The New Lottery Company Limited & Anor v The Gambling Commission

Security for costs is governed by the specific regime in CPR Part 25. An interested party joined to proceedings in that capacity cannot obtain security under the general case-management power in CPR 3.1(2)(p) where CPR 25 deliberately limits the application to defendants. Any expansion of the regime is for the Rules Committee or Parliament.

For the impecuniosity gateway, the court assesses whether there is reason to believe that the claimant will be unable to pay an adverse costs order. The claimant’s ability to call upon readily realisable assets held by a wholly owned subsidiary may be relevant. Formal documentation is not essential where the evidence establishes a reliable funding arrangement and a real ability to provide the funds when required.

The claimants challenged the Gambling Commission’s procurement and subsequent modifications concerning the Fourth National Lottery Licence. The Commission and the interested parties sought security for costs under CPR Part 25 and, alternatively, the general case-management jurisdiction.

The interested parties had been granted extensive rights to participate in the trial. The claimants argued that the interested parties lacked standing to seek security and that neither claimant satisfied the impecuniosity condition because the corporate group could provide the necessary funds through a wholly owned subsidiary.

The court therefore considered whether an interested party could obtain security for costs and whether the claimants’ access to the subsidiary’s liquid assets defeated the statutory and procedural threshold.

1. Interested-party application. CPR 25.26 applies expressly to a defendant. An interested party is not a person against whom a claim is made and cannot rely on that rule.
2. The court has an inherent jurisdiction concerning security for costs, but its exercise is constrained by the settled practice embodied in the procedural rules. CPR 3.1(2)(p), which operates subject to the Rules providing otherwise, cannot be used to circumvent the deliberate limitation in CPR 25.26. The cases concerning security in unusual appeal-procedure circumstances addressed a genuine procedural lacuna and did not support extending the beneficiaries of Part 25.
3. Any expansion of the regime to permit applications by interested parties would be a matter for the Rules Committee or Parliament. The interested parties’ application therefore failed for want of jurisdiction.
4. Impecuniosity. The gateway in CPR 25.27(b)(ii) is a question of fact, not discretion. The defendant bears the burden, but need only establish reason to believe that the claimant will be unable to pay; proof on the balance of probabilities is unnecessary. The court considers the claimant’s net and reasonably realisable resources, including what it may have available when costs fall due.
5. A claimant’s financial position is not necessarily assessed in isolation from its corporate group. On the evidence, the wholly owned subsidiary performed a treasury function, held liquid assets greatly exceeding any possible costs order, routinely transferred funds within the group, and could realise assets within days. The directors’ assurances and the established funding arrangements provided sufficient evidence that the claimants would be put in funds if required.
6. The absence of a formal inter-company agreement was not fatal. Speculation that directors might refuse funding or that the claimants might be liquidated did not establish the required belief that they would be unable to pay.
7. Neither the Commission nor the interested parties established the threshold condition. Both applications were rejected. The proposed undertakings were unnecessary because the threshold condition was not met.