Legal News

It cannot be over emphasised that every litigator should be aware of the provisions of the Civil Procedure Rules (CPR) 25.12 which deals with applications for security for costs.


What is a security for costs application?

The CPR 25.12 allows parties defending claims to seek an order for security for costs. Security for costs is a constructive tool that can be used by a defendant to ward off a claim where the claimant’s financial situation is impecunious and the chances of a successful defendant recovering its cost for defending the claim are slim. By applying for security, the claimant may have to pay money into the court to protect the legal costs of the defendant.

Conversely, a well-crafted security for costs application can also be used to head off a claim. The conditions for a security for costs application are set out in CPR 25.13 and certain conditions must be met in order for the court to be satisfied that it is ‘just’ to make such an order. These conditions are set out as follows:

The conditions are –

1. the claimant is –

1. resident out of the jurisdiction; but


2. not resident in a Brussels Contracting State, a State bound by the Lugano Convention, a State bound by the 2005 Hague Convention or a Regulation State, as defined in section 1(3) of the Civil Jurisdiction and Judgments Act 1982;

2. 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;


3. the claimant has changed his address since the claim was commenced with a view to evading the consequences of the litigation;


4. the claimant failed to give his address in the claim form, or gave an incorrect address in that form;


5. the claimant is acting as a nominal claimant, other than as a representative claimant under Part 19, and there is reason to believe that he will be unable to pay the defendant's costs if ordered to do so;


6. the claimant has taken steps in relation to his assets that would make it difficult to enforce an order for costs against him.

The award of security for costs is subject to the court's discretion as the court will need to ensure that a security for costs order is not being used to obstruct a genuine claim.


When should an application for security for costs be made?

An application for security for costs can only be made when proceedings have commenced. However, it is advised to make the application as early as possible during proceedings and as soon as there is adequate evidence that the claimant may not be able to pay costs. If an order is made in the defendants favour, the claim will not proceed until the amount of security for costs stated by the court has been paid by the claimant.

Security for costs in use

In the case of Stunt v Associated Newspapers Limited [2019] EWHC 511 (QB), the defendant applied for security for costs in the sum of £700,000 from the claimant, Mr James Stunt, the high profile ex-husband of Tamara Ecclestone. The defendant relied on CPR 25.13(2 (e) and (g). The defendant’s case was that the Claimant has failed to give his address in the claim form, or gave an incorrect address in that form and also that the claimant had taken steps in relation to his assets that would make it difficult to enforce an order for costs against him.
It was common ground that the claimant on issuing his claim against Associated Newspapers Limited listed his address as that of his solicitors. That was wrong. Furthermore, the Claimant filed a witness statement opposing the application for security but failed to provide evidence of his finances. It did not help that the claimant in a witness statement stated that;

"I do not wish in any way to brag, but I am considerably wealthy…Suffice to say for present purposes that I am and will remain well able to satisfy any adverse order for costs made against me in these proceedings at any stage."

It was then open to the Claimant to support the above statement by filing and serving evidence of his wealth and ability to satisfy any adverse cost order. Suffice to say, due to the lack of evidence of the claimant’s wealth and the fact that he provided a wrong address when issuing the claim (and he was legally represented) Mr Justice Warby granted the defendant’s application and ordered the Claimant to provide security in the sum of £460,000.


Commentary

It is quite rare for the court to order for security based on ground (e). However in the Stunt case above it appears that the court was persuaded to make the order on ground (e) (and (g)) due to the fact that the Claimant had solicitors acting for him when he issued the claim and inserted his solicitors address in the claim form as his residential address. This can be contrasted with the decision in Lederer & Ors v The Persons Listed At Schedule 1 & Ors [2019] EWHC 554 (Ch), in which an application for security based on ground e) was rejected. The judge considered that the first Claimant, Ms Lederer's omission to give her address was not suspicious as she had provided her student address on an application notice and she was acting in person when she issued the claim form.



Author Anthony Okumah is a Director and Head of the Duncan Lewis Civil Litigation and Dispute Resolution Department. He specialises in dispute resolution (litigation, arbitration or mediation), professional negligence claims predominantly against solicitors, debt recovery; insolvency; contractual disputes, leasehold disputes and contentious probate cases. Anthony also has an in-depth experience of boundary and neighbourhood dispute cases and additionally he regularly conducts his own advocacy in both the County Court and the High Court which allows him to represent his clients throughout their retainer.

Contact Anthony on 020 3114 1227 or email him on anthonyo@duncanlewis.com