Rajvel Construction Ltd v Bestville Properties Ltd

This is an appeal from the order of His Honour Judge Wilcox, sitting in the Technology and Construction Court on 15 June of last year, making an order for costs personally against the appellant, Mr Rajvel, in relation to a hearing on a renewed application for security for costs made by the defendant against the claimant.

The claimant, Rajvel Construction Limited, is a company of which the appellant is a director and shareholder. It is common ground that it is, for practical purposes, insolvent. It brought proceedings against the respondent claiming the costs of building works in a sum of approximately £200,000.

In March of last year there was a hearing of, among other things, the respondent's -- that is to say the defendant's -- application for security for costs. It was common ground on that application that the company, the claimant, could not fund an order for security for costs because it was, in practical terms, insolvent. The question arose whether its shareholding director, Mr Bhuva, had the funds available to fund not only the litigation but an order for security for costs.

For that purpose Mr Bhuva made a witness statement. He set out certain assets. It was employed by counsel directly instructed by Mr Bhuva and by his company in support of the contention that the company could not fund, and Mr Bhuva could not fund, any order for security for costs. It followed that, since the claim was a bona fide claim with a real prospect of success, that claim would be stifled if an order for security for costs was made.

On the basis of the evidence in that witness statement and submissions made to the judge, he came to this conclusion:

Following that decision, those acting for the present respondent carried out some research. The research was based in part on some of the facts set out in Mr Bhuva witness statement. It led them to find that there were in fact significant additional assets and resources available to Mr Bhuva. They therefore made an application to the judge to set aside his order for a re-hearing of their application for security for costs and, on the basis of belt and braces, it also sought to make a new application.

It was this application that came before the judge on 14 June 2011. On that occasion the judge was entirely satisfied that the assets available to Mr Bhuva were such as to enable him to fund an order for security for costs, and he did make an order for security for costs, and there is no appeal against that order.

In addition, however, he made an order -- the order which is under appeal before us -- against Mr Bhuva personally for the respondent's costs of that second application for security for costs, which had succeeded. He did so on the basis that there had been a failure on the first occasion on the part of Mr Bhuva to make full and frank disclosure. Quite clearly, on the basis of his judgment on the second occasion, had that full and frank disclosure been made, it would not have been possible for counsel for the claimant to have submitted that there was no possibility of funding an order for security for costs; and the order for security for costs which was made by the judge in June was made on the first occasion.

Mr Bhuva now appeals on the basis that it was wrong of the judge to exercise his undoubted jurisdiction to make an order for costs against him personally. In the course of argument Mr Boyd, who acts on behalf of Mr Bhuva, has emphasised the degree of criticism made by the judge of Mr Bhuva. The judge referred to impropriety at a high end and to the original witness statement being seriously economic with the truth. He did not, however, find that there was any dishonesty on the part of Mr Bhuva, and indeed Mr Hamer at no time alleged that there had been deliberate lying or deliberate concealment by Mr Bhuva of his assets.

Nonetheless, the fact remains that the original witness statement was misleading in the sense that it did not give full and frank disclosure of the assets available to Mr Bhuva and, had that full and frank disclosure been made, it is quite clear from the two judgments of the judge on the second occasion that there would have been the need for security made on the second occasion but on a similar application. It follows that the costs of the second application were entirely due to the witness statement of Mr Bhuva and the submissions made on the basis of it.

It seems to me, in those circumstances, that the judge had full discretion to make an order for costs against Mr Bhuva because it was his failure to make full and frank disclosure on the first occasion which led to the separate set of costs being incurred. I see no basis on which it could be said that he did not have that power or wrongly exercised the discretion.

During the course of his judgment I have not referred to what was said by HHJ Wilcox on the second occasion. He makes it quite clear that he was misled on the first occasion by the witness statement and by the submissions made on the strength of it. Indeed, it is quite evident that the purpose of the witness statement on the first occasion was to support the contention that the claim would be stifled if any order for security was made. In fact, the litigation will not be stifled because Mr Bhuva is in a position to provide security for his company.

In those circumstances I see no basis for which it could be said that the judge erred in the exercise of his discretion. Whether I would have described the impropriety, that is to say the failure to meet disclosure of assets, as being at the high end is a different question, but a failure to make full and frank disclosure there certainly was. There was impropriety. It was used for the basis of a submission which would not have been made and could not have been made if the true facts had been put before the judge.

For those reasons I would dismiss this appeal.

I agree.

I also agree.