April, 2021 - Security for costs: Pisante v Logothetis

  • Date: 13/04/2021
April, 2021 - Security for costs: Pisante v Logothetis

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The Commercial Court has recently handed down a useful judgment providing guidance regarding the circumstances in which it will award security for costs where claimants are domiciled out of the jurisdiction.  We take the opportunity to remind Members of the principles involved.

In English litigation, the usual principle is that the losing party pays its opponent’s reasonable legal costs. If a defendant is concerned that the claimant may be unable to pay its costs of defending the claim if the claim fails, it may apply to the court for an order that the claimant provides security by paying funds into court or providing a bond or guarantee for its potential costs liability.  Aside from this offering protection and reassurance, it can also be exploited to place the claimant at a tactical disadvantage once its funds are tied up.

A party applying for security for its costs will need to satisfy the court that its opponent will be unable to pay those costs. The court has a discretion to grant security based on factors listed in the Civil Procedure Rules (“CPR”), which include the jurisdiction of the claimant and its likely ability to meet a costs liability if required to do so.  In Pisante v Logothetis, the court provided some helpful guidance as to the principles that will be applied.

Four claimants brought claims alleging the defendants had induced them to enter into certain investments in the shipping market and sought damages in the region of US$14 million. 

The application

The defendants brought an application under CPR 25.13 for security for costs. This application was made prior to 31st December, 2020, the date on which changes to the CPR following the end of the Implementation Period under the EU Withdrawal Act came into force. At the time of making the Application, CPR 25.13 provided that an order for security for costs could be granted where it is just in all the circumstances of the case to make such an order and at least one of several conditions set out in 25.13(2) is satisfied. Those conditions included the following: 

  • 25.13(2)(a): the claimant is resident out of the jurisdiction but not resident in a Brussels Contracting State, a State bound by the Lugano Convention, a State bound by the 2005 Hague Convention or a Regulation State, as defined in section 1(3) of the Civil Jurisdiction and Judgments Act 1982. 
  • 25.13(2)(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.

The Application was made on the basis that all four claimants were resident outside the jurisdiction but not in a State referred to in CPR 25.13(2)(a) and that there was reason to believe that they would be unable to pay the defendant’s costs if ordered to do so. 

The claimants contended that the first claimant, who divided his time between Greece and New York, was resident in Greece, a Contracting State. They accepted that the second to fourth claimants, who were resident in the BVI and Marshall Islands, were not resident in the jurisdiction or in a jurisdiction referred to in 25.13(2)(a), but contended that any award of costs would be enforceable in the Brussels/Lugano zone and that there was no real prospect that such an order would not be complied with.

It should be noted that following Brexit-related changes, CPR 25.13(2)(a) now refers only to residents out of the jurisdiction but not in a State bound by the 2005 Hague Convention. Nonetheless,  the same principles remain applicable.


The judge granted the application. While accepting that the first claimant was resident in Greece, he considered that there was a real risk of the claimants’ assets being unavailable if the defendants sought to enforce a costs order. He gave important guidance of wider significance on a number of areas relevant to a security for costs application.

Split residency

Regarding residency where a party such as the first claimant splits his time between jurisdictions, the judge explained that "in the absence of any more specific authority, and bearing in mind the rationale of the rule… a person who splits his residence between a Contracting State and a non-Contracting State, but who habitually and normally lawfully chooses to spend a significant part of his time living in the Contracting State, lawfully and for a settled purpose, is to be regarded as resident in the Contracting State for CPR 25.13(2)(a) purposes". 

Obstacles to enforcement

Where condition 2(a) is satisfied, it was held in Nasser v United Bank of Kuwait [2002] 1 WLR 1868, that generally a court should not exercise its discretion to order security for costs unless it does so on grounds relating to obstacles to or the burden of enforcement of any subsequent order for costs (the so-called Nasser condition). The judge held that there was a real risk that suitable assets in a Convention State against which a costs order could be readily enforced would not be available if and when any such order were made and that accordingly the Nasser condition was satisfied. 

The following matters are of particular interest:

  1. Significant weight was placed on the net position of the claimants. Evidence had only been adduced as to their assets, without evidence provided as to their liabilities. This was an important factor in the court’s conclusion that the Nasser condition was satisfied.
  2. The test is not just whether a party can pay at all but whether payment can be made within the time ordered (usually 14 or 28 days). There was real doubt about whether a residential house was a sufficiently liquid asset to be the subject of enforcement within a reasonable time, especially where it was inhabited by family members with interests in the property.
  3. Conversely, an investment portfolio owned by one claimant was thought to be a highly liquid asset which the judge concluded could be moved or sold easily and quickly so as to be unavailable for enforcement. The judge concluded on the facts that there were a number of possible reasons, including legitimate ones, why this might occur.
  4. The fact that the BVI and Marshall Islands companies were incorporated in jurisdictions where there was little publicly available information as to their assets meant that in reality it would be difficult to locate assets of the companies against which an order for costs could be enforced. 
  5. The judge concluded that the claimants had not been fully transparent in their presentation of their assets, commenting that they showed a “lack of frankness”. This factor counted against the claimants, especially where there were evidential gaps in their presentation of the case, and in particular regarding the claimants’ net asset position.

Ability to pay costs

The judge also made findings based on CPR 25.13(2)(c) as to whether there was reason to believe the second to fourth claimants would be unable to pay the defendants’ costs. He explained that there can be such “reason to believe” even where some evidence about assets has been provided, especially where such evidence is unsatisfactory. He also stated that there was no need to prove dishonesty to succeed on this ground. Overall, the claimants’ lack of frankness, the gaps in their evidence and the fact that some of their assets could be moved provided sufficient grounds to conclude that they might not satisfy a costs order.

Guidance for practitioners

The decision rested in large part on the shortcomings of the evidence provided by the claimants. Future respondents to an application for security for costs will want to consider whether they have provided sufficient evidence of their liabilities, as well as of the extent and liquidity of their assets. 

Future applicants for security for costs will find this decision particularly helpful where they seek security for costs against parties in jurisdictions where there is little information publicly available about their financial standing. The judgment suggests that the Nasser condition may often be satisfied in such circumstances, unless the respondents can provide cogent evidence as to their asset position.

Members are invited to contact their usual Club contact for further advice in relation to the issues discussed above


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