Relational LLC v Hodges [2011] EWCA Civ 774

The Claimant had sued the Defendant in the United States, and had obtained a default judgment which it sought to enforce in England.

The Defendant applied for security for costs in the sum of £100,000, and it was agreed between the parties that the Claimant satisfied the relevant conditions for security for costs in CPR 25.13. The Claimant offered security of £25,000, arguing that the Defendant was not entitled to security over and above the estimated extra costs which would be incurred as a result of having to enforce a judgment for costs abroad.

The Defendant argued that, if he was successful in England and sought to enforce any costs order in the United States, than the Claimant would ask the US court to set off its default judgment against those costs. That judgment would almost certainly exceed the amount of the costs order, and so the Defendant would come away empty handed. In such circumstances, the Defendant submitted, he would be prevented from recovering his costs even though he had been successful before the English court. As such, the availability of setoff would be an obstacle to the enforcement of any costs order and the existence of that obstacle made it just for the court to order security for the full amount of his costs.  

The Court of Appeal found in favour of the Claimant, stating that the discretion to order security for costs should be exercised on objectively justified grounds relating to obstacles to or the burden of enforcement. Access to the court should not be restricted on the grounds of residence of a claimant, and the discretion to order security for costs should not be exercised in such a way as to discriminate between EU and non-EU residents.  

In this case, the availability of set-off in the US was not an obstacle to the enforcement of any costs order. An EU litigant with a US judgment in his favour would not be required to put up security, and if a US litigant was required to do so then that would amount to discrimination prohibited by the ECHR.  

The Court also noted that where there is a general discretion to order security for costs, it is unlikely to be appropriate to order security where a claimant is suing on a judgment obtained in a country, such as the US, which has a generally similar process for the enforcement of judgments as the UK.