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High Court: security for costs order for defendant with CFA should include 100% uplift


High Court: no suggestion claimant would be disadvantaged

A security for costs order in favour of a defendant funded by a conditional fee agreement (CFA) should include a 100% success fee, the High Court ruled last week.

Mr Justice Tugendhat also said a party should not be forced to disclose the full agreement so as to gain such an order.

He said the scales of justice in a defamation case involving a prominent Tanzanian businessman suing a woman based in England weighed in favour of the defendant receiving security for costs up to the full amount permitted for under a CFA.

In Mengi v Hermitage [2012] EWHC 2045 (QB), he overturned the ruling of the Master on both the CFA point and also restriction of the order to 75% of the defendant’s costs, which were estimated in total at just over £1m, excluding the success fee; the claimant’s were more than £1.2m, plus £300,000 in pre-action costs. The defendant sought just under £2m as security.

The Master had said: “In the absence of the full CFA, I find it difficult to form any sensible view of the likelihood of the defendant being able to establish a right to recover the uplift, let alone the likely percentage… I am not therefore in the absence of the actual agreement persuaded I should allow for such an uplift in the order for security.”

He added that the absence of the full CFA did not mean in principle that a security for costs order is not appropriate, but that on the facts of this case he could not “engage meaningfully with the point” without it. “In other words, if you want the extra security, you must provide the CFA.”

Mr Justice Tugendhat said the defendant “should not be put under indirect pressure” to waive her right not to disclose the CFA in full so as to apply for security for costs. He noted that there was no suggestion “that the claimant would be hindered or obstructed in his pursuit of his claim if he were ordered to give security in the full amount of the defendant’s agreed budget plus 100% uplift”.

The judge also said there was no “illegitimate speculation” in the court taking into account that, if the defendant succeeded to the extent that she obtained an order for costs, such costs would involve a success fee.