Kathryn Birchwood is an assistant solicitor in the litigation department at Travers Smith Braithwaite.
In Condliffe v Hislop (1996), the Court of Appeal had to consider whether an order for security for costs should be made against a bankrupt individual plaintiff on the grounds that the action was being maintained by his mother.
The court held that it had no power to require security from a plaintiff who, as an individual, did not fall within RSC Order 23 rule 1, even if the action was being maintained by a third party.
In contrast, in Keary Developments v Tarmac Construction (1995), the Court of Appeal considered the principles applicable to security applications in the context of an application under section 726 of the Companies Act 1985.
One of the arguments advanced by the plaintiff company was that an order for security would stifle its claim, a commonly used argument.
On this question, Lord Justice Peter Gibson said that the court should not only consider whether the plaintiff can provide security out of its own resources, but also "whether it can raise the amount needed from its directors, shareholders or other backers or interested persons". It is for the plaintiff to satisfy the court that it cannot raise such funds.
Following Keary, an impecunious plaintiff company being maintained by a third party is unlikely to be able to avoid having to give security on the grounds that its claim will be stifled and so, in the absence of other defences, an order is likely to be made.
In these circumstances, security will effectively have been obtained from the plaintiff on the grounds of maintenance.
These two decisions are inconsistent. Why should the question of whether the plaintiff falls within Order 23 be decisive as to the court's ability to order security on the grounds of maintenance by a third party?
Although Lord Justice Kennedy in Condliffe acknowledged that, at present, the court cannot order security against maintained plaintiffs who fall outside Order 23, he said that "that is something which it might be appropriate for the Rules Committee to consider".
He also said that in some circumstances it may be appropriate for the court to order a stay of the proceedings under its inherent jurisdiction if a maintainer refuses to provide an undertaking to meet any costs orders made against the plaintiff.
