Court orders security for costs and rejects argument that claim would be stifled

The claimant in this case is a car hire company. It has established that Autofocus Limited ("AF"), which was hired by the insurers of at-fault drivers, was involved in a widespread systematic fraud, whereby the company fabricated evidence to show that the basic hire rate of a replacement car (ie the damages recoverable for the loss of use of his/her damaged car where the claimant hires a replacement car on credit terms, even though he/she could have afforded to hire one without credit terms) was lower than the hire rate charged by the claimant. AF is now in liquidation and this action is brought against AF's former directors and the solicitors of the at-fault drivers.

Those solicitors applied for security for costs against the claimant. It was accepted that the claimant would be unable to pay any costs ordered against it if it loses the case. However, it argued that a security for costs order against it would stifle its claim. Teare J reviewed prior caselaw and noted that "The fact that the man has no capital of his own does not mean that he cannot raise any capital; he may have friends, he may have business associates, he may have relatives, all of whom can help him in his hour or need" (as per Brandon LJ in the Court of Appeal Yorke Motors case).

In this case, the claimant was 100% owned by a finance company, which had provided a witness statement to the effect that additional investment in the claimant could not be obtained. The claimant's solicitors had refused to answer the defendant solicitors' request for information about whether enquires had been made to find out if investor funds could be obtained to meet an order for security.

Teare J concluded that the claimants had failed to show that they could not, on the balance of probabilities, obtain funding from those associated with them. Accordingly, an order for security for costs was granted (albeit with some deduction (40%) to reflect the delay of the defendants in making this application).