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IN THE SUPREME COURT OF JUDICATURE CHANF 97/0471/B

COURT OF APPEAL (CIVIL DIVISION )

Royal Courts of Justice

Friday, 20th June 1997

B e f o r e :

LORD JUSTICE PHILLIPS

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(1) HARVEY MICHAELS

(2) VALENTINA MICHAELS

Appellants

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HARLEY HOUSE (MARYLEBONE) LIMITED

Respondent

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(Computer Aided Transcript of the Stenograph Notes of

Smith Bernal Reporting Limited

180 Fleet Street, London EC4A 2HD

Telephone No: 0171-831 3183/0171-404 1400

Fax No: 0171-404 1424

Official Shorthand Writers to the Court)

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MR. A. TANNEY (instructed by Messrs Merriman White, London, EC4) appeared on behalf of the Appellants.

MR. T. WEEKS (instructed by Messrs Titmuss Sainer Dechert, London, EC4) appeared on behalf of the Respondent.

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J U D G M E N T

(As approved by the Court)

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Crown Copyright

LORD JUSTICE PHILLIPS: The appellants in this case are the plaintiffs below. Application is made by the respondent for security for the costs of the appeal pursuant to O.59,r.10 on the grounds that the appellants are impecunious. As to that there is no dispute. The first plaintiff is a bankrupt with liabilities of some quarter of a million pounds and the second plaintiff has no independent assets. There is outstanding against the plaintiffs an unsatisfied order for costs.

The nature of the claim is an assertion of rights under the Landlord and Tenant Act 1987 on the ground that the plaintiffs are statutory tenants who enjoyed a right of first refusal on their flat which forms part of a large block of flats which were sold by the landlords.

The plaintiffs were legally aided for the trial, and they had to surmount a number of hurdles in order to establish their right to purchase. First, they had to establish that the disposal by the landlords was a relevant disposal and not a disposal to an associated company. They failed to surmount that hurdle. Secondly, they had to demonstrate that they had served a valid notice seeking information to which they were entitled by the statute. They failed to surmount that hurdle. Third, they had to establish that the response to their notice was inadequate. They failed to surmount that hurdle. Finally, the judge found that had they succeeded in surmounting all of those hurdles an estoppel would have arisen preventing them from the relief which they sought, in essence, that they had stood by watching very expensive improvements being done to the block of flats.

I mention those hurdles because it does seem to me, on the face of it, that the prospects of an appeal cannot be all that rosy. The respondent's solicitors raised with the appellants' solicitors the question of security for the costs of the appeal in correspondence. There has been considerable correspondence in relation to that matter. One letter is of particular relevance. It is dated 21st April 1987 and is from the appellants' solicitors to the respondent's solicitors:

"Our clients have not been refused legal aid and we are currently waiting for a determination. There is no change in their financial circumstances. As you are aware the case has attracted considerable interest and is of national importance and interest to various tenants rights groups and support has been provided to enable our clients to proceed if legal aid is not available."

Before me, Mr. Weeks' primary submission is that this application should be adjourned pending the result of the application for legal aid. As to that, it was initially made on 11th April but the legal aid authorities sought counsel's opinion which was not provided until 13th June. Mr. Weeks says that it is only in exceptional circumstances that security for costs is ordered against a legally aided appellant, the reason being that in appropriate circumstances costs can be ordered against the legal aid fund if the appeal fails. In those circumstances, he says that I should await the result of the application for legal aid.

I approach this case on the premise that legal aid may be granted but, none the less, I have concluded that it is an exceptional case where it is appropriate to order that security for costs be put up. This is a claim being brought by a bankrupt. On the face of it, it seems to me that the benefit of any rights that he enjoys in relation to his flat should form part of the assets available to the trustee in bankruptcy. I make no concluded view in relation to that. What I do consider relevant is the evidence of outside interest and outside support. Mr. Weeks has told me on instructions that, contrary to the letter of 21st April, there is no guarantee of support for this appeal. I do not find it satisfactory to be given information of that kind on instructions which is in conflict with a letter written by the appellants' solicitors, and my inference is that whether or not there is a firm undertaking to support the appeal, the likelihood is that there are interests who would be prepared to do so if no other form of support is available. Certainly no case has been made out that, absent legal aid, the appellants would not be in a position to proceed with their appeal or that, if security for costs of the appeal is ordered today and legal aid is not forthcoming, that will stifle the appeal.

In those circumstances, I reject the application that has been made for an adjournment. I am going to order security for costs to be put up. The question remains as to the amount of that security. A draft bill of costs has been put before me. I am told that a blueprint for that bill of costs has been costs in an appeal in relation to similar proceedings. All that I would observe is that I cannot believe that those proceedings were as similar as has been suggested, for the draft bill includes provision for no less than 225 letters, 135 telephone calls, 70 hours of attendance by partners or assistant solicitors, running up costs of nearly £10,000, conferences and consultations involving a further £12,250 costs, all in relation to a day and a half's appeal turning partly on fact and partly on law. Mr. Weeks has not come armed with any evidence to attack the bill of costs but I do not find such evidence is needed. I find the costs set out to be profligate. I shall order security for costs of the appeal in the sum of £30,000. The order will be that security in that sum is to be put up within 28 days. Pending the provision of the security the appeal is to be stayed. Should the security not be afforded in 28 days the appeal stands dismissed without further order.

Order: Application for adjournment refused; security for costs in the sum of £30,000 to be put up by the appellants within 28 days; pending provision of the security for cots the appeal is stayed; should security not be afforded in 28 days the appeal stands dismissed.