Beriwala v Woodstone Properties (Birmingham) Ltd & Anor

An application for security for costs under CPR 25.13 involves a two-stage inquiry. The applicant must first establish a threshold condition and must then show that security is just in all the circumstances. The condition concerning steps taken to put assets beyond creditors’ reach requires evidence of actual steps and resulting difficulty of enforcement; impecuniosity, an expensive lifestyle or reliance on family support is insufficient without more. The court may draw a double inference from undisclosed assets and non-disclosure, but the evidential burden remains on the applicant. Delay is a significant discretionary factor. Security will not ordinarily be ordered where a counterclaim is substantially the mirror image of the claim and has no independent vitality.

The claimant sought declaratory relief and transfer of shares concerning an Indian restaurant business. The defendants defended the claim and brought a counterclaim concerning the alleged contractual terms and ownership of the shares. The defendants applied for security for costs under CPR 25.12 and relied principally on alleged defects in the claimant’s address and on CPR 25.13(2)(g), contending that steps had been taken in relation to assets which would make enforcement difficult.

The application was made after pleadings, disclosure and most pre-trial steps had been completed. The central issues were whether either threshold condition was established and, if so, whether it was just to order security having regard to delay, the parties’ knowledge of the claimant’s financial arrangements, and the nature of the counterclaim.

1. Application dismissed. The court treated CPR 25.13 as imposing a two-stage test: the defendants had to establish a threshold condition and then satisfy the court that security was just in all the circumstances.
2. The omission of the claimant’s apartment number from the claim form was a technical breach of CPR 16. It was minor in context. The full address appeared in the particulars of claim, was provided when requested, caused no difficulty with service or conduct of the proceedings, and caused no demonstrated prejudice. It was therefore not just to order security on that ground.
3. CPR 25.13(2)(g) requires evidence that the claimant has taken steps in relation to assets and that those steps would make enforcement of a costs order difficult. The court may draw a double inference that undisclosed assets exist and have been put beyond creditors’ reach, but suspicion, vague inferences, shortcomings in financial evidence, or reliance on family money do not suffice. The evidential burden remained on the defendants.
4. The claimant had not been shown to possess undisclosed personal assets or to have taken steps to hide assets. The rule was directed at illegitimate concealment of assets, not impecuniosity as such, and was not intended to protect defendants from ordinary business risks they had knowingly undertaken.
5. Even if the threshold under CPR 25.13(2)(g) had been met, discretion would have been exercised against security. The application was substantially late, with no persuasive justification, and deprived the claimant of a meaningful opportunity to decide whether to provide security or discontinue before incurring most trial costs.
6. The counterclaim was the mirror image of the claim. Both proceedings required resolution of the same undocumented arrangements and ownership dispute. Applying the B.J. Crabtree (Insulations) Limited v GPT Communication Systems Limited principle, the counterclaim had no independent vitality and it would be undesirable to create one-sided litigation by ordering security.