Security for costs

Under CPR 25.13 the court can order the claimant company in legal proceedings to provide security for the costs of the defendant if the court is satisfied that ‘there is reason to believe that it will be unable to pay the defendant’s costs if ordered to do so’. Today , many claimants are funded by ATE insurance, which provides an indemnity to the claimant for his own costs and those of the defendant if the claim is lost. Does the existence of such a policy mean that there is no reason to believe that the claimant will not be able to meet any costs order? Akenhead J in Michael Phillips Architects Ltd v Riklin [2010] EWHC 834 (TCC) felt that an ATE policy was not sufficient security for a defendant.

Riklin: the facts

In 2007 the defendants, Mr and Mrs Riklin, appointed the claimant to provide architectural and other services in connection with the refurbishment of property that they had leased in Lymington, Hampshire. Problems arose in mid-2008 when the contractor engaged by the defendants went into administration. On 22 December 2009 the claimant issued proceedings, seeking payment of the sum of £147,387.04 representing the time spent by it on the work as agreed by the parties. The defendants denied that there was any agreement on the matter, and instead argued that the claimant was entitled only to payment for work actually performed. By a counterclaim the defendants sought damages in excess of £162,000 for various alleged breaches of contract.