Musst Holdings Limited v Astra Asset Management UK Limited & Anor

In determining security for costs, the court has a broad discretion to fix the sum that is just in all the circumstances. An approved costs budget is a strong guide to the likely recoverable costs, but it is not conclusive. The court must consider whether the defendant would be under-secured, the claimant would be over-secured, and the relative prejudice caused by either outcome. Relevant matters include the claimant’s apparent ability to satisfy a costs order, other potential adverse costs liabilities, any immediate need for funds, the uncertainty inherent in costs budgeting and the possibility of further uninsured costs. Security may therefore be fixed below the approved budget where the overall circumstances justify that result.

The claimant, a BVI company, brought proceedings against the defendants and accepted that the gateway for security for costs was established. The claimant relied on litigation insurance as providing adequate protection. In an earlier judgment, the court rejected most objections to the policy. The remaining issues were the amount of security required and whether £180,000 held in court should be released.

The defendants sought security equal to their approved and incurred costs, totalling approximately £1.42 million. The claimant relied on the policy’s increased indemnity limit of £1.245 million and sought payment out of the £180,000. The central issue was what additional security, if any, was just in the circumstances.

1. Application determined. The court ordered that £75,000 remain in court as additional security for costs, with the balance of the £180,000 paid out to the claimant.
2. The amount of security is discretionary. The court must fix the sum it considers just, having regard to all the circumstances. Where a costs management order has been made, the defendant’s approved or agreed costs budget is a strong guide to the likely costs order after trial and should be used as the relevant reference point: Sarpd Oil International Ltd v Addax Energy SA [2016] EWCA Civ 120.
3. The approved budget is not determinative. The court must avoid over-securing the defendant while protecting it against the real risk that an insufficiently secured costs order could not be recovered. The balance of prejudice usually favours the applicant because an under-secured defendant may be unable to recover the unsecured balance, whereas excessive security may principally burden the claimant with providing the security: Pisante v Logothetis [2020] EWHC 3332 (Comm).
4. The relevant circumstances included the claimant’s lack of evidenced assets, the accepted risk of insolvency, possible adverse costs orders in separate litigation, the absence of evidence of an immediate need for the funds, the imprecision of costs budgeting and uncertainty over the percentage of costs recoverable on detailed assessment. The court also took into account the possibility of further costs falling outside the policy if the insurer terminated it and a further application became necessary.
5. The defendants’ formal objection that the claimant had made no separate application for payment out was weak, given the repeated consideration of the issue and the original order providing for the money to be held only up to the costs and case management conference. The parties were directed to prepare a minute of order.

The application followed an earlier reserved judgment concerning the adequacy of the claimant’s litigation insurance policy, reported at [2024] EWHC 2310 (Ch). That judgment was not appealed. The present judgment determined the outstanding amount of security and the treatment of funds held in court.