanding that the effect of her construction
of the rule was that whereas jurisdiction to order security for costs would
have existed had Mr de B.’s assets been situated in England, the fact
that they were situated in another Convention state served to exclude
such jurisdiction, that “quirk” did not prevent the court from giving effect
to what she considered to be the plain language of the rule. Her fourth
reason was that K.’s reliance on the fact that, on her construction of the
rule, a claimant could always avoid having to give security by the simple
expedient of placing an asset (e.g. a cash deposit refundable on demand)
in a Convention state, was misplaced in that:
“[t]o suggest that such a person is not a person against whom a claim
can be enforced under the Conventions because of the undoubted ability
to move assets at short notice would ... be to draw an unwarranted and
discriminatory distinction between liquid assets in England and liquid
assets in other Convention states.”
26. The judge further concluded that rule 25.13(2)(g) provided a
sufficient safeguard from the suggested abuse. As to that, she said:
“In my judgment, the other conditions set out in para. (2) and in
particular that set out in para. (g), ‘the claimant has taken steps in
relation to his assets that would make it difficult to enforce an order
for costs against him’, provide a sufficient safeguard from this type of
abuse. If, for example, some two months after an unsuccessful security
application a claimant were to refuse to confirm, pursuant to a request
made by a defendant, that he continued to hold sufficient assets in a
Convention state, or refused to identify those assets, a court might
well be entitled to infer that the claimant fell within condition [(2)(g)]
and that, accordingly, a subsequent application for security would be
successful.”
27. As her fifth reason for reaching her conclusion as to the true
construction of the rule, the judge considered that the obiter dictum of
Mr Ian Hunter QC in the Bunzl case, on which Mr M. had relied, was of no
assistance in the instant case since the effect and ambit of the CPR was
not in issue in the Bunzl case.
28. The judge concluded her judgment on the application for security for
costs by saying this:
“37. I conclude that, in the light of the acceptance by Mr M. that the
claimant does indeed have assets in Convention States against which an
order for the costs of the action could be enforced, the claimant is indeed
a person against whom a claim could be enforced under the Conventions.
Accordingly, in my judgment, no security for costs can be awarded against
him under CPR 25.13 because the condition set out in para. [(2)(a)] is not
satisfied. .....
38. I do not propose, in view of the length of this judgment, to indicate
what order I would have made had I not reached the view which I have
on the construction of the new rule. I do not consider it is appropriate in
all the circumstances for me to do so.”
The arguments on the jurisdiction issue
29. Mr M. submits that on its true construction rule 25.13(2)(a) precludes
an order for security for costs being made against a claimant who is
ordinarily resident in a Convention state, and that it does not preclude
such an order being made against a claimant who is not so resident
but who happens to have assets, or an asset, in a Convention state. He
submits, further, that that was the intended meaning of the new rule,
in that the purpose of the new rule was to limit the court’s discretion to
order security so as to make it fully compatible with Community law by
providing that no order can be made against a claimant who is ordinarily
resident in a Convention state, thereby avoiding the tension which existed
under the old rules between the court’s discretion and article 6 of the
EC treaty (see the judgment of Sir Thomas Bingham MR in Fitzgerald
v. Williams (above) and his later judgment in Chequepoint v. McLelland
[1997] QB 51).
30. In support of this submission Mr M. also relies on a discussion paper
circulated by the Lord Chancellor’s Department in 1997, prior to the
introduction of the CPR, entitled “Civil Procedure Rules – Security for
Costs”. He also refers to a note to that effect in Civil Procedure Vol 1
(Autumn 2000). However, the corresponding note in the current edition
(Spring 2001, note 25.13.3 at p.451) is framed in more circumspect
terms, acknowledging that the precise construction of the rule is not free
from doubt.
31. Mr M. relies on the observation of Mr Ian Hunter QC in the Bunzl
case that “the court no longer has any jurisdiction to make an order for
security for costs against a person resident in a state party to the Brussels
Convention or the Lugano Convention”. He submits that that is the correct
interpretation of the rule. He submits out that the rule is “person-specific”
not “asset-specific”. The current location of a claimant’s assets is, he
submits, irrelevant to the question of jurisdiction.
