Lloyds Developments Limited v Accor Hotel Services UK Limited

When ordering security for costs, the court must determine the amount, form and timing that are just in all the circumstances. General percentages may provide broad guidance, but they do not replace a case-specific assessment. An approved or agreed costs budget is a strong reference point where costs management has occurred. Otherwise, the court may assess the likely recoverable costs robustly and broadly, allowing for proportionality, uncertainty, possible settlement and later detailed assessment. Security may be ordered in full but paid by instalments as the proceedings progress. Allegations of fraud do not by themselves justify assuming that indemnity costs will be awarded.

The claimant, a Guernsey special purpose vehicle, brought a £43.7 million claim for repudiatory breach of agreements relating to the development and operation of a Glasgow hotel. The defendant counterclaimed approximately £3 million and applied under the Civil Procedure Rules 1998 for £1.5 million security for costs, payable into court. The claimant accepted that security should be ordered in principle but proposed £800,000, payable into its solicitors’ client account. The issues were the amount, mechanism and timing of the security.

1. The application for security for costs was granted. The conditions in CPR 25.13(2)(a) and (c) were satisfied because the claimant was resident in Guernsey, outside the relevant Hague Convention arrangements, and there was reason to believe that it might be unable to pay the defendant’s costs. It was also common ground that security should be ordered.

2. The amount had to be determined having regard to all the circumstances. Although several authorities identified a general range of 60 to 70 per cent of accepted estimated costs, that was not a hard and fast rule. Statistics did not assist the court. The assessment remained case-specific.

3. The defendant’s estimated costs were approximately £2.02 million after excluding contingent items. Applying a broad-brush costs assessment, the court considered that the pleadings and disclosure phases were broadly reasonable, but that the witness, expert, trial preparation and trial phases were overstated. An overall figure of £1.5 million was therefore appropriate.

4. The court could not assume or speculate that indemnity costs would be awarded merely because allegations of fraud had been made. The possibility of an indemnity costs order was not used to increase the security.

5. Payment into the claimant’s solicitors’ client account was rejected because there was insufficient evidence concerning ring-fencing and the mechanics for dealing with the money. Security was ordered by payment into court. The £1.5 million was to be paid in three tranches: £300,000 within 21 days, £600,000 by 7 October 2022, and £600,000 six weeks before trial, with the precise final date to be fixed at the case management conference.