[2011]JRC016A
royal court
(Samedi Division)
19th January 2011
Before :
|
M.C. St. J. Birt, Esq., Bailiff, sitting
alone.
|
Between
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Leeds United Association Football Club Limited
|
First Plaintiff
|
|
Leeds United Football Club Limited
(formerly Leeds United 2007 Limited)
|
Second Plaintiff
|
And
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The Phone-in-Trading-Post Limited (t/a
Admatch)
|
Defendant
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Advocate P. C. Sinel for the Plaintiffs.
Mr R Weston as Director of the Defendant.
judgment
the bailiff:
1.
This is an
application by the plaintiffs to strike out the answer of the defendant and
seek judgment against the defendant on the grounds that the defendant’s
continued actions and inactions in these proceedings amount to an abuse of the
court’s process.
Background
2.
There have
been numerous interlocutory judgments in these proceedings in which the factual
background has been described. For
present purposes it can be summarised as follows.
3.
The first
plaintiff is an English company which once owned and operated Leeds United
Football Club. The defendant, which
trades under the name of Admatch, is a Jersey
company owned and controlled by Mr Robert Weston. In August 2004, the first plaintiff and
the defendant entered into an agreement for the defendant to act as agent to
the first plaintiff for the purpose of selling match and season tickets by
credit card. There is no dispute
that the defendant owes the first plaintiff £190,400 under that agreement.
4.
In the
course of 2005, control of the first plaintiff was acquired by interests
associated with Mr Ken Bates. The
present proceedings were issued by the first plaintiff in December 2005 seeking
payment from the defendant of the sum of £190,400. On 4th May 2007 the first plaintiff went into
administration, with net debts reported to be about £40 million. By an agreement of that date, the
administrators transferred the assets of the first plaintiff (including the
claim against the defendant) to the second plaintiff, and the shares in the
second plaintiff were sold to a consortium led by Mr Bates. Subsequently, the first plaintiff went
into liquidation. On 26th July 2007, the second
plaintiff was joined to the action.
Amended particulars of claim (to take account of the addition of the
second plaintiff) were filed on 31st
July 2007 and an amended answer was filed on 23rd August 2007.
5.
As already
mentioned, the debt in the sum of £190,400 is admitted. However the defendant contends that the
agreement contained at clause 9(f) a set-off clause which entitled the
defendant to set-off from any monies it owed to the first plaintiff any sum
owed by the first plaintiff (or by any parent, associate or subsidiary company
of the first plaintiff) to the defendant (or to any parent, associate or
subsidiary company of the defendant).
The defendant alleges in its answer that the sum of £1,439,734 is
owed by the first plaintiff and/or an associated company of the first plaintiff
to Cope Industrial Holdings Limited (“Cope”), which is a company in
which Mr Weston has a controlling interest and is said therefore to be an
associated company of the defendant.
6.
The
proceedings have been bedevilled by interlocutory jousting between the parties.
It is not necessary to refer to the history in detail. For today’s purposes the relevant
events would appear to be as follows.
7.
In the
original pleadings, the plaintiffs admitted the existence of the set-off
provision at clause 9(f) of the agreement but denied that it was relevant on
the grounds that the debt of £1,439,734 was owed to Mr Levi (an associate
of Mr Weston’s and a fellow shareholder in Cope) rather than to Cope,
that the debtor company was not an associate of the first plaintiff and that
Cope was not an associate of Admatch.
8.
On 24th April 2007 the Master
made an unless order against the defendant in respect of the provision of
discovery. That order was not
complied with but the matter became entangled with an application by the
defendant for a stay of the proceedings pending the hearing of an application
for security for costs. On 21st
August the Master refused a stay but extended the time for compliance with the
unless order.
9.
On 4th February 2008 the Master
made an order requiring the defendant to give certain discovery and to file
further and better particulars of its amended answer. Following a failure by the defendant to
comply with that order, the Master made an ‘unless’ order on 18th
March to the effect that the amended answer would be struck out if the
defendant did not comply with the order of 4th February 2008 within 28
days. That period expired at midnight on 15th April. The defendant sent an e-mail minutes
thereafter providing a draft affidavit of discovery but the further and better
particulars were not provided at that stage. The Master refused to grant a
retrospective extension of time for compliance with the unless order but, for
the reasons set out in a judgment dated 30th May 2008, I subsequently allowed
an appeal against that decision and granted the required extension of time.
