Security for Costs in Family Proceedings

Published: 06/07/2022 07:13

In MG v AR [2021] EWHC 3063 (Fam), Mostyn J made an order providing security for costs. Such orders are more frequently made in civil proceedings, where ‘costs follow the event’ and costs orders are made in favour of the successful party. An application for security for costs is an unusual application within the family jurisdiction where costs orders are rarely made, the usual order being ‘no order as to costs’. Indeed, this is the first reported case on the subject since the Family Procedure Rules 2010 (SI 2010/2955) (FPR) came into force.

The facts

The case concerned M, aged 8, whose Lebanese mother, having later acquired Canadian citizenship, had moved to London in 2007 where she met M’s father, a dual Saudi/British national. M had dual British–Canadian citizenship. The parties separated shortly after M’s birth, since when they had been embroiled in litigation.

A final child arrangements order was made in November 2015 providing that M remain in the primary care of the mother with weekly contact with the father. The order also recorded that M was habitually resident in England and Wales. The mother then applied for child maintenance under Schedule 1 to the Children Act 1989. The final hearing took place in December 2016, at which the father was ordered to pay an outstanding interim lump sum and costs orders. Those fell into arrears such that by the hearing of the security for costs application, the father was indebted to the mother in the sum of £127,000.

In October 2017, the mother and child went to Dubai for a holiday for M to visit her father. The trip was repeated in April 2018. The father claimed that the mother wished to relocate to Dubai and resume cohabitation with him. The mother disputed this, asserting that on the second visit the father had seized her passport and the child’s, leaving them stranded them in Dubai.

In May 2019, the mother managed to obtain the child’s passport and travel documentation for herself and subsequently fled to Lebanon. From there, mother and child returned to Canada, in June 2019, and have been living there ever since.

Further litigation ensued in the Superior Court of Ontario where the father sought the return of M to Dubai. The father’s application was granted with a finding that M was habitually resident in Dubai prior to her removal to Ontario.

The mother successfully appealed that order. On appeal, it was held that the judge had erred in treating the father’s application as if it were governed by the 1980 Hague Convention;1 that there was a dispute as to whether the United Arab Emirates (UAE) would apply a best interests approach if M were returned there; and that substantial weight should have been given to the consent order made in London in November 2015. The Ontario Court of Appeal concluded that the case should have been returned to the Central Family Court in London for determination. Mostyn J found this surprising, given the child had not been in London since April 2018, 2 years prior to the Ontario Court of Appeal decision and in circumstances in which the child had been living in Dubai until the end of May 2019, and then in Canada for nearly a year, such that ‘her prior historic habitual residence in England had surely long evaporated’ ([62]).

The Ontario Court of Appeal concluded not only that the order returning M to Dubai could not stand, but also that an order would be made staying the father’s return application on condition that he promptly commence a similar set of proceedings in the Central Family Court with the following provisos:

(1) if the English court declined to accept jurisdiction, the father could apply to the Ontario Court to lift the stay and seek a rehearing of his original application; and

(2) in the event the father brought further proceedings in the Ontario Court, the mother would not be prevented from bringing her own application in respect of M.

In addition, the father was ordered to pay the mother’s costs, which he had not paid at the date of the security for costs application. The father subsequently applied for permission to appeal to the Supreme Court of Canada but was unsuccessful, his application being dismissed with costs, which also remained unpaid.

In April 2021, the mother applied in Ontario for orders in respect of M including an order for the Ontario Court to assume jurisdiction and to make an order superseding the original child arrangements order giving her sole decision-making responsibility and primary residence for M. A matter of weeks after this application, the father made the substantive application before Mostyn J seeking ‘an order pursuant to the inherent jurisdiction of the High Court that the child is forthwith returned from Toronto, Canada to Dubai, UAE’.

In response, the mother sought a Hadkinson2 order debarring the father from proceeding with his application until he had discharged the outstanding costs and lump sum orders, and the arrears of periodical payments. The mother’s application was dismissed and on 25 October 2021 she made her application for security for costs, relying on the father being in resident in Dubai.

Mostyn J referred to a ‘gaping deficiency in both the application for security for costs and its defence’ ([70]) as neither party had provided evidence regarding their current means, or of costs already incurred and paid. The matter was adjourned for those points to be addressed and supplemental written submissions to be made. That evidence is dealt with at [71] to [77] of the judgment.

Security for costs in the FPR

The rules regarding security for costs are at FPR 20.6 and 20.7.

Security for costs

20.6

(1) A respondent to any application may apply under this Chapter of this Part for security for costs of the proceedings.

