England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice
		12 June 2018

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MR JUSTICE TEARE:

1. This is an application for security for costs by three groups of defendants. Those three groups of defendants have been referred to as three solicitor groups of defendants. The application is made in the context of major piece of litigation which is to be tried in October for 14 weeks.
2. The nature of the case advanced by the claimants, Accident Exchange Limited and Automotive and Insurance Solutions Group Plc, is an unusual one. The claimants were in the business of providing replacement cars on credit hire terms to those whose cars had been damaged in a collision. The intention was that the claimants would recover the cost of hiring the cars from the insurers of the driver at fault. It was understood that the recovery which the claimants could make against the insurers was for the market hire rate of hire of cars, not for the other charges which were included in the credit hire terms.
3. A company, Autofocus, was in the business of providing advice and expert reports to insurers. It is said, and as I understand it has been established in contempt proceedings, that Autofocus provided reports which said that the market hire rates were, in fact, lower than they were in truth. The result was that the claimants recovered less from the insurers than they ought to have done. That, at any rate, is the nature of the claim.
4. The claim is substantial. The direct losses assessed broadly in the way I have described are of the order of £60 million. In addition, there is £7 million to £8 million of litigation costs and then there is a figure of some £50 million to £60 million in respect of consequential losses to the claimants' business caused by the activities of Autofocus.
5. The first and second defendants, individuals, are, I understand, officers or employees of Autofocus, but the third to tenth defendants are the three firms of solicitors, together with, in each case, an individual who, no doubt, had some form of leading role in relation to what has been called "defendant credit hire work", that is the work which those firms of solicitors did for the insurers who were having to decide how much to pay the claimants in respect of their credit hire charges.
6. It is alleged that the defendant firms of solicitors were reckless as to the conduct of Autofocus and that there is, therefore, a case in deceit or conspiracy against the firms of solicitors and the individuals involved. Those claims are vigorously denied by the defendant firms of solicitors and the individuals.
7. It is accepted today that it is quite impossible for the court to form a view as to the strength or otherwise of the claims made. There is no dispute that they are genuine claims, but this is not a case where the court can form any view as to the strength of the claims.
8. The costs in respect of which an order for security is sought are substantial. The total costs of the three firms of solicitors are said to amount to some £19 million and an order is sought that security be provided for 80 per cent of those costs in three tranches; the first in relation to incurred costs, the second in relation to costs to be incurred until the end of July and the third in respect of costs to be incurred from the end of July to the end of the trial.
9. It is common ground that the claimants, if the claim is dismissed, will be unable to pay the costs which would, in those circumstances, be ordered to be paid by them. The court, therefore, has a discretion as to whether or not to order security for costs. The question is essentially, "Is it just to award security for costs and, if so, in what sum?"

An order for security for costs is opposed on two principal grounds. First, that the order sought will stifle the claim and, secondly, that there has been inordinate delay in making this application.

10. I have been referred to the authorities which deal both with the question of the stifling of a claim and with the question of delay. It is necessary, first of all, to refer to Keary Developments Ltd v Tarmac Construction Ltd. [1995] 2 BCLC 395. In the judgment of Peter Gibson LJ, the relevant principles are set out at para.400 through to the top of para.403. It is necessary to refer to one or two of them. Firstly, it is said that the court has a complete discretion whether to order security and that it will act in the light of all the relevant circumstances. Secondly, it is said that the possibility or probability that the plaintiff company will be deterred from pursuing its claim by an order for security is not, without more, a sufficient reason for not ordering security. By making the exercise of discretion under the relevant section conditionally on it being shown that companies were unlikely to be unable to pay costs awarded against it, Parliament must have envisaged that the order might be made in respect of a plaintiff company that would find difficulty in providing security. Thirdly, it is said the court must carry out a balancing exercise. On the one hand, it must weigh the injustice to the plaintiff if prevented from pursuing a proper claim by an order for security. Against that, it must weigh the injustice to the defendant if no security is ordered and at the trial the plaintiff's claim fails and the defendant finds himself unable to recover from the plaintiff the costs which have been incurred by him in his defence of the claim. The court shall properly be concerned not to allow the power to order security to be used as an instrument of oppression such as by stifling a genuine claim by an impecunious company against a more prosperous company, particular, when the failure to meet that claim might, in itself, have been a material cause of the plaintiff's impecuniosity. But it will also be concerned not to be so reluctant to order security that it becomes a weapon whereby the impecunious company can use its inability to pay costs as a means of putting unfair pressure on the more prosperous company. The sixth point made is this: Before the court refuses to order security on the ground that it would unfairly stifle valid claim, the court must be satisfied that in all the circumstances it is probable that the claim would be stifled. There may be cases where this can properly be inferred without direct evidence. However, the court should consider not only whether the plaintiff company can provide security out of its own resource to continue litigation, but also whether it can raise the amount needed from its directors, shareholders or other backers or interested persons. As that is likely to be peculiarly within the knowledge of the plaintiff company, it is for the plaintiff to satisfy the court that it would be prevented by an order for security from continuing litigation.
11. In Kufaan Publishing Limited v Al-Warrak Publishing Ltd. CA & Ors, which is unreported, Potter LJ said at para.34:

