Applications To Stay Enforcement Of Interim Costs Orders | The Principles

HUSSAIN & ANOR V AHMED & ANOR (APPLICATION TO STAY ENFORCEMENT OF AN INTERIM COSTS ORDER) |FULL SUMMARY

MASTER KAYE:

Claimants’ stay application and Defendants’ stay application.

158. The claimants seek to stay payment of their costs liability under the 7 January 2021 order until the disposal of the claim. They do not seek time to pay or to pay by instalments. The defendants’ stay application seeks an order providing for a stay of the proceedings for a period of time pending payment of the outstanding costs orders and a fully repleaded claim with dismissal of the claim if there is no application to lift the stay before the end of the stay period.

159. In substance, the claimants say that they are impecunious and, without a stay, their meritorious and respectable claim against the defendants for a substantial sum of money would be stifled. They argue that they should not therefore be required to pay the adverse costs orders until the conclusion of their claim and that requiring them to do so would make them vulnerable to enforcement action by the defendants.

160. They say that their impecuniosity and severe financial difficulties arises from their removal from the Food Court, which wiped out their savings. Mr Rifat says this is itself part of the narrative supporting their restitutionary claims. He says they have no money as a result of the defendants’ actions and cannot pay the costs. However, the claimants also rely on Covid-19 and their health issues.

161. There are two issues for the court to consider, first whether it has jurisdiction to make the orders sought by the claimants or the defendants and if it does whether it should exercise its discretion to do so. The defendants’ stay application is broader than the claimants’ stay application, not simply relying on the non-payment of costs orders, and is made pursuant to the court’s inherent jurisdiction to govern and police compliance with its own procedures and so is ultimately an exercise of its discretion consistent with the overriding objective. Indeed the defendants rely on the court’s broad case management powers under CPR 3.1(2)(m) and 3.4(2)(b) and (c).

Jurisdiction

162. The starting point for the claimants’ stay application is perhaps surprisingly CPR 83.7 which provides as follows:

Writs of control and warrants – power to stay execution or grant other relief

83.7

(1) At the time that a judgment or order for payment of money is made or granted, or at any time thereafter, the debtor or other party liable to execution of a writ of control or a warrant may apply to the court for a stay of execution.

…

(3) Where the application for a stay of execution is made on the grounds of the applicant’s inability to pay, the witness statement required by paragraph (6)(b) must disclose the debtor’s means.

(4) If the court is satisfied that—

(a) there are special circumstances which render it inexpedient to enforce the judgment or order; or

(b) the applicant is unable from any reason to pay the money,

then, notwithstanding anything in paragraph (5) or (6), the court may by order stay the execution of the judgment or order, either absolutely or for such period and subject to such conditions as the court thinks fit.

163. CPR 40.8 A then provides:

Stay of execution and other relief

40.8A Without prejudice to rule 83.7(1), a party against whom a judgment has been given or an order made may apply to the court for—

(a) a stay of execution of the judgment or order; or

(b) other relief,

on the ground of matters which have occurred since the date of the judgment or order, and the court may by order grant such relief, and on such terms, as it thinks just.

164. There had been some doubt as to whether CPR 83.7 was expansive enough to cover a more general stay of execution. In Michael Wilson & Partners Ltd v Sinclair (No.2) [2017] EWCA Civ 55; [2018] 1 W.L.R. 3069, CA, McCombe LJ considered the provenance of CPR 83.7 deriving as it did from RSC Ord 47 which was restricted to execution by writs of fifa now writs of control. At [15] and [16] he said;

“15. I think also that the debtor can apply for a stay of execution generally under this rule, whether that anticipated execution be by way of writ of control or by other means, for example by third party debt order, attachment of earnings, sequestration or charging order. Indeed, I see no reason why (in appropriate circumstances) a court should not impose a general stay of execution under this rule, such as would in practice prevent the pursuit of bankruptcy proceedings, similar to the grant of a general stay pending an appeal: see the notes under “Stay of execution and bankruptcy petitions” in Civil Procedure 2016 Vol. 1 paragraph 83.7.7. My view in this respect is fortified by the fact that the power to stay execution under CPR 87.3 is not on its face confined to writs of control or warrants: c.f. the old Order 47 rule 1 which was expressly confined to execution by fi. fa : …”