(Part 4 provides for the court to order payment of sums into court in other circumstances.)

(2) An application for security for costs must be supported by written evidence.

(3) Where the court makes an order for security for costs, it will—

(a) determine the amount of security; and

(b) direct—

(i) the manner in which; and

(ii) the time within which,

the security must be given.

Conditions to be satisfied

20.7

(1) The court may make an order for security for costs under rule 20.6 if—

(a) it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order; and

(b) either—

(i) one or more of the conditions in paragraph (2) applies; or

(ii) an enactment permits the court to require security for costs.

(2) The conditions are—

(a) the applicant is—

(i) resident out of the jurisdiction; …

(b) the applicant has changed address since the application was started with a view to evading the consequences of the litigation;

(c) the applicant failed to give an address in the application form, or gave an incorrect address in that form;

(d) the applicant has taken steps in relation to the applicant’s assets that would make it difficult to enforce an order for costs against the applicant.

(3) The court may not make an order for security for costs under rule 20.6 in relation to the costs of proceedings under the 1980 Hague Convention.

(Rule 4.4 allows the court to strike out a statement of case.)’

At [6] of the judgment, Mostyn J compared the FPR on security for costs with the counterpart provisions of the Civil Procedure Rules 1998 (SI 1998/3132) (CPR) at 25.12 and 25.13 noting that there are some differences which recognise that the CPR deal with commercial matters and the geographical scope of the FPR is wider. Mostyn J considered the history of the power to award security for costs. He noted that the reason for its development was to prevent an abuse of process, based on the fact that a claimant has a choice whether to litigate but the defendant to a claim does not as ‘in order to avoid default judgment, [a defendant] is compelled to litigate or settle, whether or not the plaintiff has available assets sufficient to pay the costs of a successful defence’ ([7]).

Given the fundamental differences between the costs regimes in civil and family cases, Mostyn J expressed surprise that there was no practice direction linked to FPR Part 20 to explain how the power should be exercised in the family jurisdiction ([9]). The judgment analyses the several matters to be considered in the exercise of this power, namely:

  • the gateway conditions that need to be satisfied;
  • how the exercise of the discretion to award security for costs should be exercised;
  • the procedural requirements for making the application;
  • if the application is granted, how security should be given; and
  • how to deal with non-compliance with an order for security of costs.

The gateway conditions

These are set out in FPR 20.7(2) and are matters of fact not discretion. However, in respect of 2(a)(i), residence beyond England and Wales is clearly out of the jurisdiction although post-Brexit residence in Scotland and Northern Ireland ‘literally satisfies the condition’, leaving Mostyn J to opine that ‘an authoritative decision must be awaited’ ([13]).

As to the other three conditions, the court is required to make findings of fact. With respect to condition 2(b), the court must find that the applicant has not only changed address but that he/she did so ‘with a view to evading the consequences of the litigation’. Condition (c) simply requires a finding of fact that the applicant failed to give an address or gave an incorrect one, and condition (d) requires that the court consider the steps taken and whether those steps would render it difficult to enforce an order for costs against the applicant. The type of steps taken would include the ‘dissipation of assets, their transfer overseas or into the names of third parties, or their removal to unknown destinations’ ([18]). Clearly, if such findings are made, it follows that it would be difficult to enforce an order for costs against a claimant.

Discretion

If one or more of the gateway conditions have been met, the court must then decide whether it should exercise its discretion and order security for costs. Such an order may be made if the court is satisfied that it is just so to do ‘having regard to all the circumstances of the case’ (FPR 20.7(1)(a)).

In the civil jurisdiction, the court is not generally required to consider the merits of the case because ‘the purpose of an order for security for costs is to protect a party in whose favour it is made against the risk of being unable to enforce any costs order they may later obtain’ (White Book, 2022, Vol 1, 863, para 25.12.2). The Court of Appeal confirmed this in Chernukhin v Danilina [2018] EWCA Civ 1802, [69] holding that in respect of security for costs the parties should not attempt to go into the merits of the case unless it can be clearly demonstrated one way or another that there is a high degree of probability of success or failure.

