Fortress Lending Fund Subsidiary Designated Activity Company v Edwin Coe LLP & Ors

On an application under Civil Procedure Rules 1998, rule 25.27(b)(ii), security for costs may be ordered where the evidence gives the court real reason to believe that the claimant will be unable to satisfy a substantial costs order. The court must assess the claimant’s financial position on the evidence as a whole, including the true effect of any funding structure. The discretion as to the amount of security is unfettered in principle. A costs budget is a proper influence, but there is no rule requiring security to be limited to a fixed percentage of the budget. The amount ordered must be just and reasonable in the particular case.

The claimant brought proceedings against Edwin Coe LLP and others. The defendants applied for security for costs under Civil Procedure Rules 1998, rule 25.27(b)(ii), relying on the claimant’s audited accounts and other evidence concerning its ability to meet a substantial adverse costs order.

The claimant relied on a profit-participating notes funding structure and contended that approximately US$1.9 billion was available to be drawn at its discretion. The defendants disputed that interpretation and argued that the register showed only approximately US$1.3 million of notes issued and fully paid up. The court also had to determine the appropriate amount of security, the time for compliance, and the costs of the application.

1. The application was granted. The claimant was ordered to provide security for costs of £600,000, by payment into court or another form agreed in writing by the defendants’ solicitors.

2. The claimant’s published accounts provided real reason to believe that it was, and would remain, unable to pay a substantial costs order. The evidence showed no recent management or other accounts, inadequately sourced evidence from the claimant’s solicitor, and apparently illiquid assets substantially matched by liabilities, with limited cash or cash equivalents.

3. The claimant’s reliance on the profit-participating notes structure did not answer that concern. On the more likely reading of the register, only notes with a face value of approximately US$1.3 million had been issued and fully paid up. The register did not establish an entitlement to call for approximately US$1.987 billion in cash. The explanatory table in the audited accounts supported that interpretation.

4. The discretionary considerations favoured security. There was no suggestion that ordering security would stifle the claim. The application had been made at an appropriate early stage. It had also been confirmed that at least the first defendant’s counterclaim would not be pursued if security were ordered but not provided and the claim consequently fell.

5. The court rejected any rule or practice limiting security to a relatively modest percentage, such as 60 or 65 per cent, of a costs budget. The discretion to identify the amount of security that is just and reasonable is, in principle, unfettered, although the costs budget is a proper influence. A sum of £600,000 was appropriate against a net budgeted figure of approximately £670,000.

6. The security was expected to be provided in full by 3 July 2026. The defendants could apply to strike out the claim for non-compliance, although no immediate unless order was made.

7. On summary assessment, the defendants’ costs were reduced to reflect excessive hourly rates and unreasonable and disproportionate work, while allowing the brief fee for leading counsel. Costs were summarily assessed at £49,000, payable within 21 days.