16. It seems to me, therefore, that Mr Samek is correct in his argument that rule 83.7 “provides otherwise” so as to preclude the operation of rule 3.1(2)(f) in the case of money judgments. The jurisdiction nonetheless exists (in relatively broad terms) to grant a stay in the light of circumstances that have occurred since the date of the judgment or order in issue. However, the court would be likely, in my view, to have regard to the test that applies in respect of money judgments generally under rule 83.7.” (my emphasis)

165. Mr Rifat relies on [15] as providing for a wide interpretation of CPR 83.7, which he argues, therefore covers the costs order of 7 January 2021. Mr Delehanty submits that even accepting that CPR 83.7 has a wide interpretation beyond writs of control it is clear from [16] that McCombe LJ was reflecting the provisions that already exist in CPR 40.8A.

166. It seems clear to me that

Michael Wilson & Partners Ltd v Sinclair (No.2) [2017] EWCA Civ 55 is authority for the proposition (with which I agree) that the scope of the power to grant a stay in CPR 83.7 is to the same effect as CPR 40.8A. I therefore consider the claimants’ stay application in light of the “matters which have occurred since the date of the judgment or order”.

167. An unpaid costs order is the equivalent of a money judgment and can be enforced in the same way. In Michael Wilson & Partners v Sinclair [2017] EWHC 2424 (Comm) (“Michael Wilson”) Sir Richard Field (sitting as a deputy judge of the High Court) had to consider the policy behind the imposition of interim costs orders and their non-payment. Having reviewed the authorities, he set out at [29] the following principles:

(1) The imposition of a sanction for non-payment of a costs order involves the exercise of a discretion pursuant to the court’s inherent jurisdiction.

(2) The court should keep carefully in mind the policy behind the imposition of costs orders made payable within a specified period of time before the end of the litigation, namely, that they serve to discourage irresponsible interlocutory applications or resistance to successful interlocutory applications.

(3) Consideration must be given to all the relevant circumstances including: (a) the potential applicability of Article 6 ECHR; (b) the availability of alternative means of enforcing the costs order through the different mechanisms of execution; (c) whether the court making the costs order did so notwithstanding a submission that it was inappropriate to make a costs order payable before the conclusion of the proceedings in question; and where no such submission was made whether it ought to have been made or there is no good reason for it not having been made.

(4) A submission by the party in default that he lacks the means to pay and that therefore a debarring order would be a denial of justice and/or in breach of Article 6 of ECHR should be supported by detailed, cogent and proper evidence which gives full and frank disclosure of the witness’s financial position including his or her prospects of raising the necessary funds where his or her cash resources are insufficient to meet the liability.

(5) Where the defaulting party appears to have no or markedly insufficient assets in the jurisdiction and has not adduced proper and sufficient evidence of impecuniosity, the court ought generally to require payment of the costs order as the price for being allowed to continue to contest the proceedings unless there are strong reasons for not so ordering.

(6) If the court decides that a debarring order should be made, the order ought to be an unless order except where there are strong reasons for imposing an immediate order.

168. In Siddiqi v Aidiniantz [2020] EWHC 699 (QB) (“Siddiqi”) Saini J said at [30]

“when considering whether to stay a claim until an existing costs order is paid, I would summarise the correct general approach of the court position as follows:”

(i) The ultimate aim of the Court is to identify the just order from a case management perspective, bearing in mind the overriding objective.

(ii) In approaching that task, the “working” or “default rule” is that a litigant should not be able to continue with his or her claim without satisfying an existing and non-appealed final costs order, and the court should impose a condition requiring compliance.

(iii) However, if a claimant can show his or her Article 6 rights will be interfered with by such a condition (because they cannot pay, and a genuine claim will therefore be stifled) that is a material, but not conclusive, consideration pointing against such a condition.

(iv) Finally, the Court must take into account all other circumstances of the case, including the procedural behaviour of the defaulting party in deciding on the just order to make.

169. He continued at [36]:

“the Claimant bears the burden of satisfying me, with appropriate evidence, that if an order is made requiring a payment of costs as a condition of pursuing the claim, a genuine claim will be stifled.”

