Rugby Group Ltd. v Proforce Recruit Ltd.

On an application for security for the costs of an appeal, the applicant must show reasonable grounds for believing that the appellant company will be unable to pay an adverse costs order. The company need not provide the level of financial disclosure required if it claims that security would stifle the appeal.

A judgment for costs should ordinarily be honoured as proceedings progress. The possibility that an appeal may succeed, and that costs may later be repaid, is not by itself sufficient reason to defer payment.

ProForce appealed from Field J’s decision that a contractual preferred-supplier term required inclusion on a preferred-suppliers list only if Rugby maintained one, and that there had therefore been no breach. Field J also summarily assessed Rugby’s costs at £35,500. Permission to appeal against liability and costs was granted on 24 May 2005.

Before the appeal, Rugby applied for security for appeal costs under CPR Rule 25.13(2)(c), and for an order requiring ProForce to pay the costs ordered below, with dismissal of the appeal in default. The issues were whether Rugby had shown reasonable grounds to believe that ProForce could not meet an adverse appeal-costs order, and whether payment of the existing costs order should be required.

1. Security for costs. The application under CPR Rule 25.13(2)(c) was dismissed. The applicant had to establish reasonable grounds for believing that ProForce would be unable to pay the costs of the appeal if ordered to do so. The evidence, including information about ProForce’s factoring arrangements, available funds and trading position, did not establish that inability.
2. Because ProForce did not say that security would stifle the appeal, the court did not require the fuller financial disclosure that might have been expected on such an argument. The deficiencies in the company’s accounts and evidence did not alter the conclusion.
3. Payment of costs ordered below. A judgment for payment, including a judgment for costs, should ordinarily be honoured unless the judgment debtor shows good reasons for a stay pending appeal. The grant of permission to appeal against the costs order, and the possibility that costs might later have to be repaid, did not justify postponing payment.
4. Following Hammonds Suddard Solicitors and Agrichem International Holdings [2001] EWCA Civ 2065, a party should meet judgments for costs as proceedings progress. It was generally unacceptable for an appellant to pursue an appeal while disobeying an existing costs order. ProForce was ordered to pay £35,000 on account of the costs below by 14 November 2005, failing which the appeal would stand dismissed.

• Court of Appeal (Civil Division): Permission to appeal against Field J’s decisions on liability and costs was granted on 24 May 2005. The present applications were determined before the substantive appeal. The security application was dismissed, and ProForce was ordered to pay £35,000 on account of the costs below by 14 November 2005, failing which the appeal would stand dismissed.
• High Court, Queen’s Bench Division: Field J construed the preferred-supplier term as requiring inclusion on a preferred-suppliers list only if Rugby maintained one, found no breach, gave judgment for Rugby, and summarily assessed costs at £35,500.