Trustees of Olympic Airlines SA Pension & Life Assurance Scheme v Olympic Airlines SA [2013] EWCA Civ 218

Case No A3/2012/1494[2013] EWCA Civ 218
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(CHANCELLOR OF THE HIGH COURT)
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate Monday, 25 th February 2013
Before
LORD JUSTICE KITCHIN
Between
THE TRUSTEES OF THE OLYMPIC AIRLINESApplicants/S.A PENSION & LIFE ASSURANCE SCHEMERespondentsOLYMPIC AIRLINES S.A.Respondent/
(DAR Transcript ofWordWave International LimitedA Merrill Communications Company165 Fleet Street, London EC4A 2DYTel No: 020 7404 1400 Fax No: 020 7831 8838Official Shorthand Writers to the Court)
Mr Marcus Haywood (instructed by Baker & McKenzie LLP) appeared for Applicants.Mr Sebastian Prentis (instructed by Philip Ross Solicitors) appeared for Respondent.
Judgment
[1]This is an application by the respondents, the trustees (“the Trustees”) of the Olympic Airlines S.A. Pension and Life Assurance Scheme, for security for costs of the appeal by the appellant, Olympic Airlines S.A. (“Olympic”), against the winding-up order made in relation to Olympic by the Chancellor on 29 May 2012. The application is made under CPR 25.15.[2]The background is set out in a witness statement of Mr Parminder Latimer dated 6 December 2012 made in support of the application. Mr Latimer is the senior manager of Pitman’s Trustees Limited which is itself the corporate trustee of the scheme. It and two lay trustees comprise the Trustees.[3]Olympic was the Greek national airline. It was placed into special liquidation on 2 October 2009 and the firm of Ethniki Kephaleou S.A. was appointed as special liquidator. It is accepted that the Greek liquidation constitutes main proceedings for the purposes of EC Regulation 1346/2000 of 29 May 2000 on insolvency proceedings (“the Insolvency Regulation”).[4]The scheme is an occupational pension scheme and provides defined benefits to its members. Olympic is the principal employer of the scheme, and the only employer currently participating in it. The rules of the scheme required it to be wound up in consequence of the liquidation of Olympic. The deficit in the scheme which is due from Olympic to the Trustees under section 75 of the Pensions Act 1995 is nearly £16 million.[5]The liquidation of Olympic in Greece was not a qualifying insolvency event for the purposes of section 127 of the Pensions Act 2004, with the result that the Trustees were unable to turn to the pension protection fund to seek to cover the deficit. Accordingly, on 20 July 2010 the Trustees presented a petition to wind up Olympic in England, seeking to open secondary proceedings on the basis that at the date of presentation of the petition Olympic had here an establishment within the meaning of Article 3(2) of the Insolvency Regulation.[6]That petition was opposed by Olympic on the basis that it was already being wound up in Greece where its main interests are situated. It contended that it did not, on 20 July 2010, have a relevant establishment in this country. The Chancellor held that Olympic did possess a relevant establishment here at that date, and accordingly he made the winding up order dated 29 May 2012. He refused an application by Olympic for permission to appeal, and he refused to grant a stay of the order pending any application for permission to appeal. On 13 August 2012, Etherton LJ refused Olympic’s application for permission to appeal on the papers, but at an oral hearing on 6 November 2012, Rix LJ granted permission to appeal and a stay of the order made by the Chancellor pending determination of the appeal or further order.[7]The order of 6 November 2012 did not come to the attention of the Trustees until 13 November 2012. On that same day, their solicitors wrote to Olympic’s solicitors inviting it to provide security for the Trustees’ costs of the appeal in a form to be agreed, failing which an application would be made for such relief. The letter had appended to it a costs schedule and sought security in the sum of £85,000 including VAT. By letter dated 30 November 2012, Olympic declined to provide that security, and accordingly this application was issued on 6 December 2012, supported by the statement of Mr Latimer to which I have referred.[8]On 11 January 2013, the Trustees’ solicitors wrote to Olympic’s solicitors inviting them to file any evidence in response to the application by 31 January 2013. No response to that letter was received by that date. Instead, by letter dated 12 February 2013, Olympic’s solicitors wrote explaining that they had now had an opportunity to obtain detailed instructions from their client, and asserted that under Greek law the main liquidator was unable to give or offer security for costs, and that any order for security would stifle the appeal. They continued that the Greek liquidator could not validly pay an order for security for costs under the legislative framework governing the liquidation in Greece.