Sir Swinton Thomas :

1. The sum of £615,880 be paid into court, for or on behalf of the 10^th and 38^th Defendants, by way of security for the Claimants’ costs of the appeal.

2. The following sums be paid into court, within 21 days, for or on behalf of the 10^th and 13^th Defendants:

(1) The sum of £904,198.20 being the sum representing the Claimants’ costs of the hearing before Etherton J in December 2002 less the sum of £100,00 already paid into court;

(2) The sum of £13,000 pursuant to the order of Mr Justice Etherton dated 25 July 2003; and

(3) The sum of £500,000 on account of the Claimants’ costs of the detailed assessment pursuant to the Order 26^th September 2003 of Senior Cost Judge Hurst.

3. The sum of £1m be paid to the Claimants’ for or on behalf of the 10^th and 38^th Defendants in respect of past assessed costs.

4. In the event that the Defendants fail to comply with paragraph 1 to 3 above, the 10^th and 38^th Defendants’ appeal may be dismissed with costs.

“This is an extraordinary case. It is very complicated, factually and procedurally. The sums involved are very large indeed. It is not an ordinary case by any stretch of the imagination. These matters are not themselves reasons for granting permission, but they may be reasons for not refusing permission in the relatively short time we have had to consider the application.”

“Mora and Chascona have always accepted that fairness requires that they should, through Mr Cavazza, provide security for the costs of the appeal.”

The dispute concerns the amount to be paid. Mr Marshall has provided details of the estimate of the costs that his clients will incur in the appeal amounting to £615,880 and submits that that sum or thereabouts should be paid into court. Mr Wardell submits that the sum should be £300,000.

“3.1(2) Except where these Rules provide otherwise, the Court may…..

(f) stay the whole or part of any proceedings either generally or until a specified date or event…..

(3) where the Court makes an order, it may –

(a) make it subject to conditions, including a condition to pay a sum of money into court…..

(5) The court may order a party to pay a sum of money into court if that party has, without good reason, failed to comply with the rule, practice direction or relevant pre-action protocol.”

“an order giving permission may

(b) be made subject to conditions.

Mr Marshall submitted that rule 53(7)(b) gives the Court of Appeal wider powers, following a hearing at first instance, than the powers conferred by CPR(3). Mr Wardell submitted that the principles applicable in each case were the same. In my view, Mr Wardell’s submissions on that issue are correct. However, and it is a very important proviso, in my judgment, in this case, the factual situation upon which the Court acts following a hearing at first instance may be different.

“The application to strike out gives rise to two points of principle. The first is whether it is a permissible exercise of the court’s powers, either when granting permission to appeal or subsequently, to make the prosecution of the appeal conditional upon the payment of the judgment debt and costs. The second is, if so, whether it is appropriate to do so in a case where, as here, the Appellant might have to obtain the funds to meet the various orders from a third party.”

The second question is, of course, one that arises here. As I have said, it is common ground that if conditions are applied it will be Mr Cavazza who will have to comply with them. It is common ground that Mr Cavazza is funding the litigation and is in a position to provide the funds without difficulty. It is, accordingly clear that, within reason, any order that the court makes will not stifle the appeal.

“(41) We turn to the question whether there is a compelling reason for making the appellant either pay the judgment debt or secure it as a condition of permitting it to proceed with the appeal. We have reached the conclusion that the answer to that question is yes. In our judgment, the facts which combines to constitute a compelling reason are the following:

(1) The appellant is an entity against whom it would be difficult to exercise the normal mechanisms of enforcement. It is registered in the British Virgin Islands and has not assets in the United Kingdom. There is, accordingly, a very real risk that if the appeal fails, the respondents will be unable to recover the judgment debts and costs as ordered by Silber J. Given the attitude of the appellant to date, including that demonstrated on these applications, it is fanciful to think that the appellant will cooperate with the enforcement process.

(2) the appellant plainly has the resources or has access to resources which enable it both to instruct solicitors and leading and junior counsel to prosecute its appeal and make an application to the court for a stay of execution and to provide a substantial sum by way of security for costs.

(3) There is no convincing evidence that the appellant does not have the resources or have access to resources which would enable it to pay the judgment debt and costs as ordered. It has failed to do so. It is, accordingly, in breach of the orders made by Silber J on 12^th July 2001.

(4) The discovery which the appellant has provided of its financial affairs is inadequate and gives the court no confidence it has been shown anything near the truth. Moreover, as stateed earlier, it has produced evidence (when it wanted to) that it was a thriving and profitable institution. It has wealthy owners and there is no evidence that, if they were minded to do so, they could not pay the judgment debt including the outstanding orders for costs.

(5) For the reasons which we have already given we are not persuaded that this appeal will be stifled if we make the order sought.

