Threshold for security for costs affirmed

Posted on: November 16th, 2015

Whilst the English Courts continue to remain attractive to overseas claimants, for defendants in such cases one of the risks that they face is whether they will be able to recover their costs should they successfully resist the claims against them. In that regard, the ability of defendants to seek security for costs is an important right, and a recent case confirmed the appropriate test in circumstances in which a claimant does not reside in one of various European states.

In Ras Al Khaimah Investment Authority and others v Bestfort Development LLP and others [2015] EWHC 3197 (Ch), the defendants appealed against an order rejecting their application against Claimant companies based in Georgia. It was common ground that an application engaged aspects of the European Convention of Human Rights when made against an overseas claimant falling outside of the list of prescribed countries. In particular, it could amount to discrimination in the entitlement to effective access to the courts on grounds of national origin unless such order could be objectively justified. Such objective justification can include potential difficulties or burdens of enforcement in the relevant state which would not be encountered against a person resident in the prescribed list of countries.

In Ras Al Khaimah, the defendants’ appeal was based on the test adopted by the Master when determining whether they would face such difficulties or burdens when enforcing a costs order against the claimants. They asserted that the Master had applied too high a test, and that the proper test was whether there is a real, as opposed to fanciful, risk of such difficulties or burdens.

The High Court disagreed. Relying upon the oft quoted case of Nasser v United Bank of Kuwait [2001] EWCA Civ 1454, Mr Justice David Richards confirmed that the appropriate test was that the defendants would be likely to face such difficulties or burdens. If that condition is met, the issue for the Court is then whether, having regard to all the circumstances of the case, it is satisfied that it would be just to order security for costs.

Accordingly, the appeal was dismissed. With statistics earlier this year revealing that overseas litigants continue to treat England as the international disputes resolution centre of choice, making up some 63% of all users of the Commercial Court, the decision provides welcome confirmation of the approach the Courts will take when considering whether or not to order security for costs against such claimants.