The New Lottery Company Limited & Anor v The Gambling Commission [2025] EWHC 1522 (TCC)

[2025] EWHC 1522 (TCC)Case No HT-2022-000132Case No HT-2024-000035IN THE HIGH COURT OF JUSTICETHE BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALESTECHNOLOGY AND CONSTRUCTION COURTBEFORE: THE HONOURABLE MRS JUSTICE JOANNA SMITHB E T W E E N:
Between
THE NEW LOTTERY COMPANY LIMITEDClaimantsNORTHERN & SHELL PLCClaimantTHE GAMBLING COMMISSIONDefendantALLWYN ENTERTAINMENT LIMITEDInterested PartiesALLWYN INTERNATIONAL AG (formerly known as ALLWYN INTERNATIONAL A.S.)Interested PartyCAMELOT UK LOTTERIES LTDInterested PartySa’ad Hossain KC and Khatija Hafesji (instructed by Bryan Cave Leighton Paisner LLP) for ClaimantsTamara Oppenheimer KC, Barney McCay and Hannah Bernstein (instructed by Hogan Lovells International LLP) for DefendantMalcolm Birdling (instructed by Quinn Emanuel Urquhart & Sullivan UK LLP) for Interested PartiesHearing Hearing date: 21 May 2025
APPROVED JUDGMENTThis judgment was handed down remotely at 10.30am on Monday 16 June 2025, by circulation to the parties or their representatives by email and release to the National ArchivesDate 2025-06-16
[1]This judgment is primarily concerned with two issues arising in connection with applications for security for costs by the Defendant and Interested Parties to these proceedings. The first issue, as far as I am aware an entirely novel point, is whether the court has the power to award security for costs in favour of an interested party joined to the proceedings in that capacity. The second issue (which arises on both applications), is whether a parent company with limited assets may rely upon evidence of its control over a wholly owned subsidiary with substantial assets in order to avoid a determination that an order for security for costs should be made against it.

The Background to the Applications

[2]Save where it can be shown that there is “a very high probability” that one party will succeed at trial, the court will not attempt to assess the merits of an underlying claim when assessing an application for security for costs (see OCM Singapore Njord Holdings Hardrada Pte Ltd v Gulf Petrochem FZC [2021] EWHC 2447 (Comm) per HHJ Pelling at [21]). It is not suggested here that an analysis of the merits would be of any assistance in connection with either of the two applications that are before the court. Accordingly I need only provide a brief background summary of the proceedings in this case.[3]This litigation arises out of a procurement process run by the Gambling Commission (“the Commission”) for the award of the Fourth National Lottery Licence (the “Fourth Licence”) which took place between 2019 and 2022. The First Claimant is an SPV established by the Second Claimant for the specific purpose of competing in the Fourth National Lottery Competition (the “Competition”).[4]The Claimants did not succeed in obtaining the Fourth Licence and they now make two claims against the Commission. In their first claim (“the Scoring Claim”), the Claimants challenge both the fairness of the Competition on the basis that the Commission breached the Concession Contracts Regulations 2016, which governed the running of the Competition, and the decision to award the Fourth Licence to the First and Second Interested Parties (“Allwyn”). The Claimants’ second claim challenges modifications which have been made to(i) the Enabling Agreement between the Commission and Allwyn, which governs the transition to the Fourth Licence; and(ii) the Fourth Licence itself (“the Modifications Claim”). The Claimants claim damages of approximately £1.3 billion in the Modifications Claim.

Relevant Procedural Background

[5]The Scoring Claim was issued in April 2022 and stayed from August 2022, pending claims seeking to set aside the Commission’s decision to award the Fourth Licence to Allwyn brought by Camelot UK Lotteries Limited (“Camelot”) (the Reserve Applicant in the Competition and previously incumbent provider) and International Game Technology Plc and associated companies, a subcontractor to Camelot. The stay was lifted in January 2024 and the Modifications Claim was issued shortly thereafter.[6]On 26 June 2024, the court ordered that the Scoring Claim and the Modifications Claim should be jointly managed and that a “Stage 1 Trial” on liability should take place in the Autumn of 2025. At the same time, the court granted permission to the Interested Parties to participate at the Stage 1 Trial (including permission to file a statement of case and evidence and to make oral submissions and cross-examine witnesses) in so far as they had a separate interest to the Commission. In a judgment given by Waksman J on 10 June 2024, he observed that it was “perfectly obvious” that the Interested Parties “have separate and distinct interests which they are entitled to protect at trial”.[7]In a letter dated 5 September 2024, Hogan Lovells International LLP (“Hogan Lovells”), solicitors acting on behalf of the Commission, wrote to Bryan Cave Leighton Paisner LLP (“BCLP”), solicitors acting on behalf of the Claimants, raising concerns about the Claimants’ financial position. At this time Hogan Lovells estimated that the Commission’s costs of the Stage 1 Trial were likely to exceed £10 million and that, in the event of the claim proving unsuccessful, there was potential for the Claimants also to be liable for the costs of the Interested Parties. Hogan Lovells asked how the Claimants would be able to pay any adverse costs order. On 26 September 2024, Quinn Emanuel Urquhart & Sullivan UK LLP (“Quinn Emanuel”), solicitors for Allwyn, wrote to BCLP raising similar issues and confirming Allwyn’s intention to seek an order for security for costs in the event of failure of the claim.[8]Correspondence then ensued over the course of several months, during which BCLP explained that the Second Claimant intended to meet any future costs liability from the substantial assets available to it from within its corporate group, the Northern & Shell PLC Group (“the Group”), specifically from a wholly owned subsidiary called Northern & Shell Properties Limited (“N&S Properties”). The parties engaged in discussions as to the terms of suitable security but, on 26 March 2025, the Commission issued an application for security for costs (“the GC Application”). This was swiftly followed by a similar application from Allwyn (“the IP Application”).[9]The Claimants oppose both applications. In respect of the IP Application, they contend that Allwyn lacks standing to bring the application, or put differently, that the court lacks the necessary jurisdiction to grant it. The Claimants accept that the Commission has standing (as Defendant in the proceedings) to bring the GC Application, but they submit that there is no reason to believe that the Claimants will be unable to pay the Commission’s costs if ordered to do so – i.e. the threshold ‘impecuniosity condition’ for the grant of security for costs is not met. If they are wrong about Allwyn’s lack of standing, the Claimants repeat this argument in opposition to the IP Application.[10]In the event that, contrary to the Claimants’ arguments, the court finds that the threshold condition is met in relation to the GC Application, the Claimants offer a Guarantee to be provided by N&S Properties in the sum of £15 million (the terms of which are acceptable to the Commission). The Claimants are prepared to give similar security to Allwyn in the event of the IP Application being successful, albeit that the guarantee from N&S Properties would be limited to £4.6 million having regard to alleged delay in making the IP Application.[11]If the court considers it necessary and appropriate, the Claimants have offered to provide an undertaking to the court in terms to which I shall return in a moment.[12]There was debate at the hearing over whether (subject only to arguments as to costs) the Claimants and the Commission had effectively compromised the GC Application in correspondence shortly before the hearing. The Claimants deny this is so on the basis that in all of their open negotiations with the Commission over the terms of the proposed Guarantee they have always maintained the position that the Commission has no entitlement to security. Beyond observing that it is perhaps unfortunate that the court has been troubled with the merits of the GC Application in circumstances where the parties to that application appear to have found a satisfactory means of resolving the issue without the need for any payment of money into court, I need say nothing further about this at present. It is no doubt an issue that will feature in both sides’ arguments on costs in due course.[13]The hearing was listed for half a day, which I observed at the outset was very tight. The parties had sensibly agreed that they would limit their submissions so as to ensure that they each had a similar amount of time, but this meant that it was only possible to deal swiftly with the authorities on which particular reliance was placed and there was little reference to the evidence filed by each party. I have read all of that evidence and take it into account in this judgment, but, in common with the parties, I do not propose to deal with it in more detail than is necessary.[14]Against that background I turn first to address the applicable legal principles.

