Radu v Houston & Anor

An order for security for costs should give a claimant a proper choice between providing security and discontinuing the claim. It should not become a means of obtaining summary judgment without a trial. If an unless order is made at the outset, the period for compliance should be generous.

A default judgment is not automatically set aside merely because security later becomes available. The court must consider all the circumstances, especially whether the claimant deliberately disobeyed an order despite being able to comply. Relief may be appropriate where the security order was procedurally unfair or excessive, the correctly assessed sum is available, and deliberate non-compliance has not been established.

The appellant brought a libel action concerning an article which accused him of fraud in relation to his title. Because he lived in Romania, the respondents obtained an order requiring £125,000 as security for costs. The order provided that the claim would be struck out and judgment entered for the respondents unless security was provided by the specified date.

The Senior Master granted limited permission to appeal but refused a stay. A vacation judge also refused a stay, and judgment was entered after the appellant failed to provide security in time. On appeal, Eady J found that the original hearing had been procedurally unfair and considered £80,000 the proper amount, but refused to set aside the default judgment.

The central issue was whether that refusal was a proper exercise of discretion once the security order had been found unfair and excessive and the required funds were available.

1. Appeal allowed unanimously. Waller LJ held that Eady J had erred in principle. Keene LJ agreed for the same reasons and added a qualification concerning deliberate non-compliance. Carnwath LJ agreed with both judgments.
2. An order for security for costs is intended to give a claimant a proper choice between providing security and withdrawing the claim. It is not intended to provide a defendant with a means of obtaining rapid summary judgment. Although an unless order may accompany the first security order, the claimant should receive a generous opportunity to obtain the money. It was unfair to bring the sanction into operation before an appeal, for which permission had been granted on the stifling issue, could be heard.
3. A judgment entered following non-compliance with a security order does not have the same character as a judgment on the merits after trial. If the claimant produces the required sum within a relatively short period, the court should consider granting relief and setting the judgment aside. There is no automatic entitlement to relief, and each case depends on its circumstances.
4. Eady J had found that the Senior Master should have adjourned the hearing and that £80,000, rather than £125,000, was the appropriate security. Once those conclusions had been reached, the original order was not a proper foundation for maintaining the default judgment. The refusal of a stay by Treacy J was irrelevant to that later exercise of discretion.
5. Maintaining the judgment might have been justified by conduct requiring a punitive response, such as deliberate refusal to comply despite an ability to do so. No such finding had been made, and the evidence did not establish that the appellant could have provided £125,000 by the original deadline. The Court declined either to make that finding itself or to remit the issue for determination.
6. The libel action was reinstated on condition that the appellant provide security of £80,000 by payment into court or another means reasonably acceptable to the respondents.

1. Court of Appeal (Civil Division): Allowed the appeal in [2006] EWCA Civ 1575. The action was reinstated subject to provision of £80,000 security.
2. Queen's Bench Division, Eady J: Found procedural unfairness in the hearing before the Senior Master and assessed the proper security at £80,000 rather than £125,000. He nevertheless refused to set aside the judgment dismissing the action.
3. Queen's Bench Division, Treacy J: Refused the appellant's vacation application for a stay pending appeal.
4. Senior Master: Ordered £125,000 security for costs and directed that, unless it was provided by the deadline, the claim would be struck out and judgment entered for the respondents. Limited permission to appeal was granted, but a stay was refused.