Injunctions – application for security of costs by the defendants.
[2015]JRC172
Royal Court
(Samedi)
20 August 2015
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Before :
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Advocate Matthew John Thompson, Master of
the Royal Court
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Between
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Shane Michael Holmes
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Plaintiff
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And
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Harry James Lingard
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First Defendant
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And
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HJL Holdings Limited
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Second Defendant
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And
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Angel Fish Limited
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Third Defendant
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Mr S. M. Holmes by written submissions only.
Advocate M. H. D. Taylor for the Defendants.
CONTENTS OF THE JUDGMENT
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Paras
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1.
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Introduction
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1
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2.
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Mr Holmes’ claims
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2-6
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3.
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Other proceedings
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7-11
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4.
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Procedural developments
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12-19
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5.
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The Law
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20-31
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6.
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The parties’ contentions
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32-55
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7.
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Decision
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56-77
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judgment
the master:
Introduction
1.
This
judgment represents my decision in relation to an application for security for
costs brought by the defendants against the plaintiff (“Mr
Holmes”).
Mr Holmes’ claims
2.
In his
order of justice Mr Holmes alleged that he and the first defendant (“Mr
Lingard”) had entered an agreement in June 2011 to develop Hotel La Tour
which was owned by the third defendant Angel Fish Limited (“Angel
Fish”), a subsidiary of the second defendant HJL Holdings Limited
(“HJL”), which was in turn beneficially owned by Mr Lingard. As part of that alleged agreement Mr
Holmes asserted that HJL was to make available what Mr Holmes described as “Side Funding” to enable
certain project works to be undertaken on the hotel site. This funding would be secured over a
separate development Mr Holmes was undertaking through his company Home Farm
Developments Limited (“Home Farm”).
3.
The order
of justice alleges that Mr Lingard breached and repudiated this agreement in
the autumn of 2012. The allegations
included complaints that Mr Lingard made representations to induce Investec
Bank to foreclose a loan facility made to Home Farm and to various estate
agents “with the deliberate intent
to scupper the Home Farm purchase offers” (paragraph 43).
4.
As a
result of these breaches Mr Holmes claims the following:-
(i)
the sum of
£190,000 in respect of the direct costs and expenses incurred by Mr
Holmes in the development;
(ii) the sum of £900,000 being the uplift in
value of Hotel La Tour brought about by Mr Holmes as a consequence of his
involvement in the development; and
(iii) the sum of £686,000 being losses in
expected sales values in the units being separately developed by Home
Farm.
5.
The order
of justice also contained injunctions which were signed by W. J. Bailhache,
Deputy Bailiff, (as he then was) on 17th March, 2014. On 27th May, 2015, these
injunctions were discharged by order of the Royal Court with reasons to
follow. Those reasons have been
handed down since the hearing of this matter and I refer to them, where
relevant.
6.
On 20th
April, 2014, the defendants filed an answer, (amended on 27th March,
2015,) which answer included a counterclaim for repayment of certain unsecured
loans said to be made to Mr Holmes between February and August 2012. A brief reply to the counterclaim was
filed on 21st May, 2014.
Other proceedings
7.
There have
also been other proceedings between Mr Holmes, Home Farm and the defendants
relating to the sale of two units at Home Farm. These proceedings are referred to in the
judgment of Commissioner Clyde-Smith, dated 29th October, 2014, and
reported at Home Farm Dev-v-HJL Holdings and Lingard [2014] JRC 209 (‘the
October 2014 judgment’).
8.
In the
October 2014 judgment, Home Farm and Mr Holmes sought to appeal certain costs
orders of the Judicial Greffier dated 6th February, 2014, in the sum
of £2,971.70. The judgment
dealt with a further request for an adjournment made by Mr Holmes on medical
grounds. His request for an
adjournment was refused and the medical evidence was described as being “woefully inadequate”. Mr Holmes was required to pay the costs
of his application on an indemnity basis.
9.
The
indemnity costs were subsequently assessed by the Assistant Judicial Greffier as
set out in a letter dated 12th March, 2015, in the sum of
£8,306.86.
10. Mr Holmes a few months later sought to set
aside the October 2014 judgment and the indemnity costs order which application
was to be heard on 26th June, 2015. In an affidavit filed in relation to the
application before me Mr Holmes contended that “summary judgment was taken at the hearing of 15th October,
2014, in the absence of representation” because legal aid was
withdrawn on 9th October, 2014.
11. However, the hearing on 26th June,
2015, did not proceed as the appeal was withdrawn by consent. I was informed of this settlement only
after the oral hearing had taken place in relation to the present
application. The terms of the
settlement provided for the costs previously assessed to be paid out of certain
monies held in an escrow account maintained by Hanson Renouf. As a result of this settlement, I
invited both parties to provide to me short written submissions on the effect
of this settlement on the application for security for costs and the
submissions previously made.
Procedural developments
12. It is also appropriate that I refer to the
pleadings and certain events leading to the present hearing and various orders
I made prior to the hearing.
13. The defendants’ summons for security for
costs against Mr Holmes was issued on 11th May, 2015, returnable
before me on 4th June, 2015, following a normal date fix.
14. Following email correspondence received from Mr
Holmes after the date fix, by an email 12th May, 2015, to Mr Holmes
and Advocate Taylor, I directed that the security for costs hearing should take
place on 4th June, 2015. Mr Holmes wanted to delay the hearing
because of the defendants’ application to discharge the injunctions which
was coming before the Royal Court on 27th May, 2015. I noted that Mr Holmes, by the time of
my email, had received a bundle and a supporting affidavit filed by the
defendants i.e. some three weeks before the hearing date of 4th June,
2015. I refused his request in
light of the fact that he had received the information relied upon by the
defendants and because there was over a week between the hearing before the
Royal Court on 27th May, 2015, and the security for costs
application on 4th June, 2015.
I further indicated I did not need to see skeleton arguments filed by Mr
Holmes before close of business on Tuesday, 2nd June, 2015.
15. However, on 4th June, 2015, Mr
Holmes applied for an adjournment of the security for costs application because
he was not ready. Effectively he
threw himself on the mercy of the Court.
