HT-2022-000132 - [2025] EWHC 1522 (TCC)

Fecha: 21-May-2025

Conclusions

The GC Application

43.

It is common ground that the key question arising on the GC Application is whether the threshold condition has been met; i.e. whether there is reason to believe that the Claimants will be unable to pay the Commission’s costs if ordered to do so. The Commission estimates its costs at approximately £22 million in total, albeit that it seeks security in the sum of £15 million.

44.

The Commission relies upon the evidence in the ninth (“Dickey 9”), tenth and twelfth witness statements of Jennifer Louise Dickey, a partner at Hogan Lovells. For present purposes I summarise the points made in Dickey 9 which are relevant to the satisfaction of the threshold condition as follows:

The First Claimant:

The First Claimant is the special purpose entity set up by the Group for the sole purpose of the Competition. It does not trade and its only activity is pursuit of this litigation. Company accounts for the First Claimant to 31 December 2023 show that the First Claimant had net liabilities and net current liabilities of £1.7 million for both the years 2022 and 2023. With no source of income, the First Claimant had net current liabilities of circa £1.7 million due and payable in 2024. Without further evidence as to the First Claimant’s financial position it is unclear whether it remains solvent but given that it does not trade, it is apparent that it will be unable to pay the Commission’s costs if ordered to do so.

The Second Claimant:

The Second Claimant is a publicly listed company and the ultimate parent company of the Group which comprises approximately 16 subsidiary companies. Each of these subsidiary companies is a private limited company which is wholly owned, directly or indirectly, by the Second Claimant. The Second Claimant’s annual accounts to 31 December 2023 demonstrate that it has limited tangible assets (£5.8 million as at that date, of which £5.1 million is related to land and buildings) with the vast majority of its assets (£174.5 million) being held in investments in subsidiary companies. Ms Dickey expresses the view (based on advice from colleagues in the Hogan Lovells corporate team) that it is unlikely that these investments could be sold quickly.

The Second Claimant made a loss of £15.9 million during 2023, following a loss of £28.8 million in 2022; the accounts also suggest that it will make a substantial loss in 2024, as illustrated by its significant net current liabilities of circa £40 million. The Second Claimant’s cash reserves were limited: £7.8 million as at 31 December 2023 and £4.3 million in the preceding year. Ms Dickey observes that any available cash reserves are likely to be used up in paying the Claimants’ own legal costs (estimated at £15 million). She says that given the content of the audited accounts there is reason to believe that the Second Claimant will be unable to pay the Commission’s costs if ordered to do so.

45.

In response, the Claimants rely upon the fifth witness statement of Graham Shear (“Shear 5”), a partner at BCLP. Mr Shear provides detailed (and, at times, confidential) information as to how the Group operates. Trying to summarise this information as briefly as possible:

Mr Shear’s central thesis is that the Commission has failed to take account of the financial position of the broader Group, which he describes as being a sophisticated and mature business group “with decades of commercial track record, including owning a number of high profile businesses”. The Group is involved in property development and investment and has very extensive resources available to it, including worldwide asset investments in liquid funds (which Mr Shear describes as “near cash”).

Mr Shear exhibits a confidential copy of consolidated Group unaudited management accounts as at 31 March 2025 which amply support his evidence and show very substantial sums in cash at bank and in hand. He explains that details of the Group’s investment assets are confidential but he confirms from information he has seen about those assets (which are held by N&S Properties) that they include “liquid investment assets easily sufficient to satisfy any adverse costs order”. He confirms on instructions from a named director that these investment assets “can be drawn upon quickly and are realisable within a matter of days”. He also explains that N&S Properties essentially acts as a finance vehicle for the remaining companies within the Group and that cash is transferred from N&S Properties as required to meet specific liabilities. This is all done informally owing to the fact that the Group is privately owned and that the Group companies have directors in common with appropriate authority. He gives additional evidence about policies employed by the Group to ensure that cash is available as and when required and he responds to concerns raised by the Commission about debts owed by N&S Properties, explaining that the Group has no external debt and that there is no realistic prospect of intercompany balances impacting upon external creditors.

