Gary Jones v Persons Unknown & Ors

For security for costs, the court determines the substance of an application rather than its procedural form. A non-party’s application under Civil Procedure Rules 1998 rule 40.9 to set aside an order is ordinarily an application within existing proceedings, although it may face substantial merits and procedural hurdles. Such an application does not thereby become an originating claim or proceeding for security-for-costs purposes. The court should determine the merits of the set-aside application at its listed hearing, rather than pre-empt them on an earlier security application.

The claimant had obtained summary judgment concerning Bitcoin against several defendants. Kyrrex, a non-party whose customer deposits were held in a wallet controlled by Huobi, applied under rule 40.9 to set aside the summary judgment and to defend the claim.

The claimant applied for security for costs from Kyrrex under rules 25.26 and 25.27, arguing that Kyrrex was resident outside the jurisdiction, might be unable to pay an adverse costs order, and had failed to give its address. The central issue was whether Kyrrex was to be treated as a claimant or defendant for the purposes of the security application.

1. Substance rather than form. The availability of security for costs depends on the substance of the relevant claim or application. The court must consider the nature of the proceeding rather than its formal description. This approach was applied from GFN SA v Bancredit Cayman Ltd (in official liquidation) [2010] Bus LR 587 and In re Dalnyaya Step llc [2017] 1 WLR 4246.
2. Rule 40.9 applications. Rule 40.9 of the Civil Procedure Rules 1998 concerns the circumstances in which a non-party directly affected by a judgment or order may apply to set it aside or vary it. The directly affected requirement is a gateway establishing locus standi. It is sufficient that the judgment or order is prima facie capable of materially and adversely affecting a legal interest; the applicant need not establish the substantive merits at that stage. The application must nevertheless overcome a further hurdle before the order is set aside.
3. Application in existing proceedings. Kyrrex’s application, as advanced, relied on rule 40.9 and contemplated Kyrrex becoming involved in the existing proceedings. Although the application might face substantial issues, including delay and responsibility for the failure to notify Kyrrex, those matters belonged to the forthcoming set-aside hearing. The application was therefore properly characterised as an interlocutory application in existing proceedings, not an originating proceeding.
4. Disposition. Kyrrex was not a defendant for the purposes of the security-for-costs application. The conditions in rule 25.27 therefore could not provide a basis for security. The Security for Costs Application was dismissed.