Adam Robert Giaquinto v ITI Capital Ltd (formerly “Walbrook Capital Markets Ltd” and “FXCM Securities Ltd”)
| Jurisdiction | England & Wales |
| Judge | Master Stevens |
| Judgment Date | 10 May 2022 |
| Neutral Citation | [2022] EWHC 973 (QB) |
| Docket Number | Case No: QB-2020-001291 |
| Court | Queen's Bench Division |
[2022] EWHC 973 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Master Stevens
Case No: QB-2020-001291
Paul O'Doherty (instructed by iLaw) for the Claimants
Bobby Friedman (instructed by Rosenblatt) for the Defendant
Hearing dates: 11 th November 2021, 15 th December 2021, 31 st January 2022 (notification of agreement regarding outstanding phases of budgets)
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
INTRODUCTION
This is my judgment on a security for costs application made by the defendant against each of the four corporate claimants in this action, in the sum of approximately £85,000 each (a revised figure from that originally sought in the application of £62,733.34 each or approximately £250,000 overall). The emerging overall total requested for security therefore now amounts to £340,000, up to and including the exchange of expert evidence.
This revised sum also includes £10,250 for each of the corporate claimants for the costs of this application, and approximately £11,250 each for the further costs on the Defendant's upcoming strike out application and its application in respect of outstanding Replies to a Request for Further Information. Only the costs of the first two applications were referenced in the original witness statement supporting the application, as they were contingency costs included in the defendant's budget, but they were not referenced as additional sums to be added to the security requested. If the expert stage is reached, the defendant says it will then seek a further sum by way of security for costs up to trial. The application was made shortly before the first case management conference.
FACTUAL BACKGROUND TO THE CLAIM
The claim arises from a decision by each of the claimants to invest in an option trading strategy known as the “Protected Index Option Strategy” with the defendant's predecessor in title, FXCM Securities Limited in 2014. The investments were not successful, and the claimants lost almost the entirety of their investments. The claim is particularised in the region of £5M together with excess commission charges which may be a further substantial sum. The claimants allege the defendant is liable for those losses because, when allegedly providing them with advice and management services, it committed breaches of contract and statutory duty, was negligent and is also said to be liable in misrepresentation. The allegations are fully denied and the defendant maintains at paragraph 5.1 in its Defence that the claimants “were all highly experienced and sophisticated investors”.
PROCEDURAL CHRONOLOGY
| DATE | EVENT |
| 22.1.16 | Intimation of claim by Claimants' solicitors to the Defendant |
| 13.9.16 | Letter before action |
| 9.12.16 | Letter of response |
| 3.4.20 | Proceedings issued |
| 29.7.20 | Proceedings served |
| 13.11.20 | Defence served |
| 14.12.20 | Defendant's Request for Further Information |
| 15.1.21 | Reply |
| 5.2.21 | Response to Request |
| 5.2.21 | Notice of hearing for CCMC |
| 12.10.21 | Mediation (failed) |
| 20.10.21 | Defendant changes solicitors |
| 21.10.21 | Costs budgets exchanged |
| 28.10.21 | Security for costs application issued |
| 11.11.21 | CCMC (with request to hear application for security at the same time) |
| 15.12.21 | Hearing of application |
| 31.1.22 | Further CMC and notification that outstanding budget phases had been agreed |
| 13.5.22 | Defendant's strike out application on application dated 24.11.21 due to be heard (adjournment now agreed by consent) |
THE LEGAL TEST
i) The Civil Procedure Rules at CPR 25.12 and 25.13 set out the factors to be considered. The court may make an order for security under CPR 25.13 (1) 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) (i) one or more of the conditions in paragraph (2) applies, or
(ii) an enactment permits the court to require security for costs.
ii) The relevant conditions (often referred to as “ gateways”) under CPR 25.13 (2) are –
(a) the claimant is—
(i) resident out of the jurisdiction; but
(ii) not resident in a state bound by the 2005 Hague Convention, as defined in section 1 (3) of the Civil Jurisdiction and Judgments Act 1982;
“…..”
