SECOND APPLICATION FOR SECURITY FOR COSTS WAS NOT AN ABUSE OF PROCESS (THIS TIME)

November 29, 2016 · by · in Applications, Case Management, Uncategorized

In Holyoake -v- Candy [2016] EWHC 3065 (Ch) Mr Justice Nugee decided that a second application for security for costs was not an abuse of process.  The judgment reviews the law relating to second applications and abuse in detail. It contains some important lessons for anyone considering withdrawing an application, but reserving the right to issue a second application.

KEY POINTS

  • It was possible that a second, identical, application made in a case could be an abuse of process.
  • The fact that  in negotiations leading up a consent order  withdrawing the application it was agreed that the claimant “reserved the right” to make a second application did not necessarily give that party any right to make a second application.
  • The question of whether the second application was an abuse was to be decided on the basis of a “broad merits-based judgment”.
  • On the facts of this case it was appropriate to allow the claimant to make a second application for costs after a first application was withdrawn. Further an order for security for costs was made.

IMPORTANT PRACTICE POINT

One important issue is that the claimant obtained little protection from the correspondence leading up to the consent order where it expressly reserved its position. Great care should be given to the “withdrawal” of an application. It may sometimes be more prudent to adjourn it generally if there is a possibility it could be revived.

THE CASE

The claimant made an application for security for costs which was to be heard i May 2016. The defendant served evidence on the last working day before the application was due to be heard. The claimant withdrew the application. The claimant made a later application for security for costs. The defendant argued that this second application was an abuse of process.