170. Although Michael Wilson and Siddiqi were focused on the matters the court should consider when it is being asked to make a debarring, unless or stay order for non-payment of an interim costs order, to my mind by analogy and consistent with the court’s broad case management powers, they have equal applicability to the defendants’ stay application.

171. In Siddiqi, Saini J explained that when considering applications such as these the court draws assistance by analogy with principles applied in security for costs applications. He explained the approach at [34] as follows:

“when the Court is considering an assertion that a claim would be stifled, it does not consider only whether the claimant can provide security out of its own resources. The inquiry is a broader one: the Court needs to undertake a wider investigation (with the burden being upon the claimant) to assess whether or not there might be outside sources or backers, such as friends, relatives, business associates or other interested persons, who might be able to provide the security (I will call this “third party assistance”).”

172. However, Saini J explained at [35] that the burden on the claimants seeking a stay or seeking to avoid a stay based on a stifling argument was greater where a costs order had actually been made, as here, rather than where the possibility of having to pay a costs order was still prospective.

“It seems to me that those principles must also apply in the present context. Indeed, in the present context, they apply with substantially greater force. A claimant who faces a final order for costs (not just a potential liability if it fails at trial, as in the security for costs scenario) faces possibly an even higher standard to demonstrate a lack of third party assistance. In the security for costs context, one is looking to see whether or not the claimant will be able to satisfy a potential security for costs order but in that situation of course, no costs order has actually been made. It is simply security for costs which is to be lodged in court in respect of a contingency. A court might in that case be less demanding in terms of evidence than it would be in respect of a person who has failed to meet a final and binding costs order.”

173. I agree and consider the claimants’ evidence and submissions in relation to impecuniosity and stifling against that background. Mr Rifat accepted that the propositions set out in Michael Wilson and Siddiqi at [171] and [172] governed, at least, the approach to the defendants’ stay application.

174. The first claimant’s evidence is that since being evicted from the Food Court in 2017 the claimants have been in severe financial difficulties, which they attribute to the loss of the Food Court.

175. They have been in receipt of universal credit since 17 July 2018 receiving £2,075 per month. They live in private rented accommodation. Their schedule of outgoings exceeds their income from universal credit. They have debts, which are substantial when compared to the universal credit they receive. Some details of these debts are set out in the evidence. However, the expenditure shown in the very limited bank statements provided is not fully explained. Whilst there are some limited documents to support the debts, the state of the claimants’ bank accounts does not seem to me to be entirely consistent with the dire financial position described in the witness evidence. The rolling balance on the second claimant’s bank statement for the month for which it was provided seems to be substantially in excess of the universal credit payment. The statement shows her having a comparatively substantial credit balance after paying £2,000 to the first defendant – the approximate amount of the universal credit payment. The first claimant’s statement for the same month includes receipt of the £2,000 but is also otherwise in credit though by a more modest amount. Although the claimants have debts, those debts appear to be managed with regular payments being made even though on the face of it the outgoings exceed the universal credit received.

176. The first claimant explains that he is 44 and has been married to the second claimant for 24 years. They have three children aged 23, 20 and 16. He does not explain where the older two children live or whether they are working and/or contributing to the household financially or whether they are dependent.

177. He explains that he worked as a self-employed taxi driver at some point between 2017 and 2020 but does not explain when that was or the income derived from that work. He explains that the second claimant undertook an IT course but does not explain when that course was completed or whether the second claimant was able to find any employment as a result of it.

178. He says that since the pandemic the claimants have not been able to find any work. The first lockdown commenced on 24 March 2020. There is no explanation of any income received or work undertaken or what became of any income received between 2017 and 2020. There is no evidence of the steps taken to seek work or the types of work sought during the pandemic or currently.

179. He does not explain what has happened to FCCL since 2017 or to any monies received through FCCL as a result of the partial occupation of the Food Court until July 2017. There is unexplained evidence of purchases from wholesalers by FCCL as recently as December 2020. The claimants say that they had achieved sales/takings of £385,000 in the six months ending in October 2016 equating to sales of just over £48,000 per month. Whilst there was a period in late 2016 to early 2017 when they could not operate the Food Court, in these proceedings they claim that the Food Court was a profitable business.

