STEENBOK NEWCO 10 SARL v FORMAL HOLDINGS LIMITED

On an application to increase security for costs, the court must determine an amount that is just and fair in all the circumstances. The assessment is broad-brush, but the court may examine whether the assumptions underlying the existing order remain reasonable. Security should ordinarily be calculated by reference to costs likely to be recovered on the standard basis. A realistic prospect of indemnity costs does not, without more, justify using an indemnity-costs percentage. Increased solicitors’ rates do not automatically constitute a material change or justify an uplift. The court may consider incurred costs, and the balance of prejudice will normally favour avoiding under-security. The court may allow increases caused by materially expanded pleadings, evidence and trial preparation, while making allowances for settlement, a shorter trial and unreasonable or disproportionate work.

The claimants brought proceedings in which the defendants had obtained security for costs under an order made by Robin Knowles J on 30 June 2022. That order permitted further security where matters were not included in the original schedule, its assumptions proved incorrect, or there was a material change in the litigation.

The defendants sought a further £1,743,883.59. The dispute concerned the proper costs basis, the effect of increased hourly rates, incurred costs, prejudice, and the extent to which developments in pleadings, witness evidence, expert evidence and the estimated trial length justified additional security.

1. Applicable approach. Under CPR Part 25.13(1)(a), the court had to decide what amount of security was just, having regard to all the circumstances. The proper exercise was broad-brush rather than a detailed assessment, but it remained necessary to examine why costs had increased and whether the assumptions underlying the earlier order were reasonable.
2. Basis of assessment. The appropriate starting point was costs likely to be recovered on the standard basis. A realistic prospect of indemnity costs did not justify treating 75 per cent as the starting point. The court therefore accepted a 60 per cent broad-brush percentage.
3. Rates and prejudice. Increased rates charged by the defendants’ solicitors did not, without evidence of a general change in rates or a material change within the order, justify further security. The court could take incurred costs into account. The balance of prejudice normally favoured the defendants because under-security would cause greater prejudice than requiring excessive security.
4. Quantum. Material expansion of the pleadings, requests for information, witness evidence, expert work and trial estimate justified increases. The court allowed £351,049.62 for tranche 1, £375,000 for tranche 2 and £700,000 for tranche 3. It rejected further deductions based on increased rates and general proportionality arguments, while allowing for settlement and the possibility of a shorter trial.
5. Disposition. The defendants succeeded almost across the board. The court awarded £65,000 costs of the application. The final form of order remained to be settled, and the judge required further oral argument before making a final ruling on whether the security order should remain open to later variation.