Stavrinides & Ors v Cyprus Popular Bank Public Co. Ltd (t/a Laiki Bank UK & Anor

By application notices dated 25^th August 2017 the Defendants, Cyprus Popular Bank Public Company Ltd, (Cyprus) and Bank of Cyprus Public Company Ltd (Bank of Cyprus) applied for substantial security for their costs against each of the three claimants. Following the hearing of those applications, on 17^th January 2018, the Claimants, have however, agreed confidential terms of settlement with Cyprus, such that the only application now pursued is that pertaining to Bank of Cyprus. This judgment is, therefore, limited to that application.

The three Claimants are Phytos Stavrinides (Mr Stavrinides), Stovaco Holdings Ltd (Stovaco) and Bellerive Corporation (Bellerive). Stovaco is a Cyprus based corporation. Bellerive is a Seychellois company. The shares in Stovaco are said to be held by Mr Stavrinides’ brother, Yiannakis, with 25% of those shares being held by Yiannakis for Mr Stavrinides and 50% for his sister, Chrysoula At an earlier date it is said that the shares were held by nominee companies on behalf of Mr Stavrinides. The shares in Bellerive are held, apparently, by Nevis companies. Mr Stavrinides accepts however that he is the beneficial owner, via those entities, of Bellerive.

The grounds, or gateways, pursuant to CPR 25, whereby it is said that security can be ordered are, as against Mr Stavranides, that he has taken steps in relation to his assets that would make the enforcement of a costs order difficult; as against Stovaco, that there is reason to believe that it would be unable to pay the Defendant’s (now Bank of Cyprus’) costs if ordered to do so; as against Bellerive, that it is a company resident outside the jurisdiction and not in a Brussels, Lugano or Regulation state and, further, that, like Stovaco there is reason to believe that it would be unable to pay the Defendant’s costs if ordered to do so. In respect of each Claimant it is said to be just to make an order. Although one of the gateways in respect of Bellerive derives from its status as an offshore company, not resident in a Brussels Lugano or Regulation state, it is not suggested, given that the additional gateway of what I will loosely call impecuniosity is relied upon, that the security jurisdiction is limited to the additional costs which might fall to be incurred should it be necessary to enforce a costs order in the Seychelles.

At the hearing of these applications there was also before me an application that the claims of the two corporate Claimants be struck out, or alternatively, be subjected to an unless order. The basis of the application was that each of the two companies had, as it had emerged, been dissolved and that no sufficient evidence was available to establish their reinstatement. It is, of course, the case that a dissolved company is a nullity and cannot bring suit. I was, however, satisfied that steps were being taken to reinstate the companies and, in those circumstances and the Defendants not pressing to strike out, I took the view that the better course rather than striking out, was to require the relevant Claimants to establish reinstatement to the satisfaction of the court, to give directions to that effect and to treat the two Claimant companies as having legal existence for purposes of the applications for security. This judgment therefore proceeds upon that footing.

The claims brought by the Claimants against the Defendants and now pursued only against the Bank of Cyprus are, in principle, very straightforward.

Mr Stavrinides is a property developer and Stovaco and Bellerive are both special purpose vehicles established to develop particular properties in North London. Stovaco is the registered proprietor of a property at 315 Mount Pleasant Road, London N17. Bellerive is the registered proprietor of a property at 7-8 Bruce Grove, London N17.

The first Defendant, Cyprus, had over a number of years provided secured loan finance to Mr Stavranides and his companies, in respect of his development business. In March 2013, at the date material to these proceedings, Cyprus held charges over both the foregoing properties together with secured corporate guarantees and cross guarantees in respect of the borrowing of each company. Cyprus also had the benefit of substantial guarantees from Mr Stavrinides in respect of the borrowings of each company (£2.5 million in respect of 315 Mount Pleasant and £540,000 in respect of 7-8 Bruce Grove), those guarantees being secured by way of a second charge over Mr Stavrinides home at 64 Games Road in Barnet. That charge also secured what had been a bridging loan facility granted by Cyprus to Mr Stavranides in 2009 in the initial sum of £745,000. Cyprus had also provided secured loan finance in respect of other properties, in particular a property at and known as Bonsoir House, Victorian Grove, London N16, in which Mr Stavrinides had an interest, through a separate entity, Fitzkriston LLP (Fitzkriston).

The Claimants’ case is that in or about March 2013, Cyprus entered into an agreement with the Claimants whereby upon payment to Cyprus of £1,650,000 from the sale of Bonsoir House Cyprus would release the Claimants from all their outstanding liabilities to Cyprus and discharge all charges and guarantees relating to the two companies and to Mr Stavrinides. That agreement is said to be supported by correspondence, in particular a letter from Cyprus dated 15^th March 2013 and by the evidence of a Mr Antoniou, the apparent author of that letter.

The existence of the agreement and the provenance and authenticity of the relevant correspondence is hotly contested, as is its legal effect. At the most basic level, Bank of Cyprus, which, as shortly to be explained, now stands in the shoes of Cyprus for purposes of this litigation, make the obvious point that it was, or would have been, highly unlikely that Cyprus would surrender all its security over 7-8 Bruce Grove, 315 Mount Pleasant and 64 Games Road and all its rights against the Claimants for £1,650,000 at a time when, says Bank of Cyprus, the totality of the Claimants’ liabilities were in the order of £4,877,000 and when there was substantial value to be found in the three charged properties.