Mr Shear explains that given the amount of cash at bank and in hand (which remains at a stable level) a costs bill of £15 million could be paid “within a day”.

He confirms from personal experience that BCLP’s invoices are consistently paid promptly.

Mr Shear dismisses the risk that the Claimants would be put into liquidation to avoid a costs award as “illusory” having regard to the profile of the Group and the fact that any such award would represent only a very small proportion of the Group’s liquid assets. The directors firmly reject the suggestion that they would act in such a way.

As to the position of the individual Claimants, Mr Shear confirms that the Claimants accept that the First Claimant would not, in its present position, be able to satisfy a costs award “on its own”, but contends that it is part of the wider corporate Group and that, accordingly, its financial position should not be considered in isolation because, considering it in isolation “would lead to erroneous conclusions about the status of the Group”. Mr Shear records his instruction from a director of the Second Claimant, that “the Directors fully intend to continue providing funds to the First Claimant as required”, and that this is consistent with the “treasury” type function undertaken by N&S Properties. He goes on to say that this situation is not unusual for an SPV and that no conclusions can therefore be drawn from a review of the First Claimant’s audited accounts.

As for the Second Claimant, Mr Shear points out that its assets include the very substantial current asset investments and net current assets shown in the 31 March 2025 unaudited accounts. He says that the loss shown in the 2023 audited accounts relied upon by the Commission falls away when the accounts are consolidated and that one cannot consider the Second Claimant’s cash position without regard to the position of the wider Group. He disputes the suggestion in Dickey 9 that the First Claimant is unable to realise assets quickly – reiterating N&S Properties’ ability to do so and he confirms that the current assets are “more than sufficient” to meet any Group losses and all possible costs liabilities arising from the litigation”.

Mr Shear confirms on instructions that there is currently no expectation of any extraordinary or unusual losses for the Group in the next 18 months and no expectation of any material change in investment and trading strategy.

Finally, Mr Shear says that he is instructed that the Second Claimant would be willing, should the court consider it necessary and appropriate, to provide an appropriate form of undertaking to the Court that (a) it will call on N&S Properties (as its sole shareholder) to liquidate an appropriate level of assets, should that be needed to meet any adverse costs award against it and will procure that the requisite cash is provided and that (b) it will ensure that the First Claimant is placed in funds by a similar type of asset liquidation that it will direct N&S Properties to make, in the event of a costs order against the First Claimant.

46.

Save that in oral submissions the Commission disputes the evidence in Shear 5 to the effect that the chances of the Claimants being put into liquidation are ‘illusory’ and save that it casts doubt over whether the Second Claimant would in fact exercise the control it has over N&S Properties so as to liquidate funds in the event of an adverse costs order, the evidence in Shear 5 which I have summarised above is not materially challenged by the Commission. Neither Dickey 10, nor Dickey 12 seeks to take issue with that evidence. Thus the only question for this court is whether the apparently strong financial position of the Group as a whole, the asset-rich status of N&S Properties and its ability (upon request from its parent company) to liquidate those assets swiftly and to distribute them as appropriate to other Group members is capable of rebutting what would otherwise appear to be an inevitable conclusion as to the likely impecuniosity of the First and Second Claimants (when viewed as independent entities) as at the date of any adverse costs order.

47.