Legal Principles

[15]CPR 25.26 provides:
“(1) A defendant to any claim may apply for security for their costs of the proceedings. (2) An application for security for costs must be supported by written evidence. (3) Where the court makes an order for security for costs, it must determine the amount of security, and direct the manner and time within which the security must be given.”
[16]CPR 25.27 then sets out the conditions that are to be satisfied if an order for security for costs is to be made. The Court may make an order for security for costs if:
“(a) it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order; and (b) either an enactment permits the court to require security for costs, or one or more of the following conditions apply— … (ii) the claimant is a company or other body (whether incorporated inside or outside England and Wales) and there is reason to believe that it will be unable to pay the defendant's costs if ordered to do so;”
[17]I was referred by the parties to various principles which are applicable to the court’s determination of whether “there is reason to believe that [a company] will be unable to pay the defendant's costs if ordered to do so”. The following did not appear to be controversial:a. The CPR 25.27(b)(ii) gateway, like all of the gateways in CPR 25.27, is not a question for the court’s discretion but raises an issue of fact on which the court needs to be satisfied. It is only once a case has passed through one of the gateways that the court’s discretion comes into play: Infinity Distribution Ltd (In Administration) v The Khan Partnership LLP [2021] EWCA Civ 565, [2021] 1 WLR 4630 per Nugee LJ at [30];b. The burden falls on the defendant to show that the condition at CPR 25.27(b)(ii) is made out. It is not incumbent upon a claimant to prove that it has the means to pay: Phaestos Limited and others v Peter Ho and others [2012] EWHC 622 (TCC) per Akenhead J at [71(a)(iii)];c. However, the defendant does not have to show on the balance of probabilities that the claimant will be unable to pay costs ordered against it: Jirehouse Capital v Beller [2008] EWCA Civ 908, [2009] 1 WLR 751 per Arden LJ at [26]-[29]. It need only show that “there is reason to believe” that the claimant will be unable to pay. The test is “will not be able to pay” and not “might not be able to pay” – that test is not watered down by the earlier words “reason to believe”: Eagle Ltd v Falcon Ltd [2012] EWHC 2261 (TCC) per Coulson J at [22(b)];d. If legitimate concerns about the claimants’ financial position are raised, and if the claimants “choose to provide no or incomplete information in response, that in itself can lead to a court reaching the belief that the Claimants are unable to pay”: Phaestos Limited and others v Peter Ho and others [2012] EWHC 622 (TCC) at [71(a)(iv)];e. The focus should be on the claimant’s net rather than gross assets:Pisante v Logothetis [2020] EWHC 3332 (Comm), [2020] Costs LR 1815, per Henshaw J at [53]-[56]. A claimant must therefore identify not only its liquid assets but also its current and long-term liabilities: Kompaktwerk GMBH v Liveperson Netherland [2019] EWHC 1762 (Comm), per David Edwards QC at [35];f. Illiquid assets are not a good answer to an application: Wright v Coinbase Global Inc [2023] Costs LR 1403, per Mellor J at [54(ii)];g. Whilst questions as to the claimant’s ability to pay must be decided at the time of the application, the court must consider whether there is reason to believe that a future event will occur, i.e. that the claimant will be unable to pay the defendant’s costs following trial. This calls for an assessment of what the claimant may be expected to have available for payment at that time: Thistle Hotels Ltd v Gamma Four Ltd [2004] EWHC 322 (Ch), [2004] 2 BCLC 174 per Sonia Proudman QC at [11] and Longstaff International Ltd v Baker & McKenzie [2004] EWHC 1852 (Ch), [2004] 1 WLR 2917, at [17]-[18], both citing the decision of Sir Donald Nicholls V-C in In re Unisoft Group Ltd (No 2) [1993] BCLC 532 at 534;h. Even if the impecuniosity condition is satisfied, the court’s power to award security for costs is discretionary; the overall question is whether the court is satisfied, having regard to all the circumstances of the case, that it is just to make such an[18]More controversial, as I have already alluded to, is whether the threshold impecuniosity condition is satisfied by evidence of substantial assets held by a wholly owned subsidiary over which the parent company can exercise control so as to procure the speedy realisation of cash in the event of an adverse costs order. I shall return to this question when I deal with the GC Application.