I therefore granted the adjournment requested and adjourned the security
for costs application to Monday, 15th June, 2015, subject to
requiring Mr Holmes to file his affidavit and skeleton arguments by certain
dates. These deadlines were met.
16. As Mr Holmes was not ready for the adjournment
and he was throwing himself on the mercy of the Court, I also ordered him to
pay the defendants’ costs of the adjournment application on an indemnity
basis, which costs I summarily assessed in the sum of £500.
17. Paragraph 6 of the act of court dated 4th
June, 2015, also stated as follows:-
“the said costs shall be
paid to Messrs. Bedell Cristin by 5.00 p.m. Friday, 12th June, 2015, failing
which the Plaintiff shall be debarred from make oral submissions at the hearing
of the Defendants’ summons for security for costs on 15th June,
2015.”
18. Although Mr Holmes filed his affidavit and
skeleton arguments within the deadlines specified, he did not make the payment
of £500 as directed by paragraph 6.
Accordingly, he was not permitted to make oral submissions. In fact he did not attend the hearing on
15th June, 2015, although I indicated that he could do so to observe
the submissions made by the defendants, even though he could not address the
Court.
19. As was noted at paragraph 7 of the act of court
of 4th June, 2015, although Mr Holmes was debarred from appearing to
make submissions, I still had regard to his affidavit and skeleton argument
filed. I was also addressed by
Advocate Taylor on the merits of the application for around three hours. At the conclusion of the application,
judgment was reserved.
The Law
20. In Home Farm Developments Limited &
Another v Le Sueur [2014] JRC 131, an application where Mr Holmes was the
third plaintiff, I ruled that I could make an order for security for costs
against an individual resident plaintiff.
At paragraph 20 I stated:-
“However, it is a
jurisdiction that should be rarely exercised and which would require some
special or unusual circumstances.
The mere fact of impecuniosity is not enough. Something else taking the case out of
the ordinary and into the arena of special or unusual circumstances is
required.”
21. On the facts of that case I ordered Mr Holmes
to provide security for costs in the sum of £15,000. My reasons were for doing so were
recorded at paragraph 39 as follows:-
“Taking into account the lack
of financial information about the first and second plaintiffs which is in
possession of the third plaintiff, the lack of any financial information about
the third plaintiff, the lack of any real property in the Island in the name of
the third plaintiff, the ignoring of the costs order already made, the fact
that the plaintiffs’ claim has already been struck out as vexatious and
an abuse of process, and the weakness of the third plaintiff’s claim,
these factors in my view taken together are sufficiently unusual circumstances
to require in this case the third
plaintiff in the interests of justice to provide security for costs.”
22. I also note that, in a further application for
security for costs, reported at [2014] JRC 241, following on from the decision
reported at [2014] JRC 131, I refused to order further security for costs to be
provided by Mr Holmes, because, while a change of circumstances had occurred, I
was not satisfied that the change was so special or unusual to justify
increasing the amount I originally had ordered to be provided.
23. The sum of £15,000 was provided by Mr
Holmes. I refer to how this
occurred this later in this judgment.
24. In his skeleton argument Mr Holmes referred me
to Al-Koronky & Anor v Time-Life entertainment Group Limited & Anor
[2006] EWCA Civ 1123 a decision of the English Court of Appeal dated 28th
July, 2006. He relied on paragraphs
25, 26, 27, 30 and 31 of the judgment in support of his contention that he had
provided a satisfactory affidavit which demonstrated that he could not afford
to meet a security order and any such order would unfairly stifle his
claim. Advocate Taylor referred me
to paragraphs 28 and 29 of Al-Koronky. I therefore set out paragraphs 25 to 31
in full as follows:-
“25 A third principle, in our judgment, is that the
court must not order security in a sum which it knows the claimant cannot
afford. We will develop this below.
For the defendants, Adrienne Page
QC does not deny but seeks to qualify the principle. She submits that a claimant who chooses
to litigate extravagantly (as she submits these claimants are doing) cannot
complain if the security ordered is unaffordably high. In support she cites what Mance LJ (as he
then was) said in Nasser v United Bank of Kuwait, ante, §60:
“The new arrangements for
funding litigation certainly appear capable of throwing up possible imbalance,
in so far as they permit contingency fee arrangements with uplifts potentially
recoverable from losing defendants but enable claimants to pursue litigation
without insuring or securing the defendants' fees …”
26 We
will come later to the relevance of conditional fee agreements (CFAs), but we
do not consider that this passage has any bearing on the amount to be secured. The way to deal with extravagant
litigation is by the use of the court's case management powers, including the
striking out of unnecessary or unsustainable pleadings, the capping of costs
and the restriction of disclosure and evidence. Deliberately to require an unaffordable
amount of security as a separate way of disciplining a wayward claimant is to
transform security for costs into a means of striking out a claim without any
of the ordinary safeguards. In our
judgment the principle of affordability, if we may call it that, is not
qualified in the way Ms Page proposes.
27 This
said, it is both clear on authority and requisite in principle that a claimant
resident abroad who wants to ensure that any security he is required to put up
is within his means must be full and candid in setting out what his means are.
True, as Park J noted in Brimko Holdings v Eastman Kodak Co. [2004] EWHC 1343
(Ch), §12:
“… the court should not
press too far the proposition that the burden [of showing that an order in more
than a certain sum will stifle the claim] rests on the claimant. It should be
recalled that when the claimant has to establish that third parties do not
exist from whom security can reasonably [be] expected and obtained, that is to
place on the claimant the burden of proving a negative.”
But this does not relieve the court
of the need to scrutinise as much as it is told with a critical eye and to note
unexplained gaps in the information which the claimant volunteers or in the
documentary support for it. Unless the court were prepared to draw adverse inferences
from such lacunae, a claimant would have only to deny that he can find the sum
asked in order to avoid an order.
28 It
follows that the court, once satisfied that the case is one in which the
claimant ought to put up security for the defendant's costs before continuing
with his action, is going to find itself in one of two situations. Either it
will be satisfied that it probably has a full account of the resources
available to the claimant, in which case it can calculate with reasonable
confidence how much the claimant can afford to put up; or it will not be
satisfied that it has a full account, and so cannot make the calculation. Does
it follow in the latter situation that the court must go straight to the amount
sought by the defendant and, having pruned it of anything which appears
excessive or disproportionate, fix that as the security? Or is there a middle
way — for example to set an amount which represents the court's best
estimate of what the claimant, despite having been insufficiently candid, can
afford?