10. A trial date had been fixed for 2nd December 2008 but this
was vacated by order of 28th
October 2008. On 1st December 2008 the
second plaintiff filed an amended reply to the defendant’s amended answer
which had been filed on 23rd
August 2007. For the first time the second plaintiff now conceded
that Cope was an associated company of Admatch and that the debtor company in
respect of the £1,439,734 was an associated company of the first
plaintiff. The sole dispute at that
stage therefore appeared to be whether that sum was owed to Cope (as the
defendant contended) - in which event it could be set off against the
£190,400 - or to Mr Levi (as the second plaintiff contended) – in
which event it could not.
11. However, matters changed shortly
thereafter. On 29th January 2009, the defendant
filed a re-amended answer which alleged that the assignment by the first
plaintiff to the second plaintiff of the benefit of the claim to £190,400
was invalid under Jersey law. On 16th February 2009, the second plaintiff filed
a re-amended reply joining issue in relation to the issue of the
assignment.
12. The proceedings now became side-tracked by an
issue as to security for costs. On 21st August 2008 and 4th December 2008, I had
made orders requiring the second plaintiff to provide security for costs up to
and including trial. On 19th May 2009, the Court of
Appeal allowed the second plaintiff’s appeal against those orders. On 17th December 2009 the plaintiffs applied for
leave to further amend the claim so as to allege that, contrary to what they
had admitted previously, the agreement did not in fact contain the set-off
provision in clause 9(f). After a
contested hearing I granted leave for the plaintiffs to re-amend the
particulars of claim and ordered that the defendant file a re-amended answer to
the re-amended claim by 1st
February 2010, such amendments being limited to those consequential
upon the amendments made by the plaintiffs. Various other orders were made including
that both parties should file revised affidavits of discovery, including in
particular documents relied upon arising out of proceedings for libel in the
English High Court between Mr Levi and Mr Bates.
13. When allowing the appeal in respect of security
for costs, the Court of Appeal had made an order for standard costs against the
defendant. These were subsequently
taxed and the Greffier certified total costs in the sum of £63,529.79 on 19th January 2010. The plaintiffs’ advocates wrote to
Mr Weston on 20th January
2010 requesting payment of the costs within seven days. On 29th January the matter was placed in
the hands of the Viscount’s Department for enforcement but no recovery
has been possible. On 4th February,
Mrs Weston sent an e-mail to the plaintiffs’ advocates stating that the
re-amended answer would be filed as soon as Mr Weston was well enough to do
so. However, she went on to say
that, in view of the fact that the enforcement of the taxed costs had been put
in the hands of the Viscount, the intention of the defendant to file the
re-amended answer had to be conditional upon the company being permitted to
remain in existence (in order to continue defending the action). She said that the situation would be
resolved more quickly and more certainly if the plaintiffs were to withdraw the
instructions to the Viscount’s Department to enforce the claim for costs
until after completion of the proceedings as a whole.
14. The plaintiffs filed the present summons on
12th February 2010 referring in particular to the defendant’s failure to
pay the taxed costs, the failure to file the answer to the re-amended
particulars of claim by 1st February (as ordered on 17th December 2009),
defending a claim when the defendant had no funds to honour any award and for
other unspecified repetitive breaches of court orders and timetables.
15. The hearing of the summons was listed for 8th April 2010. On 1st April, after the plaintiffs had
served and filed their bundle for the hearing, Mrs Weston wrote back stating
that the defendant would not be able to attend the Royal Court because of illness on the
part of Mr Weston. She supplied a
redacted medical certificate dated 15th March. On 8th April, having heard from Mrs
Weston on behalf of the defendant and Advocate Sinel on behalf of the
plaintiffs and having seen a brief medical report from Mr Weston’s
doctor, I adjourned the summons.
16. The matter was re-listed for 10th June and on
that occasion the defendant again applied for an adjournment. On that occasion I was provided with a
medical report from Mr Weston’s specialist and, for the reasons set out
in a judgment of that date, I agreed to adjourn the matter until the first
available date after 1st
October 2010. I made it
clear that it was highly unlikely that any further adjournment would be granted
and that, if Mr Weston remained unable through illness to represent the
defendant, the company would have to make alternative arrangements for
representation. The first plaintiff
sought leave to appeal against my decision to grant an adjournment but this
application was refused on the papers by the Deputy Bailiff as single judge and
subsequently by Pleming JA after oral argument. It was in those circumstances that the
summons came to be heard on 26th October.
The
plaintiffs’ submissions
17. On behalf of the plaintiffs, Advocate Sinel
submits that the defendant’s conduct in relation to the claim amounts to
an abuse of process such that it should be debarred from defending the
case. He relies on a number of
matters.