The IP Application: Jurisdiction

[19]The IP Application is supported by two witness statements from Dominic Roughton of Quinn Emanuel, “Roughton 4” and “Roughton 7”. Although the draft Order attached to the IP Application seeks an order under CPR 25, alternatively CPR 3.1, Roughton 7 explains that Allwyn accepts that it has no “automatic entitlement” to seek an order for security for costs under CPR 25. Consistent with this concession, Mr Birdling, on behalf of Allwyn, realistically accepted during his oral submissions that CPR 25.26 expressly applies only to “a defendant” (defined in CPR 2.3(1) as “a person against whom a claim is made”) and that, accordingly, it could not apply to an interested party such as Allwyn.[20]Nevertheless, Mr Birdling submits that the court’s jurisdiction does extend to making orders for security for costs in favour of interested parties by reason of the provisions of CPR 3.1 and the court’s inherent jurisdiction. Specifically he relies upon the general case management powers of the court under CPR 3.1(2)(p) to “take any other step or make any other order for the purpose of managing the case and furthering the overriding objective…” save where the Rules provide otherwise. This provision, he submits, is broad enough to encompass the making of an order for security for costs in favour of an interested party, particularly where, as here, Allwyn has extensive rights of participation in the proceedings and the court can “be confident” that it is likely to be awarded its costs in the event that the claims are dismissed (see International Game Technology PLC v The Gambling Commission [2023] EWHC 2226 (TCC) per Coulson LJ at [24]-[26]).[21]Having carefully considered the authorities on which Mr Birdling relied, together with the opposing submissions of Mr Hossain KC, on behalf of the Claimants, I reject Allwyn’s case on jurisdiction. In my judgment, CPR 3.1(2)(p) does not empower the court to make an order for security for costs in favour of an interested party which would have the effect of circumventing the existing regime for security for costs in CPR 25. I set out my reasoning below.[22]It is common ground that the court has an inherent jurisdiction to make orders for security for costs (see GFN SA v Bancredit Cayman Ltd [2009] UKPC 39, per Lord Scott at [9]). However, as the Privy Council made clear in GFN (a case which involved the power of the Cayman Islands courts to make orders for security for costs, but which drew heavily upon English case law), that inherent jurisdiction is constrained by the settled practice of the court, as articulated in its procedural rules.[23]As Lord Scott explained at [9], in a passage which could equally apply to the powers of the English court: “the exercise of that jurisdiction is subject to what has become the settled practice of the court. For example, the rule that an order for security for costs will not be made against a defendant was part of that settled practice. The rule that such an order will not be made against an impecunious plaintiff was also part of that settled practice but was varied by statute in the case of impecunious corporate plaintiffs by section 24 of the 1857 Act, the statutory predecessor of section 74 of the Companies Act. Ord 23, r1, like its predecessors, specified particular circumstances in which the court may entertain an application for security for costs. The Rules of Court did not create or confer the power [to make an order for security for costs] but, rather, harnessed the power so as to control its exercise”.[24]In support of this proposition, Lord Scott referred to the judgment of Dillon LJ in CT Bowring & Co (Insurance) Ltd v Corsi & Partners Ltd [1994] BCC 713. When considering the court’s power to make security for costs orders at the time when section 24 of the 1857 Act was enacted, Dillon LJ referred in that case to:
“the general rule of practice that a party who desires to litigate a claim shall not be prevented by the court from doing so, at any rate at first instance, on the grounds of poverty…”
. Lord Scott observed at [10] that “[t]his was a recognition of an inherent jurisdiction in the court to make security for costs orders and to rules of practice, established by case law, as to circumstances in which that jurisdiction could properly be exercised”. He went on to say that this reading was reinforced by Dillon LJ’s remark (when considering the effect of the then RSC Ord 23, r 1) that: “To add a new category, not covered by any enactment, to those listed in rule 1(1) in which a plaintiff can be ordered to give security would now be a matter for the Rules Committee, and not for the discretion, as a matter of inherent jurisdiction, of the individual judge in the individual case”.[25]In light of this analysis, Lord Scott went on to identify at [15] that the critical issue in the case before the Privy Council was not whether the court had jurisdiction to make the security for costs order sought by the liquidators in that case, but whether it would be proper to make such an order in connection with interlocutory applications made against the liquidators by debtors whose proofs of debt had been rejected by the liquidators. Specifically the question was whether such applications fell within the concept of “proceedings” (i.e. an originating process) as identified in the relevant statute and rules of court. Lord Scott held that they did, referring to a concession from counsel that the applications were “in substance” originating applications and pointing out that the substance of the proceedings and not their form was key: “If a defendant in proceedings commenced by originating summons were to make, by ordinary summons, a claim for relief that constituted, in effect, a counterclaim, and that was not, to borrow Dillon LJ’s words in the CT Bowring case…a mere formulation of its defence, I would regard as mere pedantry the proposition that a security for costs application could not be entertained because the ordinary summons was not a form of originating process”.[26]Lord Neuberger agreed, saying this at [30]: “…the court has an inherent jurisdiction to order security for costs, and, while that jurisdiction is essentially discretionary, the discretion must be exercised not merely in a generally judicial manner, but in a manner which accords with the settled practice of the court, as circumscribed or extended by primary or secondary legislation”.[27]As Mr Hossain points out, the CPR contains specific rules of procedure which capture the settled practice of the court in relation to security for costs. These rules are contained in CPR 25.26 and CPR 25.27, referred to above. However, as I have said, Allwyn does not contend that it can bring itself within these provisions and does not seek to make a “substance not form” argument in relation to them – this would be difficult where an interested party which has applied to participate in proceedings is quite obviously not in the same position as a defendant. Instead Allwyn seeks to rely upon a number of authorities (Olatawura v Abiloye [2002] EWCA Civ 998, Lazari v London & Newcastle (Camden) Ltd [2013] EWHC 97 (TCC) and The Royal Bank of Scotland Plc v Thomas O. Hicks [2012] EWCA Civ 1665) which it contends acknowledge the existence of a very broad jurisdiction under CPR 3.1 and demonstrate that the court’s approach to orders for security for costs made outside the scope of CPR 25 is not to be hidebound by technical distinctions but is to be guided by the principles of the overriding objective.