(6) In these circumstances, we find it unacceptable that absent any other orders of the court the appellant is intending to prosecute the appeal (and is willing to put up security for costs in order to do so) while at the same time continuing to disobey the orders of the court to pay the judgment debt and costs, as well as seeking to persuade us that he cannot do so.

[42] In our judgment, these six factors add up to a compelling reason to make the orders sought by the respondents. We think there is a real risk that, unless the orders sought are made, the respondents, if the appeal is dismissed, would be deprived of the fruits of the judgment, and will only be able to recover whatever sum is secured by way of costs. In our judgment, on the facts of this case, it is not just to allow the appellant to proceed with an appeal which is designed not only to reverse the judge’s decision that it is liable to the respondent but also to obtain judgment on its counterclaim for a very substantial amount, especially in circumstances in which it appears that it is willing and able to use resources from others, including perhaps its owners, while being unwilling to seek and obtain resources to discharge the judgment debt.”

“[48] We note that Rix LJ expressly recognised the court’s jurisdiction to make the order. We do not disagree with Rix LJ’s ‘cautious’ approach to CPR 52.9. Nor do we disagree with the final extract from his judgment set out above, since each case of course depends upon its own facts. We do, however, take the view that the new regime of the CPR, with its emphasis of the timely payment of costs, and the use of costs as a sanction, warrants a robust approach to appellants who fail to obey orders for the payment of a judgment debt and costs when they can afford to pay them either themselves or through others.”

“[19] The discretion under rule 52.9(1)(c) to impose or vary conditions upon which an appeal may be brought is unfettered by any provisions specifying or classifying the nature of the condition which may be imposed or varied. The only requirement is that the court should be satisfied that there is a ‘compelling reason’ why it should, for the purpose of doing justice between the parties, intervene in the ordinary progress of the appeal between leave being granted and the date of the hearing of the appeal….. However, the power in rule 52.9(1)(c) is one which may in appropriate circumstances properly be relied on where the condition sought to be imposed does not involve consideration of the merits of the appeal, but is based upon some aspect of the conduct of the appellant or some other circumstance which either had not occurred or was at any rate not available to be advanced by the respondent at the time of the grant of permission. It remains necessary that the reason for imposing any condition must be ‘compelling’, but the task of the court in deciding whether that is so will be the more straightforward.”

“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 a suspicion that they may not be bona fide and that the court thinks that the other side should have some financial support or protection.”

Simon Brown LJ then continued:

“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)…. 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 as expeditiously as reasonably possible in accordance with the overall objective.”

“As already indicated Contract has no assets. The action has been funded by certain individuals including Mr Shuck. The defendants have at all times been concerned to see whether they can make the individuals who funded the action responsible for the costs.”

The position of the third party, Mr Shuck was similar to the position in this case of Mr Cavazza.

“The instant case is very different from the CIBC case. First Mr Shuck had financed the whole of the trial process or been a party to the financing. Second this is a case in which a Section 51 application must stand a considerable prospect of success. Third it is an appeal that places the case management powers in a very different context. Fourth this is not a case where the respondents are simply seeking to inflate the pool against which they can later execute any judgment. Their position is that when Mr Shuck has financed the trial and is financing the appeal, there is no reason why he should be allowed to conduct that appeal on a heads he wins and tails they lose basis.”

“There is no injustice in requiring an applicant, asserting impecuniosity, to provide security for the respondent’s future costs of the application, provided that thereby the application is not stifled. Nor is there injustice in requiring an applicant, who does not assert impecuniosity but has repeatedly failed to pay past costs orders, to pay what is already due to the other side if he is allowed to make a further application….. There may be injustice in requiring an applicant to set aside a judgment to make a payment into court in respect of past costs as a condition of being allowed to proceed with such application when the court knows that the applicant cannot make payment out of his own resources and that the only source of funding to make such payment is a third party against whom no order for costs under section 51 has been sought in respect of those costs and little reason to think that such an order could be made. In this context it must be a relevant consideration that the effect of requiring such payment is, if the application fails, to give the respondent the ability to recoup part of what he is owed from additional assets which, had the application not been made, would not have been available to him.”

I make no comment at all as to the likelihood or otherwise of the impending application under section 51 to make Mr Cavazza pay the costs of the application to set aside being likely to succeed or not.

“If, as would appear, that was part of the thinking of the judge, then I am afraid that I cannot accept that it provides justification for the order to make a payment in respect of past costs, because it ignores the possibility that the application to set aside will fail.”

We now know that the application has failed.

