Infinity Distribution Ltd v The Khan Partnership LLP

When deciding the acceptable form of security for costs, the court applies the same broad, discretionary approach as when deciding whether security should be ordered. It considers whether the proposed security gives the defendant real and adequate protection and whether the order would prevent or hinder the claimant from pursuing a proper claim. If two forms provide equal protection, the court should ordinarily choose the form least onerous to the claimant. The defendant’s potential liability for the cost of obtaining security is not relevant to that assessment. The court’s task remains confined by any earlier order defining the alternatives available.

The claimant, an insolvent company in administration, brought proceedings against its former solicitors concerning alleged breaches of fiduciary duty and unauthorised deductions from money held in the solicitors’ client account. The defendant obtained an order requiring security for its costs. The claimant offered a deed of indemnity, but the defendant argued that it was unacceptable because the associated insurance premium might increase the defendant’s own costs exposure if the claim succeeded.

A deputy master held that the deed was adequate and acceptable security. The defendant appealed, contending that the premium and its potential recoverability were relevant and that security should instead be paid into court.

1. Appeal dismissed. The deed of indemnity was adequate and acceptable security.
2. Under CPR Part 25, the court applies the same approach to the manner of giving security as to whether security should be ordered. It must have regard to all the circumstances. Where alternative forms of security provide equal protection, the form least onerous to the claimant should ordinarily be selected.
3. The relevant questions were whether the deed would give the defendant real or adequate security for its costs and whether ordering it would prevent the claimant from pursuing its claim. Both questions were answered in the defendant’s favour. The defendant’s potential liability for the premium for the deed was not relevant to those questions.
4. The court rejected the submission that the expression “adequately protected” in Rosengrens Ltd v Safe Deposit Ltd required consideration of the defendant’s potential costs exposure if unsuccessful. Nor did “all else being equal” require that factor to be considered.
5. The earlier order had confined the issue before the deputy master to whether the deed was acceptable. Payment into court was required only if the deed was unacceptable. Since the deputy master had not erred, the question of exercising the discretion afresh did not arise.
6. The judge stated that, had the wider discretionary issue arisen, he would have been minded to uphold the deputy master’s order.

• High Court (Chancery Division): The appeal from the deputy master’s order dated 22 May 2019 was dismissed. The order that the deed of indemnity constituted adequate and acceptable security was upheld.