De Beer v Kanaar & Co

The jurisdiction to order security for costs against an individual ordinarily resident abroad depends on the claimant’s juridical characteristics, not the location or current value of the claimant’s assets. Under rule 25.13(2)(a) of the Civil Procedure Rules 1998, jurisdiction exists where the claimant is ordinarily resident neither in England and Wales nor in a Brussels or Lugano Convention state.

A claimant outside those jurisdictions cannot defeat jurisdiction merely by placing assets in a Convention state. Once jurisdiction exists, security should address objectively justified risks concerning enforcement. The court may consider the reliability of the claimant’s evidence and the ease with which foreign assets can be moved. The amount should reflect the nature and size of the enforcement risk.

A firm of solicitors appealed against the dismissal of its application for security for costs in an action seeking restitution of US$250,000. The claimant ordinarily resided in Florida but held assets in Switzerland. The Deputy High Court Judge held that those assets made him a person against whom a claim could be enforced under the Brussels or Lugano Conventions. She therefore concluded that rule 25.13(2)(a)(ii) of the Civil Procedure Rules 1998 excluded jurisdiction to order security.

The appeal raised two questions. First, did assets in a Convention state exclude jurisdiction even though the claimant resided outside all Convention states? Secondly, if jurisdiction existed, was it just to order security and, if so, in what amount?

1. Appeal allowed. Jonathan Parker LJ delivered the judgment of the two-member court. Rule 25.13(2)(a) of the Civil Procedure Rules 1998 conferred jurisdiction because the claimant was ordinarily resident outside both England and Wales and every Brussels or Lugano Convention state.

2. The expression “a person against whom a claim can be enforced” was ambiguous when read in isolation. Its meaning had to be determined purposively and against the background of the former security-for-costs regime. The mischief addressed by rule 25.13(2)(a)(ii) was the risk of covert discrimination against nationals resident in other Convention states, identified in Fitzgerald v Williams [1996] QB 657 following Mund & Fester v Hatrex Internationaal Transport [1994] ECR 1-467.

3. Rule 25.13(2) concerns the juridical characteristics of the individual claimant. It does not make jurisdiction depend on the assets presently owned, their value or their location. Condition (a) therefore confines jurisdiction to individual claimants ordinarily resident neither within England and Wales nor in a Convention state. A person within that class cannot remove the jurisdiction merely by transferring an asset into a Convention state. This construction accorded with White Sea & Onega Shipping Co v International Transport Workers Federation [2001] EWCA CIV 377 and was supported by Nasser v United Bank of Kuwait.

4. The competing asset-based construction would produce unstable and impractical results. Jurisdiction could change as asset values, locations and estimated costs changed. It would also anomalously protect a United States resident who transferred English assets into another Convention state while leaving an otherwise identical resident with English assets exposed to an order.

5. In exercising the discretion, the mere pleading of dishonesty did not establish a want of probity. The claimant’s materially and apparently deliberately misleading evidence about his Florida property nevertheless cast serious doubt on the reliability of his evidence. There was also a risk that a costs order would be difficult or impossible to enforce in Florida, and the Swiss assets could readily be moved.

6. It was just to protect the solicitors against the risk of being unable to enforce a costs order, in whole or in part. The court ordered the claimant to provide £130,000 as security for costs to the end of trial, payable into court within 28 days.

1. Court of Appeal: By [2001] EWCA Civ 1318, allowed the appeal and ordered the claimant to provide security for costs of £130,000.
2. High Court, Chancery Division: Miss Elizabeth Gloster QC, sitting as a Deputy High Court Judge, dismissed the application on 19 February 2001 because she considered that rule 25.13(2)(a)(ii) of the Civil Procedure Rules 1998 excluded jurisdiction where the claimant had sufficient assets in a Convention state.