Cyprus Supreme Court dismisses security for costs application where foreign plaintiff sues on bill of exchange with strong defense.

[*201] 1982 Jan 18

(BOYADJIS, P.D.C., KRONIDES, S.D.J.)

IN THE DISTRICT COURT OF NICOSIA

Frank Wright Feeds International Ltd.,

Plaintiffs,

v.

Cypromix Concentrates Co.Ltd.,

Defendants.

(Action No. 4548/81)

Costs - Security for costs - Foreign plaintiff – Claimfounded on a bill of exchange - Order 60 rule 2 of the Civil Procedure Rules - Discretion of the Court - Princip­les applicable - Likelihood of the plaintiff succeeding -Not a proper case in which to make an order for security for costs.

N. Papaefstathiou for T. Papadopoulos, for the Applicants-Defendants.

N. Ioannou for Chr. Deraetriades, for the Respondent-Plaintiffs.

RULING

The following ruling was delivered by:

BOYADJIS, P.D.C.; This is an application [*202] for security for costs in a case where the plaintiffs are out of the jurisdiction. They are a foreign company registe­red and carrying on business in England. They sue the defen­dants, a local company;, on a bill of exchange.

On December 11, 198O, the plaintiffs drew a bill of exchange in the sum of STG£4,570.- on the defendants who accepted it, payable to the order of the plaintiffs on February 2, I96I. The latter presented the bill in due course for payment but it was dishonoured. They now, claim from the defendants as acceptors of the bill STG£4,570.- plus interest and costs.

In their Statement of Defence filed on January 12, 1982, the defendants admit the proper execution of the bill of exchange and allege that on May 27, 1981, they remitted to the plaintiffs, through the Chartered Bank, Nicosia, an amount of STG£2,235.55 p. Regarding the balance of STG£2,334. 45p. the defendants allege that the plaintiffs are indebted to them in the same amount being their agreed commission on thirteen different transactions regarding the purchase of goods from the plaintiffs in respect of which the defendants accepted thirteen bills of exchange including the one upon which the plaintiffs now rely. The defendants conclude by alleging that in view of the above nothing is due on the bill and, in the alternative, they counterclaim for the amount allegedly due to them as commission.

Seeing that the plaintiffs are resident abroad, the defendants asked on November 13, 1981, for security for costs in the sum of CY£600.-. and for a stay of the proceedings [*203] against them until the security is given, .Their application which has been opposed by the plaintiffs is stated to be based on Order 60, r.1 of the Civil Procedure Rules which reads as follows:-

“0.60, r. I:- A plaintiff (and in respect of a counterclaim which is not merely in the nature of a set-off, a defendant) ordinarily resident out of Cyprus may, at any stage of the action, be ordered to give security for costs, though he may be temporarily resident in Cyprus.”

The opposition is based on Order 60, r.2 of the Civil Procedure Rules which reads;-

"0.60, r.2:- In actions brought by persons resident cut of Cyprus, when the plaintiff's claim is founded on a judgment or order or on a negotiable instrument, the power to require the plaintiff to give security for costs shall be in the discretion of the Court."

The learned counsel for the defendants argued that it has always been the practice of the Courts to order secu­rity for costs against a foreign plaintiff even where the claim is based on a judgment or order of the Court or on a negotiable instrument. He cited in support of his argument the case of Kohn v. Rinson & Stafford (Brod), Ltd. (1947) 2 All E,R. 839, where, he said,, a foreign plaintiff suing in England upon a judgment of a foreign Court

was ordered to give security for costs„ The same should apply, he argued, [*204] where as in this case, the claim is based

on a bill of exchange.

The learned counsel for the plaintiffs argued that the claim being on a bill of exchange, which is always treated as equivalent to cash payment, the probability of the plaintiffs to lose and be ordered to pay the defendants' costs is minimal, particularly in view of the fact that in their Defence the defendants do not deny either the drawing or the accepting of the bill or any other matter of fact set out in Order 21,r.3 of the Civil Procedure Rules and, therefore, we may say 'that no defence is in fact set out against the claim except the alleged part payment thereof, through the Chartered Bank, the counterclaim being in the nature of nothing else than a cross-action.

Order 21, r.3 reads:-

"In actions upon bills of exchange, promissory notes or cheques, a defence in denial must deny some matter of fact, e.g.the drawing, making endorsing, accepting, presenting, or notice of dishonour of the bill or note."