32. Mr M. further submits that the judge’s construction leads to absurd
results. By way of example, he contrasts the position where a US resident
has assets in England (in which case the English courts have jurisdiction
to order security) with the position where his assets are in another
Convention state (in which case, if the judge is right, there is no such
jurisdiction). Further, he points out that if the words “can be enforced” in
rule 25.13(2)(a)(ii) envisage enforcement leading to full recovery (that
being the basis on which the judge proceeded) then the court would be
concerned to satisfy itself as a matter of jurisdiction (a) that, having
regard to current values, the asset or assets in question would be of
sufficient value to satisfy an order for costs, and (b) that the courts in
the Convention state or states in which the asset or assets were situated
would enforce any order for costs against such asset or assets.
33. Mr M. submits that the reference to “a claim” in rule 25.13(2)(a)(ii) is
to be contrasted with the express references to the enforcement of orders
for costs in ibid. subparas (f) and (g). He submits further that, in context,
the reference to the enforcement of “a claim” includes any hypothetical
claim for relief, not necessarily limited to a money claim. He submits
that only if a person is ordinarily resident in a Convention state can it be
said that any hypothetical claim for relief is capable of being enforced
against him in that state. Such a construction would, he submits, be fully
workable.
34. Mr M. also relies on two authorities decided since the judge delivered
her judgment, namely the decision of Brooke LJ in White Sea & Onega
Shipping Co v. International Transport Workers Federation [2001] EWCA
CIV 377, and the decision of the Court of Appeal in Amy Nasser v. United
Bank of Kuwait (unreported, judgment delivered 11 April 2001).
35. In White Sea the defendant/respondent applied for security for its
costs of an appeal by the claimant, a shipping company incorporated
and based in Russia. The claimant resisted the application for security
on the ground (among other things) that there was no jurisdiction to
grant security since, as the judge put it, “the odds are that there will be
a vessel owned by [the claimant] within the jurisdiction of one or other of
the Brussels Convention or Lugano Convention countries”. In paragraphs
12 and 13 of his judgment Brooke LJ said this:
“12 Although it would be wrong to interpret the new rules simply as
altering some of the inconveniences of the old rules – the Civil Procedure
Rules are a brand new code – in my judgment, there is a good deal of
force in [counsel for the defendant’s] submission that the wording of the
new rule [a reference to rule 25.13] was introduced in order to abolish the
objection or discriminatory effect of the language of the old rule as set out
in the judgments of Lord Bingham CJ in Chequepoint SARL v. McClelland
[1997] QB 51 at 59 and 60 following, as they did, his earlier judgment in
Fitzgerald v. Williams [above].
13. In my judgment, as a matter of interpretation of the rule, [counsel for
the defendant’s] approach to interpretation should be preferred. He has
reminded me that the old security for costs provision under RSC Ord. 23,
although not unlawful, was held to be discriminatory under Article 6 of the
European treaty if applied to nationals and residents of other Convention
countries. Against this background I would interpret the rule as being
confined to persons who are nationals of or residents of other Convention
countries. This decision goes to jurisdiction, and there may be, when it
comes to the exercise of discretion, formidable reasons for declining to
order security if, on the facts before the court in any particular case, it is
not just to make an order.”
36. Brooke LJ went on to cite a passage from the judgment of Lightman J
in Leyvand v. Barasch (unreported, judgment delivered 15 February 2000)
in which Lightman J, referring to the exercise of the court’s discretion to
order security for costs, said this:
“The common sense principle applies that the existence of assets within
the jurisdiction, their fixity and permanence, are among a number of
potentially relevant factors, their importance depending on the particular
facts of the case.”
37. In Nasser, the Court of Appeal considered the jurisdiction to order
security for costs under the CPR in the light of articles 6 and 14 of the
European Convention on Human Rights, with particular reference to
applications for security for the costs of an appeal. The leading judgment
was given by Mance LJ, with whom Simon Brown LJ agreed. In his
judgment Mance LJ drew attention to an important change effected by the
CPR in the practice of the Court of Appeal as regards security for the costs
of appeals, in that whereas under the old rules the court had a discretion
to order security “in special circumstances”, and it was settled practice
that impecuniosity of itself constituted such a special circumstance, under
CPR rule 25.13 the court could only order security if one or more of the
conditions in rule 25.13(2) applies.
