Stabilad Ltd v Stephens & Carter Ltd

The Court of Appeal has power under Order 59 rule 13 to stay an order for payment out of money lodged as security for costs pending an appeal. Retaining the money does not circumvent the jurisdiction under section 726 of the Companies Act 1985 or Order 23, because the security remains directed to trial costs.

The discretion is not governed by an inflexible practice that successful plaintiffs must receive payment out. The court must balance the circumstances. A serious risk that release will defeat recovery of trial costs, coupled with no evidence that retention will prevent the appeal being pursued, may justify a stay.

Stabilad Ltd succeeded at trial in recovering £250,000 from Stephens & Carter Ltd. It had previously paid £58,000 into court as security for the defendant’s costs under section 726 of the Companies Act 1985. The deputy judge refused to stay payment out pending the defendant’s appeal, holding that he lacked power to make the order and would not have exercised the discretion in any event.

The defendant appealed. The central issues were whether the Court of Appeal had power to retain the security pending appeal and, if so, whether the balance of justice required a stay.

The Court of Appeal unanimously allowed the appeal and imposed a stay preventing payment out of the £58,000. The application was before the court de novo, so the court had to determine the discretionary question itself if power existed.

1. Power. The deputy judge was wrong if he concluded that the court lacked jurisdiction. Under Order 59 rule 13, the Court of Appeal could stay execution of an order made below for payment out of money lodged as security for costs.
2. Scope of security. Retaining the money pending appeal was not an impermissible circumvention of section 726 of the Companies Act 1985 or Order 23. The security remained security for the defendant’s trial costs, even if those costs became payable only after a successful appeal.
3. Discretion. The earlier decisions in The Bernisse [1920] P1 and Comitato Portuario v Instone [1922] WN 260 did not create an inflexible rule. Procedural practice must respond to changing litigation requirements, and a discretionary power cannot be confined within rigid boundaries. The court endorsed the approach reflected in Combi (Singapore) Proprietary Ltd v Sriram, that such practice requires contextual assessment.
4. Balance of justice. The plaintiff’s release of the money would make recovery of the defendant’s trial costs very unlikely if the appeal succeeded. The plaintiff produced no evidence that retaining the money would prevent or embarrass it in pursuing the appeal. Its success below and financial difficulties were insufficient to outweigh the defendant’s position. The ordinary rule protecting the fruits of a judgment pending appeal therefore gave way to the need for a stay.

Lord Justice Auld agreed with the Vice-Chancellor’s reasoning and considered that the balance clearly favoured retention. The application was allowed with costs, to be taxed if not agreed.

1. Court of Appeal (Civil Division) — On 1 April 1998, the appeal from the refusal to stay payment out was allowed and the stay imposed: [1998] EWCA Civ 597.
2. Chancery Division — Mr Lawrence Collins QC, sitting as a deputy judge, refused the defendant’s application for a stay on 20 March 1998, holding that he lacked power to make the order and would not have granted it as a matter of discretion.