Security For Costs | Proportionality And Foreign Enforcement

The Court of Appeal granted security for costs of £70,000, rejecting the respondent’s application for £225,000 as disproportionate. The court held that where respondents would not have been entitled to security for costs at first instance, those costs should be excluded from security on appeal, including costs of defending a respondent’s notice.

QATAR INVESTMENT AND PROJECTS DEVELOPMENT HOLDING CO & HIS HIGHNESS SHEIKH BIN ABDULLAH AL THANI V PHOENIX ANCIENT ART S.A. & ALI ABOUTAAM & HICHAM ABOUTAAM [2025] EWCA Civ 1300

In Qatar Investment and Projects Development Holding Co & Anor v Phoenix Ancient Art S.A. & Ors, the Court of Appeal granted the claimants’ application for security for their appeal costs but reduced the quantum from £225,000 to £70,000. The appellants—a Swiss company and two individuals resident in Switzerland and New York—appealed against summary judgment granted by Garnham J following disclosure failures. The claimants applied for security under CPR 25.29(1), relying on CPR 25.27(b)(i) (residence abroad), (ii) (Phoenix’s inability to pay), and (vi) (steps taken making enforcement difficult). The court found all three grounds established. It rejected the pre-Brexit rules argument, holding the Civil Procedure (Amendment) Rules 2025 applied. Phoenix was found to be insolvent based on adjusted accounts. The individual appellants had taken steps placing assets beyond reach, including disposing of interests for no consideration and making unexplained payments; their property equity was precarious due to substantial local creditor claims. Ordering security was just and not discriminatory given objectively justified enforcement concerns. However, the claimed costs were disproportionate for a one-day appeal, and costs related to the respondents’ notice were excluded. Security was ordered at £70,000.

Accordingly, I am satisfied that conditions (i) and (vi) are satisfied in the case of all of the appellants and condition (ii) is satisfied in the case of Phoenix. […] The risk that the appellants would take steps to dissipate their assets so as to avoid paying a judgment against them has been established to the court’s satisfaction, in the context of the world-wide freezing order. That is not a ground for granting security for costs, but is a factor relevant to the exercise of discretion. Added to that, the appellants have a history of failing to provide full disclosure of their assets, and of paying prior costs orders in these actions late, and only when necessary to enable the actions to continue. […] Accordingly, I consider that the amount of security ordered should be limited to an amount which reflects the Claimants’ costs of responding to the appeal, excluding the costs incurred in respect of their respondent’s notice. […] I consider that a sum of £70,000 is a reasonable and proportionate level of costs to be incurred in responding to the appeal.