38. In paragraph 35 of his judgment, Mance LJ commented that the
requirement of rule 25.13(2)(a)(i) that the claimant should be ordinarily
resident out of the jurisdiction mirrors a ground for ordering security for
costs against a plaintiff under the old rules. He continued:
“In that connection there was clear authority indicating that, although
foreign residence was a pre-condition to the making of such an order,
once that pre-condition was satisfied, the court could have regard not
merely to matters related directly to the foreign residence, but also to
matters intrinsic to the plaintiff wherever he or she might be, such as
impecuniosity...”
39. In paragraph 46 of his judgment Mance LJ said this:
“What remains as one ground on which security may be ordered is foreign
residence – except in cases involving the “single legal market” to which
the Brussels and Lugano Conventions aspire in matters of enforcement
and recognition. The rationale of the discretion to order security on that
ground is that enforcement of an order for security for costs abroad
may be more difficult or costly than elsewhere: cf. Sir Jeffery Bowman’s
Review, paragraphs 33-37. The single legal market of the Brussels and
Lugano Conventions means that ‘abroad’ in this context now means
not merely outside England or the United Kingdom, but outside the
jurisdictions of the states party to those Conventions....”
40. In paragraph 57 of his judgment Mance LJ referred to the distinction
drawn in the CPR between claimants resident within and outside
Convention states. He continued:
“This distinction serves simply to identify when a discretion exists to
order security for a defendant’s or respondent’s costs. In that context,
the distinction between residents within and outside Brussels and Lugano
states cannot be regarded as unduly discriminatory, since, first, it can
be said that the recognition of separate categories makes sense as a
broad rule of thumb, defining when any question of discretion can arise
(rather than how it will be exercised); and, secondly and in any event, the
distinction drawn is in that context reasonable and objectively justifiable.
The single legal market of the Brussels and Lugano Conventions is a
significant achievement on the road to the easy and automatic recognition
and enforcement of judgments, as recognised by the decision in Mund.”
41. Turning to the considerations relevant to the exercise of the discretion
itself, Mance LJ observed (in paragraph 58 of his judgment) that:
“[t]he distinction in the rules based on considerations of enforcement
cannot be used to discriminate against those whose national origin
is outside any Brussels and Lugano state on grounds unrelated to
enforcement.”
42. In paragraph 61 of his judgment, Mance LJ said this:
“Returning to Part 25.15(1) and 25.13(1) and (2)(a) and (b), if the
discretion to order security is to be exercised, it should therefore be on
objectively justified grounds relating to obstacles to or the burden of
enforcement in the context of the particular foreign claimant or country
concerned.
43. Later, in paragraph 62 of his judgment Mance LJ said this:
“The justification for the discretion under Part 25.13(2)(a) and (b) .... in
relation to individuals and companies ordinarily resident abroad is that
in some, it may well be many, cases there are likely to be substantial
obstacles to or a substantial extra burden (e.g. of costs or delay) in
enforcing an English judgment, significantly greater than there would
be as regards a party resident in England or in a Brussels or Lugano
state. In so far as impecuniosity may have a continuing relevance, it
is not on the ground that the claimant lacks apparent means to satisfy
any judgment, but on the ground (where this applies) that the effect of
the impecuniosity would be either (i) to preclude or hinder or add to the
burden of enforcement abroad against such assets as do exist abroad, or
(ii) as a practical matter, to make it more likely that the claimant would
take advantage or any available opportunity to avoid or hinder such
enforcement abroad.”
44. In paragraph 65 of his judgment Mance LJ noted that no evidence had
been put before the court to suggest that the defendants would face any
difficulty in enforcing an order for costs against the claimant in the United
States, but he went on to infer (in paragraph 66) that some extra costs
would be involved. Accordingly in paragraph 67 of his judgment he said
this:
“The risk against which the present defendants are entitled to protection
is, thus, not that the claimant will not have the assets to pay the costs,
and not that the law of her state of residence will not recognise and
enforce any judgment against her for costs. It is that the steps taken
to enforce any such judgment in the United States will involve an extra
burden in terms of costs and delay, compared with any equivalent steps
that could be taken here or in any other Brussels/Lugano state. Any order
for security for costs in this case should be tailored in amount to reflect
the nature and size of the risk against which it is designed to protect.”
