Consort Healthcare (Tameside) Plc v Tameside and Glossop Integrated Care NHS Foundation Trust

An application for security for costs in proceedings under Part 26A is governed by the ordinary requirements of Civil Procedure Rules 1998 rules 25.12 and 25.13. The court must consider all the circumstances, including the restructuring-plan context, but that context does not create a presumption against security or require evidence of dissipation, impropriety or a hopeless plan.

The relevant risk is the claimant company’s inability to pay costs when ordered, rather than an actuarial estimate of eventual loss after contractual set-off. Once that risk is established, security for the entirety of the relevant costs is the starting point, subject to discretionary factors such as possible stifling, funding arrangements and the mitigating effect of set-off. Security may therefore be ordered in a reduced amount where the circumstances justify it.

The claimant was proposing a restructuring plan under Part 26A of the Companies Act 2006. The defendant, a creditor opposing the plan, applied under rules 25.12 and 25.13 of the Civil Procedure Rules 1998 for security for its costs.

The claimant accepted that there was reason to believe that it would be unable to pay a costs order falling due in August 2024. It argued that the court should nevertheless refuse security because Part 26A proceedings differ from ordinary adversarial litigation, security might stifle the plan, and the defendant could ultimately set off any costs award against a larger termination payment owed by the defendant under the project agreement.

The central issue was whether security should be ordered and, if so, in what amount.

The application was granted. The claimant was required to provide security for costs equal to 50% of the amount sought, and the defendant was awarded its costs of the application.

1. Part 26A context. Proceedings seeking sanction of a restructuring plan have features distinct from ordinary litigation, including the court’s consideration of affected creditors collectively and the unusual costs position of opposing creditors. Those features are relevant circumstances under rule 25.12, but they do not require a special threshold or a presumption against security. The present plan was materially analogous to adversarial litigation because it arose from a continuing commercial dispute and sought to alter rights after the defendant had succeeded in adjudication.
2. Stifling and third-party resources. In assessing possible stifling, the court must consider resources which third parties may reasonably be expected to provide. The funds supporting the claimant had substantial assets, had already funded the plan and had not convincingly shown that further funding was unavailable. The court nevertheless had regard to the possibility that excessive security could exceed the funders’ risk-versus-reward tipping point.
3. Set-off. The relevant risk under rule 25.13(2)(c) was the risk that the claimant would be unable to pay costs when due, not an expected-loss calculation based on the possibility of eventual contractual set-off. The existence of a future set-off right did not remove that risk. Security for the entirety of the relevant costs was therefore the starting point.
4. Discretion. The likely mitigation from set-off, the prospect that costs would be lower if the plan succeeded, and the risk of stifling justified reducing the security to half the sum requested. Security was not to be refunded if the plan failed, since the risk existed when the order was made and the defendant was entitled to payment of costs when due.

First-instance decision. No appellate history was stated in the judgment.