[28]In Olatawura, the Court of Appeal considered the scope of CPR 3.1 in connection with an appeal by a claimant from an order that his claim be dismissed unless he paid a specified sum of money into court. Simon Brown LJ identified the question under appeal as whether, if at all, the court should make orders for security for costs outside the provisions of CPR Part 25. Having considered the provisions of CPR 24 and CPR 3.1 he responded to this question (at [19]) in the affirmative, saying that the individual rules to which he had referred “admit of no other possible conclusion”. However, it is important to note that (aside from the provisions of CPR 24) he focussed for these purposes specifically on(i) CPR 3.1(3) which allows the court to make any order conditional upon (amongst other things) the payment of money into court;(ii) CPR 3.1(5) which empowers the court to order a non-compliant party to pay money into court; and(iii) CPR 3.1(6) which requires the court in exercising that power to have regard to the costs incurred and to be incurred. It was in this context, that he went on to say at [24] that “…the court has an altogether wider discretion to ensure that justice can be done in any particular case”. I do not read this as a more general observation as to the breadth of the court’s discretion to order security for costs in any case not contemplated by the express provisions of the Rules.[29]Mr Birdling specifically drew my attention to a passage at [25] where Simon Brown LJ said this: “a party only becomes amenable to an adverse order for security under rule 3.1(5) (or perhaps 3.1(2)(m) [the predecessor to rule 3.1(2)(p)]) once he can be seen either to be regularly flouting proper court procedures (which must inevitably inflate the costs of the proceedings) or otherwise to be demonstrating a want of good faith…”.[30]However, this is hardly a ringing endorsement for the use of CPR 3.1(2)(p) (as it now is) as a means of circumventing the provisions of CPR 25 and, what is clear, is that there was no analysis by the Court of Appeal of the powers exercisable under CPR 3.1(2)(p). The focus of Olatawura, in my judgment, was on the exercise of the powers in CPR 3.1(3) and CPR 3.1(5). I do not consider it to be authority for the exercise of a very general discretion to order security for costs under CPR 3.1(2)(p), even in circumstances (such as where an interested party is seeking such security) which existing rules of practice specifically directed at the procedure for making orders for security for costs would not permit.[31]In Lazari v London & Newcastle (Camden) Ltd [2013] EWHC 97 (TCC), the claimant was seeking a conditional order under CPR 3.1 that the defendant pay a sum into court, in default of which it be debarred from defending the claim. In considering this application, Akenhead J set out various provisions within CPR 3.1 (including CPR 3.1(2)(m) – now CPR 3.1(2)(p); CPR 3.1(3); CPR 3.1(5) and CPR (6A) which provides that where money is paid into court under paragraphs (3) or (5) it shall be security for any sum payable by that party to any other party in the proceedings). He also set out lengthy extracts from the decision in Olatawura and another decision of the Court of Appeal in Huscroft v P&O Ferries Ltd [2010] EWCA Civ 1483 in which Moore-Bick LJ expressed the view that the court in Olatawura was concentrating primarily on the court’s power to order a payment into court under rule 3.1(5) and observed at [18] that “[t]he court has ample powers under rules 3.1(2)(m) and 3.3 to make whatever orders are needed for the proper management of the proceedings”. Akenhead J concluded at [25] that: “(a) CPR r.3.1 gives the court very wide powers of case management which are additional to, albeit that they may complement or supplement, other powers given to the court elsewhere in the rules or within the inherent jurisdiction; (b) these are powers given to the court to secure the overriding objective…; (c) CPR 3.1 empowers the court to order either a claimant or a defendant to provide security for costs and this is in addition to CPR Pt 25…Security should generally only be ordered where a respondent party has regularly flouted proper court procedures…or otherwise is demonstrating a want of good faith… (d) there are no hard and fast rules, however. An order for payment in does not have to be classified as security for costs. An underlying consideration is the need for the court to exercise a degree of control over the future conduct of the litigation. However, r 3.1(3) is to be deployed to enable the court to grant relief on terms, and when the power is exercised the condition ought properly to be expressed as part of the order granting the specific relief to which it relates”.[32]Contrary to Mr Birdling’s submissions, I do not understand these passages to support his contention that CPR 3.1(2)(p) empowers the court to make an order for security for costs against an interested party. The first two paragraphs are very general. In [25(c) and (d)], I understand Akenhead J to be referring specifically to the powers in CPR 3.1(3), (5) and (6A) to which he had referred earlier in the judgment and his reference to there being “no hard and fast rules” must be seen in that context – i.e. once a case falls within those provisions, then there are no hard and fast rules as to the approach the court must take. It is not, as Mr Birdling submitted, a more general observation as to the powers of the court under CPR 3.1(2)(p) (as it now is).[33]In Royal Bank of Scotland, the court was faced with an application for security for costs in connection with an appeal, an application which would normally be covered by the provisions of CPR 25.29 (or CPR 25.15 as it was at the time of this case). However, the court had ordered that the application for permission to appeal should be heard with the appeal to follow if permission was granted and, in those circumstances, there was no appeal and CPR 25.15 did not apply. Lewison LJ instead looked to the general powers conferred upon the court by CPR Part 3.1, including specifically CPR 3.1(2)(m) (i.e. CPR 3.1(2)(p) as it now is) and said this at [13]-[14]: “13. …CPR 3.1(2)(m) is a perfectly general provision, which the court must exercise in order to further the overriding objective. The overriding objective is, by and large, hostile to highly technical points. In my judgment, the fact that, because of the way in which this court has dealt with the application for permission to appeal, CPR 25.15 is not engaged is a purely technical point. 14. In my judgment the court does have jurisdiction to order security for costs in accordance with the decision of this court in Great Future International Limited v Sealand Housing Corp [2003] EWCA Civ 682. Had this been a full blown application under CPR 25.15, I have no doubt that I would have ordered security for costs. By analogy, I consider that it would be right to exercise the power under CPR 3.1 to order the provision of security”.[34]During the hearing I did not have access to the case of Great Future International on which Lewison LJ placed reliance in this passage, but it was provided to me by the parties to the IP Application after the hearing, together with very short additional submissions, for which I am grateful. In that case, a similar situation arose, albeit that a stay of the application for permission to appeal was being sought pending a payment into court together with a request for security for costs. CPR 25.15 was not available. Waller LJ pointed out in his judgment that there is no provision in the Rules which deals with what should happen where an application for permission has been adjourned to an oral hearing with an appeal to follow and, citing Olatawura, he expressed the view that the Court of Appeal had jurisdiction to make the orders sought.