Crystal Decisions (UK) Ltd & Ors v Vedatech Corporation & Anor

The court may make payment of an outstanding interlocutory costs order a condition of continued participation in proceedings where no other effective means of enforcement exists. That power supports responsible litigation and protects the court’s procedure. It remains subject to the right of access to justice under European Convention on Human Rights article 6.

A party asserting that the condition would exclude it from justice through lack of means must adduce evidence of inability to pay. Debarring a defendant does not automatically entitle the claimant to declaratory relief. The court must determine whether the pleaded and provable material justifies the declaration and must exercise caution where facts have not been tried.

Two applications sought permission to appeal from orders made by Patten J in proceedings concerning the validity and enforceability of a mediated settlement agreement. The first challenged parts of the order reported at [2006] EWHC 3500 (Ch), principally an unless order debarring the defendants from defending unless they paid £15,600 in outstanding interlocutory costs. The defendants did not pay.

The second challenged the resulting judgment reported at [2007] EWHC 1062 (Ch). Patten J declared the settlement agreement valid and enforceable, enforced its covenants against further proceedings, and awarded damages arising from proceedings commenced in California. The central questions were whether the unless order disclosed an appealable error and whether the relief granted after debarment was properly available.

1. Both applications for permission to appeal were refused. Patten J had directed himself correctly and had given adequate reasons for making payment of the outstanding interlocutory costs a condition of continued participation in the proceedings. There was no real prospect that an appellate court would interfere with that exercise of discretion.

2. The court’s ability to order immediate payment of interlocutory costs is a sanction intended to encourage responsible litigation. Its force would be seriously undermined if the court could not enforce such orders. Where defendants were outside the jurisdiction, had no assets within it, and ordinary enforcement offered no effective remedy, the court could protect its procedure by requiring payment as the price of continuing to defend.

3. That power remained subject to the overriding consideration under article 6 of the European Convention on Human Rights. A payment condition should not be imposed where its enforcement would drive a party from access to justice. A party relying on inability to pay an existing costs order must, however, adduce evidence establishing that inability. Earlier material about one defendant’s financial position did not establish the position of either defendant at the relevant time. Patten J therefore properly concluded that there was no evidence that payment was beyond their means.

4. Debarment did not itself establish the claimants’ entitlement to judgment or declarations. Patten J correctly confined himself to pleaded facts which could be proved and to issues of documentary construction. A court must exercise caution before making declarations without a trial because it cannot find disputed facts without evidence.

5. The declaration was nevertheless properly made. The settlement document disclosed no basis for challenging its enforceability, while the defendants could not adduce evidence supporting their rescission notices. The agreement permitted challenge for fraudulent misrepresentation, but not for innocent or negligent misrepresentation. Given the repeated challenges to the mediated settlement, the declaration was necessary to secure finality and preserve the integrity of the mediation process.

6. The covenants restraining further proceedings were enforceable. The anti-suit relief and damages corresponding to the expense of defending the California proceedings disclosed no realistically arguable error. Laws LJ agreed with Sir John Chadwick’s reasons.

1. Court of Appeal (Civil Division): Refused permission to appeal from both the December 2006 and May 2007 orders: [2008] EWCA Civ 848.
2. High Court, Chancery Division: Patten J made an unless order requiring payment of £15,600 in interlocutory costs as a condition of continuing to defend: [2006] EWHC 3500 (Ch).
3. High Court, Chancery Division: Following non-payment and debarment, Patten J declared the settlement agreement valid and enforceable, granted relief restraining further proceedings, and awarded damages: [2007] EWHC 1062 (Ch).