45. Mr M. relies on both these recent decisions as supporting the view
that the purpose and effect of rule 25.13(2)(a)(ii) is to exclude from the
scope of the court’s discretion claimants who are ordinarily resident in a
Convention state, and that the rationale of that rule is the aspirational
“single legal market” made up of Convention states and the ease with
which judgments obtained in one Convention state may be enforced in
another.
46. Mr M. accordingly submits that, construing the rule in accordance
with its purpose and its natural meaning and so as to avoid absurdity, it
must mean that jurisdiction is excluded where the individual claimant is
ordinarily resident in another Convention state.
47. In the alternative, if (contrary to his primary submissions) the word
“claim” in the new rule is to be treated as a reference to a specific
prospective judgment or order for costs in these proceedings, Mr M.
nevertheless repeats his submissions as to the meaning and effect of the
words “can be enforced”.
48. Mr S. supports the reasoning and conclusion of the judge on the
jurisdiction issue. He submits that the purpose of the condition in rule
25.13(2)(a)(ii) is to prevent security being awarded against individual
claimants who have assets in Convention states which can be used for
the purpose of enforcement of costs orders made in this jurisdiction.
He submits that the condition is “enforceability-based” as opposed to
“residence-based”. He further submits that the construction contended
for by K. wholly ignores the plain wording of the condition and requires,
in effect, that the condition be substantially rewritten. He also relies on
subparagraph (g) of the condition as extending the jurisdiction to cover
cases in which a claimant seeks to shelter his assets from an application
for security for costs.
49. Mr S. submits that the relevant question for the court is whether
the “person” referred to in the rule is a person against whom a claim
can be enforced under the Conventions, wherever his residence may be,
and that in deciding whether a “claim” can be enforced the court has to
consider (a) whether the claim is of a type which can be enforced under
the Conventions and (b) whether the claimant has assets in a Convention
state against which execution can issue.
50. As to the two recent authorities relied on by Mr M. (White Sea and
Nasser), Mr S. points out that in paragraph 13 of his judgment in White
Sea Brooke LJ interprets the rule as being confined “to persons who are
nationals of or residents of other Convention countries”. Mr S. submits
that since Mr de B. is a Dutch national (albeit resident in the United
States), it follows that on Brooke LJ’s interpretation of the rule there is
no jurisdiction to order for security for costs against him. As to Nasser,
Mr S. points out that the Court of Appeal was not concerned in that
case with the question of the true construction of rule 25.13(2)(a)(ii),
but rather with general considerations as to the jurisdiction of the court
(and in particular of the Court of Appeal) to order security for costs. He
submits that whilst it is correct to say that Mance LJ referred on a number
of occasions in the course of his judgment to a distinction being drawn
between “residence” within and outside Convention states, Mance LJ did
not have to focus on, still less decide, the question of construction raised
in the instant case.
51. We should record that, although we raised the point in the course of
argument, and despite the focus which the Conventions place on domicile,
neither side sought to put forward any argument based on domicile.
Conclusions on the jurisdiction issue
52. The drafting of Rule 25.13(2)(a)(ii) is on any footing unsatisfactory,
and its meaning is not entirely clear. This has enabled each side to
say with force that had the draftsman intended to achieve the result
contended for by the other he could easily have done so by the use of
clear words.
53. The particular words which give rise to difficulty are the words “....
a person against whom a claim can be enforced ....” The concept of
a “claim” being “enforced” is not an altogether happy one, since one
would normally speak of a claim being “brought” and of a judgment or
order being “enforced”. So the question arises which construction takes
precedence: that is to say, whether (as the judge concluded) “a claim” is
to be construed as meaning a judgment or order (i.e., in the context of
security for costs, a judgment or order for costs), or whether “enforced”
is to be construed as meaning “brought”. Taking the words in isolation
and out of context, either construction could be the correct one. For
that reason alone, we regard the judge’s reference (at paragraph 36(3)
of her judgment) to “the plain language of the provision” as somewhat
misplaced.
54. That being so, it becomes important to consider the relevant context;
that is to say the background against which the new rule came to be
introduced. In this connection, we consider that it is legitimate to have
regard to the mischief which was perceived to exist under the old rule.
55. As noted earlier, the Mund case established that the jurisdiction
under the old rule was incompatible with Community law in so far as
it discriminated covertly against nationals of other Convention states.