180. In his third witness statement, the first claimant says that the claimants had savings of approximately £65-£70,000, borrowed £30,000 from family and took out a loan of £25,000 via FCCL, with the claimants as guarantors, to assist the making the payments required to acquire the Food Court.

181. This is not however, altogether consistent with his fourth witness statement in which he says that FCCL had £38,575 in its bank account; the second claimant raised £10,000 on her credit cards and further money raised from the claimants’ families in cash to make the payments in respect of the Food Court in about March 2016. It is not therefore clear where the £65-£70,000 said to have been available in about March 2016 has gone or what it was used for or when.

182. The first claimant says he does not have a computer and cannot afford to buy one and this limits his ability to apply for work online. He did not identify what work he had not been able to apply for online. He does not say whether his wife or children have laptops, computers or printers or why he cannot access the internet by other means. I note that a number of the documents he has exhibited appear to be recently downloaded online statements. The bank statements show him using a mobile phone app to manage an online bank account. He therefore has access to the internet at least through his phone. He does not explain how the bank statements were accessed, downloaded and printed.

183.

The evidence of impecuniosity is far from compelling, lacks support and does not appear to stand up to even limited scrutiny.

184. The first claimant says he is restricted in the work he can undertake due to ill health. He says he has a form of bowel disease, which he has been suffering from for 10-years. His evidence is far from clear on the timeline and whether it has had a long-term effect on his ability to work and/or the type of work he can undertake.

185. In the last 10-years the first claimant had taken on the Food Court, had an off license business and at some point had had an embroidery business and worked in car sales. It was not suggested that his bowel condition impaired his ability to undertake any of this work. The only supporting evidence is a patient summary from 2018 from which one can glean that his condition is managed by pain relief drugs and an annual check-up with a specialist. The limited medical evidence suggests it is a long-term managed condition.

186. The first claimant says that in addition, he was diagnosed with a heart problem last year and a heart loop recorder was implanted. He does not explain what if any impact this had on his ability to undertake any paid work between 2017 to date or whether it has any ongoing impact. There did not appear to be any medical evidence in support.

187. Finally, the first claimant says he has recently been diagnosed with a condition which causes numbness and pain in his right hand. The limited supporting medical evidence appears to show an initial investigation in June 2020 and a proposed follow up four months later. There is no further medical evidence and no explanation of what this means to his longer-term employment opportunities and/or what impact it has had on his ability to undertake any work prior to or since June 2020.

188.

I accept that from the limited evidence available that it appears that the first claimant has underlying health conditions and it is possible they may have some impact on his day-to-day life but beyond that, the evidence is far from compelling. Given that the claimants have known since at least October 2020 that they would have to meet an adverse costs order and from at least January 2021 that they would not be able to do so, one might have expected that prior to the hearing in May 2021 more compelling evidence would have been provided.

189. Medical evidence which is to be relied on to support an application, whether it be for time to pay or a stay of a liability to pay a costs order, should include information from a medical practitioner of the nature of the medical condition, when it started and the features of that condition which prevent the applicant from undertaking, in this case paid work, and a reasoned prognosis. The court will then have evidence, which it can consider as part of the overall balancing exercise when considering how to exercise its discretion. Here the medical evidence consists of an historic 2018 patient summary in relation to the bowel disease and a note about initial investigations in relation to the right hand pain from mid-2020. It falls well short of the type and quality of evidence which the court would expect to see in support of the claimants’ stay application.

190. The first claimant says he and his wife have exhausted any potential funding, loans or borrowing from family or friends. The evidence of what steps they have taken was provided in the third first claimants’ witness statement and was far from full. The first claimant says that friends and family are unwilling or unable to assist, his parents are pensioners, and his brothers have refused. The second claimant is not in contact with her father and her sisters have refused or are unable to assist.

191. The defendants identify the lack of detail in this explanation noting that there is a difference between seeking general financial support and seeking assistance with payment of a specific costs order of £10,000. The defendants question whether either FCCL or indeed the claimants’ own legal representatives might be sources of third party assistance. I understand that the claimants are funding the claim by a full CFA but without ATE insurance. The claimants’ evidence is thin and unsatisfactory and falls well short of the type of evidence identified in Siddiqi as being required in relation to third party assistance.

