UNLESS ORDER MADE WHEN THE CLAIMANT HAD NOT PAID AN INTERLOCUTORY ORDER FOR COSTS

In Junejo v New Vision TV Ltd [2021] EWHC 449 (QB) Deputy Master Hill QC made a peremptory order that the claimant pay an order for costs.  However that payment was to be by instalments.  There is a useful review of the relevant principles relating to the court’s discretion when a costs order has not been paid. Note in particular the need of the defaulting party to establish, by evidence, that it is unable to pay.

“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.”

THE CASE

The claimant brings an action for libel.  Following an interlocutory application the claimant was ordered to pay the claimant £15,000. The claimant did not pay. The claimant had made offers to pay by instalments and paid £2,000 on account.

THE APPLICATION

The defendant applied to strike out the action on the grounds that the costs had not been paid.

THE MASTER’S REVIEW OF THE LAW

The Master considered the legal principles and guidance available where a party is in default of an interlocutory costs order.

1. 1. In seeking to strike out the claim by reason of the Claimant’s failure to pay the costs order made by Nicklin J, counsel for the Defendant relied on the approach to such applications set out by Patten J in Crystal Decisions (UK) Ltd v Vedatech Corp [2006] EWHC 3500 (Ch) and considered by Sir Richard Field (sitting as a Deputy Judge of the High Court) in Michael Wilson and Partners Ltd v Sinclair and others [2017] EWHC 2424 (Comm).

1. 1. At [29] of Wilson, Sir Richard Field summarised the applicable principles thus:

“(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”.

1. 1. Counsel for the Claimant relied on Walsham Chalet Park Ltd v Tallington Lakes Ltd [2014] EWCA Civ 1607 for the proposition that the general principles set out in Denton v TH White Ltd [2014] EWCA Civ 906 are applicable to strike out applications. He therefore argued that the Court should (i) identify and assess the seriousness and significance of the failure to comply with the Court order; (ii) consider why the default occurred; and (iii) evaluate all the circumstances of the case to enable the court to deal with the application justly. Ultimately, though, in a strike out application, the central question is whether the sanction of strike out is proportionate.

2. Counsel for the Claimant also emphasised that striking out a statement of case because of a litigant’s failure to comply with a court order for the payment of money which is beyond their means may amount to a breach of the right to access to a court derived from Article 6(1) of the European Convention of Human Rights. A party should not be ordered to pay a sum of money that they are unlikely to be able to raise; and a court should not impose a condition upon a party which has the effect of stifling their continued participation in the proceedings. A party can prove such a stifling effect by establishing, on the balance of probabilities, that he does not have the means to comply with the condition and cannot raise the necessary sums from friends, relatives or business associates willing to help him in his hour of need (see Ford v Labrador [2003] UKPC 4 and Goldrail Travel Ltd v Aydin [2017] UKSC 57).

THE EXERCISE OF THE DISCRETION IN THE CURRENT CASE

The Master reviewed the submissions of both parties.

1. 1. Wilson makes clear that the policy behind the imposition of costs orders made payable within a specified period of time before the end of the litigation must be borne in mind. The Claimant is in breach of that order and the issue for me to determine is whether the response to that breach should be a strike out of the Claimant’s claim or some other sanction. I do not accept the Defendant’s argument that I should not even consider the making of an unless order as the Claimant had not sought that in terms: an unless order is plainly open to me in the exercise of the Court’s discretion and indeed Wilson posits that an unless order is to be expected before a strike out is ordered. In any event counsel for the Claimant did rely on this option in his oral submissions.

1. 1. Wilson also emphasises that in deciding what order to make, 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. A similar approach is required by application of the Denton v TH White Ltd [2014] EWCA Civ 906 principles.

1. 1. As to factor (a) above, I accept the Claimant’s submission that a person who generally has means, but has specific cashflow problems such that they do not have access to funds at a particular time, is entitled to invoke their Article 6 rights. To hold otherwise would preclude a court from taking a realistic view of a person’s finances at the particular time an order impacting on them was being sought. The Claimant rightly accepted that there were further documents which he could have provided relevant to his means. However on balance I am satisfied that the witness and documentary evidence he has provided constitutes sufficient evidence to the Wilson standard to prove the difficulties he has in raising the remaining £13,000 at the present time. I accept that I should not make an order which will effectively stifle his ability to litigate what may be a meritorious claim due to these issues with his means.

1. 1. As to (b), there are alternative means of enforcing the costs order through the different mechanisms of execution, including an unless order.

1. 1. As to (c), the Claimant was represented before Nicklin J, and his decision was that a costs order payable on an interim basis was appropriate.

1. 1. Taking all those factors together, I am satisfied that striking out the Claimant’s claim now would be disproportionate. However to make no further order to mark the Claimant’s breach would not be proportionate, or fair to the Defendant, either. I consider that an order debarring the Claimant from further pursuing his claim should be made, but that this should be on an unless order basis. I do not accept that the reasons advanced by the Defendant against this course are sufficiently strong to displace the Wilson principle that an unless order should be the first form of debarring order.

1. 1. I have noted that despite the November 2020 offer of payment in instalments, no payment was actually made to the Defendant until early February 2021. It seems to me likely that notwithstanding the further ‘lockdown’ restrictions in late 2020 the Claimant could have raised some funds in that intervening period and should have made some payments other than the one £2,000 paid shortly before the hearing. I am also conscious of the upcoming hearing commencing on 25 March 2021 and the risk to the Defendant of incurring further potentially unrecoverable costs.

2. Taking into account all these circumstances and aiming to balance all the competing considerations, I consider it appropriate to make an order debarring the Claimant from further pursuing his claim unless he pays (i) £4,000 to the Defendant by 4.30 pm on 5 March 2021; (ii) a further £3,000 by 4.30 pm on 19 March 2021; and (iii) the remaining £6,000 in two instalments of £3,000 each due by, respectively, 4.30 pm on 16 April 2021 and 14 May 2021.

THE ORDER AS TO THE COSTS OF THE APPLICATION

The Master made no order on the application itself.   Neither party had achieved what it sought.

1. 1. Both parties seek their costs from the other, arguing that they were the successful party and thus the usual rule under CPR 44.2(4) should apply.

1. 1. The Defendant succeeded, but only to the extent that the unless order I made will either result in costs recovery to the Defendant or strike out, albeit in slower time than an immediate strike out. The Defendant failed to obtain the immediate strike out sought on the application, and expressly disavowed the option of an unless order. The Defendant had also declined to engage in discussion about payment by instalments, conduct which I take into account in the exercise of my discretion as to what costs order to make, if any, under CPR 44.2(4)(a) and/or (c).

1. 1. The Claimant succeeded, but only to the extent that he defended the immediate strike out application. The order I made will have the same effect if at any point he fails to comply with the payment schedule set out in the unless order. The Claimant failed to obtain the primary remedy he sought, that I make no order on the application. The Claimant also failed to make any payments towards the costs ordered by Nicklin J until shortly before the hearing, despite having indicated in November 2020 that he could do so. This is conduct by the Claimant which I also take into account under CPR 44.2(4)(a).

1. In light of the factors set out above, I categorise this application as one where there was “no real winner or no real loser” such that “No order for costs [is] the only way to do overall justice in this case” (R (Scott) v London Borough of Hackney [2009] EWCA (Civ) 217, [2009] 1 WLUK 264 at [49]). I therefore make no order for costs on this application.