4. Interim Application Flashcards

Question

Grounds for security for costs

Answer 1

The defendant must satisfy the court of two matters before an order for security for costs can be made: Having regard to all the circumstances of the case, it is just to make an order (CPR 25.13(1)(a)) and One or more of the prescribed conditions in the rules are satisfied (CPR 25.13(1)(b) and (2)) As with any interim application, the court will also consider the overriding objective and, therefore, whether it would be dealing with the case justly and at proportionate cost by making a security for costs order. We will consider the conditions first before moving on to what is 'just'.

Answer 2

The claimant is resident out of the jurisdiction (but is not resident in a State bound by the 2005 Hague Convention) (CPR 25.13(2)(a)) The claimant is a company and there is reason to believe it will be unable to pay the defendant’s costs if ordered to do so (CPR 25.13(2)(c)) The claimant has taken steps in relation to its assets that would make enforcement of a costs order against it difficult (CPR 25.13(2)(g)) Other grounds: - The claimant has changed address since claim was commenced with a view to evading the consequences of the litigation (CPR 25.13(2)(d)). - The claimant failed to give an address in the claim form (CPR 25.13(2)(e)). - Claimant is acting as a nominal claimant and there is reason to believe it will be unable to pay the defendant’s costs if ordered to do so (CPR 25.13(2)(f)).

Answer 3

The claimant is resident out of the jurisdiction (but is not resident in a State bound by the 2005 Hague Convention)(CPR 25.13(2)(a)) Meaning of resident: For an individual this is their habitual or normal residence. For a company this is where the company’s central management and control is exercised and it is usually, but not necessarily, where it is incorporated. Meaning of out of the jurisdiction: Essentially, this means not in England and Wales. The rationale for this requirement is that the defendant may have greater difficulty enforcing any costs order if the claimant is not in England or Wales. Security for costs is not available under this ground if the claimant is resident in a state bound by the 2005 Hague Convention, which at the time of writing includes the UK, all EU members states, Mexico, Singapore and Montenegro. This is because there are some (albeit limited) reciprocal arrangements between these states which would ease the enforcement of a costs order. This is a recent (ie post-Brexit transition period) change and exactly how it will operate in practice remains unclear.

Answer 4

The c****laimant is a company and there is reason to believe that it will be unable to pay the defendant’s costs if ordered to do so (CPR 25.13(2)(c)) The claimant must be an impecunious company; not an impecunious individual. The defendant must show: a) The company’s inability to pay costs; and b) the amount of the likely costs. The defendant must show the company ‘will be unable’ (as opposed to ‘may be unable’) to pay its debts when the order is made against it. However, the defendant does not have to show on a balance of probabilities that the claimant company is unable to pay – the defendant may be able to show that there is ‘reason to believe’ that the claimant company will be unable to pay even if the claimant company can adduce substantial evidence to the contrary (Jirehouse Capital v Beller [2008] EWCA Civ 908). This makes security for costs more available for defendants.

Answer 5

The claimant has taken steps in relation to its assets that would make it difficult to enforce and order for costs against it (CPR 25.13(2)(g)) The purpose of this condition is to prevent injustice to a defendant where the assets available to enforce any order for costs have been or are being put beyond the reach of enforcement, for example, the dissipation of assets, the transfer overseas or into the names of third parties or the transfer to places unknown to the defendant.

Answer 6

Even if one of the prescribed conditions is made out, the court is not obliged to give security; security will only be granted by the court if: it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order. Main consideration The main consideration that the court will take into account is the ability of the respondent to comply with any order for security for costs. The court should not normally make the continuation of a claimant’s claim dependent on a condition which it is impossible for the claimant to fulfil, because this effectively restrict the claimant's access to the justice system. An impairment of a claimant’s right of access which is disproportionate to the need to protect the defendant is likely to be a breach of Article 6 ECHR (right to a fair trial). The court has the difficult task of balancing the potential injustice to the claimant in being prevented from carrying on with the claim if it cannot pay the security as against the injustice of the defendant being at risk on costs if no security is provided. This is likely to be particularly problematic where the basis for the application is the claimant's impecuniosity. Other considerations Apart from the ability to comply with the order, the court will look at other factors (Sir Lindsay Parkinson v Triplan [1973] 2 All ER 273). For example, admission of liability by the defendant or substantial open offers (those the court can be made aware of) will make the defendant's application less likely to succeed. Delay also makes the application less likely to succeed – the application should be made promptly, as soon as the facts underpinning the application are known. A claim which appears not to be genuine, or which has little prospects of success, will make the defendant's application more likely to succeed. If the defendant has itself been responsible for the claimant’s financial difficulties, this will make the application less likely to succeed

