Chernukhin & Orsr v Danilina

Where a claimant resides in a non-Convention state, security for costs must be ordered on objectively justified and non-discriminatory grounds. A real risk of non-enforcement, or of an additional burden in cost or delay, is sufficient; likelihood need not be proved. Where the risk is confined to an additional burden, security should be tailored to that burden. Where a real risk of non-enforcement is established, security for the defendant’s full costs is the starting point. The court must not discount that figure by grading the probability of non-enforcement on a sliding scale. Its discretion remains available to reflect factors such as stifling or delay.

The respondent, a Russian resident, brought claims concerning ownership of a company and alleged family assets. The appellants applied for security for costs. Cockerill J, in the Commercial Court, found a real but relatively low risk that an English costs order could not be enforced in Russia. She ordered security of £700,000 and £90,000 after discounting an extrapolated costs figure by reference to a sliding scale of risk: [2018] EWHC 39 (Comm).

The appellants challenged both the approach to quantum and, in the third appellant’s case, the conclusion that the respondent was not a nominal claimant. The central issue was whether a real risk of non-enforcement permits a proportionate discount from otherwise full security by grading that risk.

Hamblen LJ gave the judgment of the court, with which Sir Stephen Richards and Longmore LJJ agreed.

1. Appeal allowed on ground 1. Once the jurisdictional conditions in CPR r. 25.13(2)(a) are met, the discretion to order security must be exercised non-discriminatorily. Objectively justified evidence of a real risk of substantial obstacles resulting in non-enforcement, or of an additional cost or delay burden, is sufficient. A likelihood test is impermissible.
2. Security should protect against the particular risk. Where the risk is confined to additional enforcement cost or delay, it should ordinarily cover that extra burden. Where there is a real risk of non-enforcement, the starting point is security for the defendant’s entire costs. The court followed the approach in Bestfort Developments LLP v Ras Al Khaimah Investment Authority [2016] EWCA Civ 1099 and applied the principles derived from Nasser v United Bank of Kuwait [2002] 1 W.L.R. 1868.
3. The judge erred by grading the real risk of non-enforcement and discounting security on a sliding scale. That approach effectively reintroduced a likelihood requirement and necessitated speculative evidence about both total costs and the degree of risk. Full security is only a starting point: discretionary matters, including stifling and delay, may still justify a lower order or no order.
4. It was unnecessary to determine the remaining quantum and discretionary grounds. The court nevertheless confirmed that merits should ordinarily be considered on a security application only where a high probability of success or failure can clearly be shown. It also considered the judge’s conclusion that a claimant with a significant interest in the litigation was not a nominal claimant to be correct.
5. The security already provided was to stand as payment on account. The applications were remitted to the High Court for determination consistently with this judgment, with quantum and stifling remaining open.

• Court of Appeal (Civil Division) — allowed the appeal on the sliding-scale issue and remitted the applications for security for costs: [2018] EWCA Civ 1802.
• High Court, Commercial Court — Cockerill J found a real risk of non-enforcement in Russia, ordered discounted security, and held that the claimant was not a nominal claimant: [2018] EWHC 39 (Comm).