"Thus, it is a sine qua non of a successful objection on grounds that a claim will certainly be stifled if security is granted that the court should be fully satisfied that that is so. That means that in all but the most unusual cases the burden lies on the claimant to show that, quite apart from the question of whether the company's own means are sufficient to meet an order for security, there will be no prospect of funds being available and forthcoming from any outside source, such as a creditor, principal shareholder or other party whose interests are affected. That seems to me be the practical effect of the principle as stated in Keary."

12. Similarly, in Allen v Bloomsbury Publishing Plc & Anor [2011] EWHC 770 Ch, Kitchin J, as he then was, said at para.66:

"I must therefore consider whether I have a full account of the resources available to Mr Allen, whether he and those backing him have been full and candid in setting out what their means are, and whether he can raise the amount needed to meet an order for security from his backers and other interested persons."

13. And then, finally, in the recent case in the Supreme Court of Goldtrail Travel Ltd. v Onur Air Tasimacilik AS [2017] 1WLR 3014, Lord Wilson said at para.12, and this is a passage relied upon by Mr Rees for the claimants in the present case:

"To stifle an appeal is to prevent an appellant from bringing it or continuing it."

As Mr Rees submitted the same principle applies when seeking security for costs in an action. At para.15 Lord Wilson said:

"There is no doubt - indeed it is agreed - that, if the proposed condition is otherwise appropriate, the objection that it would stifle the continuation of the appeal represents a contention which needs to be established by the appellant and indeed, although it is hypothetical, to be established on the balance of probabilities: for the respondent to the appeal can hardly be expected to establish matters relating to the reality of the appellant's financial situation of which he probably knows little."

Paragraph 16:

"But, for all practical purposes, courts can proceed on the basis that, were it to be established that it would probably stifle the appeal, the condition should not be imposed."

Paragraph 17:

"It is clear that, even when the appellant appears to have no realisable assets of its own with which to satisfy it, a condition for payment will not stifle its appeal if it can raise the required sum. As Brandon LJ said in the Court of Appeal in the Yorke Motors case, cited with approval by Lord Diplock at 449H:

"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 of need.""

Paragraph 18:

"It seems that, in particular and as exemplified by the present case, difficult issues have surrounded the ability of a corporate appellant, without apparent assets of its own, to raise money from its controlling shareholder (or some other person closely associated with it); and this is the context of what follows. When, in response to the claim of a corporate appellant that a condition would stifle its appeal, the respondent suggests that the appellant can raise money from its controlling shareholder, the court needs to be cautious. The shareholder's distinct legal personality (which has always to be respected save where he has sought to abuse the distinction: Prest v Prest [2013] UKSC 34, [2013] 2 AC 415, 487, para 34) must remain in the forefront of its analysis. The question should never be: can the shareholder raise the money? The question should always be: can the company raise the money?"

And then at para.23, in another passage relied upon by Mr Rees on behalf of the claimants Lord Wilson said:

"In this context, the criterion is: has the appellant company established, on the balance of probabilities, that no such funds would be made available to it, whether by its owner or by some other closely associated person as would enable it to satisfy the requested condition?"

