Zappia Middle East Construction Company Ltd & Anor v Clifford Chance (a firm)

On an application for security for costs, the court must first establish the relevant jurisdictional condition under the Civil Procedure Rules. For an individual ordinarily resident outside the jurisdiction, the question may be whether a claim can be enforced under the Brussels Convention. That requires consideration of domicile under the applicable national law, rather than merely the location of assets. The discretion to order security must be objectively justified and non-discriminatory. The merits are generally of limited relevance unless security would probably stifle an exceptionally strong claim. The court may consider the availability, traceability and enforcement of assets, the unexplained nature of an applicant’s financial structure, and the proportionality of the security sought.

The claimants appealed an order of Mr Justice Blofeld in the Queen’s Bench Division dated 23 February 2001, for which permission had been granted by Lord Justice Kay. The order had refused extensive amendments to particulars of claim in proceedings alleging breach of professional duty by Clifford Chance.

Clifford Chance applied for security for the costs of the appeal. The first claimant was incorporated in the British Virgin Islands with minimal issued capital. Mr Zappia’s ordinary residence and domicile were disputed, with evidence referring to Canada and Italy. The central issues were whether the jurisdictional conditions for security were satisfied and whether an order was proper in the circumstances.

1. Application allowed. Security for the costs of the appeal was ordered in the sum of £50,000, to be provided within 28 days. The appeal was stayed meanwhile and would be automatically dismissed if security was not provided.
2. Under CPR rules 25.12 and 25.13, as applied by paragraph 15, the court had jurisdiction to order security against both appellants. In Mr Zappia’s case, the relevant question was whether a claim could be enforced against him under the Brussels Convention. The statutory condition referred to a claim, rather than a judgment.
3. The purpose of the provision was to avoid the potential breach of the Treaty of Rome identified in Fitzgerald v Williams [1996] QB 658. The essential issue was whether Mr Zappia was domiciled in Italy for the purposes of the Brussels Convention, which meant domicile according to Italian law. The court had no evidence of Italian law and was entitled to resolve the conflicting evidence summarily.
4. The discretion to order security had to be objectively justified and non-discriminatory, in accordance with Nasser v United Bank of Kuwait and the approach reflected in Count Tolstoy v United Kingdom (1995) 20 EHHR 442. The merits of the claim were ordinarily of little assistance unless an exceptionally strong case showed that security would stifle a meritorious claim.
5. The evidence established available resources but gave insufficient detail about the appellants’ assets, their traceability for enforcement, Mr Zappia’s wealth and the Construction Company’s resources. The unexplained corporate structure and absence of a stifling argument meant that the application was not oppressive. The respondents’ payment into court and existing costs orders did not amount to adequate freestanding security.
6. The sum sought for the appeal was nearly £84,000 and appeared excessive in the context of security for costs. A proportionate order of £50,000 was therefore appropriate. The costs of the application were subject to detailed assessment.

• Court of Appeal (Civil Division): Allowed the application for security for costs of the appeal. Ordered security of £50,000 within 28 days, with a stay and automatic dismissal of the appeal if security was not provided.
• Queen’s Bench Division: Mr Justice Blofeld refused permission to make extensive amendments to the particulars of claim on 23 February 2001.