THE JUDGMENT ON THE ABUSE OF PROCESS ARGUMENT

The judge recounted the history of the earlier security for costs application, he then set out the detail of the circumstances in which the earlier application was withdrawn.
  1. Faced with this last-minute evidence, the Defendants decided to withdraw their application, and there was an exchange of e-mails over the weekend. Again it is necessary to set out the exchange in some detail. At 17.22 on Friday 20 May 2016 gunnercooke followed up the service of Stringfellow 9 with an e-mail containing a letter without prejudice save as to costs; this said that since the service of confirmation of an ATE policy and Stringfellow 9 the application was hopeless; if the Defendants withdrew their application, the claimants would agree to costs being in the case. This was followed by two e-mails sent on Saturday 21 May, the first by Gowling at 17.39 which read:
“Our clients accept your offer of withdrawal of the Security for Costs application, with an order that costs be in the case.
This is on the basis that:
1. Your clients accept that they are jointly and severally liable for the costs of the action (as stated in paragraph 13.1 of your counsels’ skeleton for this application and in the fourth witness statement of Mr Stringfellow at paragraphs 7.3 and 24); and
2. For the avoidance of doubt our clients do not accept the contents of the fourth or ninth witness statements of Mr Stringfellow, and reserve all of their rights in respect of them, the ability to bring a security for costs application in the future and generally.”
The second, a reply by gunnercooke at 18.58, was as follows:
“We refer to your e-mail of 17.39pm today in which you have agreed to accept our clients’ without prejudice save as to costs offer in respect of the hearing next week.
As far as the conditions set out in your e-mail are concerned we would respond as follows:
1. The claimants do not resile from the position as set out in the fourth witness statement of Mr Stringfellow and the Claimants skeleton argument;
2. We note what you say in relation to the fourth and ninth witness statements and that you reserve the right to bring a further application for Security for Costs.”
  1. A consent order was then agreed and made by Newey J on 23 May. This simply provided that
“The Defendants’ application for security for costs dated 4 December 2014 having been withdrawn there be no order other than that the costs of the application be in the case.”
Abuse of process – the law
  1. Mr Stewart QC, who appeared for the Claimants, submitted that in the circumstances it was an abuse of process for the Defendants, having voluntarily withdrawn the first application, to bring a second application on effectively the same grounds. He relied on the principle known as the rule in Henderson v Henderson (1843) 3 Hare 100, as interpreted by Lord Bingham in Johnson v Gore Wood [2002] 2 AC 1 at 31, where he referred to a:
“broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing on the question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before.”
  1. In Chanel Ltd v F W Woolworth & Co Ltd [1981] 1 WLR 485 (“Chanel”), the plaintiffs, in an action for trade mark infringement and passing-off, obtained ex parte interlocutory injunctions; on the inter partes hearing the defendants felt constrained to give undertakings and by consent the motion was stood over to trial (without being opened or the evidence read) on the defendants giving undertakings “until judgment or further order”. The defendants then carried out some research which led them to think they had an argument after all and applied to discharge the undertakings. Foster J refused the application, and the Court of Appeal refused leave to appeal. Buckley LJ held (at 492D) that an order (or undertaking) expressed to be until further order gave a right to the party bound to apply to have the order (or undertaking) discharged if good grounds for doing so are shown. He then said he would assume (without deciding) that the evidence the defendants had uncovered would have enabled them to resist the motion, and continued (at 492H):
“The defendants are seeking a rehearing on evidence which, or much of which, so far as one can tell, they could have adduced on the earlier occasion if they had sought an adjournment, which they would probably have obtained. Even in interlocutory matters a party cannot fight over again a battle which has already been fought unless there has been some significant change of circumstances, or the party has become aware of facts which he could not reasonably have known, or found out, in time for the first encounter. The fact that he capitulated at the first encounter cannot improve a party’s position.”
  1. In Woodhouse v Consignia plc [2002] EWCA Civ 275, a claimant who had unsuccessfully sought to lift a stay applied to do so a second time, and both the district judge and judge held that he could not have a second bite at the cherry. The Court of Appeal allowed an appeal. Brooke LJ, giving the judgment of the Court, said that there was a public interest in discouraging a party from making a subsequent application for the same relief based on material which was not, but could have been, deployed in the first application; that one of the reasons was the need to protect respondents to successive applications from oppression [55]; but that although the policy that underpins the rule in Henderson v Henderson had relevance as regards successive pre-trial applications for the same relief:
“it should be applied less strictly than in relation to a final decision of the court, at any rate where the earlier pre-trial application has been dismissed.” [56]
He then gave an example where an application for summary judgment under CPR Pt 24 had been dismissed, but a second application was made based on evidence that, although available at the time of the first application, was not then deployed through incompetence, but which was conclusive; the second application ought to be allowed to proceed [57]. The district judge and judge had therefore been wrong to regard the fact that the second application was a second bite at the cherry as decisive [58], and the Court of Appeal proceeded to consider the second application on its merits, regarding the fact that it was a second bite at the cherry as an important factor [61], but in the event decided that it would be a disproportionate penalty for the claimant to lose his right to damages due to a pardonable mistake by his solicitor, and lifted the stay [63].