192. As set out in Siddiqi

where the claimants are seeking a stay of a costs order the investigation that the court needs to undertake is wide and should be demanding. The claimants’ evidence is flimsy, providing little evidence in support or clarity around their financial position or inability to pay as a result of their ill health or Covid-19 or indeed stifling.

193. As Mr Delehanty notes, the claimants offered £7,531.50 in respect of the costs liability in their written submissions of 31 October 2020. No reference was made to their impecuniosity. The claimants agreed to the terms of the order made on 7 January 2021 without seeking further time to pay or a stay.

194. Importantly for the issues that arise in relation to the jurisdiction questions on the claimants’ stay application, none of the evidence relied on is new or recent. None of the reasons provided for the alleged inability to pay the costs order post-date the making of that order in January 2021 nor even, it appears, the determination of the liability for costs in October 2020. It is all historic as set out above. There was no attempt in the evidence or submissions to suggest otherwise.

195. It seems to me that the claimants’ stay application fails at the first jurisdiction hurdle. The power to stay the 7 January costs order only arises if the circumstances relied on are new or have arisen since the order was made. Whether that is October 2020 when the liability for costs was determined or January 2021 when quantum was determined, it is clear that the evidence relied on by the claimants pre-dates those determinations.

196. However, if I am wrong and there is jurisdiction to consider the claimants stay application, I need to go on and consider whether to grant it as a matter of discretion. I address this below at the same time as considering the defendants’ stay application, which also requires the court to consider the exercise of its discretion.

197. The first claimant says he has been advised that the claimants will be seeking permission to appeal the 12 October 2020 order (so far as that order relates to costs it relates to the March 2020 order). It is said this is an additional factor to be taken into account when considering the application for a stay. Mr Rifat submits that without a stay there is a risk that the claimants would not even be able to apply for permission to appeal. He suggests that the delay in progressing the proceedings and the fact that the applications for permission to appeal have yet to be considered is an additional factor weighing in favour of the claimants’ stay application.

198. It seems to me that two points arise. First, a prospective application for permission to appeal is not a basis for staying a costs order until the determination of the claim. Any such stay application should be made to the court considering any application for permission to appeal whether the first instance or appeal court at the time the application for permission is made. It can be considered on its merits at that stage.

199. No application for permission to appeal has yet been made. Although time to make that application has not yet started to run, the claimants seek to rely on a potential application for permission without even setting out the bare outline of the basis for that application. It is not even clear whether they intend to seek permission to appeal the substantive decisions or even which one or simply the costs decision.

200. If the claimants’ intention was to seek permission to appeal the substantive decisions striking out the first iteration contract claim, or refusing permission to amend to the third/fourth iteration in October 2020, that appears inconsistent with pursuing permission to amend to plead the fifth iteration rather than seeking permission to appeal at that stage.

201. Second, more generally the delay in progressing the proceedings primarily rests with the claimants. For example, in October 2020 they sought six weeks to provide a draft amendment and then sought an extension of time to 11 February 2021 to issue their third application to amend.

202. Although Mr Rifat pressed the claimants’ stay application, he did not substantially resist the defendants’ proposed stay of the proceedings as a whole pending payment of any costs orders and reformulation of the claim. His primary concern was that the claimants should not be caught in what he described as the default trap and have their claim stifled. He said that the two-month stay proposed by the defendants would crush them and sought a six-month stay. This he said would give them time and enable a new pen to cast the claim. He reiterated the claimant’s position that they had paid over very substantial sums whilst in effect running the defendants’ business for them and had nothing to show for it. They had, he said, been misled.

203. Mr Delehanty submissions can be summarised briefly. The defendants sought the stay, not simply as a result of the non-payment of the costs order, but as a result of the broader context of the claim as set out in this judgment. He relied on the state of the claim generally and the need for it to be repleaded again. He reminded me that the defendants had never sought to strike out some aspects of the claim. He argued that if there was any stifling it was caused by the way in which the claimants had advanced the claim.

