Rajvel Construction Ltd v Bestville Properties Ltd

On an application for permission to appeal against security for costs, an appellate court will not second-guess a proportionate first-instance assessment of quantum where there is no real prospect of an error of principle. Staged payments may be ordered, but are not generally required. The Ladd v Marshall conditions remain solid guidance for fresh evidence, although they are not rigid and fairness remains relevant. A company relying on the means of directors, shareholders or backers must provide full and frank evidence. That burden does not necessarily create a separate duty on a director to give full disclosure. Incomplete but apparently truthful evidence may be inadequate without amounting to impropriety. Permission was granted only on the arguable issue concerning the director’s liability for costs.

Rajvel claimed sums under a building contract and for additional work. Bestville defended the claim and counterclaimed substantial damages. After refusing an initial security-for-costs application, the Technology and Construction Court renewed the application and, on 15 June 2011, ordered Rajvel to provide £90,000 security, stayed the claim pending compliance, and joined its director, Mr Bhuva, solely for the purposes of costs relating to the application.

Rajvel sought permission to challenge the quantum of security. Mr Bhuva sought permission to challenge the costs order against him and applied to adduce fresh evidence. The central issues were whether there was a real prospect of error in the quantum assessment, whether the fresh evidence should be admitted, and whether incomplete evidence about a director’s assets could arguably amount to impropriety justifying a third-party costs order.

Disposition. Permission to appeal was granted to Mr Bhuva on ground 11 only. Permission was refused to Rajvel on the quantum issue and on all other grounds. Mr Seal’s further witness statement was not admitted.

1. Quantum of security. The first-instance judge had reduced Bestville’s costs estimate of about £144,000 to £90,000, a figure assessed as proportionate to the nature and value of the case. That was a proper exercise of judgment. There was no real prospect that the Court of Appeal would find an error of principle or make a larger deduction for assessment risk or settlement prospects. Staged payments were available, but there was no authority requiring them and the point had not been raised below.
2. Fresh evidence. The conditions in Ladd v Marshall [1954] 1 WLR 1489 remain solid guidance under the CPR, but must not be applied rigidly. The overriding objective and the need to do justice remain controlling considerations. The evidence could have been put before the judge, and admission would have been unfair to Bestville. The practical difficulty of adducing it earlier did not justify admission where the opportunity had existed and the evidence added little.
3. Third-party costs. The jurisdiction under section 51 was not disputed. The first-instance judge had treated an order against a director as exceptional and requiring some degree of impropriety. It was arguable, however, that Mr Bhuva had no separate duty to give a full account of all his assets. His evidence had to be truthful and non-misleading, and its incompleteness could have prevented Rajvel from discharging the evidential burden necessary to resist security. That did not necessarily make the evidence improper, particularly where dishonesty was not alleged.
4. Authorities on means. Keary Developments Ltd v Tarmac Construction Ltd & Anr [1995] 3 All ER 534 established the need to consider resources available from directors, shareholders and other backers, and placed the evidential burden on the company. Kufaan Publishing Ltd v Al-Wrak Publishing Ltd 1 March 2000 was to similar effect. Mahan Air & Anr v Blue Sky One Ltd [2011] EWCA Civ 544 confirmed the need for full and frank evidence of means. None necessarily established a director’s separate duty of full disclosure.

• Court of Appeal (Civil Division) [2011] EWCA Civ 1134 — On 13 September 2011, permission to appeal was granted to Mr Bhuva on ground 11 only. Permission was refused on the quantum issue and all other grounds, and fresh evidence was excluded.
• Queen’s Bench Division, Technology and Construction Court — On 15 June 2011, His Honour Judge Wilcox ordered Rajvel to provide £90,000 security for costs, stayed the claim pending provision of security, joined Mr Bhuva for costs purposes, and ordered Rajvel and Mr Bhuva jointly and severally to pay Bestville’s costs of the security application.