Bestfort Developments LLP & Ors v Ras Al Khaimah Investment Authority & Ors

Where security for costs is sought from a claimant resident in a non-Convention state, foreign residence satisfies the jurisdictional condition but does not itself justify security. The court must exercise its discretion on objectively justified grounds connected with obstacles to, or burdens of, enforcement.

The applicant need not prove on the balance of probabilities that substantial enforcement obstacles will arise. A properly evidenced real risk of serious obstacles or an extra enforcement burden will usually suffice, provided that an order is just in all the circumstances. A mere possibility will usually be insufficient. The amount of security should reflect the nature and extent of the identified risk.

The claimant entities, which were resident in Ras Al Khaimah or Georgia and had no assets in the United Kingdom or a Convention state, brought proceedings under section 25 of the Civil Jurisdiction and Judgments Act 1982. They sought freezing, disclosure and receivership relief in support of foreign proceedings.

Master Bowles refused the defendants’ application for security for costs. David Richards J dismissed an appeal from that decision in [2015] EWHC 3197 (Ch). Both held that the defendants had to show that substantial enforcement obstacles were more likely than not, rather than merely a real risk.

The defendants brought a second appeal. They also sought security for the claimants’ costs of a separate appeal from Rose J’s dismissal of the section 25 proceedings. The central issue was the evidential threshold governing security under rule 25.13(2)(a) of the Civil Procedure Rules 1998.

1. The security appeal was allowed and the separate security application was granted. The appropriate threshold was a real risk of serious obstacles to, or an additional burden of, enforcing a costs order. The Master and David Richards J had applied an erroneously demanding balance-of-probabilities test.

2. Rule 25.13(2)(a) of the Civil Procedure Rules 1998 states a jurisdictional condition. That condition was satisfied because the claimants were resident outside the jurisdiction and outside the specified Convention states. Whether an order would be discriminatory arose later, when the court exercised its broad discretion under rule 25.13(1)(a) to decide whether security was just.

3. The residence condition was prima facie discriminatory in the enjoyment of the right of access to a court under articles 6 and 14 of the European Convention on Human Rights. Claimants resident in non-Convention states were relevantly comparable with domestic and Convention-state claimants. The distinction was nevertheless based on residence, rather than nationality. Residence was an “other status” which did not require justification by very weighty reasons or severe scrutiny.

4. The security regime had a rational justification. It balanced access to the English courts against the risk that a claimant outside the court’s effective reach might disengage and leave a defendant unable to recover costs. In an individual case, however, foreign residence alone could not justify security. The discretion had to rest on objectively rational grounds concerning enforcement difficulties or another attribute making enforcement problematic.

5. Nasser v United Bank of Kuwait [2001] EWCA Civ 556 required a proper basis for considering that enforcement obstacles might exist. It did not prescribe proof that such obstacles were more likely than not. To the extent that Dumrul v Standard Chartered Bank [2010] EWHC 2625 (Comm) excluded a real-risk test, it was not accepted. A mere possibility will usually be insufficient, while a real risk will usually, though not invariably, suffice.

6. The conflicting Georgian-law evidence clearly established a real and serious risk that an English costs order would not be enforced in Georgia. Security would not stifle the proceedings. The claimants were therefore required to provide £192,062.52 as security for the defendants’ costs of the section 25 appeal. The defendants were also entitled, subject to further submissions, to their costs before the Master and David Richards J.

Briggs and Black LJJ agreed with Gloster LJ.

1. Court of Appeal (Civil Division): By [2016] EWCA Civ 1099 , allowed the second appeal, held that the Master had applied the wrong threshold, and granted security of £192,062.52 for the related appeal.

2. High Court, Chancery Division: David Richards J granted permission to appeal but dismissed the defendants’ appeal from the Master in [2015] EWHC 3197 (Ch) , holding that likelihood rather than real risk was the correct threshold.

3. High Court, Chancery Division: Master Bowles refused security for costs because the evidence showed only a real possibility, rather than a likelihood, of substantial enforcement obstacles.