[35]Mr Birdling contends that these two decisions confirm that the court has jurisdiction to make the order sought by Allwyn, notwithstanding that it is not a ‘defendant’. By analogy with the facts of these cases, he submits that the point taken by the Claimants in opposition to the IP Application is “purely technical” and that these cases illustrate that the court has power to make orders under CPR 3.1(2)(p) to fill a lacuna in the Rules. In these cases, he submits, there was a lacuna in the Rules as to the provision of security before an application for permission to appeal had been made; in the present case there is a lacuna because no express provisions are made in the Rules as to the ability of a party (other than a defendant) to obtain security.[36]To my mind, however, and consistent with the submissions of Mr Hossain, there is no analogy to be drawn between the cases of Royal Bank of Scotland and Great Future International and the facts of this case. Those cases were dealing with a lacuna in the Rules caused by a departure by the Court of Appeal from its standard appeal processes. CPR 25.29 (then CPR 25.15) is intended to provide cost protection to a respondent to an appeal, just as CPR 25.26 is intended to protect a ‘defendant’ to a claim. Owing to the approach to the appeal taken by the Court of Appeal, the respondents in those cases would, absent intervention, have been deprived of the protection of CPR 25.29. The court’s intervention was therefore purely a “technicality” in the sense that it involved no material extension to the beneficiaries of the underlying rule. Put another way, the court’s intervention was designed to address the fact that the substance of the proceedings was an appeal, involving a respondent to an appeal who would be at risk of costs; to borrow Lord Scott’s words, it might appear to be mere “pedantry” to take a different view.[37]By contrast, the application in this case is not dealing purely with a technicality – it certainly cannot be said that it is seeking to address a lacuna in the Rules created by an order of the court. On the contrary, CPR 25.26 expressly excludes non-defendants from its application (as Mr Birdling accepts) and I agree with the Claimants that an obviously deliberate exclusion cannot be characterised as creating a lacuna; just as overriding that exclusion in the circumstances of this case cannot be described as a “mere technicality”.[38]Finally, I also agree with the Claimants that it is important to have regard to the prefatory words of CPR 3.1(2) which make clear that the court may exercise its powers under CPR 3.1(2), “[e]xcept where these Rules provide otherwise”. In Royal Bank of Scotland and in Great Future International the rules are silent as to the procedure to be adopted where an application for permission to appeal is adjourned to an oral hearing and where the appeal is to follow, and accordingly silent as to applications for security in such a situation – there genuinely appears to be a lacuna. By contrast, it is to be anticipated that if the draftsmen of the Rules had intended interested parties to be able to obtain security for costs, appropriate provision would have been made for that in CPR 25. Yet, there is no existing procedure for interested parties to obtain security for costs and the specific rules relating to security for costs in CPR 25.26 are carefully and restrictively drafted to exclude anyone other than a defendant from making an application for security. There is good reason for this. As Millett LJ observed in CT Bowring at 728, “A plaintiff chooses to sue and voluntarily assumes the risk that he may not recover his costs if he is successful; a defendant has no choice in the matter. The rule, which represents a settled practice of the court for over 200 years, is made explicit by the terms of s. 726 and O.23. In my view it must now be regarded as going to the jurisdiction of the court”. As Lord Scott explained in GFN at [11], Millett LJ’s final sentence here “should not be taken to be referring to jurisdiction in its strict sense but rather to the limits on the exercise of jurisdiction that had become established by the ‘settled practice’ of the court”.[39]While CT Bowring was decided prior to the CPR and was not concerned with the question of whether an apparently general provision in the Rules was sufficient to empower the court to order security for costs in a novel case, and while Lord Scott indicated that he should not be taken as necessarily agreeing with the result in CT Bowring, the Privy Council nevertheless approved relevant extracts from the judgments of both Dillon LJ and Millett LJ, as referred to above. Neither of the parties to the IP Application has found any authority in which security for costs has previously been awarded in favour of an interested party and there can, in my judgment, be little doubt that the settled practice of the court (as exemplified by the Rules) is that security for costs under CPR 25 can only be awarded in favour of ‘a defendant’.[40]While an interested party might now be able to bring itself within the provisions of CPR 3.1(3) and/or 3.1(5) in appropriate circumstances, those provisions are not relied upon for the purposes of this application and in any event contemplate scenarios which are far removed from an application by an interested party for security for costs. The authorities which have considered the scope of these rules have not, in my judgment, contemplated the existence of more general powers in respect of the grant of security for costs which extend beyond their express provisions.[41]In all the circumstances, I can see nothing in the Rules or in the authorities to which I have been referred to support the proposition that it would be proper for me simply to ignore the longstanding practice of the court and make an order for security for costs in favour of Allwyn. Although in theory an inherent jurisdiction exists, as confirmed by the Privy Council in GFN, it is not unfettered and there is nothing in the Rules which provides the court with power to make such an order. I reject Allwyn’s case that the provisions of CPR 3.1(2)(p) have that effect. I respectfully adopt the position taken by the Court of Appeal in CT Bowring that, if there is to be an expansion of the Rules to cover applications for security for costs by interested parties, that must be a matter for the Rules Committee or for Parliament.[42]For all the reasons I have given, I reject the IP Application. By way of postscript, I observe that, in his skeleton argument, Mr Birdling sought to rely upon the recent Privy Council decision in Responsible Development for Abaco Ltd v Christie [2023] UKPC 2; [2023] 4 WLR 47. However, on his feet, Mr Birdling accepted that in that case, the Privy Council was not concerned with whether the court has power to order security for costs in favour of an interested party and he accepted that the decision was “neutral” and not relevant to the question of jurisdiction which arises in this case. Accordingly there is no need for me to consider it further.