This in turn led to the decision in Fitzgerald v. Williams, to the effect that
although the jurisdiction existed it should not be exercised in a manner
which was contrary to Community law. In the circumstances it is in our
judgment a fair – indeed, we would say inevitable – inference that it was
a primary aim of the new rule to remove that anomaly by limiting the
jurisdiction to order security for costs so as to ensure that the discretion
which it confers is not capable of being exercised in a manner which
conflicts with Community law. As Mance LJ put it in Nasser (in a passage
in paragraph 46 of his judgment, quoted earlier): “‘abroad’ .... now
means not merely outside England or the United Kingdom, but outside the
jurisdictions of the states party to [the] Conventions .....”
56. If, therefore, we are entitled to give a purposive construction to the
new rule – and we consider that we are so entitled – we take the purpose
of subparagraph (a)(ii) to be to eliminate any covert discrimination
against nationals of other Convention States which would or might
have existed had subparagraph (a)(ii) not been included as part of the
condition – that is to say, had condition (a) read simply “the claimant is
an individual who is ordinarily resident out of the jurisdiction”.
57. On that footing, we return to the wording of the subparagraph. In the
first place, it seems to us entirely legitimate, as well as being consistent
with what we have taken to be the purpose of the subparagraph, to
construe the words “a claim” in a general sense; that is to say, as
including any claim (whether or not a money claim) and not limited to
an order for costs. Such a construction is also consistent with the other
conditions in rule 25.13(2), all of which are directed at claimants of a
particular kind, rather than at execution against assets. Even paragraph
(g), which relates to the sheltering of assets, is expressed in terms of
a particular category of claimant rather than by reference to the assets
themselves.
58. In our judgment, rule 25.13(2) is directed at what we may call the
juridical characteristics of the particular individual claimant, irrespective of
what assets he may currently own or where those assets may currently be
situated. We further conclude that condition (a), on its true construction,
confines the jurisdiction to order security for costs to cases where
the claimant is an individual who is not ordinarily resident either in
this jurisdiction or in that of a Convention state. It follows that, in our
judgment, such a claimant cannot deprive the court of jurisdiction merely
by placing an asset in a Convention state.
59. We take that to be the construction of the rule adopted by Brooke
LJ reached in White Sea. Although Brooke LJ referred, in paragraph 13
of his judgment, to the rule being confined to “nationals of or residents
of other Convention countries”, that sentence must be read in the light
of the immediately preceding sentence of his judgment, where he refers
to “nationals and residents of other Convention countries”. Moreover, to
interpret Brooke LJ’s reference to nationals of other Convention countries
in the manner contended for by Mr S. would make little sense, given that
Brooke LJ earlier refers to “the ... discriminatory effect of the language of
the old rule as set out in judgments of Lord Bingham CJ in Chequepoint
SARL v. McLelland .... following, as they did, his earlier judgment in
Fitzgerald v. Williams ...”. We refer in particular to the passages from
the judgment of Sir Thomas Bingham MR in Fitzgerald quoted earlier
in this judgment. Further, in our judgment, although it addressed a
somewhat different issue, the Nasser case provides further support for
our conclusion.
60. We are also fortified in our conclusion by a consideration of the
implications of the construction of the rule favoured by the judge.
61. In the first place, it seems to us that a jurisdiction which is based
upon such ephemeral considerations as the values and the situs of a
claimant’s assets current at the date when an application for security is
heard would pose very considerable practical difficulties both for litigants
and for the court. If the existence of the jurisdiction were to depend
upon whether or not there was a reasonable prospect of full recovery
of costs from the assets in question (that being the basis on which the
judge proceeded) then the existence of the jurisdiction would appear
to depend not only upon the values of the assets from time to time,
but, one presumes, also the defendant’s estimates of the amount of
the costs which the claimant might be ordered to pay. Both may be
expected to vary from time to time. By way of example, had Mr Saini’s
initial information as to the current value of Mr de B.’s Swiss assets been
correct an extraordinary position would have been reached, in that (on
the judge’s construction) there would currently be jurisdiction to order
security whereas at the date of the hearing before the judge the value of
the Swiss assets was sufficient to exclude jurisdiction.