29 In
our judgment there is such a power, but it resides in the court's discretion
rather than in legal principle. In the second situation we have postulated, the
requirements of the law have been exhausted: what remains is to set a suitable
sum. This classically is where discretion fills the space left by judgment: the
court has a choice of courses, none of which it can be criticised for taking
provided it makes its election on a proper factual basis uninfluenced by
extraneous considerations.
30 We
agree with the submission of Mr Shaw for the claimants that article 6 of the
European Convention on Human Rights has a bearing on this issue, by virtue of
s.3(1) of the Human Rights Act 1998 which requires both primary and subordinate
legislation to be read and given effect, so far as possible, compatibly with
the Convention rights. In Tolstoy Miloslavsky v United Kingdom (1995) 20 EHRR
442, §59, the European Court of Human Rights held, what it has since
reiterated, that while the state has power to regulate access to its courts, it
must not do so in ways which “restrict or reduce the access left to the
individual in such a way or to such an extent that the very essence of the
right is impaired”. The court also insisted on “a reasonable
relationship of proportionality between the means employed and the aim sought
to be achieved”. The domestic obligation to read CPR 25.13 conformably
with the law of the Convention is met, we believe, by the approach taken in
this judgment and, in particular, by the principle that the court may not fix
security in what it knows to be an unaffordable amount.
31 It
is in the context of what we have said so far that, in our respectful view, the
judgment of Peter Gibson LJ in Keary Developments Ltd v Tarmac Construction Ltd
[1995] 3 All ER 534 , 539–40, and that of Potter LJ in Kufaan Publishing
Ltd v Al-Warrak Publishing Ltd (1 March 2002, unreported) , should be read.
There is a clear difference between incurring a substantial risk, in the
overall interests of justice, that a claimant will not be able to raise the sum
required as security, and setting a sum in the knowledge that he cannot do so.
The latter is tantamount to striking out his claim and requires the same
process and justification as any other strike-out. The former is the striking,
within the Convention paradigm, of a balance of the kind described in the two
judgments we have mentioned.”
25. It should be remembered in relation to Al-Koronky,
that this was a claim for security for costs against a plaintiff who resided out
of the jurisdiction. As in Jersey,
the defendant seeking security therefore had to establish any difficulty of
enforcement in Sudan (see Nasser v United Bank of Kuwait, ante [2001]
EWCA Civ 556). In Café de
Lecq v R. A. Rossborough (Insurance Brokers) Limited [2011] JLR 31 at
paragraph 20, the ability to require non-resident plaintiffs to provide
security for costs also is to be assessed an individual basis; this followed
the decision of the Court of Appeal in Leeds United Association Football
Club Limited v The Phone-In-Trading-Post (t/a Admatch) [2009] JLR 186 which
itself followed Nasser. The
overall approach taken Al-Koronky therefore is now followed in this
jurisdiction.
26. Where Al-Koronky is of assistance is in
defining the approach that should be taken to a assessing an affidavit of
financial circumstances provided by a plaintiff. The duty of the Court is to scrutinise
such an affidavit with a “critical eye” and note any unexplained
gaps in the information provided.
27. The observations in Al-Koronky also seem
to suggest at paragraph 28 that the issue of whether or not an affidavit
represents a full account only arises once the Court is satisfied that a
plaintiff ought to put up security.
28. However, I was also referred by Mr Holmes in
his skeleton and Advocate Taylor to the case of Olatawura v Abiloye
[2002] EWCA Civ 998 another decision of the English Court of Appeal. That judgment firstly noted at paragraph
22 as follows:-
“22 Before ordering security for costs in any
case (i e whether or not within CPR Pt 25 ) the court should be alert and
sensitive to the risk that by making such an order it may be denying the party
concerned the right of access to the court. Whether or not the person concerned
has (or can raise) the money will always be a prime consideration, not least
since article 6 of the European Convention for the Protection of Human Rights
and Fundamental Freedoms became incorporated into domestic law. Paradoxically,
of course, the more difficult it appears to be for the person concerned to
raise the money, the more obvious becomes the need for an order for security to
protect the other party against the risk of incurring irrecoverable costs. The
court will have to resolve that conundrum as best it may.”
29. Paragraphs 24 and 25 of the Olatawura
decision continue as follows:-
“24 Now, it is clear, the Court has an
altogether wider discretion to ensure that justice can be done in any
particular case. Obviously relevant considerations, besides the ability of the
person concerned to pay, will be (a) his conduct of the proceedings (including
in particular his compliance or otherwise with any applicable rule, practice
direction or protocol), and (b) the apparent strength of his case (be it claim
or defence). And these considerations, of course, are expressly reflected in
the new rules governing the court's power to order payment into court: rule
3.1(5) dealing expressly with compliance, rule 24 with the probabilities or
otherwise of success.
25 That,
however, is by no means to say that the court should ordinarily penalise
breaches of the rules and the like by making orders for payment into court
under rule 3.1(5). Quite the contrary. The one case drawn to our attention in
which this question has been considered-Buckley J's judgment in Mealey Horgan
plc v Horgan The Times, 6 July 1999, to which reference is made in paragraph
3.1.5 of Civil Procedure, Spring 2002, vol 1—held that it would be
inappropriate to order a defendant to give security as a penalty for failure to
serve witness statements in time when that had prejudiced neither the trial nor
the claimant. Buckley J suggested, however, that such an order might be
appropriate if
“there is a history of
repeated breach of timetables or of court orders or if there is something in
the conduct of the party which gives rise to suspicion that they may not be
bona fide and the court thinks the other side should have some financial
security or protection.”
That seems to me to point the way
admirably: a party only becomes amenable to an adverse order for security under
rule 3.1(5) (or perhaps 3.1(2)(m)) once he can be seen either to be regularly
flouting proper court procedures (which must inevitably inflate the costs of
the proceedings) or otherwise to be demonstrating a want of good faith-good
faith for this purpose consisting of a will to litigate a genuine claim or
defence as economically and expeditiously as reasonably possible in accordance
with the overriding objective.”
