Shipshape Holdings Ltd v Stafford & Ors

An application for permission to pursue a second appeal must satisfy the stringent test in CPR 52.13: an important point of principle or practice, or another compelling reason. The Court of Appeal may assess the prospects of success from the pleadings, even where no evidence has been heard. Fresh evidence is admitted only exceptionally and is governed by the three-fold test in Ladd v Marshall. Security for costs may properly be ordered where an impecunious corporate claimant advances a speculative claim and the defendants would otherwise be unable to recover their costs.

Shipshape Holdings Ltd brought fiduciary-duty claims against former directors concerning an intended purchase and commercial use of a sailing ship. The District Judge struck out claims by the individual claimants but refused security for costs against Shipshape. On appeal, Judge Zucker QC ordered Shipshape to provide £20,000 security and stayed the claim if it failed to do so.

Shipshape sought permission to appeal. The central questions were whether the proposed appeal satisfied the second-appeal threshold, whether fresh evidence could be admitted, and whether the lower appellate judge was entitled to conclude that the pleaded claim had no real prospect of success.

1. Application refused. The proposed appeal was a second appeal for the purposes of CPR 52.13. Permission could be granted only if an important point of principle or practice, or some other compelling reason, arose. The fact that the applicant had succeeded before the District Judge did not alter that statutory procedural character.
2. The transfer of the appeal at short notice did not establish a compelling reason. The transcript showed that the applicant had the opportunity to present the case fully. There was no demonstrated procedural unfairness or breach of Article 6 of the European Convention on Human Rights.
3. Evidence not before the lower court could not be received without an order under CPR 52.11(2). The court remained guided by the three-fold test in Ladd v Marshall: reasonable diligence, likely material influence on the result, and credibility. The proposed fresh evidence faced substantial difficulties, particularly on reasonable diligence.
4. The lower appellate judge was entitled to assess the prospects of success from the pleadings, although no evidence had been heard. The pleading did not allege that the defendants established a competing company or otherwise acted in competition with Shipshape. It also did not provide a sufficient basis for establishing recoverable net loss or profit.
5. The court reaffirmed the general principle stated in Keary Developments v Tarmac that justice will ordinarily require successful litigants to recover their costs. Security for costs is therefore appropriate where an impecunious corporate claimant pursues a speculative claim and the defendants would be unable to recover their costs even if successful.

• Court of Appeal (Civil Division): refused permission to pursue a second appeal from the order of Judge Zucker QC.
• Central London County Court: allowed the defendants’ appeal and ordered Shipshape to provide £20,000 security for costs, with a stay if security was not provided.
• County Court: District Judge Cohen struck out the individual claims but refused the defendants’ application for security against Shipshape.