Undertaking to pay adverse costs not enough to defeat security application

In Dunn Motor Traction Limited v National Express Limited [2017] EWHC 228 (Comm),  Mr Justice Teare has outlined that the Claimant’s irrevocable undertaking to pay adverse costs is not enough to defeat a security for costs application.

The case concerns the premature ending of a contract, with the claimant seeking £20m in lost profits.

The claim is due for a 12 day trial in January 2018. The defendant’s costs are estimated at about £1.8m, and it sought security of £975,000.

The claimant’s sole shareholder, Mr Dunn, argued that the irrevocable undertaking was akin to cases that have held that the existence of an ATE insurance policy satisfies security. See Geophysical Service Centre v Dowell Schlumberger [2013] EWHC 147.

However, Mr Justice Teare did not accept that analogy. He said the starting point of the approach to ATE policies was that they were a “reliable source of litigation funding” – this could not be said of an indemnity like this.

The Judge further outlined that if the Court did accept the Claimant’s undertaking, he would be in a position where he would have the opportunity of relieving himself of funds through a business opportunity or otherwise, before the costs undertaking would have effect, e.g. when the Defendant requires payment of his costs. In this matter, that is almost one year away.

Overall this is an important decision on security for costs, and shows the weight that the Courts give to a matter being backed by an ATE provider.

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