Sinclair Investment Holdings SA v Cushnie & Ors

Fortification of a cross-undertaking in damages requires evidence of a sufficient risk of loss. The court must estimate likely loss where possible, but should avoid detailed investigation of causation and quantum at an interlocutory stage. The threshold is fact-sensitive.

Security for costs is discretionary. Relevant matters include the claimant’s prospects, the risk that costs cannot be recovered, possible oppression or stifling, the cause of the claimant’s lack of means, and whether security can be obtained from backers. A premature or tactically excessive application may be refused despite impecuniosity and foreign incorporation.

Sinclair, a BVI company with no apparent assets other than its claim, brought proceedings concerning the alleged misapplication of investment funds and related fiduciary, trust, receipt, assistance and conspiracy claims. The first defendant had undertaken not to dispose of a French property after a worldwide freezing order was discharged.

He sought fortification of Sinclair’s cross-undertaking in damages. He, together with the second and fourth defendants, also sought security for costs based on Sinclair’s apparent insolvency, foreign incorporation and alleged procedural failures in obtaining without-notice relief. The issues were whether the evidence established a sufficient risk of loss, whether security would be oppressive or tactical, and whether the applications were premature.

1. Fortification refused. The value of the cross-undertaking was uncertain because Sinclair and its backer, FHC, had provided no meaningful evidence of their means. That fact did not automatically justify fortification.

2. The court had to assess whether there was a sufficient risk of loss from restraining dealings with the particular property. A general freezing order may demonstrate a general risk, but restraint over a property held for several years required positive evidence explaining the alleged loss. The threshold was a matter of judgment in each case.

3. The evidence of a proposed business venture was insufficient. The redacted business plan did not establish the timing, cash flow, required investment or Mr Cushnie’s participation. His assertion that he had no other suitable assets was also insufficiently particularised.

4. The application for security based on alleged non-compliance with the without-notice procedure was rejected. Even if the complaints were factually justified, they did not approach the seriousness required to invoke CPR 3.1(5).

5. Security for costs refused at that stage. Sinclair was apparently unable to satisfy a costs order, and it was appropriate to consider whether its backers could provide security. However, no defence had been served, the claim was at an early stage, and the amount sought included substantial and arguably premature work. The application appeared tactically excessive. A better-informed application could be made after the defence clarified the issues.

6. The court refused the applications for fortification and security for costs. It made no determination about a possible future security application.

First-instance decision. No prior appellate decision is stated in the judgment.