Somerset-Leeke & Anor v Kay Trustees & Anor

This is an appeal from a decision of Master Bowman whereby he refused to order security for costs. There are two claimants, an individual, Mr Somerset-Leeke, and a company, Brunel Trustees Ltd. Mr Somerset-Leeke is resident in Monaco. He took up residence there in 1994, well before any of the matters with which this case is concerned. He moved there for tax purposes. That is accepted. The company is a trustee of a pension fund of which Mr Somerset-Leeke is the sole beneficiary.

The matter came before the Master in what I think was a muddled and confusing state. CPR 25.1.3(1) provides:

“The court may make an order for security for costs under rule 25.1.2 if -

(a)

it is satisfied, having regard to all the circumstances of the case that it is just to make such an order; and

(b)

one or more of the conditions in paragraph 2 applies.”

Paragraph 2 sets out under heads (a) to (g) the conditions. Condition (a) is that the claimant is (1) resident out of the jurisdiction, but (2) not resident in a Brussels or Lugano State (putting it shortly).

Ground (g) is that the claimant has taken steps in relation to his assets that would make it difficult to enforce an order for costs against him. Ground (c) is, in effect, a repeat of section 726 of the Companies Act. It applies where the claimant is a company and there is reason to believe that it would be unable to pay the defendant’s costs if ordered to do so. Ground (d) is worth noting in passing, that the claimant has changed his address since the claim was commenced with a view to evading the consequences of the litigation. Grounds (g) and (d) (which are clearly linked) are new to the CPR.

The application was unsatisfactory because it did not identify which ground or grounds were being relied upon; it simply said security was being sought. If one went to the witness statement in support, that again did not refer especially to any of these grounds. From that unpromising beginning, it is not surprising quite what evidence was being relied upon by each side, and what points were being run by each side. To some extent this uncertainty has remained in the course of the appeal before me.

In applications for security, the relevant ground should always be identified and the relevant evidence aimed at that ground. In fact in this case it seems to me that the defendants are running something of a melange of the grounds. To some extent that is understandable because factors which can affect one ground may affect another ground too. But nonetheless is it essential to be clear which ground is being talked about and what factors are being used in support of that ground, both as a matter of law to establish that the ground exists, and secondly as a matter of fact to be taken into account in exercising a discretion.

I turn first to the position of Mr Somerset-Leeke and ground (a) that he is resident out of the jurisdiction and in Monaco which is not a Convention country. That plainly brings in condition (a). But it is well settled that it is not enough simply to show that the condition is satisfied in order to get an order for security. There must be factors shown which justify the grant of security. Mance LJ put it this way in Nasser v. United Bank of Kuwait [2002] 1 All ER 401 at paragraph 58:

“The exercise of discretion conferred by rule 25.13.1(2)(a)(i) raises, in my judgment, different considerations. That discretion must itself be exercised by the courts in a manner which is not discriminatory. In this context at least I consider that all personal claimants or appellants before the English courts must be regarded as the relevant class. It would be both discriminatory and unjustifiable if the mere fact of residence outside any Brussels/Lugano Member State could justify the exercise of discretion to make orders for security for costs. But the purpose of protecting defendants or respondents to appeals against risk to which they would be equally subject in relation to which they would have no protection if the claim or appeal were being brought by a resident of a Brussels or Lugano State. Potential difficulties or burdens of enforcement in States not parties to the Brussels or Lugano Conventions are the rationale for the existence of any discretion. The discretion should be exercised in a manner reflecting its rationale, not so as to put residents outside the Brussels and Lugano sphere at a disadvantaged compared with residents within. The distinction in the rules based on considerations of enforcement cannot be used to discriminate against those whose national origin is outside any Brussels and Lugano State on grounds unrelated to enforcement.”

The evidence in this case about enforcement in Monaco is that it is essentially an administrative matter to get an English judgment registered in Monaco. There is a fee payable which depends upon the size of the judgment, but once that is paid, one can have, in effect, an order in a Monaco court which is enforceable against the individual in Monaco.

What is said is that Mr Somerset-Leeke has failed to provide any information that he has any assets in Monaco against which any order of the Monaco court enforcing the order of this court could be operated. It is said that it was incumbent upon Mr Somerset-Leeke to disclose where his assets were. In my judgment, that would be making a discriminatory basis for operating under rule (a). If Mr Somerset-Leeke had gone to a Convention country, he would not have to show what assets he had and where they were for the purposes of ground (a). That is because the rationale for ground (a) is simply that you can get the judgment registered and put into force. That can be done just as well for Monaco as in a Brussels or Lugano country, subject to the payment of the fee, as to which security has been offered or indeed provided.

