“The Receivers shall, within a reasonable period of the receipt of monies pursuant to the taking of any steps provided for herein to apply to Court for directions as to what is to become of the said monies”. § 7: “Anyone served with or notified of this order may apply to Court at any time to vary or discharge this Order (or so much of it as affects that person), but they must first inform the Claimant’s legal representatives. …” § 20: “The Claimant, the First and Second Defendants, the Respondents, the Receivers and any other person affected by this Order shall have permission to apply.”
“As a result of the steps taken by the Financial Manager in the Russian bankruptcy our client no longer has any direct or indirect beneficial interest in any of the assets of the Berenger Foundation, including the membership interests in Pikeville. Accordingly, the basis upon which the receivership order was originally made has now fallen away, and … there is no good reason why your clients should remain in office as receivers and administrators. Pikeville should now be returned to the control of its officers for the benefit of its members. We consider that it is incumbent on your clients, as officers of the Court, to bring these highly material developments in the Russian bankruptcy proceedings to the attention of the Court, and to seek its directions. We should be grateful if you would confirm within 7 days of the date of this letter that your clients will make an application for directions, and that they will take no further action to realise any of the assets of Pikeville pending the outcome of that application.”
“The membership shares and interests in the Second Defendant are held on bare trust for the Fourth Respondent by the First, Second and Third Respondents. Those membership interests are not amenable to execution of the judgments obtained by the Claimant against the First Defendant because the First Defendant does not have any right to, or interest in, the assets of the Fourth Defendant. Further, or alternatively, the appointment of the Receivers serves no useful purpose because there is no property which can be reached either at law or in equity.”
“A defendant to any claim may apply under this section of this Part for security for his costs of the proceedings.”
“I have no hesitation, myself, in coming to an opposite conclusion. In my judgment the proceedings referred to in the rule, if they are not an action, are at least proceedings of the nature of an action and refer to the whole matter and not to an interlocutory application in some other proceedings. Were it otherwise, it appears to me that chaos would reign, for every time an interlocutory application was taken out by a defendant the plaintiff would be able to say, “The plaintiff is in the position of the defendant in this application and the defendant is in the position of the plaintiff. They are proceedings. Therefore I ought to have security for the costs of this application.”
“As to the point on jurisdiction, it really proceeds upon the proper construction of R.S.C., Ord. 23, r. 1 , and I have no doubt myself that the purpose of that Order is that the proceeding, which is referred to there, is the proceeding as a whole, whether it is an action or something equivalent to an action …. The right to ask for security for costs under Order 23 , where the plaintiff is not resident within the jurisdiction, is purely devoted to people who are plaintiff and defendant in the proceeding as a whole.”
“The natural meaning of the term ‘plaintiff’ in a context of litigation is the plaintiff in the proceedings as a whole or original proceedings. The definition in s. 225 should be construed in accordance with that natural meaning. Accordingly, I reject Mr Gee's submission that by route of the definition of ‘plaintiff’ in s. 225 an impoverished corporate defendant who makes an application by interlocutory summons or motion in some other plaintiff's action thereby constitutes itself a ‘plaintiff’ which can be ordered to give security for the costs of its application under s. 726 , ‘plaintiff’ in s. 726 bears its ordinary meaning and that does not include a defendant which makes an interlocutory application.” and at p721: “Mr Gee accepts, as I have mentioned, that the rule that a defendant cannot be ordered to give security when he has been brought before the court and is seeking to defend himself (as opposed to counterclaiming in respect of matters which go beyond his defence) would preclude a plaintiff from claiming security against a defendant, whether a foreign resident or an impoverished company, in respect of an application by that defendant to set aside or curtail a Mareva or other injunction obtained ex parte by the plaintiff. In my judgment, an application by the defendant for an inquiry as to damages under the crossundertaking when the Mareva or other injunction has been discharged is likewise a mere matter of defence. For this conclusion there are several reasons which are cumulative (or different aspects of the same point), viz: (1) the cross-undertaking is the price which the plaintiff has to pay for obtaining an injunction before the action can be finally tried and decided, (2) the damages under the cross-undertaking are not strictly damages but compensation to the defendant for loss suffered if it is subsequently established that the interlocutory injunction should not have been granted, and (3) there is no separate cause of action for the damages and it can only be enforced by application in the action in which the injunction was granted. See generally the observations of Neill LJ in Cheltenham & Gloucester Building Society v Ricketts[1993] 1 WLR 1545 at pp. 1550H–1552G. Therefore the general rule as to not awarding security for costs against a defendant is applicable.”