The instant case is clearly covered by the provisions of Order 60, r.2 (supra) and not rule

1 on which the defendants' application is based, The learned counsel for the defendants must have misunderstood the facts upon which Kohn's case (supra) was decided. In that case a Pales­tine resident plaintiff without any assets within the jurisdition sued an English company in England. There is nothing in the report to show that his claim was based on a judgment [*205] obtained against the defendants in a foreign court in which case the matter would probably be governed by R.S.C. Order 65, r. 6B* then in force which is the corresponding English rule to our Order 60, r.2. Refusing the defendants' application for security for costs,, the master held that in view of the provisions for reciprocal enforcement of judgments contained in the Administration of Justice Act, 1920, and the Foreign Judgments (Reciprocal Enforcement) Act, I933, applicable in Palestine, the case was Governed by the deci­sion in Raeburn v. Andrews (1874) L.R.9, Q.B. 118, where it was held that no security for costs should be ordered against a plaintiff resident in Scotland or Ireland owing to the provision for registration and automatic enforcement of English judgments there under the Judgments Extension Act, I868. On appeal against the master's refusal, Lord Denning distinguished the procedure provided for in the Acts of 1920 and 1933 from that applicable under the Act of I868 on the ground that enforcement under them was not automatic, and he held that security for costs might be ordered. At page 840 of the report, he says this:-

"…It is said that Palestine, and indeed, not only Palestine but a large number of places throughout the world are in this respect on the same footing as Scotland and Ireland. [*206]

It is plain that it is in the discretion of the court to order security for costs, and it does so as a matter of course when a plaintiff is out of the jurisdiction, the reason being that, if a judgment is obtained by the defendant against the plaintiff for costs, such an order cannot be enforced by the direct process of these courts. To enforce a judgment in the old days a party had to sue on the judgment in the foreign country, and having got his judgment, then enforce it. In these days there is a simpler process introduced, and the question is whether by reason of that process the old rule is altered. In I874 it was held by the Court of Queen's Bench in Raeburn v. Andrews (1) that the rule had been altered as regards Scotland and Ireland because the Judgments Extension Act, 1868, enabled a judgment obtained in this country to be automatically registered in Scotland and Ireland and immediately enforced as if it were a judgment of a Scottish or Irish court. The connection “ between the countries was so close and the mode of enforcement so rapid and simple that the Court of Queen's Bench held that, in effect, there was no further reason to order security for costs in the case of a plaintiff in Scotland or Ireland."

Further down Lord Denning, M.R. concludes by saying this at pp. 840-841:-

"…Approaching the matter as I think it [*207] right to do as a matter ultimately one of discretion, I am satisfied that the process in regard to countries other than Scotland and Ireland is so different that Raeburn V. Andrews (I) does not apply in a case relating to them, but that the old rule still applies, and as a matter of course security for costs should be made where the plaintiff is resident out of the jurisdiction and he has no assets here. I shall, therefore, direct that the plaintiff is to lodge security. There will be a stay until security is given."

It is true, however, that in England there was formerly a rule quite general as to security for costs. Since 1882 the rule was this:-

"In any cause or matter in which security for costs is required, the security shall be of such amount, and be given at such times, and in such manner or form, as the Court or Judge shall direct".

Applying that rule in the case of Crozat v. Brogden (1894) 2 Q.B.30 the Court said that where a person, being resident abroad, sues in England, he is by the rules of the Court compelled to give security for costs; that this was always understood to be an inflexible rule and that no difference existed in this respect between an action on a foreign judgment and other actions. [*208]

Referring to this old rule in the case of Banque du Rhone S.A. V. Fuerst Day Lawson, Ltd.

(1968) 2 Lloyd's Rep. 153, Lord Denning , M.R., expressed the view that the rule was so inflexible that security should be ordered against a foreign plaintiff even when he was suing on a judgment or on a bill of exchange.

That strict rule was not considered satisfactory so in 1920 R.S.C. Order 65, r. 6B (supra) was passed giving the Courts a discretion , This rule was superceded, howe­ver, in I962 by the present rule R.S.C. Order 23, r. 1* [*209] which gives the Court a general discretion in all actions where the plaintiff is ordinarily resident out of the jurisdiction.

In two recent Admiralty cases, namely, Hesham Enterprises v. The Ship "Rami" and Others (1978) I C.L.R. 195, and Eddy Breidi and Another v. "The Ship "Gloriana" and Others (1981) I C.L.R. 177, our Supreme Court had occa­sion to consider and compare R.S.C. Order 23, r.1 (supra) with Rule 185* of the Rules of the Supreme Court of Cyprus in its Admiralty Jurisdiction, enacted by the Cyprus Admiral­ty Jurisdiction Order , I893, which is the corresponding provision to our Order 60, r.1, applicable in Admiralty cases. In both aforementioned cases it was held that, although R.S.C. Order 23, r.1 is differently worded from our Admiralty Rule I85, there is sufficient similarity between the said two rules in material respects so that the several English cases on the matter can be of guidance to as in applications for security for costs under rule 185. In our view, our Courts may, for the same reasons, derive valuable guidance from the English decisions when faced with applications for security for costs under Order 60 of our Civil Procedure Rules.