“The judge robustly stated his complete lack of concern that Mr Cavazza had to make the payment required of the appellants and that it was irrelevant that he was a third party. For my part I cannot see how that fact can be of no relevance to the exercise of discretion. Dealing with the case justly must require the court to have regard to the substantive effect of the order being made and to the justice of, in reality, requiring the third party to make payments. In fact the judge did have regard to Mr Cavazza’s position. The judge rightly identifies the commercial reality as being that Mr Cavazza was seeking by the application to protect his investment in the Appellant. That provides good justification for making an order for security for costs of the applications even though the appellants could not pay. But the point in issue is whether that is sufficient to enable the court to require the payment into court in respect of the past costs when Mr Cavazza would have to find such payments. The judge said that Mr Cavazza must take responsibility for what happened in the past…… The position might be different if there was evidence that Mr Cavazza had funded the appellant before August 2001, for example in the jurisdiction proceedings, or was actively involved in litigation at that earlier time. But there is no such evidence and no s.51 application against Mr Cavazza.”

“100. There is no doubt that there were duly and properly served on Mora and Chascona the applications for the various orders that were made, against Mora and Chascona in 1997, 1998 and 1999 in the Proceedings, and the evidence in relation to them, and the orders made by the court pursuant to those applications.

101. Further, as appears from paragraph 99 of the affidavits sworn by Mr Gambazzi for the purpose of the Applications, which I have quoted earlier, Coleman Coyle, who were solicitors acting for Mr Gambazzi, Mora and Chascona, as well as some of the other Defendants, advised that the ‘unless’ orders should be complied with.

102. Mr Wardell accepted that compliance with the freezing orders against Mora and Chascona and the orders supplementary to them, including the ‘unless’ orders, could not possibly have prejudiced the challenge to the jurisdiction of the English court by Mora and Chascona, and that a reasonably competent solicitor would have so advised. In the absence of any evidence to the contrary, I infer that this was the advice given to Mr Gambazzi and, accordingly, Mora and Chascona, by Coleman Coyle when they advised that the ‘unless’ orders should be complied with.

104. Wilful and conscious disobedience to freezing orders, against the express advice of a defendant’s English lawyers, is a matter of the gravest concern. While each case must turn upon its own facts, the setting aside of a judgment properly entered against a defendant for wilful and conscious failure, against legal advice, to comply with such orders sends, generally speaking, entirely the wrong message to those who face allegations of fraud. Relief in such a case is likely to provide a broad base from which determined and well resourced defendants, with the benefit of the most skilful lawyers, will attempt to mitigate the court’s sanction for non compliance in other cases.

149. It seems to me that Mr Justice Rattee had no realistic alternative to making the ‘unless’ order on 4^th October 1999 (with its debarring sanction) in the face of the persistent defiance of Mora and Chascona of freezing order of Mr Justice Lightman in relation to the disclosure of assets.

153. I have already considered earlier in this judgment the explanations of Mora and Chascona for their failure to comply with the ‘unless’ orders. These explanations are manifestly not ‘good’ explanations in the sense of providing a justifiable excuse for non-compliance.

159. As I have said, the English solicitors of Mora and Chascona advised them to comply with the ‘unless’ orders. I infer, in the absence of any evidence to the contrary that the English solicitors will have advised Mora and Chascona of the consequences of the failure to comply with those orders. Ineed the orders, which were served on Mora and Chascona, specify on their face the sanction for non-compliance. Mora and Chascona took the conscious decision not to comply with the orders.

167. I do not propose to rehearse in detail all those matters which I have identified earlier in this judgment as tending to the rejection of the Applications. They include the following important considerations as to the administration of justice, in particular the deliberate non-compliance, against the advice of English lawyers, with the freezing order of Mr Justice Lightman of 23^rd July 1999 in relation to the provision of statements of assets and the ‘unless’ order of 4^th October 1999 and also the public interest in the finality of litigation, in circumstances in which setting aside the judgments would revive complex and expensive litigation, which has been entirely resolved against the defendants; the prejudice or risk of prejudice to as fair and speedy trial that there could have been if there had been compliance with the ‘unless’ orders or the Applications had been made promptly; the prejudice or risk of prejudice to the Claimants in the preparation and presentation of their case at a trial on the merits caused by delay since the judgments were entered against Mora and Chascona and the delay in making applications; the additional costs (that is to say, over and above those that would have been incurred had the litigation proceeded continuously to trial in the usual way) that would, in effect, be borne by the Claimants themselves, if the judgments had been set aside and the Claimants were to succeed in their claims.”

“For the avoidance of doubt, we should make it clear that the concession offered to Mr Justice Etherton by Leading Counsel ‘for Mora and Chascona to pay past costs’ was a concession made for the purposes of the applications and hearings before him and, in light of his rejection of those applications, the concession has fallen away. If we are wrong about that, we hereby formally withdraw that concession and confirm that it will not be renewed in the Court of Appeal.”