Court rules a standard period on Security for Costs application

Law and Courts II

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Citing the relevant principle at section 726 (1) Companies Act 1985, the learned Judge cited subsequent authorities in addition Sir Lindsay Parkinson* where it was held that questions of delay were relevant both to the principle and amount of security granted; Aquila Design Products* where it was held for entitlement of the Courts to deny security if it would result in oppression; Keary Developments* where it was held a claimant that sought to avoid a security for costs award must satisfy the Court that in all probable circumstances the claim would be stifle litigation and Fernhill Mining* where the Court held it inappropriate to engage in the merits of the underlying claim. The issues for decision were whether the security should include pre-actions costs; whether the costs should be awarded from commencement of proceedings to the actual applications for security for costs, and; appropriate quantum. In having regard for security for costs in the pre-action protocol the learned Judge held 'costs of and incidental to the proceedings' precluded pre-action mediation since there existed no nexus to the instanter trial proceedings. The honourable Court cited relevant authorities regarding recoverable costs from mediation to subsequent proceedings and where parties agreed to bear their own costs at mediation and costs incurred a priori the administration of one of the parties were included in the Court's order for costs and the attaching clear right to enforce although it was pointed out the issue was not a liquidator's preference. Regarding stifling, the Court was not persuaded to make any finding dependant upon the claimant finding it impossible to obtain an ATE policy to which Counsel fairly accepted such a circumstance did not exist although by inference such a policy would no doubt be much more expensive if it included pre-action costs. Litigation following would thus not be prejudiced. Further held was the reluctance of the Court to award security for costs in the present delay of 2.5 years and since a large portion of the defendant's costs related to the mediation the Court considered the costs unrecoverable. Prejudice to the claimant was a primary reason for consideration by the honourable Court in its reasoning for awarding the quantum of security over the delay. In the result the learned Judge awarded security for costs at the point of witness exchange for statements which was fundamentally the issue the defendant raised to the honourable Court in this UK case.
The claimant was a printing company specialising in high quality print and reprographic products, who purchased a printing press from the first defendant and later claimed a defect that caused a loss to the company. Over four years the dispute was referred to mediation where issues remained unresolved and after one year the claimant went into administration. The matter was transferred to the Technical and Construction Court ("TCC") and pre-trial, the defendants raised the issue of security for costs and a pre-action cost. The claimant requested details regarding quantum plus form and manner in which the security might be advanced and they made a formal application four months later. The learned Judge noted that the 2nd defendant had at no time put forth a draft bill for the defendant's perusal. The 2nd Defendant advancing the finance similarly requested details of security sought, likewise failed to respond to the claimant and four months later made their formal application. The matter to be adjudicated was, should the claimant provide security for the period between commencement of the proceedings and the later date of formal application filed only in February the following year.

Company Law Expertise

Vide Neutral Citation Number [2008] EWHC 413 (TCC); *Sir Lindsay Parkinson & Co v Triplan [1973] AB 609; Aquila Design (GRB) Products Ltd v Cornhill Insurance plc [1988] BCLC 134; Keary Developments Ltd v Tarmac Construction Ltd [1995] 3 All ER 534; Fernhill Mining Ltd v Kier Construction Ltd [2000] C.P. Rep 69.
Company Law Today - Awards are as common as 'appelkoos siekte' in September, however interestingly, on the pleadings regarding previous litigation in South Africa in accordance with the Companies Act No. 61 of 1973 it was appropriate for a defendant to make application simply due to the plaintiff being a company.



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