Solland Projects Llp v Nautiliodes Comercio Interracional E Servicos

On an application for security for costs, the threshold condition must first be established. The court must then exercise its discretion by assessing the likely costs, the claimant’s evidence of impecuniosity, the risk of stifling a legitimate claim, and the wider circumstances of the litigation.

A claimant resisting security on grounds of impecuniosity or potential stifling must provide proper and sufficient evidence, including full and frank disclosure capable of corroborating its financial position. Bare assertions are insufficient. Security may be limited to the costs of preliminary issues and staged where that fairly balances the defendant’s protection against the risk of preventing the claim from proceeding.

The claimant brought substantial contractual claims arising from refurbishment works at properties in London. The defendant defended the claims, brought a counterclaim alleging overpayment, and sought declarations concerning a VAT agreement.

The defendant applied both for further information and for security for costs. The parties had agreed preliminary issues concerning payments made and the character of a £1 million advance. The central security issue was whether the claimant had shown sufficient impecuniosity, and whether an order would stifle the claim.

1. Further information. The claimant was ordered to provide particulars of two unparticularised loss-of-profit claims by 16 December 2011. Unless it complied, those claims, quantified at £250,000 and £750,000, would be struck out. Further particulars of a more general contractual loss claim were ordered by 20 January 2012, without an unless sanction.
2. Security threshold. The court accepted that the threshold for exercising the security jurisdiction had been established because the claimant admitted that it could not comply with an order requiring security. The issue was therefore whether security should be ordered.
3. Evidence of impecuniosity. Under the principle identified in York Motors v Edwards [1982] 1 WLR 444, applied in the security-for-costs context, a party relying on impecuniosity or potential stifling must put proper and sufficient evidence before the court and make full and frank disclosure. The claimant had not done so. The evidence did not adequately account for substantial sums received, the financial position of associated entities, or the expenditure already incurred on legal costs.
4. Discretion and amount. Security was appropriate, but it should relate initially to the preliminary issues rather than the estimated costs of the entire action. The court took likely costs of £225,000 as a base, allowed for standard assessment, the prospects of mediation, and the claimant’s financial difficulties, and fixed security at £100,000.
5. Order. The security was payable in three tranches of £30,000 by 27 January 2012, £30,000 by 9 March 2012, and £40,000 by 1 June 2012. Costs of the case management conference were costs in the case.