The GC Application

[43]It is common ground that the key question arising on the GC Application is whether the threshold condition has been met; i.e. whether there is reason to believe that the Claimants will be unable to pay the Commission’s costs if ordered to do so. The Commission estimates its costs at approximately £22 million in total, albeit that it seeks security in the sum of £15 million.[44]The Commission relies upon the evidence in the ninth (“Dickey 9”), tenth and twelfth witness statements of Jennifer Louise Dickey, a partner at Hogan Lovells. For present purposes I summarise the points made in Dickey 9 which are relevant to the satisfaction of the threshold condition as follows: The First Claimant:a. The First Claimant is the special purpose entity set up by the Group for the sole purpose of the Competition. It does not trade and its only activity is pursuit of this litigation. Company accounts for the First Claimant to 31 December 2023 show that the First Claimant had net liabilities and net current liabilities of £1.7 million for both the years 2022 and 2023. With no source of income, the First Claimant had net current liabilities of circa £1.7 million due and payable in 2024. Without further evidence as to the First Claimant’s financial position it is unclear whether it remains solvent but given that it does not trade, it is apparent that it will be unable to pay the Commission’s costs if ordered to do so. The Second Claimant:b. The Second Claimant is a publicly listed company and the ultimate parent company of the Group which comprises approximately 16 subsidiary companies. Each of these subsidiary companies is a private limited company which is wholly owned, directly or indirectly, by the Second Claimant. The Second Claimant’s annual accounts to 31 December 2023 demonstrate that it has limited tangible assets (£5.8 million as at that date, of which £5.1 million is related to land and buildings) with the vast majority of its assets (£174.5 million) being held in investments in subsidiary companies. Ms Dickey expresses the view (based on advice from colleagues in the Hogan Lovells corporate team) that it is unlikely that these investments could be sold quickly.c. The Second Claimant made a loss of £15.9 million during 2023, following a loss of £28.8 million in 2022; the accounts also suggest that it will make a substantial loss in 2024, as illustrated by its significant net current liabilities of circa £40 million. The Second Claimant’s cash reserves were limited: £7.8 million as at 31 December 2023 and £4.3 million in the preceding year. Ms Dickey observes that any available cash reserves are likely to be used up in paying the Claimants’ own legal costs (estimated at £15 million). She says that given the content of the audited accounts there is reason to believe that the Second Claimant will be unable to pay the Commission’s costs if ordered to do so.[45]In response, the Claimants rely upon the fifth witness statement of Graham Shear (“Shear 5”), a partner at BCLP. Mr Shear provides detailed (and, at times, confidential) information as to how the Group operates. Trying to summarise this information as briefly as possible:a. Mr Shear’s central thesis is that the Commission has failed to take account of the financial position of the broader Group, which he describes as being a sophisticated and mature business group “with decades of commercial track record, including owning a number of high profile businesses”. The Group is involved in property development and investment and has very extensive resources available to it, including worldwide asset investments in liquid funds (which Mr Shear describes as “near cash”).b. Mr Shear exhibits a confidential copy of consolidated Group unaudited management accounts as at 31 March 2025 which amply support his evidence and show very substantial sums in cash at bank and in hand. He explains that details of the Group’s investment assets are confidential but he confirms from information he has seen about those assets (which are held by N&S Properties) that they include “liquid investment assets easily sufficient to satisfy any adverse costs order”. He confirms on instructions from a named director that these investment assets “can be drawn upon quickly and are realisable within a matter of days”. He also explains that N&S Properties essentially acts as a finance vehicle for the remaining companies within the Group and that cash is transferred from N&S Properties as required to meet specific liabilities. This is all done informally owing to the fact that the Group is privately owned and that the Group companies have directors in common with appropriate authority. He gives additional evidence about policies employed by the Group to ensure that cash is available as and when required and he responds to concerns raised by the Commission about debts owed by N&S Properties, explaining that the Group has no external debt and that there is no realistic prospect of intercompany balances impacting upon external creditors.c. Mr Shear explains that given the amount of cash at bank and in hand (which remains at a stable level) a costs bill of £15 million could be paid “within a day”. He confirms from personal experience that BCLP’s invoices are consistently paid promptly.d. Mr Shear dismisses the risk that the Claimants would be put into liquidation to avoid a costs award as “illusory” having regard to the profile of the Group and the fact that any such award would represent only a very small proportion of the Group’s liquid assets. The directors firmly reject the suggestion that they would act in such a way.e. As to the position of the individual Claimants, Mr Shear confirms that the Claimants accept that the First Claimant would not, in its present position, be able to satisfy a costs award “on its own”, but contends that it is part of the wider corporate Group and that, accordingly, its financial position should not be considered in isolation because, considering it in isolation “would lead to erroneous conclusions about the status of the Group”. Mr Shear records his instruction from a director of the Second Claimant, that “the Directors fully intend to continue providing funds to the First Claimant as required”, and that this is consistent with the “treasury” type function undertaken by N&S Properties. He goes on to say that this situation is not unusual for an SPV and that no conclusions can therefore be drawn from a review of the First Claimant’s audited accounts.f. As for the Second Claimant, Mr Shear points out that its assets include the very substantial current asset investments and net current assets shown in the 31 March 2025 unaudited accounts. He says that the loss shown in the 2023 audited accounts relied upon by the Commission falls away when the accounts are consolidated and that one cannot consider the Second Claimant’s cash position without regard to the position of the wider Group. He disputes the suggestion in Dickey 9 that the First Claimant is unable to realise assets quickly – reiterating N&S Properties’ ability to do so and he confirms that the current assets are “more than sufficient” to meet any Group losses and all possible costs liabilities arising from the litigation”.g. Mr Shear confirms on instructions that there is currently no expectation of any extraordinary or unusual losses for the Group in the next 18 months and no expectation of any material change in investment and trading strategy.h. Finally, Mr Shear says that he is instructed that the Second Claimant would be willing, should the court consider it necessary and appropriate, to provide an appropriate form of undertaking to the Court that(a) it will call on N&S Properties (as its sole shareholder) to liquidate an appropriate level of assets, should that be needed to meet any adverse costs award against it and will procure that the requisite cash is provided and that(b) it will ensure that the First Claimant is placed in funds by a similar type of asset liquidation that it will direct N&S Properties to make, in the event of a costs order against the First Claimant.