30. I regard these as helpful observations. Ultimately, in reaching a decision
whether not to order security for costs, whether in the circumstances
considered in Café de Lecq or whether in applying the exceptional
circumstance test applicable to residential individuals, I consider I am entitled
to take into account, in exercising the discretion vested in me, the extent to
which a plaintiff has provided a full account of his assets or whether there
are unexplained gaps. I consider
that the lack of any account goes not just to the amount of any security but is
also a factor that may be taken into account in deciding whether or not to
order security to be provided. This
because a lack of candour may well increase the need for an order for security
to protect a defendant. I also
regard it as artificial to separate out information about a plaintiff’s
means and criticisms of any such evidence from an analysis of any other factors
which can be taken into account in deciding whether or not to order security
for costs. As noted in paragraph 25
of Olatawura, I can take into account repeated breaches of timetables or
Court orders, and I am entitled to take into account something in the conduct
of a party which gives rise to a suspicion whether they are acting bona fide and the Court thinks the other
side should have some financial security or protection. I consider that, in deciding whether or
not to order security, this extract also justifies having regard to any lack of
candour in an affidavit of financial circumstances on a case by case basis. I stress in reaching this conclusion that
the test to order security for costs against a resident individual remains a
high one and requires exceptional circumstances to be established.
31. Finally, I refer to paragraph 40 of Café
de Lecq. Although security for
costs against a resident individual will only be ordered in exceptional
circumstances, the purpose of ordering such security is no different from where
security is ordered against companies or, non-residential individual. The purpose of ordering security as it
was put at paragraph 40 of Café de Lecq is “to give effect to the
underlying principle referred to in Keary that the interests of justice are
served if the unsuccessful litigant pays the costs of the successful litigant
or the bulk of them.”
The Parties’ contentions
32. In addition to the legal arguments deployed by
Mr Holmes referred to in the previous section of this judgment, Mr Holmes
contended, by reference to his affidavit sworn in opposition to the defendant’s
application, filed on 9th June, 2015, and sworn on 11th June,
2015, that he could not afford to meet any security order and such order would
unfairly stifle his claim. I
address later in this judgment Mr Holmes’ evidence of his financial
position.
33. Mr Holmes further contended that his present
want of means had been brought about by the conduct of Mr Lingard. At paragraph 17 of his affidavit Mr
Holmes deposed that it was “the
conduct of Mr Lingard for the period in and around September 2012 (the outbreak
of the dispute) through to October 2013, that in my view has inflicted the most
damage on my assets and in turn, my present want of means.” These specific elements of Mr
Lingard’s conduct that Mr Holmes complained about are set out in
paragraph 24 of affidavit and in summary are as follows:-
(i)
That Mr
Lingard would not provide an itemised redemption statement for repayment of his
alleged secured loans in respect of Unit 2 and Unit 5 of the Home Farm
Development.
(ii) Mr Lingard refused to lift secured charges for
the sale of Unit 5 despite his knowledge that 100% of the sale proceeds would
be delivered to the entity with a benefit of the first hypothec over Unit 5.
(iii) Mr Lingard made unsubstantiated demands for
repayment.
(iv) Mr Lingard interfered
with the sale of Unit 5. Mr Holmes
relied on affidavit from Mrs Geraldine O’Brien in support of this
assertion.
(v) Mr Lingard’s wider ulterior motive was to
instigate a foreclosure or bankruptcy on Home Farm to take Units 2 and 5 at a
distressed undervalue.
(vi) The consequence of Mr Lingard’s actions
led to sales at an undervalue of Units 2 and 5.
34. Advocate Taylor, in accepting that he was
required to show exceptional circumstances by reference to Home Farm v Le
Sueur referred to above, relied on the following matters.
35. Firstly, he relied on Mr Holmes’ conduct
referred to in the judgment of Commissioner Clyde-Smith on 29th October,
2014, reported at [2014] JRC 209.
Advocate Taylor contended that this was Mr Holmes dragging out payment
of the costs of £2971.70 that he was ordered to pay on 6th February,
2014. He referred me to Mr Holmes
failure to appear without justification on 29th October, 2014, as
the Royal Court found, and then seeking to further challenge the decision of 29th
October, 2014, by way of a purported appeal some eight months after the
decision, which application failed to address the inadequacies of medical
evidence provided on 29th October, 2015. This approach was systematic of Mr
Holmes’ attitude of not paying costs which indicated an abusive approach
to litigation.
36. I observe that this appeal was withdrawn,
albeit after the hearing before me, with the result that both the costs order
of 6th February, 2014, and the indemnity costs ordered as a result
of the October 2014 judgment will now be paid. These costs will be met out of an escrow
account in the name of Hanson Renouf representing the balance of the sale
proceeds of Unit 2 Home Farm. These
funds which were held in an escrow account, pursuant to arrangements made
between the then legal advisers acting for the parties. The total amount held in the escrow
account was £23,447.14.
37. Now the injunction has been discharged and
previous costs orders will be met, Advocate Taylor contends that the balance
held in the escrow account in the sum of £12,000 will be used to meet any
costs order made in his clients’ favour as a result of the injunction
being discharged. He contends it is
highly likely that such a costs order will be made, possibly on the indemnity
basis. Even if made on the standard
basis, his clients’ costs will exceed the sum of £12,000.
38. Mr Holmes’ approach to litigation,
according to Advocate Taylor, was further illustrated by Mr Holmes’
conduct in the litigation involving Mr Holmes and Mr Le Sueur. Although the security ordered was
provided, the basis of the decision at paragraph 39 of the judgment, set out
above, is a further example of Mr Holmes’ approach. Advocate Taylor also relied on my
decision to strike out the claim brought by Home Farm and Mr Holmes referred
to in the security for costs application and reported at [2014] JRC 079, upheld
by the Royal Court in its decision reported at [2015] JRC 110. Despite the clear judgement of the Royal
Court, Mr Holmes was seeking to challenge the Royal Court’s decision
before the Court of Appeal. Both my
judgement and the Royal Court judgment found that the claim by Home Farm
and Mr Holmes against Mr Le Sueur was scandalous, vexatious and an abuse of
process.
