NEW TASTY BAKERY LTD v MA ENTERPRISE (UK) LTD (2016)

A claimant was ordered to provide security for costs where its accounts showed that it was in financial difficulties, it owed substantial sums to its director and sole shareholder who could call for repayment at any time, and although it had alleged that an order would stifle its claim it had failed to produce any evidence that it could not obtain funds from another source.
The defendant applied for an order for security for costs in the sum of £50,000 against the claimant. 

The defendant had indicated in a February 2015 letter that it might apply for security for costs. A case management conference was listed for July 2015 and the defendant indicated that it would apply for security for costs at that hearing. The case management conference and the security for costs application were delayed. The claimant’s accounts showed that it had made a modest profit and that it had creditors accounts falling due after more than a year of £478,000. The sole director and shareholder said that it was not a sum that would be called in because it reflected a loss caused by a fire at certain premises. 

The claimant argued that security should not be ordered because the defendant had delayed in making the application, had offered to settle the claim and an order would stifle the claim.

HELD: On the face of the accounts the claimant was potentially insolvent, or at least had financial difficulties. The court was satisfied that the director was the creditor and that he could call in the debt at any time, causing the claimant’s financial collapse. It was reasonable to believe that the claimant would be unable to pay costs if ordered to do so. Both parties were responsible for the disorderely progress of the proceedings, so the delay would not be taken into account. It could not be inferred from the fact that the defendant had made an offer of settlement that its case was weak. The claimant had made no effort to produce evidence that it could not secure the sum sought from another source. A claimant who alleged stifling was obliged to produce satisfactory evidence that it did not have funds and could not obtain them from a third party who might reasonably be expected to provide them, Al-Koronky v Time Life Entertainment Group Ltd [2005] EWHC 1688 (QB) applied. In the absence of such evidence, the court was bound not to give any great weight to the alleged stifling. An order for security for costs was granted.

Application granted
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