Lederer & Ors v The Persons Listed At Schedule 1 & Ors

When deciding security for costs, the court must distinguish jurisdiction from discretion. Establishing a gateway under Part 25.13(2) does not itself justify an order. The court must consider the claim’s bona fides, prospects, timing, oppression and whether security would stifle the claim.

The claimant bears the burden of proving, on the balance of probabilities, that security would stifle the claim. A bare assertion of impecuniosity is insufficient. The court may assess the probable availability of funds by examining the underlying financial realities, relationships and potential third-party or litigation funding. Security may be ordered in stages and discounted to reflect likely irrecoverability.

The claimants, property-owning and development companies and their guarantor, sued Lendy Limited and receivers concerning loans secured over two development properties. They alleged breach of warranty of authority, fraudulent misrepresentation and ineffective loan agreements.

The court considered applications for security for costs by Lendy and the receivers, an application to enforce an unpaid costs order, and the claimants’ application for a general stay because of threats made against the first claimant and her mother. The central issues were whether the proceedings should be stayed, whether security should be ordered, and whether the evidence established that security would stifle the claims.

1. Stay and case management. The court accepted the evidence of threats at face value and ordered a stay until 22 March 2019. The claimants were not required during that period to take openly any step capable of being seen as advancing or sustaining the proceedings. The defendants’ applications were nevertheless heard because postponement would cause substantial wasted costs and delay.
2. Security for costs. The gateways under Part 25.13(2) were established for the corporate claimants. In the case of the first claimant, the omission of her address from the claim form gave jurisdiction under paragraph (e), but did not determine whether security should be ordered. The discretion was exercised by reference to the factors identified in Sir Lindsay Parkinson and Co v Triplan.
3. The claims were bona fide and properly arguable. There had been no admissions or offers, and the applications were made in good time. The court could not say that the claims were more likely than not to succeed merely from the limited contractual material before it.
4. The burden of proving that security would stifle the claims lay on the claimants, on the balance of probabilities. Applying Goldtrail Travel v Onur Air, the court should assess the probable availability of funds by reference to the underlying realities of the claimant’s financial position and relationships. A bare assertion that funds were unavailable was insufficient.
5. The evidence did not address family funds, the financial position of the property developer behind the companies, the grandmother’s resources, the persons behind the single-purpose vehicles, or attempts to obtain third-party or litigation funding. The court was therefore not persuaded that security would stifle the claims.
6. Security was ordered against the second to fifth claimants. The sums were discounted to reflect likely irrecoverable costs and limited initially to the period up to the adjourned case management conference. Security of £232,725 was ordered for Lendy and £47,600 for the receivers, payable by 4 pm on 1 April 2019, failing which those claimants’ claims would be struck out.
7. No unless order was made for payment of the outstanding £30,000 costs order. The receivers retained their ordinary enforcement remedies.

First-instance decision. No prior appellate decision is stated in the judgment.