Kerry Underwood

SECURITY FOR COSTS: HIGHER AMOUNT NOT JUSTIFIED BY POTENTIAL INDEMNITY COSTS AWARD

leave a comment »


Kerry Underwood offers consultancy services in relation to this and other matters and details are here.

In

Phones 4u Ltd v EE Ltd and others [2020] EWHC 1943 (Ch) (20 July 2020)

the claimant was in administration and agreed to provide security for costs to all of the defendants and the issue was whether the security should be for a higher amount based on a potential award of indemnity costs as the claimants’ claim raised serious allegations of impropriety.

Here, the Chancery Division set out the principles in relation to indemnity costs, stating that the critical requirement is that “there must be some conduct or some circumstance which takes the case out of the norm” – see

Excelsior Commercial & Industrial Holdings Ltd v Salisbury Hammer Aspden & Johnson (a firm) [2002] EWCA Civ 879 .

The court also set out the principles contained in the case of

Three Rivers District Council & Ors v The Governor & Company of the Bank of England [2006] EWHC 816 .

Here the defendants relied on the case of

Danilina v Chernukhin [2018] EWHC 2503 (Comm),

where the court said that where there was a reasonable possibility of indemnity costs, security should be by reference to about 75% of incurred and expected costs.

The Chancery Division followed this in

Re Ingenious Litigation [2020] EWHC 235 (Ch)

Here, the court referred to the specific factual context of Danilina and Ingenious and said that it was important not to read the judges’ words in those cases as if they were a statutory test.

It was not the case that the fact that there was a real possibility or reasonable possibility of an ultimate award of indemnity costs justified a higher level of security. That is much too low a threshold.

In

Stokors SA v IG Markets Ltd [2012] EWCA Civ 1706,

where a high percentage of security was sought as the defendants might recover indemnity costs, the Court of Appeal said that they had never heard of security being awarded on a more generous basis for that reason.

Stokors was apparently not cited in Danilina or Ingenious.

The court should not engage with the merits of a case when considering security for costs, save in the most obvious cases, and that weakness of legal argument is not, without more, justification for the indemnity basis of costs, which is in its nature penal  – see

Arcadia Group Brands Ltd v Visa Inc [2015] EWCA Civ 883 .

Consequently the application for a higher level of security for costs based on a potential indemnity costs order was refused.

Written by kerryunderwood

July 29, 2020 at 1:55 pm

Posted in Uncategorized

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: