In re The SIL VER DAWN

- Headnote -

Security for costs against impecunious plaintiff ordinarily resident outside Hong Kong - Ord. 23 rl(I) R.S.C. - If plaintiff cannot raise the funds to meet order for security, that would be good reason for not ordering security: dictum in De Bry v. Fitzgerald [1990]1 WLR 552 at 559A applied. Appeal allowed.

IN THE COURT OF APPEAL

1992, No. 171
(Civil)

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J U D G M E N T

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Litton, J.A.:

1. This is an interlocutory appeal. The writ was issued on 8 November 1989. The plaintiff was the owner of a fishing vessel "Nan Ao 33066". He claims damages against the owners of the "Silver Dawn" arising from a collision which occurred off the coast of Shanwei, PRC on 4 November 1989.

2. On 10 January, 1992, the Statement of Claim was served. This put the whole of the blame for the collision on the Silver Dawn and averred that the Nan Ao was stationary in the water displaying a large bamboo sphere and had just raised its fishing net when the collision occurred.

3. The Defence was served on 30 April 1992. It admits that the Silver Dawn was underway at the time, and therefore had responsibility for avoiding a collision. The Defence however does not admit that the fishing vessel was stationary in the water.

4. On 22 September 1992 the defendants took out a summons to require the plaintiffs to provide security for the defendants' costs in the action, on the ground that the plaintiff is ordinarily resident out of the jurisdiction. The summons sought an order to stay the proceedings until the security is provided.

5. On 14 October 1992 Barnett J. ordered the proceedings to be stayed until the plaintiff provided security for the defendants' costs in the sum of $500,000.

6. In the court below the plaintiff's position was stated by two affidavits. The relevant one was that by Mr. Kerr, a partner in the plaintiff's solicitors' firm, who said:

" 'The Nan Ao 33066' was the only fishing vessel owned by the Plaintiff and was financed in part by a bank loan. Since the sinking of the boat, the Plaintiff has been unable to acquire a replacement. At present, his only means of making a living is by selling vegetables. The family of his brother, who was killed when the Plaintiff's boat was sunk, relies on the support of relatives. Since the sinking of the vessel, the Plaintiff has lost his only real asset. As with virtually all fishing vessel in China of this type, the Plaintiff's vessel was uninsured.

The Plaintiff is impecunious as a result of the sinking (by) the 'Silver Dawn' and if any order for security was made, his right of redress would be effectively frustrated."

7. The affidavit was put in at very short notice and the information came second-hand: but this is permissible in interlocutory proceedings under Order 41 r5(2) of the Rules of the Supreme Court.

8. There is nothing in the inherent probabilities of the case as they stood before the judge to contradict any of Mr. Kerr's statements. The underlying facts have since been elaborated upon in an affidavit from the plaintiff Mr. Wang Niu which we admitted into evidence by consent.

9. The judge's jurisdiction to make the order is contained in Order 23 rl(1) of the Rules of the Supreme Court which sets out a number of circumstances in which an order for security can be made against a plaintiff. The relevant one is paragraph (a), that the plaintiff is ordinarily out of the jurisdiction. The rule goes on to say that "if having regard to all the circumstances of the case the court thinks it just to do so", the court can order the plaintiff to give such security for the defendants' cost "as it thinks just".

10. The justice of the case expressed by Mr. Michael Thomas, QC on behalf of the plaintiff is this: (a) The plaintiff's claim against the defendants is brought in good faith for a substantial sum; approximately $1m. (b) The plaintiff has a reasonable prospect of success. There are witnesses from three other fishing vessels to the effect that the Nan Ao 33066 was stopped in the water in clear visibility at the time of the collision, whilst the defendants' vessel was on their own admission underway and therefore clearly had responsibilities for taking action to avoid a collision. (c) The defendants have no counterclaim against the plaintiff; there is therefore no risk of the plaintiff being liable at the end of the day to pay the defendants. (d) The plaintiff plainly lacks the means himself to put up security for the defendants' costs. He is now heavily in debt as a result of the collision. (e) The plaintiff's impecuniosity has been brought about by the conduct of the defendants. (f) The defendants have, it would appear, far greater financial resources than the plaintiff and are probably covered by insurance.