62. We further agree with Mr M. that the judge’s construction would
produce the extraordinary result that whilst jurisdiction would exist
to order security for costs against a US resident with assets in this
jurisdiction (but in no other Convention state), no such jurisdiction would
exist if he moved those assets to another Convention state.
63. We accordingly conclude, in disagreement with the judge, that the
court has jurisdiction under rule 25.13(1) to order security for costs to be
given by Mr de B. by reason of the fact that he is an individual claimant
who is (a) ordinarily resident out of the jurisdiction and (b) not ordinarily
resident in a Convention state. We accordingly allow the appeal.
64. It follows that we must now move on to consider whether the
jurisdiction which we have held to exist should be exercised, and if so on
what terms: that is to say, to address the discretion issue.
The discretion issue
65. Mr M. submits that in considering whether to exercise its discretion
to order security it is material for the court to consider whether there is a
want of probity on the part of Mr de B.. In support of this submission Mr
M. cites a passage from the judgment of Lightman J in the Leyvand case
(above) which follows the passage quoted by Brooke LJ in White Sea. In
paragraph 6 of his judgment in Leyvand Lightman J said this:
“The Court will not infer the existence of a real risk that assets in this
country will be dissipated or shipped abroad to avoid their being available
to satisfy a judgment for costs unless there is reason to question the
probity of the claimant: there is no such reason in this case. If there is
reason to question the claimant’s probity, the character of his property
within the jurisdiction is relevant in assessing the risk: the risk may be
greater if the property is cash or immediately realisable or transportable,
and less if fixed and permanent.”
66. Mr M. goes on to submit that want of probity on the part of Mr de B.
is demonstrated in the instant case (a) by the fact that triable allegations
of dishonesty are made against him and (b) by the fact that he has made
grossly and demonstrably misleading statements in his witness statement
concerning his assets in Florida.
67. He further submits that, on the authority of Lightman J’s observations
in Leyvand (quoted above), the court should also have regard to the fact
that the assets presently held by Mr de B. in Switzerland are capable of
being moved at the push of a button.
68. Mr M. also relies on observations made by Bingham LJ in Thune v.
London Properties Ltd [1990] 1WLR 562. In that case the claimants
were Norwegian trustees in bankruptcy, and although there was no
question but that they would act with complete rectitude in relation to the
enforcement of an order for costs against the bankrupt’s estate, there was
nevertheless a risk that the defendants would be unable to achieve full
recovery since there might be other competing priority claims of unknown
amount. Bingham LJ said (at p.574):
“Thus the defendants are put to the very great cost of defending
this expensive litigation with the risk, however small, that if they are
ultimately successful they will be unable to recover their taxed costs
despite the ease of procedural enforcement in Norway. I consider, in
the exercise of my discretion, that this is a risk to which the defendants
should not be put and that security should be given ...”
69. Mr M. submits that a similar risk exists in the instant case, and that
accordingly security should be ordered.
70. As to the enforceability in Florida of an order for costs made in this
jurisdiction, Mr M. referred us to the witness statement of a Mr Litsky,
an American lawyer and K.’s expert witness, to the effect that although
a costs order made by the English court is a type of judgment which is
prima facie capable of recognition in Florida pursuant to a Florida statute,
nevertheless Mr de B. could argue that the statute does not apply on the
ground that the order was obtained by fraud, alternatively on grounds
of non-reciprocity. Mr Litsky’s opinion is that such challenges by Mr de
B. could involve a fully argued hearing, possibly involving disclosure and
expert evidence on English law.
71. As to Mr de B.’s Swiss assets, in a Note sent to us after the hearing
by way of response to Mr S.’s Note (referred to earlier in this judgment),
Mr M. submits that on the available documentary material there must be
considerable doubt whether enforcement could be effected in Switzerland
against the shares in A. Technology Inc., since the situs of the shares
would appear to be the United States. At all events, he points out, there
is no evidence either that the company was incorporated in Switzerland
or that it maintains a register of members there. Mr M. further submits
that the share certificate could easily be moved, or the shares themselves
disposed of. Finally in relation to the Swiss assets, Mr M. says that the
court below was never informed that the Swiss assets included shares
in an American company, and that in consequence it was (as he puts
it) extremely doubtful that they would be capable of being realised by
enforcement in Switzerland.
72. Mr M. accordingly submits that security should be ordered in the sum
of £130,000, on the footing that that is a reasonable estimate of the
amount of K.’s costs up to the end of the trial.
