Lloyds Developments Limited v Accor HotelServices UK Limited

The court determined that the Claimant, Lloyds Developments Limited, may satisfy an order for security for costs by providing an after-the-event (ATE) insurance policy containing an Anti-Avoidance Endorsement (AAE) in the form approved and appended to the judgment. The principal legal issue was whether the policy should be capable of being avoided for fraud by reference to principals or agents and, more broadly, whether express anti-avoidance wording should be included. Applying the authorities (including HIH Casualty & General Insurance Ltd v Chase Manhattan Bank [2003] UKHL 6 as cited), the court concluded that, although the insurer’s risk of avoiding for fraud might be small on strict analysis, it was appropriate to adopt the clearer drafting sought by the Defendant to eliminate doubt. The court also resolved subsidiary drafting disputes concerning the definition of the policy "Limit", the insurer’s role in approving agreements about costs, and the circumstances in which payment to a nominated Security Payee may be declined, and ordered provision of the approved ATE policy with AAE. The Claimant was ordered to pay a proportion of the Defendant’s costs of the security applications, assessed to a net sum of £38,500.

Background and procedural posture. The Defendant, Accor HotelServices UK Limited, applied for security for costs. The Claimant, Lloyds Developments Limited, sought permission to provide security by way of an ATE insurance policy rather than by payment into court. An earlier hearing was reported at [2025] EWHC 1238 (TCC). Following that hearing the Claimant was given an opportunity to provide amended policy wording; further disputes led to a second hearing on 25 July 2025 and this short written judgment of 31 July 2025, which appends the approved policy.

Nature of the application and issues framed. The dispute concerned whether security for costs should be provided and, if so, whether the form of ATE insurance proposed by Lloyds (including an Anti-Avoidance Endorsement) was acceptable. The parties focused on: (i) whether the policy could be avoided for fraud and whether that risk required express wording covering fraud by "principals or agents" or by any person; (ii) the correct drafting of the policy "Limit" and its effect once a liability to pay costs arises; (iii) the insurer’s practical role in approving agreements about costs; and (iv) the mechanism for payment to a nominated Security Payee and the effect of an opponent unreasonably declining an offered payment.

Court’s reasoning and decision. The court balanced legal analysis and commercial practicality. It accepted that HIH (2003) establishes the need for clear wording where a party seeks to exclude consequences of an agent’s fraud, and concluded that Accor’s insistence on express wording was justified and proportionate in the circumstances. The judge therefore required an Anti-Avoidance Endorsement stating that any claim under the policy would be honoured irrespective of fraud, dishonesty or related conduct by or affecting any person. On other points, the court approved the insurer-proposed definition of "Limit" (which reduces available cover by reference to liability as well as payment) as reflecting commercial reality and accepted provisions giving insurers a practical role in controlling agreement about costs. The court also accepted Accor’s proposed amendment that a Security Payee’s unreasonably and unjustifiably declining payment should be the criterion for reducing cover. The Claimant was ordered to provide security in the form of the approved ATE policy with the AAE appended. Costs of the security applications were apportioned: Accor was awarded 55% of its reasonable costs of the security issue and the court summarily assessed recoverable costs to £38,500 payable by Lloyds.

Ancillary matters. The judgment records that the Claimant had been given an earlier opportunity to provide an acceptable policy but that iterative negotiation and limited engagement by the Defendant led to two hearings; the judge took that conduct into account in assessing costs. The approved policy is appended to the judgment.

The court ordered that Lloyds be permitted to provide security for costs by way of an ATE insurance policy incorporating the Anti-Avoidance Endorsement in the form appended to the judgment. The court required express anti-avoidance wording making the policy non-voidable and non-cancellable and stating that any claim will be honoured irrespective of fraud or related improper conduct by or affecting any person. The court resolved subsidiary drafting issues (including the definition of "Limit", the insurer’s role in approving cost agreements, and the Security Payee mechanics) and ordered Lloyds to provide the approved policy and to pay Accor’s security-related costs; Accor was awarded 55% of its reasonable costs of the security applications, summarily assessed to result in a payment of £38,500 by Lloyds. The order reflects a balance between legal principle (including authorities on fraud and agency) and commercial practicality.