Ms Oppenheimer KC, on behalf of the Commission, points out (correctly) that neither Claimant has seriously contested the proposition that the impecunious company condition is made out against it. She contends that the fact that a claimant may be part of a group of companies whose overall financial position may be more favourable than its individual position is no answer to an application for security for costs, because what matters is the financial position of the claimant, not the companies with whom it is in an inter-company relationship. She submits that the reliance upon the Group position is misconceived because (even if it is assumed that the parent company has unfettered control over its subsidiaries, as the evidence appears to establish in this case) the evidence in Shear 5 provides no reassurance to the Commission that the funds of N&S Properties will in fact be drawn down to meet any liability of the Claimants for an adverse costs order – no enforceable mechanism for achieving this is identified. She points out that, absent the undertakings offered in Shear 5, there is nothing that requires the Second Claimant to exercise the control it has over N&S Properties. Ms Oppenheimer also submits that an undertaking from a group company to pay a claimant’s costs following trial will not defeat an application for security for costs because the offer of such an undertaking effectively concedes that the conditions for ordering security exist.

48.

In response, Mr Hossain submits that the question of ability to pay is a factual question which must be determined by an evaluative judgment in light of the totality of the available evidence. He rejects the suggestion that it is a question which turns on a narrow analysis of the assets directly owned by the Claimants; instead he says it is a much broader question involving an assessment of the assets that the Claimants will be able to marshal when and if they are required to satisfy an adverse costs order. He relies upon the evidence in Shear 5 as to the arrangements within the Group for the transfer of funds and the general operation of its business, the repeated assurances from the directors that they will make payment and the evidence of the prompt payment of BCLP’s invoices. He submits that the Commission has come up with nothing to suggest that the directors of N&S Properties, if and when asked, will not transfer to the Second

Claimant sufficient sums to enable it to pay any award of costs that may be made against it. He rejects the suggestion that Shear 5 is inadequate in failing to provide sufficient reassurance in respect of payment by one company to another and he points out that the Commission has identified no authority in which a parent company has been required to give security for costs in circumstances where its wholly owned subsidiary, or its group of companies, was good for the money. He says this is unsurprising because holding companies are very often just “wrappers”, i.e. vehicles for holding operating subsidiaries, and that furthermore, corporate groups of this type very often operate with common banking facilities and manage their affairs on a group basis.

49.

On balance I prefer Mr Hossain’s submissions, for the reasons he gives. There is substantial, unchallenged, evidence in this case that, in the event of the Claimants’ finding themselves on the wrong end of an adverse costs order, they will be put in funds by N&S Properties to satisfy that order. Shear 5 confirms that the swift realisation of assets is achievable and the liquid assets held by N&S Properties plainly exceed (by a very considerable margin) the total amount of any costs order that might be made against the Claimants. In the face of the evidence in Shear 5, I do not consider that I could properly find that there is reason to believe that the Claimants will be unable to pay an adverse costs order following trial. Specifically (and addressing a key issue raised by the Commission), given the evidence as to the treasury function exercised by N&S Properties, together with the explanation of the informal intercompany funding arrangements operated without the need for board meetings or resolutions, I do not consider the absence of a formal, documented, agreement or mechanism as to the transfer of funds from one company within the Group to another to be fatal to the Claimants’ opposition to the GC Application.

50.

Furthermore, I am not persuaded by Ms Oppenheimer’s submission that, in the event of an adverse costs order being made, there is potential for the directors of N&S Properties to decide not to transfer funds to the Second Claimant in the proper exercise of their directors duties. I do not consider this somewhat speculative possibility (not foreshadowed anywhere in the Commission’s evidence or skeleton argument) to satisfy the requirement for the Commission to show that there is reason to believe that the Claimants will not (as opposed to may not) be able to pay an adverse costs order. As Mr Hossain submitted, this contention might have traction if the subsidiaries within the Group were in danger of insolvency such that the directors’ duties to creditors were engaged. But there is no suggestion of that in the evidence – the Group is profitable and has virtually no external debt. There is also no evidence before the court of any proposed change of strategy of the Group or any foreseen event that might affect the solvency position of the Group in 12-18 months’ time, when, if the Claimants are unsuccessful, an interim payment on account of costs and later detailed assessment may be ordered. Shear 5 confirms there is no expectation of any change in normal trading strategy over the next 18 months.