On the other side of the argument, it is not in debate but that, in consequence of the Cypriot financial crisis of 2012, Cyprus, itself, suspended the bulk of its operations in the Spring of 2013 and that it was shortly after the date of the alleged agreement, namely 29^th March 2013, that by a decree of the central Bank of Cyprus, many of the assets of Cyprus including the loan portfolio relating to Mr Stavrinides, Stovaco, Bellerive and Fitzkriston were transferred to the second Defendant, Bank of Cyprus. It is by reason of that transfer that Bank of Cyprus now stands in the shoes of Cyprus, for purposes of this litigation and, by its defence, seeks to assert the continued existence of the charges, guarantees and liabilities that the Claimants claim to have been discharged. What is said by the Claimants is that Cyprus’s own circumstances, at the date of the alleged agreement, afford an obvious explanation for what might otherwise seem a strangely unfavourable agreement.

Be that as it may, none of the parties, while each expressing the strength of their respective cases, have ever sought to apply for a summary disposal of the claim and the claim, now continuing only against Bank of Cyprus is fixed for a lengthy trial in May 2019.

The sums sought by way of security by Bank of Cyprus are substantial, being in the order of £850,000. The sums are sought to be provided, or secured, by way of payments into court, in two stages; a first payment in a sum in excess of £300,000 within 14 days of the making of the order for security; the balance at a later date. The sums sought are said to reflect 80% of the costs likely to be incurred in bringing the case to trial. Security is sought against the Claimants and each of them jointly and severally, because, as it is said (and this is not in contest), the costs liability which would arise against the Claimants, if they are unsuccessful in these proceedings, will be a joint and several liability.

In respect of the corporate Claimants, it is rightly conceded, their only assets being the properties they respectively own and, in the case of Stovaco, a modest income stream of some £7,500 per month, which is currently utilised by Mr Stavranides, that, in the event that they are unsuccessful at trial, there is every reason to believe that they will be unable to pay Bank of Cyprus’ costs if ordered to do so. The fact, if it were to be a fact, that there might be substantial equity in the properties after payment of the sums which, in the event that the Claimants’ claim is unsuccessful, will be found to be due to Bank of Cyprus, would not prevent the satisfaction of what I will call the impecuniosity gateway. It is clear law that to defeat the contention that there is reason to believe that a corporate claimant will be unable to pay costs if ordered to do so it is necessary for such a claimant to be able to show that it would be in a position to pay those costs within the relatively short time within which it would be ordered to pay those costs. Accordingly, a company with substantial but illiquid assets which, in consequence, could not pay with promptness will still be regarded as one where there is reason to believe that it would be unable to pay costs if ordered to do so.

Given the concession made by the corporate Claimants, the issue for determination in respect of each of those claimants is whether justice requires that an order for security be made. If so, the further discretionary question arises as to what amount of security should be ordered and in what form.

The starting point and the underlying rationale for any order requiring security for costs, perhaps particularly where the ‘gateway’ to security is corporate impecuniosity, is that the successful defendant should not be faced with the obvious injustice of irrecoverable costs. Accordingly, once, in this instance, the impecuniosity gateway is established, the question for determination is whether good reason exists for not ordering security.

In this case, a number of points are raised, the bulk of which are also relevant to the application for security against Mr Stavrinides, personally, and a number of which I can deal with very shortly.

Firstly, although there are cases where the obvious strength of a claim and the corresponding unlikelihood that a costs order would be made in favour of a defendant militates against the grant of an order for security, this is not such a case. This is a case where the merits must await trial and where the prospects of success or failure fall into that large middle area where an attempted evaluation at this stage is, or would be, inappropriate and where the merits do not assist in determining whether, or not, security should be ordered.

Secondly and correspondingly, this is not one of those rare cases where it can be seen at this stage that it is the conduct of the Defendants, in not honouring the alleged agreement, which has given rise to the impecuniosity which has opened up the impecuniosity gateway. While that is the allegation, it being said that the failure of the Defendants to acknowledge and give effect to the agreement to discharge its security and release the Claimants from their liabilities has precluded the Claimants from further borrowing and from taking up further opportunities, that allegation is an allegation which depends solely upon the Claimants’ success on the merits and which can, in consequence, only be determined at trial.

Thirdly, although this is a case where Bank of Cyprus have counterclaimed for judgment against each of the Claimants in respect of their alleged continued indebtedness under and in respect of the facilities, charges and guarantees said by the Claimants to have been discharged, I do not see this case as one of those cases where it is simply happenstance that one party rather than the other commenced the litigation and where, if the Claimants had not commenced this claim then Bank of Cyprus would and where, therefore, it would be unjust for the claiming party, who, in that context, would not have forced litigation upon the other party, to be obliged to provide security. In this case there can be no doubt but that the prime movers in launching this litigation have been the Claimants and that without their claim and their challenge to Bank of Cyprus’s security the occasion for the Bank of Cyprus’s counterclaim for judgment upon the Claimants’ indebtedness would never have come about. Without the Claimant’s claim Bank of Cyprus would simply have moved to enforce its security in the usual way.

