Apollo Ventures Co Ltd v Manchanda & Ors

Security for costs requires a qualifying ground under Civil Procedure Rules 1998 Part 25 and a just exercise of discretion. A claimant alleging that security would stifle its claim must provide full, frank, clear and unequivocal evidence proving, on the balance of probabilities, that the claim could not continue. The court may consider funding available from owners, backers and associates, assessing the underlying financial realities rather than accepting assertions at face value. ATE insurance may reduce the security required only where its terms provide effective protection. An application to increase fortification should ordinarily be made at the return date; substantial delay may make a later order unjust.

Apollo Ventures Co Ltd, a Thai company, brought claims arising from alleged fraudulent loans and diversion of loan proceeds against members of the Manchanda family and two companies. The Second to Eighth Defendants applied for security for costs. The Seventh Defendant also sought increased fortification of an undertaking given in support of a worldwide freezing order.

The court considered whether the claimant had shown that security would stifle its claim, whether its Thai residence supplied an additional jurisdictional ground, whether ATE insurance should reduce the amount, and whether the fortification application was too late.

1. Security for costs granted. The claimant was resident in Thailand and there was a real possibility that it would be unable to meet an adverse costs order. The conditions in CPR Part 25 were therefore engaged.

2. The claimant had not established, on the balance of probabilities, that security would stifle the claim. Following Danilina v Chernhukin, the evidence required had to be full, frank, clear and unequivocal. The claimant had produced no satisfactory financial records, bank documents or complete explanation of how it had funded extensive litigation. The court could consider resources available from those standing behind the company and assess the underlying realities of their relationship, consistently with Goldtrail Travel Ltd v Onar Air Tasimacilik AS.

3. The alternative ground based on residence outside the jurisdiction also supported the jurisdiction to order security. The stifling objection failed for the same evidential reasons.

4. The court declined to discount the security for ATE insurance. The policy excluded substantial pre-insurance costs and raised unresolved issues concerning privity, cancellation and avoidance. It might support security up to £400,000 if suitable arrangements were made with the insurers; otherwise the claimant had to provide £500,000.

5. The application for increased fortification was refused. The Mito was distinguishable because the freezing order remained in force. Nevertheless, the application should have been made at the return date. Four years had elapsed, and requiring further security totalling £775,000 could well stifle the claim. Ordering further fortification was therefore not just.