Sandra Bailey & Ors v Glaxosmithkline UK Ltd

Security for costs against a non-party funder is governed by a broad, fact-sensitive discretion. The court must assess whether security is just having regard to all the circumstances, including the funder’s commercial interest, the risk of non-payment, the link between funding and the costs sought, and the effect on the litigation.

The Arkin cap is a relevant consideration, but it does not automatically limit interlocutory security to the amount funded. ATE insurance may provide sufficient protection, subject to adequate assurance that the policy will not be avoided. The court may make a broad assessment of recoverable costs, allow for contingencies, and require a cross-undertaking in damages.

The claimants pursued group litigation against the defendant. Managed Legal Solutions Limited (“MLS”), their litigation funder, was joined as an additional party to an application under CPR r.25.14 for security for costs.

The defendant sought security for costs incurred from August 2015 to trial. The parties disputed the relevance of the Arkin cap, the value of the claimants’ ATE insurance, the recoverable level of the defendant’s costs, and whether security should cover historic as well as future costs. The central issue was the appropriate amount and terms of security.

1. Application granted. MLS was ordered to provide £1.75 million as security for costs. The sum was to be paid into court, or retained by an agreed alternative arrangement, within 28 days after sealing of the order. The proceedings would be stayed if security was not provided.
2. CPR r.25.14 confers a wide discretion. The court adopted the fact-sensitive considerations identified in The RBS Rights Issue Litigation (No. 2) [2017] EWHC 1217 (Ch). Relevant matters included MLS’s effective commercial interest in the litigation, the real risk of non-payment, the connection between the funding and the defendant’s costs, the extent to which the risk of costs liability had been brought home to MLS, delay, and any adverse effect on the claimants’ ability to pursue the claim.
3. The Arkin v Borchard Lines Ltd (Nos 2 and 3) [2005] 1 WLR 3055 cap was not an absolute restriction on the security that could be ordered at an interlocutory stage. Its possible application at the end of the proceedings was a factor, but the court could not assume that it would necessarily apply. The court also noted that the extension of the cap beyond partial funding had been strictly obiter in Arkin.
4. An ATE policy could in principle answer an application for security, consistently with Premier Motorauctions Ltd v PWC LLP [2017] EWCA Civ 1872 and Nasser v United Bank of Kuwait [2002] 1 WLR 1868. However, the absence of an anti-avoidance clause and uncertainties concerning the proposal and policy conditions meant that the policy could not be treated as completely secure. Two-thirds of the £750,000 cover was therefore deducted.
5. The defendant’s estimated costs were reduced to a broad working figure of £4.5 million. Security was fixed at 50 per cent of that figure, less £500,000 for the assessed value of the ATE cover. A cross-undertaking in damages was required in accordance with the guidance discussed in The RBS Rights Issue Litigation (No. 2).

First-instance decision on an application for security for costs. No appellate history is stated in the judgment.