[46]Save that in oral submissions the Commission disputes the evidence in Shear 5 to the effect that the chances of the Claimants being put into liquidation are ‘illusory’ and save that it casts doubt over whether the Second Claimant would in fact exercise the control it has over N&S Properties so as to liquidate funds in the event of an adverse costs order, the evidence in Shear 5 which I have summarised above is not materially challenged by the Commission. Neither Dickey 10, nor Dickey 12 seeks to take issue with that evidence. Thus the only question for this court is whether the apparently strong financial position of the Group as a whole, the asset-rich status of N&S Properties and its ability (upon request from its parent company) to liquidate those assets swiftly and to distribute them as appropriate to other Group members is capable of rebutting what would otherwise appear to be an inevitable conclusion as to the likely impecuniosity of the First and Second Claimants (when viewed as independent entities) as at the date of any adverse costs order.[47]Ms Oppenheimer KC, on behalf of the Commission, points out (correctly) that neither Claimant has seriously contested the proposition that the impecunious company condition is made out against it. She contends that the fact that a claimant may be part of a group of companies whose overall financial position may be more favourable than its individual position is no answer to an application for security for costs, because what matters is the financial position of the claimant, not the companies with whom it is in an inter-company relationship. She submits that the reliance upon the Group position is misconceived because (even if it is assumed that the parent company has unfettered control over its subsidiaries, as the evidence appears to establish in this case) the evidence in Shear 5 provides no reassurance to the Commission that the funds of N&S Properties will in fact be drawn down to meet any liability of the Claimants for an adverse costs order – no enforceable mechanism for achieving this is identified. She points out that, absent the undertakings offered in Shear 5, there is nothing that requires the Second Claimant to exercise the control it has over N&S Properties. Ms Oppenheimer also submits that an undertaking from a group company to pay a claimant’s costs following trial will not defeat an application for security for costs because the offer of such an undertaking effectively concedes that the conditions for ordering security exist.[48]In response, Mr Hossain submits that the question of ability to pay is a factual question which must be determined by an evaluative judgment in light of the totality of the available evidence. He rejects the suggestion that it is a question which turns on a narrow analysis of the assets directly owned by the Claimants; instead he says it is a much broader question involving an assessment of the assets that the Claimants will be able to marshal when and if they are required to satisfy an adverse costs order. He relies upon the evidence in Shear 5 as to the arrangements within the Group for the transfer of funds and the general operation of its business, the repeated assurances from the directors that they will make payment and the evidence of the prompt payment of BCLP’s invoices. He submits that the Commission has come up with nothing to suggest that the directors of N&S Properties, if and when asked, will not transfer to the Second Claimant sufficient sums to enable it to pay any award of costs that may be made against it. He rejects the suggestion that Shear 5 is inadequate in failing to provide sufficient reassurance in respect of payment by one company to another and he points out that the Commission has identified no authority in which a parent company has been required to give security for costs in circumstances where its wholly owned subsidiary, or its group of companies, was good for the money. He says this is unsurprising because holding companies are very often just “wrappers”, i.e. vehicles for holding operating subsidiaries, and that furthermore, corporate groups of this type very often operate with common banking facilities and manage their affairs on a group basis.[49]On balance I prefer Mr Hossain’s submissions, for the reasons he gives. There is substantial, unchallenged, evidence in this case that, in the event of the Claimants’ finding themselves on the wrong end of an adverse costs order, they will be put in funds by N&S Properties to satisfy that order. Shear 5 confirms that the swift realisation of assets is achievable and the liquid assets held by N&S Properties plainly exceed (by a very considerable margin) the total amount of any costs order that might be made against the Claimants. In the face of the evidence in Shear 5, I do not consider that I could properly find that there is reason to believe that the Claimants will be unable to pay an adverse costs order following trial. Specifically (and addressing a key issue raised by the Commission), given the evidence as to the treasury function exercised by N&S Properties, together with the explanation of the informal intercompany funding arrangements operated without the need for board meetings or resolutions, I do not consider the absence of a formal, documented, agreement or mechanism as to the transfer of funds from one company within the Group to another to be fatal to the Claimants’ opposition to the GC Application.[50]Furthermore, I am not persuaded by Ms Oppenheimer’s submission that, in the event of an adverse costs order being made, there is potential for the directors of N&S Properties to decide not to transfer funds to the Second Claimant in the proper exercise of their directors duties. I do not consider this somewhat speculative possibility (not foreshadowed anywhere in the Commission’s evidence or skeleton argument) to satisfy the requirement for the Commission to show that there is reason to believe that the Claimants will not (as opposed to may not) be able to pay an adverse costs order. As Mr Hossain submitted, this contention might have traction if the subsidiaries within the Group were in danger of insolvency such that the directors’ duties to creditors were engaged. But there is no suggestion of that in the evidence – the Group is profitable and has virtually no external debt. There is also no evidence before the court of any proposed change of strategy of the Group or any foreseen event that might affect the solvency position of the Group in 12-18 months’ time, when, if the Claimants are unsuccessful, an interim payment on account of costs and later detailed assessment may be ordered. Shear 5 confirms there is no expectation of any change in normal trading strategy over the next 18 months.[51]Similarly I can see no reason for any genuine concern over the potential for the Claimants to be put into liquidation so as to avoid paying an order for costs, and none was identified. I am inclined to accept that it is little more than fanciful to suggest that a high profile and sophisticated corporate Group with decades of commercial track record would take such a step in relation to its parent company in order to avoid a costs order which would, on any view, amount to an insignificant proportion of the Group’s total assets. The Second Claimant has the right to procure the funds to cover any costs award from its subsidiary and there is no sound basis to suppose that it will not do so, given the evidence in Shear 5.[52]The burden on this application lies with the Commission and, in my judgment, it has identified no credible reason why the payment mechanism described in Shear 5 would not be adopted in the event of an adverse costs order so as to put the Claimants into the funds necessary to enable them to satisfy that order.[53]Finally, I do not consider that the two authorities to which my attention was drawn by the Commission affect my conclusion on the GC Application.