Gowrie Holdings Limited v Keycircle Limited

For security for costs, the threshold in CPR 25.13(2) is satisfied where there is reason to believe that the claimant may be unable to pay an adverse costs order. The defendant need not prove inability to pay on the balance of probabilities. A material change of circumstances may justify reconsideration of an earlier security order, but the threshold and the discretionary question remain distinct. In deciding whether security remains just under CPR 25.13(1), the court must consider all the circumstances, including post-trial findings of wrongdoing, uncertainty concerning the claimant’s assets, possible competing claims and prejudice. A fiduciary’s consent to a transaction is vitiated by failure to disclose all relevant facts; the court need not speculate about the reaction that full disclosure would have produced.

The judgment addressed consequential matters following a trial judgment dated 26 June 2023 in litigation involving Krishna Holdco Limited, Gowrie Holdings Limited, Keycircle Limited and related parties. The court considered Krishna’s application for the return of more than £6.3 million paid into court as security for costs, following findings of wrongdoing and the rescission of certain agreements.

The judgment also clarified the reasoning supporting the trial court’s assessment of expert evidence, refused permission to appeal on grounds concerning fiduciary consent, alleged fraudulent misrepresentation, funding and accruals, and confirmed the refusal to release the security. The central issues were whether circumstances had materially changed, whether the CPR 25.13(2) threshold remained satisfied, and whether it remained just to retain the security.

1. Security for costs. Krishna’s application to release the security was refused. There had been a material change of circumstances sufficient to justify reconsideration of the earlier order, but not a change in the threshold question under CPR 25.13(2).
2. Under CPR 25.13(2), the phrase reason to believe does not require proof on the balance of probabilities that the claimant will be unable to pay an adverse costs order. The value of Krishna’s B Shareholding remained uncertain, including because of the Equalisation Amount and possible competing claims. The threshold therefore remained satisfied.
3. The discretionary question under CPR 25.13(1) required consideration of all the circumstances. The post-trial findings of wrongdoing and dishonesty were relevant. So too were the uncertainty surrounding the Rewind Suite, the potential interests of former creditors, the possibility that the shareholding or funds in court would be contested, and the absence of evidence that retaining security would materially prejudice Krishna. The security should therefore remain in place, at least for the time being.
4. Fiduciary consent. A fiduciary seeking assent to conduct involving a serious breach must make full disclosure of all relevant facts. The obligation is one of positive disclosure. Failure to disclose a fraudulent misrepresentation about the source of funding was sufficient to vitiate ongoing consent to the SYRI arrangements; it was unnecessary to ask what the consenting party would have done had proper disclosure been made. There was no procedural unfairness because the relevant allegation had been fully pleaded, tested and proved.
5. Permission to appeal. Permission was refused on the grounds concerning the SYRI arrangements, the £4.5 million funding finding and the Gowrie accruals. The proposed challenges either mischaracterised the legal basis of the trial findings or sought to reopen factual assessments for which there was no real prospect of appellate interference.

The judgment followed the court’s trial judgment dated 26 June 2023. It refused the application to release security for costs and refused permission to appeal on the specified grounds.