MUHAMMAD IBRAHIM v. ASMAT A. M. KHAN

Headnote

Courts, practice and procedure - relevance and proof of Defendant's impecuniosity in R.S.C. 0.14 procedure.

If a Defendant seeks to rely on the principle that it would be a wrong exercise of discretion under R.S.C. 0.14 to impose upon him, as a condition of granting leave to defend, a financial condition that it would be impossible for him to fulfil (for it would be tantamount to giving judgment for the Plaintiff, notwithstanding the Court's opinion that there was an issue or question in dispute which ought to be tried) it is incumbent on him, if he has chosen not to mention his means in his affidavit showing cause, to inform the Judge that he wishes to be given an opportunity of adducing evidence (if the extent of his impecuniousity is not conceded by the Plaintiff) to show that he would not be able to meet the conditions imposed. He cannot remain silent, and demand as of right to adduce fresh evidence on that issue before the Court of Appeal.

(M.V. Yorke Motors v. Edwards [1982] 1 W.L.R. 444: Hwang Yiou Kwa v. Morgan Guaranty, Civil Appeal No. 78 of 1985, unreported, applied.)

_________________________

REASONS FOR JUDGMENT

_________________________

Fuad, J.A.:

1. This is an appeal by Mr. Asmat A.M. Khan from a decision of His Honour Judge O'Dea, sitting as a Deputy Judge of the High Court, given on 1 October this year, allowing in part his appeal from an Order by Master Betts entering summary judgment against him under R.S.C. 0.14. The Deputy Judge set aside the Master's Order but gave leave to defend on condition that Mr. Khan paid the whole amount claimed in the action ($512,350) into Court within 14 days. Mr. Khan did not fulfil this condition and judgment in default was entered against him.

2. At the conclusion of the hearing, we dismissed the appeal and I now give my reasons for agreeing with my Lords to this course.

3. By his Notice of Appeal, Mr. Khan asked this Court to set aside the Deputy Judge's order and grant him unconditional leave to defend, on the following grounds -

"1. There is a serious conflict in the evidence of the parties.

2. The Defendant is unable to satisfy the condition imposed by the learned Deputy Judge, and the condition prevents him from presenting his defence.".

4. The Plaintiff's claim was based on five dishonoured cheques for $100,000 each, and interest. Master Betts had made his Order on 22 July 1985. Mr. Khan did not appeal to the Judge in Chambers within the time limited by the R.S.C.. We do not know when he took out his summons for leave to appeal out of time, but the papers show that he was at least two months late.

5. On 1 October the Deputy Judge granted him leave and heard the appeal on the same day. In his "Ruling" he reviewed, briefly, the evidence before him and reached the following conclusion -

" Like the learned Master before me I considered the Defendant's explanations to be concocted and at best shadowy. His whole course of conduct seemed to be designed to delay the payment of this debt and I was on the verge of dismissing the appeal but felt it could possibly be a suitable case for conditional leave to defend on full payment in and I allowed the appeal to that extent.".

6. Mr. Bell, for Mr. Khan, made submissions to us firstly on the second ground of appeal. This was based on M.V. Yorke Motors v. Edwards⁽¹⁾ where the House of Lords held that it would be a wrong exercise of discretion under R.S.C. 0.14 to impose on a Defendant, as a condition of granting him leave to defend, a financial condition that it would be impossible for him to fulfil, for it would be tantamount to giving judgment for the Plaintiff, notwithstanding the Court's opinion that there was an issue or question in dispute which ought to be tried.

7. Mr. Bell, and Mr. Bharwaney who appeared for the Respondent, (neither counsel had represented the parties before the Deputy Judge) were not aware that in a judgment delivered on 30 May 1985 (so far unreported) this Court followed M.V. Yorke Motors⁽¹⁾. In Hwang Yiou Kwa and Another v. Morgan Guaranty Trust Company of New York⁽²⁾ we referred to the indorsement by Lord Diplock in M.V. Yorke Motors⁽¹⁾ of the following part of the Respondent's written case -

" (i) Where a defendant seeks to avoid or limit a financial condition by reason of his own impecuniosity the onus is upon him to put sufficient and proper evidence before the court. He should make full and frank disclosure.

