In Areotel Ltd v Wavecrest Group Enterprises Ltd and others – Butterworths Law Direct 29.1.07 the Claimant was an Israeli company. It agreed by a consent order £20,000 for security for costs. Following various proceedings the Defendant made a further application for security for £225,000, having rejected the Claimant’s offer of £50,000. The Defendant made the application on the basis that because, as an Israeli company, the Claimant was not obliged to file audited account, the figures that were provided about the Claimant’s accounts had never contained an audited account and no officer of the Claimant had given evidence verifying its accounts, there was no reason to believe that the Claimant would be able to pay the costs if they became due.
CPR 25.13 (1) provides: ‘(1)The court may make an order for security for costs under rule 25.12 if— (a) it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order, and (b)(i) one or more of the conditions in paragraph (2) applies …(2)The conditions are— (c) the claimant is a company or other body (whether incorporated inside or outside Great Britain) and there is reason to believe that it will be unable to pay the defendant's costs if ordered to do so.’
The essential question was a matter of principle, namely whether or not there was reason to believe that the Claimant would be able to pay if ordered to so.
The Chancery court held that in the circumstances of the case it would be right to make an order for security for costs. There was a danger that the assets of the Claimant would not be able to satisfy the costs of the action, if so ordered. The Claimant had also been deliberately coy about distributing financial information and had given the minimum that it could get away with.