Citadel Management Inc v Equal Ltd & Ors

When an appeal is automatically dismissed for failure to provide security for costs, reinstatement is governed by the checklist in rule 3.9(1) of the Civil Procedure Rules 1998. The court must assess the interests of the administration of justice, promptness, whether the default was intentional, the explanation for it, the prejudice to the respondent, and the need for finality in litigation. The merits of the proposed appeal usually have limited relevance to security for costs. A respondent’s breach of an undertaking may weigh decisively in favour of reinstatement only where it has made compliance with the security order impossible. The resources of associated companies or entities may also be relevant. A late application, unsupported by adequate evidence from the appellant, may properly be refused.

Mr Hertzog sought reinstatement of an appeal against an order of Crane J dated 15 May 2000. The appeal had been automatically dismissed on 6 March 2001 after Mr Hertzog failed to provide security for costs ordered on 6 February 2001. He relied on alleged breaches by Citadel of undertakings given in connection with freezing orders, Citadel’s recovery of approximately $280,000, and the asserted merits of the appeal.

The Court of Appeal considered whether the delay, the explanations and evidence offered, the alleged breaches, the respondent’s position, and the interests of finality justified reinstatement.

1. Application refused. The appeal had been automatically dismissed following non-compliance with the security-for-costs order, and the balance of justice was against reinstatement.
2. The relevant factors were in effect codified in rule 3.9(1) of the Civil Procedure Rules 1998. They included the interests of the administration of justice, promptness, whether the failure was intentional, the explanation for the failure, and the need for finality in litigation. The court also had to consider the respondent’s position and any prejudice caused by the delay.
3. The merits of the proposed appeal were of relatively little materiality. The purpose of security for costs was to protect against the possibility of an appellant failing in the appeal, whether the prospects of success were large or small.
4. Citadel’s recovery of approximately $280,000 was only marginally relevant because, in the absence of a stay, the money had to be treated as Citadel’s. A breach of an undertaking would have been important, and probably decisive, if Citadel had thereby made it impossible for Mr Hertzog to provide security. The breach found by Crane J did not have that effect and was treated as relatively venial.
5. The court could consider not only the individual appellant’s means but also the resources of associated companies or entities able to provide security. Mr Hertzog had provided no proper explanation, supported by a statement of truth, for his non-appearance or the subsequent delay. The application should have been made with the greatest promptness, whereas more than six months passed before it was made. Citadel had been entitled to believe that the appeal was dismissed, and finality weighed against relief.

The order was: application refused.

• High Court, Queen’s Bench Division: Crane J refused Mr Hertzog’s application to set aside a default judgment on 15 May 2000 and granted limited permission to appeal. In earlier proceedings, the judge also found breaches of freezing orders and considered alleged breaches by Citadel of its undertakings.
• Court of Appeal (Civil Division): An order for security for costs was made on 6 February 2001. The appeal was automatically dismissed on 6 March 2001 for non-compliance. The present application to reinstate it was refused.