UK: Security For Costs - Chernukhin v Danilina (Court Of Appeal)

Court of Appeal rejects "sliding scale" test in assessing quantum of security for costs

The defendants sought security for costs against the claimant on the basis that she is an individual resident outside of the EU/EEA (CPR r25.13(2)(a)). The judge found that there was (just) a real risk of non-enforcement in Russia, but the greater probability was that enforcement would be possible but take longer and be more difficult. The judge held that in such circumstances, a "sliding scale" should be applied to the costs claimed. The Court of Appeal has now upheld the appeal from that decision.

Prior caselaw has held that where there is a risk of non-enforcement, the court may order security to cover the full likely recoverable amount of costs to date and then later to trial, but where the risk is limited to additional costs or delay, security should usually be ordered by reference to that extra burden of enforcement.

Hamblen LJ added that although a real risk of additional burdens of enforcement is enough to satisfy the threshold test, "Mere difficulty of enforcement in itself is not enough (save in so far as it results in additional costs and therefore an extra burden of enforcement)". He said it was therefore difficult to see how delay can be quantified in terms of security, unless that delay is also likely to result in some additional cost or interest burden.

Furthermore, a sliding scale approach was not appropriate because it would require a detailed evidentiary exercise, which the courts should avoid in security for costs cases. The Court of Appeal concluded that "once it has been established that there are "substantial obstacles" sufficient to create a real risk of non-enforcement, the starting point is that the defendant should have security for the entirety of the costs and there is no room for discounting the security figure by grading the risk using a sliding scale approach".

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