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Security for costs

Discussion of Huscroft v P&O Ferries Ltd [2010] EWCA Civ 1483, published in the New Law Journal and Butterworths' Civil Costs Newsletter

New Law Journal, 01 July 2011, 915 (www.newlawjournal.co.uk)
Butterworths Civil Costs Newsletter, August 2011, Vol 3 Issue 1, p6

In Bryan Huscroft v P & O Ferries Ltd [2010] EWCA Civ 1483 the Court of Appeal considered how an application for security for costs should be made and under which circumstances security should be ordered (or, more particularly, under which circumstances it should not be ordered). At a CMC in the county court, the claimant (by then living in Portugal and unemployed) was ordered to pay £5,000 into court as security for the defendant's costs, in default of which the claimant's case was to be struck out. The claimant appealed the order.

Rather than make its application under CPR 25, the defendant made, and was granted its application, under CPR 3.1(3), which provides that 'When the court makes an order, it may -

(a) make it subject to conditions, including a condition to pay a sum of money into court; and
(b) specify the consequence of failure to comply with the order or a condition.'

By CPR 25.12 a court may order security for a defendant's costs, where it is just to do so and where one or more of the conditions in 25.13 are satisfied; a much higher threshold than 3.1(3) which is 'couched in general terms' - either that the claimant: is resident in a non-Lugano Convention state; or is a company (anywhere) and there is reason to believe that it will be unable to pay the defendant's costs, if ordered to do so; or has failed to provide an address on the claim form, has changed the address (with a view to evading consequences of litigation) or has given an incorrect address; or is acting as a nominal claimant (other than as a Part 19 representative claimant) and there is reason to believe that he will be unable to pay the defendant's costs, if ordered to do so; or has taken steps in relation to his assets that would make it difficult to enforce a costs order against him. The judge at first instance approached the matter on the basis that, when making an order of any kind, the court has the power to impose conditions on one or both parties, whether related to specific paragraphs of the order or not.

 

Giving judgment, Moore-Bick LJ said that: 'It would be wrong, in my view, to encourage litigants to regard rule 3.1(3) as providing a convenient means of circumventing the requirements of Part 25 and thereby of providing a less demanding route to obtaining security for costs. In my view, when the court is asked to consider making an order under rule 3.1(3) or 3.1(5) which is, or amounts to, an order for security for costs, or when it considers doing so of its own motion, it should bear in mind the principles underlying rules 25.12 and 25.13. These include the principle that a personal claimant who is resident within the jurisdiction or in one of the other member states of the European Union cannot be required to provide security for costs just because he is impecunious, even though his conduct of the proceedings may be open to criticism. Although it might be argued that the defendant in such a case should be entitled to obtain protection against the risk of being unable to enforce a judgment for costs, a policy decision has been taken to the contrary.'

CPR 3.1(3) did not give the court a general power to impose conditions on one or other party whenever it happens to be making an order. The purpose of rule 3.1(3) was to enable the court to grant relief on terms and when the power is exercised the condition ought properly to be expressed as part of the order granting the specific relief to which it relates. The order in the present case did not do that.

Moore-Bick LJ did not think that the power to attach a condition to an order can be exercised only if there is a history of repeated failures to comply with orders of the court or the party in question is not conducting the litigation in good faith. He did think, however, that before exercising the power given by rule 3.1(3) the court should identify the purpose of imposing a condition and satisfy itself that the condition it has in mind represents a proportionate and effective means of achieving that purpose having regard to the order to which it is to be attached. Whilst the judge at first instance had found that the claimant had adopted a "scattergun" approach to the litigation, which had increased the costs, these findings did not justify attaching to a wide-ranging order for directions, of the kind routinely made at a CMC, a condition that the claimant pay a sum of money into court as security for P&O's costs. If the District Judge had been concerned about timely compliance with court orders he could have simply attached sanctions, most obviously, unless orders.

Although there was reason to doubt the claimant's ability to meet a substantial liability for costs if he lost, there was no reason to think that he would take active steps to avoid doing so. In reality the effect of the District Judge's order, therefore, was to enable P&O to obtain, on the back of an order for case management directions, an order for security for costs against Mr Huscroft; which it could not have obtained under rule 25 and which was unrelated to the orders being made in his favour. It was inappropriate to make an order of that kind in this case and the appeal would be allowed.

More recently, the High Court considered an application for security for costs on the back of an application for summary judgment. In Allen v Bloomsbury Publishing Plc[2011] EWHC 770 (Ch) the claimant alleged copyright infringement against the publishers of the Harry Potter series of books. Whilst it was improbable that the claim for copyright infringement would ultimately succeed, the application for summary judgment against the claimant had 'failed by the narrowest of margins'. The court then granted the application for security as there was jurisdiction under 24.6 to make an order which was 'tantamount to an order for security for costs' but a court should bear in mind the principles underlying rules 25.12 and 25.13 when doing so. Kitchin J also echoed Moore-Bick LJ's comments about it being wrong to encourage litigants to regard rule 3.1 as providing a convenient means of circumventing the requirements of Part 25. Further, a party would only become amenable to an adverse order for security under rule 3 once he can be seen either regularly to be flouting proper court procedures or orders or otherwise has demonstrated a want of good faith, that is to say a will to litigate a genuine claim or defence as economically as reasonably possible in accordance with the overriding objective. Before ordering security for costs in any case, the court should be alert and sensitive to the risk that by making such an order it may be denying the party concerned a right of access to the court; whether or not the person concerned has raised or can raise the money will always be a prime consideration; the court had wide discretion to ensure that justice is done in any particular case; relevant considerations, beside the ability of the person to pay, include his conduct of the proceedings and the apparent strength of his case.

 

Bernard Pressman / 6th Aug 2011


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