top of page

Upper Tribunal has jurisdiction

 

“There is no inconsistency between that finding and the position in respect of the power to order security for costs, where it has been accepted by this tribunal, in Blada Limited (in liquidation v Revenue and Customs Commissioners [2013] FTC/64/2010, that s 25 enables this tribunal to make such an order, notwithstanding the absence of an express power to do so under the tribunal’s own rules.” (Raftopoulou v. HMRC [2015] UKUT 630 (TCC), §17, Judges Berner and Raghavan).

“There was no dispute before me that this tribunal has jurisdiction to make an order for security for costs. That was confirmed by Judge Bishopp, sitting in this 35 tribunal, in Blada Limited (in liquidation) v Revenue and Customs Commissioners [2013] UKUT B7, on the basis that in relation to matters incidental to this tribunal’s functions this tribunal has, pursuant to s 25 of the Tribunals, Courts and Enforcement Act 2007, the same powers as the High Court. The judge accordingly held, at [22], that the procedure was governed by the rules contained in Part 25 of the Civil 40 Procedure Rules 1998.” (GSM Export (UK) Limited v. HMRC [2014] UKUT 457 (TCC), §14, Judge Berner).
 

Upper Tribunal has jurisdiction

Companies threshold: reason to believe they will be unable to pay costs (threshold condition)

 

“The threshold did not require the court to be satisfied on the balance of probabilities that the claimant would be unable to pay the defendant's costs. The court only needed reason to believe that it would not be able to do so. Unless the relevant condition, which is a threshold test, is satisfied, the jurisdiction to make an order for security for costs does not arise (Geophysical Service Centre Co v Dowell Schlumberger (Me) Inc [2013] EWHC 147 (TCC), per Stuart Smith J at [12]).” (Goldshine Trade Ltd v. HMRC [2019] UKUT 229 (TCC), §6, Judge Raghavan)

“Under CPR, rule 25.13, the tribunal may make an order for security for costs if it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order and a relevant condition has been met. In the context of this application, the relevant condition is in rule 25.13(2)(c), namely that the appellants 5 are companies and “there is reason to believe that [they] will be unable to pay the [respondents’] costs if ordered to do so”.” (GSM Export (UK) Limited v. HMRC [2014] UKUT 457 (TCC), §15, Judge Berner).

 

ATE policy may be relevant

 

“An ATE policy may, depending on its terms, suffice so that the tribunal is not satisfied that there is reason to believe that the appellants will be unable to pay the respondents’ costs.” (GSM Export (UK) Limited v. HMRC [2014] UKUT 457 (TCC), §28, Judge Berner).


Query whether proceeds of insurance policy would be payable to HMRC

 

“My own further research following the hearing, on the other hand, suggests that, as a matter of law, a payment made by way of indemnity on the terms of the Policy may well be impressed with a Quistclose trust, as it will have been paid to the company for the specific purpose of that money being used to discharge the particular liability for the respondents’ costs…On this basis, it seems to me reasonable to conclude that the risk of sums paid under the Policy by way of indemnity for the respondents’ costs not being paid to the respondents because those sums would fall into the assets available to creditors of the appellants generally is not a real one.” (GSM Export (UK) Limited v. HMRC [2014] UKUT 457 (TCC), §§37…38, Judge Berner).

Companies: reason to believe they will be unable to pay costs (threshold condition)

Discretion

 

“With the exception of considerations of the lateness of the application, that summary is equally relevant in this case:
(1) The balancing exercise must weigh the injustice to the party against whom an order is sought if that party is prevented from pursuing, in this case, its appeal against the injustice to the respondents if no security is ordered and, having been successful, the respondents find themselves unable to recover costs. 
(2) The possibility or probability that the appellants will be deterred from pursuing their appeals is not without more a sufficient reason for not ordering security. 
(3) Regard should be had to the appellants’ prospects of success. But the tribunal should not go into the merits in detail unless it can clearly be demonstrated that there is a high degree of probability of success or failure. 
(4) Before a tribunal refuses to order security on the ground that it would unfairly stifle a valid claim, the tribunal must be satisfied that, in all the circumstances, it is probable that the claim would be stifled. There may be cases, likely to be exceptional, where this can properly be inferred without direct evidence. However, it is for the party against whom an order is sought to satisfy the tribunal that it would be prevented from continuing the litigation. The tribunal should consider not only whether the appellant can provide security out of its own resources, but also whether it can raise the amount needed from its directors, shareholders or other backers or interested persons. (Gibson LJ explained that as this was likely to be peculiarly within the knowledge of the company against the order was sought, it is for the company to satisfy the court that it would be prevented by an order for security from continuing the litigation).” (Goldshine Trade Ltd v. HMRC [2019] UKUT 229 (TCC), §7, Judge Raghavan)

 

“Subject to the relevant condition being satisfied, this tribunal accordingly has a discretion, to be exercised judicially. The tribunal has to carry out a balancing exercise, taking all the relevant circumstances into account.” (GSM Export (UK) Limited v. HMRC [2014] UKUT 457 (TCC), §16, Judge Berner).

