Hammonds win sparks new law on cost payment

Companies defeated at first instance now face paying costs and security to the winning party before they can appeal.
The action concerns advice given by Hammonds to offshore company Agrichem International Holdings on Spanish and English law in relation to the transfer of title of a non-ascertained collection of olives.
At first instance, Ham-monds made a claim for fees while Agrichem counter-claimed with an allegation of professional negligence. Mr Justice Silber concluded that Agrichem had suffered no loss, despite accepting that London-based Hammonds lawyers had been negligent when they argued that English law applied when it did not.
He allowed the claim for fees and dismissed Agri-chem's counter-claim. Judge Silber concluded that Spanish advice given by Hammonds' Brussels office had been correct. Agrichem was ordered to pay Hammonds' fees and to make an interim payment towards its costs of some £300,000.
At appeal, Lord Justice Mance rejected Agrichem's request for a stay of the £300,000 payment until after a later appeal set down for July 2002.

		"The Court of Appeal can impose not merely security for the costs of appeal, but also discharge of first instance judgment and costs" Justin Fenwick QC, Four New Square

Agrichem will have to pay Hammonds this sum, plus £85,000 to cover the costs of the firm's security it laid down for the appeal action. If it does not do so by March 2002, the appeal set down for July 2002 will be struck out.
Lead counsel for Agrichem Justin Fenwick QC, head of Four New Square, said two significant new laws have been made as a result of these decisions.
Fenwick said: "The new law is that the Court of Appeal can impose as a condition of appeal not merely security for the costs of appeal, but also discharge of first instance judgment and costs.
"The second new law is that the Court of Appeal can make such a condition not only at the time of granting leave, but also subsequently."
The Appeal Court judgment went against Agrichem mainly because, as it is a company registered in the British Virgin Islands, there are no international conventions that can enforce rulings against it. The court also doubted financial information provided by Agrichem, particularly its claim that it is penniless.