Premier Motorauctions Ltd & Anor V Price WaterhouseCoopers LLP & Anor [2017] EWCA Civ 1872

Court of Appeal orders security for costs where ATE insurance policy did not contain an anti-avoidance provision

The defendants applied for a security for costs order on the basis that the claimant is a company and there "is reason to believe that it will be unable to pay the defendant's costs if ordered to do so" (CPR r25.13(2)(c)). After the claim form was issued, the claimant obtained ATE insurance cover. The issue in this case was whether the security for costs order should be made in light of the ATE insurance cover.

At first instance, the judge held that the existence of an ATE policy should be taken into account when asking whether there is reason to believe that the claimant will be unable to pay an adverse costs order (i.e. the threshold jurisdictional question), rather than only after a security for costs order has been made (and it is necessary to decide whether the policy is as good as cash or a bank guarantee). On the appeal, the Court of Appeal did not disagree with that approach and held that "an appropriately framed ATE insurance policy can in theory be an answer to an application for security".

The judge had refused to find that there was reason to believe that the ATE policy in question would not respond, and in particular, that the insurers would avoid for non-disclosure or misrepresentation. That was despite the underlying case involving doubts about the credibility of the claimant's managing director. The Court of Appeal allowed the appeal from that...