Lords Ltd v HSBC Bank Plc  EWHC 860 (Comm)
The main action arose from an investment made by the Claimant in 2007 in two financial products (bonds or policies) issued by the Defendant with minimum terms of 5 years. The sums involved were not insubstantial.
The Claimant alleged that the bonds or policies were surrendered by the Defendant and encashed early in breach of the contractual terms between the parties.
The Claimant issued Proceedings in November 2017, but before the Defendant even filed its Defence, applied for an Order for security for costs. In support of the application the Defendant indicated that the claim was to be defended on the basis the bonds or policies were used to secure the Claimant’s indebtedness to the bank in respect of a loan and overdraft facility provided to the Claimant by the Defendant.
The Order sought by the Defendant was twofold:
An order that the Claimant provide security for costs up to and including the filing of the Defence in the sum of £38,023.85, representing costs incurred and to be incurred; and
The Defendant be permitted to serve a Defence, by way of extension of time, up to 14 days after the provision of security ordered to be provided by the Claimant.
One of the main issues in this case was whether the Defendant’s application for security for costs was premature as it had yet to serve its Defence.
CPR rule 25.13(1)(a) provides that the Court may order security for costs if “it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order”.
It was commented that although security for costs are usually sought at the first case management conference, there was
“no reason to think that it should not have been made, if the application is otherwise justified…..Nevertheless, the early stage at which the application is made may be a relevant consideration insofar as the Court has a discretion to exercise to order such security”.
Upon consideration of all relevant factors, the Court held that it was indeed just in this particular matter and accordingly, ordered security for costs to be provided by the Claimant. The amount ordered for security in this instance was £27,500.
Mr Peter MacDonald Eggers QC went on to observe that
“There is something to be said for an application for security for costs to cover the costs of a larger segment of the action at a time when more is known about the parties’ respective positions which would be revealed by their statements of case“.
Notwithstanding that, he did not consider this to be a sufficient reason for delaying the provision of security for costs given that he had found that it would otherwise be just in all the circumstances to order security.
As a side note, a similar decision was also reached in the recent case of Brainbox Digital v Backboard  EWHC 2465 (QB). In that case, Mr John Howell QC held that an order for security for costs could be made despite no Defence having been served at that point. This was on the basis that the application should be made promptly. Mr John Howell QC commented,
“There is no requirement that a defendant must first serve a Defence before making such an application. Were there to be such a requirement, a Defendant may find that an impecunious Claimant discontinues having received the defence without any provision having been made for payment of its costs“.
Food for thought, no matter which side of the fence you’re sitting.