Lawyers Briefing Notes

Tue, 22 Feb 2011

Security for Costs: CPR 3.1(3)

Should a defendant be deprived of security for its costs in circumstances where the claimant does not have the financial means or insurance to satisfy a judgment of the court; has ‘limited prospects of success’ and whose conduct has been criticised as ‘leaving a lot to be desired’?

In allowing the claimant’s appeal, the court of appeal in Huscroft v P&O Ferries [2010] EW CIV 1483 answered the question in the affirmative on what, it is submitted, was a fairly technical point.

The claimant claimed damages for personal injury following an incident whilst working on board the defendant’s vessel as a member of the catering crew. At the outset, the claimant had varied his version of events. Many of the allegations advanced by the claimant were of no relevance and despite the defendant advising the claimant about this, the claimant ignored this and issued regardless only to later amend the particulars of claim. The claimant advanced no less than 33 new allegations. Applications were made for disclosure of documents which were already in the possession of the claimant, the claimant frequently made late requests for information notwithstanding the imminent court directions. On the whole the claimant had adopted a ‘scattergun approach’ thereby increasing the costs and litigation process considerably.

During the course of the proceedings the defendant discovered that the claimant was impecunious. This was confirmed by the claimant’s solicitor. In addition, the claimant was largely resident out of the jurisdiction. There was no ‘after the event insurance’ in place and the claimant was in receipt of state benefits.

Owing to the wide discretion of the court when addressing costs, if a party has conducted itself in unacceptable manner, it may well find itself on the receiving end of an unfavourable costs order. Whilst this ought to serve to keep a litigant on the straight and narrow, the deterrent effect would be watered down in circumstances where a party knows they will not be able to meet any costs order.

On account of the claimant’s conduct, the defendant submitted an application to the court pursuant to 3.1(3) and/or 3.1(5) of the Civil Procedure Rules.

CPR 3.1(3) provides that when the court makes an order, it may – (a) make it subject to conditions, including a condition to pay a sum of money into court; and (b) specify the consequences of failure to comply with the order or a condition.

CPR 3.1(5) provides that the court may order a party to pay a sum of money into court if that party has, without good reason, failed to comply with a rule, practice direction or a relevant pre action protocol.

At first instance, in advance of a case management hearing, the defendant asked the court to make it a condition when making an order for directions that the claimant pay £20,000 in to court as security for costs.

Although, at first instance, the district judge was not satisfied that the criteria under 3.1(5) had been met, the court ordered the claimant to pay £5,000 into court in default of which the case would be struck out.

District Judge Babbington said:

“and, looking at this in the round, it does seem to me that the claimant does play fast and loose with the orders. He obfuscates in relation to the orders and twists them round at times to show that it is the defendant that is delaying matters when the defendant is reacting, and can only react, to late requests, late Part 18 delivery, late requests for information about witnesses. And when one looks at that carefully, it comes to the conclusion that I have already indicated, that this is a matter where it is the claimant that is not playing ball in assisting getting this case to trial”.

In addition, when addressing the provisions of article 6 of the European Convention on Human Rights, District Judge Babbington added:

“given that I am going to make orders today that deal with the case management, given what I know about the overall picture, I am going to make an order for directions which is going to include a condition to pay a sum of money into court. I have already said that I accept the £20,000 would deprive him of his right and that the sum I am going to order to pay is £5,000 into court in relation to the case management requirements. That money shall be security for sums payable by that party to any other party in the proceedings, in accordance with 6(A) of CPR 3.1”.

When the case reached the court of appeal the court confirmed that it would be wrong to encourage a litigant to use Rule 3.1(3) as a means of circumventing the requirements of CPR Part 25(12) and (13) thereby providing a less demanding route to obtaining security for costs. However, this was not a case where Part 25 could apply since the position of the claimant did not meet the conditions applicable before the rule could bite. Further ambiguity is added when we consider CPR 25.12(1) which, in effect, states that CPR Part 3 provides for the court to order payment of sums in ‘other circumstances’ falling outside CPR 25 and when we turn to CPR 3.1(6A) a payment in to court is treated as security for any sum payable by that party or other party.

The court of appeal then considered the first ground of appeal namely whether the appellant’s conduct of the litigation provided sufficient grounds for exercising the jurisdiction in the way that he did. Lord Justice More-Bick said that he

‘did not think that the power to attach a condition to an order can be exercised only if there is a history of repeated failures to comply with orders of the court or the party in question is not conducting the litigation in good faith. I do think, however, that before exercising the power given by Rule 3.1(3) the court should identify the purpose of imposing a condition and satisfy itself that the condition it has in mind represents a proportionate and effective means of achieving that purpose’.

Acknowledging the criticisms of the claimant, the court of appeal did not feel that the findings made by the district judge justified attaching a condition. However, the district judge, unlike the court of appeal, had the benefit of hearing the substantive evidence first hand. In addition, the district judge had directed his mind to alternative orders but as he was entitled to do, did not find this an attractive proposition.

It is difficult to see how the court of appeal arrived at the reasoning that the District Judge did not satisfy itself that the condition it had in mind represented a proportionate and effective means of achieving the purpose. At first instance the District Judge reduced the applied payment of £20,000 to £5,000 and as the court of appeal admitted, this was relatively modest in the context of litigation of this kind.

Ultimately the court of appeal allowed the appeal because the district judge did not expressly identify the purpose of imposing the condition in the order. It is submitted that this is a fairly technical point because the purpose behind the order was, arguably, readily ascertained from the judgment at first instance and the defendant’s application, which, specifically focused on the claimant’s conduct in the case.

The judgment provides limited guidance for future cases and whilst this case is symbolic of some of the flaws identified by Lord Justice Jackson, the court of appeal were not inclined to remedy the unfairness to the defendant.