204. There is considerable force in the submission that any stifling is self-inflicted. The claimants made choices about when and how to pursue their claims and those choices have consequences. In this case, that includes adverse costs orders. The claim needs a complete rethink in light of both the claimants’ own evidence and the way in which the claimants had previously formulated the claim. It is not a claim that can proceed in the current form. The defendants’ applications have been successful because of these shortcomings.

205. However, even if there were some risk of stifling, which is far from clear given the limitations of the claimants evidence, is only one factor to be considered when considering the overall exercise of the court’s discretion and its presence or absence is not conclusive either way.

206. As part of the exercise of my discretion, I also need to consider the impact on the defendants of the state of the claim against them, the now substantial unpaid costs orders in their favour, the length of time already taken up by the claim including its wasteful use of court resources.

207. The defendants query how the claimants intend to prosecute their claim given their dire financial position. The claimants have already confirmed that they have used Help With Fees to pay court fees so the defendants understandably question how the claimants will manage to pay for expert evidence. There is no evidence as to whether disbursements would be covered under their CFA.

208. The claim has been proceeding for nearly 2 years and is now in an even more confused state than it was at the outset. The claimants’ evidence is inconsistent with the claim sought to be advanced by them. The claimants made serious allegations of fraudulent misrepresentation many of which are no longer sustainable whichever version of the contract they seek to pursue which will at the very least have a substantially diluted effect on the value of any claim.

209. I have considerable sympathy with the defendants’ submission that the claim to date has been wasteful of costs and court resources. They suggest that the blame may well lie with the claimants’ legal representatives and therefore suggest that their proposed stay provides time for the claimants to reassess the position and if considered appropriate to change their legal team or at least regroup.

210. It does seem to me that the suggestion of a “cooling off” period to allow the claimants to regroup and consider which claims they want to take forward and how can only have merit given where we are.

211. The CPR was designed to create a more level playing field by evening up the negative impact of interim applications on all parties. As a consequence, unsuccessful parties to interim applications make those applications knowing that if they are unsuccessful and a costs order is made against them that they will have to pay it within 14 days in the absence of any other order. The claimants’ legal representatives are funded by a full CFA but this does not protect the claimants from the consequences of adverse costs orders.

212.

Whilst it is always a matter for the court’s discretion, if the court is not in a position to enforce an interlocutory costs order, the force of the sanction of an adverse costs order in ensuring the proper conduct of litigation and enabling the court to police compliance with its own rules and orders is undermined. The balance between the parties, which the overriding objective seeks to maintain, is also seriously undermined.

213. I have carefully considered the claimants’ evidence of impecuniosity, Covid-19, ill health, which the claimants say, is directly attributable to the defendants conduct. I have considered the history of this claim and the risk of stifling and the balance between the claimants and the defendants.

214. Consistent with the overriding objective, the court should seek to manage cases justly, efficiently, and proportionately and at proportionate cost taking into account all the circumstances of a particular case when exercising its discretion.

215. Based on the evidence available and taking into account the matters set out in this judgment, it seems to me that even if the claimants can overcome the jurisdiction hurdle, the fair balance between the parties, consistent with the overriding objective, and as an exercise of the courts’ discretion and my broad case management powers, is to refuse the claimants’ stay application in any event.

216. For the same reasons I will grant the defendant’s stay application. This will allow a further period of time for the claimants to seek advice and consider whether and how they want to reformulate their claim. It will do that without causing the defendants to incur further costs and without using more court resources.

217. Mr Rifat sought an indulgence of 6-months whilst the defendants sought a stay of two-months. It seems to me that there is some force in the suggestion that a stay of only two-months would present additional difficulties for the claimants, particularly if there is to be a regrouping and potentially a fresh or new pen to consider the claim. I need to balance that against the time this claim has already taken to reach this stage and the need for there to be finality. It seems to me that four months provides sufficient time for a cooling off and reformulation of the claim and for the claimants’ funding issues to be resolved. I would therefore grant a stay of four-months on the defendants’ stay application.

218. Mr Rifat accepted that the 19 May costs orders should be included in the defendants’ stay if I granted it. The costs orders to be included in the defendants’ stay are therefore both the 7 January costs order and the 19 May costs order.

219. I will hand this judgment down remotely and invite the parties to seek to agree the terms of any order. Any consequentials hearing should be listed as soon as possible, ideally in August 2021 to avoid further delay.