Discretion

Stifling Appeal

 

Wrong to impose a condition that stifles an appeal

"[12] To stifle an appeal is to prevent an appellant from bringing it or continuing it. If an appellant has permission to bring an appeal, it is wrong to impose a condition which has the effect of preventing him from bringing it or continuing it...There will seldom be a “fair hearing” within article 6 if a court which has permitted a litigant to bring an appeal then, by indirect means, does not permit him to bring it.

...

 [16] But, for all practical purposes, courts can proceed on the basis that, were it to be established that it would probably stifle the appeal, the condition should not be imposed." (Goldtrail Travel Limited (in liquidation) v Onur Air Tasimacilik As [2017] UKSC 57)

Or: stifling appeal is a factor but not a sufficient reason

 

“(a)The balancing exercise must weigh the injustice to the party against whom an order is sought if that party is prevented from pursuing, in this case, its appeal against the injustice to the respondents if no security is ordered and, having been successful, the respondents find themselves unable to recover costs. (b) The possibility or probability that the appellants will be deterred from pursuing their appeals is not without more a sufficient reason for not ordering security.” (GSM Export (UK) Limited v. HMRC [2014] UKUT 457 (TCC), §18, Judge Berner).

Stifling of appeal must be proven by evidence

 

"[15] There is no doubt - indeed it is agreed - that, if the proposed condition is otherwise appropriate, the objection that it would stifle the continuation of the appeal represents a contention which needs to be established by the appellant and indeed, although it is hypothetical, to be established on the balance of probabilities: for the respondent to the appeal can hardly be expected to establish matters relating to the reality of the appellant’s financial situation of which he probably knows little." (Goldtrail Travel Limited (in liquidation) v Onur Air Tasimacilik As [2017] UKSC 57)

“Before a tribunal refuses to order security on the ground that it would unfairly stifle a valid claim, the tribunal must be satisfied that, in all the circumstances, it is probable that the claim would be stifled. There may be cases, likely to be exceptional, where this can properly be inferred without direct evidence. However, it is for the party against whom an order is sought to satisfy the tribunal that it would be prevented from continuing the litigation.” (GSM Export (UK) Limited v. HMRC [2014] UKUT 457 (TCC), §18, Judge Berner).

 

Insolvency of party not sufficient: consider whether they can raise the money

 

"[17] It is clear that, even when the appellant appears to have no realisable assets of its own with which to satisfy it, a condition for payment will not stifle its appeal if it can raise the required sum. As Brandon LJ said in the Court of Appeal in the Yorke Motors case, cited with approval by Lord Diplock at 449H:

“The fact that the man has no capital of his own does not mean that he cannot raise any capital; he may have friends, he may have business associates, he may have relatives, all of whom can help him in his hour of need.”

[18] It seems that, in particular and as exemplified by the present case, difficult issues have surrounded the ability of a corporate appellant, without apparent assets of its own, to raise money from its controlling shareholder (or some other person closely associated with it); and this is the context of what follows. When, in response to the claim of a corporate appellant that a condition would stifle its appeal, the respondent suggests that the appellant can raise money from its controlling shareholder, the court needs to be cautious. The shareholder’s distinct legal personality (which has always to be respected save where he has sought to abuse the distinction: Prest v Prest [2013] UKSC 34, [2013] 2 AC 415, 487, para 34) must remain in the forefront of its analysis. The question should never be: can the shareholder raise the money? The question should always be: can the company raise the money?" (Goldtrail Travel Limited (in liquidation) v Onur Air Tasimacilik As [2017] UKSC 57)

“It is well settled that mere insolvency of a corporate appellant or a corporate claimant does not prove that an order would stifle the relevant appeal or the relevant claim. Otherwise, in any case where an applicant for security demonstrated that the insolvency test was satisfied in relation to the party against whom security was sought, a stifling test would prima facie be satisfied. It has been made clear in a number of cases that the court must first consider whether the company has backers or supporters who have both the resources and the motivation to provide the security.” (Calltel Telecom Ltd v HMRC [2008] STC 3246, §13, Briggs J).

 

“The tribunal should consider not only whether the appellant can provide security out of its own resources, but also whether it can raise the amount needed from its directors, shareholders or other backers or interested persons.” (GSM Export (UK) Limited v. HMRC [2014] UKUT 457 (TCC), §18, Judge Berner).

Question is not whether backers/interested persons could afford to fund, but whether they will

"[25]...in circumstances in which Patten LJ concluded that “it seems clear to me that Mr Bagana has decided not to fund the payment by the company”, I am driven to the view that this court cannot proceed on the basis that Onur’s application for discharge of the condition was refused by reference to the correct criterion...In other words he was proceeding by reference to the Court of Appeal’s misconception, born of the additional observations in the Hammond Suddard case and developed in the Société Générale case, that in exceptional circumstances an order for a party, without apparent assets of its own, to make a payment into court could be justified by whether another person probably could advance the necessary funds to it irrespective of whether he probably would do so."  (Goldtrail Travel Limited (in liquidation) v Onur Air Tasimacilik As [2017] UKSC 57)

Consider denials that funds will be made available realistically

"[24]...The court should therefore not take the refutation at face value. It should judge the probable availability of the funds by reference to the underlying realities of the company’s financial position; and by reference to all aspects of its relationship with its owner, including, obviously, the extent to which he is directing (and has directed) its affairs and is supporting (and has supported) it in financial terms." (Goldtrail Travel Limited (in liquidation) v Onur Air Tasimacilik As [2017] UKSC 57)

Ability to fund own legal team indicates appeal not stifled 

 

“Although it could not be said that there is powerful evidence in this case that the backers can provide security, it nevertheless remains the case that there is no evidence that they cannot.” (Blada Limited v. HMRC FTC/64/2010, §28, Judge Bishopp).