(c) 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;
(d) the claimant has changed his address since the claim was commenced with a view to evading the consequences of the litigation;
“…..”
(f) the claimant is acting as a nominal claimant, other than as a representative claimant under Part 19, and there is reason to believe that he will be unable to pay the defendant's costs, if ordered to do so;
Gateways
The defendant clearly set out in both its application, and skeleton argument, why the conditions were met in respect of various gateways for each of the corporate defendants, as required by the rules. On the eve of the CCMC, the claimants' solicitor filed a witness statement resisting the application but not contesting the gateway conditions. Resistance to the application was mounted on the grounds that it would not be just in all the circumstances.
Discretion
As the notes in the White Book at 25.12.5 make clear, proof of one or more grounds for seeking security does not by itself ensure that an order will be made. Therefore, the outcome of this application rests very firmly on whether I determine an order for security would be just in all the circumstances. All interim remedies within CPR 25 are discretionary, and the discretion is to be exercised judicially within a framework of case law.
The court has the widest possible discretion as to whether to award security, and if so, in what amount. In exercising its discretion, the court must seek to give effect to the overriding objective and should not impair the right of access of a party to the courts which could lead to a breach of Article 6 (1) of the ECHR.
It is as well to set out the overriding objective, which is to enable the court to deal with cases justly, and at proportionate cost, which includes so far as is practicable—
(a) ensuring parties are on an equal footing and can participate fully in proceedings, and that parties and witnesses can give their best evidence;
(b) saving expense;
(c) dealing with the case in ways which are proportionate—
I. to the amount of money involved;
II. to the importance of the case;
III. to the complexity of the issues; and
IV to the financial position of each party;
(d) ensuring that it is dealt with expeditiously and fairly;
(e) allotting it an appropriate share of the court's resources, while taking into account the need to allot resources to other cases; and
(f) enforcing compliance with rules, practice directions and orders.
Factors which may be relevant to the exercise of discretion
(1) Timing of the application
The notes in the White Book at 25.12.6 reference the Commercial Court Guide which requires the first application for security to be made no later than the first case management conference. The notes go on to say that the court may refuse an application if the delay has deprived the claimant of time to collect security, or led them to act to their detriment, or may cause hardship in the future conduct of the action. In the latter circumstance, security may be limited to future costs only.
(2) Stifling of a claim
If the effect of an order for security would prevent the respondent from continuing its claim, then it should not be ordered. The claimants did not seek to persuade me that this was a live issue at the hearing of the application so I will say no more about it. The case law is clear that “The burden is on the Claimant to establish the probability that her claim would be stifled if she were ordered to pay… security for costs” (as per Teare J at [29] in Danilina v Chernukhin & Others [2018] EWHC 2503 (Comm)).
(3) Merits
The Court of Appeal in Chernukhin v Danilina [2018] EWCA Civ 1802 at [69] held that parties should not attempt to go into the merits of the case unless it can be clearly demonstrated that there is a high degree of probability of success or failure. Whilst the witness statement filed by the defendant's solicitor in support of the application touched on merits, counsel's skeleton referred to the pending strike out application and encouraged me not to consider merits unless my determination of the matter was otherwise in the balance.
Additionally, counsel for the defendant referred me to the claimants' solicitors' letter of 2 nd November 2021 (at page 360 in the bundle) which stated “In the circumstances, we would submit that it is not appropriate for the Court to review the merits of the claim during its consideration of your client's application for security. Nonetheless, should the Court decide to consider the merits as part of its analysis of the application, we are confident that the claim is sufficiently robust to stand up to such scrutiny”.
As the claimants' skeleton argument did not address the issue further I see no need to detain myself with it now. In any event, at this pre-disclosure stage in proceedings, I have...
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Adam Robert Giaquinto v ITI Capital Ltd (formerly “Walbrook Capital Markets Ltd” and “FXCM Securities Ltd”)
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