Wojakovski v Matyas & Ors

This is an application by the sixth and seventh respondents for security for costs in respect of an unfair prejudice petition under s.994 of the Companies Act 2006. The court considered applications under CPR 25.12 relying on CPR 25.13(2)(c) and (g).

The court held that CPR 25.13(2)(c) did not apply because that limb is concerned with claimants that are incorporated bodies and the petitioner is an individual. The court found that the requirements of CPR 25.13(2)(g) were met on the facts: the petitioner had structured assets through offshore entities and trusts in a manner that was more likely than not to make enforcement of a costs order more difficult.

The judge rejected the petitioner’s contention that his known United Kingdom assets provided a sufficient answer, noting risks that those assets represented traceable proceeds of the Tonstate group and that the petitioner’s shares in group companies were exposed to a rescission claim and may lack value. Applying the court's discretion under CPR 25.13(1)(a), the judge considered it just to order security for costs limited to the costs already incurred and ordered security of 70% of £193,207 (namely £135,244.90), subject to further submissions on quantum and form of security.

Background and parties:

• The application was made by the sixth respondent (Mrs Rachel Robertson) and seventh respondent (Betchworth Consulting Limited) for security for costs in relation to an unfair prejudice petition brought by Edward Wojakovski under s.994 Companies Act 2006.
• The petition and related actions involve disputes concerning alleged improper extractions from companies in the Tonstate group and a claim by Mr and Mrs Matyas to recover shares. The trial originally listed for 2 June 2020 would determine certain principal issues but the claims against the applicants would not be heard at that trial; therefore the security application related only to costs already incurred (approximately £193,207).

Nature of relief sought:

• The applicants sought an order for security for costs under CPR 25.12 on the grounds set out in CPR 25.13(2)(c) and CPR 25.13(2)(g), and the court considered CPR 25.13(1)(a) (whether it would be just to make such an order).

Issues framed and decision-making approach:

• Whether CPR 25.13(2)(c) applied where the claimant is an individual.
• Whether steps taken by the claimant in relation to his assets satisfied CPR 25.13(2)(g) by making enforcement of a costs order difficult.
• Whether, having regard to all the circumstances and relevant legal principles (as summarised in Ackerman v Ackerman and other authorities), it would be just to order security for costs and in what amount.

Reasoning and subsidiary findings:

• CPR 25.13(2)(c) was inapplicable because it addresses claimants that are companies. The court relied on authority that impecuniosity of an individual is not a standalone ground for security for costs.
• On CPR 25.13(2)(g) the court applied the principles set out in Ackerman v Ackerman and related authorities, focusing on objective effect of steps taken in relation to assets rather than motive. The applicants had adduced evidence that the petitioner held properties and artwork through offshore companies and trusts and had not clarified whether he was the beneficial owner. The petitioner’s failure to provide a clear answer and the absence of evidence to the contrary led the court to conclude it was more likely than not that the assets had been structured so as to make enforcement of a costs award more difficult.
• The court considered the petitioner’s UK assets: there was a real risk they were traceable proceeds of the Tonstate group and therefore beneficially belonged to claimants in the related Main Action; the petitioner’s shares in Tonstate Group Limited were the subject of a rescission claim and his other group shares may be of limited value in light of the judge's earlier judgment ([2019] EWHC 857 (Ch)).
• Because the petitioner had not discharged the burden of showing he could raise security (including from third parties), and taking into account the principle that security should not stifle a genuine claim, the judge exercised his discretion to order security for the costs already incurred. He discounted the claimed costs by 30% to reflect uncertainty on detailed assessment and proposed security of 70% of £193,207 = £135,244.90, while allowing further submissions on quantum and form of security.

Wider context:

• The judgment applies established principles on security for costs, including scrutiny of asset structuring and risk of stifling legitimate claims, and recognises the court's broad discretion to decide whether an order is just in all the circumstances.

The application for security for costs was allowed in part. The court held CPR 25.13(2)(c) did not apply to an individual claimant, but that CPR 25.13(2)(g) was satisfied because the claimant had structured assets through offshore entities and trusts so as to make enforcement of a costs order more difficult. The court exercised its discretion under CPR 25.13(1)(a) and ordered security for the costs already incurred, set at 70% of £193,207 (namely £135,244.90), subject to further submissions as to quantum, form and timing of security.