Trinity’s Adam Chaffer Successfully Obtains Security for Costs Against Financially Impecunious Company

Following an interim application before the Business & Property Court in Newcastle, Trinity’s Adam Chaffer successfully obtained security for costs against a financially impecunious claimant company.

In Boutique Hotels Company Holdings (Durham) Limited v Marshall (unreported), Adam was successful in arguing that (1) there was reason to believe that the Claimant company would be unable to pay the defendant’s costs if ordered to do so; and, (2) that having regard to all the circumstances of the case it was just for the Court to make such an order.

The wider proceedings concerned a landlord and tenant dispute in which the Claimant had brought proceedings before the Court for relief from forfeiture. The Claimant, already in arrears on their rent, had declined to disclose their financial position beyond their published accounts, which showed no tangible assets or reserves. Before and during the hearing, various offers of security from a third party were proposed, but without any adequate supporting financial information to understand if the offers were viable.

The primary challenge by the Claimant company to the application was that it would stifle their claim. Adam was able to rebut this assertion by drawing on the Claimant’s evidence, which identified that a third-party funder was assisting the Claimant in their litigation costs.

The outcome of the case gives rise to several important factors which are worth considering when making an application for security for costs:

1. Applications for security for costs turn on evidence, and this can come in a variety of forms. Given that part of the test for security is an exercise of judicial discretion, the greater the quality of the evidence, then the more context can be given to submissions on discretion.
   
   
2. If expert evidence is required to support the application, then a two-tier approach is required. First, an interim application to the Court would be required to seek permission to rely on expert evidence in the substantive application and then a further application to determine the question of security for costs.
   
   
3. It is for the respondent to an application for security for costs to evidence that they are in a position to pay a future cost order should one be made. Declining to engage in providing the supporting evidence gives rise to inferences.

Adam was instructed by Amandeep Dhillon, Senior Associate at Hay & Kilner LLP on behalf of the Defendant landlord.