[9]By letter dated 18 February 2013, the Trustee’s solicitors responded that they did not accept it would be unlawful under Greek law for Olympic to provide security for the Trustees’ costs of the appeal, but in any event there existed a compelling reason to require security to be provided, namely it would be unjust for the Trustees to be expected to incur costs in resisting an appeal brought by an insolvent corporate entity such as Olympic without those costs being secured. In that connection, they referred to the decision in Olympic Airlines SA (in special liquidation) v ACG Acquisition XX LLC[2012] EWCA Civ 1659, where this court had regard to the ability of those behind Olympic to provide security, namely the Greek State. They continued that they could not see any basis for the court to depart from the clear reasoning in the ACG case in relation to the present application. No response to that letter was received until, shortly before the hearing of this application, the Trustees received a witness statement of Ms Violetta Vassilakou, in-house legal counsel of Olympic, and prior to the liquidation head of its legal department. The statement is dated 20 February 2013 and in it Ms Vassilakou outlines the nature of the special liquidation procedure in Greece and explains that, in her opinion, until claims concerning the creditor’s list are determined and the list is settled, the liquidator has no power to make any payment. Further, in order to be classified as an execution expense, and so secure priority, an expense has to be incurred in the general interest of all creditors, not in the exclusive interest of a particular creditor. She continues that the opening of the secondary proceedings by the Trustees has not been motivated by anything other than their own interests. It is not, therefore, likely that any costs of these proceedings can properly be treated as an execution expense, and that instead they will fall within the general creditor claims and be paid accordingly. For all these reasons, she says that Olympic has no power to give security for costs; and any order that it must do so will therefore prevent the hearing of the appeal for which permission has been granted.[10]CPR 25.15 confers upon this court a power to order security for costs of an appeal against an appellant on the same grounds as it may order security for costs against a claimant. Under CPR 25.13 the court 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 one or more of the conditions in paragraph (2) applies. Those conditions include, at (c), that the claimant is a company or other body, whether incorporated inside or outside Great Britain, and there is reason to believe that it will be unable to pay the defendant’s costs if ordered to do so.[11]Mr Haywood, who has appeared on this application on behalf of the Trustees, submits that, as a general rule, where a company appeals a winding-up order made against it, security for costs will be ordered. He says that general rule should apply in the present case. Olympic has been placed into liquidation in this jurisdiction and in Greece. It has not satisfied any part of the section 75 debt. Olympic no longer has any significant assets in this jurisdiction and there is plainly reason to believe that it will be unable to pay the Trustees’ costs if ordered to do so. He continues that the evidence of Ms Vassilakou is not accepted, but in any event this does not constitute a sufficient reason to refuse the application, and in that regard relies upon the decision of this court in the ACG case.[12]Mr Prentis, who has appeared on behalf of Olympic, recognises that if the threshold condition set out in CPR 25.13(2)(c) is met, this court has a discretion whether to order security for costs, and if so the terms and the amount of that security. Nevertheless, he says that the general rule in winding-up cases is descriptive of a practice rather than a rule, and in any event that rule is inapplicable in the present case. Further, as explained, by Ms Vassilakou, under Greek insolvency legislation, Olympic has no power to give security, and any order that it should do so would stifle the appeal.[13]I have no doubt that the threshold condition in CPR 25.13(2)(c) is indeed met in this case. Upon the evidence before me, there is reason to believe that Olympic will be unable to pay the Trustees’ costs if ordered to do so. I am therefore satisfied that this court does therefore have a complete discretion whether to order security. In the circumstances of this case, including that Greek law is the applicable law of the liquidation, and the appeal is plainly not frivolous, I am content to proceed on the basis that it is appropriate to exercise that discretion having regard to all the circumstances and unfettered by any general rule which may apply in winding-up cases. I turn then to the balancing exercise which I must carry out, and consider the following matters are relevant.[14]First, the appeal is, as I have said, plainly not frivolous. Permission to appeal has been granted by this court and I must assume that it has a real prospect of success.[15]Second, I am concerned not to allow the power to order security to be used as an instrument of oppression. In that regard I must consider the evidence of Ms Vassilakou that Olympic has no power to give security for costs and that any order that it must do so will stifle the appeal. Mr Haywood says, with some justification, that this evidence has been served very late, and it is not accepted. Mr Prentis accepts that the evidence has been served very late and has apologised to this court during the course of his submissions this morning. More substantively, he says the evidence was foreshadowed in the correspondence to which I have referred. For the purposes of this application, I therefore accept that it is at least arguable that, at the present time, Olympic cannot itself provide security.