73. Mr S. accepts that £130,000 is a reasonable estimate of K.’s costs up
to the end of the trial, but he submits that in the circumstances it would
not be just to order any security; alternatively he submits that if security
is to be ordered at all it should be ordered in a much smaller sum,
proportionate to the degree of risk which K. faces. In this connection,
Mr S. relies on Mance LJ’s reference in paragraph 67 of his judgment in
Nasser (quoted earlier) to any order for security being “tailored in amount
to reflect the nature and size of the risk against which it is designed to
protect”.
74. Mr S. submits that the mere fact that an allegation of dishonesty
is made against Mr de B. on the pleadings cannot justify the court in
proceeding on the footing that there is any want of probity on Mr de B.’s
part. As to Mr de B.’s witness statement, Mr S. accepts that it contains a
misleading statement as to his assets in Florida, but he submits that there
is no reason to infer that the statement was deliberately misleading; in
any event, he submits, the witness statement establishes that Mr de B.
has substantial assets in Florida.
75. As to possible difficulties of enforcement, Mr S. referred us to the
witness statement of Mr L. St., Mr de B.'s expert witness as to American
law. In a short witness statement, Mr Stinson confirms that an order
for costs made by an English court would be capable of enforcement in
Florida in accordance with the Florida statute. He further states that the
costs of enforcement in Florida “assuming no dispute as to recognition or
enforceability of the judgment” would be relatively modest.
76. Mr S. submits that in the light of Mr St.’s evidence the court should
proceed on the footing that there is no significant risk that enforcement of
an order for costs may prove more difficult, or materially more expensive,
in Florida.
77. As to enforcement of an order for costs against Mr de B.’s Swiss
assets, Mr S. relies on paragraph 32 of the judgment of Mr Ian Hunter QC
in the Martin Bunzl case (above), which reads as follows:
“In my judgment the consideration which requires careful attention in the
circumstances of the present case is whether, as Sir Thomas Bingham MR
put it in Fitzgerald, there is ‘any cogent evidence of substantial difficulty in
enforcing a judgment’ in Switzerland, notwithstanding that Switzerland is
a party to the Lugano Convention. It is a matter for consideration whether
the Court should ever accede to the contention that there is or may be
substantial difficulty in enforcing a judgment in a Member State party to
the Brussels or Lugano Conventions. After all, the whole purpose of those
two Conventions is to greatly reduce the opportunity for contesting the
recognition or enforcement of judgments from other Contracting States
and to produce in effect a free market in Community judgments. Member
States of the European Union and the EEA are expected to give ‘full faith
and credit’ to the judgments of courts in other Contracting States and
judicial comity demands that the courts of one such State should not
readily accede to the proposition that in practice the Conventions are not
achieving their purpose. On the other hand, there may be cases where
cogent evidence to that effect is forthcoming: and where that is the case,
the Court should not hesitate to recognise the fact.”
78. Mr S. submits that there is no basis in the instant case for any
suggestion that K. would have difficulty in enforcing an order for costs
in Switzerland, and he points to the fact that on current values the
Swiss assets (including the shares in A. Technology Inc) are worth some
£162,000.
79. We accept Mr S.’s submission that the mere fact that K. made serious
allegations of dishonesty against Mr de B. does not justify this court in
proceeding on the footing that he lacks probity. On the other hand, we
take a serious view of the misleading statement in his witness statement
to which Mr M. has drawn our attention.
80. In paragraph 44 of his witness statement, which is dated 27 October
2000, under the heading “Personal Finances”, Mr de B. says this:
“I am a Dutch citizen but my place of ordinary residence is Miami, Florida,
USA. I have lived in the USA since 1987 and I have substantial assets in
Florida. These include the following:
(i) I am the owner of a property at 1222 Seabreeze Boulevard, Fort
Lauderdale, Florida. The value of this property is about US$1.2 million and
it is subject to a mortgage of about US$210,000. This produces for me a
monthly income of US$5,000.
