Brimko Holdings Ltd v Eastman Kodak Company

An order for security for costs requires both a qualifying condition and a conclusion that the order is just in all the circumstances. Security should ordinarily be refused, or limited, where it would probably stifle a genuine claim. The claimant bears the burden of showing this on the balance of probability. The court must consider realistically available support from third parties, while evaluating sympathetically the difficulty of proving that such support does not exist. Assets of non-backing relatives, pension funds and money required to fund the litigation should not be treated as available merely through indirect pressure. The application was therefore limited to the security offered and an additional £15,000.

Brimko Holdings Ltd, a Guernsey company, brought a substantial damages claim against Eastman Kodak Company arising from the termination of a proposed Shanghai joint venture. Kodak applied for £2.5 million security for costs under the Civil Procedure Rules, alternatively under section 726 of the Companies Act 1985. Brimko accepted that its own resources were insufficient but relied on security offered by associated companies and argued that any greater order would stifle a genuine claim. The central issue was which resources could fairly be treated as available and whether a further order was just.

The application was granted only to a very limited extent. The court ordered the security offered by associated companies, together with an additional payment of £15,000. The balance of the application failed.

1. Under rule 25.13, the condition in rule 25.13(2)(c) was satisfied because Brimko was a company and was unable to pay Kodak’s costs if ordered to do so. The decisive question was whether, under rule 25.13(1)(a), it was just to order security having regard to all the circumstances. The same result would have followed under section 726(1) of the Companies Act 1985.
2. A particularly important consideration was whether the order would probably stifle a genuine claim. The court applied the principle stated in Keary Developments Ltd v Tarmac Construction Ltd [1995] 3 All ER 534 at 550, that the security jurisdiction should not become an instrument of oppression. The claimant bore the burden of proving stifling, but only to the standard of probability rather than certainty.
3. The court considered resources beyond those of the claimant itself. It was appropriate to consider persons or companies from whom security could realistically and reasonably be expected, including shareholders and associated companies. The claimant also had to show that suitable third-party support was unavailable. That burden involved proving a negative and required sympathetic evaluation of the evidence, with reference to Anglo-Eastern Trust Ltd v Kermanshahchi [2002] EWCA Civ 198 at paragraph 55.
4. The evidence was accepted as substantially accurate. Charges over the equity in 25 Richbourne Court and over Xerton Ltd’s contingent entitlement were available. It was unreasonable to exert further pressure on Mrs Brim or the sons, who were not backers of the claim, by treating their separate assets as available security.
5. The modest bank balances, the £45,000 paid to Mrs Brim under a bargain, and £130,000 retained by solicitors for disbursements were not available. No value was attributed to Mr Brim’s pension fund because he was not of pensionable age, could not receive its capital value, and could not raise a loan against it under section 19(1) of the Pensions Act 1995. A further £15,000 could fairly be raised by selling one or two cars.
6. Upon the two charges being granted and the £15,000 being paid into court, the application was to be dismissed. If the conditions were not fulfilled, Brimko’s claim would be struck out.