Kew Holdings Ltd v Donald Insall Associates Ltd

Under CPR 3.1(3), the court may make continued participation in proceedings conditional on payment of security and may specify strike-out as the consequence of non-compliance.

The condition must be clear, capable of compliance and must not stifle a genuine claim. The party alleging stifling bears the burden of showing, on the balance of probabilities, that it cannot comply or raise the necessary funds. For a corporate party, the court assesses the company’s ability to raise funds while respecting the shareholder’s separate legal personality. A claimant must also have a real opportunity to obtain the money. Persistent breaches of judgment debts, security and costs orders, combined with inadequate alternatives, may justify an unless order striking out the claim.

The defendant applied for an unless order requiring the claimant to pay £600,000 into court as security for costs, failing which the claim would be struck out and judgment entered for the defendant.

The claimant had not paid an earlier adjudication judgment debt, previously ordered security or costs. It relied on efforts to obtain loans, security over property, and an anticipated after-the-event insurance policy and bond. It also proposed granting a second charge over property.

The central issues were whether the claimant had been given a real opportunity to raise the required funds, whether the proposed alternatives provided adequate protection, and whether strike-out was an appropriate consequence of continued non-compliance.

1. The defendant’s application was granted. Unless the claimant paid £600,000 into court by 4 pm on 30 November 2020 as security for the defendant’s costs, the claim would be struck out and judgment entered for the defendant without further notice.

2. CPR 3.1(3) authorised the court to make an order subject to conditions, including payment of money into court, and to specify the consequence of failure to comply. The condition had to be clear, precise and capable of compliance.

3. The court applied the principles restated in Goldtrail Travel v Aydin [2017] UKSC 57. A financial condition should not stifle participation in proceedings. The claimant had to prove inability to comply, including inability to raise funds from willing sources. In the case of a company, the question was whether the company could raise the money, not simply whether its shareholder could do so. The shareholder’s separate legal personality remained important.

4. The court also applied the guidance in Radu v Houston [2006] EWCA Civ 1575: security should leave the claimant with a genuine choice whether to provide security and continue or withdraw, and a substantial sum should not be made subject to an unless sanction without a real opportunity to raise it.

5. The claimant had had years to satisfy the judgment debt and months to comply with the security and costs orders. Its breaches were significant. The proposed second charge was not a realistic substitute for payment into court because enforcement and sale of the unique property could take substantial time. The existing stay also did not adequately protect the defendant, which remained exposed to the professional negligence claims and the need to retain legal representatives.

6. The defendant was awarded the costs of the application on the indemnity basis, summarily assessed at £11,469.15.

The judgment refers to earlier judgments in the same proceedings dated 5 February 2019 and 15 July 2020. No appeal or appellate decision is stated.