DEVELOPMENTS IN SECURITY FOR COSTS CASE LAW
In September 2024, the High Court handed down judgment in Asertis v Bloch and Musst v Astra. Both judgments deal with an application for security for costs where the claimant had taken out after the event insurance (ATE), but with very different outcomes.
In Asertis, the court ordered the claimant, a litigation funder bringing the claim under assignment, to make a payment into court by way of security for the defendant’s costs. The order was made despite the claimant having taken out ATE with anti-avoidance endorsement (AAE) provisions. AAE provisions prevent an insurer from exercising their usual termination and cancellation rights (unless otherwise agreed with the defendant) thereby providing the defendant with assurance that the insurer will, in all circumstances, meet their costs should the policy be called upon.
While the judgment has garnered a lot of attention in the legal press, practitioners should not be alarmed. This judgment has simply highlighted a principle well established by case law – every case will turn on a careful consideration of the actual terms of the ATE policy relied on.
Jurisdiction to make an order for security for costs
Under CPR 25.13, the court has discretion to make an order for security for costs against a claimant company if there is reason to believe that they will be unable to pay the defendant’s costs if ordered to do so. In exercising its discretion, the court will consider all the circumstances of a particular case.
The court can also order that security be given by way of payment into court, or a guarantee from a first-class bank. However, this is often prohibitively expensive and can stifle valid claims.
Jan-Mar 2025 issue
Austen Hays
Ignite Specialty Risk