Kingsway Investment & Anor v Falmouth House Freehold Company Ltd

Security for costs must be assessed with due regard to proportionality. The court should identify the reasonable costs of the appeal itself and compare them with what is realistically at stake. Costs generated by collateral disputes, unnecessary interlocutory wrangles or work that should fall within the ordinary preparation of the appeal may be excluded. The fact that the dispute concerns a person’s home is relevant, but does not justify disproportionate expenditure. Where procedural disputes are causing delay and waste, the court may order an expedited hearing and require the parties to agree the bundle.

The appellants sought security for the respondent’s costs of an appeal from an order of Peter Smith J in the Companies Court. The claimed security was approximately £86,000, while the maximum value said to be at stake was about £220,000 and the realistic value was said to be nearer £10,000. The costs estimate included expenditure concerning a stay, an agreed chronology, a respondent’s notice, a lengthy skeleton argument and possible further interlocutory applications. The central issue was the proportionate amount of security required for the appeal.

1. Security ordered. Lord Justice Thomas assessed the reasonable costs strictly incurred in relation to the appeal at £12,000. That sum was sufficient to cover solicitors’ attendance, brief fees, preparation of the skeleton argument and respondent’s notice, attendance at the appeal, checking the bundle and implementing directions. The claimed sum of £86,977.50 was disproportionate.
2. Proportionality. In fixing security, the court considered both the amount genuinely in issue and the claimant’s real concern that the dispute related to his home. Those matters did not justify costs beyond what was proportionate to the appeal.
3. Excluded expenditure. No security was ordered for costs relating to the stay. The parties had not agreed responsibility for those costs, and the court would not determine that issue on the application. No costs were allowed for preparation of the chronology, which should have been included within the £12,000 figure.
4. Case management. The parties’ inability to agree the chronology and their expenditure on collateral and prospective interlocutory disputes made it intolerable for the appeal to continue in that way. The appeal was ordered to be expedited and the bundle was to be agreed. Security was to be paid by 5 September.

• Court of Appeal (Civil Division): On appeal from the Chancery Division, Companies Court, before Mr Justice Peter Smith. The order dated 16 January 2008 was stayed by consent pending appeal. On 11 July 2008, security for costs was fixed at £12,000, the appeal was expedited and the bundle was ordered to be agreed.