.... ”
81. In a witness statement dated 4 December 2000 Mr J. A., K.’s solicitor,
states that he caused an investigator to visit the property in question,
and that the investigator confirmed that it was up for sale. This drew
a response from Mr Cohn (Mr de B.’s solicitor). In paragraph 3.4 of his
witness statement dated 8 December 2000 Mr C. says this:
“[Mr de B.] put the house on the market through a real estate agent ...
some months ago at a price of US$895,000, and he has received a
number of offers. While none has reached US$895,000, [Mr de B.] tells
me that he would not, in fact, accept less than US$1.2 million for the
property, as he considers that figure to reflect its true worth.”
82. Mr Co. then exhibits a letter from the agent dated 6 December 2000,
addressed to Mr de B., in which the agent confirms that the house has
been on the market “for some months” at a price of US$895,000. In the
final paragraph of his letter, the agent says:
“You have told me that you personally consider the property to be worth
$1,200,000. ...... I consider that figure to be somewhat ambitious, but I
recognize that you have considerable experience of property values and
that your view may be correct."
83. In our judgment, the evidence of Mr Co., coupled with the letter from
the agent, establishes that Mr de B.’s evidence about the property in Fort
Lauderdale is materially misleading in what it does not say. It does not
say that the property had been placed on the market for sale. It does not
say that it was being marketed at a price substantially less than US$1.2
million. It does not say that although offers have been received, none
has matched the asking price. It does not say that the valuation of US
$1.2 million represents Mr de B.’s personal opinion of the value of the
property (still less that it is an opinion which does not appear to be shared
by the market). Moreover, it is difficult to see how Mr de B.’s evidence in
this respect could have been other than deliberately misleading. In the
circumstances, we take the view that it places a serious question mark
over the reliability of the remainder of his evidence.
84. Moreover, it appears from the evidence of Mr L. (which is not directly
challenged in this respect by Mr S.) that there is, to put it at its lowest,
a risk that an order for costs in K.’s favour may be difficult or even
impossible to enforce in Florida.
85. As to enforcement against Mr de B.’s Swiss assets, we are concerned
that the court below may not have been told that by far the most valuable
of these assets is the shareholding in A. Technology Inc. Certainly no
mention of this fact is made in Mr de B.’s witness statement dated 27
October 2000, where he merely says:
“I also have cash, securities and Swiss mutual funds [on] deposit at UBS
in Zurich amounting to about US$175,000.”
86. It seems to us that if the court below was not told that the Swiss
assets included the shares in A. Technology Inc it plainly should have
been, if only because (to put it at its lowest) it is by no means self-
evident that an order for costs could be enforced in Switzerland against
shares in an American company. However, not having heard oral
submissions on the question of possible non-disclosure, it would not be
appropriate for us to form any view on that question.
87. The terms of the fax from UBS dated 31 July 2001, a copy of which is
annexed to Mr S.’s Note and the material parts of which we have quoted
earlier in this judgment, also appear to raise doubts as to whether an
order for costs could be enforced against the shares in Switzerland. On
the face of it, unless and until Mr de B. signs the requisite form, UBS
cannot part with the share certificate other than to Mr de B..
88. Once again, however, we take the view that since we have not heard
oral argument on this question it would not be appropriate for us to form
any view about it. In the circumstances we propose to proceed on the
basis, favourable to Mr de B., that so far as enforcement of a costs order
in Switzerland is concerned, the shares stand on the same footing as the
other assets held by UBS.
89. However, whilst we are content to proceed on the footing that there is
in principle no reason to suppose that an order for costs might not be fully
enforceable in Switzerland, we must also take into account the ease with
which the assets presently held there may be moved. This applies to the
A. shares as it does to the other assets.
90. In all the circumstances, we conclude that K. is at risk of being unable
to enforce an order for costs against Mr de B., whether in part or at all,
due either to lack of available assets against which such an order could be
enforced, or to the unenforceability of such an order in Florida, or both.
91. We further conclude that it is just in all the circumstances that K.
should be protected against that risk by the making of an order that Mr de
B. give security for its costs of the action to the end of the trial. Bearing
in mind the nature and potential size of the risk, and given that Mr S.’s
accepts that the proposed figure of £130,000 represents a reasonable
estimate of K.’s costs up to the end of the trial, we order that security be
given in that sum.
92. We will hear counsel further as to the precise form of the order, in the
event that it cannot be agreed.
ORDER: Appeal allowed; costs adjourned; Security of £130,000 to be paid
into court within 28 days.
(Order does not form part of approved Judgment)