(ii) ..........

(iii) A defendant cannot complain because a financial condition is difficult for him to fulfil. He can complain only when a financial condition is imposed which it is impossible for him to fulfil and that impossibility was known or should have been known to the court by reason of the evidence placed before it.".

8. Mr. Bell conceded that no issue had been raised before the Deputy Judge as to the ability of Mr. Khan to meet the conditions imposed, explaining that neither party had addressed its mind to this issue because Mr. Khan was asking for unconditional leave and the Respondent was seeking to uphold the Master's Order entering summary judgment. On this ground, Mr. Bell contended that the justice of the case demanded that this Court should exercise its discretion to admit evidence as to Mr. Khan's means, by way of an affirmation made by him which, if true, indicated that he was quite unable to comply with the conditions. The affirmation had been supplied to the other side a few days before the hearing of the appeal.

9. It is clear from the report of M.V. Yorke Motors⁽¹⁾ that additional evidence about the Defendant's means had been admitted by the Court of Appeal. The only material before Boreham, J. which pointed to the Defendant's financial circumstances was the fact that he had been granted a legal aid certificate with a "nil" contribution, but the additional evidence adduced before the Court of Appeal prompted that Court to reduce the amount of the security required from £12,000 to £3,000.

10. In Hwang Yiou Kwa⁽²⁾ this Court also admitted fresh evidence as to the Defendants' means, but in the following circumstances. When counsel for the Defendants heard from the Judge that he was about to impose onerous conditions for leave to defend, he invited the Judge either (a) to stand the matter over so that evidence of the Defendants' means could be filed, or (b) to make the Order, but to grant liberty to apply in relation to their ability to meet the conditions. The Judge had followed neither course. After admitting the additional evidence, we reduced the security ordered from $11.6 million to $500,000.

11. Mr. Bharwaney, in opposing the application to admit fresh evidence, relied on the decision of the House of Lords in Langdale and Another v. Danby⁽³⁾ for the proposition that Mr. Khan had to persuade this Court that he had made out "special grounds" for the reception of this evidence within the meaning of R.S.C. 0.59, r.10(2) as explained in Ladd v. Marshall⁽⁴⁾, later approved by the House of Lords in Skone v. Skone⁽⁵⁾. In Langdale v. Danby⁽³⁾ the House held that on the proper construction of R.S.C. 0.59 r.10(2), an appeal against a summary judgment given under R.S.C. 0.14 was an appeal from a judgment after a hearing "on the merits" because the Judge could only give judgment for the Plaintiff if he were satisfied that there were no such merits in the Defendant's case as to warrant the granting of leave to defend. Lord Bridge of Harwich, with whose speech all their Lordships agreed, said at p.1133 -

" In the situation arising on an appeal to the Court of Appeal from a summary judgment, the application of these conditions [the Ladd v. Marshall conditions] and perhaps the conditions themselves will require some modification. It may well be that the standard of diligence required of a defendant preparing his case in opposition to a summons for summary judgment, especially if under pressure of time, will not be so high as that required in preparing for trial. The second and third conditions will no doubt be satisfied if the further evidence tendered is sufficient, according to the ordinary principles applied on applications for summary judgment, to raise a triable issue. But I can see no injustice at all in requiring a defendant to use such diligence as is reasonable in the circumstances to put before the judge on the hearing of the summons, albeit in summary form, all the evidence he relies on in defence, whereas it would be a great injustice to the plaintiff to allow the defendant to introduce for the first time on appeal evidence which was readily available at the hearing of the summons but was not produced.".

