Two recent cases reinforce the strategic value of a well-targeted application for security for costs. In the first, a defendant obtained an order for security at a very early stage in the litigation, before even filing its defence. In the second, a claimant obtained an order for security against a defendant, pursuant to CPR 3.1(5).
(1) Order for security in advance of a Defence
In Brainbox Digital Ltd v Backboard Media GMBH [2017] EWHC 2465 (QB), the Court was faced with an application by the defendant for security for costs in advance of service of the defence.
CPR 25.13 provides that the Court may make an order for security for costs if (i) one of the threshold conditions at CPR 25.13(2) applies; and (ii) it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order. One of those threshold conditions is that the claimant is a company and there is reason to believe that it will be unable to pay the defendants’ costs if ordered to do so. In Brainbox there was acceptance that the threshold was met; the question was whether it was just to order security on the particular facts of that case.
Opposing the application, the claimant took a point of principle, arguing that the power to order security for costs should not be exercised in advance of the service of a defence. It was submitted that until any defence is served, the issues cannot be identified; and furthermore that the court will be in a much better position to exercise an informed discretion in relation to a properly targeted application for security for costs at the case management conference, if it remains relevant. The claimant further submitted that, before the defence is served, no meaningful advice on the case can be provided to justify an application for after the event insurance and that, to order security to be provided before any such application could be considered, would be self-evidently oppressive.
Mr John Howell QC, sitting as a Deputy Judge of the High Court, concluded that an application for security at this stage was not oppressive. He found that, consistent with the guidance in the White Book, applications for security for costs should normally be made promptly as soon as the facts justifying the order are known. There is no requirement that a defendant must first serve a defence before making such an application. Were there to be such a requirement, a defendant may find that an impecunious claimant discontinues having received the defence without any provision having been made for payment of its costs.
The case is a useful authority for those seeking to apply pressure to an impecunious claimant at a very early stage. The defendant had tailored its application so that security was sought only in respect of the first ‘instalment’ of the litigation, namely through to the CCMC.
(2) Order for security in favour of a Claimant
In Komcept Solutions Limited v Prestige Group (UK) Limited (citation and full judgment transcript awaited), the shoe was on the other foot: the application was brought by the claimant seeking that the defendant be required to pay a sum into court (in the alternative to strike out of the defence or summary judgment on the claim).
There appears to have been a litany of errors on the part of the defendant. The defendant had produced a defence, but, contrary to the CPR, it contained no statement of truth. The court had later been required to impose an unless order requiring the defendant to comply with its disclosure obligations. The defendant had belatedly requested inspection of documents. For the hearing of the claimant’s application, the defendant had filed evidence and skeleton argument at the last minute.
The court found that the breaches by the defendant were not so severe that strike out or summary judgment was justified. However, in the exercise of its case management powers to ensure that the overriding objective was respected, it found that it was appropriate to require the defendant to pay £100,000 into court within 28 days, failing which it would be debarred from defending the claim and its defence would be struck out. The claimant was also granted its costs of the hearing of the application.
This is a relatively unusual example of what is in substance a security for costs application being made against a defendant rather than a claimant. Such an application is possible outside of the jurisdiction of CPR 25. It arises pursuant to the Court’s case management rules under 3.1(5), which rule gives the court has a general jurisdiction to order a party to pay money into court where it has failed, without good reason, to comply with a rule, practice direction or pre-action protocol.