18. First, he refers to the fact that the defendant
has not paid the sum of £63,529 in respect of taxed costs which, pursuant
to RCR12/3(2), are payable forthwith.
He points out that in response to the demand for payment, Mrs Weston
sent an e-mail dated 27th January 2010 stating that the defendant intended to
appeal the decision of the taxing officer, that the defendant had not received
any income for the past five years, that it had no funds available to meet the
requested payment of costs, and that a decision would have to be taken by the
defendant’s shareholders as to whether or not to put the company into
liquidation as they were not willing to provide additional funding to enable
payment of the costs. Further
information about the financial position of the defendant is to be found in the
affidavit dated 12th
February 2010 sworn by Mr Weston. In that affidavit he said that the
defendant had not traded since 1999, apart from the short period in 2004 when
it acted pursuant to the agreement with the first plaintiff. It had no assets. It had only one bank
account which was overdrawn to the extent of some £9,700. It had other creditors, namely Mr Weston
and companies wholly or partially owned by him. These other debts amounted to many times
the value of the claim by the plaintiffs but none of these creditors had been
pressing for payment. Mr Weston had
personally guaranteed the overdraft with the bank and had agreed to pay off the
overdraft pursuant to that guarantee.
19. Advocate Sinel pointed out that the sum of
£190,400 had been disbursed by the defendant to other companies owned by
Mr Weston notwithstanding that the agreement provided that the sum in question
remained the property of the first plaintiff. In the circumstances, it was an abuse of
process for the defendant to continue to defend the claim when it had not paid
the order for costs.
20. Secondly, Advocate Sinel argued that it was an
abuse of process for the defendant to continue to defend the claim when it had
no funds with which to settle any liability ultimately found against it and
when Mr Weston had made it clear that he would not be putting in funds to pay
the claim.
21. Thirdly, he referred to the fact that the
defendant was in continued breach of the order of the court dated 17th December
2009 in two respects, namely it had failed to file a re-amended answer to the
re-amended particulars of claim by 1st February 2010 and it had failed to file
a revised affidavit of discovery by 15th February 2010.
22. Fourthly, he referred to repeated breaches of
court orders and timetables. For
example, the defendant had repeatedly sought to delay the hearing of this
particular summons, it having originally been fixed for hearing on 8th April
2010 and had also delayed the taxation of the costs awarded by the Court of
Appeal for a considerable period.
The defendant had also sought to delay the hearing of the appeal against
my decision to adjourn the hearing of the summons on 10th June 2010; the
defendant had failed to comply with two unless orders, namely those of 24th
April 2007 and 18th March 2008 (as described above); and had also repeatedly
been late in complying with orders, for example the Act of 16th April 2009
requiring a memorandum of understanding to be produced by 30th April 2009 and
delays leading up to the hearing of 22nd January 2009 in relation to the issue
of segregated funds.
23. In short, argued Advocate Sinel, the defendant
was doing all it could to avoid the matter ever coming to trial. The defendant, said Advocate Sinel, knew
that it would lose when the case eventually came to trial and was therefore
simply delaying matters indefinitely in the hope that the plaintiffs would give
up because the costs would become out of all proportion to the sum at
stake. In support of his assertion,
Advocate Sinel referred to the chronology attached to his skeleton argument and
the affidavit sworn by Mr Hiren Mistry, an employee of Advocate Sinel, in
support of the summons. I have
carefully considered those documents.
The
defendant’s submissions
24. In response, Mr Weston argued on behalf of the
defendant that there had not been any abuse of process. The defendant was insolvent on an asset
basis but had not been insolvent on a cash flow basis until the plaintiffs had
demanded payment of the taxed costs.
The defendant did not have any monies with which to pay the costs. An impecunious defendant was entitled to
defend a claim and should not be barred from doing so because of an inability
to pay a costs order or to pay any sum ultimately found to be due. There was an additional reason for
permitting the defendant to defend the claim in this case. The plaintiffs had made it clear that,
if, following a successful outcome of their claim against the defendant, they
were unable to recover from the defendant, they would pursue Mr Weston and/or
one or more of his companies. If
the defendant was debarred from defending the claim, this would severely
prejudice Mr Weston and/or his other companies as they would not be able to
dispute the liability of the defendant in the course of the subsequent
proceedings against them. This
would be grossly unfair when there was a valid defence to the claim.