There remains, of course, the potential difficulty, if security is ordered against the Claimants, or any of them, and if that security is not provided, such that the Claimants’ claims are stayed, or, ultimately, dismissed, that they would still be entitled to defend the counterclaim and raise all the issues in the claim by way of defence to the counterclaim, while yet, if successful, being unable to procure the formal declaratory or substantive relief required to remove, in particular, the charges over the relevant properties. This problem, or variations of it, was first envisaged in BJ Crabtree v GPT Communications Systems 1990 59 BLR 43. The solution canvassed in Crabtree and again in Dumrul v Standard Chartered Bank [2010] EWHC 2625 Comm. is for the defendant, here Bank of Cyprus, to undertake to discontinue its counterclaim in the event that the claimants’ claims are dismissed arising from their failure to put up security. Miss Benn on behalf of Bank of Cyprus has indicated that her client is willing to give that undertaking. In those circumstances, I do not see that the existence of Bank of Cyprus’s counterclaim, which I would characterise as defensive, or reactive, rather than offensive should preclude the grant of security if such a grant was otherwise appropriate.

The fourth point raised is that of delay. It is said that this is a late application and that for that reason security should not be granted.

There are cases where the fact that a claim is allowed to proceed at length before an application for security is made has the effect of lulling the claimant into the belief that security will not be sought and, consequentially, into pursuing litigation, which had he, or she, realised that security would be sought that claimant would not have pursued.

This is not one of those cases. There is no sense, or suggestion, here, that an early application for security would have led the Claimants to give up on this litigation. The only relevance, as I see it, of delay, loosely so described, in this case, is that, the court, in the exercise of its very broad discretion as to the quantum of any security, may take the view that where a defendant has taken substantial steps in the litigation without the protection of an order for security and then applies that, in those circumstances, security should not be retrospective but should only ordered in respect of costs yet to be incurred.

There remains, in respect of the corporate Claimants, one further matter, special to their situation, as well as two matters applicable both to the corporate Claimants and to Mr Stavrinides personally.

The matter specific to the corporate Claimants pertains to the protection, if any, available to them, in respect of an order for security, by reason of the fact that any liability they may incur for costs will be a liability joint and several with that of Mr Stavrinides. The two general points relate, firstly, to the question as to whether the surplus monies which might arise, on the realisation by Bank of Cyprus of its security, would provide such sufficient ‘cover’ for its costs as to render it unnecessary and, hence, unjust to order further security, save, perhaps, by way of some additional restriction, or notice on the register. This is, as I see it, a different question to the ‘gateway’ question discussed in paragraph 13 of this judgment. The second general point is that of ‘stifling’; whether an order for security against the Claimants, or any particular Claimant, would have the effect of precluding the Claimants, or each, or any of them from carrying their claims to a trial.

I will deal, firstly, with the possible ‘cover’ available to Bank of Cyprus on the sale of the Claimants’ charged assets, having regard to Bank of Cyprus’ security over those assets. The two other matters, stifling and the value to the corporate Claimants of Mr Stavrinides’ potential joint and several liability with the corporate Claimants for Bank of Cyprus’s costs, are closely tied up with the separate ‘gateway’ allegation against Mr Stavranides, that he has taken steps in relation to his assets that would make it difficult to enforce an order for costs against him, and are best discussed alongside that allegation.

Unsurprisingly, there are significant disagreements between the Claimants and Bank of Cyprus as to the value of the various properties over which Bank of Cyprus has security. Included in that portfolio, in addition to the three properties already mentioned, is a further property at 429 Cockfosters Road, charged in favour of Bank of Cyprus as security for guarantees given by the owners of that property, Sotiris and Fotoulla Joannou, in respect of Stovaco’s indebtedness to Bank of Cyprus to the extent of £2.5M.

Taking each property in turn, Bank of Cyprus relies upon a Zoopla valuation of 64 Games Road in the sum of £1.46M, while acknowledging, by reference to the sale of a nearby and similar property in May 2016, for £1.9M that the Zoopla figure might, on a sale, be exceeded. The Claimants put in play a letter from well-known estate agents, Foxtons, dated 20^th November 2017, suggesting that the property go to the market at an asking price of £2.5M.

Whichever value is, or may be, correct, there falls to be deducted the amount outstanding to Bank of Scotland, as first chargee, in the sum of £750,000. Even at the Foxtons asking price, therefore, the amount which would be available to Bank of Cyprus on a sale would be no more than £1.7M. Against that optimum figure, there has to be set Mr Stavranides’ liability to Bank of Cyprus, on the footing that he has lost his claim and that therefore, his indebtedness and the security that he has given for his indebtedness remains in place. Applying the rates of interest applicable to his indebtedness, I am told that by the date of trial that indebtedness will stand at around £1.76M. It follows that even on the Claimants’ best case there would be no equity in Games Road to meet Bank of Cyprus’ costs to and including trial (estimated to be somewhat in excess of £1M). On Bank of Cyprus’ estimation of value, taking a mean between the Zoopla figure and the higher price, which, it is conceded might be obtained, say £1.75M, far from there being available security to meet costs, there would, in fact, be a significant shortfall in the recovery from Mr Stavrinides of his indebtedness to Bank of Cyprus.