11. Reference has also been made to a number of cases where the wide discretion under Order 23 r1(1) of the Rules of the Supreme Court has been discussed. In the case of Porzelack K.G. v. Porzelack (U.K.) Ltd. [1987] 1 WLR 420 at 422H, Sir Nicholas Browne-Wilkinson VC said this:

"The purpose of ordering security for costs against a plaintiff ordinarily resident outside the jurisdiction is to ensure that a successful defendant will have a fund available within the jurisdiction of this court against which it can enforce the judgment for costs. It is not, in the ordinary case, in any sense designed to provide a defendant with security for costs against a plaintiff who lacks funds. The risk of defending a case brought by a penurious plaintiff is as applicable to plaintiffs coming from outside the jurisdiction as it is to plaintiffs resident within the jurisdiction."

12. Mr. Thomas also relies upon a passage at p.426F to this effect:

"It is always a matter to be taken into account that any plaintiff should not be driven from the judgment seat unless the justice of the case makes it imperative. I am always reluctant to allow applications for security for costs to be used as a measure to stifle proceedings."

13. Similar views have been expressed by Lord Donaldson MR in De Bry v. Fitzgerald [1990]1 WLR 552 at 559A to the effect that if difficulty in enforcing an order for costs against the plaintiff should "arise from the impecuniosity of the plaintiff, the court will of course have to take an account of the likelihood of his succeeding in his claim, for it would be a total denial of justice that poverty should bar him from putting forward what is prima facie a good claim".

14. And lastly Mr. Thomas relies upon the judgment of Bingham LJ in Thune v. London Properties Ltd. [1990]1 WLR 562 at 573 where, having cited with approval the judgments in Porzelack and De Fry v. Fitzgerald he said this:

"If the plaintiff is impecunious and an order for security for costs may stifle his claim, that may very well be a powerful reason for not ordering security."

15. Mr. Clifford Smith, counsel for the defendants, raises in effect one point in answer to the plaintiff's arguments namely: the plaintiff has on the evidence failed to show impecunosity; Mr. Smith accepts that if impecuniosity were established, that would be good reason for not making the order. In essence, Mr. Smith says this: The further evidence, far from strengthening the plaintiff's case, has weakened it. It shows that the plaintiff has a house in his native village which, though mortgaged to the bank, is an asset; and further that the Village Brigade has managed to persuade the bank from foreclosing on the mortgage by guaranteeing that they would account for the debts outstanding; this shows that the plaintiff has access to resources which could well be used to satisfy the order for security for costs. It is relevant at this juncture to cite the passage in Mr. Wang Niu's affirmation in full. This is what he said:

"10. By way of security for that loan, my boat had been mortgaged to the Bank and I had also deposited the Title Deeds of my house with the Bank. The house is a single story brick house I inherited from my parents who are both dead. The Bank have been mentioning to sell the property but the Village Brigade (appointed organisers of the village) have guaranteed to the Bank they will account for the amount outstanding when the present Action has ended, utilising the recovery achieved." (Emphasis added).

16. Mr. Smith argues that it is not sufficient for the plaintiff to show that he does not personally have assets within his own control; he has to show that he is unable to raise the amount of the security elsewhere; Mr. Smith says the plaintiff has failed to show this.

17. He relies on two cases: (1) Kloeckner v. Gatoil [14 March 1990] Court of Appeal (unreported) which deals with an international conglomerate of companies: facts which appear to me to be very far removed from the those of the present case. (2) Mr. Smith relies on a passage in the judgment of Lord Diplock in Yorke Motors v. Edwards (1982)1 WLR 444 at 449 to the effect that a-legally-aided party with nil contribution may be able to raise substantial sums. That case concerned conditional leave being given to the defendant to defend in Order 14 proceedings; the defendant was a dealer in motor-cars. The case itself arose from a transaction concerning a second-hand Rolls-Royce: circumstances remote from those of a fisherman in a small village in Guangzhou.