39. Advocate Taylor furthered relied on Mr
Holmes’ failure to pay the indemnity costs of £500.00. In his judgment this was not an
illustration that Mr Holmes could not pay, but rather was evidence that he
would not pay. Mr Holmes indicated
that he offered payment of this sum out of the escrow account referred to above
which was refused.
40. Turning to the merits, Advocate Taylor
contended that the first part of Mr Holmes’ claim against the defendants
was hopeless and bound to fail.
This was because this claim was based on the parties having entered into
an agreement dated June 2011, a copy of which was annexed to Mr Holmes’
order of justice. However, in an
affidavit filed by Advocate Daniel Young dated 24th February, 2015,
Advocate Young exhibited to his affidavit a series of slightly different heads
of terms some of which had manuscript comments on. Advocate Young also deposed that he had
drafted an agreement circulated for discussion on 1st August, 2011,
and which contained various gaps where agreement was required. Advocate Young therefore deposed that to
be best of his knowledge no agreement was ever entered into.
41. The agreement relied upon by Mr Holmes, at
paragraph 6(a), made reference to planning permission dated 1st September,
2011. Advocate Taylor therefore
argued that if the agreement had been entered into in June 2011, as alleged by
Mr Holmes, it was difficult to understand how it could have referred to
planning permission issued some three months later.
42. Advocate Taylor further referred me to a letter
written by Mr Holmes dated 6th December, 2011, putting forward
proposals for providing consultancy project management and contracting services
for the development of the Hotel La Tour site. Such an approach was said not to be
consistent with a part exchange/profit share agreement for the development of the
hotel alleged to have been reached some five months earlier.
43. I was also referred to an email dated 2nd
October, 2011, exhibited to Mr Lingard’s affidavit sworn on 25th
February, 2015, in support of the application to discharge the injunction
obtained by Mr Holmes. That email
indicated that the parties were in negotiation and specifically stated that all
documents were to be approved by Messrs Bois Bois. Again this was inconsistent with an
agreement reached in June 2011.
44. Advocate Taylor further relied on an email from
Mr Holmes to Mr Lingard dated 24th November, 2011, containing a fee
proposal which was also inconsistent with the June agreement as pleaded by Mr
Holmes.
45. Annexed at page 169 to Mr Lingard’s
affidavit was exhibited an equity statement produced by Mr Holmes dated 24th
October, 2012, which recorded that the fees for consultancy and directors
instead of a profit share should be £70,000. This was again inconsistent with the
claim in the order of justice for £190,000.
46. All these matters lead to the injunctions being
discharged, with the Court refusing to re-impose the same because it was not
seriously arguable that an agreement had been entered into in June 2011.
47. In respect of sales of units at Home Farm,
which it is alleged that Mr Lingard interfered with, Advocate Taylor relied
firstly on the point that this was a claim vested in Home Farm and not Mr
Holmes. He had not applied to
strike out this part of the claim because the defendants had taken the view
that any such decision would be appealed and therefore it was better just to
proceed to trial and have the matter resolved.
48. Furthermore, Unit 1 was sold in June 2012 i.e.
before any dispute on the plaintiff’s own case had arisen. The complaints about misrepresentation,
referred to at paragraphs 42 and 43 of the order of justice, only occurred in
or around October 2012.
49. In relation to the sale of Unit 5, Mrs
O’Brien’s evidence did not help because at paragraph 11 she deposed
that the buyers “withdraw their
offer on Unit 5 because of concerns that Home Farm was in financial difficulty,
and would be unable to honour any guarantee and warrantee for their new build
works”. On Mr
Holmes’ own evidence therefore there was no evidence that the buyers
withdrew on the basis of anything Mr Lingard had stated. No evidence was adduced by Mr Holmes in
respect of the sale of Unit 2 and the order of justice did not contain any
particulars of the circumstances in which any misrepresentations were made.
50. Advocate Taylor also produced advertisements
from Thompson’s Estate Agents showing Unit 5 being offered for sale at a
price of £650,000 and Unit 2 for £675,000. This could only have been authorised by
Mr Holmes. While his claim is based
on the difference in value between CBRE valuations (pages 33-35 of exhibit SK1)
of £917,550 for Unit 2 and £794,500 for Unit 5, it could only have
been Mr Holmes who authorised the advertisements through Thompsons at the
prices referred to above. The claim
was therefore overstated.
51. Advocate Taylor further relied on the discharge
of the injunction. To discharge and
not impose the injunction was a serious matter and costs consequences were
likely to follow. The discharge of
the injunction further pointed to reasons why exceptional circumstances
existed.
52. He further relied on delay. While proceedings were commenced in
2014, after the filing of a reply, no further steps had been taken in the
proceedings. Other than the
arguments about costs leading to the October 2014 judgment, the plaintiff had
not taken steps to drive matters forward and had offered no justification for
his failure to do so.
53. In relation to the adequacy of Mr Holmes’
affidavit and his financial position, Advocate Taylor relied on the following:-
(i)
Firstly,
he criticized Mr Holmes for failing to deal with properties in which he may
have had an interest. At paragraph
28 of Mr Holmes’s affidavit he referred to his former residence Property
A, which at paragraph 32 he explains was sold in December 2013, which he
alleges was at an undervalue. At
paragraph 34 following the sale of Property A Mr Holmes deposed that he no
longer owned any property on the Island.
However in his affidavit he exhibited at page 1 a letter from the Acting
Bâtonnier dated 26th June, 2014, was addressed Mr Holmes at Property
B. From the Public Registry, it
appears that this property is where Mr Holmes’ parents reside and is
owned by his mother. Mr. Holmes
failed to explain this position and whether he has any interest in Property B
or why he was using this property as an address.
(ii) Secondly, at times Mr Holmes corresponded from
an address we shall call Property C.
This was not explained.
(iii) Thirdly, Mr Holmes’ address by reference
to his affidavit is c/o Property D.
No explanation was offered as to whether this was his property or to
explain his ability to live in this property.
