Golden Grove Estates Ltd v Chancerygate Asset Management Ltd

An applicant for security for costs under CPR 25.13(2)(c) must show reason to believe that the claimant will be unable to pay the costs if ordered to do so. It is insufficient to show that the claimant might be unable to pay. The burden remains on the applicant unless its evidence is sufficient to shift it. Under CPR 25.13(2)(a), the likely cost of enforcing a costs order abroad depends on the location and nature of the claimant’s assets. An appellate court may take account of subsequent information when exercising the discretion afresh, but any material financial information required from the claimant should be properly verified. A renewed application for security covering the trial may be premature where the scope and cost of the trial remain uncertain.

Golden Grove Estates Ltd, a British Virgin Islands company, brought a substantial contractual claim against Chancerygate Asset Management Ltd. Chancerygate applied for security for costs under CPR 25.13(2)(a) and (c). Golden Grove voluntarily paid £10,000 into court and provided information about its assets, income and cash balances.

A Master made no order on the application but required information about the location and nature of Golden Grove’s assets, with liberty to renew. Chancerygate appealed and renewed its application, seeking security first to exchange of witness statements and then to the end of the trial. The issues were whether the Master’s order contained an error of law and whether the evidence justified security on either basis.

1. Appeal. The appeal against paragraph 2 of the Master’s order was allowed. The speaking judgment and the order were internally inconsistent: the judgment indicated that no order would be appropriate only if further asset information were supplied, whereas the order made no order immediately. The Master also confused the relevance of asset location to the Nasser enforcement-costs issue under CPR 25.13(2)(a) with the separate inability-to-pay condition in CPR 25.13(2)(c).
2. Ground (a). The £10,000 paid into court could not be assessed without knowing where Golden Grove’s assets were situated. Once the available information identified assets in the United Kingdom, Scotland, the British Virgin Islands, Dublin and Guernsey, there was no sufficient reason to conclude that enforcement would be materially more expensive than enforcement against comparable assets in the United Kingdom or Guernsey.
3. Ground (c). The burden was on Chancerygate to establish reason to believe that Golden Grove would be unable to pay the costs if ordered to do so. It was not enough to show that Golden Grove might be unable to pay, and Golden Grove was not required to prove its ability to pay unless Chancerygate first shifted the burden. The evidence of substantial assets, growing income, liquidity and cash at bank did not satisfy that strict condition.
4. Verification and renewed application. The information supplied in a solicitor’s letter was treated as acceptable in form because that was the apparent understanding at the earlier hearing, but it had to be verified by a director’s witness statement or affidavit. Subject to verification, no security was ordered either to exchange of witness statements or to the end of the trial. The latter application was in any event premature because the trial length, witnesses, disclosure and expert evidence remained uncertain. Chancerygate retained liberty to make a later fresh application. Costs and consequential directions were adjourned for further hearing.

The judgment records an appeal from the order of Master Bragge dated 23 May 2006 and a renewed application pursuant to that order. Permission to appeal was initially refused by David Richards J. on paper and granted on oral renewal by Lewison J. The High Court allowed the appeal against the Master’s no-order provision and exercised the consequential discretion itself.