APPEALS: STAY OF EXECUTION AND CONDITIONS IMPOSED BY APPELLATE COURT: THE RELEVANT PRINCIPLES

The fact that an appeal is made, or permission to appeal is granted, does not automatically grant a stay of execution.  The appellant has to apply for a stay and the court can grant conditions.  The law and principles governing granting conditions on appeal is summarised in the recent Court of Appeal decision Sunico -v-  Commissions for HMRC [2014]  EWCA Civ 1108.

THE FACTS

Sunico were appealing against a judgment of £1,278,527.71. The issue of whether or not payment into court of the judgment sum was heard on the first day of the appeal hearing.  This led to the substantive appeal being adjourned.

THE PRINCIPLES GOVERNING IMPOSING CONDITIONS UPON APPEAL

The relevant rules and principles governing the imposition of conditions are encapsulated in part of the judgment of Lord Justice Briggs.

“The legal principles applicable to the imposition of conditions and to stay of execution pending appeCPR 52.3(7) provides that:

“22. An order giving permission may –

(a) limit the issues to be heard; and

(b) be made subject to conditions.”

This paragraph of Part 53 applies to any court with jurisdiction to give permission to appeal. CPR 52.9 provides as follows:

“(1) The appeal court may –

(a) strike out the whole or part of an appeal notice;

(b) set aside permission to appeal in whole or in part;

(c) impose or vary conditions upon which an appeal may be brought.

(2) The court will only exercise its power under paragraph (1) where there is a compelling reason for doing so.”

. There is at first sight a curious and unexplained tension between the power to impose conditions under Part 52.3(7)(b) and the power to do so under Part 52.9(1)(c), since the latter is, but the former is not, constrained by the requirement that a compelling reason for doing so be identified. Nonetheless, in the only two authorities cited to us about the principles applicable to the exercise of this power, namely Hammond Suddard Solicitors v Agrichem International Holdings Ltd [2001] EWCA Civ 2065 and Days Medical Aids Limited v Pihsiang Machinery Manufacturing Co. Limited and ors [2004] EWCA Civ 993, the court was minded to proceed on an assumption, without deciding the point, that the compelling reason requirement applied in both cases, notwithstanding the linguistic anomaly. Counsel before us did not suggest that we should do otherwise, and for my part I am content to do so. It reflects the undoubted fact that a condition such as a requirement to pay or secure payment of the judgment debt is not routinely applied as a condition for permission to appeal. Nor is the fact that an unsuccessful defendant wishes to appeal to be taken as a routine shortcut to the need to enforce a judgment, by the obtaining of the requisite condition for payment. Something more than mere non-payment of the judgment debt needs to be shown although, as both cases show, a deliberate failure to pay by a judgment debtor with the resources to do so may be a factor supportive of the imposition of a condition.

23. Nonetheless the existence of a compelling reason is only a necessary rather than sufficient factor. Even where a compelling reason is shown, the question remains a matter for the court’s discretion: see per Clarke LJ in the Hammond Suddard case at paragraph 40.

24. It is unhelpful to treat the particular circumstances identified in each of those two cases as giving rise to a compelling reason for the imposition of a condition as indicative of any more detail in the underlying legal principle. They are merely illustrations of the proper exercise of the discretion on particular facts.

25. Nonetheless the following emerged from those cases as factors which, depending on the overall circumstances, may point towards the imposition of a condition:

(1) Difficulties of enforcement of the court’s judgment in a foreign jurisdiction;

(2) An apparent sufficiency of resources to enable the judgment debtor to continue to fund litigation;

(3) The absence of convincing evidence that the appellant lacks the resources, or access to the resources, which would enable it to pay the judgment debt;

(4) 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;

(5) 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 first four of those factors emerge from the Hammond Suddard case. The last comes from the citation in the Days Medical case of paragraph 22 of the judgment of Potter LJ in Bell Electric Limited v Aweco Appliance Systems GmbH & Co KG [2003] 1All ER 344.

  1. Plainly, the main factor which, if it is sufficiently demonstrated, is likely to tell against the imposition of a condition is where to do so would stifle the appeal. The concept of stifling an appeal (or claim) is well-known in the context of applications for security for costs. It needs no elucidation here, beyond the following two observations. The first is that a corporate appellant is unlikely to persuade the court that an appeal will be stifled by an order for payment or security merely by reference to its own assets. The court will wish to consider whether the company’s backers or supporters have the resources and motivation with which to assist: see Calltel Telecom Limited v Revenue and Customs Commissioners [2008] STC3246, at paragraph 13. The second is that proof that the imposition of a condition for payment or security will probably stifle an appeal is only a factor against the imposition of the condition, rather than an absolute bar to it. Thus for example, where an appellant’s conduct amounts to a continuing abuse of process, this may be sufficient to justify the imposition of a condition, even if that would stifle an appeal. This is because the losing party has no absolute right of appeal, but only a right to the discretionary grant of permission to appeal: see the Hammond Suddard case at paragraph 38. In the context of this case, where a present inability to comply with the condition can be shown to have been caused by an appellant deliberately putting out of its reach assets with which it might have done so, at a time when an application for the imposition of the condition was pending, then an assertion that, thereafter, the imposition of the condition would stifle the appeal may fall on stony ground, because the appellant’s predicament will have been self-induced.
  1. The principles applicable to an application for a stay of execution pending appeal are very well known indeed. They are concisely summarised in paragraph 22 of the judgment of Clarke LJ in the Hammond Suddardcase. In short, CPR 52.7 provides that unless the appeal court or the lower court orders otherwise an appeal does not operate as a stay of execution of the orders of the lower court. The grant of a stay is discretionary. The court needs to balance the risks of injustice which may be occasioned by the grant or refusal of a stay. The obvious risk of injustice if the stay is refused is that the appeal may be stifled. The obvious risk if it is granted is that, after an unsuccessful appeal, the respondent will be unable to enforce the judgment. The risk that, if paid in the meantime, an unsuccessful respondent to the appeal may be unable to disgorge its receipt does not arise in relation to HMRC.”

THE ORDER MADE IN THE SUNECO CASE

In the Suneco case a stay of execution was granted pending the appellant raising sums to be paid into court as a condition of the appeal.  Further once the money was in court protection was granted to protect enforcement proceedings.

“It follows from the foregoing that I would not have granted a stay of execution, if no condition had been imposed. But I have been persuaded by Mr. Lakha that, if the condition as to payment into court is imposed, then the appellants do need or deserve protection from further enforcement measures by HMRC while they seek to raise the money to make that payment by the end of September. Further, I consider that the appellants ought to be entitled to protection, once having made that payment into court. A payment into court does not automatically prevent enforcement by a judgment creditor but, in the event that the payment is made, it seems to me that the appellants ought to be entitled to protection from double exposure, and from the risk of bankruptcy proceedings at the instance of HMRC between payment in and judgment on the appeal which would then follow.”

ESSENTIAL READING

The Suneco case, coupled with the cases cited in are essential reading for anyone applying for a stay of execution pending appeal or a party seeking the imposition of a condition.