Leeds United v Admatch [2009] JCA097

In what circumstances will the Court grant an application for security for costs?

The test for whether security should be granted at all, and if so how much, has been shaken upcompletely, particularly where the plaintiff is resident in the UK.

The Plaintiff appealed to the Court of Appeal against orders made by the Royal Court increasing and requiring payment of security for the defendant's costs in the sum of £263,500 which sum was paid into Court. The appeal was successful and the security was ordered to be repaid in full.

The principles applicable to security for costs in Jersey originally developed in line with those applied in England, where it was long-standing practice to order security for costs against a plaintiff residing outside the jurisdiction with no assets within it. The premise was that a defendant, if successful, ought not to have to pursue a foreign resident plaintiff abroad for his costs. The fact of non-residence was enough to justify an order for security, unless the plaintiff could be seen to have a high probability of success or the plaintiff's financial situation was such that the security if granted would stifle a claim.

The premise on which security has long been granted has always been open to objections, one of which was that such an order was discriminatory. This in turn led to changes in English law following the incorporation of the ECHR and following the English case of Nasser v United Bank of Kuwait [2002] 1 WLR 1868. Nasser held, inter alia, that to treat the foreign residence of a plaintiff as justification for such an order was discriminatory pursuant to the ECHR because, in like circumstances, security would not have been ordered against a plaintiff resident in England (or in a country party to the Brussels or Lugano conventions). Following Nasser security could only be ordered in England in cases where there was an objective justification for the order, based on real difficulty associated with enforcing a judgment for costs in the country where the plaintiff held assets.

In ordering security in the sum of £263,500, the Royal Court had held that, even assuming discrimination on the ground of residence was contrary to the ECHR, an order for security served a legitimate objective to which it was proportionate. The Court of Appeal disagreed with the Royal Court in this regard. The Court of Appeal was of the view that a provision of security has potentially significant implications for a plaintiff in respect of cash flow, tying up funds and/or necessitating borrowing.

The Plaintiff in this case was British. The Court of Appeal referred to the cost of enforcing in England as "too trivial" to warrant an order for costs. Accordingly, the Court of Appeal considered that no security should have been granted and ordered that it be repaid in full.

The Jersey Court of Appeal has now dragged Jersey into line with England following the case of Nasser. As a consequence, being sued by a foreign plaintiff is no longer enough in itself to justify a security for costs order. A defendant must show that it would actually be difficult to enforce a Jersey costs judgment abroad against the plaintiff. Even if successful, the security to be paid by the plaintiff will no longer reflect the amount of costs likely to be incurred by the defendant defending the case but will be limited to the future cost of enforcement, which in Nasser for example was estimated to be £5000.

Given that Jersey judgments can be registered and enforced in the UK for a few hundred pounds, security for costs should not be granted at all as against plaintiffs resident in the UK suing a defendant located in Jersey.

It is not yet clear what the position might be in a case where a plaintiff has already given security. It would seem hard to unravel security already given. It does not appear that the judgment will have retrospective effect but it is arguably open to challenge. However, if security has been given in stages, which is the usual practice, this judgment may now provide the basis for refusing to provide any further security.