News

Apr 1 2001

Privy Council - Security for Costs in the Privy Council

Electrotec Services Limited -v- Issa Nicholas (Grenada) Limited (Privy Council Appeal No. 79 of 1996

Successful applications for security for costs are a common feature of actions brought under the Civil Procedure Rules in England and Wales. An identical application made in the Privy Council however may be viewed in a rather different light.

In an Appeal from a Commonwealth country the Privy Council must adopt the procedures of the Court of first instance where the application originated. It is constrained by the procedural rules of the original Court, notwithstanding that such rules may not reflect its own.

The difference in approach was highlighted clearly in Electrotec Services Limited and Issa Nicholas (Grenada) Limited. The Respondents applied unsuccessfully for an order that (i) the Appellants give security for the costs arising out of their Appeal to the Privy Council; and (ii) that the Appeal be stayed until such security had been given.

The Privy Council robustly dismissed the application on the basis that the Appellant had a constitutional right enshrined in Section 104(1) of the Constitution of Grenada to appeal to Her Majesty in Council. It was considered that to require the Appellant of an insolvent company to provide security for costs would preclude the Appellants' legal right under its governing constitution to appeal to the Privy Council as its final Court of Appeal.

The only power granted to the Privy Council to require the Appellant to provide any form of security is section 5(a) of the West Indies Associated States (Appeals to Privy Council) Order 1967 S.I. No. 224 of 1967. This required the Appellant to pay £500 as security. Notwithstanding the argument that £500 would hardly indemnify a successful Respondent against liability for its legal costs against an insolvent Appellant, the Privy Council held that recoverability of costs by a successful litigant is not a universal requirement of justice. Priority is to be given to the free availability of the right of appeal.

The Privy Council does have an inherent power contained in Rule 27(1)(a) of the Court of Appeal rules to exercise a power to require an impecunious litigant whether individual or corporate to give security for the costs of an appeal. However the Privy Council considered in this case that their jurisdiction to do so was impliedly excluded by the code of procedure for appeals constituted by the West Indies Order and the Judicial Committee Rules. No precedent had ever been cited of such a condition ever having been imposed by the Board in an appeal as of right. It also appeared to be inconsistent with the constitutional right of a Grenadan litigant to appeal to her Majesty in Council. The only circumstance in which the Privy Council would use this power would be in an exceptional case. For example if the bringing of an appeal appeared to be an abuse of process.

The result is that every Grenadan litigant has a constitutional right pursuant to section 104(1) of the Constitution of Grenada to appeal to the Privy Council unless the bringing of the appeal is considered to be an abuse of process. The result is that the Respondent party is likely to incur significant legal costs which may not be recoverable from an impecunious litigant.

It is arguable that a party's right to bring such an appeal is no more important than the right of a Respondent to require a party to provide security for costs. If the successful party cannot recover its costs, it may face considerable financial hardship. Given that the Respondent did not bring the appeal, for it to incur irrecoverable costs appears unjust. That is not to argue that Grenadian Appellants who cannot provide security for costs should be denied the absolute right of Appeal as that would breach a constitutional right. However, perhaps the Privy Council should also consider the likelihood of success for the party bringing the Appeal.

If an Appellant's prospects of success are minimal, to grant that party leave to appeal notwithstanding that it is insolvent and has not given security for costs, is arguably disproportionate to the Appellant's constitutional right to bring the Appeal. It certainly does not reflect the Overriding Objective of the Civil Procedure Rules of England and Wales which is to deal with a case in ways which are proportionate to the amount of money involved, the importance of the case, the complexity of the issues and the financial position of each party. England and Wales is unique in that it is the only legal jurisdiction in the world whose Civil Procedure Rules state at the very beginning what the purpose of those rules are, the rationale being to ensure that cases are dealt with justly. This approach to litigation is arguably more likely to achieve a just result for all parties involved in a dispute than an approach which allows the parties to pursue an action without regard to the legal costs involved.

It would be more proportionate and in the interests of justice if the Privy Council had a discretion to require an applicant to give security for costs if the applicant was in financial difficulties and in addition had a less than likely prospect of success. This would protect Respondents from the unfairness of defending appeals which they may win at law but lose in costs.

A more balanced approach which considers the constitutional right of the Appellant and the financial interests of the Respondent would more accurately reflect the spirit of proportionality which Lord Woolf is seeking to inject into the Civil Procedure system.

Written by Judith Gamble and David Miles of Glovers Solicitors, London instructed as Privy Council Agents by Henry Henry & Bristol Attorneys-At-Law for Electrotec Services Limited who ultimately successfully appealed against the judgement of the Court of Appeal in Grenada.

"This article originally appeared in the April 2001 issue of The Commonwealth Lawyer, and is reproduced with the kind permission of that journal."

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