Atlantic Ways Holding SA v Freetown Terminal Holding Limited

When managing costs, the court sets a reasonable and proportionate budget. It does not conduct a detailed assessment in advance or approve charging rates, hours or working methods. Proportionality is assessed principally by reference to the value and complexity of the claim, and proportionality prevails over reasonableness where the two conflict. A budget need not include every cost intended to be incurred, and courts should avoid treating comparison with the opposing party’s budget as determinative.

For security for costs, the court considers whether it is just to make an order after the relevant condition is satisfied. The merits should generally be considered only where there is a high degree of probability of success or failure. Security may reflect realistic doubts about whether estimated costs will be incurred, but the court may award the full budget where costs are likely to arise.

The claimant brought proceedings concerning fees allegedly due under a 2013 business consultancy agreement, valued at approximately US$2.5 million plus interest, together with a declaration that the agreement remained in existence. The defendant disputed liability and applied for security for costs under rule 25.13(2)(c) of the Civil Procedure Rules 1998.

The court was required to fix the defendant’s costs budget and determine whether security should be ordered, and if so in what amount. The claimant accepted that the relevant condition for security was satisfied. The central issues were the reasonableness and proportionality of the budget, the relevance of the merits and litigation conduct, and the appropriate percentage of incurred and estimated costs to secure.

1. Costs budgeting. The court fixed the defendant’s budget after considering whether each phase fell within a reasonable and proportionate range. Costs budgeting was not a detailed assessment in advance. The court did not approve charging rates, hours or methodology, although excessive rates could affect the assessment of reasonableness and proportionality.
2. Proportionality. Under rule 44.3(5) of the Civil Procedure Rules 1998, the value and complexity of the claim were generally the most important considerations. Costs at the outer end of a reasonable range could remain proportionate. Under rule 44.3(2), proportionality prevailed over reasonableness. The court also cautioned against treating the opposing budget as determinative, since budgets might be prepared on different assumptions and an underestimate did not necessarily make a budget inappropriate.
3. Security for costs. The claimant accepted the condition in rule 25.13(2)(c). The remaining question under rule 25.13(1) was whether, having regard to all the circumstances, it was just to order security. The court would not investigate the merits unless a high degree of probability of success or failure could clearly be shown. That threshold was not met. Litigation tactics, the size of the budget and the defendant’s approach to the application did not undermine the case for security.
4. Quantum and costs. Security was ordered. A 65 per cent allowance was appropriate for incurred costs where no particular objections had been raised. For estimated costs, 90 per cent of the budget was ordered for disclosure, witness statements and experts because of some doubt about whether all the work would be required. The remaining phases attracted 100 per cent because the costs were likely to be incurred if the trial proceeded. The claimant was ordered to pay the defendant’s costs of the application, subject to assessment, with a payment on account.

First-instance decision. No earlier appellate decision is stated in the judgment.