12. In para. 14/3 - 4/38 of the current White Book, after noting this decision of House of Lords, the learned authors say -

" The firm and clear judgment of the House of Lords would seem to apply whether the summary judgment obtained by the plaintiff is unconditional or even conditional; and although it may be possible to contend, on the wording of 0.59, r.10(2) that it does not apply, where the defendant is granted unconditional leave to defend and the plaintiff is appealing to the Court of Appeal to obtain summary judgment, as he can now do with leave, it would be anomalous if the same firm and clear ruling did not also apply to such a case.".

13. And in a later note on Langdale v. Danby⁽³⁾, in para. 59/10/10 we see: "Quaere whether there has been a 'hearing on the merits' where conditional or unconditional leave to defend is granted in 0.14 proceedings".

14. It seems to me that a true analysis of Langdale v. Danby⁽³⁾ binds us to hold that it also embraces the position where conditional or unconditional leave is granted in 0.14 proceedings, at any rate in so far as the merits of the defence to the action put forward by the Defendant in his attempt to show cause under r.5 are concerned. After all, no issues will arise unless the Defendant seeks to show cause. Where he does, then the Judge will have to decide on the competing merits of the respective cases, on the material before him, whether to enter judgment for the Plaintiff or to give leave with or without conditions. I can discern no principle which would dictate a different approach where summary judgment has not been entered for, mutatis mutandis, I see the same injustice to the Plaintiff, if the position were otherwise, adverted to by Lord Bridge of Harwich in the passage I have cited if the Defendant were allowed to improve his case by additional evidence adduced before the Court of Appeal except on special grounds.

15. The issue as to the amount of security to be required, once the Judge has decided that conditions must be imposed on the facts put before him as to the merits of the defence, is perhaps slightly different; yet it is still for the Judge in Chambers to decide the amount of security he should order and not for the Court of Appeal. I see no injustice to the Defendant, subject to what I say later, if he is required to adduce evidence as to his impecuniousity before the Judge, but I feel it would be a great injustice to the Plaintiff (causing delays and defeating the object of the useful and salutary 0.14 procedure) if he were permitted, except in special circumstances, to raise the issue for the first time on appeal. As the House of Lords, and later this Court, made clear, the onus is on a Defendant to put sufficient and proper evidence before the Court of his impecuniousity and he cannot complain unless the impossibility of his being able to fulfil the conditions "was known or should have been known to the Court by reason of the evidence placed before it".

16. I respectfully adhere to what Kempster, J.A. said in Hwang Yiou Kwa⁽²⁾, delivering the judgment of this Court -

" As we explained when ruling in relation to evidence it must not be thought that every imposition of onerous conditions calls for the meticulous examination of the financial resources of the defendant nor as a general rule, should those advising parties seeking leave to defend commit their clients to the expense of preparing such evidence prior to an intimation from the Court that it intends to take that course.".

17. Undoubtedly a Judge has a discretion to raise the issue of the Defendant's ability to meet the conditions he is about to impose, of his own motion, and to postpone laying down the conditions until the Defendant's means have been gone into. This is what Webster, J. did in Paclantic v. Moscow Naradonwy Bank⁽⁶⁾. But I do not think he is bound to do so, particularly when, as here, the Defendant is represented.

18. In my judgment, it is incumbent on a Defendant, if he has chosen not to mention his means in his affidavit showing cause, to inform the Judge in Chambers that he wishes to be given an opportunity of adducing evidence (if his impecuniousity is not conceded by the Plaintiff) to show to what extent he would be able to meet conditions that might be imposed. He cannot remain silent, and then demand as of right to adduce fresh evidence before the Court of Appeal.

19. Looking again at the wording of R.S.C. 0.59 r.10(2), I was persuaded that Mr. Khan was indeed obliged to show "special grounds" before we could exercise our discretion to admit further evidence, and he was unable to surmount the first of the hurdles presented by Ladd v. Marshall⁽³⁾.

