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Stokors Sa and Others v IG Markets Ltd

Judgment Cited authorities 3 Cited in 12 Precedent Map Related
Vincent
JurisdictionEngland & Wales
JudgeMr Justice Popplewell
Judgment Date25 May 2012
Neutral Citation[2012] EWHC 1684 (Comm)
CourtQueen's Bench Division (Commercial Court)
Docket NumberCase No: 2010 Folio 1331
Date25 May 2012
Categories
Between:
Stokors Sa & Ors
Claimants
and
IG Markets Limited
Defendant

[2012] EWHC 1684 (Comm)

Before:

Mr Justice Popplewell

Case No: 2010 Folio 1331

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand

London WC2A 2LL

MR J NASH QC (instructed by Laytons) appeared on behalf of the Claimants

MR P DOWNES QC (instructed by McClure Naismith LLP) appeared on behalf of the Defendant

Mr Justice Popplewell
1

This application is made by the Defendant for security for costs of the claim brought by the First and Third Claimants, on the grounds that there is reason to believe that they will be unable to pay the Defendant's costs at the conclusion of the trial if they are ordered to do so.

2

On 1 July 2011, Steel J ordered the First and Third Claimants to provide security in the sum of £320,000 to cover the period up to completion of discovery. The Defendant's application, as it came before me today, was for a further £1.2 million or so as security for costs, security for those costs which had been incurred and were to be incurred up to the stage of the exchange of witness statements. That was calculated as 80 per cent of the estimate of the total costs after allowing for the £320,000 security already provided.

3

The largest part of that £1.2 million comprises the costs of the disclosure exercise which the Defendant contends should be further secured notwithstanding Steel J's order because the disclosure exercise has proved to be vastly more extensive and complex than had been contemplated and had been within the parties' contemplation at the time of the hearing before Steel J.

4

During the course of the hearing, the application has been refined and confined to being only for security for costs of the disclosure exercise itself. That is the application that is currently before me. If there is a subsequent application at some later stage for security in respect of a later stage of the proceedings, then it will be open for the Claimants at that stage to suggest it was made too late and that submission can be evaluated in the light of the circumstances which then exist.

5

In approaching the task of determining the appropriate amount of security, I have in mind the following principles. Firstly, that under CPR 25.13(1)(a), the court's discretion to award security is a discretion to award it an amount which it considers just, having regard to all the circumstances of the case. The appropriate amount will generally be the sum which the court considers the applicant would be likely to recover in a detailed assessment if awarded its costs on a standard basis following the trial (see, for example, Procon (Great Britain) Limited v Provincial Building Company Limited & Anor [1984] 1WLR 557).

6

Secondly, on such an application what the defendant will recover on an assessment are such costs as are reasonably and proportionately incurred, and reasonable and proportionate in amount, having regard in particular to the factors which are set out in CPR 44.5(3). I observe that in relation to a number of those factors, the particular circumstances of this case would point to costs being recoverable on a more generous scale or in a more generous amount than in other cases. In particular, the factors include: (b) the amount or value of any money or property involved: the amount at issue in this case is very substantial, now something not far short of €100 million; and (c) the importance of the matter to all the parties: it is apparent from what I have seen that the parties to this case treat the dispute as a matter of high importance involving, as it does, not only large sums of money but also serious allegations of dishonesty against individuals, which are having a significant effect on their personal and professional lives.

7

I also bear in mind that although the exercise required looks forward to what will happen at a detailed assessment of costs, it is not the task of the court when hearing an application for security to undertake a similar exercise, to seek to carry out a detailed assessment. It is necessary to approach the evidence about the amount of costs which have and will be incurred, and their reasonableness or otherwise, on a robust basis and applying a broad-brush.

8

The next matter of principle which I bear in mind is that where the court is asked to choose between rival contentions which it cannot and should not seek to decide definitively on disputed evidence, it is right to have in mind the nature and degree of prejudice which might fall on each party if the figure turns out to be on the one hand too high, or on the other hand too low. If a defendant is under-secured, the likelihood is that that defendant will be prejudiced by the amount of the shortfall in security because that is the amount of costs which it is unlikely to be able to recover. If on the other hand the defendant is provided with excessive security so that it is over-secured, the excessive security will ultimately be returned to the claimant. In those circumstances, the prejudice to the claimant in providing excessive security is not the whole amount of the excess but only potentially the cost to the claimant of providing that excess, to the extent that such cost proves to be irrecoverable.

9

Assuming it to be irrecoverable, which I do not decide, the financial impact of getting it wrong in the defendant's favour is therefore usually less, indeed usually much less, compared with the financial impact of getting it wrong in the claimant's favour. That factor, which is sometimes referred to as the balance of prejudice, is usually the reason for resolving any doubts in favour of a defendant rather than a claimant. This is all the more so in a case to which paragraph 5 of Appendix 16 of the Commercial Court Guide applies (2A-185). That paragraph provides, in appropriate cases, that an order for security for costs may be made on terms that the applicant gives an undertaking to comply with any order that the court may make if the court later finds that the order for security for costs has caused loss to be suffered, and the claimant should be compensated for such loss. Such undertakings are intended to compensate claimants in cases where no order for costs is ultimately made in favour of the applicant.

10

In my view, this is a case in which it would be appropriate for an undertaking to be given. That is because the First and Third Claimants are trading companies whose business is trading in highly leveraged products, and who might well be in a position to say that the loss to them of paying money into court by way of a security is a far greater loss than the interest which is earned on it.

11

I have been told that there was correspondence between the parties as to whether the Defendant was prepared to give such an undertaking. It was refused in correspondence and Mr Downes QC, on the Defendant's behalf, indicated to me that the Defendant was not prepared to give such an undertaking.

12

In those circumstances when I come to resolve any matters which are in doubt, it seems to me that the balance of prejudice is not one which is tipped in favour of the Defendants and I have to do the best that I can on disputed issues without resolving doubts in favour of either party.

13

The next matter of principle which is important is that where a security for costs up to a particular stage of proceedings has already been provided, a defendant who applies to increase the amount of security for the costs of that same stage in proceedings will generally have to justify a further order by reference to circumstances which did not exist or were not apparent at the time the order was made. For it to be just to order further security, a defendant will generally have to show a material change of circumstances from those which pertained or were envisaged when the matter was before the court making the order. Otherwise the court is simply being asked to reconsider a decision made on the basis of arguments which were made or could have been made at the time (see CPR 25.12.1 and Republic of Kazahkstan v Istil Group Inc [2006] 1WLR 596 at paragraph 32).

14

The last matter of principle which I take into account relates to the investigation of the merits of the case. Paragraph 4 of Appendix 16 to the Commercial Court Guide (2A–184) says this:

"Investigation of the merits of the case on an application for security is strongly discouraged. It is usually only in those cases where it can be shown without detailed investigation of evidence or law that the claim is certain or almost certain to succeed or fail will the merits be taken into consideration."

15

In this case, the change in circumstances which is alleged by the Defendant is that the disclosure exercise has turned out to be a vastly longer, more complex and more expensive exercise than was or could have been envisaged in the estimates put before Steel J. Accordingly, the approach which I adopt is firstly to identify what are the additional costs of the disclosure exercise which are now estimated over and above the costs of that exercise estimated when the matter was before Steel J, then to determine whether there has been a significant and material change of circumstances in the disclosure exercise which makes it just to award further security for the costs of the disclosure exercise, and then, if so, to determine how much of the additional cost of the disclosure exercise, both incurred and anticipated, should form the subject matter of further security.

16

The additional costs of the disclosure exercise are about £725,000. Before...

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