51.

Similarly I can see no reason for any genuine concern over the potential for the Claimants to be put into liquidation so as to avoid paying an order for costs, and none

was identified. I am inclined to accept that it is little more than fanciful to suggest that a high profile and sophisticated corporate Group with decades of commercial track record would take such a step in relation to its parent company in order to avoid a costs order which would, on any view, amount to an insignificant proportion of the Group’s total assets. The Second Claimant has the right to procure the funds to cover any costs award from its subsidiary and there is no sound basis to suppose that it will not do so, given the evidence in Shear 5.

52.

The burden on this application lies with the Commission and, in my judgment, it has identified no credible reason why the payment mechanism described in Shear 5 would not be adopted in the event of an adverse costs order so as to put the Claimants into the funds necessary to enable them to satisfy that order.

53.

Finally, I do not consider that the two authorities to which my attention was drawn by the Commission affect my conclusion on the GC Application.

54.

The first, Eagle Ltd v Falcon Ltd [2012] EWHC 2261 (TCC) concerned an application for security for costs against a subsidiary company which was wholly owned by a second company, itself wholly owned by a third company (described in the judgment as the Osprey Group). All three companies were owned and controlled by one individual. In support of the application for security, Falcon Ltd relied upon evidence that Eagle Ltd was insolvent and that the Osprey Group, of which it was a part, had an uncertain future and few assets that it could realise quickly. There was also evidence as to the interdependence of the Osprey Group upon another group of companies (described as the Buzzard Group), also owned by the same individual.

55.

Coulson J (as he then was) held that the threshold condition had been satisfied in relation to the financial position of Eagle Ltd and then made the following observation at [33] upon which Ms Oppenheimer relies:

“On one view it is unnecessary for me to go on to consider whether [the impecuniosity condition] has been made out in relation to the other companies owned and controlled by Mr Allirajah. What matters is the financial position of Eagle, not the companies with whom they are in a complex inter-company relationship”.

56.

However, the Judge did then go on to consider the position of other companies, finding that the financial position of the two parent companies in the Osprey Group could not give the court confidence that they could meet costs orders on behalf of Eagle and that terms of business between Eagle and the Buzzard Group, relevant to Eagle’s future performance, had not been provided. At [44] the Judge concluded that the impecuniosity test had been satisfied in relation to Eagle. At [45] he observed that the evidence in relation to the holding companies in the Osprey Group was troubling and unclear. At [47] he said that, on analysis, “the intercompany relationships in this case, which obviously underpin any potential future profitability on the part of Eagle, are not unfairly described as a ‘house of cards’”.

57.

In my judgment, this case lends no support to the Commission’s position. As Mr Hossain pointed out during his submissions, it was a case involving an application for security for costs against a subsidiary company, and so was not concerned with the

reverse situation in which a parent company has control, and can call upon, the assets of its subsidiaries. Although it is true that Coulson J observed that what mattered was the financial position of Eagle, I do not understand this to suggest that there will never be circumstances in which, on the facts of any particular case, the financial position of other related companies (and the arrangements between them and the claimant company) will be irrelevant to the analysis of whether there is reason to believe that a claimant company will be unable to satisfy an adverse costs order. Indeed in this context it appears to me to be of significance that Coulson J did go on to consider whether the court could have any confidence that the parent companies in the Osprey Group would meet Eagle’s costs if necessary in due course.

58.

The second case on which Ms Oppenheimer relies is Longstaff International Limited v Baker & McKenzie [2004] EWHC 1852 (Ch), another case involving an application for security for costs against the claimant company, referred to in the judgment as Longstaff. Longstaff’s major asset was a 100% shareholding in another company called Redwell Ltd whose major asset was a property in the Isle of Dogs with value as a development site. Park J found that, while Redwell Ltd owned a substantial asset, that asset was substantially illiquid and incurring losses. He made a similar finding in respect of Longstaff on the grounds that it owned valuable shares in Redwell Ltd but that those shares were substantially illiquid. In opposition to the application for security for costs, Redwell Ltd offered an undertaking to the court to meet in full any liability for Longstaff’s costs that Longstaff failed to meet.