[16]Third, that is not, however, the end of the matter. It is well established that before the court will refuse to order security on the ground that it would unfairly stifle a valid claim, the court must be satisfied that, in all the circumstances, it is probable that the claim would be stifled. In this regard, I must consider not only whether Olympic can provide security, but also whether it can raise the amount needed from other interested bodies. As this court explained in Keary Developments Ltd v Tarmac Construction Ltd [1995] 3 All ER 534, this information is likely to be peculiarly within the knowledge of the respondent to the application, and it is for the respondent to satisfy the court that it would be prevented by an order for security from continuing with the litigation, or in this case the appeal. This issue was raised squarely by the Trustees in their letter of 18 February 2013 to which I have referred. In that letter, they specifically pointed to the decision of this court in ACG, and in particular to paragraph [19] of the judgment of Rimer LJ:
“Fourth, in my view there is in all these circumstances a 'compelling reason' to require security to be provided. It is founded on basic considerations of justice. ACG has secured a first instance judgment in its favour. In principle, it is obviously unjust for ACG to be expected to incur costs in resisting an appeal brought by an insolvent corporate appellant such as Olympic without being secured as to its costs of such resistance. Whilst Olympic's stance is that it cannot provide security because to do so would be unlawful under Greek law, it is also faced with a decision of the English court in this very litigation that it would not be so unlawful. In any event, even if the liquidator has concerns about the lawfulness of the giving of security, it is well settled that when it comes to the question of giving security the court also has regard to the ability of those behind the corporate appellant to help it out (see Keary Developments Ltd v. Tarmac Construction Ltd and another [1995] 3 All ER 534, at 540j, per Peter Gibson LJ). The liquidator wishes to pursue the appeal because, presumably, it regards it as for the benefit of the liquidation; the liquidation is being conducted primarily for the benefit of the State; and so the State has the primary interest in the pursuit and success of the appeal. Whilst the court can take judicial notice of the current straitened economic circumstances with which the State is faced, there is no evidence that the State cannot or would not itself be prepared to put up the (in the context of the sums the subject of Olympic's claims in the litigation) relatively modest sums sought by way of security in order to keep the appellate show on the road. Moreover, any security provided will be paid into court and, as I understood to be accepted by Mr McLaren, if ACG wins the appeal, no money will be ordered to be paid out to it except by consent or after a full inquiry as to ACG's claim to the money. By that, I mean an inquiry as to the Greek law and issue estoppel points.”
[17]I accept that there are significant differences between the facts of the ACG case and the present. But there are important similarities, too. In particular, Rimer LJ explained that the liquidation of Olympic was being conducted primarily for the benefit of the Greek State, and that the State has the primary interest in the pursuit and success of that appeal. That observation seems to me to be equally apposite in the present appeal. Further, as Rimer LJ put it, there was no evidence that the State could not or would not itself be prepared to put up the relatively modest sums sought by way of security in order to allow the appeal in that case to proceed. Now in the present case, the Trustees’ solicitors’ letter of 18 February specifically drew the attention of Olympic’s solicitors to the regard had by this court in the ACG case to the ability of those behind Olympic to provide security, and in particular the Greek State. Yet despite the decision in that case, and that express reference, I have nothing before me by way of evidence in this regard other than the statement by Ms Vassilakou that the order for security would stifle the appeal. In my judgment, that is wholly inadequate. It says nothing at all about the position of the Greek State, or any efforts made by Olympic to raise the money from anywhere else.[18]Finally, and just as in the ACG case, it seems to me that it would be manifestly unjust for the Trustees to be expected to incur costs in resisting this appeal without being secured as to their costs of that resistance.[19]In all these circumstances I have reached the clear conclusion that it is appropriate to order security, although in the light of the submissions made to me this morning by both Mr Haywood and Mr Prentis, I believe that it is appropriate to make that order subject to either party having liberty to apply for a determination of any issue concerning Greek law prior to any payment out.[20]As for the amount of security sought, Mr Prentis submits that the sum sought is excessive for a half day appeal on a point of law, and in that regard has taken me in the course of his submissions through the estimated costs of the appeal appended to Mr Latimer’s statement. This submission does, in my view, have some force, and a review of the schedule of actual and anticipated costs relied upon suggests to me that an excessive amount of time has been and will be spent in relation to it. In my judgment, a fair and proportionate sum to order by way of security in all the circumstances is £60,000.

Order

Application granted