25. Mr Weston submitted that, far from the
defendant not wishing to allow the matter to come to trial, it was the
plaintiffs who did not wish the matter to come to trial as they knew they would
lose. Mr Bates was seeking to browbeat the defendant into submission without a
hearing. This was particularly so
following the decision of the Court of Appeal in relation to security for
costs, because the comments of the Court of Appeal suggested that the defendant,
being a company represented by its director, would not be able to recover any
costs even where costs were awarded in its favour. Thus the plaintiffs could
safely run up costs without any risk of having to pay costs to the defendant. As to the merits, Mr Weston referred to
the libel action in the High Court in London where the judge had found the
evidence of Mr Levi and Mr Weston himself to be credible and reliable, whereas
he had found the evidence of both Mr Bates and his solicitor Mr Taylor (who would
be key witnesses in the present case) to be unreliable and, in Mr Bates’
case, undermined by documents. Mr
Bates wished to try and win the case without going to trial by swamping the
defendant with collateral issues so that it missed deadlines imposed by the
Court. Mr Weston admitted that the
£190,400 had been disbursed amongst various of his other companies but
this was only done following exercise of the right of set off, at which point
the monies concerned became the property of the defendant.
26. He accepted that the defendant had failed to
file the re-amended answer by 1st February 2010 or to file an affidavit of
discovery by 15th February but the failure to do so had been due to his ill
health and to the fact that, since then, the plaintiffs had forced the
defendant to spend time in litigating the present summons and the
plaintiffs’ various unsuccessful appeals to the Court of Appeal. This meant that he was unable to attend
to the outstanding matters. He
concluded that, even in normal circumstances, it took him up to ten times as
long as a small team of lawyers with secretarial resources would take to carry
out the same task. During the
course of 2010, he had been even more limited because of his illness. The plaintiffs were continuing their
tactic of overwhelming the defendant with paperwork and numerous hearings in
order to make things impossible for the defendant. The filing of the answer and the
affidavit of discovery were the only outstanding matters and these could be
dealt with by an order giving new deadlines for compliance.
27. As to the alleged repetitive breaches, he
accepted that the defendant had on occasions been late but this was due to the
problems of not having a lawyer and the breaches had all been rectified. The plaintiffs had been guilty of far
greater delays and indeed had been responsible for loss of most of the trial
dates which had been fixed.
28. In short, there had been no abuse of process
and there was no reason why the court should not give directions now to bring
the matter to trial. When pressed
as to how long he would require to produce the re-amended answer and affidavit
of discovery, Mr Weston stated that the amendment by the plaintiffs in December
2009 of its case concerning whether the set-off provision was contained in the
agreement would involve a substantial revision of the pleadings. Furthermore, there had been a delay in
the defendant receiving the documents from the libel proceedings in England and
this had been caused by the failure of the plaintiffs to grant consent. These documents would need to be
reviewed. He thought he would require five weeks in order to comply with the
two outstanding matters.
The law
29. I was referred to a number of cases, but it
seems to me that the applicable principles are to be found in those referred to
below.
30. In Alhamrani v Alhamrani and others
[2008] JRC 051, the Royal Court was
faced with a defendant, Sheik Abdullah, who had repeatedly failed to comply
with orders of the Court or to take an appropriate part in the
proceedings. Having summarised at
paragraph 34 of the judgment the nature of the inherent jurisdiction of the
Court following Mayo v Cantrade [1998] JLR 173, Page Commissioner said
this at paragraph 37:-
“It is axiomatic that one
area in which considerations of necessity may demand the exercise of the
court’s inherent jurisdiction is when someone who has been properly made
a party to the litigation takes it upon himself to flout or ignore the
court’s orders or persistently to conduct himself in a way that evinces
an unwillingness to engage in the litigation process on an equal footing with
the other parties, as here. And, while striking out or threatening to strike
out a defendant’s pleading, or otherwise barring him from defending
proceedings, is a strong thing to do – more so, perhaps, than striking
out a plaintiff – the ability to do so in an appropriate case must be, on
any view, a necessary part of the court’s armoury.”
31. Despite the fact that the conduct of Sheik
Abdullah as summarised in the judgment was, in my judgment, worse than that of
the defendant in this case, the court in Alhamrani gave Sheik Abdullah a final
chance to put his house in order.
It made clear, however, that any further breach of court orders would be
likely to lead to the summary striking out of his answer.
32. Although, initially, Sheik Abdullah complied
with the order, he failed to participate in the proceedings at a later stage as
a result of which his answer was struck out. On appeal [2008] JCA 187A, the Court of Appeal
confirmed at paras 65 – 67 of the judgment the jurisdiction of the Royal Court to
strike out a defence because of defaults on the part of a defendant in
complying with orders of the Court.