One of the leading English cases is Aeronave SPA and Another v. Westland Charters Ltd., and Others (1971) 3 All E.R. 531, where Lord Denning, M.R., stated the following at page. 533:-

"In 1894 in Crozat v. Brogden (supra) Lopes, L.J., said that there was an inflexible rule that if a foreigner sued he should give security for costs. But that is putting it too high. It is the usual practice of the Courts to make a foreign plaintiff give security for costs. But it does so as a matter of discretion, because it is just to do so. After all, if the defendant succeeds and gets an order for his costs, it is not right that he should have to go a foreign country to enforce the order. It is to be noted that Italy is not within the provisions as to the recognition of foreign judgments under the Foreign Judgments (Reciprocal Enforcement) Act, I933. But even if it were, Kohn v. Rinson & Stafford (Brod) Ltd. (supra) shows that is not a ground for refusing security. The ordinary rule still remains, that it is a matter of discretion. I certainly did not mean to say anything different in Barque Du Rhone SA v. Fuerst Lawson Ltd. (supra)."

We have derived considerable help and valuable guidance from the decision in the case of Banque du Rhone (supra) in view of the fact that the claim in that case, [*211] like in the present case, was based on a bill of exchange. The Court of Appeal dismissed the suggestion that there was a rule of practice that, in case of a bill of exchange, if the plaintiff was outside the jurisdiction he should not be ordered to give security for costs. There is no such practice one way or the other, and it depends on the parti­cular case, Lord Denning said, and he added the following at page 155 ;-

"How does it stand? In the ordinary way, when a plaintiff brings an action on a bill of exchange we treat the bill of exchange as cash. If it is an action by a foreign seller against an English buyer on a bill given for the goods, and then the buyer does not challenge the bill itself, but says that the goods are not up to contract, or something of that kind, we would not dream of ordering security to be given by the foreign plaintiff. The dispute as to the quality of the goods can be thrashed out in a counterclaim or cross-action".

The last aforementioned case was decided on the new R.S.C. Order 21, r.1(1) (supra) whose object was, as we believe, to extent the discretion conferred upon the Court by the previous R.S.C, Order 60, r.63 (supra) to all cases where security is asked from a plaintiff outside the jurisdiction. Our view finds support in the following passage from the Annual Practice, 1979, Part 1, page 391:-

"In particular, the former Order 65, r.6B (almost [*212] identical to our Order 60, r.2) which had provided that the power to require a plaintiff resident abroad, suing on a judgment or order or on a bill of exchange or other negotiable instrument, to give security for costs was to be-in the discretion of the Court, has been preserved and extended to all cases by Rule 1(1).".

What was said by Lord Denning in the extract from his judment in Banque du Rhone case (supra), set out here in before, applies a fortiori in Cyprus where the defence of set-off is not recognised.

In the exercise of our discretion in the present case a major matter for consideration is the likelihood of the plaintiff suceeding and that it may be a denial of justice to order & plaintiff to give security for the costs of a defendant who has no defence to the claim.

Having weighed all relevant factors including inter alia, the nature of the claim in this action and the allegations in the pleadings, we are of the view that this is not a proper case in which to make an order for security for costs.

In the result, the defendants application is dismissed with costs in favour of the plaintiffs.

Application dismissed with costs in favour of plaintiffs.

*R.S.C. Order 65, r.6B:- In actions brought by persons resident out of the jurisdiction, when the plaintiff's claim is

founded on a judgment or order or on a bill of exchange or other negotiable instrument, the power to require the plaintiff to give security for costs shall be in the discretion of the Court or Judge."

*(i) Where, on the applicationI.- (J)

R.S.C. Order 23; r. 1. – (1) Where, on the application of a defendant to an action or other proceeding in the

High Court, it appears to the Court - ,

(a) that the plaintiff is ordinarily resident out of the jurisdiction, or

(b) that the plaintiff (not being a plaintiff who is suing in a representative capacity) is a nominal plaintiff who is suing for the benefit of some other person and that there is reason to believe that he will be unable to pay the costs of the defendant if ordered to do so, or

(c) subject to paragraph (2), that the plaintiff's address is not stated in the writ or other origina­ting process or is incorrectly stated therein, or

(d) that the plaintiff has changed his address during the course of the proceedings with a view to evading the consequences of the litigation,

then if, having regard to all the circumstances of the “case. the Court thinks it just to so plaintiff to give such security for the defendant's costs of the action or other proceedings as it thinks just"

Rule 185 reads as follows:-

"If any plaintiff (other than a seaman suing for his wages or for the loss of his clothes and effects in a collision) or any defendants making a counterclaim is not resident in Cyprus, the Court or Judge may, on the application of the adverse party, order him to give such security for the costs of such adverse party as to the Court or Judge shall seem fit; and may order that all proceedings in the action be stayed until such security is given."