WHEN A PARTY FAILS TO PAY INTERLOCUTORY COSTS: MAKE A PEREMPTORY ORDER

In Peak Hotels -v- Tarek Investments Ltd [2016] EWHC 690 (Ch) Mrs Justice Asplin considered the appropriate approach when a party  has failed to pay an interlocutory costs order.  There is a succinct summary of the relevant case law.

“If the court is not in a position to enforce immediate interlocutory orders for the payment of costs which it was thought right to make, then the force of that sanction is seriously undermined.”

KEY POINTS

  • In many cases it is appropriate to enforce an unpaid  interlocutory costs order  by making a peremptory order.
  • In this case the evidence was that the party ordered to pay could pay the costs, would not be shut out from litigating and a peremptory order was made.

THE CASE

The third Part 29 defendant (Mr Amanat) had an order for costs made him in the sum of £40,000. That sum had been outstanding for some time. The time was payment was extended twice,  on the later occasion to the 18th March. On the 23rd March the defendants who were due to be paid the costs made an an application for a peremptory order unless costs were paid by 12.00 pm the following day.

THE JUDGMENT
  1. Today, Mr Brindle, who appears on behalf of the Sherway defendants, has, nevertheless, sought an unless order to take effect, if the £40,000 is not paid by 12 noon tomorrow, 24 March, which is also Maundy Thursday and falls immediately before the lengthy bank holiday period. In that regard, he says that there is no reason now not to make an order of this kind and that it is consistent with the overriding objective that matters are dealt with justly, proportionately and that also the orders of the court are enforced and, that it should be clear, that there must be compliance with them.
  2. In particular, Mr Brindle referred me to the decision of the Court of Appeal in Crystal Decisions UK Limited and Others v Vedatech Corporation & Another, the citation of which is [2008] EWCA Civ 848, and, in particular, to passages from the judgment of Sir John Chadwick in that case.
  3. It was a case in which the amount of the costs outstanding in relation to orders relating to the interlocutory applications amounted to £15,600 in aggregate and the claim, itself, was worth in the order of $970,000. In particular, I was referred to paragraphs 17 and 18 of Sir John Chadwick’s judgment.
  4. At paragraph 17, he says:
“But thirdly, and to my mind most importantly, the court’s ability to make interlocutory costs orders following, in particular, the access to justice reforms in 1998 is a sanction which is available to it in order to encourage responsible litigation. The court marks what it regards as an irresponsible application by an immediate order for the payment of costs. That is intended to bring home to a party, when considering whether to make an application, that an unsuccessful application may carry a price, which will have to be paid at once. If the court is not in a position to enforce immediate interlocutory orders for the payment of costs which it was thought right to make, then the force of that sanction is seriously undermined. It is important that, in cases where the court thinks it right to make an order for immediate payment on an interlocutory application, it does have the power and can exercise the power to ensure that the order is met. For the reasons which Patten J explained, the only effective sanction in a case of this nature is to require payment of interlocutory costs as the price of being allowed to continue to contest the proceedings. Unless the party against whom an order for costs is made is prepared to or can be compelled to comply with that order, the order might just as well not be made.”
  1. He went on, at paragraph 18, to quote a paragraph from the learned judge’s decision, but then went on:
For my part, I would hold that, whether or not a statement in such general terms can be supported, the proposition can be supported in a case such as the present where there is no other effective way of ensuring that the interim costs order is satisfied. That, of course, is always subject to what the judge referred to as the overwhelming consideration falling within article 6, that orders requiring payment of costs as a condition of proceeding with litigation are not made in circumstances where to enforce such an order would drive a party from access to justice, but for reasons which the judge explained, and to which I have already referred, this is not such a case.”
  1. In this case, it is said that Mr Amanat has had much opportunity to pay this sum and that, on his own evidence before this court, he is an extremely wealthy man and that, therefore, the £40,000 should in fact cause him little difficulty.
  2. There have also been numerous other failures and breaches of court orders along the way.
  3. I was specifically referred to what is said to be Mr Amanat’s long history of not paying debts and the fact that in an application in these proceedings Henderson J found that he had been found in the United States to be a blatant fraudster. It is also drawn to my attention that it is said that Mr Amanat deliberately misled this court in the current proceedings when the Sherway defendants applied for security for costs. Mr Amanat caused PHRL’s solicitors to provide evidence to the court that PHRL held $35 million of Treasury bonds and it turned out in fact that that evidence was false and was based on letters written to PHRL on Mr Amanat’s instructions.
  4. It is also said that the evidence now produced by Mr Amanat also demonstrates that the $50 million lent to PHRL by Sherway, which is the central issue remaining in this case, was immediately transferred to another company under Mr Amanat’s control, Peak Venture Partners LLC. The main remaining claim in this part of the action relates to a guarantee in relation to those sums.
  5. I was also taken to the history of non-compliance with orders in the current proceedings. It was drawn to my attention that Mr Amanat provided his questionnaire and disclosure reports five months late. The disclosure given by Mr Amanat on 14 August 2014 was incomplete. He did not provide the additional disclosure that was required until December 2015, when an application had been threatened.
  6. Mr Amanat failed to serve his witness statements for trial by 26 February of this year, as required by an order that I made on 17 February, and was forced at the PTR to seek a further extension of time, until tomorrow, 24 March. Mr Brindle says that his clients and his solicitors await events to see whether in fact those witness statements are served.