Nevertheless, the Court of Appeal emphasised the drastic consequences of
such an order and, despite Sheik Abdullah’s conduct, allowed the appeal
and permitted Sheik Abdullah to continue to defend the case provided that he
paid into the hands of the Greffier a substantial sum by way of security for
costs of the other parties.
33. Further assistance as to the circumstances in
which striking out may be appropriate is to be found in the comment of Chadwick
LJ in Arrow Nominees Inc v Blackledge [2000] 2 BCLC 167 at para 54:-
“I adopt, as a general
principle, the observations of Millett J in Logicrose v Southend United FC
Limited (The Times 5 March 1988) that the object of the rules as to
discovery is to secure the fair trial of the action in accordance with the due
process of the Court; and that , accordingly, a party is not to be deprived
of its right to a proper trial as a penalty for disobedience of those rules-
even if such disobedience amounts to contempt for or defiance of the Court
– if that object is ultimately secured by (for example) the late
production of a document which has been withheld. But where a litigant’s conduct
puts the fairness of the trial in jeopardy, where it is such that any judgment
in favour of the litigant would have to be regarded as unsafe, or where it
amounts to such an abuse of the process of the Court as to render further
proceedings unsatisfactory and to prevent the Court from doing justice, the
Court is entitled – indeed I would hold bound – to refuse to allow
that litigant to take further part in the proceedings and (where appropriate)
to determine the proceedings against him. The reason, as it seems to me, is that it
is no part of the Court’s function to proceed to trial if to do so would
give rise to substantial risk of injustice. The function of the Court is to do
justice between the parties, not to allow its process to be used as a means of
achieving injustice. A litigant who
has demonstrated that he is determined to pursue proceedings with the object of
preventing a fair trial has forfeited his right to take part in a trial. His
object is inimical to the process which he purports to invoke.” (Emphasis
added)
34. The above passage was quoted with approval by
Bean J in Madarassy v Nomura International plc [2006] All ER (D) 75 and
he went on to say at para 30(iii):-
“Striking out is a draconian
remedy: it must be a proportionate response to the misconduct involved, and
there must be a compelling reason for the Court or tribunal to take such a
step.”
35. I draw from the above authorities the
conclusion that it is a strong thing to strike out a defence and there must be
an abuse of process such as to render further proceedings unsatisfactory or
prevent the court from doing justice or, to quote Page Commissioner, a party
must have flouted or ignored the Court’s orders or persistently conducted
himself in a way that evinces an unwillingness to engage in the litigation
process on an equal footing with the other parties.
36. I should add that this is not a case where the
defendant is, at present, in breach of an ‘unless’ order. The plaintiffs have not sought an unless
order in respect of the two failures by the defendant to comply with the order
of 17th December 2009. Where there is a breach of an unless
order, different considerations are likely to apply; see the observations of
Ward LJ in Hytec Information Systems Limited v Coventry City Council
[1997] 1WLR 1666 at 1674 – 1675, quoted with approval by the Court of
Appeal in Alhamrani at paras 84 and 85.
37. I turn next to consider the authorities in
relation to a failure to pay a sum ordered by the Court, such as an order for
costs. There is clear authority for
the proposition that such a failure may lead to a party being struck out
provided that the failure is not due to an inability to pay. Although the case involved very
different issues, the observations of Millett LJ in Abraham v Thompson [1997]
4 All ER 362 at 377 are relevant:-
“It is not an abuse of the
process of the court for an impecunious plaintiff to bring proceedings for a
proper purpose and in good faith while being unable to pay the
defendant’s costs if the proceedings fail. If the plaintiff is an individual the
court has no jurisdiction to order him to provide security for the
defendant’s costs and to stay the proceedings if he does not do so. It may be unjust to a successful defendant
to be left with unrecovered costs, but the plaintiff’s freedom of access
to the courts has priority. The
risk of an adverse order for costs and consequent bankruptcy has always been
regarded as a sufficient deterrent to the bringing of proceedings which are
likely to fail. Where there is no
risk of personal bankruptcy as in the case of a plaintiff which is a limited
company, the court has a statutory jurisdiction to award security for costs;
but even in this case it will frequently not do so if this will have the effect
of stifling bona fide proceedings.
It is preferable that a successful defendant should suffer the injustice
of irrecoverable costs than that a plaintiff with a genuine claim should be
prevented from pursuing it.”