(iv) At page 56 of exhibit SH1 is an extract from an
account in the name of Mr Holmes at Bank A. On 19th and 20th December,
2013, Mr Holmes transferred the sum of £3333.00 to an estate agents; on
20th December, 2013, he transferred £20,000 to the same agent and
on 24th December, 2013, a further £10,000. At paragraph 36(i) of his affidavit he
explained that these payments were for up front rentals. No explanation was provided as to what
property was being rented and why up front rental was being paid. Mr Holmes did explain at paragraph 36(v)
of his affidavit the sum of £20,089.06 was the return of up front rental
referred at paragraph 36(i) following his cancellation of the lease. However, no explanation was provided by
Mr Holmes in respect of this lease, how long it was intended to be for, or why
it was cancelled.
(v) Advocate Taylor also indicated that Mr Holmes
had not explained what had happened to the surplus sale proceeds made on the
sale of Property E. By reference to
page 27 of exhibit SH1, the sum of £161,970.85 was transferred to Bank B. It was not clear whether this was to a
personal account in the name of Mr Holmes, or in respect of the discharge of
some other indebtedness to Bank B.
No explanation has been forthcoming as to what happened to this money.
(vi) Also in respect of the completion statement of Property
E, out of the proceeds of sale, £362,858.25 was paid to Bois Bois in
respect of Property F in December 2010.
No explanation was contained in the affidavit as to why Bois Bois were
paid this sum, what it related to and what became of it. I observe that it is matter of public
record that Mr Holmes acquired Property F in December 2010 for £355,000
which property he sold in June 2011 for £356,000. On 2nd February, 2011, the
sum of £412,500 was borrowed by Mr Holmes from Company A secured against Property
F. The registration of this charge
was cancelled on 30th June, 2011, which leads to the inference that
the borrowing was repaid. As Property
F was acquired out of cash paid to Bois Bois, the Court observes that no
explanation was given as to what happened to the sum of £412,500 borrowed
in February 2011, how this sum came to be repaid and whether it was repaid out
of the proceeds of sale of Property F or from another source.
(vii) In respect of a financial statement produced in
respect of Property E by Mr Holmes exhibited at page 25 OF SH1, the balance due
in respect of the sale of Property E was said to be £524829.10. This appears roughly equated to the
payment in respect of Property F and the sums sent to Bank B but neither of
these matters were explained or what has become to them. It is right to observe that Mr Holmes
did have a facility with Bank B exhibited at pages 48 to 53 of SG1 at a rate of
2% per quarter and Property A was not sold until December 2013. It may be the payment to Bank B
therefore represents interest on the facility, but no evidence was produced to
explain the position.
(viii) In relation to the account records produced by
Mr Holmes of an account at bank A at pages 73 to 95 of exhibit SH1, Advocate
Taylor was critical that these accounts are only from December 2013 to
September 2014. They do not explain
the basis upon which Mr Holmes has been living since then.
(ix) In respect of this account Advocate Taylor drew
my attention to the following:-
(a) A payment £1,000 was made to Miss G on 18th
December, 2013, and a further payment of £2,000 was made to Miss G on 23rd
December, 2013. These payments are
not explained.
(b) A payment was made to School 1 for school fees on
23rd December, 2013, for £3,495.75. It was not clear whether this
represented past or future school fees or how school fees since then are now
being met. The position was unexplained.
(c) The payment of £3,333.33 to H on 19th
December, 2013, was not explained.
(d) The transfer of £13,333.33 on 24th
December, 2013, was not explained.
It was not clear who this transfer was to or the reasons why the payment
was being made.
(e) On 30th December, 2013, by standing
order, £1,144.20 was paid to J.
Again this was not explained and neither was a similar payment made to J
on 30th January, 2014.
(f)
On 7th
January, 2015, £3,500.00 was paid to K. This payment was not explained.
(g) On pages 61 and 62 the sums of £2,000
were paid to Mr and Mrs O on 14th and 17th January,
2014. These payments are not
explained.
(h) On page 62 £2,000 was paid to a Mr L. This is also not explained.
(i)
Two
further payments were made to Miss G of £4,000 and £1,000 on 28th
April, 2014. Again the rationale
for these payments is not explained.
(j)
On or
around 28th May, 2014, Mr Holmes’ bank account was credited
with a payment of £10,000.
This appeared to be a private loan from M. Looking at the address of the letter of
11th May, 2015, it is from Property N. M based on the information in the Public
Registry appears to be a relative of Mr Holmes, and appears to own Property N
but again this not explained.
(k) On 10th July, 2014, (page 83 of SH1)
£15,000 was paid to the Judicial Greffe. This appeared to be to meet the security
for costs orders I made in the action brought by Home Farm against Mr Le
Sueur. The source of these funds
appears to have been the monies returned by way of rent on 27th June,
2014, referred to above.
(l)
The credit
of £3,689.34 (page 84 of SH1) headed described as a refund in advance was
not explained.
(m) The credits of £1500 on 2nd September,
2014, and £1,924.04 on 16th September, 2014, at page 92 of SH1
are also unexplained. These
unexplained credits according to Advocate Taylor meant that Mr Holmes can
borrow money and appears to have access to funds.
54. In respect of what was revealed by the bank
statements, ultimately, according to Advocate Taylor, they left a lot of
questions unanswered and certainly did not explain Mr Holmes’ current
financial position.
55. In conclusion Advocate Taylor contended that it
was the combination of all the circumstances he relied on that amounted to
exceptional circumstances to justify security for costs being ordered.
Decision
56. In reaching my decision, I have had regard to
the fact that some special or unusual circumstances are required to justify an
order for security for costs against an individual resident plaintiff, and that
such a jurisdiction should be rarely exercised. The mere impecuniosity of an individual
is not enough.
57. Turning first to the merits of the claims
brought by Mr Holmes, I agree that these are weak. As Commissioner Clyde-Smith noted in the
judgment discharging the injunction handed down on 29th June, 2015,
at paragraph 28, there does not appear to be a serious issue to be tried in
respect Mr Holmes’ reliance on an agreement entered into in June
2011.
58. However, the remedy for this reliance would appear
to be an application to strike out the relevant parts of the order of
justice. Yet the defendants have
elected not to do so. Instead, they
have elected to proceed to trial and seek for security for costs as a result. This was addressed at paragraph 26 of
the Al-Koronky judgment where the English Court of Appeal stated as
follows:-
“The way to deal with
extravagant litigation is by the use of the court's case management powers,
including the striking out of unnecessary or unsustainable
pleadings…”
The Court continued:-
“Deliberately to require an
unaffordable amount of security as a separate way of disciplining a wayward
claimant is to transform security for costs into a means of striking out a
claim without any of the ordinary safeguards.”
