Reference:  EWCA Civ 1575; The Times, 1 January 2007
Court: Court of Appeal
Judge: Waller, Keene, Carnwath LLJ
Date of judgment: 22 Nov 2006
Summary: Security for costs - Stay - Failure to comply with unless orders - Summary judgment
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Instructing Solicitors: Carter-Ruck for the Claimant; Tarlo Lyons for the Defendants
The Defendant applied to the Master for security for costs for the additional costs that would arise from enforcing a costs order against the Claimant in Romania. The Master ordered that unless the Claimant paid £125,000 in security, judgment would be entered against him. Permission to appeal was granted but the Master refused to grant a stay of the unless order pending such appeal. Judgment against the Claimant was subsequently entered. On appeal, by which time the Claimant had raised the required amount of security, Eady J refused to set aside the judgment despite finding that there had been a procedural unfairness at the initial hearing, and that the amount of security should be reduced to £80,000. The Claimant appealed.
Whether the security for costs order should have been varied, and whether judgment entered following the failure to comply with the unless order should be set aside
The Court observed that, unlike most forms of interlocutory first orders, it was quite common for an unless order to be made in relation to security for costs. Where permission to appeal such an order had been granted it was unlikely to be appropriate not to grant a stay. Even when judgment had been entered pursuant to the unless order, if a Claimant came to court with the right sum within a short period time, the court should be willing to consider granting relief. Whether such relief should be granted would largely depend on whether the non-compliance was a “deliberate flouting of that order by a litigant who could have complied with it” (per Keene LJ). On the facts, the only circumstance in which it might have been appropriate not to set aside the summary judgment would be if some conduct of the Claimant required punitive action. Since there was no finding of deliberate flouting and no evidence on which such a finding could have been made, the Claimant’s action was reinstated.
The Court observed that security for costs orders should be used as a shield for the Defendant and not as a sword to obtain summary judgment against the Claimant without an examination of the merits of the claim at trial.