These observations are, a fortiori,
applicable in the case of an impecunious defendant who finds himself brought
before a court at the instance of a plaintiff.
38. Nevertheless, the general principle is that, in
the absence of an inability to pay, a party should pay an order for costs as it
falls due and if the party does not do so, he may be struck out. Thus in Crystal Decisions (UK)
Limited v Vedatech [2006] EWHC 3500 (Ch), having observed that there was no
suggestion that the defendants could not in that case pay the costs of an
interlocutory hearing which they had been ordered to pay, Patten J said as
follows at para 16:-
“In any event I take the view
that the orders of the Court, even in relation to interim costs, require to be
complied with and that, unless there is some overwhelming consideration falling
within Article 6 [of the ECHR] that compels the Court to take a different view,
the normal consequence of a failure to comply with such an order is that the
Court, in order to protect its own procedure, should make compliance with that
order a condition of the party in question being able to continue with the
litigation.”
39. In the case of a company with no assets which
is being supported by its shareholder or directors, the Court may look to the
reality of the situation. In PDM Holdings (Jersey) Limited v Rockwood
Investments Limited [2010] JRC
010, the plaintiff was a company with no assets and which had been used
specifically to pursue the claim in question. An order for costs had been made against
the plaintiff in respect of an unsuccessful interlocutory application and these
had subsequently been taxed. The Royal Court upheld
the decision of the Master to order that the claim would be struck out unless
the plaintiff paid the sum due by way of taxed costs. The Royal Court observed that the directors
of the plaintiff would have to fund the liability for costs if they wished the
action to continue.
40. In Jakobsson v Offshore Nautical Sales
Limited [2003] JLR 71, the plaintiff obtained judgment for £125,000
against the defendant company in respect of the sale of a yacht. After the events forming the basis of
the plaintiff’s claim, but prior to the commencement of the proceedings,
the defendant transferred its business to another company within the same
group. It therefore had a
substantial balance sheet deficit and, but for the financial support of its
parent company, would have been insolvent.
The defendant’s substantial legal costs and all other debts had
been met by the parent company. The
defendant sought to appeal the judgment of the Royal Court. The plaintiffs sought an order that the
appeal be stayed until the defendant had provided security for the payment of
the judgment debt and the plaintiff’s costs before the Royal Court.
41. The Court of Appeal held that it had an
inherent jurisdiction to enforce its rules of practice and to suppress any
abuse or attempted thwarting of its process or that of the Royal Court. It held that an abuse of process had
occurred. The actions of the
defendant and the parent group i.e. the failure to comply with the Royal
Court’s order, the payment of the defendant’s legal costs and other
debts by the parent group, and the transfer of the franchise to another company
within the group, was evidence of a clear intention, if the defendant’s
appeal were unsuccessful, to use the defendant’s impecuniosity to force
the plaintiff to undertake the long and expensive task of pursuing companies
and individuals in the parent group for payment of the judgment debt. The defendant and the parent group were
therefore attempting to use the courts to further their own interest, while
refusing to comply with the Court’s existing order. In the circumstances
the appeal was stayed until sufficient funds to meet the judgment debt and the
plaintiff’s costs were paid into Court or secured by bank guarantee.
Decision
42. I take first the non payment of the outstanding
costs of £63,529. The
starting position is that orders of the Court are to be obeyed and if a party
refuses to pay an award of costs made against it, it is at risk of having its
claim or defence, as the case may be, struck out. However, if the reason for non-payment
is an inability to pay, questions of access to the Court under Article 6 ECHR
will arise and may militate against an order striking out that party.
43. Nevertheless, as appears from PDM and Jakobsson, the Court may, in
appropriate circumstances, order an impecunious company to pay sums due where
this would otherwise give rise to an abuse of process. In my judgment, there would be such an
abuse in this case if the defendant were allowed to continue to defend the case
without paying the outstanding costs.
I say this for the following reasons:-
(i)
It is
clear that the defendant has no real interest of its own in defending the
action. It has no assets which
could be taken in the event of a judgment against it. It is a dormant company. The sole
interest in defending the case lies with Mr Weston and one or more of his other
companies because, in the event of success against the defendant, it is clear
that the plaintiffs intend to seek to recover the sum due from Mr Weston
personally and/or from some of his companies. As Mr Weston rightly conceded, the
position of himself and his companies would be prejudiced considerably in the
event of judgment being obtained against the defendant because its defence had
been struck out. They would lose
the ability to argue that the sum of £190,400 is not owed and therefore
they cannot be liable for it. In
circumstances where the real interest in defending lies with Mr Weston and/or
his companies, I do not consider it unreasonable to require that he or his
companies fund the defendant so that it can pay the outstanding costs order as
a condition for being allowed to continue to defend.
