EVR Consulting Limited v Nathan Osbaldstone

For security for costs against a company, the applicant must establish a reason to believe that the company will be unable to pay an adverse costs order. Mere doubt, concern, or proof that the company cannot meet a future liability from its present assets is insufficient. The burden remains on the applicant. A company’s detailed, logical and unchallenged explanation of how it expects to fund a future liability may prevent that threshold being met, even if the explanation contains assumptions and optimistic projections. Deliberate refusal or inadequate disclosure of financial information may support the required belief, but a case in which the company has provided a detailed explanation is materially different. The applications were dismissed because the threshold condition was not established.

EVR Consulting Limited brought claims against Nathan Osbaldstone and Tel Group Limited concerning alleged misuse of confidential business information. The defendants each applied for security for costs under CPR rule 25.27(b)(ii).

The claimant relied on filed accounts, current solvency, trading projections and a financial forecast explaining how it expected to accumulate sufficient cash to meet any adverse costs order. The defendants challenged the assumptions and reliability of that evidence. No witness was cross-examined. The central issue was whether there was reason to believe that the claimant would be unable to pay the defendants’ costs if ordered to do so.

1. Applications dismissed. The defendants had not established the threshold condition in CPR rule 25.27(b)(ii).
2. The burden was on the defendants to show a reason to believe that the claimant would be unable to pay the defendants’ costs. The test required more than mere doubt or concern about the claimant’s future ability to pay. It was insufficient to show only that the claimant lacked enough present assets to meet a future liability. There had to be reason to believe that a future deficiency would exist.
3. The claimant had provided a detailed explanation, supported by a financial forecast, of how its trading activities and expected projects could generate sufficient cash. The evidence contained assumptions, but those assumptions were identified and explained. The claimant was solvent at present.
4. Because the claimant’s evidence had not been challenged in cross-examination, the court could not disbelieve it unless it was manifestly incredible in light of all the circumstances. The evidence was not manifestly incredible. The defendants’ evidence raised, at most, a doubt about whether the claimant would have sufficient resources, which did not satisfy the threshold.
5. The principle that deliberate reticence or failure to provide relevant financial information may justify the required belief did not assist the defendants. The claimant had not refused to explain how it could meet a future costs liability; it had provided a detailed explanation which the defendants sought to undermine.
6. As the threshold was not satisfied, it was unnecessary to exercise the court’s discretion to order security in the circumstances of the case.