“where there is a claim to establish that the plaintiffs are entitled to something, possibly merely to a declaration to that effect, and there is a counterclaim for the opposite declaration, which would be the automatic counterpart of the claim of the plaintiffs failing. There again it would not I would think, normally be appropriate to order a defendant to give security for costs of such a counterclaim”
“But there are other circumstances which may lead to other conclusions, as for instance where, in The Silver Fir, there were two claims on different aspects of the one event and it was a matter of chance which party happened to be the plaintiff, and, on one ground or another there was jurisdiction….”
“At that point, one moves on to the largely discretionary area. The trend of authority makes it plain that, even though a counterclaiming defendant may technically be ordered to give security for the costs of a plaintiff against whom he counterclaims, such an order should not ordinarily be made if all the defendant is doing, in substance, is to defend himself. Such an approach is consistent with the general rule that security may not be ordered against a defendant. So the question may arise, as a question of substance, not formality or pleading: is the defendant simply defending himself, or is he going beyond mere self-defence and launching a cross-claim with an independent vitality of its own? It appears to me that Field J put his finger on the appropriate question when he pithily observed in Mapleson v Masini(1879) 5 QBD 144 at 147: ‘The substantial position of the parties must always be looked at.’ For my part, I think that no simple rule of thumb exists to determine the answer to the question. An order for security against a counterclaiming defendant is not precluded because the counterclaim arises out of the same transaction as the claim. Otherwise, no order could have been made in The Silver Fir. It is again not conclusive that the counterclaim overtops the claim, although I venture to think that the relative quantum of the counterclaim and the claim is not in all circumstances irrelevant. It is clearly a relevant consideration that, if the plaintiffs had not issued proceedings, the defendants would have done, as in The Silver Fir, because in such a case it may be almost a matter of chance whether a party happens to be the plaintiff or the defendant; and if the proper inference is that the defendants would have sued anyway, that fortifies the inference that the counterclaim has an independent vitality of its own and is not a mere matter of defence.”
“As is usually the case in London maritime arbitrations, both parties are overseas corporations without assets within the jurisdiction. Both parties seek substantive relief: the plaintiffs to be declared free of their charter obligations to the defendant charterers and the defendants to recover substantial damages from the plaintiffs. Either could properly have been claimant in the arbitration quite consistently with normal procedure. Indeed it is the defendant who advances the major claim for monetary compensation, whereas the plaintiffs, although claiming damages, are concerned mainly to have the two vessels declared free of the charter. In these circumstances the just and equitable approach to security for costs would be that there should be orders for both parties to put up such security: the plaintiffs in respect of their claim, the defendants in respect of their counterclaim. This is consistent with the decision of the Court of Appeal in Samuel J. Cohl Co. v. Eastern Mediterranean Maritime Ltd. (The Silver Fir), [1980] 1 Lloyd's Rep. 371. … In the present case, as I have said, both parties made substantive claims based on the same facts and either could properly have been claimant. The counterclaim was not merely a defence, directed to smothering the plaintiffs' claim by a set-off: it was a large claim for damages in its own right. The plaintiffs have not suggested that their own damages' claim is of anything like that magnitude. That being so, this presents itself as prima facie a classic case for security from both sides. … The plaintiffs say that if the counterclaim remains stayed and no security is put up they are highly unlikely to pursue their claim in the arbitration. This is not difficult to understand. Their main claim is for declaratory relief. If they obtained an award for damages they would be very unlikely to be able to enforce it and the same would be true of an award of costs. … Finally, on this point, [defendant’s counsel] submitted that the plaintiffs had put up an unsustainably high figure for security. He said the individual items were exaggerated. He has, however, adduced no evidence in support of this submission. I am satisfied that the plaintiffs have sufficiently proved the appropriate question of the individual items on a taxed basis for the purpose of this application. However, [defendant’s counsel] further submitted that the amount of security ought to be measured by the extent to which the plaintiffs' potential costs had been and would be increased by having to meet the counterclaim over and above the costs of pursuing their claim had there been no counterclaim. He relied on the decision of the House of Lords in Medway Oil and Storage Co. Ltd. v. Continental Contractors Ltd., [1929] A.C. 88 . That case was concerned with the question how costs of a claim and counterclaim should be taxed where both claim and counterclaim failed and the defendant was awarded his costs of the claim and the plaintiff his costs of the counterclaim. In the result the House of Lords held that the counterclaim should bear only the amount by which the costs of the proceedings had been increased by the counterclaim. [Defendant’s counsel] submits that where an order is made for security for costs of the counterclaim the amount of the security should likewise be calculated by reference only to the extent by which the costs of the plaintiff are likely to be increased by the counterclaim over what they otherwise would be. It may very well be that in cases where the plaintiffs and defendants are advancing claims based on different bodies of fact in the same action security for the costs of the counterclaim should be quantified to reflect the taxation principles stated in MedwayOil. But where both parties are substantial claimants founding their claims on the same body of facts, as in this case, so that if the claim fails the counterclaim will succeed, there can be no basis for adopting such a quantification of the security for costs of the counterclaim. In this kind of case the purpose of security for the costs of the counterclaim is to secure the plaintiff against his inability to recover on an order that the counterclaiming defendant should pay the costs of the proceedings. In such a case the plaintiff is entitled to be secured in respect of costs no less fully than if he were merely defendant to the claim advanced in the counterclaim and not also plaintiff in the action. Where the claim and counterclaim arise out of the same facts the extent of entitlement of a defendant to a claim to security for costs against the claimant cannot depend on the fortuity of whether the claimant is procedurally a plaintiff or a counterclaiming defendant. This ground of criticism of the quantum of security ordered must therefore be rejected.”