  1. In Orb a.r.l. v Ruhan [2016] EWHC 850 (Comm) Popplewell J had to deal with a number of applications arising out of a freezing order made by Cooke J which had been obtained by the defendant (Mr Ruhan) against the claimants (the Orb Parties) [1]-[2]. The order required Mr Ruhan to fortify his cross undertaking in damages by charging certain shares [48]. Mr Ruhan had done so but the Orb Parties sought further fortification on the ground that the shares were inadequate security. Popplewell J dismissed the application for a number of reasons, the first of which was that it was open to the Orb Parties to take the point before Cooke J but they had failed to do so. None of the material relied on had come to their attention subsequently; Cooke J had given them an opportunity to raise any objections to the shares as fortification, but they had not raised the points now sought to be raised, although they were well known to them; there had been no significant or material change of circumstances [81]. Popplewell J continued [82]:
“That is fatal to this ground for discharge: see Chanel Ltd v FW Woolworth & Co Ltd [1981] 1 WLR 485. Mr Drake emphasised that that case involved a consent order. But the principle is well established, and often applied, in relation to contested interlocutory hearings. It is that if a point is open to a party on an interlocutory application and is not pursued, then the applicant cannot take the point at a subsequent interlocutory hearing in relation to the same or similar relief, absent a significant and material change of circumstances or his becoming aware of facts which he did not know and could not reasonably have discovered at the time of the first hearing. It is based on the principle that a party must bring forward in argument all points reasonably available to him at the first opportunity; and that to allow him to take them serially in subsequent applications would permit abuse and obstruct the efficacy of the judicial process by undermining the necessary finality of unappealed interlocutory decisions.”
  1. Mr Stewart also referred to a judgment of Etherton C in this action, Holyoake v Candy [2016] EWHC 1718 (Ch). The Claimants had initially applied for a notification injunction, making the decision not to apply for a freezing injunction. I granted that application in a modified form. The Claimants then applied for a freezing order after all. It was that application which came before the Chancellor. He dismissed it. The Claimants’ counsel, Mr Trace QC, had submitted that all that he needed to show was the usual prerequisites for a freezing order, namely a good arguable case on the merits, a real risk of dissipation and that the balance of convenience favoured the grant of the order [18]. The Chancellor disagreed, saying [21]:
“I do not agree with Mr Trace’s statement of principle. The starting point in such a case as the present is that the claimants must point to something that has happened since the grant of the original order. They must show something material has changed to make it appropriate to investigate the same issues over again at yet another extensive hearing with even more voluminous evidential material. Absent any such change, the application for a freezing order is not only a disproportionate call on the court’s resources, but an abuse of the court’s process, in effect making successive applications for the same objective but testing the court’s willingness each time to see how far the court will go, each such application involving, to a greater or lesser extent, duplication of issues, evidence and arguments.”
He then examined, and rejected, various matters which were said to amount to a sufficiently material change of circumstances.
  1. These authorities are not entirely easy to reconcile with each other. The decisions in Orb v Ruhan and Holyoake v Candy proceed on the basis that a party who has sought and obtained relief on an interlocutory application cannot return to court and ask to extend (or “upgrade”, in the words of the Chancellor) the relief without showing a material change of circumstances. It is easy to see the policy reasons behind such a principle which are well articulated by both judges. Chanel indicates that similar considerations apply where a party has submitted to an order, and that the question does not turn on whether the applicant did in fact have the evidence at the earlier hearing but on whether it was reasonably available to him. Yet in Woodhouse v Consignia the Court of Appeal held that the rule in Henderson v Henderson was not applied so strictly in interlocutory matters, that the judges below had been wrong to dismiss the second application as a second bite at the cherry, and that it did not matter that the evidence deployed had in fact been available to the applicant at the time of the first application, at any rate if the evidence was conclusive.
  2. I propose not to resolve these difficulties at this stage but to consider first the answers given by Mr Plewman QC, who appeared for the Defendants, to the suggestion that the application is an abuse of process. I will then consider whether it is necessary to give any further consideration to the principles.
Was it agreed that the Defendants could apply again?
