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England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Tyndaris v MMWWVWM Ltd  EWHC 778 (Comm) (22 April 2020)
Cite as:  EWHC 778 (Comm)
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QUEEN'S BENCH DIVISION
Fetter Lane, London, EC4A 1NL
B e f o r e :
| TYNDARIS, SAM
- and -
Joe Smouha QC and Jeremy Brier (instructed by Bryan Cave Leighton Paisner LLP) for the Defendant
Hearing dates: 27 March 2020
Crown Copyright ©
Covid-19 Protocol: This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to Bailii. The date and time for hand-down is deemed to be 10:30 on 22nd April 2020.
Mrs Justice Moulder :
i) the application of the defendant dated 25 February 2020 for an order that unless the claimant pays the final instalment of security for costs in accordance with the order of Knowles J dated 22 March 2019 (the "March Order"), the claim in these proceedings should be struck out (the "Application for an Unless Order"); and
ii) the application of the claimant dated 6 March 2020 (the "Variation Application") to vary the March Order and reduce the total amount of security for costs ordered by Knowles J to the sum that it has already paid into court.
"The claimant had hoped to secure funding to make the payment referred to at paragraph 1d of the [March Order] (the "Security Payment") but it became apparent during the course of this week that that would not be possible. Accordingly, the claimant has not made the Security Payment today and it does not anticipate being in a position to do so in the immediate future."
Application for an Unless Order
i) in relation to the extent of the counterclaim; and
ii) in relation to the financial situation of Tyndaris.
In relation to the latter it was submitted for the claimant that, had the financial situation prevailed at the date of the March Order, a different order would have been made as the court will not make an order for security for costs that a claimant cannot comply with and where the effect would be to stifle a good claim.
i) It is for the claimant to establish on the balance of probabilities that the payment would stifle the claim; the defendant cannot establish matters relating to the reality of the claimant's financial position of which he probably knows little: Goldtrail at .
ii) Even when the claimant appears to have no realisable assets of its own a condition for payment will not stifle the claim if it can raise the required sum. The court must be cautious when a defendant suggests that the claimant can raise money from its controlling shareholder - the shareholder's distinct legal personality must be respected and the question should always be can the company raise the money (Goldtrail at ).
iii) Where the claimant refutes the suggestion that the necessary funds would be made available by the owner, the court should not take the refutation at face value; it should judge the probable availability of the funds by reference to the underlying realities of the company's financial position and by reference to all aspects of its relationship with its owner including the extent to which it is directing its affairs and is supporting and has supported it in financial terms (Goldtrail at ).
"a third party had indicated to me and to Mr Schwartz on several occasions that as a former director of the claimant, he would be willing [to] fund the payment. I therefore believed that the payment could be made."
He then states that such funding was not received nor was any confirmation that payment would be forthcoming from the third party.
"Nor is it reasonable to expect the directors to provide such funding even if they could do so."
"44. The judge treated the principles in Mitchell as "relevant and important" even though the question in this case was whether to impose the sanction of a strike-out for non-compliance with a court order, not whether to grant relief under CPR rule 3.9 from an existing sanction. In my judgment, that was the correct approach. The factors referred to in rule 3.9 , including in particular the need to enforce compliance with court orders, are reflected in the overriding objective in rule 1.1 to which the court must seek to give effect in exercising its power in relation to an application under rule 3.4 to strike out for non-compliance with a court order. The Mitchell principles, as now restated in Denton , have a direct bearing on such an issue. It must be stressed, however, that the ultimate question for the court in deciding whether to impose the sanction of strike-out is materially different from that in deciding whether to grant relief from a sanction that has already been imposed. In a strike-out application under rule 3.4 the proportionality of the sanction itself is in issue, whereas an application under rule 3.9 for relief from sanction has to proceed on the basis that the sanction was properly imposed (see Mitchell paragraphs 44-45). The importance of that distinction is particularly obvious where the sanction being sought is as fundamental as a strike-out. Mr Buckpitt drew our attention to the recent decision of the Supreme Court in HRH Prince Abdulaziz Bin Mishal Bin Abdulaziz Al Saud v Apex Global Management Ltd  UKSC 64 , at paragraph 16, where Lord Neuberger quoted with evident approval the observation of the first instance judge that "the striking out of a statement of case is one of the most powerful weapons in the court's case management armoury and should not be deployed unless its consequences can be justified"."
i) given the much larger and complex counterclaim the trial will proceed in any event; the factual and expert evidence has been completed and the witnesses will attend in any event;
ii) Tyndaris has already provided security in the amount of $487,500;
iii) $1.4 million of the claim is admitted to be due (subject to set off under the counterclaim);
iv) this is not a deliberate breach.
i) I have found that the claimant has not established on the evidence that the payment of the outstanding amount will stifle the claim;
ii) whilst there has been partial compliance in the sense that three of the four staged payments have been made, the amount which remains outstanding by reference to the total amount which Knowles J determined was appropriate in the circumstances is of such size as to be significant. To allow the claim to proceed on the lesser amount of security would reduce the security for the costs of the claim from the $750,000 determined by Knowles J to be appropriate to a sum of only $487,500 against an approved budget (in relation to the claim) of approximately $900,000;
iii) whilst I accept that the trial of the counterclaim will go ahead in any event, this is not a valid reason why the defendant should now have to accept a significantly lower amount by way of security for the costs of the claim than previously determined by Knowles J and the fact that the trial will go ahead is not a sufficient justification not to give effect to the March Order.