Ceto Shipping Corporation v Savory Shipping Inc

The court may impose an unless order, and ultimately strike out or permanently stay a claim, where a party fails to pay ordered costs or provide ordered security. The discretion must be exercised having regard to all relevant circumstances, including the purpose of interlocutory costs orders, possible enforcement alternatives, Article 6 of the ECHR, and properly evidenced impecuniosity. Where a party has no sufficient assets in the jurisdiction and has not produced cogent financial evidence, payment may generally be required as the price of continuing to litigate unless strong reasons exist otherwise. A proposed stay or bifurcated trial will not ordinarily provide a satisfactory substitute where it increases delay, cost and pressure on court resources.

Savory applied under CPR r 3.4.2(c) for a contingent order striking out Ceto’s damages claim unless Ceto provided security for costs and paid two outstanding interlocutory costs orders. The unpaid sums comprised costs ordered after dismissal of a related Part 8 claim, costs of an anti-suit injunction in the present proceedings, and two tranches of security for costs ordered by Mr Hollander KC.

Ceto argued that its damages claim should instead be stayed pending determination of its wider claim. It also argued that the earlier security-for-costs order limited the available sanction to a stay. The central issues were whether an unless order was appropriate and whether the earlier order prevented the court from imposing a more stringent sanction.

1. Application granted in principle. The court considered that an unless order should be made to secure payment of the outstanding costs and provision of security, although the period for compliance would be longer than seven days and would be settled after hearing argument.
2. Under CPR r 3.4.2(c)(ii), failure to comply with a rule, practice direction or court order may justify strike-out. In relation to unpaid costs, the sanction is available to ensure compliance with costs orders, but only in an appropriate case. The analogous approach applies to failure to provide ordered security for costs.
3. The relevant considerations include the policy that promptly payable interlocutory costs discourage irresponsible applications or resistance, the possible applicability of Article 6 of the ECHR, alternative enforcement mechanisms, and whether payment before the end of the litigation was properly considered when the costs order was made. An assertion of impecuniosity must be supported by detailed, cogent and full evidence, including prospects of raising funds.
4. Where the defaulting party has no, or markedly insufficient, assets in the jurisdiction and has not provided proper evidence of impecuniosity, payment will generally be required as the price of continuing to contest the proceedings unless strong reasons justify a different order. If a debarring order is made, it should ordinarily be framed as an unless order.
5. Ceto had clearly failed to pay the security tranches and the two costs orders. Its impecuniosity argument had already been rejected, and the evidence indicated that it could find money for legal representation but had chosen not to make the required payments. The absence of assets in the jurisdiction further supported the sanction.
6. A stay of the damages claim pending determination of the wider claim was unsatisfactory. It would create a bifurcated trial, increase time and costs, delay final resolution and burden court resources. The earlier security order did not determine that a stay was the only possible sanction. In any event, the failure to pay the anti-suit injunction costs and the other costs orders constituted changed circumstances, and the application independently succeeded in respect of those defaults.