The Northampton Regional Livestock Centre Company Ltd v Cowling & Anor

On an application for security for costs, the court may consider the claimant’s prospects of success, but should not examine the merits in detail unless a high degree of probability of success or failure is clearly shown. A finding that a claim is more likely than not to succeed falls materially short of that threshold.

Even a genuine claim should not be stifled by security, but the claimant must establish a probability that the order would prevent continuation of the litigation. That inquiry includes the possibility of raising security from shareholders, directors, backers or other interested persons. The decision whether to order security remains a broad discretion exercised having regard to all the circumstances.

The claimant appealed against an order of Deputy Master Eyre requiring it to provide £240,000 security for the defendants’ costs, staying the action until security was provided and providing for automatic dismissal on default.

The claim arose from the sale of a cattle auction site and included allegations of negligent marketing, sale at an undervalue, secret profits and breach of fiduciary duty. The claimant argued that its prospects were highly favourable, that its impecuniosity resulted from the defendants’ conduct, and that security would stifle a genuine claim. The central issues were whether the Deputy Master applied the correct approach to the merits, impecuniosity and stifling, and whether his discretionary decision was plainly wrong.

1. Appeal dismissed. The Deputy Master’s order for £240,000 security for costs was upheld.
2. Under Civil Procedure Rules 1998, rules 25.12 and 25.13, the court had power to order security where it was just having regard to all the circumstances. The merits were relevant, but detailed examination was inappropriate unless a high degree of probability of success or failure could clearly be demonstrated. The finding that the claim looked more likely than not to succeed did not meet that threshold.
3. The secret-profit claim raised disputed issues about the Second Defendant’s alleged resignation from the partnership, his continuing role, the effect of section 38 of the Partnership Act 1890, and the scope of any continuing fiduciary duty. Those issues required detailed examination at trial. Section 38 did not provide a complete answer on the material before the court, and the claimant had not shown a high degree of probability of success.
4. The merits could nevertheless be considered more generally in deciding whether the claim was bona fide, had reasonably good prospects, or should be protected from oppressive use of security. The claim was genuine, but that did not establish that it would probably be stifled.
5. The burden lay on the claimant to provide proper evidence that it could not continue the litigation if security were ordered. That included evidence about funds available from outside sources, including shareholders, directors, backers or interested persons. The claimant had made no such proper attempt.
6. The Deputy Master was not plainly wrong in assessing the evidence about impecuniosity, the alleged conduct of the defendants, the availability of after-the-event insurance, delay, public interest, liability insurance or dissipation of funds. His decision fell within the generous ambit of reasonable disagreement. The order’s liberty to apply also left the form of security, including possible ATE insurance, open for later consideration.

• High Court (Queen’s Bench Division): appeal against the order of Deputy Master Eyre dismissed; the order requiring £240,000 security for costs was upheld.