Citations

Phaestos Ltd v Ho [2012] EWHC 662 (TCC) A party seeking security for costs must establish a reason to believe the opposing party will be unable to pay any costs order, based on objective financial evidence, not mere doubt or concern. Jirehouse Capital v Beller [2008] EWCA Civ 908, [2009] 1 WLR 751 The applicant for security must show a real reason to believe the other party will be unable to pay costs; mere suspicion is insufficient, even though proof on the balance of probabilities is not required. Re Unisoft Group Ltd [1993] BCLC 532 Evidence of financial instability can support a belief of inability to pay, provided such evidence goes beyond uncertainty and raises a clear reason for concern. Texuna International Ltd v Cairn Energy plc [2004] EWHC 1102 (Comm) The court must be satisfied that the party “will be unable” to pay a costs order, not merely that it might be unable to do so. Golden Grove Estates Ltd v Chancerygate Asset Management Ltd [2007] EWHC 968 (Ch) The burden of proving inability to pay lies on the party seeking security, and failure by the other party to produce adequate financial disclosure may support an inference of such inability. Mbasago v Logo Ltd [2006] EWCA Civ 608 A party’s refusal or failure to provide financial disclosure can justify a belief that the party lacks funds to comply with a future costs order. Hutchinson Telephone (UK) Ltd v Ultimate Response Ltd [1993] BCLC 307 Even if the threshold for security is met, the grant of security is discretionary and must be based on what is fair and just in the specific context of the case. Jones v Environcom Ltd [2010] EWHC 2659 (Ch), [2010] Lloyd’s Rep IR 190 In assessing whether to order security, the court should consider all relevant circumstances, including fairness and potential prejudice. Ackerman v Ackerman [2011] EWHC 2183 (Ch) Security for costs may be granted where a claimant has taken steps in relation to their assets making enforcement of a costs order more difficult, regardless of intent or timing of those steps. Chandler v Brown [2001] CP Rep 103 It is not sufficient that a party has behaved dishonestly or improperly; there must be actual dealings with assets that impair enforceability of future costs orders. Aoun v Bahri [2002] EWHC 29 (Comm), [2002] CLC 776 The court evaluates objectively whether asset dealings will hinder enforcement of a costs order, irrespective of the claimant’s motives or intentions. Dubai Islamic Bank v PSI Energy Holding Co [2011] EWCA Civ 761 A party’s failure to disclose assets can support an inference that assets have been concealed or removed, thereby justifying security for costs. Harris v Wallis [2006] EWHC 630 (Ch) Steps taken to hinder enforcement of a prospective costs order may justify granting security, irrespective of whether the steps occurred pre-litigation. Sir Lindsay Parkinson & Co Ltd v Triplan Ltd [1973] QB 609 In exercising discretion for security, the court may consider whether a claimant’s financial difficulty has been caused by the defendant’s conduct. Spy Academy Ltd v Sakar International Inc [2009] EWCA Civ 985 Security for costs should not be ordered simply because a claimant lacks means; the order must not stifle a genuine claim, and affordability must be considered. Keary Developments Ltd v Tarmac Construction Ltd [1995] 3 All ER 534 The court must not order security in a sum it knows the claimant cannot pay, and may consider whether others (such as friends or family) would fund the litigation. Al-Koronky v Time-Life Entertainment Group Ltd [2006] EWCA Civ 1123, [2006] CP Rep 47 The party opposing security must fully and candidly disclose their financial means, and the court may draw adverse inferences from incomplete evidence. Brimko Holdings Ltd v Eastman Kodak Co [2004] EWHC 1343 (Ch) While the opposing party carries the burden of disproving ability to pay security, the court recognises the difficulty of proving a negative in relation to third-party funding. Bestfort Developments LLP v Ras Al Khaimah Investment Authority [2016] EWCA Civ 1099 In ordering security for foreign residents, the court must act on objective, legally justified grounds related to enforcement barriers specific to the litigant or their country. Nasser v Bank of Kuwait [2002] EWCA Civ 556, [2002] 1 WLR 1868 Security for costs against foreign parties must be justified by objectively rational grounds tied to real enforcement difficulties, not merely by their residence abroad.

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Key Points

When considering a security for costs application on appeal, the court applies a two-stage test: first, whether one or more of the grounds in CPR 25.27(b) is satisfied; and second, whether it is just in all the circumstances to make the order. [9]
To satisfy the inability to pay ground under CPR 25.27(b)(ii), there must be evidence giving reason to believe the party will be unable to pay an adverse costs order—not merely a possibility or concern—assessed on the basis of available financial information or justified inferences drawn from the lack thereof. [15–21]
The requirement under CPR 25.27(b)(vi) that a party has taken steps relating to assets which would make enforcement difficult is assessed objectively and may be satisfied by evidence of asset dissipation, unexplained transfers, or failure to disclose assets, particularly where subject to a relevant disclosure obligation. [22–30]
When assessing whether to exercise discretion to grant security for costs under CPR Part 25, the court may consider factors including the risk of asset dissipation, lack of transparency in financial matters, history of non-compliance with cost orders, and absence of evidence that such an order would stifle the proceedings. [32]
In determining the appropriate amount of security, the court will adopt a proportionate, broad-brush approach, excluding costs not directly attributable to defending the appeal, such as costs associated with supporting the decision below via a respondent’s notice. [41–44]

"The anticipated difficulties in this case relate to the circumstances of the appellants themselves: including a lack of available assets (taking into account that any equity in the real properties in New York and Geneva are vulnerable to enforcement action by local creditors), failures in disclosure of assets and the risk that the appellants will take steps to prevent any order being enforced. These provide (in the words of Gloster LJ at §77 of Bestfort) 'rational and objective justification for discrimination against non-Convention state residents'."

