THE COURT CAN (AND IN THIS CASE SHOULD) ORDER ADDITIONAL SECURITY FOR COSTS

I am grateful to solicitor Shimon Goldwater  for sending me a copy of the judgment of Mrs Justice Moulder in Mayr -v- CMS Cameron McKenna Nabarro Olswang LLP [2018] EWHC 3093 (Comm).  It relates to the principles to be applied when a party makes a second application for security for costs.

“This approach is consistent with the principle that in the case of doubt the issue should be resolved in favour of the defendant given that the prejudice to the defendant of taking the risk of being unable to recover its costs outweighs the prejudice to the claimants.”

THE CASE

The claimant brings an action for professional negligence against the defendant.  In November 2017 the parties came to an agreement that the claimant should provide security for cost by tranches.   The defendant made an application seeking additional security of £1.45 million.

THE PRINCIPLE

“The authorities are thus clear that a party cannot come back and seek further security solely on the basis that the original amount sought is now inadequate. That would amount to a second bite at the cherry. Nevertheless, if the party can show that there has been a material change of circumstances the party can come back to the courts and seek additional security”

It was conceded by the claimants that there had been a change in circumstances, however it was contended that these changes did not warrant the amount of the additional security that was now being sought.

THE JUDGE’S CONSIDERATION OF THE RELEVANT TEST TO BE APPLIED

23. It seems to me that the question for the court is as set out in Stokors. The question is, what amount is it just to order to protect the defendant from a costs order which the claimant is unable to pay? It is a two-stage test and to introduce a limit confining the increase in security to only those items which arise from a change in circumstances is not warranted. However, the court does need to look at the matter in the round and apply the usual principles which were set out by Popplewell J at paragraphs 5 to 9 of his judgment, that is that it considers the amount which the parties will be likely to recover in detailed assessment and it bears in mind that the test which will be applied on a detailed assessment is whether the costs are reasonably and proportionately incurred.
24. It seems to me that in deciding what is an appropriate amount to order by way of further security, the court should take into account the revisions which are being sought and it is in that context that it seems to me the decision in Vald. Nielsen should be read. The overall purpose of giving security for costs is to protect the defendant and that purpose can only be achieved if the court considers the overall figures on the basis of the up to date estimate before the court.
25. However, at this stage it is, of necessity, a broad-brush approach and the court has in mind the degree of prejudice to the parties if the defendant is under-secured or over-secured and it has regard to guidance in the Commercial Court Guide that any doubts would usually be resolved in favour of the defendant.

EVIDENCE BEFORE THE COURT

The judge considered the evidence before the court.

26. The amount of the costs of the proceedings now estimated by the defendant are set out in the evidence of the witness statement from Mr. Pollock and there is no reason to suggest that Mr. Pollock has advanced in evidence anything other than his honest belief as to the costs as they now appear to be. It was submitted on behalf of the claimant and set out in the witness statement of Mr. Asserson at (paragraph 5) that the defendant is using the application for security for costs for improper purposes as a means of killing the claim. It is acknowledged by Mr. Pollock that he said words to that effect in May 2017 but, in my view, this is not a factor to be considered on this application where the issue before the court is the quantum of the order and there is no substantive evidence before the court which would call into question the bona fides of the evidence on costs advanced by the defendant or support an assertion that the claimant will be unable to raise additional security.
27. The claimant’s case therefore can only be considered on the basis that they say it would not be just to order the amount sought because the figures cannot be justified as being reasonably and proportionately incurred or reasonable and proportionate in amount, having regard to the factors set out in CPR 44. However, as already noted, the court cannot and does not descend into the level of detail which would be examined on a detailed assessment and does not have before it the level of detail which would be before a court on a detailed assessment. The court on an application for security for costs must of necessity adopt a broad-brush approach and in this regard, I do not accept the submissions of the claimant that the breakdown provided by Mr. Pollock was inadequate.

ISSUES OF DOUBT RESOLVED IN FAVOUR OF THE DEFENDANT

The judgment considers the approach to be adopted if there is doubt about the reasonableness of the figures.

“This approach is consistent with the principle that in the case of doubt the issue should be resolved in favour of the defendant given that the prejudice to the defendant of taking the risk of being unable to recover its costs outweighs the prejudice to the claimants. I note that in this particular case no particular prejudice has been put before the court by the claimants.”

THE RESULT

The judge made an order for  further security for costs in the sum of £1.3 million.