Perotti v Watson & Ors

A stay of execution of a costs order requiring payment of money is exceptional. It requires special circumstances and that justice requires a stay. The existence of pending litigation, an expectation of recovering damages, financial hardship or the risk of losing a home will not ordinarily justify postponing payment. Costs are recompense for expenditure incurred by the receiving party, not funds available to finance further litigation against that party. A court may permit restrained assets to be used for legal representation in specified proceedings, but the permission is confined to its proper purpose. It does not extend to another person’s litigation or to general litigation expenses. The judge who made such an order may recall it where the order was not perfected and circumstances have materially changed.

The claimant had accumulated substantial costs liabilities arising from prolonged litigation concerning the administration of his late uncle’s estate. He applied for stays of execution, permission to use assets subject to freezing and charging orders, permission to fund his daughter’s litigation and permission to appeal against the recall of an earlier funding order.

The applications followed decisions in the Chancery Division concerning freezing orders, charging orders and the claimant’s proposed use of a leasehold property to finance legal representation. The central issues were whether the costs orders should be stayed, the scope of the Court of Appeal’s earlier permission to raise funds, and whether the first-instance judge had jurisdiction to recall an unperfected order after the intended purpose of the funding had not been fulfilled.

1. Applications dismissed. The claimant had not shown special circumstances justifying a stay of the costs orders. The pending second, third and fourth actions, the remuneration action, the proposed petition to the House of Lords, his expectation of substantial damages and the hardship caused by possible loss of his flat were insufficient.
2. The costs orders represented recompense for expenditure incurred or payable by Mr Watson. It would be unjust to stay enforcement so that the claimant could use money owed to Mr Watson to finance further litigation against him. Any speculative recovery in other proceedings had to be pursued with the claimant’s own funds.
3. The earlier Court of Appeal order permitted the claimant to raise money on the leasehold only for his legal advice and representation in the forthcoming appeal. The transcript accurately recorded that limitation. It did not permit funding of his daughter’s legal costs, unrestricted litigation expenses, a computer, running costs, legal database access or a copy of the White Book.
4. The claimant’s daughter had no established proprietary right to the property, and the charging order in Mr Watson’s favour gave judgment creditors a materially stronger claim to the restrained assets. Denying access to those funds did not breach Article 6 of the European Convention on Human Rights.
5. Rimer J had jurisdiction to recall his earlier order. The order had not been perfected, its purpose—funding representation in the forthcoming appeal—had not been fulfilled, and there had been a material change of circumstances. The earlier direction that another judge should try the remuneration action did not make Rimer J unfit to determine an application to recall his own order in the main action.

Lord Justice Kay agreed with Lord Justice Aldous.

• Court of Appeal (Civil Division): dismissed the applications and ordered Mr Perotti to pay Mr Watson’s costs assessed at £3,522.
• High Court, Chancery Division: Rimer J recalled the earlier order permitting further borrowing against the leasehold and dismissed the claimant’s application; related orders had also been made concerning the freezing and charging orders.