Judge makes value of security contingent on costs management hearing

Security for costs: order excludes part of budget relating to ‘contingent costs’

Security for costs: order excludes part of budget relating to ‘contingent costs’

A deputy High Court judge has made a security for costs order whose value is contingent on the outcome of a forthcoming costs management hearing.

Having decided to order security, Mr Richard Salter QC described the pending hearing as a “practical complication, since nothing I say in the context of this application can bind the judge [hearing it].

“It would also be undesirable (to say the least) were I to make an order for security in an amount greater than the costs budget settled for the relevant part of the litigation.”

Ruling in Eminent Energy Ltd v Krässik Oü & Ors [2016] EWHC 2585 (Comm) – a dispute over a joint venture and supply agreements – the judge made a three-stage order.

First he made a lump sum order for security up to the completion of disclosure, given that those costs were almost all likely to have been incurred prior to the costs management hearing.

He then made orders for security to cover first for the period up to the pre-trial review, and thereafter the trial period.

“Those orders will be for a percentage of the costs budget for the action for that period, including any allowance in that budget for ADR/settlement discussions (which ought to take place in every case) but excluding any part of that budget relating to other ‘contingent costs’.

“That seems to me to be the fairest way of dealing with costs that may never be incurred. If any of those contingencies in fact comes about, and makes a really significant difference to the level of their costs, it would always be open to [the claimant and the third parties] to make an application to increase the amount of security on the grounds of a material change of circumstances.”

An eight-day trial is expected and the claimant and two third parties have filed costs budgets amounting to approximately £1.5m. The defendant’s budget is about £500,000.

In opposing the application for security, the defendant argued that it was being used oppressively. Mr Salter QC said that though the cost budgets filed by the claimant and third parties – which formed the basis of the claim for security – were three times that of the defendant’s budget, “that is a circumstance that can properly be dealt with both in considering the appropriate amount of any order for security, and at the stage of costs budgeting”.

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