And at para.24 Lord Wilson said:

"The criterion is simple. Its application is likely to be far from simple. The considerable forensic disadvantage suffered by an appellant which is required, as a condition of the appeal, to pay the judgment sum (or even just part of it) into court is likely to lead the company to dispute its imposition tooth and nail. The company may even have resolved that, were the condition to be imposed, it would, even if able to satisfy it, prefer to breach it and to suffer the dismissal of the appeal than to satisfy it and to continue the appeal. In cases, therefore, in which the respondent to the appeal suggests that the necessary funds would be made available to the company by, say, its owner, the court can expect to receive an emphatic refutation of the suggestion both by the company and, perhaps in particular, by the owner. The court should therefore not take the refutation at face value. It should judge the probable availability of the funds by reference to the underlying realities of the company's financial position; and by reference to all aspects of its relationship with its owner, including, obviously, the extent to which he is directing (and has directed) its affairs and is supporting (and has supported) it in financial terms."

14. The only authority to which it is necessary to make reference in the context of delay is the decision of Hildyard J in Re RBS [2017] 1 WLR 4635, where at para.44 he said:

"Once again, however, there are no hard and fast rules. An order for security for costs can be made at any stage of the proceedings. For example, in Warren v Marsden [2014] EWHC 4410 (Comm) an application for security against a claimant was made three months before the date fixed for the trial, in an action which had commenced 2 years and 3 months before the hearing of the application. Teare J held that the material being relied upon to support the application had been available for "a very long time" and that the application could have been made at the commencement of the action rather than shortly before trial. However, he nevertheless granted security (albeit limited to future costs). Thus the balance may be struck in the context of delay by fashioning the order so as to restrict it in its application to costs from and after a later point."

And just before making those remarks Hildyard J had quoted from a decision of Mr Richard Millett QC, sitting as a Deputy Judge of the Chancery Division, in the case of Re Bennet Invest Ltd [2015] EWHC 1582, where he said, at para.28:

"Delay in making the application is one of the circumstances to which the court will have regard when exercising its discretion to order security. The court may refuse to order security where delay has deprived the claimant of the time to collect the security, or led the claimant to act to his detriment or may cause hardship in the future costs of the action. The court may deprive a tardy applicant of security for some or all of his past costs or restrict the security to future costs…"

15. I turn, then, to the present case. Ms Woods, the Chief Executive Officer of Accident Exchange and Director of Automotive Insurance Solutions Group Plc, has made a witness statement in which she has stated the history of how it is that the ownership structure and debt position of the claimants has been changed in recent times. Morgan Stanley had made a loan to the claimants but on 30^th December 2015 an entity called Eight Bar Financial International acquired the interests of Morgan Stanley under a facility agreement pursuant to which Morgan Stanley had made available to the claimants a loan. At the time of the transfer, the sum outstanding under the loan was almost £60 million. She states that her understanding is that Eight Bar Financial International acquired the loan and its equity interest in the claimants not as an individual asset purchase but as part of the acquisition of a wider debt portfolio sale by Morgan Stanley. In 2017 there was a restructuring of the debt and of the ownership of the claimants. In para.42 Ms Woods summarised the effect of the final restructuring in these terms: One, the sale by the second claimant and all of its subsidiary except the first claimant, to the first claimant in return for a total consideration of £8, apportioned to represent consideration of £1, for the entire issue share capital of each of the eight subsidiaries. Two, a sale by the second claimant of the first claimant to Eight Bar Financial International in return for the discharge of £30 million of the debt owed to Eight Bar Financial International under the loan pursuant to a sale and purchase agreement. Three, the novation from the second claimant to the first claimant of approximately £11.1 million of the debt owed to Eight Bar Financial International under the loan, leaving a debt of £10 million owing from the first claimant to Eight Bar Financial International. Four, the novation from the second claimant to the first claimant of all sums outstanding under the Arena loan, which is another loan quite separate taken out by the claimants, and an increase of the facility under the Arena loan by £1 million, although the £1 million was not drawn down, leaving a debt of approximately £6.8 million owing from the first claimant to Arena. The effect of that restructuring was that some £26 million of the loan remained to be paid but it, is I am told, only to be repaid by the proceeds of the claim in this action.
16. Ms Woods provided a structure chart of the claimants and the Eight Bar companies. It is a complex document. What it indicates, as is clear from Ms Woods' statement, is that the first claimant, Accident Exchange Ltd., is 100 per cent owned by Eight Bar Financial International S.a.r.l., which is a Luxemburg company. That Luxemburg company is owned as to 100 per cent by what has been described as "the Fund", Eight Bar Financial Partners I LP, a Cayman Islands limited partnership. The partners in that limited partnership are a Mr Thomas E Doster IV as to 1 per cent, with a nominal percentage held by another individual, Holly Neiweem, and a partnership called aPriori Capital Partners EB, but 99 per cent of the Fund is owned by Coller Partners 701 LP Incorporated, a Guernsey limited partnership. The Fund is managed, I understand, by Eight Bar Financial Partners GP LP, another Cayman Islands partnership, which is owned or controlled by Eight Bar Partners HC Inc., a Delaware corporation, which, in turn, is owned by Mr Thomas E Doster IV. My understanding is that Thomas E Doster IV is, therefore, the manager, as it were, of the Fund.
17. Mr Doster has made two statements on the question of whether providing security will stifle the claim. In his first statement, made on 11 May 2018, he said this in para.30: "It would simply not be possible for Eight Bar Partners to deploy its investors' funds to meet an order for security for costs against the claimants. The contractual terms of Eight Bar Partners' fund provide that Eight Bar Partners cannot make any direct or indirect additional investment in any portfolio company, including the first claimant, absent relevant limited partner consent." The reference to "limited partner consent" is a reference to the partners in the Fund. Since Coller Partners owns 99 per cent of the Fund, if there is to be relevant limited partner consent one would expect that to have to come from Coller Partners. However, Mr Doster, neither in this statement nor his second statement, has given any information about the individuals or companies which make up Coller Partners 701.
18. On 25 May 2018, Norton Rose Fulbright, solicitors acting for one of the groups of solicitor defendants, asked the claimants' solicitors a number of questions, pointing out that in their view the evidence provided by the claimants falls short of the standard required of them as indicated by the authorities and pointed out that it failed to disclose, in particular, any information as to the identity of the persons and entities interested in Coller Partner 701, any information as to the means of such persons and entities and what enquiries, if any, had been made as to whether relevant limited partner consent would be given by the partners in Eight Bar Financial Partnership Coller to deploy investor funds to meet an order for security in the event one were made. By a letter dated 7 June 2018, the claimants' solicitors replied to those points in these terms:

