News

The Court of Appeal rules on Security for Costs

  • March 24, 2016
  • By Hunters Law

This month in SARPD Oil International Ltd v Addax Energy SA and another [2016] EWCA Civ 120, the Court of Appeal gave a judgment clarifying the appropriate test on security for costs under CPR 25.13(2)(c). This decision is particularly important for defendants who are facing claims brought by a non-EU or EFTA company.

Under CPR 25.13(2)(c), a defendant may seek security for its legal costs for defending an action brought in an English court from a claimant company resident outside the EU and EFTA, where ‘there is reason to believe that it will be unable to pay the defendant’s costs if ordered to do so’. This security is ordinarily in the form of a bank guarantee but can also be a payment into court.

It was held that to pass this test, the court must simply have reason to believe that the claimant will not be able to pay the defendant’s costs. If the claimant is given an opportunity to show that it can pay the defendant’s cost but remains silent on this point, it cannot resist a defendant’s request under CPR 25. This is important forcompanies that may seek the tax benefits and limited transparency of an offshore registration.

The decision also touched on the issue of costs budgets. The Court of Appeal held that there is “little if any difference between the practical effect of the court’s order in relation to incurred costs and its order in relation to estimated costs”. This means that when the court makes a costs management order approving a costs budget, it not only approves the estimated costs, but can also rule on the incurred costs to the effect that they are reasonable and proportionate. Some commentators have held that this means that where a court comments on incurred costs set out in a costs budget, it is effectively assessing those costs. In addition, pursuant to this judgment, it was further held that where a costs budget has been recorded in a costs management order, when assessing the costs on a standard basis, the court will not depart from that order unless it finds there is good reason to do so.

The decision particularly affects defendants who may wish to persuade the court to allow less on assessment of costs as, for many parties who have agreed a costs budget, they will find that they have also agreed the incurred costs as well as estimated costs, which the court will not depart from unless it has been provided with a good reason. It would be advisable that if parties wish to take issue with the other side’s cost budget then they should do so at the first Case Management Conference.

For queries in relation to dispute resolution matters, please contact the partner at Hunters having responsibility for your legal matters, or (for new enquiries) please contact a member of our Dispute Resolution team.

Related News

Oct 20, 2021
Partner Richard Baxter is attending the FT Live’s The Banking Revolution
Oct 18, 2021
Richard Baxter and Constance Tait discuss considerations for dispute resolution and M&A scenarios
Sep 29, 2021
Richard Baxter outlines lessons for business owners from an abortive company sale and purchase transaction
Sep 22, 2021
Stephen Morrall examines worker status in the gig economy in Economy Standard
Jul 22, 2021
Gregor Kleinknecht and Constance Tait examine the impact on trademark litigation and provide 10 tips on navigating the post-Brexit era in Managing IP
Jul 16, 2021
Gregor Kleinknecht and Anastassia Dimmek examine the growing threat of zombie firms in Lawyer Monthly
Jul 07, 2021
Richard Baxter and Constance Tait examine a report suggesting that firms with targeted support for ethnic minority workers see benefits
Jun 28, 2021
Richard Baxter discusses UK-EU Data Protection and how adequacy decisions avoid imminent disruption to data flows
Jun 23, 2021
Richard Baxter and Constance Tait examine the recent Burnell v Trans-Tag Ltd case in the High Court
Jun 22, 2021
Anastassia Dimmek discussed the key challenges of protecting clients’ healthy businesses from zombie firms in a webinar hosted by Advoselect

© Hunters Law LLP 2021 | Privacy NoticeLegal & Regulatory | Cookies Policy | Complaints Procedure.

Hunters Law LLP is authorised and regulated by the Solicitors Regulation Authority (number 657218)