Turning to 315 Mount Pleasant, Bank of Cyprus relies upon a desk top valuation carried out by Savills, which, on the footing of the sale, as individual units, of the six two bedroom units to be found at that property, placed an overall valuation of the property at £1.8M. On the basis of a sale of the whole, as one transaction, Savills warned that the achievable price might reduce by 10% to 15%, that is to say, to £1.62M or £1.53M. In contrast, Foxtons had provided Mr Stavranides with indicative values for each unit totalling £2.69M. Foxtons, however, were at pains to say that this was not a formal valuation and was not to be relied upon as such.

Taken in isolation, neither valuation would release sufficient equity, once Stovaco’s liability to Bank of Cyprus was satisfied, to provide substantial security for Bank of Cyprus’ costs; that liability, by May 2019, being a liability in the order of £2.4M. Rather, on the footing of even the top range of the Savills valuation there would be a shortfall in respect of Bank of Cyprus’ recovery of some £600,000.

That said, I do not overlook that, in respect of Stovaco, Bank of Cyprus has the benefit of the Joannous’ guarantee, secured by a first charge over 429 Cockfosters Road, or that a nearby property of similar size apparently sold in late 2016 for some £1.1M. Even allowing for the fact that, Bank of Cyprus’ first charge also secures a separate debt to Bank of Cyprus by the Joannous, themselves, in the sum of circa £460,000, it is apparent that any shortfall arising on the sale of 315 Mount Pleasant might be met from the proceeds of a sale of 429 Cockfosters Road. While, however, that might make good Stovaco’s liability to Bank of Cyprus, any surplus arising on the sale of Cockfosters Road would accrue to the Joannous and would not give rise to any funds available to Stovaco, or to the Claimants generally, which could be utilised as security for costs. Although Stovaco also has a guarantee from Mr Stavranides, it is hard to see, given the position of Mr Stavranides, as just set out, that that guarantee is, as regards Stovaco, of any value to Bank of Cyprus.

In respect of 7-8 Bruce Grove, the position here is that Bank of Cyprus has, again, secured a desk top valuation (this time from Strettons) in respect of what is, as I understand it, an undeveloped bare site. That valuation comes in at £2.8M. It is, however, as it is put by Mr Pitt, the solicitor for Bank of Cyprus, heavily caveated. The site is, for example, without planning permission, in the context, as I read the valuation, of a development regime where developers are more reluctant than they were to take on such a site without an approved scheme of development and where London planning policy has become more focused on affordable and, consequently, less profitable housing. The valuation also assumes (a) that the site is not, as it may be, landlocked and (b) that it has been fully remediated; this in the context of repeated concerns in the report as to the presence of Japanese knotweed upon the land and the destructive effects of knotweed infestation.

The liability, taken to the date of trial, that Bellerive, the owner of 7-8 Bruce Grove, is said to have to Bank of Cyprus is about £1.36M. Ignoring, therefore, the risks and caveats mentioned in the Strettons valuation, there is, ostensibly a potential surplus which could be available out of the site and which could be sufficient to afford Bank of Cyprus substantial security. Given the joint and several nature of the Claimants’ potential costs liability, that surplus, if available, would, on its face, provide a sufficient protection to Bank of Cyprus in respect of the recoverability of its costs from all, or any, of the Claimants.

What is clear, however, from the foregoing, is that the availability of any fund, or equity, which might be available to Bank of Cyprus as protection against the risk that it would achieve an order for costs and yet remain unpaid, is fraught with uncertainty. It is, on any view, only the potential value of 7-8 Bruce Grove which might afford a sufficient protective surplus once Bellerive’s liability to Bank of Cyprus is met and, of all the properties in play, it is Bellerive’s bare development site where, necessarily, the potential value is most in question. It is more than apparent from Strettons’ desk top valuation, firstly, that for anything like the suggested value to be achieved the site would first have to be remediated and any issues of access resolved and, secondly, that, even then, any developer purchaser would be very cautious as to the purchase, given the absence of planning permission and changes in the current approach to the grant of permissions. It is hard, if not impossible, to envisage a speedy sale at anything like the value postulated by Strettons.

In that circumstance, I am unpersuaded that the possibility that there might be funds available to cover Bank of Cyprus’ costs from any surplus arising upon a sale of 7-8 Bruce Grove after repayment by Bellerive of its liabilities to Bank of Cyprus affords Bank of Cyprus any sufficient protection in respect of those costs and so justifies, or might justify, the refusal of an order for security.

It is, in this context, material that, notwithstanding the ostensible equity within 7-8 Bruce Grove, Bellerive has not, as explained by Mr Stavranides, been able to raise loan finance upon that property. If no commercial lender will lend against that property, it is hard to see why Bank of Cyprus should be required to accept the possible, or potential, equity in that property as affording sufficient security for its costs. As explained in, among other cases, AP (UK) Ltd v West Midlands Fire Authority [2002] CLC 766, where a bank or lending institution is unwilling to lend against a particular property, then, unless some special circumstance exists whereby the defendant should accept that property, or its value (and there is none here), that property, or the residual equity in that property, is, in principle, inadequate as security.