"There is no basis for you to request any information as to the identity of any persons and entities interested in any limited partner in the EBFP Fund. As confirmed in para.31 of Mr Doster's first witness statement, EBPF is a closed-end investment fund in which all committed funds have already been deployed in a number of portfolio investments, including those made in the first claimant. There is no outstanding capital commitment on the part of any limited partner. As such, no limited partner can have any obligation to advance funds for litigation undertaken in good faith by one of the fund's portfolio companies. The information you request is, therefore, irrelevant for the purposes of the applications."

And in relation to the fifth topic, any information as to the means of such persons:

"This information is irrelevant and the request for it unjustified on the basis set out in the response to your numbered paragraph 4."

Since Mr Doster has said that absent relevant limited partner consent it will not be possible to deploy investors' funds to meet an order for security, and since the relevant limited partners include, and importantly include Coller, I do not understand how it can be said to be irrelevant to provide the information which has been requested.

19. Mr Doster goes on to say in para.31:

"Further, and notwithstanding such contractual restrictions, the Fund does not hold reserves in the amount of security sought by solicitor defendants approximately £15.2 million in total. The fund operates a closed-end fund, meaning that a fixed amount of capital was committed by investors at the outset with no other capital committed or available. The cash raised from investors has been deployed in a series of debt and equity investments in the Fund's various portfolio companies. Further, any cash received from the sale of investments must be returned to the Fund's limited partners. The Fund is also restricted under the terms of its fund agreement from raising additional capital. The Fund, as the Fund manager, is only permitted to maintain or observe to meet essentially operational expenses, for example, legal and accounting expenses. The permitted amount of such reserve would in no way be sufficient to meet any order for security for costs. The Fund can therefore make no assurance regarding the ability of the Eight Bar Partners Group to provide further funding if requested by the claimants."

Many of those statements are no doubt true, but what is not said is who the investors in Coller are, whether they have been approached and what their response, if any, is.

20. Mr Doster has made a further statement dated 7 June, in which he states that:

"I am not willing to provide any personal funds to the claimants to satisfy the orders for security for costs sought by the third to tenth defendants and I am under no obligation to do so. Further, I do not hold a direct shareholding in any of the claimants."

