Conditions on permission to appeal

An order giving permission to appeal may be made subject to condition. In the recent case of Palladian Partners LP and others v The Republic of Argentina and another [2024] EWCA Civ 139, the Court of Appeal made an order granting Argentina permission to appeal the first instance judgment conditional on Argentina paying €310m to be held in escrow pending determination of the appeal. Argentina sought reconsideration of the imposition of that condition.  

The rules

CPR 52.6(2)(b) provides that an order giving permission to appeal may be made subject to conditions. Although that rule does not identify the test to be applied, CPR 52.18(1)(c) provides that the appeal court may impose or vary conditions upon which an appeal may be brought. CPR 52.18(2) states that the court will only exercise that power where there is ‘compelling reason’ to do so.

In Hammond Suddard Solicitors v Agrichem International Holdings Ltd [2001] EWCA Civ 2065, Days Medical Aids Ltd v Pihsiang Machinery Manufacturing Co Ltd [2004] EWCA 993 and Sunico A/S v Commissioners for HMRC [2014] EWCA Civ 1108, the Court of Appeal held that the compelling reason requirement also applies to the imposition of a condition under CPR 52.6(2)(b). The existence of a compelling reason is only a necessary rather than a sufficient factor, and the imposition of a condition is a matter for exercise of the court’s discretion.

The court may consider the following factors which justify the imposition of conditions:

• Difficulties of enforcement of the court’s judgment in a foreign jurisdiction.
• An apparent sufficiency of resources to enable the judgment debtor to continue to fund litigation.
• The absence of convincing evidence that the appellant lacks the resources to pay the judgment debt.
• Inadequate disclosure by the appellant of its financial affairs, or a lack of confidence on the part of the court that it has been shown the truth.
• The combination of (i) a deliberate breach of an order to pay the judgment debt; (ii) the refusal of a stay; and (iii) ability to pay, but a failure to do so cynically based upon the difficulties for the respondent in enforcing the judgment in a foreign jurisdiction.

The main factor against the imposition of a condition is where to do so would stifle the appeal (see Sunico A/S).

Background

Argentina defaulted on $80bn of debt in 2001; at the time this was the largest sovereign debt default in history. Creditors were offered GDP-linked securities in exchange for their existing non-performing bonds at a rate of 25% to 30% of the face value of the securities they held. However, four hedge funds succeeded in at first instance bringing a €1.33bn lawsuit against Argentina. Argentina appealed. The Court of Appeal granted permission to appeal but in doing so it imposed a condition that Argentina pay over €310m to be held in escrow pending the appeal. In seeking reconsideration of that condition, Argentina argued that any payment condition would prove difficult to raise due to its worst economic crisis in decades and would pose a significant burden on Argentina’s population.

Decision

Phillips LJ decided to retain the condition and extended the time for compliance with it. He dismissed Argentina’s argument that a compelling reason must arise from conduct in the case, and that it was impermissible to consider wider issues and Argentina’s previous related conduct. Phillips LJ noted that the securities were issued within the context of restructuring Argentina’s debt in 2001; and the fact that it had taken the creditors a substantial period of time to realise judgment illustrated that Argentina’s pattern of default and delay had not been broken. He also noted that Argentina had not paid any of the judgment of a separate claim brought in New York and that it had failed to comply with the conditions on a stay of execution pending appeal. Phillips LJ also observed that Argentina had failed to explain how or when it would pay the debt if it lost the appeal and found that there was a real risk that Argentina would not pay if it lost its appeal in the Court of Appeal and, if it were permitted, an appeal to the UK Supreme Court. These were all reasons for concluding that there was a compelling reason to impose a condition.

Phillips LJ was not persuaded by Argentina’s argument that the court should exercise its discretion and not impose a condition because of the impact it would have on an already distressed economy and, as a consequence, the irreparable harm it would have on the Argentine population.  His lordship noted that Argentina had failed to identify what expenditure it would actually divert to paying the creditors. He also dismissed the contention that he was in any way constrained by the unconditional stay of execution granted at first instance; he was entitled to and bound to consider the question afresh.

The decision neatly illustrates judicial interpretation and application of the relevant rules concerning the imposition of a condition on an order giving permission to appeal. It will be for the court, in light of all the circumstances of the case, to determine whether there are compelling reasons to impose a condition and the nature of those conditions. In exercising its discretion, the court will, in particular, have regard to the factors identified by the Court of Appeal in Sunico A/S. 

Masood Ahmed is an associate professor of law at the University of Leicester and a member of the Law Society’s Dispute Resolution Committee. Lal Akhter is director of Docket Live and an unregistered barrister