Security For Costs

The following points arising from recent judgments will be of interest to those considering making or defending an application for security for costs.

The standard of proof for the applicant is lower than the balance of probabilities (Coral Reef Limited v (1) Silverbond Enterprises Limited (2) Eiroholdings Invest (2016) EWHC 874 (Ch)). In Bestfort Developments LLP and others v Ras Al Khaimah Investment Authority and Others [2016] EWCA Civ 1099, Gloster LJ concluded that the European Human Rights Convention does not require the higher "likelihood" burden to be applied. The existence of an ATE policy can be effective to lead to defeat of an application for security for costs - the courts will consider whether the policy is likely to respond and if there is no reason to doubt that it will, or to question the creditworthiness of the insurer, then security for costs applications may be refused (Premier Motorauctions Ltd and another v PricewaterhouseCoopers LLP & Anor [2016] EWHC 2610 (Ch)). In order to argue successfully that providing security would effectively 'stifle' the claim, a claimant must provide evidence of what has been done to try to obtain funding (Premier Motorauctions, New Tasty Bakery Ltd v MA Enterprise (UK) Ltd [2016] EWHC 1038 (IPEC)). In the latter case, the court emphasised the obligation on a claimant to produce satisfactory evidence that it does not have funds and cannot obtain them from another source, e.g. a third party who might reasonably be expected to provide them. Without such evidence, no great weight can be given to the argument that the claim would be stifled by an order for security for costs. Arguments in relation to the '(in) equality' of the parties: in Dawnus Sierra Leone Ltd v Timis Mining Corporation Ltd [2016] EWCA Civ 1066 the court noted that in the face of an argument that justice demands that both parties are put on an equal footing in accordance with the overriding objective, the basic principle is that security is provided by the claimant alone and, therefore, in that respect the parties are not treated equally. Guidance on whether or not it will be appropriate to depart from this principle is to be found in the case law on security for costs rather than the terms of CPR Rule 1.1.(2)(a). Security for costs protection may be more appropriate if it is to cover the additional costs burden of any enforcement action (Sheikh Tahnoon Bin Saeed Bin Shakhboot Al Nehayan v John Kent (aka Joannis Kent) [2016]...