LIBYAN INVESTMENT AUTHORITY & Ors v ROGER KING & Ors

An order for security for costs requires satisfaction of a threshold condition and a separate assessment of whether the order is just in all the circumstances. The relevant question under CPR 25.13(2)(c) is whether there is reason to believe that a company claimant will be unable to pay costs when payment becomes due. Illiquid assets may be insufficient where a substantial payment on account is likely to fall due within a short period. For a foreign claimant, the court may consider real risks of substantial obstacles to enforcement, including cost or delay, but the order should be tailored to that risk. Deliberate or unexplained reticence about available assets may materially support the application. Delay is relevant only where it causes prejudice or otherwise affects the justice of the order.

The defendants applied under CPR 25 for additional security for their costs of a substantial fraud claim concerning a failed hotel development. The first claimant was the Libyan sovereign wealth fund, the second claimant an English company owning a valuable but illiquid Mayfair property, and the third claimant a Guernsey company. Voluntary security of £322,500 remained available after earlier interlocutory costs had been paid.

The defendants sought approximately £1.9 million to cover costs to trial. The claimants argued that the second claimant’s property and the first claimant’s substantial reputed assets made security unnecessary, and that the application was delayed. The central issues were whether the threshold conditions were met, whether enforcement against the first claimant presented a real risk, whether the order was just, and the appropriate amount.

1. Security ordered. It was just to order the claimants to provide further security of £1.9 million, in addition to the security already held. Cash was to be paid into court, subject to revisiting the form of security if realistic alternative proposals could not be agreed.
2. For the second claimant, the defendants established the CPR 25.13(2)(c) threshold. The relevant test was whether there was reason to believe that the company would be unable to pay the defendants’ costs when due, rather than proof on the balance of probabilities. The likely liability involved a substantial payment on account after trial. The claimant’s principal asset was illiquid, and a sale or borrowing secured against it could not be assumed to produce funds within the relevant period without evidence.
3. The first claimant satisfied the threshold applicable to a claimant resident outside the jurisdiction and outside a state bound by the 2005 Hague Convention. Enforcement in Libya was accepted to be non-viable because of the political and military conditions. The court therefore considered the availability of assets outside Libya and the real risk of substantial obstacles to enforcement.
4. The first claimant’s general reputation and reputed wealth were insufficient. Its evidence disclosed neither particular assets nor adequate information about whether assets were frozen under the Libya sanctions regime. The limited bank statement did not establish that funds would remain available at the end of the trial. Its reticence materially increased uncertainty about payment and enforcement.
5. There was no culpable delay. The claimants had themselves indicated that an application before disclosure was premature, and the defendants sought further security after disclosure and attempted to resolve the issue voluntarily. No material prejudice was shown.
6. The amount was assessed by reference to incurred and future costs, with appropriate discounts and rounding. There was no reason to limit security to costs incurred after the application.