Gold Harp Properties Ltd v McLeod & Ors

J U D G M E N T (As approved by the Court)

1. LORD JUSTICE RIMER: This is an application made on 7 February 2014 by the claimants/respondents for an order under CPR Part 52.9(1)(c) imposing a condition upon the bringing of the appellant's appeal that Gloster LJ permitted on 17 January 2014.

2. The claimants are four individuals, including Michael Byrne and John Briars. The appellant is Gold Harp Properties Limited, the second defendant. The applicants were, when they made their application, apparently under the illusion that Matthew Ralph, the first defendant, is also an appellant, but he is not, as the applicants now correctly recognise. I shall refer to Matthew Ralph, with no disrespect, as “Matthew”.

3. I must summarise the background. The litigation concerns the roof space in a house at 72-74 St Quintin Avenue, London, W10. The house is divided into flats and the roof space has been developed to a limited, but not yet habitable, extent. Long 135-year leases of the flats 5 and 6 in the roof space were granted in 2000 to Michael Byrne and John Briars. The titles to their leases were registered.

4. Matthew acquired the freehold of the property in 2009. He is the son of the fifth Defendant, Grahame Ralph, a property developer, whom I shall call “Grahame”. On 30 July 2009, Matthew applied to HM Land Registry for the claimants' leases to be closed on the grounds that they had been forfeited by peaceful re-entry on 27 July 2009. The Land Registry closed both titles on 2 August 2009.

5. On 3 August 2009, Matthew granted a new long lease of the roof space to Insignia Property Limited, the third defendant. Its title to that lease was registered. Insignia then assigned that lease to Lavender Estates Limited, the fourth defendant, on 28 February 2011 for a stated consideration of £10,000. On the same day, Lavender assigned the lease to Gold Harp, the appellant, for a stated consideration of £150,000.

6. The claimants challenged the validity of the closures of their leases by proceedings in the Central London County Court commenced on 11 November 2011, although they had known about the closure of their titles since October 2009. There were several hearings before HHJ Gerald in the County Court resulting in several orders.

7. The order under challenge on Gold Harp's appeal is dated 24 May 2013, but I must first refer to an earlier order. That order is dated 2 March 2013 and was made at a time when the only defendants were Matthew and Gold Harp. It records the judge's finding after the trial that the claimants' leases of the roof space had not been forfeited by peaceful re-entry and that HM Land Registry should not have closed their titles. By this order, the judge adjourned the proceedings to enable the claimants to claim consequential relief, including rectification of the register.

8. The order permitted the joinder of Insignia and Lavender as defendants, and added them as such there and then. It also permitted an application to join Grahame as a defendant for the purposes of applying for a costs order against him. The order gave directions for the future conduct of the claim. Importantly, by paragraph 10, it ordered the defendants, meaning Matthew, Gold Harp, Insignia and Lavender, to pay the claimants' standard costs and ordered a payment of £30,000 on account by 4.00 pm on 5 April 2013.

9. Following the subsequent trial of the rectification claim, the judge made his order of 24 May 2013. The claimants were again successful. By paragraphs 1 to 4, the judge made orders whose effect was to reinstate the claimants' long leases as if they had never been closed and to give them priority to Gold Harp's lease of the roof space. Paragraphs 6 to 9 made orders that the defendants pay the claimants' costs of the determination of the issue the judge had decided.

10. Those paragraphs also gave permission to add Grahame as a costs party, although did not make any costs order against him at that stage. Grahame was then added as a costs party on 21 November 2013. The judge ordered him to pay the claimants' standard costs of the claim, including payment of £30,000 on account ordered on 22 March 2013. He was, in theory, thereby being ordered to pay a sum that was due for payment some seven months earlier, but I interpret the order as meaning that he had to pay it within the conventional period of 14 days from the date of that order. He did not pay it.

11. In the meantime, the claimants had taken some steps towards enforcing the “on account” costs order against Matthew. On 9 July 2013, they obtained a final charging order against his freehold interest in the property, charging it with the £30,000 costs he had been ordered to pay on 22 March, plus costs and interest.

12. On 21 August 2013, they obtained a charging order for the like sums against Matthew's interest in a house in Tadworth, Surrey, an order which was confirmed by a subsequent order of 3 January 2014. The evidence before the court is that this house is owned by Matthew, Grahame and Grahame's daughter, who is not a party to the proceedings. The claimants have not sought to enforce either charging order, nor have they taken steps to enforce the costs orders made against Gold Harp on 22 March 2013 or against Grahame on 21 November 2013.

13. Gold Harp is now an appellant with, as I have said, Gloster LJ's permission, the order under challenge being that of 24 May 2013. The application before us is that Gold Harp's permission to appeal be made conditional on both Matthew and Gold Harp paying the claimants, or into court, the £30,000 costs sum.

14. Since only Gold Harp is the appellant, it appears to me that any such condition, if it is to be imposed at all, can formally only be imposed on Gold Harp, although, in considering whether any such condition ought to be imposed, it would no doubt be relevant to have regard to the ability of those behind and associated with Gold Harp to satisfy the order.

15. The application is supported by a witness statement from the claimants' solicitor, Anthony Andrews of Coles Miller Solicitors. He explains that Grahame is Matthew's father and one of Gold Harp's directors. He asserts his belief that, based on the judge's findings, Grahame is the mastermind and orchestrator of the main events that caused this dispute, including the bringing of the appeal. He asserts that it is "reasonable to infer" that Grahame is funding the appeal.

16. He refers to three of the judge's judgments which include, he says, important findings about the defendants' conduct, including that of Grahame. He says that his firm's costs of the proceedings to the date of this statement are about £64,000 and estimates that the claimants' costs of resisting the appeal will be about £17,000, including disbursements. He says he believes they will be able to fund the appeal, "but will greatly struggle to do so and will have to raise money by borrowing."