Answer 7

If a party applies for security for costs, then the normal rules relating to interim applications apply (see the element relating to interim applications). In addition, note that: - The application notice should state which ground(s) or enactment applies - The application must be supported by written evidence (CPR 25.12(2)). Evidence will normally be given by way of witness statement which should cover: a. The ground eg for the impecunious company ground, the witness statement is likely to exhibit the accounts to show the claimant is unable to pay b. The factors in the exercise of the court’s discretion c. The likely costs to trial eg the witness statement is likely to exhibit a statement of costs or to refer to an approved costs budget d. The amount of security requested.

Answer 8

If the court makes an order for security for costs it will determine the amount of security as well as the manner in which and the time within which the security is given (CPR 25.12(3)). The amount is entirely within the court’s discretion and the court will fix a sum it thinks just taking into account: - The amount of the defendant’s likely costs - The security can be for the whole action or up to a point in time eg up to disclosure - The amount can cover costs incurred (including pre-action) and future costs - A deduction can be made for the likely reduction upon assessment of costs or the possibility of settling - Other factors eg delay may mean that security is not given for costs already incurred but is given for future costs.

Answer 9

The manner in which security is given can be: - A payment into court - A payment to the defendant’s solicitor - A bank guarantee - An undertaking to pay costs The most frequent order is for a sum to be paid into court by a required date.

Answer 10

An injunction is an order of the court requiring a party to do or to refrain from doing a given act. Breach of an injunction is potentially punishable as contempt of court, so breach can result in a fine and/or imprisonment. An interim injunction is a temporary measure taken at an early stage in the proceedings (including pre-action) before trial and before any final decision on the merits of either party’s case to restrain the respondent from causing irreparable or immeasurable damage to the applicant by continuing conduct or ceasing conduct that has led to the dispute. It is usually made in circumstances of urgency and lasts until trial or further order. A perpetual injunction is a final injunction (usually made at trial) that continues with no limitation of time. These are not covered in this element.

Answer 11

Prohibitory injunction: Requires the respondent to refrain from doing an act eg An employer has brought a claim against an employee for breaching a confidentiality clause in an employment contract. The employer obtains an interim prohibitory injunction preventing specified uses of information pending trial. Mandatory injunction : Requires the respondent to do a specific act eg In a claim alleging that a supplier of computer software failed to deliver up software at the end of the parties' relationship, the claimant obtains an interim mandatory injunction requiring the software to be delivered up pending trial. Quia timet injunctions: Allow both prohibitory and mandatory injunctions where a wrong has been threatened but not yet committed eg In a claim alleging that the threatened closure of a bank account would be a breach of statutory duty, the customer obtains an interim mandatory injunction requiring the bank to keep the account open

Answer 12

An injunction may be granted where it is just and convenient (s.37 of the Senior Courts Act 1981). In American Cyanamid Co v Ethicon Ltd [1975] AC 396, Lord Diplock laid down guidelines, now known as the 'American Cyanamid guidelines', on how the court should exercise its discretion to grant an interim injunction. These following summary will be considered in more detail in the following pages. Step 1: Is there a serious question to be tried? Step 2: Would damages be an adequate remedy for a party injured by the court’s grant of, or failure to grant, an injunction? - Damages for the applicant? - Damages for the respondent? Step 3: Where does the balance of convenience lie? Equitable and discretionary remedy Step 1: is there a serious question to be tried? An injunction is not a cause of action - it is a remedy. Therefore, an applicant cannot sue for an injunction. The applicant must have a pre-existing cause of action. The court must be satisfied that this is not "frivolous or vexatious” and that “there is a serious question to be tried”. In many cases, this is not a difficult hurdle to surmount. However, if this test cannot be met, the injunction will generally be refused (and the court will not go on to consider steps 2 and 3). Step 2: would damages be an adequate remedy for a party injured by the court’s grant of, or failure to grant, an injunction? When considering the adequacy of damages, the court will firstly consider the issue from the applicant’s perspective and, depending on the outcome of this analysis, the court might then go on to consider the same issue from the respondent’s perspective: Step 2(a) – applicant's perspective - the court will generally refuse an injunction if the applicant could be adequately compensated by damages for any loss caused by the refusal to grant an interim injunction. However, damages may be inadequate if the respondent has not means of paying them or the harm being caused is irreparable, cannot be quantified, or is serious and likely to continue. Step 2(b) – respondent's perspective – if an injunction is granted, the respondent is going to be prevented from doing something, or required to do something, until trial – but it might transpire that the injunction should never have been granted, most likely if the applicant fails at trial. The court will ask itself whether the respondent could be adequately compensated by the applicant if it transpires that the injunction was wrongly granted. If so, then this suggests the injunction should be granted. Step 3: the balance of convenience Step 3 – if it appears that damages would be adequate for neither party, then the court will consider a very broad range of factors to try to ascertain whether granting or not granting the injunction carries the lesser risk of injustice ie to ascertain where the 'balance of convenience' lies.

