MOHAMMAD ALI AOUN v (1) HASSAN BAHRI [2002] EWCA Civ 1390

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
(Mr Justice Moore-Bick)
[2002] EWCA Civ 1390Case No A3/2002/0444Venue Royal Courts of Justice, Strand, London WC2A 2LL, Wednesday, 4th September 2002
Between
MOHAMMAD ALI AOUNClaimant/Appellant(1) HASSAN BAHRI(2) COSTAS ANGELOLUDefendants/Respondents
Before
Lord Justice BrookeLord Justice TuckeyMR NIGEL JACOBS (Instructed by Jeffrey Green Russell, Appollo House, 56 New Bond Street, London W1Y OSX)appeared on behalf of the Applicant.MR GRAHAM DUNNING and MR STEPHEN HOUSEMAN (Instructed by Messrs Constant & Constant, 20 Upper Ground,Blackfriars Bridge, London SE1 9QT) appeared on behalf of the First Respondent.MR HUW DAVIES (Instructed by Barlow Lyde & Gilbert, Beaufort House, 15 Boltoph Street, London EC3A 7NJ)appeared on behalf of the Second Respondent.Date 4 September 2002
[1]Tuesday, 4th September 2002 LORD JUSTICE BROOKE: I will ask Tuckey LJ to give the first judgment.

LORD JUSTICE TUCKEY: On 19th February 2002 Moore-Bick J ordered the appellant Mr Aoun, who is the claimant in these proceedings, to provide substantial security for the two defendants' costs. Mance LJ gave the appellant permission to appeal against this order and on 3rd July of this year Brooke LJ and Wall J ordered that the appellant should provide security for the respondents' costs of this appeal.