Key Findings In The Case

The Court found that Phoenix Ancient Art S.A. was unable to pay an adverse costs order, based on unrebutted evidence that its 2023 accounts substantially overstated its inventory and net asset position, and that a purported debt from Electrum was largely irrecoverable, rendering Phoenix heavily insolvent [16–21].
The Court accepted that Mr Ali Aboutaam had disposed of his interests in at least one valuable company, Tanis Antiquities Ltd, in 2023 for no consideration, without adequate explanation or documentation—constituting a transaction likely to frustrate enforcement of a costs order [24].
The appellants failed to provide proper disclosure of their assets despite being under obligations to do so, including pursuant to a worldwide freezing order; this failure supported a finding that they had taken steps in relation to assets that would make enforcement more difficult, thereby bringing CPR 25.27(b)(vi) into play [26–30].
The Court found that the appellants’ equity in real properties in New York and Geneva did not provide a sufficient safeguard against the risk of non-payment, given the existence of significant local judgment debts and enforcement actions pending against those assets, making recovery of costs uncertain [27–29].
The Claimants’ anticipated costs of £225,000 for the appeal were held to be disproportionately high, and the Court ruled that only costs directly referable to defending the appeal (excluding those relating to any respondent’s notice) would be secured, setting the appropriate security for costs at £70,000 [41–45].

"In view of the very substantial amounts owed to local creditors, by each of Mr Ali and Mr Hicham Aboutaam, the remaining equity in their respective properties represents a precarious asset at best, being vulnerable to imminent enforcement proceedings in their respective jurisdictions."

The Court of Appeal’s decision in Qatar Investment and Projects Development Holding Co & Anor v Phoenix Ancient Art S.A. & Ors [2025] EWCA Civ 1300 addresses proportionality in security for costs applications on appeal and the principles governing security against foreign appellants.

Background

The claimants, Qatar Investment and Projects Development Holding Co and His Highness Sheikh Bin Abdullah Al Thani, brought two actions against five defendants, including the appellants Phoenix Ancient Art S.A., Ali Aboutaam, and Hicham Aboutaam. The 2020 Action concerned a small chalcedony statuette figure of the goddess Nike, while the 2023 Action related to a marble object known as the Head of Alexander the Great as Herakles and a small chalcedony cameo known as the Phalera with an Imperial Eagle. The principal claims were for rescission of the contracts of purchase and claims in deceit and conspiracy. The two actions were managed together.

On 9 December 2024, the claimants applied for summary judgment and for orders striking out the defences in both actions and debarring the appellants from defending on the grounds of non-compliance with disclosure orders. By an order dated 11 April 2025, Garnham J debarred the appellants from defending the 2023 Action, struck out their defence, and granted the claimants summary judgment. In relation to the 2020 Action, he granted summary judgment on the claims based on fraud, dishonesty and fraudulent misrepresentation, and stayed all other claims. Consequential orders were made on 29 April 2025.

The appellants were granted limited permission to appeal by Phillips LJ on 25 July 2025. The core issue on appeal was whether Garnham J was correct to order summary judgment without considering the substantive merits, on the basis that the substance of the allegations which the appellants were precluded from defending were deemed to be admitted. The permission order allowed the claimants to apply for security for costs. The claimants subsequently issued an application on 8 August 2025, seeking security in the sum of approximately US$229,000, representing 75% of their total anticipated appeal costs of US$305,291.38.

Costs Issues Before the Court

The application for security for costs was brought under CPR 25.29(1), which permits the court to order security for costs on an appeal on the same grounds as against a claimant. The claimants relied on three specific grounds under CPR 25.27(b): (i) that the appellants were resident out of the jurisdiction; (ii) that Phoenix was a company and there was reason to believe it would be unable to pay the claimants’ costs if ordered to do so; and (iii) that the appellants had taken steps in relation to their assets that would make it difficult to enforce an order for costs against them.