  1. Mr Plewman’s first answer was that the parties had proceeded on the agreed basis that the Defendants could make a further application. The first stage in this argument was that the consent order made by Newey J on 23 May 2016 reflected a real agreement between the parties. I accept this submission, which was not disputed by Mr Stewart. It is well established that an interim order made by consent may have a true contractual foundation and evidence a real contract between the parties; or it may simply reflect an acceptance by the parties that the order is the correct order to make in the circumstances, in which case the words “by consent” really mean “the parties not objecting”: see Foskett on Compromise (8th edn, 2015) at §6-22 and cases there cited, particularly Siebe Gorman Ltd v Pneupac Ltd [1982] 1 WLR 185 at 189 per Lord Denning MR. In the present case the exchange of e-mails over the weekend (paragraph 10 above), couched as they were in terms of offer and acceptance, seem to me to fall clearly on the contractual side of the line. The consent order was not the result of a simple acceptance by Gowling that it was right to make no order on the application, but was the result of a bargain between the parties that in return for Gowling withdrawing the application, the costs would be costs in the case.
  2. The second stage in the argument was that it was part of that agreement that the Defendants should be entitled to reopen the matter. Mr Plewman said that this meant that they were not limited to having to show a misrepresentation or change of circumstances or discovery of new facts, but had an unrestricted ability to apply again.
  3. In this connection he relied on Butt v Butt [1987] 1 WLR 1351. Like Chanel, this was another case where the plaintiff had obtained an interlocutory injunction in the motions court ex parte, and the matter came back for an inter partes hearing at which the defendant gave undertakings, in this case among other things not to sell his former matrimonial home, those undertakings being expressed to be until trial or further order (despite its name, it was not in fact, as Mr Plewman suggested, a matrimonial dispute but a commercial dispute between two cousins over the ownership of a coal yard, in which the plaintiff sought Mareva relief against the defendant). The defendant later sought to be discharged from his undertakings on the grounds of non-disclosure. The Court of Appeal distinguished Chanel. The judge’s judgment recorded that it had been expressly stated to the Court when the defendant’s undertakings were given that they were being given as a matter of expediency and that he might later apply to discharge them, especially on the grounds of possible material non-disclosure (see at 1353C). Nourse LJ said (at 1354F) that that showed that it was:
“expressly contemplated that the defendant might wish to apply to be discharged from his undertakings on the ground that there had been a material non-disclosure when the plaintiff first made his ex parte application to Judge Fitzhugh. It seems to me that it would be quite wrong to prevent the defendant from making that application.”
Mustill LJ said (at 1355A):
“If there is an inter partes hearing on which an undertaking is given in lieu of an injunction, and if it is made plain and understood by all concerned in the hearing that the undertaking is given in the contemplation that the defendant may subsequently wish to apply for the discharge of the undertaking when his evidence is in order, there would, in my judgment, be something wrong with the law if that common understanding were to be frustrated simply because the relief takes the form of an undertaking rather than an injunction…
In my judgment the situation in the present case is that the court should meet the justice of the matter by giving effect to the explicitly evinced intention of the parties once that intention had been established…
The defendant had signalled the possibility (not yet crystallised into a firm intention) of returning to court to have the injunction discharged. I believe it would be wrong in such circumstances to hold that the defendant’s advisers had succeeded in shutting out their client from arguing that the plaintiff had failed to fulfil his obligations to the court at the ex parte stage of making a full disclosure of all the material facts.”
Mr Plewman said that that was completely on all fours with the present case.
  1. Mr Stewart submitted that it was not a term of the contract between the parties in the present case that the Defendants could apply again. All that had happened was that the Defendants had said they were reserving their rights, including the right to apply again, and the Claimants had noted that they had done so. That could not be regarded as an agreement that the Defendants could make a fresh application without having to show some material misrepresentation or the like: it was doing no more than accepting that if they had a right to apply again they were reserving it. In other words it preserved whatever rights they had; it did not create any new rights that they would not otherwise have had. Butt v Butt was a quite different situation where the Court itself had recognised that there was a possibility of an application to discharge which was being reserved.
  2. I have not found this an entirely straightforward question. I agree with Mr Stewart that when gunnercooke said in their e-mail at 18.58 on 21 May that they “noted” that the Defendants reserved their rights, that was not a contractual agreement to the effect that the Defendants could apply again on any grounds they liked. The contract was formed by the offer made by the Claimants which was accepted by the Defendants in Gowling’s e-mail of 17.39; it may well have been (and probably was) subject to confirmation that the Claimants accepted joint and several liability for the costs, but I do not think the reservation of rights in Gowling’s e-mail was put forward as a proposed new term of the contract (amounting to a counteroffer requiring acceptance) – it was a statement of the basis on which the Defendants had accepted the Claimants’ offer, and understood as such.
  3. As I read Butt v Butt, that is not however the determining criterion. In that case the plaintiff never accepted that the defendant could apply to discharge the undertakings without showing Chanel grounds: see at 1354G which records that the plaintiff’s counsel made this point at the inter partes hearing when the undertakings were given. So the basis for the decision in Butt v Butt is not that the plaintiff had contractually agreed that the defendant could apply to discharge, but that the defendant had made it clear when giving the undertakings (and the plaintiff and the Court had understood) that it was contemplating applying to discharge.
