UK: Court Denies Security For Costs To Protect Claimants

Last Updated: 1 May 2018
Article by Fanos Theophani

Most Read Contributor in UK, November 2018

On occasion, parties engaged in court proceedings will consider procedural tactics with the ultimate intention of exerting such pressure on their adversaries that their weakened position, or even inability to pursue the proceedings, will work to their advantage. Such a situation arose in (1) Deleclass Shipping Co. Ltd (2) MWI Shipping Services Ltd v Ingosstrakh Insurance Co. Ltd (2018) where the defendant's application for security for costs became very problematic for the claimants. Clyde & Co (Fanos Theophani (partner) and Natalie Johnston (associate)) acted for the successful claimants.


The claimants'/shipowner's vessel was declared a constructive total loss after it was involved in a collision and sank. The vessel had been insured by the defendant insurance company, Ingosstrakh Insurance Co. Ltd.

Following the collision, a third party appeared and claimed they were entitled to the insurance proceeds, alleging they were the beneficiaries of two assignments. The shipowners denied this and claimed the third party's case was false and fraudulent.

In view of the competing claims, the insurance company decided it would only pay the proceeds following a court order. In the event, the third party claim was struck out by the Court. The insurance company, nevertheless, took the view that the claimants were not entitled to the insurance proceeds for the reasons given by the third party who'd had their claim thrown out.

Security for costs

Both parties applied for security for costs under CPR r.25.12. It was accepted that the claimants might not be able to pay the defendant's costs if ordered to do so. If the application for security for costs was allowed by the Court, claimants argued, it was likely to stifle their ability to continue with the proceedings.

The insurers' decision to adopt the third party's claim, notwithstanding it being struck out, was highly unusual and contrary to their previously pleaded case; it was obvious that the application for security for costs was intended to stifle the shipowners'' genuine claim.

Where an order for security for costs might result in the oppression of a claimant, meaning that the claimant would be forced to abandon a claim which had a reasonable prospect of success, the Court could refuse to make the order despite the possibility that, if unsuccessful, the claimant would be unable to pay the defendant's costs.

The Court would need to be satisfied that it was probable that this was the case, and it fell on the claimant to show that there was no prospect of raising funds from any outside source.

For this purpose, the Court had to take various factors into consideration:

  • Suggestions that funds could be sourced from the controlling shareholder of the claimant company, which had a distinct legal personality, were generally not satisfactory. This was not equivalent to money being raised by the claimant itself.
  • Where the claimants' financial position resulted from the defendant's failure to abide by the parties' agreement, security for costs should not be ordered. In those circumstances, the claimant would not be required to have a strong claim on the merits.
  • The Court would not usually consider the merits of a claim unless there was a high degree of probability of success or failure and, even so, an assessment of the merits was strongly discouraged (Commercial Court Guide paragraph 4).
  • However, an impecunious party would not be allowed to use its inability to pay to put unfair pressure on a more prosperous party.


The Court had to consider both injustice to the claimants and the fact that the defendant may not be able to recover its costs.

In this instance, the Court found that the claimants had an arguable prima facie case, although it was unable to determine whether the case in itself was very strong.

Various elements illustrated the precarious financial position of the claimants: they were not trading, had limited assets, were unlikely to raise funds from the shareholders, and faced difficulty in financing the proceedings. Also, the first claimant did not have a bank account and the second claimant had gone out of business. They were unable to provide security.

The Court stated that, although there was a dispute as to quantum, the defendant's failure to pay under the insurance policy had been a contributing factor to the claimants' financial predicament.

In addition, the defendants' adoption of the third party's claim was seen as an apparent tactic to circumvent a payment altogether.

The Court concluded that an order for security was likely to stifle the claim and refused the defendant's application for security for costs:

  • The claimants were in a poor financial position, as described above.
  • The claimants were not unfairly using impecuniosity to put pressure on the defendant.

The Court also turned down the claimants' application.


This case illustrates the discretion available to the Court when considering applications for security for costs and the many factors they will take into account to make sure that no injustice is done to a party which is in a financial tight spot, whilst still bearing in mind the other party's position.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Charles Russell Speechlys LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Charles Russell Speechlys LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions