Murray Construction Ltd v Marino Family Trust Ltd

Where an insolvent company seeks to continue litigation, the court has a broad discretion to order security for costs. It must balance the claimant’s ability to pursue a proper claim against the defendant’s protection from unrecoverable costs. The risk that security may deter a claim is insufficient by itself to justify refusal. The court should consider whether the claim is likely to be stifled, including whether funding could be obtained from directors, shareholders or other backers. It should avoid detailed examination of the merits unless a high probability of success or failure is clear. An application to revisit security should not become an indirect appeal against an earlier order, particularly where no material new evidence is shown.

The claimant’s construction proceedings, commenced in 1992, had been stayed after an order requiring £32,000 security for costs. Permission to appeal was granted, but the appeal was not pursued. The claimant was later dissolved, restored to the register, and sought to revive the proceedings.

After the claimant provided the original security, the defendant applied for additional security under CPR 25.12. The claimant resisted, asserting that the original order was unjust and that new allegations of fraud and conspiracy provided a genuine claim. The central issues were whether the threshold for security was met, whether further security would stifle a genuine claim, and whether the claimant could reopen matters determined in 1993.

1. Order for further security. The claimant was insolvent and accepted that it could not pay an adverse costs order. The threshold under CPR 25.13(2)(c) was therefore satisfied.
2. Discretionary balance. Applying the principles stated in Keary Developments v Tarmac Construction Ltd [1995] 3 All ER 534, the court had to consider all relevant circumstances. It balanced the injustice to the claimant if a proper claim were prevented against the injustice to the defendant if it incurred costs without a realistic prospect of recovery. The possibility that security might deter litigation was not sufficient by itself.
3. The claimant had provided no adequate evidence that further security would stifle the claim, either from its own resources or from directors, investors or other backers. The proposed new allegations had not been pleaded and their effect on the existing construction claim was unclear. The court therefore found no sufficient basis for refusing security.
4. The claimant could not use the present application as an alternative route of appeal against the 1993 order. The relevant matters had already been considered, and no new evidence showed oppression or that the defendant had caused the claimant’s impecuniosity. The earlier findings had to be given proper effect.
5. The court did not undertake a detailed merits assessment. The pleaded claims were arguable, but the claimant faced substantial difficulty after the long delay. The defendant’s estimated costs were discounted by about 30 per cent. Since £32,000 had already been provided, a further £45,000 was ordered. The proceedings were stayed until payment, with a deadline of 7 June 2012.