59. These observations summarise what Advocate
Taylor was trying to do by his criticisms of the claim based on the June 2011
agreement as a ground to justify security for costs. Insofar as any claims brought by Mr
Holmes are capable of being struck out, then that is the route the defendants
should adopt. It is not therefore
appropriate to rely on the fact that a cause of action might be struck out to
require security for costs.
60. The second aspect of Mr Holmes’ claim
that is said to be weak relates to what misrepresentations were made, by Mr
Lingard. The evidence produced in
relation to this issue concerns the affidavit of Mrs O’Brien. However, for the reasons advanced by
Advocate Taylor, at paragraph 11 of her affidavit, as set out above, the
reasons the potential purchasers did not proceed related to the financial uncertainties
surrounding Home Farm and not because of any actions on the part of Mr
Lingard. For this claim to succeed
other evidence would need to be adduced and the allegations particularised to
show that Mr Lingard made misrepresentations as alleged and that purchasers
pulled out as a result of such misrepresentations. The rest of Mrs O’Brien’s
evidence merely shows that Mr Lingard called her. At present there are no particulars or
no allegations that he called purchasers or acted in such a way to prevent
sales taking place. Ultimately this
will be a matter for trial but I agree there is a lack of detail or evidence in
support of this part of Mr Holmes’ claim.
61. The other aspect of the claim that appears to
be weak concerns what losses were suffered. I agree with Advocate Taylor that no
losses can be said to have been suffered in relation to the sale of Unit 1, due
to Mr Lingard’s conduct because this sale occurred some three months
before any breakdown of the relationship which is the basis of Mr Holmes’
claim. There are also problems with
the losses in respect of the sales in relation to Units 2 and 5 because the
prices at which these were offered for sale was significantly below the CBRE
valuations relied on by Mr Holmes.
It can only be Mr Holmes who authorised the properties to be marketed at
these prices. There is no
suggestion in the pleadings that the marketing of these properties at lower
prices was due to the conduct of Mr Lingard. The losses therefore in respect of Unit
1 do not appear to be recoverable and any losses in respect of Units 2 and 5,
assuming liability is established, based on the materials provided to me,
appear to be difficult to sustain at the levels claimed in light of the fact
that it was Mr Holmes who had chosen offer these properties for sale at lower
prices, than the CBRE valuations.
While this may lead to some loss, it does not appear to be as great as
the loss claimed in the order of justice.
It is in that regard that the amounts claimed seem to be weak.
62. In relation to Mr Holmes’ financial
position more generally, compared to the Le Sueur case more information
has been provided about his financial position. In respect of the Home Farm Development
it appears that this ended up making a loss (see page 25 of exhibit SH1 of Mr
Holmes’ affidavit sworn on 11th June, 2015). Mr Holmes also sold Property A for a
price close to the borrowing from Bank B and any surplus has since been
spent. However, Advocate Taylor was
critical of the lack of information as to the payment to Bois Bois in respect
of PropertyF and what this related to.
Based on information publically available, Mr Holmes either had the
benefit of the proceeds of sale of Property F in 2011, which was a cash
purchase, or had the benefit of borrowings from Company A. His affidavit does not explain what
happened to these monies.
63. It is also around this time that Mr Holmes
started to have some involvement with Mr Lingard in respect of Hotel La
Tour. I refer to some involvement
because I agree with the observations of Commissioner Clyde-Smith at paragraph
27 of the judgment discharging the injunctions dated 29th June, 2015,
that there appear to have been some dealings between Mr Holmes and Mr Lingard,
albeit not on the basis of the June 2011 agreement.
64. It was also in June 2011 that Mr Holmes
acquired Trident Nurseries (see Mayhew & Holmes Limited v Bois Bois [2015]
JRC 118). It may therefore be that
any monies in respect of Property F ended up either in Hotel La Tour in some
way or in the Trident Nurseries project.
This project too was unsuccessful.
However, this is as far as I can go because beyond making the statement
that he no longer has any real property, Mr Homes has not explained what
happened in respect of these transactions or any monies he may have invested in
them.
65. No explanations have been offered about the
payment of £161,970.85 to Bank B for Mr Holmes paid on 15th December,
2010. It maybe that this payment
related to borrowings from Bank B secured over Property A but the position is
not clear.
66. There are also unexplained financial payments
as set out in Advocate Taylor’s submissions, which I have recorded
above.
67. What I conclude in relation to Mr Holmes’
financial position, is that I have not received the full story. I have also not been told anything about
his financial position since the end of September 2014. While Mr Holmes has explained that his
whole time is spent conducting litigation, no information has been provided
about how he is living from day to day.
He has not indicated whether he is on income support or provided any up
to date bank accounts. I am
therefore left in the position of there being unexplained gaps. While this is relevant to the quantum of
any security ordered, the lack of full information I consider is also a factor
I can take into account in deciding whether or not to order security at
all. This is why the extent to
which the lack of information about a plaintiff’s means is a matter of
discretion. The lack of any
information, in particular when taken with other factors as occurred in Le
Sueur, or supplying information that is known to be untrue points towards
security being ordered. Providing
some information but which is not complete is not on the same scale but still
can be taken into account in deciding whether or not to order security.
68. In relation to the factors relied upon by
Advocate Taylor concerning Mr Holmes’ approach to litigation, Advocate
Taylor firstly relied on the fact that the injunction was discharged. However, in my judgment care needs to be
taken here. This is because costs
consequences are likely to follow the discharge of an injunction. It is not uncommon for indemnity costs
to be imposed as a consequence of an injunction having been found to be wrongly
granted, in particular either for seeking an injunction where notice should
have been given, or where material non-disclosure has occurred. I observe that in Goldtron v Most
Investment Limited & Ors [2002] JLR 424, referred to in the
Commissioner’s decision to discharge the injunction, that indemnity costs
were ordered. Care needs to be
taken that an additional penalty of ordering security for costs is not imposed,
which might overlap with any penalty imposed by the Royal Court in costs.