20. If I was wrong, and our discretion was unfettered, I wish to make it clear that I would not have been inclined to admit Mr. Khan's new affirmation because he was represented, on an appeal filed at least two months out of time, before the Judge in Chambers, and nothing was said about his means. I was also influenced by the fact that Mr. Khan did not mention his financial difficulties successively before the Master and the Judge in Chambers when he made two unsuccessful applications for a stay of execution pending this appeal.

21. When we announced our decision to reject Mr. Khan's application, Mr. Bell asked for a short adjournment to take instructions as to whether he should proceed on the first ground of appeal. In the event, while he was unable to abandon this ground, he told us that he was not in a position to contend that the Deputy Judge had erred in the exercise of his discretion by not giving unconditional leave to defend. If such was the case, this was an entirely proper stand. There were no grounds whatever for interfering with the Deputy Judge's decision.

22. It was for these reasons that I agreed with my Brothers that this appeal should be dismissed.

Sir Alan Huggins, V.-P.:

23. The judge agreed with the Master that the Defendant's defence was "concocted and at best shadowy" and that "his whole cause of conduct seemed to be designed to delay the payment of this debt". Nevertheless he "felt it could possibly be a suitable case for conditional leave to defend on full payment in". It was to be inferred that he not only felt this to be a possibility but also that he was not entirely satisfied that the defence was unarguable. There being no cross appeal we were bound to assume that leave to defend was properly given.

24. Mr. Bell fairly said that he could find nothing to advance in favour of the contention that unconditional leave should have been granted. The only question which gave me cause for concern was whether the condition attached to the granting of leave was an appropriate condition. We were bound by authority to hold that, where a condition is imposed, that condition must not be so onerous as to be tantamount to a denial of the opportunity to defend which ex hypothesi the Defendant ought to have. I could understand the argument that, if the condition required payment into Court of a sum which was beyond the means of the Defendant to pay, the Defendant was denied that opportunity whether or not he had given evidence of his insufficient means before the judge. Nevertheless a Court could proceed only upon evidence before it. On an application under Order 14 the principal issue was whether there was an arguable defence, but there was always the subsidiary issue where an arguable defence was disclosed, namely whether leave to defend should be conditional and, if so, what the condition or conditions should be. Kempster, J.A. said in Victor Hwang Yiou Kwa v. Morgan Guaranty Trust Co. of New York Civil Appeal 1985 No. 78 that it must not be thought that, as a general rule, those advising parties seeking leave to defend should commit their clients to the expense of preparing evidence of their financial resources prior to an intimation from the Court that it intends to impose onerous conditions. However, if they do not come prepared with evidence it is incumbent on them at least to indicate that the Defendant wishes to call evidence. In other words, they must raise any relevant issue of fact before the judge. It would make a mockery of the Order 14 procedure if a Defendant were entitled to remain silent about his lack of means at the time of the imposition of the condition and to raise it for the first time in the Court of Appeal: he could so raise it only if he obtained leave to adduce fresh evidence, and he would not be permitted to adduce fresh evidence upon an issue of fact which was not directly raised in the Court below. There had to be an end to litigation and a party who failed to adduce his evidence at the proper time could not be heard to complain if the decision went against him.

25. I was not prepared to admit evidence of means for the first time in this Court, and without it there was no ground upon which we could interfere with the decision of the judge in Chambers.

Cons, J.A.:

26. I have had the advantage of reading in draft the reasons prepared by my Lord Fuad, J.A. to explain why he declined to admit the further evidence proffered at the hearing of the appeal and agreed to dismiss the appeal. They coincide with my own.

⁽¹⁾ [1982] 1 W.L.R. 444

(2) Civil Appeal No. 78 of 1985

⁽³⁾ [1982] 1 W.L.R. 1123

⁽⁴⁾ [1954] 1 W.L.R. 1489

⁽⁵⁾ [1971] 1 W.L.R. 812

⁽⁶⁾ [1983] 1 W.L.R. 1063