RBIL v Ryhurst & Ors

Security for costs is discretionary even where defendants advance a counterclaim. The court must examine whether the costs of defending the claim are also costs of pursuing the counterclaim, or whether the counterclaim was brought only because the claimant commenced proceedings. Where the claimant’s position as claimant is not merely accidental, security may properly be ordered. The court should also consider delay, specific prejudice, commercial disadvantage, realistic costs, and costs attributable to postponement. The amount ordered must not be oppressive or prevent pursuit of an otherwise legitimate claim.

The claimant brought proceedings concerning the termination of a management services agreement. The second to twelfth defendants, project companies within the relevant healthcare portfolio, brought a counterclaim raising related alleged defaults. The defendants applied for security for costs. The claimant accepted that the statutory threshold was met but argued that security should not be ordered because the defendants’ costs related substantially to pursuing their counterclaim. The central issues were whether the counterclaim made security inappropriate and, if not, what sum should be ordered.

1. Application granted in part. The threshold for security was accepted: the claimant would probably be unable to pay the defendants’ costs if unsuccessful.
2. The existence of a counterclaim did not by itself prevent an order. The relevant question was whether the defendants’ costs of defending the claim could equally, or preferably, be regarded as costs incurred to prosecute the counterclaim. On the evidence, the defendants would not have pursued their counterclaim if the claimant had not brought the proceedings. The claimant’s position as claimant was therefore not shown to be a matter of chance. Security was, in principle, appropriate.
3. The application had been made very late. Although no specific prejudice was established, lateness created a real risk of commercial disadvantage because security would probably have to be provided by the claimant’s holding company. That factor justified a reduction in the amount.
4. The defendants’ current costs estimate included costs caused by postponement of the trial. Since those costs were already payable by the defendants under an earlier costs order, they had to be excluded from the security calculation. The court assessed the gross costs properly relevant to security at £2 million, deducted £500,000 for lateness, and assessed the net figure at £1.5 million.
5. The security had to be set at a reasonable level and must not be oppressive or deter pursuit of a potentially legitimate claim. Two-thirds of the net figure, namely £1 million, was ordered as security for costs.

Not stated in the judgment.