High Court Finds Onus On Non-resident Respondent To Application For Security For Costs To Provide Evidence Of Location, Nature And Value Of Assets

• Published date: 13 June 2022
• Subject Matter: Litigation, Mediation & Arbitration, Trials & Appeals & Compensation
• Law Firm: Herbert Smith Freehills
• Author: Ms Anna Pertoldi and Maura McIntosh

A recent High Court decision helpfully sheds light on the court's approach to exercising its discretion as to whether to order security for costs against a claimant on grounds of their residence outside the court's jurisdiction (and outside the states bound by the 2005 Hague Convention on Choice of Court Agreements): Ras Al Khaimah Investment Authority v Azima [2022] EWHC 1295 (Ch).

The purpose of an order for security for costs is to protect a defendant (who of course does not choose to initiate proceedings) against the risk that it will successfully defend the action but then be unable to enforce a costs order in its favour against the claimant, or face extra burdens in doing so - for example because the claimant is based in a jurisdiction that may not readily enforce an English court judgment.

The discretion to order security on grounds of residence outside the jurisdiction cannot be exercised in a discriminatory manner, and so must be based on a finding that there is a real risk of non-enforcement or of additional burdens in the way of enforcement. Where the risk is of non-enforcement, security will ordinarily be ordered by reference to the costs of the proceedings as a whole, but where the risk is limited to additional costs or delay, it will ordinarily be by reference merely to that extra burden of enforcement.

The present decision is of particular interest in suggesting that a non-resident claimant cannot argue that security should be provided merely by reference to the additional costs of enforcing a costs order in their place of residence (rather than the costs of the proceedings as a whole) unless they provide some evidence that they have substantial assets there. Where the claimant does not provide evidence as to the location, nature and value of their assets, the court may infer that there is a substantial risk of non-enforcement and order security on that basis.

The decision also considers a number of issues relating to disclosure, which we will consider in a separate post.

Background

The application for security arose in the context of a retrial of the defendant's (Mr Azima's) counterclaim against the original claimant, the Ras Al Khaimah Investment Authority (RAKIA). Following the original trial, the High Court gave judgment for RAKIA on its claims against Mr Azima for fraudulent misrepresentation and conspiracy, and dismissed Mr Azima's counterclaim that his email accounts had been unlawfully hacked by RAKIA and his data used against him...