Ali v Keith Hudson (t/a Hudson Freeman Berg)

A court has jurisdiction under its general case-management powers to stay proceedings on terms requiring payment into court as security for future costs. That power is independent of the power arising from failure to comply with a rule, practice direction or pre-action protocol.

The jurisdiction requires great caution. An order which would stifle a genuine claim or appeal will be justified only exceptionally, if ever. Ordinarily, security outside the prescribed security-for-costs regime requires regular flouting of court procedures or want of good faith. Mere unreasonableness is insufficient. Weakness on the merits will ordinarily justify security only where the case has no real prospect of success.

The claimant brought professional negligence and contract proceedings against his former solicitor. A district judge struck out the action. The claimant exercised his right of appeal in time, but the county court failed to process it. The proceedings were later stayed automatically under paragraph 19(1) of the Practice Direction to CPR Part 51.

A circuit judge imposed an additional stay until substantial costs were paid. Leveson J allowed an appeal in part, substituting a condition that the claimant pay £1,750 into court as security for the costs of applying to remove the automatic stay.

The claimant appealed. The central issues were whether the court possessed jurisdiction to impose that condition, whether his conduct justified it, whether it would impede access to the court, and whether his underlying appeal was so weak that he should be prevented from pursuing it.

1. Appeal allowed unanimously. Clarke LJ, with whom Potter and Ward LJJ agreed, held that the court possessed jurisdiction under CPR rules 3.1(2)(f) and 3.1(2)(m) to stay proceedings until payment into court as security for future costs. That jurisdiction was independent of rule 3.1(5), which creates a separate power following an unjustified failure to comply with a rule, practice direction or relevant pre-action protocol.

2. The jurisdiction had to be exercised with great caution because security may impede access to the court. It would be exceptional, if ever permissible, to require security where the condition would stifle a claim or appeal. Outside the ordinary security-for-costs regime, such an order should not ordinarily be made unless the party regularly flouts proper court procedures or demonstrates want of good faith. Good faith means a will to pursue a genuine case as economically and expeditiously as reasonably possible in accordance with the overriding objective.

3. Mere unreasonable conduct was generally insufficient where the order would deprive a party of access to the courts. Nor did a somewhat weak claim or appeal ordinarily justify security. Weakness would generally become material for this purpose only where the party had no real prospect of success.

4. The claimant had exercised his right of appeal in time. Much of the delay resulted from the court’s failure to process the appeal and from erroneous procedural information. His conduct could not fairly be characterised as regular flouting of court procedures, abuse of process or want of good faith. It was therefore wrong in principle to require payment into court as the price of proceeding.

5. The underlying appeal had not been sufficiently examined to be characterised as doomed to failure. The claimant was entitled to pursue it. The order requiring payment of £1,750 was set aside, the automatic stay under paragraph 19(1) of the Practice Direction to CPR Part 51 was lifted, and directions were ordered for the future conduct of the appeal. There was no order as to costs.

1. Court of Appeal (Civil Division): The appeal was allowed unanimously. Leveson J’s order was set aside, and the automatic stay was lifted.

2. High Court: Leveson J allowed the claimant’s appeal in part. He replaced the circuit judge’s condition with a requirement to pay £1,750 into court before removal of the additional stay.

3. Central London County Court, circuit judge: His Honour Judge Green QC stayed the claimant’s appeal pending payment of the defendant’s costs and interest arising from the order under appeal.

4. Central London County Court, district judge: District Judge Hasan struck out the professional negligence and contract action as disclosing no cause of action and as frivolous and vexatious.