I turn, therefore, to what I see as three associated questions; firstly, as to whether Mr Stavrinides has, as alleged, dealt with his assets in such a way as to make it difficult to enforce a costs order against him, such as to render him open to an application for security; secondly, as to whether an order for security against the Claimants, or any of them, would stifle the Claimants’ claims, or the claim of any particular Claimant and, thirdly, whether the fact that Mr Stavrinides is a co-claimant with the corporate Claimants and would, therefore, be jointly and severally liable with the corporate Claimants for Bank of Cyprus’ costs has the effect of protecting the corporate Claimants from themselves providing security.

The inter-relationship of those questions arises, as I see it, in this way. If the court can be satisfied that Mr Stavranides is a man of accessible means, such that there would be no difficulty in recovering costs from him, should he and his co-Claimants be ordered to pay those costs, then that would be a good reason for not ordering the corporate Claimants to give security. In respect of that, however, it is the bank’s case, while asserting that Mr Stavrinides is a man either of means, or with access to means, and, therefore, capable of paying costs, that Mr Stavrinides has put assets out of the way such as to make the recovery of costs difficult and that it is for that reason that he should give security. If that be right, then, at least until Mr Stavrinides, himself, provides security, his shared liability for costs with the corporate Claimants does not provide Bank of Cyprus with adequate ‘cover’ in respect of its costs and does not, therefore, preclude, or protect, the corporate Claimants from being made the subject of an order for security. It is, in any event, Mr Stavrinides’ case that he is not a man of, or with access to, serious wealth and, therefore, that, any significant order for security in respect either of himself or of the corporate Claimants would, in consequence, stifle the Claimants’ claims. If that be right, then his joint liability for costs, with his co-claimants, would not provide Bank of Cypus with any protection, albeit that, in that circumstance, the fact that the Claimants’ claims would, or might be, stifled, would, of itself, provide good reason for not ordering security.

There does not seem to me to be much doubt but that, at least to an extent, Mr Stavranides has dealt with, or taken steps in respect of his assets which would, in respect of those assets, make it difficult to enforce an order for costs against him. To take three obvious matters; Bellerive, which Mr Stavrinides accepts is his asset, has been set up as a Seychellois company with Nevis corporate shareholders; Mr Stavrinides’ shareholding in Stovaco, itself an offshore asset, is held behind a trust; the shares in another company, Muster Services Ltd (Muster), of which Mr Stavrinides was, until July 2016, the sole shareholder, were, at that date, transferred to an overseas company, Herald Management Ltd, itself apparently under the control of a Nevis trust.

In regard to Muster, it is right to say that the materials relating to that company were only put to Mr Stavrinides by Stephenson Harwood, acting for Cyprus, by its letter of 10^th January 2018 and, therefore, that those materials are not dealt with by Mr Stavrinides in his evidence; that evidence, purporting to provide full and frank disclosure of all his assets, having been filed on 5^th January 2018. That said, however, Mr Stavrinides was in court when this matter was heard and his counsel, Mr Page, was given considerable latitude by me, in putting forward his client’s position. At no point, in the course of those submissions, did Mr Page, assert that Muster had not been, or was not, Mr Stavrinides’ company, or that the shareholding in that company, now, seemingly, protected behind a Nevis trust, was not, or had not been his shareholding; this notwithstanding that the relevance of Muster was plainly foreshadowed in the skeleton arguments lodged both by Bank of Cyprus and by Cyprus.

In regard to other possible assets of Mr Stavranides, the position is less clear.

Bank of Cyprus and, at the hearing of this matter, Cyprus attached considerable weight to the fact that Mr Stavranides had been, until 2016, the sole shareholder and director of a company, Harvest Investment Solutions Limited (Harvest), and that, in April 2016, that shareholding had been transferred to an overseas company, NV Management Company Ltd. While Mr Stavranides has retained his directorship, Harvest is now said to be under the control of the trustees of a Nevis trust.

Bank of Cyprus attach similar weight to the fact that Mr Stavrinides has been the sole director of another company, Goldflex Investment Ltd (Goldflex), since April 2013, that the shares in that company, albeit not previously held in his name, were recently (February 2017) transferred to another company, Aurora Management Ltd, and that Goldflex is now shown to be under the control of a Nevis trust.

In each instance, Bank of Cyprus invites me to draw the inference that Mr Stavrinides was and is the ultimate beneficial owner of the shareholdings in the relevant company and that the share movements and the intervention of a Nevis trust has been designed to render his shareholdings less visible and less accessible.

Mr Stavrinides has always denied any beneficial interest in the shares of these companies and, by an email letter, dated 21^st November 2017, his accountant, Mr Papapetrou, as accountant, also, for both Goldflex and Harvest, has stated unequivocally that Mr Stavrinides has only ever been a nominee in respect of his directorship, or any shareholding, in, or of, either company and that he has never had any beneficial interest or benefits from the companies.