It is no doubt the case that he is not willing to provide any personal funds. He has not, however, despite the points made by the defendants as to the apparent wealth of Mr Doster, given any indication as to what his wealth is and what his abilities are. He goes on to say:

"As stated in my first witness statement, the Fund is a closed-end fund, meaning that a fixed amount of capital was committed by the limited partners. All such capital has been contributed to the Fund and deployed in its various investments. The limited partners are therefore under no obligation to contribute any further capital to the fund. Again, as referenced in my first witness statement, a reserve is maintained essentially for operational expenses, but the permitted amount of such reserve would in no way be sufficient to meet any order for security for costs. In short, therefore, there are no funds available or committed to the Fund that could be deployed to meet any order for security for costs."

Again, many of those statements are no doubt true, but what is not said is whether, although the limited partners are under no obligation to contribute any further capital to the Fund, they are, nevertheless, willing to do so.

21. Very little information is available to the court as to the size in financial terms of the Eight Bar Partners Group or of Coller Partners. The only indication to which I have been referred is that the sum invested in the Fund was some $206 million. That, essentially, is the evidence which has been put before the court in support of the claimants' case that an order for security will stifle the claim.
22. Mr Rees has pointed out that the history of requests made by the claimants for funding from Eight Bar Partners have been refused and, I think, used the phrase "the proof of the pudding was in the eating". In that regard, he made reference to a number of paragraphs in Ms Woods' statement, in particular, para.26, 73, 103, 107 and 126. That evidence does show that in the past the Fund has refused to provide further funding. But looking at the evidence as a whole, the absence of any evidence at all about the individuals or entities within Coller is a gaping hole in the evidence. There are indications that it is probable that the fund and/or Coller would, if asked, make available funds to comply with an order for security for costs.
23. Thus, in the annual report and accounts 2017, it was stated at para.21 that the company, which is the second claimant, has agreed to delegate to Accident Exchange Limited ("AEL"), that is the first claimant, and Eight Bar Financial International, the conduct of a claim for unlawful means conspiracy against two former directors of Autofocus and a number of solicitors. What is stated in both the accounts is that based on the company's contractual relationships with AEL and Eight Bar Financial International, together with having held discussions with the directors of AEL and Eight Bar Financial International, the directors have a reasonable expectation that the first claimant and/or Eight Bar will provide sufficient future funding such that the company will be able to meet its obligations as they fall due. That is a statement which is also to be found in the report and accounts for the first claimant.
24. The statement that the company has agreed to delegate to EBFI the conduct of a claim for unlawful means conspiracy is said to have been a mistake and it is accepted, on the basis of other documents which have been provided, that it was a mistake. However, no explanation has been given as to how that mistake could possibly have been made. The fact that it was made suggests that there was some understanding by those involved with the claimant companies that Eight Bar did, in fact, have conduct of this claim. As I said, it is accepted that that is a mistake, but it is difficult to understand how it could have been made unless some people concerned with the claimant companies thought that that was the position. Further, the Eight Bar Fund provided letters of comfort. It was, no doubt, those which in part enabled the statement to be made in the accounts that the directors had a reasonable expectation that Eight Bar would provide sufficient future funding.
25. Eight Bar Partners provided to the second claimant a letter dated 9^th February headed "Letter of Comfort" which said as follows:

"We refer to your request for a written, non-binding statement from us regarding the proposed restructuring of the existing debt owed to us by the second claimant and its subsidiaries. As you are aware, negotiations in respect of such a restructuring between us, the second claimant and the other principal shareholders of the second claimant are ongoing. This is to confirm that while we anticipate that the restructuring will be completed and we are working to this end, should terms ultimately not be agreed it remains our intention to continue to support the second claimant so that it has sufficient financial resources to continue to trade and is in a position to meet its financial obligations as they fall due. This support may also involve our agreeing to extend the maturity of the debt obligations owed to us. As is customary, the above statement is intended to be a statement of our present policy only and, accordingly, should not be construed as constituting, nor does it constitute, any promise, undertaking or any form of legally binding obligation or commitment to you or any of the AISG Group companies, nor does it impose on us any obligation to give you notice of any future change in policy."

A letter in similar terms was sent to the first claimant; it is undated.

