Adam Robert Giaquinto & Ors v ITI Capital Limited

Security for costs is discretionary even where a gateway under CPR 25.13 is established. The court must decide whether security is just in all the circumstances, giving effect to the overriding objective and avoiding unjust impairment of access to the court.

A claimant relying on ATE insurance must show that the policy provides real protection. The court may require anti-avoidance provisions, a direct payment mechanism, and protection against insolvency-related difficulties. Merits should ordinarily be considered only where there is a high degree of probability of success or failure. Security may reflect incurred and estimated costs differently, and a broad-brush assessment is permissible.

The defendant sought security for costs from four corporate claimants in proceedings concerning losses arising from an unsuccessful investment strategy. The claimants alleged breaches of contract and statutory duty, negligence and misrepresentation. The defendant relied on gateways under CPR 25.13 and sought approximately £340,000 up to the exchange of expert evidence.

The gateways were not contested. The claimants resisted the application principally on delay, the existence of ATE insurance and the proposed amount of security. The issues were whether security was just in all the circumstances, whether the ATE policy provided adequate protection, and what proportion of incurred and estimated costs should be secured.

1. The application was granted in principle. The relevant gateways were satisfied and the claim was not said to be stifled. The court’s task remained to exercise the discretion under CPR 25.13(1) by asking whether an order was just in all the circumstances.

2. There had been no culpable delay. The application was issued shortly after an unsuccessful mediation and before the first case management conference. The merits were not examined because there was no evidence of a high degree of probability of success or failure, as required by Chernukhin v Danilina [2018] EWCA Civ 1802.

3. The ATE policy in its existing form was inadequate. It lacked approved anti-avoidance protection and did not provide the defendant with a sufficiently direct route to payment. The court also considered unresolved issues concerning redactions, allocation of cover and possible insolvency. A suitable endorsement, direct payment mechanism or deed of indemnity could make the policy acceptable, subject to adequate cover.

4. Security for incurred costs was assessed on a broad-brush standard-basis approach. The appropriate figure was £80,000, representing approximately 65% of the defendant’s incurred costs. Indemnity costs were not appropriate to assume at that stage because disclosure had not taken place and the case was not shown to be outside the norm.

5. Estimated costs were treated differently because the relevant budgeted figures had largely been agreed. Security of 100% of the defendant’s estimated costs, adjusted pro rata for the four corporate claimants out of nine, produced £179,200. No security was ordered at that stage for the security application, the strike-out application or the application concerning further information.

6. The total security was therefore £259,200, exclusive of VAT, payable severally by the four corporate claimants. The parties were invited to make brief further submissions on the period for obtaining acceptable ATE terms. Failing agreement, payment into court would be required. Costs of the application were reserved.

First-instance decision. No prior appellate decision is stated in the judgment.