#16078 - Security For Costs And Interim Payments - BPC Civil Litigation

Interim Applications (2): security for costs, interim payments, interim costs orders

NB, procedure:

• Security for costs normal part 23 procedure, issue an application notice supported by written evidence, serve 3 clear days before hearing etc.

• Interim payment 14/7/3 rule (like summary judgment).

Security for Costs

(Part 25, Interim Remedies and Security for Costs)

25.12, Security for Costs

• (1) A DEFENDANT to any claim (including a D to a counterclaim/additional claim) may apply under this section for security for his costs of the proceedings

  • (NB, Part 3 provides for court to order payment of sums into court in other circumstances.

  • R20.3 provides for this section to apply to Part 20 claims (counterclaims/additional claims) i.e. it also applies to Defendants to counterclaims and additional claims, such Ds can apply for security.

  • [[so a Claimant could apply for security for costs against a defendant who brings a counterclaim, or a 3^rd party may apply for security against a defendant who makes an additional claim against the 3^rd party]].

• (2) an application for security for costs must be supported by written evidence.

• (3) where court makes an order for security for costs, it will:

  • (a) determine the amount of security; and

  • (b) direct:

    • (i) the manner in which the security must be given; and

    • (ii) the time within which the security must be given.

25.13, Conditions to be satisfied, The court may make an order for security for costs under 25.12, IF:

• (1) is satisfied that, having regard to all circumstances, that it is JUST to make such an order; ( see commentary below)

• AND

• (2) either:

  • (i) one or more conditions in para (2) apply:

    • (a) the Claimant is: (i) resident out of the jurisdiction BUT (ii) NOT resident in a Brussels Contracting State, a State bound by the Lugano Convention, a State bound by 2005 Hague Convention, or a ‘Regulation State’ (as defined in s1(3) Civil Jurisdiction & Judgments Act 1982).

    • (b) – omitted

    • (c) C is an (incorporated) company or other body [not an individual] (whether incorporated inside or outside Great Britain) AND there is reason to believe that it will be unable to pay D’s costs if ordered to do so;

      • See commentary below

      • D must show that: there is reason to believe the company would not be able to meet its debts when an Order for Costs was made against it. Having regard to the nature and liquidity of the company’s assets.

      • See commentary the standard of proof is ‘reason to believe’ is lower threshold than balance of probabilities.

      • If C is an insolvent company: then an application for security for costs under this rule is the primary method of protection.

      • Adequate insurance may be adequate for C to avoid a security for costs order

    • (d) the Claimant has changed his address since claim was commenced with a view to evading the consequences of the litigation;

    • (e) C failed to give his address/gave an incorrect address in the claim form;

    • (f) C is acting as a nominal claimant, other than as a representative claimant under Part 19, and there is reason to believe he will be unable to pay D’s costs if ordered;

      • [[NB: “nominal claimant” someone who isn’t really the actual C, doesn’t have an interest in the claim, and doesn’t have any interest in the costs, is Claimant in name only]]. May have been done as a way to subvert costs, window-dressing.

    • (g) C has taken steps in relation to his assets that would make it difficult to enforce an order for costs against him.

      • see commentary below.

      • egs of such steps:

      • dissipation of assets;

      • transfer of assets overseas;

      • transfer of assets into names of 3^rd parties;

      • transfer/removal of assets into places unknown to D.

      • D need not show specific intent to avoid enforcement on behalf of C; but showing specific intent would increase the likelihood of an order for security.

  • OR (ii) an enactment permits court to require security for costs.

• (R3.4 allows court to strike out a statement of case; and Part 24 allows for summary judgment).

• [[NB so all the claimants above that you can seek an order for costs against are claimants who, for the above reasons, who are dodgy/might evade costs]]

• SO NOTE an order for security is DISCRETIONARY You need to show both (a) that a condition listed in (2) is satisfied AND (b) court must also be satisfied that an order is ‘just’ given all the circumstances

Procedure for making an application = the GENERAL PART 23 PROCEDURE for interim applications

• Should follow general Part 23 procedure (serve application notice at least 3 DAYS before court is to deal with application).