59.

The Judge found that the nature of Longstaff’s asset position was such that it could not realise its assets with any degree of promptness and he observed that there was no suggestion that its shares in Redwell Ltd could be realised at short notice. Thus he concluded that the impecuniosity condition had been satisfied. He rejected a submission that the offer of the undertaking from Redwell Ltd made a difference, relying on three points at [22]-[24], as follows:

“22.
First, CPR r 25.13(2)(c) applies if there is reason to believe that ‘it’ will be unable to pay the defendant’s costs if ordered to do so. “It” is the claimant company, and in this case it is Longstaff. A case cannot be taken out of sub-paragraph (c) by saying that, although the claimant company will be unable to pay the defendant’s costs, some other person will…
23.
Second, the reason why Longstaff will not be able to pay [the defendant’s] costs is because Longstaff, though having a positive net asset value, is illiquid, and it seems to me the same is true of Redwell…In the circumstances it is not obvious that the offer from Redwell improves or alleviates the problem which, without Redwell’s undertaking, would be conceded to exist and to bring Longstaff within sub-paragraph (c).
24.
Third, even if Redwell had large liquid assets, the offer of its undertaking would not, in my judgment, mean that the case was taken out of rule 25.13(2)(c). Rather the offer of the undertaking concedes that the conditions for ordering security for
Longstaff’s potential costs liability do exist. Longstaff is, in reality, offering security in the form of an undertaking to the court from its subsidiary Redwell.”

60.

At first blush, these passages appear supportive of the Commission’s position on this application. However, on careful analysis I consider that the facts of this case are obviously distinguishable.

61.

As Mr Hossain pointed out, Longstaff was not a case in which there was any evidence that Longstaff could call on Redwell to provide it with cash at any relevant time, and of course Redwell did not have any cash (a point the Judge made at [23]). The provision of an undertaking from Redwell to pay costs (even assuming it had the means to do so) was merely an undertaking from a third party, as the Judge found in [22] and effectively therefore a concession that Longstaff itself would not be able to satisfy any adverse costs order (paragraph [24]); thus it was not enough to enable Longstaff to escape from the impecuniosity condition.

62.

However, in this case, the evidence shows that when and if an adverse costs order is made against the Claimants they will call upon N&S Properties to put them in funds to pay the costs themselves. Consistent with this, the offer of an undertaking is not from N&S Properties but from the Second Claimant and does not appear to me to amount to a concession that the threshold condition for ordering security exists. It reflects the evidence as to what the Second Claimant will do in the event that the Claimants are required to meet any adverse costs order following the trial. As Mr Hossain explained in his skeleton, the function of the undertaking is to provide yet further reassurance that if required to pay costs, the Second Claimant will procure the necessary payments of cash to it by N&S Properties.

63.

In all the circumstances, the Commission has failed to satisfy me that the threshold condition for an award of security for costs is met in this case. Strictly, therefore, I cannot see that it is necessary or appropriate to require the provision of the undertaking offered in Shear 5 and I note from Mr Hossain’s skeleton that the undertaking is only proffered in the event that the threshold condition is met.

Conclusion

64.

For all the reasons I have given, I reject the IP Application and the GC Application. The IP Application fails for want of jurisdiction, but it would also have failed on the same grounds as the GC Application: that the court could not be satisfied that there is reason to believe that the Claimants will be unable to pay the Defendant’s and Allwyn’s costs if ordered to do so. There is nothing in Allwyn’s evidence for the IP Application that impacts upon the analysis I have set out above.

65.

Given my conclusion on the two applications, there is no need for me to go on to look at factors which might have been relevant to the exercise of my discretion.