Mengi v Hermitage (security for costs appeal)
Reference:  EWHC 2045 (QB);  5 Costs LO 641
Court: Queen's Bench Division
Judge: Mr Justice Tugendhat
Date of judgment: 20 Jul 2012
Summary: Defamation - Libel - Security for costs - Costs Budgeting – Conditional Fee Agreement
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Jonathan Barnes (Defendant)
Instructing Solicitors: Carter-Ruck
The defendant in a libel claim appealed against a Master’s decision made on her application for security for costs. The application was made on the basis that the claimant was outside the jurisdiction, and domiciled in a country in which on a previous application the court had found the defendant would face a substantial obstacle or extra burden in enforcing any costs order, in the light of corruption in the judiciary of that country. The defendant argued on the appeal that while the Master had ordered an already large sum in respect of security, that sum was insufficient to secure her costs in two respects. First, the Master had ordered by way of security only 75% of the defendant’s likely recoverable costs, even though the figures for 100% of that likely recovery had been agreed to by the claimant under the Defamation Proceedings Costs Budgeting Scheme. Secondly, the Master had refused to order any security in respect of a success fee arising under the defendant’s CFA arrangements, on the basis that since she had not disclosed the CFA to the court, the court could not conclude that any additional liability under the CFA was likely to be enforceable.
1. Should security for costs have been ordered in respect of the full likely recoverable costs agreed under the Costs Budgeting Scheme?
2. Should the order have included provision in respect of an additional liability under the CFA, and if so in what amount?
1. This was a case in which the claimant had not suggested an order for security at any level would stifle his claim. By contrast, the defendant had established by evidence that she would face a substantial obstacle or extra burden in enforcing any costs order in the claimant’s home jurisdiction, if a lack of security for her costs made that necessary. The Master had been wrong not to order security in the full amount as disclosed by the agreed costs budget. A defendant in an English court should not have to take the risk that enforcement of an order of the court will be obstructed by a corrupt judiciary. Accordingly, the appeal on this point was allowed.
2. It was not illegitimate for the court to speculate that if the defendant won the case funded by a CFA she would be entitled to recover a success fee uplift. To the extent that involved an assumption adverse to the claimant, it was no different in kind from the assumption that the defendant might obtain an order for costs at all. The CPR provides that there is no requirement upon the defendant to specify the amount of the additional liability separately, nor to state how it is calculated, until it falls to be assessed. No inference adverse to the defendant could be drawn from her exercising her right not to disclose her CFA at this stage. She should not be put under indirect pressure to waive that right in order that she may exercise the right to apply for security for costs. Accordingly the appeal on this point was also allowed, with the appropriate additional liability to be provided for in the order for security for costs being 100%.
This case provides some useful guidance in the relatively uncommon situation of a defendant CFA, with issues of security for costs arising. It is of note that the parties’ agreed costs budgets led the court to base its assessment of likely recoverable costs on those budgets, making no deduction from them. That can be contrasted with the position where no costs budgeting scheme applies, and so the defendant will typically be forced to proceed on the basis of a costs estimate that is unlikely to have been agreed to by the claimant. Further general encouragement for the use of CFA representation by a defendant is provided by the court’s preparedness to order security in an appropriate case for a success fee calculated at the maximum permissible level, 100%, even though the defendant need not in order to obtain that result disclose any details of the CFA on a security for costs application.