• The application notice should state which of the grounds inr.25.13applies and, if the order is sought under an enactment, should state the enactment authorising the Court to make the Order.

• Rule 25.12(2)states that the application must be supported by written evidence.

• The written evidence relied on may be set out (1) in the applicant’s Statement of Case, or (2) in the application notice, or (3) in a witness statement.

Commentary, 25.13.1, Discretionary power to order security for costs

• 2 pre-requisites for an order for security for costs (see above), r25.13:

  • (1) it is JUST to make an order having regard to all circumstances;

  • AND

  • (2) one or more of the conditions in r25.13(2) applies OR an enactment permits the court to require security for costs.

• So you need BOTH these conditions: i.e. not sufficient only if 1+ condition in 25.13(2) applies, it must ALSO be just having regard to all circumstances.

Re ‘having regard to all the circumstances’ (in deciding whether an order is just). Some circumstances to consider:

• (1) One circumstance of increasing important = ability of respondent (i.e. claimant) to comply with any Order made/whether order is oppressive in stifling a good claim:

  • A requirement to raise funds which they are unable to raise (and thus the Order stifles C’s claim) may breach Art 6(1) ECHR (right of access to trial/court).

  • Re whether an order for security for costs may infringe Art 6(1) ECHR right to fair trial (if it stifles the claim):

  • A C who alleges that an order for security will stifle the claim must adduce satisfactory evidence that they do not have the means to provide security AND that they cannot obtain appropriate assistance to do so from any third party (eg a relative or friend) who might reasonably be expected to provide such assistance if they could.

• (2) The likelihood of the respondent’s (claimant’s) claim succeeding/prospects of success:

  • The purpose of security for costs is to prevent injustice to the applicant (i.e. the defendant);

  • But there is also a need to avoid injustice to a respondent who has a meritorious claim who would be prevented from pursuing it if required to provide security for costs.

  • Although it is important to avoid a situation in which the merits have to be considered, the overall result requires that the Order should be just.

  • An application for security for costs should not involve a detailed examination of the merits of the case: Parties should not attempt to go into the merits of the case UNLESS it can be clearly demonstrated, one way or another, that there is a high degree of probability of success or failure.

  • But if the Claim appears highly likely to succeed at time of application a C will not be required to provide security for costs

• (3) In considering an application for security for cost against a Claimant, court must consider:

  • (1) Admissions by D;

  • (2) Open offers &

  • (3) payments into court.

  • But a Defendant should not be adversely affected in seeking security merely because they have attempted to reach a settlement

    • Evidence of negotiations conducted ‘without prejudice’ should not be admitted without D’s consent.

• (4) Not relevant that D is wealthy enough or has some other protection:

  • An order for security is intended to give a measure of protection to Defendants who are put to the cost of defending themselves against claims made by persons to whom 1+ conditions in r25.13(2) applies.

  • Although the making of an order is discretionary, an order is unlikely to be refused on the basis that the Defendants are wealthy enough to survive without such protection; or are protected by some other means (eg a right of indemnity against a third person).

• (5) A claimant who has satisfactory legal expenses insurance may be able to resist an order for security for costs, If the insurance cover gives D sufficient protection [[this is also a consideration for condition (c), re impecunious/insolvent companies]].

  • (but not where the terms of the insurance policy permit the insurers to avoid any liability for costs which was consequent upon their not having been told the truth, where the defamation case depended entirely upon which side was telling the truth)

  • (not where the policy terms entitle the insurer to avoid liability if the case advanced by the insured is subsequently held to have been untruthful)

  • An ATE (after the event) insurance policy may not amount to adequate security IF the proper law of the policy does not confer upon the Defendant rights such as those conferred by the Third Parties (Rights Against Insurers) Act 1930 in the event of the C’s insolvency.

  • So ATE insurance policies are often accepted as reliable sources of litigation funding, IF (1) the policy confer rights on third parties, and (2) doesn’t contain a clause allowing the insurer to avoid liability if the insured claimant’s case is subsequently held to be untruthful.

  • An indemnity given to a claimant company by its sole shareholder is NOT accepted as a reliable source of litigation funding giving adequate...