PRACTICE — Joinder — Company bringing action to recover money without settling defendant's costs incurred in Companies Court — Assignment of company's claim to another company — Joinder of assignee as co-claimant on condition of payment of costs incurred by company in Companies Court — Whether jurisdiction to stay action for failure to pay costs incurred — Whether winding up proceedings to be regarded as former action — CPR rule 3.4(4)

Investment Invoice Financing Ltd v Limehuse Board Mills Ltd

CA: (Tuckey and Moore-Bick LJJ): 18 January 2006

It was an abuse of process of the court for a creditor to bring an action or its assignee to join as a co-claimant against the debtor before settling the costs ordered against the creditor in the Companies Court on a winding up petition presented by the creditor which had been dismissed as an abuse of process of the court.

The Court of Appeal so held dismissing an appeal by the claimant , Investment Invoice Financing Ltd, as an assignee of the trade creditor, from an order of Judge Mackie, QC dated 9 June 2005 sitting in the Mercantile List of the Central London Civil Justice Centre whereby he ordered that unless the costs incurred by the creditor was paid into court by 23 June 2005 the claim should be struck out without further order.

MOORE-BICK LJ said that there was a clear distinction between imposing on a new party to the litigation as a condition of joinder a requirement to provide security for costs to which he could not otherwise be made subject and staying the proceedings until a previous order for costs has been satisfied. The former was concerned primarily with costs that were likely to be incurred in the future and with the ability of the party in question to pay them. The latter was concerned with preventing an abuse of the court's process. The purpose of making such an order was to do substantial justice between the parties. CPR rule 3.4(4) gave the court an express power after striking out a statement of case to stay a second action arising out of the same or substantially the same facts until the costs of the first have been paid. It was pointed out, the expression "statement of case" was defined in rule 2.3(1) in a way that did not include a winding-up petition and that the court had no jurisdiction to make an order of the kind contemplated by rule 3.4(4) in this case. This was a false point. As its place in the structure of rules demonstrated, rule 3.4(4) was dealing with a particular consequence of striking out a statement of case. It was not dealing with the court's power to impose a stay of proceedings in general, much less with the court's inherent jurisdiction to stay proceedings to prevent an abuse of its process. There was nothing in the rule that affects the court's power to make an order of a similar kind in other cases where proceedings were brought for a second time by the same person to enforce the same claim. Whether the winding up petition could properly be regarded as a previous action for present purposes was a different matter. The purpose of presenting a winding up petition was to obtain payment of debt either by obtaining a dividend in the winding up or more likely by the exertion of commercial pressure. These proceedings were dismissed because they were themselves an abuse of the process and resulted in an order for costs which had remained unpaid. To start fresh proceedings to recover the same debt without paying the costs of the winding up petition was abuse and the court had power to stay the proceedings until those costs were paid.

TUCKEY LJ agreed.

Appearances: Leolin Price QC and Thomas Williams (Key2 Law LLP) for the claimant; Michael McLaren QC (Bircham Dyson Bell) for the defendant.

Reported by: Ken Mydeen, barrister.