69. Advocate Taylor relies on the injunction
proceedings as being illustrative of an approach to litigation. That approach to litigation was
reflected by Mr Holmes’ approach to costs as recorded in the October 2014
judgment. Advocate Taylor argues
that the approach to the injunction and the approach to costs are indicative of
an approach to litigation which involves unnecessary costs being incurred for a
defendant. The fact that Mr Holmes
has now resolved issues referred to in the October 2014 judgment by a payment
has only occurred late in the day and at the Court door of a further hearing. He also referred to not paying
£500. I do not regard this
sum as significant in the scheme of what is sought.
70. He further links this submission to the delays
that have occurred in the present case and the approach taken in the Le
Sueur litigation where the claim was found to be vexatious and struck out
both by me and by the Royal Court, and that this decision is to be appealed
further. However the security
ordered was provided. Advocate
Taylor also referred to the delay recorded in the claim brought by Mr Holmes
against Bois Bois which proceedings were also started and not pursued, although
they were not struck out (see [2015] JLR 118).
71. Looking at all these matters taken together is
indicative of an approach to litigation which involves issuing unmeritorious or
weak claims, which are not then pursued in line with the Court’s
expectations, where costs orders are challenged and only dealt with at the
eleventh hour, all of which is designed to put pressure on any defendant
pursued by Mr Holmes. Frequently
interlocutory orders are also appealed.
When taking into account the incomplete information about Mr
Holmes’ financial position, Advocate Taylor’s clients have real
concern for concern that any costs order in their favour at trial will simply
not be met. The escrow account will
be exhausted by any costs order made as result of discharging the injunction,
whether on a standard basis order or an indemnity basis.
72. Against these submissions which have force, it
is right to remind myself that there are other options available to the
defendant. Unmeritorious claims can
be struck out as I have noted above.
If costs orders made during proceedings are not paid, then a claim can
be stayed and ultimately struck out for non-payment. There are also remedies for delay. In the present action, although no steps
have been taken since Mr Holmes filed a reply, in response to the application
for security for costs, Mr Holmes did issue a summons for directions which is
indicative of an attitude of looking to progress proceedings. There are also remedies for dealing with
vexatious litigants -see Eves & Anor v Hambros Bank (Jersey) Limited
[2000] JLR 221 and [2001] JLR 499 and The Vexatious Litigants (Jersey) Law
2001. Security for costs for appeals to the Court of Appeal can also be
ordered.
73. I also remind myself that in the Le Sueur
case [2014] JRC 131, Mr Holmes deliberately chose not to provide information
about the first or second defendants which was under his control, or about his
own position, that he did not own any real property in the Island, that he had
not paid a costs order already made at that time and that the security for
costs was sought in respect of an action already struck out as vexatious and an
abuse of process.
74. The present claims by contrast are weak but,
other than relying on the June 2011 agreement, are not vexatious although there
may be difficulties in relation to them both as to liability and quantum. The outstanding costs orders have been
met and there is a willingness on the part of Mr Holmes to pursue matters to
trial. Some information about Mr
Holmes’ financial position has been forthcoming albeit it is not
complete. There are also remedies
in particular a strike out application available to the defendants to address
the specific issues complained of in relation to the June 2011 agreement as
pleaded in the order of justice.
75. In exercising the discretion vested in me, I
return to where I started in respect of this section of the judgment. The jurisdiction is one that should be
rarely exercised and requires some special or unusual circumstances. Ultimately the question comes down to
this. Should a plaintiff who brings
a weak claim and who is difficult in the sense of resisting interlocutory
applications and appealing decisions made against him, who does not progress
actions in accordance with the timetable expected by the Court and who at times
delays paying costs orders, be required to put up security for costs in respect
of future difficulties a defendant might face.
76. I accept that Mr Holmes is a difficult litigant
in the sense complained of. In
addition he has not been clear about his financial position, in particular in
respect of developments he became involved with. However, these developments do appear
ultimately to have lost money and have not been successful. This points towards Mr Holmes being
impecunious; this is not a basis to order security for costs. I have therefore reached the conclusion
that something more is required than being a difficult opponent with a weak
case and one who appears to be impecunious, as best as I can assess it, even if
he his evidence about all aspects of his financial position is not complete. There are many cases where a plaintiff is
difficult, does not have a strong case and who is of limited means. I am not therefore persuaded that these
matters amount to special or unusual circumstances even though I do not have a
full financial picture. In my
judgment, in exercising the discretion vested in me, I consider that, at
present, this action should not be looked at on the same basis as my decision
in Le Sueur. While this is a
case that is close to the line of ordering security, as matters stand, I am not
persuaded that the case has crossed the line which requires the rare
jurisdiction vested in me to be exercised in the defendants’ favour. Accordingly, I refuse the application.
77. Had I resolved to order security, I would only
have done so up to completion of witness statements and expert evidence and not
up to trial. I would have been
concerned that the figure claimed to trial of £50,000 would have stifled
the plaintiff’s claim. The
overall sum I would have allowed for the tasks up to and including expert
evidence based on the information provided by Advocate Taylor would have been
£9,000, which represents a reduction of around £4,000 from the
amounts claimed. In light of the
fact that Mr Holmes’ affidavit was not complete for the reasons set out
above, I would not have accepted his contention that ordering payment of
security of this sum would have stifled his claim.
Authorities
Home
Farm Dev-v-HJL Holdings and Lingard [2014] JRC 209.
Al-Koronky &
Anor v Time-Life entertainment Group Limited & Anor [2006] EWCA Civ
1123.
Leeds
United Association Football Club Limited v The Phone-In-Trading-Post (t/a
Admatch) [2009] JLR 186.
Eves
& Anor v Hambros Bank (Jersey) Limited [2000] JLR 221.
Eves
& Anor v Hambros bank (Jersey) Limited [2001] JLR 499.
Goldtron
v Most Investment Limited & Ors [2002] JLR 424
Café
de Lecq v R. A. Rossborough (Insurance Brokers) Limited [2011] JLR 31.
Home
Farm Developments Limited & Another v Le Sueur [2014] JRC 131.
The Vexatious Litigants (Jersey) Law
2001.
Nasser v United
Bank of Kuwait, ante [2001] EWCA Civ 556.
Olatawura v
Abiloye [2002] EWCA Civ 998.