“Had Parliament intended to confer power on the court to order security for costs against the applicant (whether a plaintiff or a defendant in existing proceedings) who makes an application to the court in the course of those proceedings, it would hardly have restricted the operation of the section to ‘a plaintiff in an action, suit or other legal proceedings’.”
“Policy considerations support the same conclusion. The purpose of the jurisdiction to order security for costs is to prevent the injustice which would result if a plaintiff who was in effect immune from orders for costs were free to litigate at the defendant's expense even if unsuccessful. Such an order can be made only against a plaintiff; it cannot be made against a defendant. That is because a plaintiff institutes proceedings voluntarily. If he chooses to bring proceedings against an insolvent company with limited liability, he does so with his eyes open; he takes the risk that he may not recover his costs even if successful, but it is his own decision to take that risk. The defendant, however, has no choice in the matter. He is compelled to litigate or submit to the plaintiff's demands. He must be allowed to defend himself without being subjected to the embarrassment of having to provide security for the plaintiff's costs. This involves being free to take whatever steps and make whatever applications are necessary in order to enable him to defend the proceedings.” and at p727: “It has long been firmly established by authority that the court cannot award security for costs against a defendant, and that in considering whether a party is a plaintiff or a defendant the court must have regard to the substantial and not the nominal position of the parties. The question in every case is whether the party against whom an order for security is sought is in the position of plaintiff in the proceeding in question.” 42.On the facts, Millett LJ stated at p728: “If attention is concentrated on the defendant's application to enforce the plaintiff's cross-undertaking in damages, the defendant certainly has the appearance of a plaintiff. It claims that it has suffered loss for which the plaintiff is responsible and it seeks compensation for that loss. If the plaintiff recognises that it is likely to be ordered to pay something, though not as much as the defendant claims, it can protect its position by making a payment into court. It certainly looks like a defendant. But as the cases which I have cited in this part of my judgment demonstrate, it is necessary to consider the whole litigation between the parties in order to determine which of them is really in the position of a plaintiff and which a defendant. If the proceedings are considered as a whole, then it is apparent that the parties have never exchanged roles, and that the defendant has done nothing to justify being treated as a plaintiff. …” “As for the defendant, it has had no choice in the matter. It has done nothing beyond reacting to the steps which the plaintiff has taken against it. The plaintiff brought the proceedings; the defendant has been compelled to defend them. The plaintiff obtained an injunction against it which the defendant claims ought not to have been granted; the defendant has obtained its discharge. The defendant claims that the existence of the injunction caused it loss; it seeks to recover the loss. It seeks only to be restored, so far as compensation can achieve it, to the position it was in before the proceedings began. The defendant must counter-attack to recover ground lost by an earlier defeat, but it makes no territorial claim of its own; it cannot fairly be described as an aggressor.”
“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 must be borne in mind that the design of the rules is to protect a defendant (or a claimant placed in a similar position by a counterclaim) who is forced into litigation at the election of someone else against adverse cost consequences of litigation.”
“In my judgment, viewed in the light of these principles, the applications in the present case were originating applications falling within the expressions I have just quoted. They brought before the court issues which were not previously before the court, and which would not otherwise have been before the court; and, although brought in the context of a winding up ordered by, and under the ultimate supervision of, the court, these applications were essentially free-standing. The applications arose because of Bancredit Cayman Ltd's insolvency and because of a dispute as to whether that company was genuinely indebted to the appellants (as they claimed and the liquidators denied) or to other claimants (as the liquidators claimed and the appellants denied). The winding up proceedings merely provided the forensic framework in which the applications were made, or the procedural launch pad from which the applications were issued. Indeed, in his engaging submissions, Mr Lowe QC realistically accepted that the applications were in substance originating proceedings. This concession must be right given that these applications would admittedly be originating proceedings if this was a voluntary or creditors' winding up and all the facts were otherwise identical.”
“The defendants are seeking a rehearing on evidence which, or much of which, so far as one can tell, they could have adduced on the earlier occasion if they had sought an adequate adjournment, which they would probably have obtained. Even in interlocutory matters a party cannot fight over again a battle which has already been fought unless there has been some significant change of circumstances, or the party has become aware of facts which he could not reasonably have known, or found out, in time for the first encounter. The fact that he capitulated at the first encounter cannot improve a party's position.”