The court was required to conduct a two-stage inquiry: first, to determine whether any of the conditions in CPR 25.27(b) were satisfied; and second, to decide whether it was just in all the circumstances to make an order. A further issue concerned the appropriate quantum of security, with the claimants seeking a substantial sum and the appellants challenging both the principle and the amount.

The Parties’ Positions

The claimants argued that all three grounds for security were met. Regarding residence abroad, they contended that all three appellants were resident outside the jurisdiction. On inability to pay, they pointed to Phoenix’s financial statements, which they argued showed a heavily insolvent position when adjusted for overvalued inventory and irrecoverable debts. They also highlighted previous statements by the appellants concerning their impecuniosity. On the assets ground, they relied on specific transactions, including Mr Ali Aboutaam’s disposal of his interests in Phoenix and Tanis Antiquities Ltd for no consideration, monthly payments from Phoenix to Mr Ali Aboutaam with no evidence of their destination, and a general failure by the appellants to provide full disclosure of their assets.

The appellants challenged the application on several fronts. On the residence ground, they argued that for the 2020 Action, the pre-Brexit version of the rules should apply to Phoenix and Mr Ali Aboutaam as Swiss residents, which would have provided protection as Switzerland was a Lugano Convention state. They accepted this point had limited practical effect as it did not apply to the 2023 Action or to Mr Hicham Aboutaam. On inability to pay, they suggested the claimants’ own case was that the appellants were wealthy, which was inconsistent with the assertion that Phoenix could not pay costs. On the assets ground, they argued that the Individual Appellants each had substantial equity in real properties in Geneva and New York respectively, which far exceeded the potential costs liability, and that the matters relied on by the claimants did not demonstrate steps taken to make enforcement difficult. They further submitted that ordering security based on residence abroad would be discriminatory absent objectively justified grounds relating to obstacles to enforcement.

The Court’s Decision

The court found that the residence abroad condition under CPR 25.27(b)(i) was satisfied for all appellants. It rejected the argument that the pre-Brexit rules applied to the 2020 Action, holding that the Civil Procedure (Amendment) Rules 2025 had substituted a new Part 25 with no transitional provision preserving the old position for pre-2021 claims.

On the inability to pay condition concerning Phoenix, the court applied the principles from Phaestos Ltd v Ho, noting that there must be reason to believe the company will be unable to pay, which is more than mere doubt. It found the evidence amply justified this conclusion, pointing to Phoenix’s 2023 financial statements, which showed a net asset position that became heavily insolvent when adjusted for overvalued inventory and an irrecoverable debt from Electrum. The court also noted Mr Hicham Aboutaam’s evidence that Phoenix had very little ready cash and could not borrow, indicating a worsened financial position.

Regarding the assets condition, the court applied the principles from Ackerman v Ackerman, emphasising that the test is objective and concerns steps taken in relation to assets that would make enforcement difficult. It found that Mr Ali Aboutaam’s disposal of his interest in Tanis for no consideration and the unexplained monthly payments from Phoenix to him were such steps. It also drew an adverse inference from the appellants’ failure to provide full asset disclosure, both in the context of their pleaded impecuniosity and under a worldwide freezing order. The court rejected the argument that the Individual Appellants’ property equity provided a sufficient answer, noting the properties were subject to substantial local creditor claims, making the equity precarious and vulnerable to enforcement.

On the second stage of the inquiry, the court held it was just to order security. It noted the established risk of dissipation, the history of non-disclosure, and late payment of prior costs orders, and the absence of any suggestion that security would stifle the appeal. On the discrimination point, the court found there were objectively justified grounds for ordering security based on the appellants’ own circumstances, including lack of available assets and the risk of steps to prevent enforcement, which provided rational justification.

On quantum, the court found the claimants’ claimed costs of £225,000 disproportionately high for a one-day appeal on a short point of law. It rejected the argument that costs of the respondent’s notice (seeking to uphold the judgment on the merits) should be included, holding that the claimants would not have been entitled to security for the underlying summary judgment application. Taking a broad-brush approach, it ordered security in the reduced sum of £70,000, reflecting the costs of responding to the appeal alone.

The application for security for costs was therefore allowed, but only in the sum of £70,000.

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