Quadra Commodities SA & Ors v International Bank of St-Petersburg (Joint Stock Company)

A debarring order for unpaid costs is available, but it is not automatic. The court must exercise case-management discretion with care, particularly where the party adopts a defensive position. Relevant considerations include the genuineness and importance of the issues at the forthcoming hearing, whether the sanction would assist payment, the party’s solvency and legal ability to pay, the risk of satellite litigation, and the interests of justice and the overriding objective. A party should generally be heard where its submissions may assist determination of a genuine dispute about the meaning or effect of an undertaking, especially where the hearing may affect related arbitration proceedings.

The claimants sought a peremptory order preventing the defendant, a Russian bank in liquidation, from participating in a forthcoming half-day hearing unless it paid £100,000 in costs ordered by HHJ Pelling QC after the grant of an anti-suit injunction.

The forthcoming hearing concerned the interpretation of a complex undertaking given by the claimants. The defendant argued that the undertaking had been breached, while the claimants sought declaratory relief. The central issue was whether non-payment of the earlier costs order justified debarring the defendant from making submissions.

1. Debarring sanction. The court may make an order which effectively prevents a party from participating in further proceedings if an earlier costs order remains unpaid. However, such a sanction is not automatic. Motorola Credit Corporation v Uzan [2003] EWCA Civ 752 required care, particularly where the party sought to be debarred was taking an essentially defensive position.
2. Case-management discretion. The court had to assess all the circumstances. The approach in Days Healthcare UK Ltd v Pihsiang Machinery Manufacturing Co Ltd & Ors [2006] EWHC 1444 (QB) arose from extreme facts involving a solvent defendant taking repeated steps to frustrate court orders. Those circumstances were materially absent here.
3. The defendant raised a genuine issue about the meaning and effect of the claimants’ undertaking. The March hearing would benefit from submissions on both sides, and determining it without the defendant risked an unsatisfactory and potentially unjust result. The application for the debarring order was itself undesirable satellite litigation.
4. The court also considered the defendant’s insolvency and the plausible evidence that Russian law might restrict voluntary payment without recognition of the costs order in Russia. A final determination of Russian law was inappropriate on the interlocutory material, but the evidence could not safely be disregarded. The court would have reached the same result even if Russian law had provided no arguable impediment to payment.
5. The forthcoming hearing could affect the related LCIA arbitration, in which the defendant remained entitled to defend itself. The possibility that the sanction might encourage payment was weak because the defendant said it would not pay in light of legal advice. The debarring order was therefore refused and this part of the application dismissed.
6. The defendant was awarded costs from 14 December 2020, subject to deductions for the late reliance on Russian-law arguments and the late expert report. Those costs were to be set off against the £100,000 costs debt.

First-instance decision. The judgment describes the earlier anti-suit injunction and costs order made by HHJ Pelling QC on 30 September 2020, but no appellate decision is stated.