By Jeremy Morgan QC, 39 Essex Street, London

Playing by the rules


Since the Civil Procedure Rules (CPR) came into force, the courts have shown an increasing tendency not to allow litigants to play the game unless they obey all its rules. Little sympathy from the courts comes to those who are prepared to incur legal costs by throwing all possible obstacles in the way of their opponents while, at the same time, refusing to pay a penny when ordered to do so. There have been a number of recent cases in which litigants who have simply ignored judgments or orders against them have been denied access to the court when they want to seek relief of their own.


The leading case in the appellate field is Hammond Suddards v Agrichem International Holdings Ltd (2001) EWCA Civ 2065, where an unsuccessful defendant's permission to appeal was made subject to a condition under CPR 52.9 that it should first pay into court or secure the full amount of the judgment debt and costs ordered to be paid under CPR 44.3(8). The appellant in that case was, according to the judgment, a British Virgin Islands company without assets in the UK, against which enforcement would be, at best, extremely difficult, and which was prepared to instruct solicitors and counsel to prosecute its appeal but not to pay the amounts found to be due to its opponent. The principle was extended in Bell Electric v Aweco Appliance Systems (2003) 1 All ER 344, CA to a situation where there was no reason to suppose that enforcement against the appellant, Bell Electric, would not succeed, but where failure to pay was 'cynically based upon the practical difficulties for the respondent in seeking enforce-ment in a foreign jurisdiction'.


A similar approach, this time in the context of a detailed assessment of costs, underlay the recent decision of Mr Justice Langley in Days Healthcare UK Ltd v Pihsiang Machinery Manufacturing and others (2006) EWHC 1444 (QB). The defendants had lost a commercial action and been ordered to pay damages in excess of £10 million and costs, and an order for payment of £2 million on account of costs had been made under rule 44.3(8). Permission to appeal had been granted by the Court of Appeal, but only on Hammond Suddard conditions as to payment of the judgment debt and order for payment on account. When these conditions were not satisfied, the appeal was struck out. Nothing had been paid and both defendants were subject to committal orders for failure to comply with orders requiring them to attend court to give evidence as to their means. The court had regard to the history of attempts to enforce against the defendants' assets in Taiwan, and concluded that the defendants 'will not honour any orders which involve payment or of which they disapprove made by any court in this country and will pay nothing unless and until the legal machinery in a country where they have assets successfully executes an order against those assets'. By contrast, the defendants had paid and would continue to pay their own lawyers to represent them in 'whatever proceedings seem to them to be of benefit to them or damaging to' the claimant.


In the detailed assessment proceedings, the claimant's bill came to nearly £5 million. The defendants served points of dispute, filling a lever arch file and challenging 'virtually every minute worked on the case'. The detailed assessment was estimated as likely to last 30-40 days, and the costs of it to exceed £350,000. Faced with the prospect of such massive expenditure to quantify a figure that the defendants would do all that they could not to pay, the claimant applied for an order that unless the defendants paid the £2 million ordered on account of costs plus interest, a final costs certificate should be issued for the amount set out in the notice of commencement.


The costs judge said he had serious reservations about his power to make such an order and declined to do so, pointing out that the usual approach was to enforce the judgment and order for costs in Taiwan.


Mr Justice Langley held that the court had an inherent jurisdiction to control its own processes sufficient to enable it to make an order of the nature sought in this case, and that that inherent powers of the court were expressly preserved by CPR 3.1(1). Furthermore, the power of the court to attach conditions to an order under rule 3.1(3)(a) was not limited to the attachment of a condition to a direction that the court was being asked to make; the wording of the rule was general. Moreover, the defendants were in contempt of court, providing a further basis for the order sought to be made.


It followed that the costs judge was wrong to doubt his jurisdiction, and he was also wrong to place the emphasis he did on the attempts being made to enforce in Taiwan. Therefore, an order would be made.


However, it would be wrong to make an order that had the effect of rubber-stamping the bill. There had to be an assessment, but if the defendants did not comply with the condition of paying the claimant the £2 million payment on account plus interest, they would be debarred from participating in the assessment.


Two comments should be made. First, orders of this sort will only ever be made if the court can be sure that it is not stifling a party's access to the court (at common law and under article 6 of the European Convention on Human Rights) by imposing a condition that it cannot, by reason of impecuniosity, meet. In all these cases, the court was satisfied that the party on whom the condition was imposed had the money to comply with it (or at least had failed to demonstrate that it did not).


Second, solicitors should not rush to make such an application in every case where their opponent has not paid a judgment debt or sum ordered on account of costs. The facts of this case were obviously exceptional, and the exceptional nature of the remedy is spelled out in the authorities on CPR 52.9 (see Bell).


In particular, all these cases involve situations where conventional enforcement is difficult, usually because it has to take place abroad. However, like every case that is decided on extreme facts, Days lays the ground for an argument in cases that are less extreme, and it remains to be seen how far that argument will be allowed to go.