While I can understand Bank of Cyprus’ suspicions as to Harvest and Goldflex, I am not persuaded that I should go behind, in particular, the clear statement from Mr Papapetrou, as to Mr Stavrinides’ nominee status in respect of the two companies. I do not, therefore, treat the share transactions and activities in respect of Harvest and Goldflex, as described above, as constituting, or amounting to, steps taken by Mr Stavrinides in relation to his assets.

I am likewise not persuaded that this is a case where I should, upon the basis of what was termed, by counsel, for Cyprus, the money washing through Mr Stavrinides’ accounts, draw the double inference, contemplated in the Noga v Abacha litigation [2004] EWHC 2601 (Comm) and Dubai Islamic Bank PJSC v PSI Energy Holding Company BSC [2011] EWCA Civ 761, that Mr Stavrinides has (a) failed to disclose assets and (b) that that failure is evidence of the fact that steps have been taken to put those assets out of the way of his creditors.

There is no doubt, on the basis of the bank statements produced by Mr Stavrinides, that substantial sums have passed through his banking account in the period August 2016 to November 2017. His case, however, is that, over and above an income of circa £7500 per month, which reflects the net monthly income achieved from Stovaco’s lettings of 315 Mount Pleasant and which Mr Stavrinides’ brother and sister have given him the use of, the monies flowing through his account stem from borrowings that he has been able to make from family and friends and do not evidence, or indicate, significant undisclosed funds, or assets, or, therefore, assets which he has put out of the way of his creditors.

I do not think that Mr Stavrinides’ disclosure has been perfect. I have already referred to Muster, the existence of and shareholdings in which, were not disclosed or explained by Mr Stavrinides. It is also established that Mr Stavrinides is the owner of a company called Autodelta (London) Limited (Autodelta) and that that company advanced a director’s loan of £19,000 to Mr Stavrinides in December 2016. Neither of those companies, however, are shown to have either substantial balance sheet values, or any significant income stream. Mr Stavrinides, also, while making reference to his mother’s estate, to property in Florida and Cyprus and to the lack of equity in those properties, has disclosed no details, or values in respect of either the properties or the estate.

As to other ‘inputs’ into Mr Stavrinides account, there are to be found payments from his accountants, from a Mr Antoniou, who may well be the previous employee of Cyprus, who has given a witness statement to the Claimants, from a company called YK Sparks Ltd and from a number of named individuals (two, from a G Georgiou, totalling £50,000). There is also to be found a loan of £50,000, apparently emanating from Connect Lettings, the managing agents of 315 Mount Pleasant, a number of payments from (and to) an unidentified account with reference 515000 and a payment of £12,000 from an entity called Brentview, with which Mr Stavrinides name appears to be associated.

On the whole and with the exception of the Autodelta payment and, perhaps, the Brentview payment, the broad pattern shown up by the account seems to me to reflect Mr Stavranides’ case, namely that he has been in receipt of loans and other payments from a number of sources and that it is upon funds of that nature, rather than substantial undisclosed assets, or funds of his own, that he has been relying for finance.

In the result, while my conclusion is that there has been some non-disclosure of assets, I do not think that that non-disclosure has been substantial. Nor, in consequence, do I think that one can properly infer from that non-disclosure that Mr Stavranides has taken steps in respect of his assets, other than in respect of those already identified, such as would make it difficult to enforce an order for costs.

In regard to the extent of Mr Stavranides’ non-disclosure, I have drawn attention to Muster, to Autodelta, to the want of detail as to Mr Stavranides’ mother’s estate, to the lack of any values pertaining to the Cyprus and Florida properties and to the possibility that Brentview is an entity in which Mr Stavranides may have some interest.

I have seen nothing, however, such as to make me think that there are large hidden values in these assets, or that they, or any of them, reflect substantial sources of funds. Muster had, at May 2016, net assets of circa £47,000, of which only £27,000 reflected cash in hand, the balance being the difference between monies owed to and monies owed by the company. Autodelta was, as at September 2016 in asset deficit to the extent of some £17,000. Its creditors greatly exceeded its debtors and its cash, stock and other tangible assets stood only at some £15,000. The loan it has already advanced to Mr Stavranides will have stretched, indeed overstretched, its resources.

Looked at more generally, the fact that Mr Stavranides has, as shown by his bank account, been drawing monies from multiple and distinct external sources seems to me to indicate, with some clarity, that he is not benefitting from substantial hidden personal resources, or, for example, that he has significant resources available either from his mother’s estate, or from realisable equity in the Cyprus or Florida property. Rather, it seems to me that he is, as he says he is, finding money where he can. Without in any way criticising either his solicitors or counsel, there is nothing in the presentation or preparation of his case which indicates to me that Mr Stavranides is doing anything other than prosecute his case on relatively limited resources. I do not find it in any way hard to believe that, in prosecuting this claim, he has had to make, as he tells me, payment arrangements with his solicitors, or that his ability to instruct counsel is and has been limited.