26. The relevance of those letters of comfort and the understanding stated in the annual reports of the claimant companies is twofold. First, it enables, albeit not by way of a legal obligation, the claimants to approach Eight Bar Partners to ask whether, in the event that a security for costs order has to be given, Eight Bar or Coller are willing to provide the funding. The letters of comfort also show that Eight Bar must have envisaged that it would have funds available to provide the funding which it is said was its policy to provide. Mr Rees, in his submission, asked rhetorically, "Is it realistic to suggest that the first claimant should go to either the fund or Coller?" I would answer that rhetorical question by saying, "Yes, it is, in circumstances where they have the benefit of these letters of comfort, notwithstanding the fact that they do not amount to a legal obligation."
27. There is a suggestion in skeleton argument that the claimants would not know who the partners in Coller are, but the directors of the claimants, who include Mr Doster, no doubt do know who is involved in the Fund and Coller. Moreover, if this claim succeeds, Eight Bar, and therefore Coller, expect to receive, based on the figures put before me by Mr Norbury of Counsel on behalf of one of the defendants firms of solicitors, some £90 million. That is in accordance with the agreed allocation of the proceeds which was agreed by the claimants and Eight Bar at the time of the restructure in late 2017.
28. The solicitor acting on behalf of the defendants has said that it is thought that the claimants had a reasonable prospect of success. Mr Norbury has said, "Well, if that is taken as at least a 40 per cent chance of success the claim is worth about £36 million." On that basis, Mr Norbury submits that one would expect the Fund and Coller, if asked, to put up security for costs. An investment has already been made in becoming the owner of AE, some $30 million debt was waived in return for becoming owner of AE, and in those circumstances it is improbable that the Fund and/or Coller would wish to do nothing to enable the claim, which they believe to have reasonable prospects of success, to continue to trial. For all those reasons, it seems to me that the claimants have wholly failed to show that the claimants could not, on balance of probabilities, obtain funding from those associated with them.
29. The next matter to consider is the question of delay. There is no doubt that this application is made at a late stage. As I say, the trial is to take place in October and I think the applications were issued in April of this year. There is, however, some background which it is said explains the delay.
30. On 22 April 2016, Womble Bond Dickinson, acting for the Lyons Davidson group of solicitors, raised the question of security for costs in a letter to DLA Piper, who then acted for the claimants. On 9 May, DLA Piper replied, saying that they do not accept that the condition which must be satisfied in order for the court to have jurisdiction to award security for costs was satisfied. They said that their clients had taken further measures to improve their balance sheet, they are in discussions with their senior lender in relation to a potential refinancing, but they could not say anything more because they remain bound by the City Code. However, it was anticipated that the refinancing will significantly improve their client's balance sheet. The CMC was listed for 24 June of that year and DLA Piper said their clients remained willing to provide further information regarding the proposed refinancing once they were able to do so. Then on 24 May, Womble Bond Dickinson replied, saying they looked forward to receiving the further information and they reserved their clients' rights in relation to the issue of security for costs.
31. On 28 September, that is after the CMC had taken place, Womble Bond Dickinson chased for a response, asking for an update as a matter of priority, and on 4 October, DLA Piper replied, saying this:

"Our client Automotive and Insurance Solutions Group, and its subsidiary undertakings, last week completed, subject to shareholder approval, a refinancing which will materially strengthen the financial position of the group. In summary, the refinancing provides for (1) a reduction in the group's loan liabilities by about £53 million and (2) a new working capital facility of £10 million. In that context, we enclose an audited proforma consolidated balance sheet for AISG which confirms that following the present refinancing AISG's net current assets will be approximately £32 million. As a consequence, and further to our letter dated 9 May, CPR 23.13(2)(c) is not satisfied and nor would it be just, having regard to all the circumstances of the cases, for an order for security for costs to be made."

The evidence filed by the solicitor at Womble Bond Dickinson is that that information was considered and, as a result, it was decided not to pursue, at that time, the application for security for costs.

