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

The CPR 25.27(b)(ii) gateway, like all of the gateways in CPR 25.27, is not a question for the court’s discretion but raises an issue of fact on which the court needs to be satisfied. It is only once a case has passed through one of the gateways that the court’s discretion comes into play: Infinity Distribution Ltd (In Administration) v The Khan Partnership LLP [2021] EWCA Civ 565, [2021] 1 WLR 4630 per Nugee LJ at [30];

The burden falls on the defendant to show that the condition at CPR 25.27(b)(ii) is made out. It is not incumbent upon a claimant to prove that it has the means to pay: Phaestos Limited and others v Peter Ho and others [2012] EWHC 622 (TCC) per Akenhead J at [71(a)(iii)];

However, the defendant does not have to show on the balance of probabilities that the claimant will be unable to pay costs ordered against it: Jirehouse Capital v Beller [2008] EWCA Civ 908, [2009] 1 WLR 751 per Arden LJ at [26]-[29]. It need only show that “there is reason to believe” that the claimant will be unable to pay. The test is “will not be able to pay” and not “might not be able to pay” – that test is not watered down by the earlier words “reason to believe”: Eagle Ltd v Falcon Ltd [2012] EWHC 2261 (TCC) per Coulson J at [22(b)];

If legitimate concerns about the claimants’ financial position are raised, and if the claimants “choose to provide no or incomplete information in response, that in itself can lead to a court reaching the belief that the Claimants are unable to pay”: Phaestos Limited and others v Peter Ho and others [2012] EWHC 622 (TCC) at [71(a)(iv)];

The focus should be on the claimant’s net rather than gross assets:Pisante v Logothetis [2020] EWHC 3332 (Comm), [2020] Costs LR 1815, per Henshaw J at [53]-[56]. A claimant must therefore identify not only its liquid assets but also its current and long-term liabilities: Kompaktwerk GMBH v Liveperson Netherland [2019] EWHC 1762 (Comm), per David Edwards QC at [35];

Illiquid assets are not a good answer to an application: Wright v Coinbase Global Inc [2023] Costs LR 1403, per Mellor J at [54(ii)];

Whilst questions as to the claimant’s ability to pay must be decided at the time of the application, the court must consider whether there is reason to believe that a future event will occur, i.e. that the claimant will be unable to pay the defendant’s costs following trial. This calls for an assessment of what the claimant may be expected to have available for payment at that time: Thistle Hotels Ltd v Gamma Four Ltd [2004] EWHC 322 (Ch), [2004] 2 BCLC 174 per Sonia Proudman QC at [11] and Longstaff International Ltd v Baker & McKenzie [2004] EWHC 1852 (Ch), [2004] 1 WLR 2917, at [17]-[18], both citing the decision of Sir Donald Nicholls V-C in In re Unisoft Group Ltd (No 2) [1993] BCLC 532 at 534;

Even if the impecuniosity condition is satisfied, the court’s power to award security for costs is discretionary; the overall question is whether the court is satisfied, having regard to all the circumstances of the case, that it is just to make such an order: CPR 25.27(a).