Gemyat Gemi Insa VE & Anor v Oakley & Ors

An order for security for costs is not oppressive merely because a company’s assets are illiquid. The company must provide evidence that the order is likely to stifle a genuine claim, including evidence concerning available external funding. An application to remove arbitrators for alleged bias or unfairness may attract security for costs under the general power in Civil Procedure Rules 1998, rule 25.12, even though section 24 of the Arbitration Act 1996 contains no express costs provision. Permission to appeal should be refused where there is no realistic prospect of overturning the security order or the consequential dismissal of proceedings.

The sellers and builders of a vessel brought High Court proceedings challenging arbitration decisions and seeking the removal of the arbitrators. The buyers and arbitrators obtained orders for security for costs. When the security was not provided, Morison J ordered the proceedings stayed and later struck them out. The sellers applied out of time for permission to appeal, arguing oppression, the seriousness of their section 24 challenge, limits on statutory costs provisions, and a treaty bar. The Court of Appeal treated the application as one against the final orders and considered whether any proposed appeal had a realistic prospect of success.

Application refused.

1. Procedural approach. The application for permission was three months late. By the time it was made, both High Court proceedings had been struck out because the ordered security had not been provided. The court treated the application as one seeking permission to appeal against the final orders dismissing the proceedings. On that basis, no extension of time was necessary, and the merits were considered.
2. Oppression and stifling. The principle stated in Keary Developments v Tarmac Construction Ltd [1995] 3 All ER 524 was relevant to the submission that security was oppressive. There was, however, no evidence that the order would stifle a genuine claim. The assertion that the company’s funds were not liquid was insufficient, particularly when no evidence addressed the possibility of obtaining funds from outside the company.
3. Application to remove arbitrators. The seriousness of an application under section 24 of the Arbitration Act 1996, alleging unfairness or bias, did not prevent an order for security for costs. Although section 24 contained no express power to order security, the general power under rule 25.12 of the Civil Procedure Rules 1998 applied. The arbitrators were entitled to respond to the allegations and to seek security for the costs of doing so.
4. The treaty argument and the other grounds had been considered below. There was no realistic prospect that an appeal would set aside the security orders or the subsequent dismissal of the proceedings. The application was therefore refused.

• High Court of Justice, Queen’s Bench Division, Commercial Division: Morison J ordered the sellers to provide security for the buyers’ and arbitrators’ costs, stayed the proceedings pending payment, and subsequently struck out both proceedings when security was not provided.
• Court of Appeal (Civil Division): The application for permission to appeal was treated as an application against the final orders and was refused.