Law Report: Defendant not required to pay security for costs as if a plaintiff: C T Bowring & Co (Insurance) Ltd v Corsi & Partners Ltd - Court of Appeal (Lord Justice Dillon, Lord Justice Millett and Sir Michael Kerr), 16 June 1994.

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A defendant who sought to enforce a cross-undertaking in damages, given by the plaintiff when obtaining an ex parte injunction against the defendant, was not a 'plaintiff' for the purposes of section 726(1) of the Companies Act 1985 so as to entitle the court to make an order requiring him to furnish security for costs.

The Court of Appeal dismissed an appeal by the plaintiff, C T Bowring & Co (Insurance) Ltd, against the refusal of Mr Justice Waller, on 7 October 1993, to order the defendant, Corsi & Partners Ltd, to provide security for costs for its interlocutory application for an inquiry into damages said to have been incurred as a result of the imposition, on the plaintiff's ex parte application, of a Mareva (asset-freezing) injunction.

In obtaining the injunction, the plaintiff, who was suing the defendant for balances due in respect of insurance and reinsurance business, had given the court the usual cross-undertaking in damages. Although the injunction was in force for less than two months, the defendant claimed losses of pounds 3.75m. The plaintiff disputed the amount and argued the case was unsuitable for ordering an inquiry into damages.

Steven Gee QC (Clyde & Co) for the plaintiff; Andrew Fletcher (Norton Rose) for the defendant.

LORD JUSTICE DILLON said that in seeking security for the costs to which it might be entitled, should the defendant's application fail, the plaintiffs relied on section 726(1) of the Companies Act 1985, which provided:

'Where . . . a limited company is a plaintiff in an action or other legal proceedings, the court . . . may, if . . . there is reason to believe that the company will be unable to pay the defendant's costs if successful in his defence, require sufficient security to be given for those costs, and may stay all proceedings until the security is given.'

That was the only established exception to the general rule that a party who desired to litigate a claim should not be prevented on the ground of his poverty and consequent inability to pay his adversary's costs, if his action failed. And there was a strongly established rule of practice that someone in the position of a defendant should be at liberty to defend himself without being called on to give security.

The cases, outside the Companies Acts, in which the courts used to order security for costs under their inherent jurisdiction, were now formulated in the Rules of the Supreme Court (see Order 23). To add a new category would now be a matter for the Rules Committee and not the discretion of an individual judge.

Here, the judge held that the defendant was a defendant and not a plaintiff and so could not be ordered to provide security for the plaintiff's costs.

Section 225 of the Judicature Act 1925 provided that 'plaintiff' included 'every person asking for any relief (otherwise than by way of counterclaim as a defendant) against any other person by any form of proceedings, whether the proceeding is by action, suit, petition, motion, summons or otherwise'.

In his Lordship's judgment, the natural meaning of the term 'plaintiff' in a context of litigation, was the plaintiff in the proceedings as a whole or in the original proceedings. The definition in section 225 should be construed in accordance with that natural meaning.

'Plaintiff' in section 726(1) of the 1985 Act bore its ordinary meaning and that did not include a defendant who made an interlocutory application. An impoverished corporate defendant who made an application by interlocutory summons or motion in some other plaintiff's action did not thereby constitute itself a 'plaintiff' which could be ordered to give security for the costs of its application under section 726.

If a defendant, including a foreign defendant or a defendant which was an impecunious company, put in a defence which was extravagant and without foundation, the plaintiff might be able to have it struck out as an abuse of process, or, in an appropriate case, to obtain summary judgment under Order 14. But there was no case in which it had been, or could be, held that if a defence could not be struck out but appeared, on a preliminary trial on affidavits and statements without cross-examination, to be weak, the defendant ought to be ordered to give security for the plaintiff's costs of the action.


Paul Magrath, Barrister