Brake & Anor v Guy & Ors

Under CPR rule 25.13(2)(g), security for costs may be ordered only where the claimant has already taken steps in relation to assets which would make enforcement of a future costs order difficult. The provision is backward-looking and does not cover contemplated future steps. The court must assess the continuing effect of the relevant step, including the effect of bankruptcy or liquidation. Satisfaction of the gateway condition does not itself justify security: the order remains discretionary and should reflect the actual adverse effect on enforcement. Adverse inferences from silence or non-disclosure are discretionary and require a case to answer. On an interlocutory application, the merits should ordinarily be disregarded unless a very high probability of success or failure is clearly shown. The defendants’ application failed, and the claimants received their costs on the standard basis.

The defendants applied for security for their costs in the claimants’ proceedings concerning alleged appropriation and use of private, confidential and privileged documents and data. The application relied principally on CPR rule 25.13(2)(g), alleging that the claimants had taken steps in relation to their assets which would make enforcement of a costs order difficult.

The application was argued after the claimants supplied a further witness statement confirming that no part of funds received from a third party had been placed in a trust or scheme to protect them from enforcement. The defendants accepted that security could no longer be ordered but sought their costs, including on the indemnity basis. The central issues were whether the application would have succeeded without the further statement and what costs order was just.

1. Outcome. The application for security for costs was dismissed. The defendants were ordered jointly and severally to pay the claimants’ costs of the application on the standard basis.
2. Gateway condition. CPR rule 25.13(2)(g) requires three matters: the claimant must have taken steps; the steps must relate to the claimant’s assets; and the steps must be such as would make enforcement of a costs order difficult. The provision is concerned with past actions, not steps which might be taken in future. The court applied the approach in Chandler v Brown and Al Jaber v Al Ibrahim.
3. Effect of earlier steps. There is no fixed temporal limitation. However, a step ceases to satisfy the rule if its causal effect has been spent. Where bankruptcy or liquidation means that the asset would have passed into an insolvent estate even if the step had not been taken, the step will not ordinarily make enforcement of a later costs order more difficult. The earlier trusts, assignment of life policies and alleged sale of horses therefore did not satisfy the gateway.
4. Evidence and inference. The settlement of shares in Loxley & Brake Ltd into the family trust was a qualifying step, but the evidence showed that the shares had little or no present value. The correspondence seeking information about assets was not itself a qualifying step. Following Wisniewski v Central Manchester Health Authority, an adverse inference requires a case to answer; following Manzi v King’s College Hospital NHS Foundation Trust, drawing an inference remains discretionary. No adverse inference was justified.
5. Discretion and merits. Even if the gateway had been satisfied, justice did not require security. The effect of the only qualifying step was minimal. The interlocutory judgment granting interim relief in the documents dispute did not establish a high probability of success and was not a proper basis for evaluating the merits under Porzelack KG v Porzelack (UK) Ltd.
6. Costs. The further witness statement did not change the outcome. The defendants had no adequate basis for an order in their favour, and the claimants’ conduct was not sufficiently outside the norm to justify indemnity costs. The ordinary rule therefore applied.