  4. I do not however accept Mr Plewman’s submission that this case is on all fours with Butt v Butt: in that case one of the grounds of Nourse LJ’s decision – indeed the primary ground – was that the motion was not stood over to trial (as it had been in Chanel) but was adjourned generally with liberty to apply, which indicated that it had not been dealt with and disposed of: see at 1354A-B. In the present case by contrast the application was not adjourned on 23 May; it was withdrawn and no order was made on it, which on any view must be regarded as a disposal of the application. Somewhat curiously, the CPR do not appear to contain any express provision for “withdrawal” of an application (unlike I think the RSC, although my recollection may be faulty), but there is I think no doubt that the effect (and the intended effect) of Newey J’s order, which not only recorded that the application had been withdrawn but made no order on it, was to put an end to the application.
  5. Both Chanel and Butt v Butt seem to me to be decisions based on the regular practice in what was then the motions court and is now the Applications Court. Both are cases where the plaintiff sought an injunction initially ex parte, which was granted in the usual way until the return date when the matter came back inter partes. In the Applications Court the well-known practice is that applications for interlocutory injunctions will be adjourned from time to time until they are ready to be heard, with a temporary injunction being granted (or undertaking given in lieu) to hold the ring until the application can be argued substantively. Once however the application has been argued and a decision made, that is usually intended to govern the position until trial absent a sufficient change of circumstances. What Chanel decides is that the position is no different if the respondent accepts, without the matter having to be argued, that the case for an injunction is made out, or, which comes to the same thing, gives an undertaking. In either case this is intended to dispose of the application and it cannot thereafter be reopened without good reason. What Butt v Butt decides is that the position is different if an undertaking is given, and is understood (not only by the other side but by the Court) to be given, not as a way of disposing of the application, but as a provisional measure pending further investigation. In effect the respondent is merely agreeing to the undertaking temporarily, which is why Nourse LJ regarded it as significant that the motion was adjourned generally, rather than (as in Chanel) stood over to trial as the practice then was.
  6. Seen in this light, it does seem to me that Butt v Butt is not truly analogous to the position here. There was nothing temporary or provisional about Newey J’s order dealing with the first application: it was disposed of and that was an end of it. It was not in any sense adjourned and could not be restored – there was nothing left to restore. There is nothing in the terms of the order to suggest (nor any other reason to think) that Newey J understood he was being asked to make a temporary order preserving the position pending further consideration. Mr Plewman pointed to some of the phrases used by Mustill LJ such as “if it is made plain and understood by all concerned that the defendant may wish to apply for the discharge of the undertaking when his evidence is in order” (at 1355B), “giving effect to the explicitly evinced intention of the parties” (at 1355E), and “the defendant has signalled the possibility … of returning to court”. He said that that was the same here. Attractively although the point was made, I do not accept it: it is to my mind an illustration of the danger of taking phrases out of a judgment and seeking to apply them to a different factual situation.
  7. I agree with Mr Stewart therefore that the Defendants’ reservation of their rights in the e-mail of 17.39 on 21 May did not by itself entitle them to launch a fresh application without having to show a good reason for doing so, and that the fact that gunnercooke in their reply at 18.58 noted the position took the matter no further. If Mr Plewman were right, it would mean that despite agreeing to withdraw the application on 21 May and the consent order being made on 23 May, the Defendants could immediately have brought a second application on 24 May without any new material at all. That would I think have been prima facie an abuse; and if Gowling wished gunnercooke to agree to their having the right to do that, it would have required much more explicit agreement than they sought or obtained. I therefore reject Mr Plewman’s first answer to the abuse question.

THERE  WERE GOOD GROUNDS FOR A SECOND APPLICATION

The judge reviewed the evidence that had come to light since the application was withdrawn. This cast some doubt on the evidence that the defendant had served at the last minute that led to the first application being withdrawn.
  1. That seems to me to be sufficient to entitle the Defendants to re-open the question of security. I do not need to decide if it was a misrepresentation as such, because Mr Plewman did not actually seek to set aside the consent order disposing of the first application for security – what he seeks to do is bring a second application – but I am satisfied that the circumstances at least come within the principle in Chanel that a party cannot re-open matters unless he “has become aware of facts which he could not reasonably have known, or found out, in time for the first encounter.”
  1. In these circumstances I am satisfied that it is not an abuse of process for the Defendants to bring this second application. In terms of the broad merits-based judgment referred to by Lord Bingham in Johnson v Gore Wood, it does not seem to me that there is anything inappropriate in the Defendants having withdrawn the first application at a stage when, although they had suspicions, they had no material to indicate that the impression given by Stringfellow 9 was wrong, and then applying again once they had obtained evidence casting real doubt on that impression.

Second set of proceedings/abuse of process

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