(ii) It is strongly arguable that the defendant
should have retained the £190,000 pending resolution of the dispute. If it had done so, there would have been
monies from which the outstanding costs order might have been paid, although it
would clearly have been argued by the plaintiffs that these were proprietary
funds and could not therefore be used for such a purpose. It was Mr Weston’s decision, as
director and shareholder of the defendant, to allow these monies to be
transferred to one or more of his other companies, so that they have had the benefit
of it. In the circumstances, it
would in my judgment be an abuse for the defendant to be allowed to continue to
defend notwithstanding a failure to pay an outstanding costs order, when the
monies in question were paid away to Mr Weston and/or his other companies.
(iii) On the basis of the evidence before me, I
conclude that there should be no difficulty in Mr Weston and/or his companies
funding the defendant to the extent of £63,529. In the first place, in an e-mail dated
24th October 2008 to the plaintiff’s previous advocates, Mr Weston, on
the topic of whether the defendant would be able to satisfy any judgment
against it for the £190,400, said “If
it makes the plaintiff feel more comfortable, you may be assured that if there
were to be any shortfall in the defendant’s funds, I could personally
afford to make up the shortfall if I choose to do so”. Secondly, at paragraph 57 of his
affidavit, Mr Mistry lists various other hotels and properties which he says
are owned by companies owned by Mr Weston and these have a very substantial
gross value. I accept, as Mr Weston asserted during the course of argument,
that there are borrowings which are not referred to in these figures and that
the valuations may be inaccurate. Nevertheless, it is clear that, through his
various companies, Mr Weston has very substantial property and hotel interests
and, in the absence of any evidence from Mr Weston to the contrary, I consider
it highly unlikely that he or one of his companies will not be able to come up
with the necessary sum. Thus no
question of stifling the defendant’s defence arises.
44. However, even allowing for the other failures
of the defendant as summarised in the remainder of this judgment, I consider
that it would be completely inappropriate to strike out the defence at this stage
without giving the defendant a final opportunity to pay the outstanding amount
of costs. As all the cases make
clear, to strike out a party for non-compliance with a court order is a
draconian step which should only be done where it is necessary and proportionate. In my judgment, it is not necessary or
proportionate to strike out the defence at this stage. If, following the making of an unless
order, the costs are paid, the plaintiffs will be in the position that they
should have been and the matter can therefore proceed to trial. Accordingly, I consider the right course
in this case is to make an order that, unless the defendant pays the
outstanding costs by a certain date, its defence will be automatically struck
out. This will give the defendant
and Mr Weston a final opportunity to consider how they wish to proceed in
knowledge of the consequences should the decision be not to fund the defendant
to the necessary extent.
45. Advocate Sinel argued that it was also an abuse
of process for a company with no assets to defend a claim in circumstances
where it was clear that the shareholder would not provide any funds to meet the
claim in the event of the defendant company being found liable. I do not agree. As Millett LJ made clear in the passage
cited at para 37 above, it is not an abuse for an impecunious plaintiff,
whether a company or not, to pursue a claim in circumstances where it will not
be able to meet any adverse costs order.
This must be even more true in the case of an impecunious defendant because
at least a plaintiff has a choice as to whether to proceed or not whereas a
defendant is brought before the Court by the actions of a plaintiff. The fact that a defendant has
insufficient finds to meet a claim does not make it an abuse of process to
defend a claim which it believes to be ill founded. I therefore reject this ground of
the plaintiff’s application.
46. I turn next to the remaining matters relied
upon by Advocate Sinel, namely repeated failures to comply with court
orders. In so far as Advocate Sinel
relied upon the conduct of the defendant during the course of 2010 in relation
to this summons and the various appeals to the Court of Appeal, I do not
consider this relevant. This Court
accepted that there were valid grounds for the two adjournments of the hearing
of this summons on the basis of Mr Weston’s ill health and that decision
was upheld by the Court of Appeal.
I cannot see therefore that any grounds for criticism of the defendant in
seeking to adjourn the hearing of the summons. In so far as it is said by Advocate
Sinel that the defendant sought to delay the hearing of the various appeals,
the fact remains that these were heard on schedule and that any attempts at
delay were therefore unsuccessful. I cannot see that such conduct even begins
to give grounds for the draconian remedy of striking out. It is of note, in any event, that the
summons to strike out was filed before any of these events.