18. In my judgment the cases referred to by Mr. Smith do not support his argument. On an application under Order 23 rl where it is shown that the plaintiff is impecunious, and from all the circumstances is unlikely to have the ability to raise large sums, he does not have the additional onus of showing that his friends, relatives and neighbours will not dig into their pockets to support him. The matter cannot be generalised; it must depend upon the circumstances of each case. What the argument boils down to is this. Is it reasonable to infer from the evidence that the Village Brigade of Zhong Zhu Village on Nan Ao Island will support the plaintiff with hard cash or assets in the event that the court orders that security in the amount of $500,000 be provided? The evidence before the court is, in my view, wholly one way. It is contrary to the proposition advanced by the defendants.

19. What the plaintiff's affirmation says is that he and those supporting him in the litigation are looking to the prospect of substantial recovery and it is that which constitutes the means for fending-off the threatened foreclosure by the bank. That is a far cry from evidence of a plaintiff having access to substantial resources elsewhere.

20. In my judgment the facts before the judge pointed only one way namely that the justice of the matter required that no security be ordered. The judge, in my view, plainly erred when he said this:

"I am not prepared to take into account the Defendants may have destroyed the Plaintiff's only real asset and impoverished the Plaintiff."

21. In my judgment, if there is a real possibility that is the situation before the court (as appears to be the position here), that is a very relevant circumstance in the exercise of the discretion under Order 23 rl. I would accordingly set aside the exercise of the judge's discretion as being erroneous in law, allow the appeal and in exercising my own discretion conclude that no security should be ordered to be provided by the plaintiff for the defendant's costs in the litigation.

Power, V.-P.:

22. I concur.

Godfrey, J.A.:

23. I concur in the conclusion that my Lord, the Vice-President and my Lord Mr Justice Litton have reached, though I arrive at it by a slightly different route.

24. There is fresh evidence before us here, which was not before the judge, and the parties are agreed that we have to exercise our discretion in the matter de novo. But upon what principle?

25. The principle applicable appears to me to be as follows: Where a plaintiff outside the jurisdiction of the court resists the making of an order for security for costs against him on the ground of his impecuniosity, he must be prepared to prove that the effect of an order against him would be to stifle his action, so that it would be a denial of justice for the court to make the order. It does not follow from the mere fact that a man has no capital of his own that he is unable to provide security for the costs of his action. He may have friends; he may have business associates; he may have relatives; all of whom can help him in his hour of need, as Brandon L.J. pointed out in the Court of Appeal in M.V. Yorke Motors v. Edwards [1982]1 WLR 444 (see the speech of Lord Diplock at p.449).

26. So the court must, in every such case as this, decide whether, on the totality of the evidence, it ought to be inferred that it would really be impossible for the plaintiff to provide or procure the provision of the sum in which security would otherwise be ordered. Looking at the totality of the evidence in this case, the plaintiff has satisfied me that it really would be impossible for him to provide or procure the provision of $500,000 as security. That is really the end of the matter.

27. I would add only this. In the present case, the plaintiff says, not only that he is impecunious, but that his impecuniosity arises from the conduct of the defendants. In these circumstances, he says, there is a further powerful reason for refusing the order for security for costs which has been sought against him. I agree. In my judgment, it is established by Rourke v. White Moss Colliery Company (1876)1 C.P.D. 556 as explained in Farrer v. Lacy, Hartland, & Co. [1885]28 Ch.D.482 (especially per Bowen L.J. at p.485) that this is a consideration which the court ought to bear in mind on applications of this sort.

28. For these reasons I agree that this appeal should be allowed.