32. In fact, what happened was that on 17 October, just a matter of days after DLA Piper wrote its letter, the refinancing was not approved. The claimants' solicitors did not inform the defendants of that. It is accepted that they had no duty to do so, because what had been said in the letter was strictly true, the reorganisation was subject to shareholder approval. But it is difficult not to accept the comment made by Mr Adam in his supplementary note that whilst the claimants may not have owed any strict obligation to correct it, their state of mind can only have been "let us keep quiet and hope they do not rumble us". The defendants' solicitors, Womble Bond Dickinson, did not return to the question of security for costs until early this year, when they asked what the position was.
33. It is submitted by Mr Rees on behalf of the claimants that there was a delay in those circumstances by Womble Bond Dickinson. He took a number of points. First, he said that, having received the letter of 4 October, a prudent solicitor would surely have replied immediately, asking for details of when the shareholders' approval was to be given and what the up-to-date position was. He submitted that if that had been done, Womble Bond Dickinson would have learned within weeks that the shareholder approval had not been obtained, and therefore, submits Mr Rees, the delay caused by the failure to take that step was a delay from, say, November 2016 to January 2018. Secondly, he submits that Womble Bond Dickinson ought to have kept the matter under review and an obvious step to take in that regard would have been to inspect the claimants' accounts in March 2017. That also would have told them shareholders' approval had not been obtained. The third point he makes is that this correspondence only involved Womble Bond Dickinson and not the other two groups of solicitors.
34. On the evidence which has been put before me, Keoghs Solicitors were, it seems, aware of the effect of the correspondence and the Morgan Cole Solicitors do not appear to have been involved in the correspondence or been party to it, but say that their understanding was that Womble Bond Dickinson, acting for Lyons Davidson, were taking the lead role in that matter.
35. It seems to me that there is some cogency in those submissions by Mr Rees. This is a major piece of litigation, the costs were very substantial. In those circumstances, one would expect the Lyons Davidson Solicitors, who had raised this matter to pursue the matter. If they had done so, it seems to me very likely they would have discovered that shareholders' approval had not been granted.
36. On the other hand, as Mr Norbury has submitted, if the truth had been discovered earlier and the matter had been raised during 2017, for example, it seems likely that the solicitors acting for the claimant at that stage would have said, "Well, that is perfectly true, but the reorganisation negotiations are still underway and, really, any application should await completion of them." It seems likely that something like that would have been said, but it also seems likely, having regard to the date for trial, that an application would have been made earlier than it was in fact.
37. I therefore consider that if it is otherwise appropriate to grant an order for security, some reduction in the amount ordered should be made to reflect the delay of the defendants in making this application.
38. Before dealing with the appropriate order, I should mention two further matters which were specifically relied upon by Mr Rees. The first is his submission that there is a public interest in this action proceeding. The action concerns, he submits, the perversion of the course of justice on a considerable scale and, therefore, it is in the public interest to go ahead. I agree that, in that sense, it can be said to be in the public interest though, of course, ultimately, it is simply a private claim for damages allegedly suffered by an alleged wrong. But nevertheless, if it is otherwise appropriate to grant an order for security, I do not consider that that factor leads to the conclusion that the order should be refused.
39. The other matter relied upon by Mr Rees arose out of the list of factors to be taken into account in the White Book at p.841, the first of which is that the claimants' claim is bona fide and not a sham; there is no dispute about that. The second and third are whether the claimant has a reasonably good prospect of success and whether there is an admission by the defendants in their defence or elsewhere that money is due. I have already said that this is not a case where I can form any view as to the prospects of success. I merely say this in relation to the matters relied upon by Mr Rees under the heading of "Admissions", that those points also do not enable me to form any view as to the prospects of success. There will no doubt be, in a case set down for 14 weeks, a considerable amount of evidence about these matters and it is simply impossible for the court to form any view today based on what has been said about various matters.
40. So, my conclusion, having, I hope, had proper regard to the appropriate authorities, the test and the matters relied upon by the parties, is that this is an appropriate case in which justice requires that security be provided.
41. So far as the quantum is concerned, there are two matters which I must say as a matter of principle in assessing the order. The first is this: Security has been sought in an amount equal to 80 per cent of what the defendants say would be their costs.
42. I was referred to another case Stokors SA & Ors v IG Markets Ltd. [2012] EWCA Civ 1706, in which the Court of Appeal supported the view that a broad-brush approach is appropriate in matters of this nature and that 60 per cent, or thereabouts, is an appropriate figure to take when deciding upon the figure to be provided as security. The skeleton argument of Mr Rees and his junior counsel have set out a number of detailed points on the breakdown of future costs which they say suggest that the costs are excessive, but it is precisely because points of that nature that can be taken that it is appropriate to use a broad-brush in allowing about 60 per cent. That is the first point of principle.
43. The second point relates to the deduction which should be made in relation to delay. It seems to me, having borne in mind the submissions of Mr Rees and the response of Mr Norbury to those submissions, that in relation to incurred costs the order should be in respect of 60 per cent of 60 per cent of the incurred costs. In relation to tranches 2 and 3, the figure should be 60 per cent of the costs which have been claimed. I will leave it to the parties, if I may, to work out and agree the appropriate figures.

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