 

“…neither the appellants nor Mr Gohir have taken the opportunity to challenge with any evidence the powerful inference that Mr Gohir has both the means and the motive to provide the necessary security if necessary as the price of being able to pursue this appeal. Accordingly, it seems to me that no case is made out or even begun to be made out that an order for security in the present case would stifle the appeal.” (Calltel Telecom Ltd v HMRC [2008] STC 3246, §14, Briggs J).

 

Caution where HMRC are, potentially, the cause of the insolvency

 

“I agree that in the context of a dispute, as this is, between taxpayer and state one should be cautious about the making of an order for security when the taxpayer’s insolvency may, if only in part, be attributable to its treatment by the state, and when the making of an order might be seen, even if not oppressive, as a means of stifling a claim…But, important though those considerations are, it does not seem to me that there can be any basis on which applications for security if made by HMRC should be routinely refused; the general body of taxpayers is entitled to some protection from the pursuit of an appeal on the “heads I win and tails you lose” basis criticised by Waller LJ in Contract Facilities...” (Blada Limited v. HMRC FTC/64/2010, §36, Judge Bishopp).
 

Stifling Appeal

Prospects of success

 

Prospects of success relevant if very high or very low

 

“Regard should be had to the appellants’ prospects of success. But the tribunal should not go into the merits in detail unless it can clearly be demonstrated that there is a high degree of probability of success or failure. In the case of an appeal to this tribunal, I take the view that this factor will include the fact that the appellant has been given permission to appeal, and will thus have established that there are arguable grounds of appeal.” (GSM Export (UK) Limited v. HMRC [2014] UKUT 457 (TCC), §18, Judge Berner).
 

Prospects of success

Late application

 

Late application after costs have been incurred may point against order

 

“The lateness of the application for security is a circumstance which can properly be taken into account. What weight, if any, this factor should have and in which direction it should weigh must depend upon matters such as whether blame for the lateness of the application is to be 5 placed at the door of the respondents or at that of the appellants. It is proper to take into account the fact that costs have already been incurred without there being any order for security. Nevertheless, it is appropriate for the tribunal to have regard to what costs may yet be incurred.” (GSM Export (UK) Limited v. HMRC [2014] UKUT 457 (TCC), §18, Judge Berner).
 

Late application

Examples

 

No evidence that backers would not fund security leading to application being granted

 

“I accept, as I have already said, that the appellant has no resources of its own and that Mr Bliss is impecunious, but I have no information at all about the resources of the other backers, or proposed backers, and their ability to provide security beyond Mr Bliss’s unsubstantiated assertions that it has been difficult to secure their support and that £25,000 would be “a lot of money for them”. This is not a case in which the appellant, or Mr Bliss, has had very little time to produce the evidence to support the proposition that security cannot be provided.” (Blada Limited v. HMRC FTC/64/2010, §38, Judge Bishopp).

 

Late application leading to refusal

 

“But the fact that the appellants have been unable to produce evidence that the appeals would be stifled if an order for security for costs were made is entirely attributable to the lateness of the respondents’ application and the truncated timetable for considering the application that such delay has mandated. The lateness of the application has given the appellants an unreasonably short time in which to arrange security, if an order were to be made. It would not, in my view, be in the interests of justice now to require the appellants to address these funding questions at a time when they are in the late stages of preparing for trial.” (GSM Export (UK) Limited v. HMRC [2014] UKUT 457 (TCC), §45, Judge Berner).
 

Examples

Form of security

 

Security need not be by payment of money

 

“I do not propose to direct that the appellant must pay any sum, but shall instead direct that it provide security. If, however, the simplest means of doing so is to make a payment, then it may adopt that course. I mention for the avoidance of doubt that the tribunal does not have the facility to hold funds. The parties should endeavour to agree on the means by which security is to be provided, and revert to 40 me if they are unable to do so.” (Blada Limited v. HMRC FTC/64/2010, §41, Judge Bishopp).
 

Form of security

Consequence of not providing security

 

Appeal dismissed if security not given

 

“I am mindful that the amount of the security directed is substantial and I have decided to allow the appellant a little more than two months to provide it. But I make the provision of security a condition on the non-satisfaction of which the appeal cannot proceed, and if the appellant fails to provide it as I have directed the appeal will be dismissed, without further direction.” (Blada Limited v. HMRC FTC/64/2010, §41, Judge Bishopp).
 

Consequence of not providing security
bottom of page