Reliance is placed upon a judgment of Mr Gabriel Moss QC, sitting as a Deputy Judge of this Division, a case called Aines Asset Management v. Kazakhstan Investment Fund [2002] WL 1654967. He was concerned with a company which was incorporated in a non-Convention country, namely the Cayman Islands. The evidence was that the company had no assets in the Cayman Islands and that all its assets were in Kazakhstan. Mr Moss rejected a submission that one should look at only the ability to enforce the judgment in the country of incorporation, namely the Cayman Islands. He said this:

“To interpret the provision in such a way that the risk of enforcement relates only to the place of residence of the counterclaiming company would, in my judgment, be absurd if, as in the present case, the place of incorporation is one which is no doubt simply convenient for tax and regulatory reasons. To say that the risk only relates to enforcement in that jurisdiction would be to give a completely unrealistic emphasis to the place of incorporation or residence …

The limit to the question relating to the risk of enforcement to the Cayman Islands alone would, in my judgment, would be to apply the discretion given by the CPR in a wholly unrealistic and impractical manner.”

What is said here is that if Mr Somerset-Leeke in fact has his assets outside Monaco, then getting a judgment in Monaco would be no good. That, to my mind, is bringing in as a factor of discretion really the kind of concept involved in (g) and (c). I am not saying that that kind of concept should not come in when considering how to exercise discretion under (a), but one must look at those factors along the lines of (d) and (g). I do not quarrel with what Mr Moss said; it is evident that in that case the Cayman Islands was a shell place from which the assets were controlled, but one cannot elevate what Mr Moss did in that case to a general principle that any non Brussels/Lugano resident must indicate assets in his place of residence (or I suppose within Brussels/Lugano) failing which security will be ordered. That would be discriminatory.

On the facts in this case Mr Somerset-Leeke has been resident in Monaco for now nine years. There is no challenge to the reason why he went there. There is evidence (before me and not before the Master but to which there was no objection) to the effect that he has to show every three years that he is worth at least €250,000. There was thin, but nonetheless existing, evidence on Mr Somerset-Leeke’s solicitor on instructions that there were ample assets in Monaco. There was a refusal by Mr Somerset-Leeke to indicate what his assets were and where they were, and there is now some evidence that there is a pension fund in this country worth about £250,000. Even apart from those matters I would not have ordered security because the application was, in effect, discriminatory. But those matters make it to my mind plain that this is not a case for security so far as Mr Somerset-Leeke is concerned.

What then of the company? The procedural position in relation to this was even worse than in relation to the individual. No reference was made to ground (c); no direct evidence was put in about ground (c). There was, on the court file, a witness statement showing some old accounts of the company which indicated that the company itself would not be able to meet any order for costs against it without any support from Mr Somerset-Leeke. It is common ground and accepted that the company and Mr Somerset-Leeke are jointly and severally liable, so all the defendants are looking for is anything that would not be paid by Mr Somerset-Leeke. I will assume for the moment that he has no assets other than those identified in the evidence. What is clear from the evidence is that this trustee company is acting for Mr Somerset-Leeke, in this sense, that it holds his pension fund. It is acting at his request and for his benefit. In those circumstances, if it incurs any costs, it will be liable, as one would expect, to reimburse him.

Evidence to that effect has been given. It is suggested that there should be a document in writing, it being a guarantee. If it is more than a guarantee, the company is acting in substance as Mr Somerset-Leeke’s agent in these proceedings. It has recourse to a pension fund which is in this country £250,000, and in my judgment there is no case for an order for security against the company.

When the matter was before the Master, the position was considerably more opaque. I have considerable doubt as to whether the Master really should have dealt with a claim for security against the company. I say that because, the matter never having been advanced specifically against the company, there was no reasonable way in which the company could have put in the evidence which is now before me. It goes back to the fact that this application was inherently procedurally muddled.

As to ground (g), it was alleged that Mr Somerset-Leeke had taken steps in relation to his assets that would make it difficult to enforce an order for costs against him. The only step which can be pointed to is that he moved to Monaco and moved his assets out of this jurisdiction when he did so. There is no material which establishes that he did so in order to make it difficult to enforce an order for costs against him, nor is there evidence that where he moved his assets to would make it difficult to enforce an order for costs against him. There was a debate as to whether or not the moving had to be with a motive of making enforcement difficult. The White Book suggests in paragraph 25.13.18 that motive is not necessarily essential; that proof of specific intent merely makes the case stronger.

That is probably right. I do not think I have to decide it here because there is no material suggesting that it is difficult to proceed against Mr Somerset-Leeke or that he has moved his assets to somewhere where it is difficult to get at them. He has just moved countries. That alone is not evidence of making it more difficult to recover the money, particularly when he has moved to a country where judgments are recognised as of course. Accordingly, ground (g) considerations, in my judgment do not arise, either directly under ground (g) or as an exercise of discretion under ground (a).

This appeal is dismissed.