Pagemanor Ltd v Ryan & Ors

A company within section 726 of the Companies Act 1985 is in principle vulnerable to an order for security for the costs of an appeal. Prospects of success are seldom relevant and very rarely determinative. An argument that security would stifle the appeal, including because the respondent lacks clean hands, may justify reducing the amount ordered but does not necessarily justify refusing security. The appeal may be stayed pending provision of security and made subject to automatic dismissal for non-compliance.

Pagemanor Limited appealed against an order of Miss Sonia Proudman QC, sitting as a deputy judge of the Chancery Division, dismissing its application under section 423 of the Insolvency Act 1986. Michael Ryan and Doris Ryan, two respondents, applied for security for the costs of the appeal.

Pagemanor had issued capital of £2 and an apparently irrecoverable debt as its only recorded asset. It argued that the respondents lacked clean hands and that security would stifle an appeal said to have strong prospects of success. The central issue was whether security should be ordered and, if so, at what level.

1. Application granted. Lord Justice Robert Walker held that Pagemanor was a company falling within section 726 of the Companies Act 1985 and was therefore in principle vulnerable to an order for security for costs.
2. The prospects of success of the appeal were given no weight. It was implicit in the jurisdiction to order security for the costs of an appeal that the appeal might fail. Prospects of success were seldom relevant and very seldom determinative.
3. The submission that the respondents lacked clean hands did not justify making no order. However, it justified a relatively modest order so as to preserve some possibility that Pagemanor could pursue the appeal. A bare assertion that any security would stifle the appeal did not require security to be refused altogether.
4. The sum of approximately £9,200 sought was reduced to £5,000. The security was to be provided within 28 days. The appeal was stayed meanwhile and was to be dismissed automatically, without further application, if security was not provided. The applicants were awarded £2,000 costs of the application, summarily assessed.

• Court of Appeal (Civil Division): Heard an application for security for the costs of Pagemanor’s appeal against the Chancery Division order dismissing its section 423 application.
• Chancery Division: Miss Sonia Proudman QC, sitting as a deputy judge, dismissed Pagemanor’s application on 5 February 2002.
• Permission to appeal: Granted on paper by Lord Justice Chadwick on 13 May 2002.