On the contrary, and because the family jurisdiction does not contain the presumption that costs follow the event, Mostyn J in MG v AR ([25]) is clear that in family cases:

‘the merits of the application and the strength of the defence necessarily have to be carefully considered. It is only by considering the merits that a view can be taken of the likelihood of an award of costs in favour of the respondent. This is because the default regime in family cases is no order as to costs. This is so whether the claim is about children or financial remedies …’

Having reviewed both private and public law children cases as well as financial remedies cases where costs orders have been considered, the point is made that a respondent in a family case will, unlike the successful defendant in a civil case, get an order for costs only if they can both demonstrate that their opponent has conducted the case unreasonably and that they have the means to satisfy such an order. The Family Court must therefore consider whether, if a respondent successfully defended the application, they would obtain an order for costs. It was held in MG v AR ([34]) that:

‘the court should only, in the exercise of its discretion, consider ordering security for costs if it is satisfied that there is a good chance (but not necessarily a probability of more than 50%) of the respondent obtaining an order for costs at the final hearing.’

As well as considering the merits of the application and the strength of the defence, the court will also consider the means of both parties. An order for security for costs will not be made where it is clear that the applicant, against whom it was intended to be made, is without means to satisfy it. In assessing the ability to pay an order for costs – and, it follows, an order for security of costs – the court should apply the principles in TL v ML [2005] EWHC 2860 (Fam), [124], as set out by Mostyn J in MC v AR, [36]:

‘Where the disclosure of the applicant is obviously deficient, the court should make robust assumptions about his ability to pay. Similarly, where it is asserted that an external source of support has been cut off but where there is no clear evidence to that effect from the provider of that support, the court should assume that the source of support will be maintained at least until final trial.’

Having considered a number of other matters related to an application for security of costs, Mostyn J opined at [53] that the following steps must be taken and applied:

‘i) The court must find as a fact which gateway condition applies.

ii) The court must have regard to all the circumstances in order to determine whether to make the order for security would be just. In making that determination the court will form a value judgment until it reaches the stage of quantification of the amount of security, where it will exercise a true discretion.

iii) If the applicant has a meritorious case and is of limited means so that the imposition of an order for security would hinder or stifle his substantive application then it would not normally be just to make an order for security.

iv) Subject to para (iii) above, the court must have regard to the merits of the substantive application and to the strength of the defence, as well as to the means of the parties, in order to determine if the respondent has a good chance of being awarded an order for costs at the final hearing of the substantive application. If the court concludes that the respondent does not have that good chance, then it would not normally be just to make an order for security.

v) When assessing the ability of the applicant to pay an order for costs and, ex hypothesi security for those costs, the court should apply the principles in TL v ML at [124] and make robust assumptions about his ability to pay where his disclosure had been deficient or where he maintains that a source of support has been cut off.

vi) If the court determines that the respondent has that good chance, it must then be satisfied by evidence adduced by her that there is a real risk (albeit not as high as a 50% probability) that she will not be in a position to enforce an order for costs against the applicant. Findings as to gateway condition (b) or (d) are likely to be highly relevant to the assessment of this risk.

vii) In determining whether it would be just to make an order for security the court will pay particular attention to whether the application for security was made promptly. It may not allow historic costs if the application for security was made unduly late.

viii) If the court decides to make an order for security it will fix the amount in a robust, broad-brush manner, deploying a wide discretion. Historic costs are fully claimable. The evidence of the respondent seeking security must provide full detail of claimed historic costs and a detailed estimate of future costs.

ix) The court may reflect future litigation uncertainties, as well as potential reductions on a detailed assessment, in a percentage discount from the sum claimed.

x) In the first instance, security should only be provided in a financial remedy case up to the FDR; in a children’s case it should be provided up to the pre-trial review (or equivalent). Security should be payable in monthly instalments rather than in a single lump sum.

xi) Before making an order for security, the court must finally stand back and satisfy itself that what it is going to do is just. In a children’s case the court must be satisfied that what it is proposing to do is consistent with the best interests of the children, or at least not contrary to their interests.

xii) In the event of default in the provision of security there should not be an automatic strikeout of the claim. Rather, the respondent should be entitled to apply urgently for a hearing at which the court will consider what measures should be taken in the light of the default. Such measures will include a summary dismissal of the substantive application, but in children’s proceedings the court must be satisfied that such an order is in the best interests of the children, or at least not contrary to their interests.’

Conclusion

In MG v AR, notwithstanding the guidance that security for costs should be payable in instalments, the court ordered the father to pay a single lump sum to the mother of £50,000 given the following:

  • the father’s case was unmeritorious;
  • the mother case was strong on her chance of obtaining a costs order;
  • the father had the means to satisfy any costs order; and
  • the mother would have difficulty in enforcing a costs order.

It remains to be seen whether applications for security for costs in the family jurisdiction become more frequent following this judgment. However, in the absence of a practice direction accompanying FPR Part 20 in respect of security for costs, this judgment is enormously helpful.

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