High Court orders Russian claimant to provide security for costs despite evidence of assets in Switzerland and Cyprus

The High Court has granted an order for security for costs against a Russian claimant, on the basis that there was a real risk that any costs order against it would have to be enforced in Russia, where the court said there was a real risk of substantial obstacles to enforcement – even though there was evidence that the claimant also had assets in Switzerland and Cyprus, where there was no such risk: PJSC Tatneft v Bogolyubov [2019] EWHC 1400 (Comm).

The decision is of interest in illustrating the court’s approach to an application for security for costs against a claimant resident in a non-convention country (ie one that is not bound by the various regimes for mutual enforcement of English judgments, namely the recast Brussels Regulation or the Brussels, Lugano or Hague Conventions), but where there is evidence that the claimant has assets in a convention country. The decision suggests that the court will look at whether, despite that evidence, there is a real risk of having to attempt enforcement in a jurisdiction where there is a real risk of non-enforcement. The court may conclude that there is such a risk despite there being no evidence of a lack of probity on the part of the claimant.

Where a claimant is considering an offer of undertakings to prevent an order for security for costs, the decision suggests that this will only be effective if the undertakings “clearly and satisfactorily eliminate the risk” of non-enforcement. Continue reading

Court of Appeal confirms second claim an abuse of process after first claim struck out for non-payment of security for costs

In a recent judgment, the Court of Appeal upheld a decision to strike out a claim as an abuse of the court’s process, where the claim repeated an earlier claim which had been struck out as a result of the claimant’s failure to provide security for costs pursuant to an unless order: Harbour Castle Limited v David Wilson Homes Limited [2019] EWCA Civ 505.

It was accepted that, if the claimant’s failure to provide security had been deliberate, this would justify a finding that the present action was an abuse of process. The appeal centred on whether the High Court had been entitled to find that the failure had been deliberate, in circumstances where it was accepted that the claimant did not itself have the means to pay security but was reliant on funds being provided by its owner.

The claimant argued that the Supreme Court’s judgment in Goldtrail Travel Limited (in liquidation) v Onur Air Taşimacilik AŞ [2017] UKSC 57 (considered here) meant that the question was not whether a third party (here the claimant’s owner) could pay the required sum, but whether the claimant itself could raise the funds. Ultimately, the Court of Appeal accepted that, as the claimant’s owner and directing mind could have provided the funds if he considered it in the company’s interests to do so, the High Court had been entitled to find that his refusal to do so amounted to a deliberate breach of the unless order by the claimant.

The judgment provides a helpful illustration of the application of the principles set out in Goldtrail, in particular where the third party that would be in a position to pay the required sum on the claimant’s behalf is also the claimant’s directing mind and will. The decision suggests that, in such circumstances, there may be little distinction between the claimant’s ability to raise the funds and the third party’s ability to do so.

Francesca Ruddy, an associate in our dispute resolution team, considers the decision further below. Continue reading

Draft Civil Procedure Rule changes in the event of a no deal Brexit

The government has published a draft statutory instrument, the Civil Procedure Rules 1998 (Amendment) (EU Exit) Regulations 2019, which makes amendments to the CPR that are consequential on the various other civil justice measures that are to be implemented in the event of a no deal Brexit. These include, most importantly, the disapplication of the recast Brussels Regulation and the Lugano Convention in relation to questions of jurisdiction and enforcement of judgments (as outlined here), as well as the disapplication of the EU Service Regulation and Taking of Evidence Regulation – in each case subject to transitional provisions.

The CPR amendments, which will only take effect if there is a no deal Brexit, include sweeping changes to CPR Part 6 in relation to service of documents and Part 74 in relation to enforcement of foreign judgments, as well as changes to other rules such as the provisions in Part 25 relating to security for costs. The most significant amendments are outlined below. Continue reading

Court of Appeal rejects “sliding scale” approach to level of security for costs when real risk of non-enforcement established

The Court of Appeal has allowed an appeal against the High Court’s decision to reduce the amount of security for costs a Russian-resident claimant was ordered to pay by applying a “sliding scale” of risk where the defendants had shown a real risk of non-enforcement of a costs order in Russia: Chernukhin v Danilina [2018] EWCA Civ 1802.

The court confirmed that, once it has been established that there are substantial obstacles sufficient to create a real risk of non-enforcement, the starting point should be that the defendant should have security for the entirety of the costs. There is no room for discounting the security figure by grading the risk using a sliding scale approach. However, the quantum of security is a matter for the judge’s discretion and discretionary factors (such as delay and the risk of stifling a genuine claim) may affect the amount of security ordered.

Maria Clarke, a senior associate in our disputes team, outlines the decision below. Continue reading

Security for costs: where claim and counterclaim raise same issues

A recent High Court judgment considers the principles that apply in security for costs applications where similar issues arise on both claim and counterclaim (Dumrul v Standard Chartered Bank [2010] EWHC 2625 (Comm)). Following this judgment, if a defendant seeks security for costs in circumstances where the same issues arise on both claim and counterclaim, it is likely to have to commit to abandoning its counterclaim in the event that the security is not provided and the claim is not pursued as a result. Continue reading