Carr v Bower Cotton (A Firm)

Under rule 52.9 of the Civil Procedure Rules 1998, the appeal court may impose a payment or security condition only for a compelling reason. The court must not impose such a condition if it would stifle an appeal, particularly where permission has been granted on a real prospect of success and the costs order may be altered if the appeal succeeds. But the absence of stifling is not itself a reason to let an appeal proceed. A compelling reason may arise where an appeal is pursued for beneficiaries who can provide resources, while the respondent has no practical means of recovering costs already ordered and those beneficiaries refuse to accept responsibility for them. The appeal may be stayed, with a personal claim allowed to continue separately.

Mr Carr, a solicitor, claimed damages and restitution from Bower Cotton for the alleged unauthorised payment of US$4m. US$200,000 was said to be his own money and US$3.8m was held for five investors. Blackburne J dismissed the claim on 19 December 2001, ordered costs and directed an interim payment of £250,000, of which £155,000 remained unpaid.

Permission to appeal on the authority issue was granted by Arden LJ on 8 March 2002. The respondents applied under rule 52.9 of the Civil Procedure Rules 1998 for the appeal to be stayed or struck out unless the outstanding costs were paid or secured. The central issue was whether there was a compelling reason for such an order and whether it would stifle the appeal.

1. Disposition. The respondents’ application was granted conditionally. The appeal was stayed unless, within 21 days, Mr Carr either amended the notice of appeal to confine the relief sought to his personal US$200,000 claim and abandoned the appeal concerning the remaining US$3.8m, or paid or secured the outstanding £155,000 costs. If neither condition was met, the appellant’s notice was to be struck out. Mr Carr’s application for a stay of the costs order was dismissed.
2. Rule 52.9 threshold. The powers under rule 52.9 of the Civil Procedure Rules 1998 could be exercised only where there was a compelling reason. That requirement applied even though the respondents had not attended the hearing at which permission to appeal was granted.
3. Stifling. A payment or security condition could not properly be imposed if it would stifle the appeal. Permission had been granted because the appeal had a real, rather than fanciful, prospect of success, and a successful appeal might lead to the costs order being varied or set aside. The court therefore assessed the evidence that compliance was impossible. A conditional-fee arrangement reduced the significance of the appellant’s lack of funds for solicitors, but counsel would still require funding. The alleged refusal of the investors to provide further funds was largely unsupported, commercially inexplicable and inconsistent with the evidence, including the unexplained funding arrangement involving Miss Waks.
4. Compelling reason. The absence of stifling was not itself a compelling reason to permit the appeal. Following the approach in Hammond Suddard Solicitors v Agrichem International Holdings Limited [2001] EWCA Civil 1915, the court considered the practical enforceability of the costs order, the availability of resources through others, the quality of the financial evidence and the appellant’s continued failure to pay. The appeal was substantially pursued for the benefit of investors who were potentially exposed to costs under section 51 of the Supreme Court Act 1981, yet sought to avoid responsibility for costs already ordered. The court should not encourage that situation.
5. Proportionate order. The conditional order preserved Mr Carr’s ability to pursue his own claim while preventing the investors from obtaining the benefit of an appeal without accepting responsibility for the costs below.

1. Court of Appeal (Civil Division) — On 9 May 2002, the appeal was stayed conditionally under rule 52.9. Failure to comply within 21 days would result in the appellant’s notice being struck out.
2. Court of Appeal (permission stage) — Arden LJ granted permission to appeal on 8 March 2002.
3. High Court, Chancery Division — Blackburne J dismissed the claim on 19 December 2001, ordered costs and directed an interim payment of £250,000, of which £155,000 remained unpaid.