Premier Motorauctions v PwC & Lloyds  EWCA Civ 1872
In the recent case of Premier Motorauctions v PwC & Lloyds  EWCA Civ 1872 the Court of Appeal held unanimously that ATE insurance did not constitute sufficient security for costs and accordingly that ATE insurance did not remove the jurisdiction to order security.
The decision overturned the High Court’s previous ruling that the ATE insurance meant that there was no jurisdiction to order security for costs.
The Defendant sought an order for security for costs. CPR 25.13 provides that the Court may make an order for security for costs if it is satisfied, having regards to all the circumstances of the case, that it is just to make such an order and that one of the factors in Paragraph 2 applies. In Premier Motorauctions the Defendant sought security on the basis that Paragraph 2(c) applied, which states:
“the claimant is a company or other body (whether incorporated inside or outside Great Britain) and there is reason to believe that it will be unable to pay the defendant’s costs if ordered to do so.”
Despite the Court of Appeal ruling that that ATE insurance did not constitute sufficient security on this occasion the Claimant’s submission that the ATE insurance obtained should not be considered at all was rejected. The Court decided that it should be considered whether the particular ATE insurance in this case gave the defendants sufficient protection.
Accordingly, an ATE insurance policy should be considered when deciding whether to order security for costs and it seems that if a Court opines that a particular policy does provide sufficient protection, in theory the policy could be an answer to an application for security. The key issue is therefore whether the ATE insurance provides sufficient protection.
In Premier Motorauctions the key consideration in deciding whether the policy provided sufficient protection was the absence of anti-avoidance provisions. As a result of the anti-avoidance wording the premium was not deemed to provide sufficient protection and accordingly, despite having ATE insurance the Claimants were ordered to provide security for costs in the sum of £4 million.
This case illustrates the importance of the terms of an ATE policy. The wording must be checked carefully to ensure there are no terms which would render the policy insufficient to provide the required protection, the presence of which would potentially place you at risk of an order requiring you to provide an additional security for costs. This should be a decision also considered carefully by ATE providers when looking to set terms for cover.