Summary
For security for costs under CPR rule 25.13, the applicant must show, on evidence, a justified reason to believe that the claimant company will be unable to pay a future costs order. The standard is below likelihood or probability, but mere doubt or possibility is insufficient. The court considers the totality of the evidence, including the claimant’s failure to provide evidence within its particular knowledge.
Where a claim and counterclaim substantially overlap, the usual position is that security will not be ordered because dismissal of the claim may leave the same issues to be tried on the counterclaim. That is a discretionary principle, not an inflexible rule. An undertaking to stay or dismiss the counterclaim if the claim is dismissed for failure to provide security may remove the resulting unfairness.
Factual background
The claimant brought contractual claims for approximately £3.5 million against the defendant. The defendant defended those claims, advanced a counterclaim of approximately £2 million under the same subcontract, and applied for security for costs under CPR rules 25.12 and 25.13(1)(a) and (2)(c).
The central issues were whether there was reason to believe that the claimant company would be unable to pay a future costs order, whether it was just to order security given the substantial factual overlap between the claim and counterclaim, and how the court should exercise its discretion. The defendant offered to consent to a stay or dismissal of its counterclaim if the claimant’s claim were dismissed for failure to provide security.
Held
The application was granted in principle. The defendant established a reason to believe that the claimant would be unable to pay a costs order made at the conclusion of the action, although the court did not conclude that inability was likely or probable. The claimant’s cash reserves were below the amount sought; much of its net assets consisted of the alleged debt owed by the defendant; its position was worsened by the counterclaim; and its forecasts lacked sufficient underlying detail and did not cover the whole relevant period.
The phrase “reason to believe” in CPR rule 25.13 requires more than doubt or a possibility of non-payment, but less than proof of likelihood or probability. The applicant bears the burden of proof and must provide evidence justifying the belief. The court considers the claimant’s prospective ability to meet a future costs order, normally at the anticipated date of that order, rather than merely its present position.
The court may consider the totality of the evidence, including the absence of evidence from the claimant where it is best placed to provide it and any unexplained discrepancies in its financial material. The merits of the claim should not ordinarily be assessed on a security application.
Once the jurisdictional condition is established, it will ordinarily be just to order security, although the court retains a broad discretion under the overriding objective. The claimant’s assertion that the order would be oppressive did not justify refusal because there was no evidence that the claim would be stifled or that security could not be raised.
The substantial overlap between the claim and counterclaim engaged the default principle that security will not usually be ordered where the same issues would be litigated in the counterclaim if the claim were dismissed. That principle was not invariable. The defendant’s undertaking to consent to a stay or dismissal of the counterclaim in that event neutralised the principal unfairness. The defendant was therefore entitled to security, with the form and amount to be determined after further submissions.
The court’s approach to earlier authorities
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Key cases cited
10 authorities cited.
- Anglo Irish Asset Finance Plc v Flood [2011] EWCA Civ 799
- Autoweld Systems Ltd v Kito Enterprises LLC [2010] EWCA Civ 1469
- Jirehouse Capital & Anor v Beller & Anor [2008] EWCA Civ 908
- World Challenge Expeditions Limited v Zurich Insurance Plc [2022] EWHC 1365 (Comm)
- Guest Supplies Intl Ltd v South Place Hotel Ltd & Anor [2020] EWHC 3307 (QB)
- Abbotswood Shipping Corporation v Air Pacific Ltd (Rev 1) [2019] EWHC 1641 (Comm)
- Phaestos Ltd & Anor v Ho & Ors [2012] EWHC 662 (TCC)
- Dumrul v Standard Chartered Bank [2010] EWHC 2625 (Comm)
- Nicholas G Jones v Environcom Limited & Anor [2009] EWHC 16 (Comm)
- Keary Developments Ltd v Tarmac Construction Ltd [1995] 3 All ER 534
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Cases citing this case
4 later cases · 3 positive · 1 neutral
Most senior citing decisions:
- Contis Group Limited & Anor v Swipewallet Holdings Limited & Ors [2025] EWHC 3065 (Comm) considered
- Baker Botts (UK) LLP v Carbon Holdings Limited & Anor [2025] EWHC 2225 (Comm) applied
- Ceto Shipping Corporation v Savory Shipping Inc [2023] EWHC 2995 (Comm) applied
- Bend Weld Engineering Sdn Bhd v FMC Technologies Limited [2023] EWHC 2782 (TCC)
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