Société Eram Shipping Co Ltd v Cie Internationale de Navigation

Security for costs may be ordered against an appellant under the Civil Procedure Rules 1998 on the same grounds as against a claimant. The court must be satisfied that the order is just in all the circumstances and that a specified condition applies. For an overseas corporate appellant, unexplained failure to pay an existing costs order may support reason to believe that it could not pay the respondent’s appeal costs. Mere non-payment of costs does not, without more, justify staying an appeal. Inability to pay is not itself a proper reason to prevent an appellant with permission from pursuing the appeal where security protects the respondent.

The High Court, Tomlinson J, discharged a garnishee order nisi obtained by Société Eram Shipping Co Ltd against the Bank. Permission to appeal was granted, and the appellant was ordered to pay approximately £14,000 in costs.

Pending the appeal, the Bank applied for security for its appeal costs and for a stay until the existing costs order was paid. The appellant sought disclosure of the Bank’s documents concerning the judgment debtor, hoping to establish an indemnity for the Bank’s costs.

The Court of Appeal considered whether the appellant’s unexplained failure to pay justified security or a stay, and whether disclosure was necessary to investigate a possible indemnity.

1. Security for costs. Under the Civil Procedure Rules 1998, CPR 25.15 permitted security for an appeal on the same grounds as security against a claimant. CPR 25.13 required the court to be satisfied both that security was just in all the circumstances and that a specified condition applied. The relevant condition was that the appellant was a company incorporated outside Great Britain and there was reason to believe that it would be unable to pay the respondent’s costs if ordered to do so.
2. The appellant had provided no evidence explaining its continued failure to pay the existing costs order. Although the court could not say that it was a rich company, it preferred the inference that the appellant could not pay rather than that it would not pay. The circumstances also made security just: the appellant had failed in its garnishee attempt and had impleaded the Bank despite having no direct claim against it. The approach in In Re a Company [1950] 94 SJ 369 and Cornhill Insurance Plc v Improvement Services Ltd [1986] 1 WLR 114 was distinguishable in its application to rich companies, but assisted the analysis.
3. Stay for non-payment of costs. The pre-CPR authorities, including Re Wickham (1887) 35 Ch D 272, Graham v Sutton, Carden & Co [1897] 2 Ch 367, Thames Investment and Securities plc v Benjamin [1984] 1 WLR 1381 and Hines v Birkbeck College and Another (No 2) [1992] Ch 33, showed that mere non-payment was insufficient. A stay was a separate discretionary response, generally requiring vexatious conduct in the proceedings as a whole, such as plainly bad or duplicate proceedings. The present appeal was genuine. The court did not exclude jurisdiction to stay, but found no compelling reason or sufficient authority for doing so here. Security adequately protected the Bank.
4. The Bank’s sworn evidence established that it had no express or implied costs indemnity from its customer and was defending the proceedings as a matter of principle. There was therefore no case for disclosure or an adjournment.
5. The application for security for costs was allowed. The stay application and the appellant’s disclosure application were refused. Costs were summarily assessed at £4,000.

1. Court of Appeal (Civil Division). On the interlocutory applications in the pending appeal, the court allowed security for costs but refused a stay and disclosure.
2. High Court of Justice. Tomlinson J discharged the garnishee order nisi, granted permission to appeal and ordered the appellant to pay approximately £14,000 in costs.