“23. Assume, then, that in a given case the court concludes that an order for security would not unfairly deprive the party concerned of his ability to litigate the dispute. Should such an order then be made? In addressing this question it is right to bear in mind that under the new rules it is not just the claimant against whom an order for security for costs can be made; it can also be made against the defendant. Under the old rules, of course, it was only the defendant who could be ordered to pay money into court, principally in proceedings for summary judgment, as a condition of his being allowed to defend the claim. That payment in was not, of course, in respect of costs, but rather to provide some security for the claim. But if, as a condition of pursuing an unpromising defence, it is appropriate to secure the claim, why not also the claimant's costs of advancing the claim? And if that, why is it not at least as appropriate to require someone advancing an unpromising claim to secure the defendant's costs. He, after all, has chosen to involve the defendant in litigation and the defendant has no option but to concede the claim or incur costs in resisting it. Such no doubt was the thinking underlying the new rule 24. 24. Now, it is clear, the court has an altogether wider discretion to ensure that justice can be done in any particular case. Obviously relevant considerations, besides the ability of the person concerned to pay, will be (a) his conduct of the proceedings (including in particular his compliance or otherwise with any applicable rule, practice direction or protocol), and (b) the apparent strength of his case (be it claim or defence). And these considerations, of course, are expressly reflected in the new rules governing the court's power to order payment into court: rule 3.1(5) dealing expressly with compliance, rule 24 with the probabilities or otherwise of success. 25. That, however, is by no means to say that the court should ordinarily penalise breaches of the rules and the like by making orders for payment into court under rule 3.1(5) . Quite the contrary. The one case drawn to our attention in which this question has been considered — Buckley J's judgment in Mealey Horgan plc v Horgan (transcript24 May 1999 , briefly reported in The Times,6 July 1999 ), to which reference is made in paragraph 3.1.5 of the Annual Practice — held that it would be inappropriate to order a defendant to give security as a penalty for failure to serve witness statements in time when that had prejudiced neither the trial nor the claimant. Buckley J suggested, however, that such an order might be appropriate if “there is a history of repeated breach of timetables or of court orders or if there is something in the conduct of the party which gives rise to suspicion that they may not be bona fide and the court thinks the other side should have some financial security or protection”
“40. Those principles show that the power to order security for costs in a case of this kind should be exercised with great caution. The correct general approach may be summarised as follows: i) it would only be in an exceptional case (if ever) that a court would order security for costs if the order would stifle a claim or an appeal; ii) in any event, a) an order should not ordinarily be made unless the party concerned can be shown to be regularly flouting proper court procedures or otherwise to be demonstrating a want of good faith; good faith being understood to consist (as Simon Brown LJ put it) of a will to litigate a genuine claim or defence (or appeal) as economically and expeditiously as reasonably possible in accordance with the overriding objective; and b) an order will not be appropriate in every case where a party has a weak case. The weakness of a party's case will ordinarily be relevant only where he has no real prospect of succeeding. 41. That approach seems to me to be consistent with that of Field J in Reed v Oury, although he was there considering, not a possible condition that security for costs be imposed, but a condition that previous orders be satisfied. In that context he said in paragraph 24 that if, having regard to a party's conduct overall, a party has acted very oppressively or very unreasonably, it may be appropriate to stay his claim conditionally or unconditionally or strike it out or order a payment into court. That is a high test. 42. A similar approach should to my mind be adopted before imposing a condition that a party should only be permitted to proceed with a claim or an appeal by providing security for costs, unless the case falls withinCPR rule 25.13 , which this does not. I would accept Mr Cranston’s submission that merely to act unreasonably in a sense other than that identified above should not in general be sufficient to make an order which will have the effect of depriving the party concerned of access to the courts. 43. These principles have been recently considered in this court by Peter Gibson LJ (with whom Mance LJ and Hale LJ agreed) in CIBC Mellon Trust Co v Mora Hotel Corp NV[2002] EWCA Civ 1688 ,[2003] 1 All ER 564 . In paragraph 38 of his judgment Peter Gibson LJ referred both to Olatawura v Abiloye and to Reed v Oury and said that both those authorities suggest that it is only appropriate for the court to exercise its powers underCPR Part 3 to require a payment into court in limited circumstances and that the court should not do so in the absence of a want of good faith on the part of the party against whom the order is sought. Peter Gibson LJ added: “That consideration is reinforced by the greater significance, since theHuman Rights Act 1998 came into force, which the court attaches to not impeding access to justice.”” “That consideration is reinforced by the greater significance, since theHuman Rights Act 1998 came into force, which the court attaches to not impeding access to justice.””
“bearing in mind that the court may release such undertakings altogether, it must be entitled to impose terms on parties seeking to enforce them, in whatever way appears to be just in the circumstances; and some form of security for costs may be an appropriate requirement in some cases… I prefer not to seek to define the limits of the court's discretion in this or other cases, save that – as already mentioned – its scope is in my view wider than the inherent jurisdiction to deal with abuses of the court's process.”