AP (UK) Ltd v West Midlands Fire & Civil Defence Authority

Security for costs may exceptionally be offered by a charge over a claimant’s property, but the court need not accept that form where its adequacy or enforcement is uncertain. Where no bank is prepared to lend against the property, the proposed security will ordinarily be inadequate unless a satisfactory explanation is given. If property is assessed, the court may rely on conservative written valuations, immediate realisable value, marketing delays, forced-sale risks and sale expenses. Relief from an unless order under Civil Procedure Rules 1998, Part 3.9, remains discretionary. A requirement for a compelling case describes the evidential circumstances and is not an additional legal test.

AP (UK) Ltd brought a substantial claim arising from a fire at its premises, including a negligence claim against the respondent fire authority. In January 2001 the Mercantile Court ordered security for costs of £135,000. The claimant offered charges over several properties instead of payment into court or a bank guarantee. The judge rejected that proposal, ordered security in a traditional form, and dismissed the claim when the security was not provided. She later refused an eleventh-hour application for an extension of time and ordered that the costs of an earlier unsuccessful summary judgment application be the claimant’s costs in the case.

The claimant brought three appeals concerning the form and adequacy of security, relief from the unless order, and the costs order.

1. Security by charge. The first appeal was dismissed. The authorities did not establish an unrestricted right to choose any form of security. Rosengrens Ltd v Safe Deposit Centres Ltd concerned straightforward alternatives such as a solicitor’s undertaking or bank guarantee. It did not require acceptance of a charge over real property involving valuation difficulties, enforcement risks and a possible forced sale. Re I was a domestic appeal and did not govern this commercial dispute.
2. Where no bank was prepared to lend £135,000 against the property offered, and no satisfactory explanation was given, the court was entitled to conclude that the proposed charge was inadequate. The judge was also entitled to reject optimistic or uncorroborated evidence, assume no future planning permission, use the lower written valuation, and allow for marketing delay, sale expenses, forced-sale risks and market movements.
3. Extension of time. The second appeal was dismissed. The judge correctly treated the application under Part 3.9 as an exercise of discretion. Her reference to the need for a compelling case did not impose an additional legal test. The claimant’s evidence showed only that funds would probably become available, and the application was made at the eleventh hour after inadequate preparation. The judge was entitled to refuse relief and was not plainly wrong.
4. Costs. The third appeal was dismissed. The judge had been entitled to order that the costs of the failed Part 24 summary judgment application be the claimant’s costs in the case. Her concerns about the credibility and completeness of the claimant’s evidence meant that the claim could not be said to have no real prospect of success, although success remained doubtful. The appeals were dismissed with costs to be assessed.

• Court of Appeal (Civil Division): The three appeals from orders of Her Honour Judge Caroline Alton were dismissed with costs.
• Mercantile Court, Birmingham: Security for costs was ordered; the claim was dismissed when security was not provided; an extension of time was refused; and the costs of the Part 24 application were ordered to be the claimant’s costs in the case.