Client suing law firm ordered to pay security for costs

Security for costs: Cash payment

A businessman whose property company is suing a law firm for damages cannot provide security for costs in the form of an indemnity backed by legal charges and must provide cash, the High Court has ruled.

Deputy Master Teverson said the possibility “cannot be ruled out” that David Saurymper would not have “sufficient liquid assets in the future” to pay any costs ordered in favour of London firm Fishman Brand Stone.

This was not a case in which ordering security in a conventional form would “stifle the claim”, he said.

He described Mr Saurymper, the first claimant, as “a wealthy individual with substantial liquid assets” who was in a position to provide security in a conventional form but wanted to avoid “tying up a significant sum in cash for a year or more”.

Mr Saurymper was “in effect seeking to put his own business interests ahead of those of the defendant”.

The High Court heard in Saurymper and another v Fishman Brand Stone [2022] EWHC 752 (Ch) that the property investor was sole shareholder in Whyteleafe Ltd, the second claimant, and its sole director.

The company was incorporated in 2018 as a special purpose vehicle to buy Whyteleafe House, an office building near Caterham, Surrey, and replace it with a block of 167 flats.

Contracts were exchanged with the seller to buy the property for £11.75m, with a 10% deposit and other payments made, but completion never took place.

Mr Saurymper and company last year launched a £1.8m claim for breach of contract and/or negligence against Fishman Brand Stone.

The law firm applied for an order in January that Mr Saurymper’s claim be struck out, which the deputy master said was no longer opposed.

It also applied for an order that Whyteleafe provide security for costs by paying £269,900 into court.

The company sought permission to give that security in the form of a deed of indemnity provided by Mr Saurymper under which he would assume personal liability to the law firm for any costs awarded, “secured by one or more second legal charges”.

Deputy Master Teverson said an agreement to this was reached “in principle only” and said the “possibility cannot be ruled out” that Mr Saurymper may not have sufficient liquid assets in the future to pay costs ordered against the company.

It was not clear whether “any of the charges being offered” fell into the category of “readily realisable assets”. One of the properties involved was his family home, another was “in the process of being divided into two leasehold titles”.

The deputy master said: “The balance of injustice to the claimant in having to tie up some of his cash until trial and the injustice to the defendant in being without readily realisable security falls in favour of the defendant.”

While it was “not unreasonable” for the law firm to explore resolving the issue of security by agreement, it “should not have allowed the correspondence to continue for six months” before issuing the application, only two and a half weeks before the costs and case management conference.

Deputy Master Teverson ordered security to be provided to cover 60% of the law firm’s incurred costs at the time of its costs budget, together with 90% of estimated costs up to the pre-trial review, making a total of £225,200.

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