Jirehouse Capital & Anor v Beller & Anor

For security for costs under CPR 25.13(2)(c), the applicant need not establish that a claimant company will probably be unable to pay. It is sufficient to show a significant danger of non-payment. An unlimited company is within the rule, although shareholders’ assets may be relevant. The court must then decide whether security is just in all the circumstances. Fortification of a cross-undertaking requires an intelligent estimate of likely loss, sufficient risk of loss, and causation.

The claimants brought related proceedings concerning an alleged fraudulent release and conspiracy, an application under section 262 of the Insolvency Act to revoke an individual voluntary arrangement, and a bankruptcy petition. The proceedings were ordered to be tried together.

The defendants sought security for costs under CPR Part 25 and fortification of the claimants’ cross-undertaking in damages given for freezing orders and other interim relief. The issues were whether the inability-to-pay condition was satisfied, whether security was just, and whether the evidence justified fortification.

1. Security for costs. CPR 25.13(2)(c) is a self-standing jurisdiction expressed more broadly than section 726 of the Companies Act 1985. It permits security against any corporate body, including an unlimited company.
2. The applicant need show only a significant danger that the claimant will be unable to pay costs when ordered to do so. The threshold is lower than the probability test. The claimants’ projected profits and shareholder’s undertaking did not eliminate the risk, particularly as no evidence of his means was provided.
3. It was just to order security. Security was ordered for the first defendant’s costs incurred to date in the sum of £150,000 and for the second defendant’s estimated trial costs in the sum of £250,000, payable by instalments.
4. Fortification. The application required an intelligent estimate of likely loss, a sufficient risk of loss, and causation. The revised estimate was substantially lower and causation was uncertain. No fortification was ordered.