Property & Real Estate Barristers
Andrew Butler wins in Court of Appeal
6th October 2016
Andrew Butler secured a notable victory in the Court of Appeal when he successfully challenged an order for security for costs made against his client. The case (Dawnus Sierra Leone Ltd v Timis Mining Corporation Ltd, 6 October 2016, CA) gave rise to a novel point, namely the effect of foreign litigation on the security for costs jurisdiction.
Andrew acted for D, a building contractor, against T, the operator of a mine in Sierra Leone. D had undertaken urgent works at the mine pursuant to a Letter of Intent which contained a non-exclusive English jurisdiction clause. Interim payments had been made totalling $26.125m. No contract was ever finalised. At the conclusion of the relationship D contended that it was owed a further $15.2m; T contended that it had overpaid $16.7m.
During protocol correspondence between solicitors in the UK, T unexpectedly commenced proceedings in Sierra Leone. D subsequently issued proceedings in the UK. Unsuccessful jurisdictional challenges were made by both parties (judgment reported at [2016] EWHC 236) and the two cases therefore proceeded in parallel, with T defending and counterclaiming in the UK proceedings.
Both parties applied for security for costs in the UK. At first instance, the Judge ordered D to provide security (in the sum of £750,000), but refused to order T to do so, holding that, although as a matter of form its counterclaim satisfied the test of having “independent vitality” (see Hutchison Telephone (UK) v Ultimate Response [1993] B.C.L.C. 307), T did not want to be party to litigation in the UK, would happily have abandoned the proceedings if D had been prepared to do likewise, and was therefore adopting an essentially defensive posture in this jurisdiction. The Court at first instance was influenced by the consideration that T would not itself have commenced proceedings in the UK – that having been one of the indicators of independent vitality identified by the Court in Hutchison.
The Court of Appeal (Patten and Hamblen LJJ) allowed the appeal, holding that in determining the question of whether a counterclaim had independent vitality the Court’s primary focus should be on the substantial nature of the counterclaim, and not the counterclaiming Defendant’s preferred litigation forum. Far from providing a reason not to order security, the fact that T had commenced proceedings in Sierra Leone was an indication that the counterclaim did have independent vitality. Ordinarily, this might have been a case for ordering both sides to provide security (and indeed this had been D’s stance at first instance). However, since the first instance hearing T had been debarred from pursuing its counterclaim on other grounds, and in the circumstances the correct order was that D should be relieved of the order for it to provide security for the costs of its claim.