National Justice Cia Naviera SA v Prudential Assurance Co Ltd (The Ikarian Reefer) (No 2)

The English court has jurisdiction to determine whether a person abroad has a sufficient connection with proceedings before it to bear their costs under section 51 of the Supreme Court Act 1981. An allegation that the person effectively brought the proceedings also permits the court to determine whether that person submitted to its jurisdiction.

Domicile in a Brussels Convention state does not prevent that determination. An ancillary costs application either falls outside the Convention's concept of suing or constitutes third-party proceedings within Article 6(2). The insurance jurisdiction provisions do not govern a separate costs claim against a non-party.

Under the former procedural rules, the application could proceed by summons in the existing action. Leave for service abroad was required under Order 11 rule 9(4), but could be granted retrospectively in the circumstances.

National Justice Compania Naviera SA, the owner of the Ikarian Reefer, claimed under its hull and machinery insurance following the vessel's grounding and fire. Prudential Assurance Company Ltd represented the underwriters. Cresswell J upheld the owner's claim, [1993] 2 Lloyd's Rep. 68. The Court of Appeal reversed that decision after finding that the vessel had been deliberately grounded and set on fire on the owner's authority, [1995] 1 Lloyd's Rep 455. Prudential recovered part of its costs through security but claimed a substantial unpaid balance.

Prudential applied under section 51 of the Supreme Court Act 1981 for a personal costs order against Constantine Comninos. He had been a director and majority shareholder of the owning company and subsequently became its sole shareholder. Prudential alleged that he had instituted, controlled and financed the litigation.

The costs summons was served on Comninos in Greece without leave. Rix J dismissed his jurisdictional challenge and retrospectively granted leave for service abroad. Comninos appealed, relying on the Brussels Convention and the absence of a procedural gateway for service outside the jurisdiction. The central issue was whether the English court could determine the costs application against him.

Appeal dismissed unanimously. Waller LJ delivered the substantive judgment. Tuckey and Simon Brown LJJ agreed.

1. The English court had jurisdiction to determine whether a non-party abroad had such a connection with proceedings before it that he should pay their costs under section 51 of the Supreme Court Act 1981. The costs jurisdiction was exercised within substantive proceedings over which the court already had jurisdiction. A substantial connection with those proceedings was required. Where the allegation was that the non-party was the alter ego of the litigating party, the court could determine whether he had effectively brought the proceedings and submitted to its jurisdiction. This established jurisdiction to hear the application, rather than personal liability for costs.

2. Under the former rules, the appropriate procedure was a summons in the existing action. Fresh originating proceedings and a gateway under Order 11 rule 1 were unnecessary. Leave to serve the summons abroad was required under Order 11 rule 9(4). Waller LJ preferred the approach in Seismik Securitik AG v. Sphere Drake Insurance to reliance on the tentative procedural dictum in Murphy v Young & Co Brewery, [1997] 1 WLR 1591. Rule 9(5) required an affidavit stating the grounds, the deponent's belief that there was a good claim for costs against the non-party, and where that person could be found.

3. The Brussels Convention did not prevent the application. Waller LJ preferred the view that an ancillary costs application did not involve suing a non-party within Article 2, because suing contemplated pursuit of a substantive cause of action. Alternatively, the application fell within the broad expression covering other third-party proceedings in Article 6(2). The procedure for bringing the non-party before the court was governed by English procedural law.

4. Article 11 afforded Comninos no protection. If the costs application constituted separate proceedings, it did not concern insurance matters. If the relevant proceedings were the original insurance action, those proceedings had already been brought against the insurer in England consistently with Article 8.

5. Rix J's retrospective grant of leave was a proper exercise of discretion. It saved costs and avoided delay, and Comninos had suffered no disadvantage from the omission. No reference to the European Court was warranted.

6. Waller LJ tentatively suggested that an application for joinder under rule 48.2(1) of the Civil Procedure Rules should be served on the non-party abroad under Order 11 rule 9(4) and (5). He also inclined towards an inherent power to permit service after joinder. Those questions had not been fully argued and called for express procedural clarification.

Appeal 0893 was dismissed with costs to be assessed. Leave to appeal to the House of Lords was refused. Appeal 0924 was consequently dismissed without an order as to costs.

• Court of Appeal: The present jurisdictional appeal was dismissed unanimously. Rix J's retrospective grant of leave for service abroad was upheld. Leave to appeal to the House of Lords was refused.
• High Court, Commercial Court: On 12 July 1999 Rix J dismissed Comninos' challenge to jurisdiction over the non-party costs application. He held that leave for service in Greece was required and granted it retrospectively. No citation for that decision is supplied.
• Court of Appeal: In December 1994 Prudential's appeal in the underlying insurance action was allowed. The vessel was found to have been deliberately grounded and burned on the owner's authority. Prudential was awarded its costs of the appeal and trial: [1995] 1 Lloyd's Rep 455.
• High Court, Commercial Court: Cresswell J initially gave judgment for the vessel's owner on its insurance claim: [1993] 2 Lloyd's Rep. 68.