[54]The first, Eagle Ltd v Falcon Ltd [2012] EWHC 2261 (TCC) concerned an application for security for costs against a subsidiary company which was wholly owned by a second company, itself wholly owned by a third company (described in the judgment as the Osprey Group). All three companies were owned and controlled by one individual. In support of the application for security, Falcon Ltd relied upon evidence that Eagle Ltd was insolvent and that the Osprey Group, of which it was a part, had an uncertain future and few assets that it could realise quickly. There was also evidence as to the interdependence of the Osprey Group upon another group of companies (described as the Buzzard Group), also owned by the same individual.[55]Coulson J (as he then was) held that the threshold condition had been satisfied in relation to the financial position of Eagle Ltd and then made the following observation at [33] upon which Ms Oppenheimer relies: “On one view it is unnecessary for me to go on to consider whether [the impecuniosity condition] has been made out in relation to the other companies owned and controlled by Mr Allirajah. What matters is the financial position of Eagle, not the companies with whom they are in a complex inter-company relationship”.[56]However, the Judge did then go on to consider the position of other companies, finding that the financial position of the two parent companies in the Osprey Group could not give the court confidence that they could meet costs orders on behalf of Eagle and that terms of business between Eagle and the Buzzard Group, relevant to Eagle’s future performance, had not been provided. At [44] the Judge concluded that the impecuniosity test had been satisfied in relation to Eagle. At [45] he observed that the evidence in relation to the holding companies in the Osprey Group was troubling and unclear. At [47] he said that, on analysis, “the intercompany relationships in this case, which obviously underpin any potential future profitability on the part of Eagle, are not unfairly described as a ‘house of cards’”.[57]In my judgment, this case lends no support to the Commission’s position. As Mr Hossain pointed out during his submissions, it was a case involving an application for security for costs against a subsidiary company, and so was not concerned with the reverse situation in which a parent company has control, and can call upon, the assets of its subsidiaries. Although it is true that Coulson J observed that what mattered was the financial position of Eagle, I do not understand this to suggest that there will never be circumstances in which, on the facts of any particular case, the financial position of other related companies (and the arrangements between them and the claimant company) will be irrelevant to the analysis of whether there is reason to believe that a claimant company will be unable to satisfy an adverse costs order. Indeed in this context it appears to me to be of significance that Coulson J did go on to consider whether the court could have any confidence that the parent companies in the Osprey Group would meet Eagle’s costs if necessary in due course.[58]The second case on which Ms Oppenheimer relies is Longstaff International Limited v Baker & McKenzie [2004] EWHC 1852 (Ch), another case involving an application for security for costs against the claimant company, referred to in the judgment as Longstaff. Longstaff’s major asset was a 100% shareholding in another company called Redwell Ltd whose major asset was a property in the Isle of Dogs with value as a development site. Park J found that, while Redwell Ltd owned a substantial asset, that asset was substantially illiquid and incurring losses. He made a similar finding in respect of Longstaff on the grounds that it owned valuable shares in Redwell Ltd but that those shares were substantially illiquid. In opposition to the application for security for costs, Redwell Ltd offered an undertaking to the court to meet in full any liability for Longstaff’s costs that Longstaff failed to meet.[59]The Judge found that the nature of Longstaff’s asset position was such that it could not realise its assets with any degree of promptness and he observed that there was no suggestion that its shares in Redwell Ltd could be realised at short notice. Thus he concluded that the impecuniosity condition had been satisfied. He rejected a submission that the offer of the undertaking from Redwell Ltd made a difference, relying on three points at [22]-[24], as follows:
“22. First, CPR r 25.13(2)(c) applies if there is reason to believe that ‘it’ will be unable to pay the defendant’s costs if ordered to do so. “It” is the claimant company, and in this case it is Longstaff. A case cannot be taken out of sub-paragraph (c) by saying that, although the claimant company will be unable to pay the defendant’s costs, some other person will… 23. Second, the reason why Longstaff will not be able to pay [the defendant’s] costs is because Longstaff, though having a positive net asset value, is illiquid, and it seems to me the same is true of Redwell…In the circumstances it is not obvious that the offer from Redwell improves or alleviates the problem which, without Redwell’s undertaking, would be conceded to exist and to bring Longstaff within sub-paragraph (c). 24. Third, even if Redwell had large liquid assets, the offer of its undertaking would not, in my judgment, mean that the case was taken out of rule 25.13(2)(c). Rather the offer of the undertaking concedes that the conditions for ordering security for Longstaff’s potential costs liability do exist. Longstaff is, in reality, offering security in the form of an undertaking to the court from its subsidiary Redwell.”
[60]At first blush, these passages appear supportive of the Commission’s position on this application. However, on careful analysis I consider that the facts of this case are obviously distinguishable.[61]As Mr Hossain pointed out, Longstaff was not a case in which there was any evidence that Longstaff could call on Redwell to provide it with cash at any relevant time, and of course Redwell did not have any cash (a point the Judge made at [23]). The provision of an undertaking from Redwell to pay costs (even assuming it had the means to do so) was merely an undertaking from a third party, as the Judge found in [22] and effectively therefore a concession that Longstaff itself would not be able to satisfy any adverse costs order (paragraph [24]); thus it was not enough to enable Longstaff to escape from the impecuniosity condition.[62]However, in this case, the evidence shows that when and if an adverse costs order is made against the Claimants they will call upon N&S Properties to put them in funds to pay the costs themselves. Consistent with this, the offer of an undertaking is not from N&S Properties but from the Second Claimant and does not appear to me to amount to a concession that the threshold condition for ordering security exists. It reflects the evidence as to what the Second Claimant will do in the event that the Claimants are required to meet any adverse costs order following the trial. As Mr Hossain explained in his skeleton, the function of the undertaking is to provide yet further reassurance that if required to pay costs, the Second Claimant will procure the necessary payments of cash to it by N&S Properties.[63]In all the circumstances, the Commission has failed to satisfy me that the threshold condition for an award of security for costs is met in this case. Strictly, therefore, I cannot see that it is necessary or appropriate to require the provision of the undertaking offered in Shear 5 and I note from Mr Hossain’s skeleton that the undertaking is only proffered in the event that the threshold condition is met.

Conclusion

[64]For all the reasons I have given, I reject the IP Application and the GC Application. The IP Application fails for want of jurisdiction, but it would also have failed on the same grounds as the GC Application: that the court could not be satisfied that there is reason to believe that the Claimants will be unable to pay the Defendant’s and Allwyn’s costs if ordered to do so. There is nothing in Allwyn’s evidence for the IP Application that impacts upon the analysis I have set out above.[65]Given my conclusion on the two applications, there is no need for me to go on to look at factors which might have been relevant to the exercise of my discretion.

order

CPR 25.27(a).

Cited in 2 later judgments