Summary

A master had confused the situation of the claimant's assets under CPR r.25.13(2)(a) and its ability to pay under CPR r.25.13(2)(c) when making no order on an application by the defendant for security for costs.

Facts

The appellant company (C) appealed against a decision by the court to make no order on an application for security of costs against the respondent company (G). G had initiated proceedings against C claiming damages for breach of contract. G was a British Virgin Islands company and was therefore outside the jurisdiction for the purposes of CPR r.25.13(2)(a). It had voluntarily paid a sum into court but C applied for security for costs under CPR. r.21.13(2)(c) on the basis that G would not be able to pay an order for costs in C's favour were it ordered to do so. The master held that it was not correct to make an order for security under grounds (a) or (c) of the rule provided that the court was informed where G's assets were situated. The master stated that assurances by way of a letter from G's solicitors would be sufficient to provide the required details. Accordingly no order was made on the application. C submitted that the master had erred in making no order on the application and that he had confused the situation of assets relevant to ground (a) with inability to pay under ground (c). C further submitted that the burden had been on G to provide information to prove that it would be able to pay costs and that the details so far provided only referred to assets and did not make allowance for any liabilities to which G might be subject.

Held

(1) The master had confused grounds (a) and (c) by stating that no order be made on the basis that G provide details of its assets, because asset location was only relevant under ground (a). He had confused the situation of assets with inability to pay under ground (a). However, he had been correct in finding that it could not be said that the money previously paid into court by G was sufficient without knowing where G's assets truly were. The solicitor's letter that G had provided, which outlined its assets, although in a form approved by the master's order, was insufficient of itself and should be verified by affidavit or witness statement. (2) The obligation was on C to satisfy the court that G would be unable to pay C's costs at the end of trial, which, on the basis that G's solicitor's letter would be verified, C had failed to do. It was not enough for C to show that G might not be able to pay. Further, unless a defendant to an action did enough to shift the burden of proof, it was not for the claimant in that action to prove that they would be able to pay the defendant's costs at the appropriate time, Unisoft Group (No2), Re (1993) BCLC 532 applied. The court was unable to conclude that C had shifted the burden as required. In the circumstances, it was not appropriate for the court to exercise its discretion under r.25.13(2)(c) to make an order for security for costs against G, provided it supplied the court with the required asset information.

Appeal allowed in part