This is not a case, like Dubai Islamic Bank, where the party against whom security was sought asserted a requirement of £6,000 per week in respect of his lifestyle, where he had the benefit of very expensive legal representation and where his explanation of his resources was pitched at a very high level of generality. Here, I see a respondent to the application for security with a limited budget for representation and who, albeit in a somewhat piecemeal fashion, related, perhaps, to the costs of such representation, has given substantial, if not perfect, disclosure as to his assets and resources, in circumstances where I am not persuaded that the failures of disclosure have resulted in substantial funds, or assets, being hidden from the court.

The consequence, or effect, of the foregoing is that, while I am satisfied that Mr Stavranides has taken steps in respect of his assets which would, potentially, render the recovery of costs more difficult, he has only done so in the respects set out and dealt with in paragraph 40 of this judgment.

On that footing, it seems to me that, while the relevant ‘gateway’ to an order for security has been established, a serious question arises as to whether the extent and impact of the steps taken by Mr Stavranides, in respect of his assets, warrants, or renders it just to make, an order for security against him.

It seems to me that the rationale behind this particular ‘gateway’ provision, under CPR 25.13(2)(g), is that a defendant should not be disadvantaged, in respect of his potential recovery of costs, by the fact that steps have been taken by a claimant which would, in the event that that defendant was awarded his costs, have the effect of rendering the recovery of those costs more difficult. Granted that rationale, it further seems to me that, if, in fact, the steps taken have had no, or minimal, adverse effect upon the defendant’s ability to recover his costs, then, logically, there is no, or only a minimal basis, for the court ordering security. Put shortly, it seems to me that the order for security should reflect the adverse consequence, if any, flowing from the satisfaction of the gateway condition giving rise to an entitlement to seek security and that, if there is no such adverse consequence, or if the adverse consequence is insignificant, then that is and ought to be a good reason for refusing an order for security.

How, then, does this case stand?

It does not seem to me that the steps which have been shown to have been taken by Mr Stavrinides, such as to render Bank of Cyprus’ recovery of costs, potentially, more difficult have, in fact and on the facts of this case, had any significant adverse effect upon Bank of Cyprus’ prospects of recovery.

In regard both to Stovaco and Bellerive, the fact that, in the one case, Mr Stavrinides’ shares are held behind a trust and, in the other, his acknowledged beneficial interest is hidden behind a Nevis trust, will, as I see it and for so long as Stovaco and Bellerive remain active co-Claimants, make no difference at all to Bank of Cyprus’ prospects of recovery. Any order for costs will, in that context, be a joint and several order and will enable Bank of Cyprus to enforce its order, as best it can, against the assets of Stovaco and Bellerive, in the jurisdiction, that is to say against 315 Mount Pleasant and 7-8 Bruce Grove, quite irrespective of Mr Stavrinides’ shareholdings in those companies and quite irrespective of the way, or manner, in which those shares are held.

In regard to Muster, given what is known about that company and its assets, it is hard to see how a charging order over its shares, which would be the remedy available to Bank of Cyprus, had Mr Stavrinides not transferred his shares offshore, would give rise to any significant recovery. It seems unlikely, indeed, that a well advised judgment creditor would regard such an enforcement exercise as worthwhile.

In the result and in circumstances where I am not persuaded that the steps taken by Mr Stavrinides in respect of his assets have had, or will have, any significant effect upon Bank of Cyprus’ recovery of costs, if such an order is made, I do not think that it is just to make an order that Mr Stavrinides give security.

It is possible that that position might change. If, for example, Stovaco and Bellerive were ordered to give security and failed to do so, such that their claims were stayed, or struck out and such that any costs ordered at trial to be paid by Mr Stavrinides to Bank of Cyprus were ordered against him alone, then, one can see that the fact that, in that circumstance, Bank of Cyprus might only be able to recover any costs out of 315 Mount Pleasant or 7-8 Bruce Grove by reference to Mr Stavrinides shareholdings in the proprietors of those properties and might be handicapped in that process, by the steps that he has taken in respect of those shareholdings, might well render it appropriate to make an order for security, reflective of the value of the assets, which, by reason of the steps taken in respect of his shareholdings, Bank of Cyprus might have difficulty in recovering by way of enforcement. In that circumstance, should it arise, the question which would be raised is whether, having regard to Stovaco and Bellerive’s liabilities to Bank of Cyprus, those shareholdings would, in reality, provide, or have provided, a significant resource for enforcement. If not, then, as it seems to me, the case for security, under the CPR 25.13(2)(g) gateway, remains moot.

Reverting to the application for security, in respect of the corporate Claimants, my conclusions as to the depth and extent of Mr Stavrinides’ resources, set out above, provides, as it seems to me, a clear answer to the question, posed earlier, as to whether the fact, that Mr Stavrinides will, or would, stand alongside the corporate Claimants, in respect of any order for costs, constitutes a good reason for those corporate Claimants not, themselves, to give security. The clear answer to that question is ‘no’. Mr Stavrinides has not been shown to have anything like the readily available resources which might be required to meet any order for costs made against himself, or the corporate Claimants, such as to warrant, or justify, the court in refusing to order the corporate Claimants to give security.

It remains to consider, in respect of the corporate Claimants, the question of stifling and the allied, or linked, question as to the quantum of any security to be ordered to avoid stifling.

