Summary

The court considered the circumstances in which a defendant who had withdrawn a security for costs application might be entitled to make a second application without giving rise to abuse of process. It also indicated that where a security for costs application was withdrawn by consent, a defendant did not retain an unrestricted right to launch a fresh application by indicating, in correspondence relating to the consent order, that he reserved his rights to bring a security for costs application in the future.

Facts

The defendants applied for security for costs from the second claimant company under CPR r.25.13(2)(c).

The second claimant was owned by the first claimant. The defendants had previously issued an application for security for costs, but had withdrawn it after further evidence came to light, indicating that the first claimant had sold certain shares, as a result of which he had €2 million in his bank account. The claimants agreed to costs being in the case if the defendants withdrew their application. During correspondence, the defendants indicated that they reserved their rights to bring a security for costs application in the future and generally. The claimants replied, noting that indication. A consent order was made, withdrawing the application. Further evidence came to light which cast doubt on whether the first claimant had the €2 million in his bank account and the defendants therefore made the instant application.

The claimants submitted that (1) it was an abuse of process for the defendants to pursue a second application after withdrawing their first one; (2) there was no reason to order security for costs because the defendants would also be able to obtain a costs order against the first claimant, who would be able to meet that order; (3) the second claimant had obtained an after-the-event insurance policy which would be adequate to the meet the defendants' costs.

Held

(1) The consent order was the result of a bargain between the parties that in return for the defendants withdrawing the application, the costs would be costs in the case. However, it was not part of that agreement that the defendants should be entitled to reopen the matter without restriction. When the claimants "noted" that the defendants reserved their rights, that was not a contractual agreement to the effect that the defendants could apply again on any grounds that they liked. The case was not analogous to Butt v Butt [1987] 1 W.L.R. 1351 where a plaintiff had obtained an interlocutory injunction and the defendant had given undertakings at an inter partes hearing, but later applied to discharge the undertakings. In that case, the defendant had made it clear that it was contemplating applying to discharge the undertakings which it gave and had intended his undertaking to be a temporary measure. That case had been adjourned generally with liberty to apply, whereas the application in the instant case had been withdrawn and there was no doubt that the effect of the consent order was to put an end to the application, Butt v Butt distinguished. If the defendants had wished the claimants to agree to them having the right to launch a fresh application without having to show a good reason for doing so, they would have required much more explicit agreement than they sought or obtained (see paras 20-21, 23-28 of judgment). The evidence now before the court painted a materially different picture from that presented when the first security for costs application was withdrawn. The new evidence cast doubt on the value of the first claimant's interest in the shares which had been sold and the court had no confidence that he had actually received €2 million into his bank account. That was sufficient to entitle the defendants to re-open the matter and it was not an abuse of process for it to do so, Chanel Ltd v FW Woolworth & Co Ltd [1981] 1 W.L.R. 485 applied, Johnson v Gore Wood & Co (No.1) [2002] 2 A.C. 1 followed (paras 29-49).

(2) The first claimant's assets were not an answer to the defendants' application. He owned a property, but its value was uncertain. The value of his interest in the shares was unclear and he had not demonstrated that it would be available at the end of the trial. He did have substantial assets, but it had not been shown that he would be able to meet any costs order promptly (paras 58-64).

(3) The after-the-event insurance policy was good security to the level of £4 million. However, it was not by itself sufficient to meet the figure of £5.5 million, which the court had adopted as the likely recoverable costs (para.65).

(4) The general principle was that a defendant who was sued by an impecunious company should not be at risk of a costs order being left unsatisfied. There was no reason to take a different view in the instant case. The second claimant would be ordered to provide security in the sum of £5.5 million, of which the after-the-event insurance policy would stand for £4 million (para.67).