Kahangi & Ors v Nourizadeh

Security for costs requires both a qualifying condition under Civil Procedure Rules 1998, rule 25.13 and a discretionary conclusion that security is just in all the circumstances. The application should not become a mini-trial, particularly where fraud allegations depend on disputed evidence. A foreign claimant’s residence outside the jurisdiction is insufficient by itself; the applicant must show significant additional obstacles to enforcing a costs order abroad. Impecuniosity and wealth are relevant but not decisive. Where enforcement evidence establishes a substantial practical burden, security may be ordered. The amount should reflect the stage of the proceedings, and a conservative, staged approach may be appropriate. The possibility that security might stifle a claim requires convincing evidence.

The defendant sought security for costs in four consolidated libel actions concerning six publications alleging fraud, money laundering, corruption and other criminal conduct. Three claimants were treated as outside the jurisdiction for the purposes of the relevant procedural rule, while the defendant also relied on the alleged inability of the corporate claimants to meet an adverse costs order.

The defendant relied on evidence concerning enforcement of English judgments in Iran, including the absence of a reciprocal enforcement treaty, concerns about judicial independence and alleged threats connected with the publications. The claimants disputed the merits of the justification defence and alleged bad faith. The central issues were whether the jurisdictional conditions were met, whether enforcement in Iran presented significant additional obstacles, and whether security should be ordered without determining the merits at an interlocutory hearing.

1. Application granted. Security for costs was ordered in the sum of £275,000, with the timing and mechanism to be addressed separately.
2. Under Civil Procedure Rules 1998, rule 25.13, the applicant must establish a qualifying condition and satisfy the court that, having regard to all the circumstances, it is just to order security. The existence of a condition under rule 25.13(2)(a) does not, by itself, justify an order.
3. The court should avoid conducting a mini-trial. Conflicting allegations of fraud, disputed documents and issues likely to require disclosure, witness statements and cross-examination generally prevent a reliable prediction of success at the security stage. The claimants had not shown a high probability of success.
4. Following the public policy approach in Nasser v United Bank of Kuwait [2002] 1 WLR 1868, the defendant had to show significant additional obstacles to enforcement in the relevant foreign jurisdiction. Mere foreign residence, impecuniosity or the claimants’ asserted wealth was insufficient.
5. The evidence concerning Iran was sufficient. It included the absence of a reciprocal enforcement treaty, uncertainty about the Iranian recognition process, evidence concerning judicial independence, and the defendant’s personal circumstances. Those matters demonstrated a substantial potential burden in enforcing an English costs order.
6. The risk of stifling a claim also required convincing evidence. No such evidence had been advanced. The substantial and expensive nature of the justification defence, together with the legitimate relevance of the conditional-fee uplift, supported an order.
7. A staged and conservative order was appropriate because the evidential position might change before trial. The security was therefore limited to £275,000 and was not calculated to cover all anticipated costs.
8. The challenge to the Reynolds privilege defence was a matter for trial. Responsible journalism had to be assessed in the round, and failure to satisfy one of Lord Nicholls’s factors did not automatically defeat the defence.

Not stated in the judgment.