47. I accept that the defendant has a history of
being late in complying with orders of this Court, although the plaintiffs are
not without fault in this area either.
Furthermore, the defendant has twice failed to comply with unless orders
as set out at paragraphs 8 and 9 above. However, its failures have in the end
been remedied and there are only two respects in which the defendant is in
default at present. They both arise
out of the order of this Court dated 17th December 2009.
In the first place the defendant has failed to file its re-amended
answer to the re-amended particulars of claim. That should have been filed by 1st February 2010 but was
deliberately not filed, as was made clear by Mrs Weston in her e-mail of 4th
February. In the second place it
has failed to file its revised affidavit of discovery, which should have been
done by 15th February 2010. Again it is to be noted that the
plaintiffs’ summons to strike out was filed before the expiry of the date
for filing the affidavit of discovery.
48. I do not consider that the two failures, even
when taken together with the other failures referred to at paras 17 - 23 above,
justify the draconian remedy of striking out. There is no reason why this case cannot
be tried properly and fairly if the defendant now files the two outstanding
documents. It is true that they are
long overdue but the plaintiffs have contributed to this. They have expended enormous time and
costs in issuing this summons within days of the expiry of the time for filing
one of the documents (and before the expiry of the time for filing the other)
and then pursuing hopeless appeals to the Court of Appeal. If they had taken the more obvious and
appropriate step of seeking an unless order shortly after the expiry of the
time for filing the documents, this matter would have been resolved one way or
the other a long time ago and at much less cost.
49. In the circumstances, I consider that the
proportionate and fair way to deal with this matter is now to make an unless
order in respect of the filing of the two outstanding documents. Mr Weston indicated that he would need
five weeks for this purpose, although he qualified that by saying that he might
need more if he was having to work on the appeal against my costs decision of 10th June 2010, which was
due to be heard by the Court of Appeal in November. That has now occurred and the appeal has
been dismissed. That is therefore
no longer relevant. Mr Weston has
had the time available since then to work on the outstanding matters. In these
circumstances, I propose to order that, unless the defendant files its
re-amended answer to the re-amended particulars of claim (as described in
paragraph 2 of the Act of 17th December 2009) and the revised affidavit of
discovery (as described in paragraph 5 of the said Act) on or before 23rd
February 2011, (being 5 weeks from the date that this judgment is formally
delivered), the answer of the defendant shall be struck out without further
order and the plaintiffs will be entitled to judgment. I consider that a similar period is
appropriate for the payment of the costs and I therefore order that, unless the
defendant pays to the plaintiffs the outstanding costs in the sum of
£63,529.79 by the same date, the defendant’s answer shall be struck
out and the plaintiffs shall be entitled to judgment.
50. By way of conclusion I would add this. The Court made it clear in its judgment
of 10th June 2010
that it would grant no further adjournments on the grounds of the ill health of
Mr Weston. The defendant is the
company and it is up to the company to ensure that it is adequately represented
in this case, whether this is by Mr Weston, by Mrs Weston if she feels up to
it, by another director or by a lawyer. The same principle will apply
going forward. The defendant must
appreciate that the orders of the court must be complied with. If it does not comply with the unless
orders, I find it hard to imagine any circumstances in which further time would
be granted. Assuming that it
complies with those orders, there is no reason why the Court should not fix a
timetable to bring this matter to trial in early course. Further failures to
comply with timetables are likely to result in stringent unless orders, with
the likelihood of the defendant being struck out in the event of failure to
comply with those orders. So far as
the plaintiffs are concerned, they should stop litigating collateral issues
(which enables Mr Weston to argue that this is a deliberate tactic to overwhelm
him) and concentrate on bringing the matter to trial as soon as possible.
Authorities
Alhamrani
v Alhamrani and others [2008] JRC 051.
Mayo
v Cantrade [1998] JLR 173.
Alhamrani
v Alhamrani [2008] JCA 187A.
Arrow Nominees Inc v Blackledge
[2000] 2 BCLC 167.
Madarassy v Nomura International plc
[2006] All ER (D) 75.
Hytec Information Systems Limited v
Coventry City Council [1997] 1 WLR 1666.
Abraham v Thompson [1997] 4 All ER
362.
Crystal Decisions (UK) Limited v
Vedatech [2006] EWHC 3500 (Ch).
PDM
Holdings (Jersey) Limited v Rockwood Investments Limited [2010] JRC 010.
Jakobsson
v Offshore Nautical Sales Limited [2003] JLR
71.