Cruz City 1 Mauritius Holdings v Unitech Ltd & Ors

Under Civil Procedure Rules 1998, rule 52.9, the court must first identify a compelling reason to impose a condition on an existing permission to appeal and must then decide whether to exercise its discretion.

A compelling reason may arise where a solvent judgment debtor, liable under a final award or judgment, deliberately refuses payment and obstructs enforcement. The court may require payment into court or satisfactory security as a condition of pursuing an appeal against a post-judgment enforcement order. Such a condition does not stifle an appeal merely because it removes the appellant's commercial incentive to continue. The decisive question is whether the appellant can comply and the fund remains subject to the court's control.

Cruz City obtained London-seated arbitral awards requiring the appellants to pay more than US$300 million and costs. Challenges to two awards under Arbitration Act 1996, section 67 succeeded only in relation to Award 1. Awards 2 and 3 were final and enforceable.

After enforcement orders were made, Field J ordered the appellants to disclose assets worldwide under Senior Courts Act 1981, section 37(1). The appellants obtained permission to appeal that order and a stay of its execution. Their proposed appeal challenged service on former solicitors and the propriety of requiring disclosure from officers outside the jurisdiction.

Cruz City then applied to make the permission conditional on payment into court, or security, for the sums due under Awards 2 and 3. The central issue was whether there was a compelling reason under Civil Procedure Rules 1998, rule 52.9 to impose that condition.

1. The application was granted. The appellants' permission to appeal was made conditional on payment into court, within 28 days, of US$333,620,492 and £182,882. Failing payment, the appeal would be struck out and the stay of Field J's order lifted. The money was to remain subject to further order, and Cruz City undertook not to enforce against it meanwhile.

2. Rule 52.9 required two questions. First, was there a compelling reason to make continued pursuit of the appeal conditional on payment or security? Secondly, should the discretion be exercised? The condition cases, including [2001] EWCA Civ 2065, showed that a compelling reason could exist where the debtor was able but unwilling to pay, enforcement was difficult, and the debtor's conduct indicated obstruction.

3. The appellants had ample funds, but had paid nothing under final awards and intended to resist enforcement wherever possible. There was a real risk that assets would be moved to jurisdictions where enforcement was harder, while the stay deprived Cruz City of asset disclosure. Those circumstances corresponded with the Masri enforcement cases and supplied a compelling reason. The policy that London-seated arbitration awards should be satisfied and enforced reinforced that conclusion.

4. The condition was proportionate. It did not stifle the appeal because the appellants could pay, the funds would remain in court pending further order, and the loss of a tactical advantage from payment did not amount to stifling. It was immaterial that the appeal concerned disclosure and service, whereas the condition protected final awards and enforcement orders in related proceedings.

5. The security jurisdiction under Arbitration Act 1996, section 70(7) was not analogous. The section 67 challenge had already been finally determined. The court therefore declined to import a requirement that the appeal be flimsy or that its prosecution would prejudice enforcement.

• Court of Appeal (Civil Division) Granted Cruz City's application to attach a payment-into-court condition to the appellants' existing permission to appeal.

• Commercial Court Field J, by order dated 23 May 2013, refused to set aside orders permitting service on the appellants' former solicitors and ordered worldwide asset disclosure under Senior Courts Act 1981, section 37(1).

• Commercial Court Andrew Smith J determined the appellants' challenges under Arbitration Act 1996, section 67. The challenge to Award 1 succeeded; the challenge to Award 2 failed. No appeal was pursued from that determination.