Investment Invoice Financing Ltd v Limehouse Board Mills Ltd

The court has an inherent, discretionary jurisdiction to stay proceedings where their continuation would abuse its process because an earlier costs order concerning substantially the same claim remains unpaid. The jurisdiction may extend to an assignee pursuing the assignor’s claim and does not depend on commencing a formally separate action.

The court must distinguish such a stay from an impermissible attempt to require a substituted claimant to provide security which could not otherwise be ordered against it. The stay protects a defendant from the injustice of further proceedings while earlier costs remain unpaid. It does not protect against the prospective costs risk posed by an impecunious claimant. The court must consider all the circumstances, including the relationship between the proceedings, succession to the claim, timing, delay and fairness.

PSL unsuccessfully presented a winding-up petition against Limehouse Board Mills Ltd to obtain payment of debts represented by 42 invoices. The petition was dismissed as an abuse of process, with costs of £18,000 awarded to Limehouse. PSL then brought ordinary proceedings to recover the same debts. After most of the debts were assigned to Investment Invoice Financing Ltd, that company was substituted as claimant for PSL in respect of 40 invoices.

PSL failed to pay the winding-up costs or £5,000 subsequently awarded on applications in the ordinary proceedings. His Honour Judge Mackie CBE QC stayed the assignee’s claim until both sums and interest were paid into court, directing that the claim be struck out upon non-payment. The central issue was whether the court had jurisdiction, and properly exercised its discretion, to impose that stay against the assignee.

1. Appeal dismissed. The judge had inherent jurisdiction to stay the proceedings until the outstanding costs orders against the assignor were satisfied. The direction that the claim be struck out upon non-payment was strong but fell within his discretion in the circumstances (Moore-Bick LJ; Tuckey LJ agreeing).

2. A condition requiring a newly joined claimant to provide security for future costs must be distinguished from a stay imposed until an existing costs order is satisfied. The former depends on the claimant’s personal circumstances and cannot be used to impose security where the procedural rules provide no jurisdiction to do so. The latter prevents abuse of the court’s process and seeks substantial justice between the parties. Eurocross Sales Ltd v Cornhill Insurance [1995] 1 WLR 1517 and Norglen Ltd v Reeds Rains Prudential Ltd [1999] 2 AC 1 therefore did not preclude the order.

3. The inherent jurisdiction applies where substantially the same claim is pursued for a second time while an earlier costs order remains unpaid. Substantial identity is sufficient. The later claimant may be an assignee or other successor in title, because the assignee should not obtain a better position than the assignor in respect of the procedural impairment affecting the claim. The principle also applies where substitution within existing proceedings achieves substantially the same result as discontinuance followed by a fresh action.

4. The precise form of the earlier proceedings is not decisive. The question is whether, having regard to their nature and outcome and the failure to satisfy the costs order, pursuit of the claim is abusive. The winding-up petition had sought payment of the same invoice debts and had itself been dismissed as abusive. Continuing recovery proceedings without paying its costs could therefore be stayed.

5. Rule 3.4(4) of the Civil Procedure Rules 1998 concerns a particular consequence of striking out a statement of case. It neither exhausts nor restricts the court’s inherent jurisdiction to stay other proceedings to prevent abuse.

6. The jurisdiction is discretionary. The court must consider all the circumstances. A late application may be refused where the claimant has incurred costs or acted in reliance on being permitted to continue. Here the application was made early, soon after substitution, and no intervening unfairness was shown.

1. Court of Appeal (Civil Division): The appeal was dismissed. The order staying the claim until the earlier costs and interest were paid into court, with automatic strike-out upon non-payment, was upheld: [2006] EWCA Civ 9.

2. Central London Civil Justice Centre (Mercantile List): His Honour Judge Mackie CBE QC ordered that the assignee’s claim be stayed until £18,000 and £5,000 in outstanding costs, together with interest, were paid into court. He directed that the claim be struck out if payment was not made by the specified date. No neutral citation is stated in the judgment.