  7. In relation to the order for payment of the £40,000 with which this application is concerned, as I have already said, Mr Amanat was originally granted just over two weeks, to 4 March, to pay those sums and failed to do so and failed to give an excuse in that regard. Nevertheless, I extended that period at the PTR to 18 March, the date which had been offered by Mr Amanat, himself.
  8. However, in the correspondence which has emanated from his solicitors in the last few days, no explanation is given as to why the deadline of 18 March passed and the sum of £40,000 was not paid.
  9. It is now said in further correspondence, in fact it is a letter of 22 March, that Mr Amanat is seeking a loan in relation to the costs of the litigation as a whole, including this £40,000; that although there is much progress in that regard, there remain outstanding steps, including those which are out of the control of Mr Amanat and his advisers.
  10. It is, nevertheless, suggested in that letter that, although there is a risk that the deadline would not be complied with, 4 pm tomorrow, 24 March, should be set as the time at which the £40,000 should eventually be paid.
  11. It is said, therefore, that there is no question here that Mr Amanat may be unable to pay these costs. That is contrary to his own evidence before this court. However in the letter it is suggested that he is seeking to raise funds because his assets are illiquid.
  12. I am asked by Mr Brindle to take account, when looking at that letter, of the fact that there is no-one here who represents Mr Amanat today, despite the fact that he was represented by counsel at the PTR, despite the fact that the risk in relation to an unless order being made is perhaps greater today than it was on the previous occasion; that, furthermore, there is no sworn evidence of any kind before the court, but all there is is the letter from his solicitors Charles Fussell LLP.
  13. It seems to me that that is quite an unusual and extraordinary step to take in the circumstances, and given the seriousness of this hearing today, and I do take that into account when determining what weight to give to the explanation which Mr Amanat’s solicitor has perfectly properly set out on the instructions of his client in the letter of 22 March.
  14. It is said, therefore, by Mr Brindle that this failure, taken against the background of other breaches, is a substantial failure. He also says when one takes into account that there is no real reason given, for the failure to comply and when one looks at the proportionality of the matter an unless order should be made. The sum in costs is substantial, albeit not huge. However this should be weighed against the fact that there has been plenty of time given already to Mr Amanat and he is fully aware of the seriousness of this matter. Mr Brindle says that if one weighs up those matters against the fact that prejudice is being suffered by the Sherway defendants because they continue to have to prepare for a trial which is due to commence on or about 18 April, and those costs may well be irrecoverable in all of the circumstances it is appropriate and proportionate that there should be an unless order.
  15. I referred Mr Brindle to the authority which is set out under the notes at 3.4.1 in the White Book at page 82, which is Walsham Chalet Park Limited v Tallington Lakes Limited [2014] EWCA Civ 1607 in part because reference was made to it in the correspondence from Charles Fussell LLP on behalf of Mr Amanat. In the notes there, it is said that the factors which are relevant in relation to rule 3.9 of the CPR in relation to relief from sanction and which were considered in the Mitchell and Denton cases are also relevant in circumstances such as these, and that it is also necessary, to take into account the proportionality of the sanction as against the failure.
  16. It seems to me, in this case, if one does apply a Denton-style test, that, first, the breach here is not one which is other than serious and substantial. It is quite clear, as Sir John Chadwick pointed out in the Court of Appeal, in the Vedatech case, and before him Patten J, as he then was, at first instance, that it is important that costs orders in interim applications are paid and that the orders and rules of the court are complied with. It seems to me also that there is no reason put forward in relation to Mr Amanat’s failure whatsoever, save that in the most recent correspondence it is said that he is raising a loan. He, nevertheless, has had a considerable time and knew well of the need to pay the money and put forward his own date of 18 March, which passed without any comment on his part.
  17. It seems to me also that, overall, I am entitled to take into account the additional prejudice to the Sherway defendants in their continuing to have to prepare for this substantial trial in these circumstances, and it seems to me that, overall, therefore, it is appropriate on this occasion to make an unless order, given all of the factors which I have already mentioned, including the history in relation to this particular payment of £40,000.
  18. I am satisfied that, on the basis of the evidence before the court as to Mr Amanat’s wealth, despite the content of the letter in relation to a loan, it cannot be said that he is being shut out were the unless order to take effect because, it seems to me, in the light of his wealth to which he has sworn himself, that £40,000 is not an insurmountably substantial sum.
  19. In all the circumstances, therefore, it seems to me entirely appropriate that an unless order should be made on this occasion in relation to the payment of the £40,000 which remains due and owing.
  20. However, I am not satisfied that it is appropriate to make that order, particularly also in the absence of any representation whatsoever before the court, to take effect tomorrow at 4.00 pm, or even at 12.00 noon. It seems to me that, despite the fact that Mr Amanat has been given further extensions of time in the past, given the seriousness of the consequences of an unless order if it is not met, that it is appropriate, despite the further extensions which have already been granted, that he should be given a short amount of further time, and when determining that I balance the prejudice which is suffered by those Sherway defendants who have to continue to prepare for the trial in April.
  21. On that basis, therefore, I consider that it is appropriate that the date for payment of the £40,000 should be Wednesday, 30 March at 4.00 pm. I adopt that date because I consider that that properly balances the seriousness of the sanction against the prejudice to the Sherway defendants because, given the lengthy holiday period and the bank holidays, that gives, in effect, tomorrow and then two further working days during which it is possible that preparations for trial will continue.

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