Harlequin Property (SVG) Ltd & Anor v Wilkins Kennedy (A Firm) (No. 2)

Where security for costs has been provided through an agreed after-the-event insurance policy and incorporated into a court order, the court should not vary the security without an exceptional event showing that the assumptions underlying the agreement were fundamentally misplaced. Security ordinarily covers the costs of the proceedings as a whole where that was the agreed basis.

Under Civil Procedure Rules 1998, r.31.19, claims to withhold inspection on confidentiality or public-interest grounds require a balance between the relevant public interest and the need for the fair disposal of proceedings. Highly relevant documents should be made available where justice requires it. The ordinary, rather than indemnity, basis applies to costs unless the conduct is markedly improper or unreasonable.

The claimants brought professional-negligence proceedings arising from a Caribbean property development. They alleged that the defendant accountancy firm had a conflict of interest because it advised both the claimants and the ICE Group contractors.

The court determined applications concerning disclosure and inspection, confidentiality, security for costs and costs assessment. The claimants sought to increase the disbursement element of an agreed £3 million after-the-event policy, reducing security available to the defendant from £2.75 million to £2.5 million. They also sought inspection of documents withheld because of possible Serious Fraud Office public-interest objections or third-party confidentiality.

1. Security for costs. The application to reduce the security was refused. The agreed after-the-event policy and the order based on it represented adequate security of £2.75 million. The court had no power to alter the policy, go behind the parties’ agreement or change the basis of the order without an exceptional event rendering the assumptions made in April 2015 fundamentally misplaced (paras [10], [15]).
2. Security had been ordered by reference to the costs of the case through trial. This was not a case where money paid into court kept the claimants out of funds and justified staged security. There was no sufficient reason to substitute security only to the pre-trial review stage, particularly as there was no evidence that further security or funding would later be available (paras [11]-[14]).
3. Public-interest confidentiality. The exercise under Civil Procedure Rules 1998, r.31.19 was a balancing exercise. The public interest in confidential fraud investigations had to be balanced against the public interest that the administration of justice should not be frustrated. The ultimate question was whether disclosure and inspection were necessary for the fair disposal of the proceedings, applying [1995] 1 WLR 1217 and [1980] AC 1028 (para [21]).
4. The SFO-related documents were highly relevant. The SFO did not maintain that withholding them was in the public interest, and the objections raised by one witness were non-specific and unpersuasive. Final and draft statements were to be disclosed and offered for inspection; no distinction was required on the facts (paras [22]-[23]).
5. Third-party confidentiality. Documents concerning the ICE Group were central to the alleged conflict of interest and had to be offered for inspection. Other documents identified through keyword searches were also to be offered pragmatically, subject to their apparent irrelevance bringing the matter to an end (paras [24]-[27]).
6. Costs. The security application was unsuccessful, but the claimants’ conduct was not improper or sufficiently unreasonable to justify indemnity costs. The defendant’s costs were assessed on the standard basis and summarily assessed at £35,000 (paras [28]-[32]).