17. By contrast, he advances his view that Grahame is a man of relative substance. He is a property developer who controls Gold Harp, Insignia and Lavender. He says that the defendants instructed counsel and an expert valuer throughout the proceedings. He offers his view that the appeal will continue to be funded even if the “on account” costs order has, in the meantime, to be met.

18. As to the attempts made to enforce that order, Mr Andrews explains that the claimants have taken the view that the time and expense which would be incurred in trying to enforce the charging order over the Tadworth house are not justified at the moment, nor would bankruptcy or winding up proceedings. As for the charging order over the Matthew's freehold interest in the property, Mr Andrews explains that as the title is subject to numerous pending applications, it has not been possible to register the charge against the title.

19. Mr Andrews' firm has been in communication with Grahame as to whether he has any intention of paying the £30,000 costs, to which Grahame has not responded.

20. Mr Andrews' assertion as to Grahame being the mastermind between the whole story is solidly supported by the judge's findings. In short, those findings were that Matthew did what he was told by his father to do and that the actions of Gold Harp, Insignia and Lavender were also all procured by Grahame. That is the explanation of why, in due course, a costs order was also made against Grahame in November 2013.

21. The present application is, as I have said, for the imposition on Gold Harp of a condition that it pays the £30,000 costs judgment as a condition of being permitted to pursue its appeal. There is no stay of execution on that judgment and so, in principle, it ought to have been satisfied. Without more, however, the court will not require compliance with such an order as a condition in pursuit of an appeal.

22. It is said by Mr Bowker for the claimants, who addressed us with commendable succinctness this morning, that there is nevertheless a "compelling reason" for imposing such a condition, as there has to be if this case is to be brought within the requirements of Part 52.9(1).

23. Central to the consideration of whether the type of order sought in this case should be made is the decision of this court by Clarke LJ and Wall J on 18 December 2001 in Hammond Suddard Solicitors v Agrichem International Holdings Limited[2001] EWCA Civ 2065. The paragraph from Clarke LJ’s judgment of the court which is commonly referred to in contexts such as the present one is paragraph 41, which I shall quote:

"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 is yes. In our judgment, the facts which combine to constitute a compelling reason are the following.

(1) The appellant is an entity against whom it will be difficult to exercise the normal mechanisms of enforcement. It is registered in the British Virgin Islands and has no 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 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 co-operate in the enforcement process.

(2) The appellant plainly either 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 either 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 July 2001.

(4) The discovery which the appellant has provided of its financial affairs is inadequate and gives the court no confidence that it has been shown anything near the truth. Moreover, as stated 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 we have already given, we are not persuaded this appeal is 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 intended to prosecute the appeal (and is willing to put up security for costs in order to do so) whilst 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 it cannot do so."

24. In approaching the present case, I consider it appropriate to have regard, as I have said, not just to Gold Harp's ability to satisfy the costs judgment, but also that of those behind it and the other defendants against whom the costs order has been made. The key such person is, as I am disposed to accept, probably Grahame. There is no suggestion that he is not able to meet the costs liability. He has simply preferred not to do so, nor has any attempt been made to enforce it against him.

25. In my view, this is a case in which I would be disposed to hold, or draw all necessary inferences, that were the requested condition to be imposed, Gold Harp could and would satisfy it, if necessary by recourse to those who stand behind it, and that its appeal would not thereby be stifled.

26. The difficulty I have, however, is in relation to Clarke LJ's first condition. I accept, of course, that there will now be a practical difficulty in enforcing the costs judgment prior to the hearing of the appeal which is due to be heard on 12 or 13 May, a mere month or so away. But Clarke LJ's first condition focuses on the ability of the respondent to the appeal to enforce the costs order if the appeal fails.

27. In Hammond Suddard, the court's assessment was that, were the appeal to fail, there would be a real difficulty in enforcing the judgment. If Gold Harp's appeal fails, I cannot, however, see that there is likely to be any comparable difficulty in enforcing the costs judgment against those defendants, including Grahame, against whom the costs order has been made.

28. The circumstances of the present case are, I consider, relevantly very different from those in the Hammond Suddard case. There can in principle be no good reason why the claimants could not already have enforced, or have taken steps to enforce, the costs order against those various defendants who are answerable to it. The only explanation given is that they have taken the view that it is disproportionate, or might cause cost and delay, for them to do so.

29. Mr Bowker submits that there is a compelling reason for imposing the condition because, at the moment, the defendants are not facing any consequences as a result of their failure to comply with the orders of the court. That I fully understand and accept, but the proposition appears to amount to no more than that a defendant who wishes to appeal and indeed obtains permission to appeal, but who has not complied with a judgment of the court below and has obtained no stay of execution of it, must as a matter of course be required to comply with and satisfy that judgment as a condition of being permitted to pursue an appeal. As it seems to me, there would be a good deal to be said for such a principle. But, in my judgment, that is simply not the law.

30. This case falls within what I might call the ordinary run of appeals. The appellant is liable to an unsatisfied judgment debt, yet is seeking to appeal in circumstances in which there is no stay of execution of that judgment. As I have said, it might well be thought that, if there are no grounds for a stay of execution, it ought to be a matter of course for a defendant to have to comply with the judgment of the court below as a condition of pursuing an appeal. As I have also said, I do not, however, understand that to be the law.

31. Conditions upon which an appeal may be pursued can only be imposed if there is a compelling reason to do so. I am not satisfied that in the circumstances of this case there is any such compelling reason. I would, therefore, dismiss the application.

32. LORD JUSTICE McFARLANE: I agree. I too take the view that the Applicant has failed to establish a compelling reason and I too would dismiss the application.