Asertis Ltd v Lewis Barry Bloch

Where a claimant company’s financial position gives reason to believe that it will be unable to pay an adverse costs order, the court has jurisdiction to require security, but the order remains discretionary and must be just in all the circumstances.

An after-the-event insurance policy may provide some security, but will rarely equal a payment into court or bank guarantee. The court must assess realistically whether the policy gives real protection, including its limits, exclusions, termination rights, avoidance provisions, conditions, lack of direct enforceability and coverage of costs already incurred. A real risk that the policy will not respond in full may justify disregarding it when fixing security.

Asertis Ltd, a litigation funder and claims acquisition company, brought claims assigned by the liquidators of Genesis Capital (UK) Ltd against its former director, Lewis Barry Bloch. The claims concerned the transfer of £2,754,170.60 from Genesis’s bank account.

Mr Bloch applied for security for costs under CPR 25.12 and CPR 25.13, relying on Asertis’s loss-making accounts. Asertis relied on a revolving credit facility and an after-the-event insurance policy supplemented by an anti-avoidance endorsement. The issues were whether there was reason to believe Asertis could not pay an adverse costs order, whether the policy afforded sufficient protection, and the appropriate amount and form of security.

1. Jurisdiction. Under CPR 25.12 and CPR 25.13, the court need not be satisfied on the balance of probabilities that a claimant will be unable to pay costs. It is sufficient that there is reason to believe that it will be unable to do so. If that condition is met, the court retains a discretion which must be exercised having regard to all the circumstances and to whether it is just to make an order.
2. Financial position. Asertis’s limited accounts showed continuing losses, a worsening balance sheet and assets substantially dependent on uncertain litigation recoveries. The unexplained revolving credit facility did not demonstrate that funds would be available for an adverse costs order. There was therefore reason to believe that Asertis might be unable to meet such an order.
3. ATE insurance. An ATE policy can in principle provide some or all of the required security, but the court must take a pragmatic view of whether it provides real security. Relevant matters included the policy limit, coverage of incurred and interim costs, avoidance and termination provisions, exclusions, conditions within the claimant’s control, absence of direct enforceability by the defendant, and the risk that the insurer might legitimately refuse payment. The cumulative effect of these features may diminish or extinguish the policy’s value.
4. The policy, even as modified by the anti-avoidance endorsement, left a real risk that Mr Bloch’s costs would not be paid in full. It was capped at £250,000, did not cover the preceding nine months’ costs, contained broad termination and exclusion provisions, and gave Mr Bloch no direct means of enforcement or policing compliance. It was therefore given no value in reducing the security.
5. The claim was bona fide, had a real prospect of success and would not be stifled by security. The order was staged: 60% of the relevant incurred costs was payable into court, and 60% of estimated costs incurred by the next costs management order together with 70% of approved or agreed future costs was to be paid within 28 days of that order. The security application costs were consequential upon the judgment.