Answer 13

The guidelines just stated should be considered in the context of an injunction being an equitable remedy, so equitable principles apply, including that; - An injunction will not be obtained when it would serve no practical purpose; - The court might refuse to grant an injunction if the applicant has not come to court with 'clean hands' - Excessive delay may lead to a refusal of the application. An injunction is also a discretionary remedy: there is no automatic right to an injunction just because all the ‘guidelines’ that follow in this element have been met. An application for an interim injunction must be supported by written evidence setting out the facts to justify the relief sought (CPR 25.3(2)), keeping in mind the guidelines and considerations set out above. In addition, if the application is made without notice, the evidence must state the reason why notice has not been given (CPR 25.3).

Answer 14

An application for an interim injunction is an interim application so the starting point is that the procedure is the same as any for any other interim application (see the element relating to interim applications). However, because an interim injunction is a form of interim remedy (CPR 25.1(a)), and one with potentially very serious consequences, there are some additional procedural considerations. - Cross undertaking in damages - Without notice safeguards - Applications before a claim is issued These are explained in the following pages. Undertakings A court will often decide to grant an interim injunction only if the applicant offers an cross-undertaking to pay damages to the respondent for any loss sustained by reason of the injunction if it is subsequently held that the applicant ought not to have been granted an interim injunction - for example, if proceedings are discontinued, or the injunction is discharged before trial, or if it is decided at trial that the applicant had not been entitled to restrain the respondent from doing what it was threatening to do. The cross-undertaking is made to the court. It is there for the protection of the respondent, but the court can also require (as a condition of granting the injunction) an undertaking to be given for the protection of any other person who may suffer loss because of the order (25A PD 5.1 and 5.2). Without notice safeguards The application for an interim injunction can, like any interim application, be made without notice if this is justified. If the application is made without notice and the injunction is granted, it will be granted initially for a limited period only and the court will fix a second hearing called the 'return date'. The respondent will be given notice of that hearing and the opportunity to attend it to make representations, and at that second hearing, the court can make the following orders: - Maintain order (to keep the injunction in place until the trial of the substantive matter). - Discharge the injunction vary the terms of the injunction. - Enforce the applicant’s undertaking in damages if it transpires that the injunction should not have been granted. - Accept an undertaking by the respondent not to do the acts in question, in place of the injunction. In the case of a without notice application, the applicant must make full and frank disclosure of all matters of fact or law relevant to the application – including those which are or may be adverse to the applicant. This is required for any interim application made without notice, and its importance is particularly pronounced when something as important as an interim injunction is at stake. The applicant’s legal representatives must prepare a full note of the hearing as soon as possible and this should also be served on the respondent (and any other party affected by the order) without delay. The full note of the hearing ensures the respondent knows what case they have to meet at the next, with notice, hearing. Applications before a claim is issued In cases of exceptional urgency, not only can a party apply for an interim injunction without notice but a party can apply before a claim form has even been issued. The court will only grant an interim remedy before a claim has been issued if the matter is (CPR 25.2(2)(b)): - Urgent; or - It is otherwise desirable to do so in the interests of justice. In these circumstances, the applicant must undertake to the court to issue a claim form immediately.