Security for Costs – the appropriate test to apply
BESTFORT DEVELOPMENT LLP & ORS v RAS AL KHAIMAH INVESTMENT AUTHORITY & ORS (2015)
The appropriate test to apply when deciding whether to make an order for security for costs under CPR r.25.13(2)(a) is whether it was “likely” that there would be obstacles to or burdens of enforcement in the foreign jurisdiction, and not whether there was a “real risk” of such obstacles or burdens arising.
The Defendants appealed against a refusal of their application for security for costs against the Claimants.
The Defendants had sought security for costs under CPR r.25.13(2)(a) on the basis that the Claimant companies were resident in Georgia and so not resident in the jurisdiction or in a state falling within CPR r.25.13(2)(a)(ii). In refusing the application, the Master relied on Nasser v United Bank of Kuwait  EWCA Civ 1454 and Dumrul v Standard Chartered Bank  EWHC 2625 (Comm),  2 C.L.C. 661 to hold that he was not satisfied that there were likely to be obstacles to or burdens of enforcement in Georgia as compared with enforcement in a state falling within CPR r.25.13(2)(a)(ii).
The Defendants submitted, in reliance on De Beer v Kanaar & Co (No.1)  EWCA Civ 1318,  1 W.L.R. 38, that the Master had applied too high a test in considering whether there were “likely” to be any difficulties in enforcement, and that the appropriate test was whether there was a “real risk” of such difficulties arising. They contended that the cases of Texuna International Ltd v Cairn Energy Plc  EWHC 1102 (Comm),  1 B.C.L.C. 579 and AIMS Asset Management v Kazakhstan Investment Fund Ltd supported their suggestion that the test was not one of likelihood but one of real risk.
(1) Reading the judgment of Nasser as a whole, it was clear that the Court had considered whether obstacles or burdens to enforcement were likely to arise rather than whether there was a real risk of them arising, Nasser considered. The cases relied on by the Defendants had not specifically considered the correct test to be applied, De Beer, Texuna and AIMS Asset Management considered. However, the issue of the correct threshold had been specifically considered in Dumrul, and it had been held that an applicant had to show that an obstacle or burden was likely. The fact that De Beer had not been cited in Dumrul did not affect the correctness of the approach taken in Dumrul. It was appropriate to apply the reasoning in Dumrul, particularly since it had been subsequently approved and applied by the Court of Appeal in Star Reefers Pool Inc v JFC Group (Security for Costs)  EWCA Civ 1065, Dumrul and Nasser applied, Star Reefers and Allen v Bloomsbury Publishing Plc  EWCA Civ 943 considered. On that basis, the Master had not applied the wrong test.
(2) The Master had not failed to take into account relevant matters or taken into account irrelevant matters. He had been entitled to take the approach he did and there was no basis for interfering with his decision.
As a result the Appeal was dismissed