Danilina v Chernukhin & Anor

Residence outside the jurisdiction is a jurisdictional trigger for security for costs, not a basis for automatically ordering security in the full amount. The court must assess the additional enforcement risks objectively and exercise the discretion without discrimination. A real risk of extra cost or delay will generally justify security limited to that burden. A real risk of non-enforcement may justify security for the likely recoverable costs. The amount remains a matter of proportionality and may reflect a sliding scale of risk. The merits should not ordinarily be examined at this stage, save where the claim appears highly likely to succeed or fail. A claimant with a significant personal or financial interest will rarely be a nominal claimant under the Civil Procedure Rules.

The claimant brought substantial claims concerning her alleged beneficial ownership of Navigator Equities Limited and alleged family assets. The defendants applied for security for costs under CPR 25.13(2)(a), on the basis that she lived outside the jurisdiction, and under CPR 25.13(2)(f), on the basis that she was a nominal claimant unable to pay costs.

The principal issues were the enforcement risks associated with obtaining and enforcing an English costs order in Russia, the relevance of the merits and other discretionary factors, the appropriate amount of security, and whether the claimant’s funding and option arrangements made her a nominal claimant.

1. Security under CPR 25.13(2)(a). Residence outside the jurisdiction merely triggered the jurisdiction. The discretion had to be exercised in a non-discriminatory manner, consistently with articles 6 and 14 of the ECHR. The relevant question was what the claimant’s residence meant for enforcement of a future costs order.
2. A mere possibility of enforcement obstacles was insufficient. A real risk would usually suffice. Where enforcement was possible but likely to involve additional cost or moderate delay, security should generally be limited to that burden. Where there was a real risk of non-enforcement, security could cover the likely recoverable costs. The court adopted a sliding-scale approach, taking account of the degree and financial consequences of the risks.
3. The evidence established additional costs, possible non-recovery of costs, and risks arising from reciprocity, public policy, procedural objections, delay and uncertainty about assets. Complete non-enforcement was not highly probable, but there was a real, though relatively small, risk of it. A single substantial order was therefore appropriate. The court ordered £700,000 for the First and Second Defendants and £90,000 for the Third Defendant.
4. The merits were not a matter for determination at this stage except, if relevant, at the final discretionary stage. The claim was not shown to have such a high probability of success or failure that the security decision should be altered. Nor was there compelling evidence of bad faith or want of probity by the claimant.
5. Nominal claimant. The claimant had a quantifiable interest under the option arrangement, a possible damages claim, and separate family claims for her own benefit. She therefore had a significant interest in the outcome and was not a nominal claimant under CPR 25.13(2)(f). The alternative possibility of seeking security from the funder under CPR 25.14(2)(b) did not justify an order under paragraph (f). The applications succeeded under paragraph (a) only.