Huscroft v P & O Ferries Ltd – jurisdiction under CPR 3.1 [2010] EWCA Civ 1483 www.bailii.org/ew/cases/EWCA/Civ/2010/1483.html

The power to make an order for a sum to be paid into court under CPR 3.1(3) should only be used as a condition when making another order for the purpose of exercising control over the way in which the proceedings are conducted in the future. The rule does not give the court a general power to impose conditions on a party.

CPR 3.1(3) states:  

“When the court makes an order, it may –

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

(b) specify the consequence of failure to comply with the order or a condition.”  

CPR 3.1(5) states:  

“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 a rule, practice direction or a relevant pre-action protocol.”

The defendant applied for an order that the claimant in this personal injury case should pay £20,000 into court as security for costs under CPR 3.1(3) or (5) on the ground that the claim did not have a reasonable prospect of success, that the claimant had failed to comply with court orders and that he did not have the financial resources to meet a judgment for costs in the defendant’s favour. The district judge held that, as the claimant had not failed to comply with “a rule, practice direction or a relevant pre-action protocol”, he was unable to make an order under CPR 3.1(5). He made an order that the claimant pay £5,000 into court, failing which the claim would be struck out, under CPR 3.1(3).

On the claimant’s second appeal to the Court of Appeal, the court held that the power to make an order for what is in effect security for costs is not limited to cases where there is a history of repeated failures to comply with orders of the court or where the party in question is not litigating in good faith, as was held in Halabi v Fieldmore. However, unlike CPR 3.1(5) which is directed to what has gone on in the past, CPR 3.1(3) is directed towards controlling the litigation in the future. Although the claimant’s conduct of the case left much to be desired, it did not justify attaching a condition that the claimant pay money into court as security for the defendant’s costs to a wide-ranging order for directions of the kind routinely made at a case management conference. Had it been appropriate to make an order, the sum of £5,000 was reasonable.

Comment

The Court of Appeal first considered this power under CPR 3.1 in Olatawura v Abiloye. It came back before the court in Ali v Hudson where it held that, although an impecunious individual resident within the jurisdiction cannot be required to give security for costs under CPR 25, the court may make an order for security for costs under CPR 3.1(3) and (5) but the power should be exercised with great caution. Only in an exceptional case, if ever, should a court order security for costs if the order would stifle a claim or appeal. In any event, an order should not ordinarily be made unless the party concerned can be shown to be regularly flouting proper court procedures or otherwise to be demonstrating a want of good faith, namely a will to litigate a genuine claim or defence or appeal as economically and expeditiously as reasonably possible in accordance with the overriding objective. An order will not be appropriate in every case where a party has a weak case. The weakness of a party’s case will ordinarily be relevant only where he has no real prospect of succeeding.

The present case shows that a defendant who wishes to protect his position when faced with an unmeritorious claim and a difficult claimant needs to set up an application for security for costs under CPR 3.1 with care. This will be relevant not only where the claimant is an individual resident in the UK but also where they are an EU resident who lives outside the jurisdiction, since security cannot be ordered under CPR 25 in either case. Here the court noted that the defendant did not apply for summary judgment despite the fact that the claim appeared to have limited prospects of success. It was also material that, although the defendant claimed that the claimant’s manner of conducting the litigation had led to an increase in costs, no one had attempted to determine the extent to which this was so.

The district judge was under the impression that he had a general power to impose conditions on the party when making an order for directions, which is not the case. Where the claimant has not clearly acted in breach of the rules justifying an order under CPR 3.1(5) but has been litigating in a way which does not further the overriding objective, a defendant will probably need to apply for summary judgment in order to justify the court in imposing a condition of payment of security under CPR 3.1(3) if the claim is to continue.