Mengi v Hermitage

When security for costs is justified because enforcement of a costs order abroad would face substantial obstacles or an extra burden, the amount must reflect the protection reasonably required. The court may include a conditional-fee success fee in the security, even where the agreement has not been disclosed. Taking account of a possible uplift is not impermissible speculation, and the defendant need not waive her entitlement to withhold funding details. Where the enforcement risk arises from corruption affecting the foreign judiciary, the court need not reduce security to an uncertain estimate of the likely burden. It may order security for the full recoverable budget, including the maximum permitted uplift, provided this is just having regard to the parties’ access to justice, equality of arms and freedom of expression.

The defendant appealed from the Master’s order requiring the claimant, who was resident and domiciled in Tanzania, to provide £610,500 as security for costs in a libel action. Permission had been granted on whether security could include the defendant’s conditional-fee success fee. The defendant also sought permission to appeal the Master’s adoption of a 75% limit on the claimant’s budgeted recoverable costs.

The Deputy Master had found substantial obstacles and extra burdens in enforcing an English costs order in Tanzania, arising from corruption within the Tanzanian judiciary and the claimant’s wealth and public power. The central issues were whether security could include a possible 100% CFA uplift and whether the security should be limited to 75% of the defendant’s budget.

1. The CFA point. The appeal was allowed. Under CPR r 25.13, the court had to exercise its discretion justly, having regard to the parties’ access to court, equality of arms, reputation and freedom of expression. It was legitimate to assume that the defendant might obtain an order for costs including a CFA uplift. That assumption was no different in principle from assuming that she might succeed and recover costs at all.
2. The defendant was not required to disclose the CFA or waive her procedural entitlement not to specify the additional liability until assessment. No adverse inference should be drawn from her reliance on that entitlement. Security could therefore include the full 100% uplift permitted for a CFA.
3. The 75% point. Permission to appeal was granted and the appeal was allowed. The Master had not been bound to repeat the unexplained 75% figure adopted by the Deputy Master. The amount of security had to be considered afresh by reference to the established enforcement risk and the current agreed costs budget.
4. The guidance in Nasser v United Bank of Kuwait [2001] EWCA Civ 556 required security to be related to obstacles to, or the burden of, enforcement. That guidance did not require a defendant to remain partly unsecured where the burden arose from corruption affecting the foreign judiciary. Attempting to calculate the probable financial consequences of such corruption would be impractical and objectionable in principle. Security should therefore cover the full claimant’s budget, together with the 100% CFA uplift.
5. The exact further sum and other terms were left to be settled after further submissions, unless agreed. The observations concerning the general availability of English jurisdiction for foreign defamation claims and the importance of equality of funding where freedom of expression is engaged were additional contextual observations.

• High Court (Queen’s Bench Division): Allowed the appeal on the CFA point, granted permission to appeal on the 75% point, and allowed the appeal on that point. Further security was to be ordered substantially as sought, with the precise amount and terms to be settled.
• Master: On 28 February 2012 ordered security totalling £610,500 and refused to include any CFA success fee. The Master adopted a 75% approach to the recoverable costs.
• Deputy Master: Previously ordered security of £90,000 up to filing and service of the Defence, applying the enforcement principles in Nasser v United Bank of Kuwait [2001] EWCA Civ 556.