It is, of course, well understood, where, as here, it is submitted, on behalf of the corporate Claimants, that an order for security would stifle their legitimate claim, that the burden lies upon those arguing that contention to establish not merely that they, themselves, have not the resources to provide security, but, also, that they do not have access to those who might have such resources and who might reasonably be expected to provide such resources, in support of their claim.

It does not seem to me, however, that that approach is, or should be, entirely mechanistic, such that security should automatically be ordered and the risk of stifling presumed not to exist, wherever and whenever it can be demonstrated that there has been some failure to satisfy the court as to every potentially available source of funding. The ultimate question must, given that it bears upon access to justice, be whether the court is satisfied that the grant of security will not stifle a realistic, or legitimate claim. A failure, fully, to meet the burden imposed upon those asserting stifling to prove absence of resources, while an important consideration in assisting the court to a determination of the ultimate question, cannot, in every case, absolve the court from that determination, or, automatically, dictate the answer to the question.

Similarly, the question of stifling cannot be separated out from the question of quantum. It may well be that, at one level of quantum, a claim will not be stifled. At another level of quantum, the effect, or impact, of a direction to give that level of security will operate so as to stifle a claim. The court, in ordering security, even where there may have been failures of disclosure in respect of available resources, must take a realistic view as to the funds likely to be available to support the claim and provide security and should not, consequent upon a failure fully to establish an absence of resources, automatically assume that those resources would be sufficient to provide full security. There is, otherwise, a very real risk that a claim will be inadvertently stifled. It is considerations of this nature which underpin the very broad discretion that the court has in respect of the quantum of security to be ordered.

In this case the corporate Claimants, acting by Mr Stavrinides, have not fully established the absence of available resources. The persons who might be expected to support the corporate Claimants in their litigation are those with interests in those companies. In the case of Bellerive, beneficially owned by Mr Stavrinides, it is Mr Stavrinides, therefore, who might be expected to support that company’s litigation. In the case of Stovaco, it is Mr Stavrinides, together with his brother and sister, who, together own 75% of the shares in Stovaco (Chrysoula 50%, Yiannakis 25%), who might be expected to support the litigation.

Mr Stavrinides’ resources and sources of funds have already been discussed in this judgment. Subject to the income stream from Stovaco, derived from the rental income from 315 Mount Pleasant and, to which, should they choose, his brother and sister could seek to appropriate 75%, he has been, as I put it earlier, finding money where he can. I have already indicated that, in my view, there is no evidence of any substantial hiding of assets, or that he has other significant, or substantial resources that could be utilised in support of these proceedings, or for the provision of security.

What does, however, appear to be the case (and is, indeed acknowledged and admitted) is that Mr Stavranides does have access to friends and connections, who have been prepared to give him significant financial support. While one should not assume that support to be open ended, or that his friends and connections would either have the will, or the resources, to provide security at the level sought by Bank of Cyprus, it does seem to me that the reality is that, if Bellerive and Stovaco were directed to give security at a realistic level, then Mr Stavrinides, as owner of Bellerive and a significant shareholder in Stovaco, is likely to be able to procure sufficient support for those companies, from those who have assisted him, such as to ensure that the corporate claims are not stifled.

That likelihood is reinforced, in respect of Stovaco, by the fact that the shares in that company are owned, as to 75%, by Mr Stavrinides’ brother and sister and that, in consequence, it is they who will be the substantial beneficiaries of Stovaco’s claim should Stovaco succeed in this litigation. In that circumstance, the realistic expectation must be that their resources, as well as those of Mr Stavrinides are, potentially, available to Stovaco in support of its litigation.

No information has been provided as to the resources either of Yiannakis or Chrysoula. What can be said, however, is that they are, collectively, of sufficient substance as to allow Mr Stavrinides the use of a substantial income stream from 315 Mount Pleasant. The ready inference is that this is not the finite limit of their resources. It would be surprising if all their resources had been committed to this litigation. On the other side of the coin, however, the fact, that this litigation is being funded by all three Claimants on something of a hand to mouth basis, seems to me to indicate that their residual resources, while existent, are not overly substantial. I am not sufficiently cynical, in the context of this case, to conclude that my very clear impression, that this litigation is being pursued with the benefit, only, of a modest budget, is an impression created by the Claimants in order to disguise the true depth of their available resources.

In the result, my conclusion, both in respect of Bellerive and Stovaco, is that a measure of security can be provided without running a serious risk that this litigation will be stifled, but that an order for security at anything like the levels contemplated by Bank of Cyprus would stifle the claim.

In those circumstances, I have to find a figure for security which strikes the appropriate balance. Doing the best I can, I think that figure should be £100,000, but that a sensible amount of time should be provided to Stovaco and Bellerive to raise that amount.

The effect of the foregoing is that I will dismiss Bank of Cyprus’ application so far as it relates to Mr Stavrinides, personally, but I will allow the application for security in respect of Bellerive and Stovaco; limited, however, to an order that they pay into court the sum of £100,000. I will hear submissions, as to the time which they should have to put in that money and as to whether their claims should be stayed pending the payment of that money, when this judgment is handed down.