High Court considers threshold test in security for costs applications
An order for security for costs requires a party to pay money into court or provide a bond or guarantee as security for their opponent's costs. This feature of the English Civil Procedure Rules is intended to mitigate the potential injustice faced by a successful defendant who is unable to recover his legal costs.
In Ras Al Khaimah Investment Authority and others v Bestfort Development LLP and others  EWHC 3197 (Ch) the High Court recently considered the standard which defendants have to meet to satisfy the court that, without an order for security for costs, enforcement of a costs order in their favour will be difficult.
The Court held that in order to grant security it had to be satisfied that the defendants would be ‘likely’ to face difficulties or burdens in enforcement; merely a ‘real risk’ was insufficient. There is established authority for this point in a line of cases beginning with Nasser v United Bank of Kuwait  EWCA Civ 556. However, the Claimants had argued that a subsequent Court of Appeal case (De Beer v Kanaar  1 WLR 38) effectively modified the threshold down from ‘likely’ to ‘risk’. Having reviewed the authorities, the Court rejected this argument.
The Court ultimately saw no reason to interfere with the decision of the Master at first instance, who found that the fact that the Claimants’ assets were located in the country of Georgia was not, without more, sufficient to justify an order for security.
The decision illustrates the importance of providing specific evidence - where applicable - that the state in which the claimant’s assets are located presents difficulties for the purposes of enforcement.
Tom is a general commercial litigator with experience acting in a wide variety of cases including:
- Disputes between directors, partners, shareholders and joint-venturers;
- Corruption and bribery actions involving global asset tracing projects, acting both for Defendants and Claimants;
- Insurance and reinsurance litigation; and
- Complex multi-jurisdictional and multi-party commercial claims.