[3]The relevant parts of the court's order said:
"2)the order of Lord Justice Mance ..., granting the Appellant permission to appeal ... be set aside and the Appellant's appeal be dismissed forthwith and without further order, unless: ... (iii)the Appellant provides, by 4pm on Wednesday 24th July 2002, security for: (a) the First Respondent's [that is Mr Bahri] costs of defending the present appeal in the sum of £26,520; and (b)the Second Respondent's [that is Mr Angelou] costs of defending the present appeal in the sum of £23,893.63, such security to be provided in the form of a first class bank guarantee or other security reasonably satisfactory to the Respondents."
[4]There was no suggestion at the hearing on 3rd July before this court that the appellant was considering providing security other than in the way which this court normally expects and he consented to the form of the order which was made.[5]The day before this order had to be complied with the appellant's solicitors faxed the respondents' solicitors, saying that security would be provided by their client placing with them one of his five shares certificates in Apex General Trading SA. They enclosed an audit report from Price Waterhouse Coopers showing the financial position of this company for the six months to 31st January 1999 which, they said, showed that each of the appellant's shares was worth more than $330,000. Neither respondent accepted that by placing this share certificate with his solicitors (which he has in fact done) the appellant would comply with this court's order. As no other security was offered or provided, the respondents say the appeal stands dismissed in accordance with the terms of the order. The appellant says he has complied with the order and today's hearing was arranged to decide who is right about this.[6]Apex is a $10,000 Panamanian company. The shares are bearer shares and the share certificate, which was deposited with the solicitors, (certificate no.1) represents 10% of its capital. The appellant says that this certificate, together with four similar ones, were given to him by Mr Angelou in the context of their dispute which is the subject of this litigation when he discovered that the respondents had moved assets from their ship-owning and oil trading companies into Apex. It is common ground that Mr Bahri holds the other five share certificates. Mr Angelou, on the other hand, says that the five certificates now held by the appellant were stolen from him in Greece by the appellant and another man in November 1999, about which he complained to the Greek authorities.[7]When the certificate was first offered as security the appellant's solicitors, on instructions, said that on 2nd February 2002 the public prosecutor in Athens had decided that the appellant had no case to answer on the allegation of theft so, in effect, the criminal proceedings in relation to the share certificates were over. That was incorrect. It is clear from material produced by the respondents that the criminal investigation into the theft of the shares continued, and the appellant was bailed to answer the charge and a warrant of arrest was issued against his co-accused. However, in the last few days the appellant's lawyers in Greece have produced further documents which, they suggested in correspondence, showed that an appeal court in Greece has recently ruled that the appellant has no case to answer on the theft charge. We have now seen a proper translation of the appeal court ruling relied on, which was made in May this year, which, although it refers to the theft allegation and the handing over of the shares, did not in fact, and was not concerned to, rule on the outstanding theft charges. So there is still an on-going investigation into the allegation which Mr Angelou has made.[8]The Greek lawyers also assert that in the course of the criminal investigation the respondents have made statements to the effect that Apex has assets of at least US$3.45 million and may be due some further monies from Mr Bahri. So, it is contended, the shares the subject of the certificate have a value which more than covers the amount of security ordered by this court.[9]At 4.00 p.m. yesterday afternoon this court was asked to adjourn the hearing today so that further documents could be obtained from Greece. We refused that application, and it has not been renewed before us this morning by Mr Nigel Jacobs, who appears for the appellant. Instead, shortly before we came into court at 11 o'clock, a statement from Mr Aoun was produced. This statement repeats his assertion that Mr Angelou gave him the shares and that he has not stolen them, and that Apex has a value of at least $3.5 million. It also says that the reason he has not been able to raise money on the Apex shares is because of the allegations of theft which are still outstanding and complains of the fact that the respondents, who it is alleged control Apex, have refused to provide any financial information so as to enable the appellant and his advisers to put forward some positive case about its worth.[10]For the purposes of today's hearing it is not necessary to form any view about the merits of the theft allegation. All, I think, one has to note is that those allegations are still alive and that the Greek criminal process in relation to them has not been completed. But in relation to the value of Apex, for present purposes I am prepared to assume that it has a value of at least $3.45 million. By making this assumption there can be no possible prejudice to the appellant from the fact that this case is proceeding today. The real question, however, is whether on this assumption the placing of the share certificate complies with the court's order, which clearly contemplated the provision of a first class bank guarantee or its equivalent, designed to give the respondents the comfort that if they were successful on the appeal they could recover their costs without difficulty.[11]Traditionally, security was provided by payment into court or solicitors undertakings. Nowadays bank guarantees are the norm, provided they are from first class banks. Other forms of security are not ruled out, but they must be copper bottomed - in the sense that they can be enforced in a simple and straight forward way - otherwise the purpose of ordering security is defeated. Thus, in this case, as at an earlier stage, Moore-Bick J rejected an offer by the appellant to provide security by the deposit of share certificates in other companies in which he had an interest, and this court in AP (UK) v West Midlands Fire and Civil Defence Authority [2001] EWCA Civil 1917 rejected security in the form of a charge over property. The reason for this was put by Moore-Bick J in this case when he said:
"The fact is that if any of these shares have any realisable commercial value, it will be more appropriate for Mr Aoun to use them as counter-security for a bank guarantee in favour of the defendants."
[12]Passages in the judgment of Longmore LJ in the AP(UK) case are to the same effect. He expressed surprise that security was being offered in the form of a charge on real property, adding:
"... for myself, I have never come across such a suggestion in commercial or mercantile action. The reason for that must be that in a normal case if real property is sufficiently valuable to stand as security there will no difficulty in the claimants procuring a bank guarantee for the purpose of security for costs by, if appropriate, granting a charge to the bank."
[13]I do not think that the placing of the share certificate with the solicitors provides the respondent with security of the quality to which they were entitled under the order. One can demonstrate this by asking what would happen if the respondents were successful on the appeal and sought to realise the security? What rights would they have over the certificate? What would they do with it? There is no evidence of a market in these shares. If there was, what would a 10% share holding be worth? Certainly it could not be assumed to be worth 10% of the value of the company. Would the respondents have to wind the company up? If so, why should they have to do this in order to realise their security? The whole thing is complicated by the fact that there are two respondents with separate interests and separate legal representation, and the appellant was ordered to provide different security for each. How could they execute against a single share certificate?[14]In short the matter is fraught with uncertainty and difficulty. Any attempt to execute against such security would not be a simple and straightforward matter, as the court intends when it makes such an order. The respondents were entitled to security which could be realised with relative ease.[15]Mr Jacobs in his valiant submissions before us this morning sought to say, "Well, that may be all very well in a general case, but in this case the respondents should in effect be bound to accept the security which is offered." He founds his submission on a paragraph from the judgment of Longmore LJ in AP/UK which says:
"For myself, I would say more broadly that if no bank will lend on the security of proposed real property that will mean the proposed security is inadequate unless there is a reason to explain why the defendants should be required to accept security by way of charge on property when no bank is prepared to do just that."
[16]Here, he says, there is a reason why the respondents should be required to accept the security. The reason is that Apex is controlled by the respondents; it is a substantial company and they must be aware of its assets. If it is to be contended that the share which the appellant has deposited is of no value, they should have put before the court evidence to demonstrate this, and they have not done so. Indeed, they have failed to answer questions posed by the appellant's solicitors which were designed to show what the worth of the company was. They should, therefore, be required to accept the share certificate as security. The requirements for providing security on appeal should be less stringent because in such a case the appeal will have passed the threshhold for permission and so the court should be less anxious to protect the position of the respondents.[17]I do not accept any of these submissions. It seems to me that the offer of this share was inadequate security, for the reasons I have already explained: its uncertain ownership and the inability to realise it in a simple and straightforward way. Whatever the position about who controls Apex and what it is worth, the respondents cannot be compelled to accept one of its shares as security.[18]I can see no reason in principle why, if this court intends to protect a respondent by making an order for security for costs, why the security to be provided should be any less copper-bottomed than would be the case where such an order is made at first instance.[19]For those reasons, I conclude that the appellant has not provided the security which was ordered by this court within the time he was given to do so, and so I think his appeal stands dismissed in accordance with the terms of the unless order which this court made.

LORD JUSTICE BROOKE: I agree. The appeal therefore stands dismissed.

Order

We make an order to clarify the position to the effect that the security as tendered should not be regarded as reasonably satisfactory so that the appellant fails to comply with the conditions set out in paragraph (2) of the Court's order of 3rd July. Accordingly, the appellant's appeal is dismissed forthwith with costs. The solicitors are released from their undertakings which relate to the sums which they now hold on their client's account in relation to the sums paid under paragraphs 2(1) and (2) of their order. We also order that the appellant should pay the two respondents their costs of today. So far as counsel's fees are concerned, we consider this is a case in which it would be inappropriate for the solicitors to instruct a single counsel. We would allow a fee of £4,000 for that purpose and we would allow £2,000 for counsel's fees in relation to each respondent. So far as solicitors' fees are concerned, we consider that in each case a sum of £3,000 is appropriate. Further, there will be a sum of £5,000 awarded, plus whatever VAT is appropriate, in favour of each respondent.

Cited in 1 later judgment