Security For Costs Ordered Against Dormant Company Where ATE Insurance Inadequate And Claim Speculative

Summary

An application for security for costs may be made when a defendant is concerned that the claimant will not be able to pay the defendant's costs should the claim fail. Claimants often point to the fact that they have after the event insurance (ATE) to challenge such applications. ATE is an insurance policy covering the legal costs and expenses of the claim, but the recent case of Lewis Thermal Limited v. Cleveland Cable Co Limited [2018] EWHC 2654 (TCC) demonstrates the difficulties of attempting to rely upon ATE, where the actual provisions of the policy inhibit it as security and the claim is considered speculative.

Background

The claim itself was for breach of contract and fraudulent misrepresentation relating to electrical cabling provided by the defendant to Guardian ECL Limited (Guardian), which Guardian claimed was defective, resulting in a loss of business of £8 million. Prior to its liquidation, Guardian assigned the claim to the dormant claimant