In the recent case of Owners of the Panamax Alexander v Registered Owners of the NYK Falcon, the defendant managed to obtain an order for security for costs despite culpable delays. What then, does this mean, for the timing of such applications?
Background
The rules regarding security for costs orders are contained in CPR 25.12 onwards and certain threshold conditions must be met in order to proceed. If the parties cannot agree the terms of a security, an application must be made under CPR 23.
Whilst no timescales or cut off point are specified in the CPR for an application for security for costs, PD 23A.2.7 provides that “an application should be made ‘as soon as it becomes apparent that it is necessary or desirable to make it.”
This is particularly relevant in security for costs applications, where delay is seen as problematic for two reasons:
- The claimant must be given time to raise the funds required to meet any security.
- The claimant must have a meaningful opportunity to assess whether to proceed or discontinue the claim and the choice to provide security or give up the claim diminishes as the claim (see Hniazdzilau v Vajgel).
Usually the Case Management Conference (CMC) is considered the ideal time to make such an application.
Facts and Judgment
In Owners of the Panamax Alexander v Registered Owners of the NYK Falcon (a claim concerning a collision between the two vessels), the claimant had transferred ownership of a vessel during the proceedings, becoming a no ship company. The CMC had taken place in February 2021. The defendant later applied for an order for security for costs and the application came before the court just 4 months prior to trial. Andrew Baker J found that there was no doubt that the application could have been made earlier, as although the claimant had kept quiet about the transfer of ownership, it would not have been difficult for the defendant to discover the position. Certainly, the transfer was known to an associate at the defendant’s solicitors by the previous summer. That said, he found that the question to be addressed by the court was “whether, in all the circumstances of the case, that renders it unjust that the defendant should be secured for the very substantial costs it inevitably has incurred and will continue to incur so long as the claim is pursued, that being a heavy prejudice, in my judgment, to the defendant that it would be required to bear if I declined to order security because of those failings on the part of its solicitor” (paragraph 3, judgment).
Andrew Baker J then considered the degree to which the lateness prejudiced the claimant. It was accepted that in many cases the impact of the factor would be real and the claimant would be in a position to provide evidence of the actual difference made by the delay either to the ability to provide security or to its attitude to the proceedings. However, in this case, no evidence of any such kind was presented and it was concluded that there would be no prejudice.
It is also useful to note the commentary within the judgment regarding whether the fact that more costs had become incurred and therefore there were less future costs as a result of the delay was sufficient prejudice or outweighed the potential prejudice to a defendant of succeeding at trial and whistling for its costs (paragraph 6, judgment).
The application was allowed and security was ordered in two tranches in respect of incurred and future costs.
Weighing up the position
It is clear from the above decision and the extensive case law surrounding this area of law that such decisions are a balancing act. This claim succeeded on the basis that it would be unjust to penalise the defendant for the “dropping of the ball” by his solicitors and that there would be no prejudice to the claimant, who had failed to provide any evidence to the contrary (paragraph 3, judgment). This is not always the case, with there being plenty of examples of a delay leading to a reduction in costs awarded or no order at all.
Comment
Whilst clearly a delay is not always fatal, as seen from numerous cases, the courts take a dim view of delay and this could well lead to a finding in favour of the claimant or the reduction of the level of security. As is often the case, such decisions are a balancing act, which turn on the facts of the specific claim at hand.
It would therefore appear prudent to continue to make any such application at the earliest possible juncture and, should a delay in making such an application be experienced, it is clearly wise for the parties to give proper consideration to their evidence.
