The Commercial Court has recently confirmed that a claimant can, in the right circumstances, be granted security for costs against a defendant - even where the defendant is not bringing a counter-claim.
Security for costs - The rules
Security for costs can generally be ordered against a claimant in the following circumstances:
- where a claimant company is impecunious;
- where a claimant company or individual is resident outside England and Wales;
- where a claimant is a nominal' clamant (i.e. suing on behalf of another);
- where a claimant or defendant has taken steps in relation to its assets that would make it difficult to enforce an order for costs.
However, in the recent case of Komcept Solutions Limited v Prestige Group (UK) Limited, the Commercial Court ordered a defendant to pay security for costs under its case management powers to ensure compliance with the overriding objective.
The claim was issued at the beginning of 2017 and listed for trial towards the end of 2018. At the date of the application for security for costs, the claimant had complied with all of the directions prior to trial. The defendant, however, had defaulted on numerous procedural rules and orders such that at the time of the hearing, it had:
- no costs budget having defaulted in supply the same;
- no entitlement to inspect the claimant's disclosure; and
- no evidence filed for trial and no entitlement to call witnesses to give oral evidence.
Pursuant to civil procedure rule (CPR) 3.1(5), the court has a general jurisdiction to order a party to pay money into court where it has failed to comply with a rule, practice direction or pre-action protocol. Further, the court is entitled to make a conditional order as part of its general case management rules - CPR 3.1(2)(m) - which apply in relation to a failure to comply with orders of the court.
In this case, the claimant successfully argued that the defendant had regularly flouted court procedures and had failed to exhibit a will to litigate a genuine defence as economically and expeditiously as reasonably possible in accordance with the overriding objective.
On these facts, the court concluded that it was appropriate to exercise its case management powers to ensure that the overriding objective was honoured and to minimise the risk to the claimant caused by the defendant's conduct. It ordered the defendant to pay £100,000 into court within 28 days, failing which, it would be debarred from defending the claim and its defence would be struck out. The court also ordered that any application to adduce witness evidence be made within 28 days and that the defendant pay the claimant's costs of the application.
Litigation can be a costly and time-consuming endeavour, especially where a defendant drags its feet. Parties to litigation should bear in mind that the courts can, where appropriate, enforce compliance with the overriding objective by ordering payments into court.
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.