Sanita Limited v Rare Art (London) Ltd

An appellate court should interfere with a discretionary order for security for costs only where the first-instance judge exceeded the permissible ambit of discretion, took account of an immaterial matter, omitted a material matter, or erred in principle. Delay is a factor, not an inflexible bar. The claimant must have a genuine and reasonably generous opportunity to provide security.

A freezing order ordinarily requires a good arguable case, a real risk of dissipation causing a judgment to go unsatisfied, and a just and convenient basis for relief. The jurisdiction may be founded on an existing costs order. It may also arise where an unsatisfied security-for-costs order is effectively capable of converting into a costs judgment following an imminent strike-out.

Santina Limited brought a claim for rescission and repayment of the purchase price of silver-gilt soup tureens acquired from Rare Art (London) Ltd. Deputy Master Glover ordered Santina to provide security for costs and ordered a stay if it failed to do so.

Santina obtained permission to appeal that order. Meanwhile, Rare Art obtained an ex parte worldwide freezing order from Edwin Johnson J, relying on an unpaid costs order, the unsatisfied security-for-costs order and the prospective costs of the proceedings. The issues were whether the security-for-costs order should be set aside and whether the freezing order could properly be maintained pending the appeal and possible strike-out.

1. Appeal against security for costs. The appeal was dismissed. The order was discretionary and could be disturbed only on the principles stated in Dhillon v Asiedu. The Deputy Master had considered the alleged delay, the expedited trial timetable, the parties’ conduct, the costs already incurred and the appropriate amount of security. Mere disagreement with the weighting of those matters was insufficient.
2. There was no inflexible rule requiring an application for security to be made as soon as possible. Delay was a factor whose weight depended on the circumstances. The court should consider whether the order deprived the claimant of a proper choice between providing security and allowing the claim to be stayed and ultimately struck out. The time allowed must be assessed in light of the amount and nature of the security, with forward-looking security generally easier to justify at short notice than security for costs already incurred.
3. Freezing order. The challenge based on failure of full and frank disclosure failed. Rare Art had disclosed the relevant stays, the jurisdictional basis and the prospective strike-out and costs consequences. Failure to cite the persuasive decision in Cooke and Cooke v Venulam Property Investments Ltd was not, in the circumstances, a breach because the substance of the point had been placed before the judge.
4. The freezing-order jurisdiction under Senior Courts Act 1981, section 37, ordinarily required a good arguable case, a real risk that a judgment would go unsatisfied because of unjustified asset disposal, and a just and appropriate exercise of discretion. The applicant would ordinarily need to be a claimant or counterclaimant with an accrued cause of action, consistently with Siskina v Distos Compania Naiera SA (The Siskina) and Den Norske Bank A/S v Antonatos (The Veracruz).
5. However, Jet West Ltd v Haddican established that a money judgment or costs order could found the jurisdiction even where the precise sum remained to be assessed. In the present case the unpaid security-for-costs order was effectively capable of converting into a costs judgment after the stay was lifted and the claim struck out. It was therefore sufficient to engage the jurisdiction. The freezing order was substantially continued.
6. The stay imposed by Zacaroli J was lifted. Santina was given until 4.00 pm on 21 April 2023 to provide the ordered security and discharge outstanding costs orders. If it failed, the claim would be automatically struck out and Rare Art would be entitled to its costs, subject to detailed assessment if not agreed. The freezing order continued until judgment or further order and covered use of the tureens to raise money.

• High Court (Business List): the appeal against Deputy Master Glover’s security-for-costs order was dismissed. The stay was lifted, subject to a short further period for compliance, and the freezing order made by Edwin Johnson J was substantially continued.