Security for Costs under CPR 2025: No Transitional Carve‑Out for Pre‑Brexit Claims; Litigant‑Specific Enforcement Risks Justify Residence‑Abroad Orders; Security Confined to Costs of Resisting the Appeal

Introduction

This commentary examines the England and Wales Court of Appeal’s decision in Qatar Investment And Projects Development Holding Co & Anor v Phoenix Ancient Art SA & Ors [2025] EWCA Civ 1300, an interlocutory appeal concerning security for costs. The appellants are Phoenix Ancient Art S.A. (a Swiss company) and two individuals, Ali and Hicham Aboutaam (resident in Switzerland and New York respectively). The respondents (the Claimants) sued in two related actions (2020 and 2023) alleging that artefacts purchased from Phoenix were forgeries, advancing claims for rescission, deceit and conspiracy.

The litigation history is significant: following serious disclosure defaults, the High Court (Garnham J) debarred the defendants from defending, struck out defences in the 2023 Action, granted summary judgment there, and granted summary judgment on the fraud-based claims in the 2020 Action (with other claims stayed). Limited permission to appeal was granted, confined essentially to whether the judge could grant summary judgment without determining the merits on the footing that allegations were deemed admitted by reason of the debarring order.

In the Court of Appeal, the respondents sought security for their costs of the appeal in the region of US$229,000 (approximately £169,000–£225,000 figures were mentioned), under the new CPR Part 25 regime (as substituted by the Civil Procedure (Amendment) Rules 2025). They invoked three grounds under CPR 25.27(b): residence abroad; inability to pay (as against the corporate appellant); and steps taken in relation to assets making enforcement difficult.

Summary of the Judgment

The Court held that the conditions for ordering security were satisfied under CPR 25.27(b)(i) (residence abroad) and 25.27(b)(vi) (steps relating to assets) for all appellants, and under 25.27(b)(ii) (inability to pay) for Phoenix.
Transitional argument rejected: the Court confirmed that the 2025 overhaul of Part 25 applies; there is no preserved pre‑Brexit carve‑out for claims issued before 31 December 2020 within the 2025 Rules’ transitional provisions. The residence‑abroad condition therefore applies to all appellants in both actions.
On the evidence, there was “reason to believe” Phoenix would be unable to pay costs if ordered: the inventory figure in its 2023 accounts was substantially overstated by reference to its own stock disclosure; a major debtor (Electrum) appeared irrecoverable in part; and Phoenix had little ready cash and limited borrowing ability.
The Court found steps had been taken in relation to assets making enforcement more difficult: disposal of shares for no consideration; untraced monthly payments; and failures to give proper asset disclosure (including under a worldwide freezing order). Equity in high‑value foreign real property did not neutralise enforcement difficulty given heavy local creditor pressure.
As to discretion, the WFO risk of dissipation, past failures in disclosure, and history of late payment of costs orders supported making an order. There was no suggestion the order would stifle the appeal.
Non‑discrimination: even if relying on residence abroad alone, the Court indicated there were objectively justified, litigant‑specific enforcement risks warranting security consistently with Bestfort/Nasser.
Quantum: the respondents’ projected costs (~£225,000) were disproportionate for a short, single‑issue appeal. Security was limited to the reasonable costs of resisting the appeal itself, excluding costs referable to a respondent’s notice on the merits. The Court ordered security of £70,000.

Analysis

Precedents Cited and Their Influence

Phaestos Ltd v Ho [2012] EWHC 662 (TCC): Reaffirmed the threshold under the “inability to pay” condition—there must be a reason to believe the paying party will be unable (not merely might be unable) to pay adverse costs, with the burden on the party seeking security. The Court relied on this structured approach to test Phoenix’s financial capacity.
Jirehouse v Beller [2009] 1 WLR 751; Re Unisoft Group Ltd [1993] BCLC 532; Texuna International Ltd v Cairn Energy Plc [2004] EWHC 1102: These authorities emphasise that “reason to believe” targets inability, not mere doubt. The Court read Phoenix’s own disclosures against its accounts to satisfy that threshold.
Golden Grove Estates v Chancerygate [2007] EWHC 968; Mbasago v Logo Ltd [2006] EWCA Civ 608: Where the respondent provides no or unsatisfactory financial information, adverse inferences may be drawn. That principle underpinned the Court’s treatment of incomplete asset disclosure.
Ackerman v Ackerman [2011] EWHC 2183 (Ch) (Roth J): A key digest of principles on “steps in relation to assets” including (i) focus on objective effect of asset‑related steps; (ii) undisclosed assets and failed disclosure can justify an inference that assets are placed beyond reach; (iii) timing and motive inform discretion; (iv) affordability and anti‑stifling principles; and (v) evidential rigour about means and third‑party funding. The Court measured each asserted step against this framework, accepting some and rejecting mere generalised allegations of dishonesty.
Bestfort Developments LLP v RAKIA [2016] EWCA Civ 1099; Nasser v Bank of Kuwait [2002] 1 WLR 1868: Security must not be discriminatory under Article 14 ECHR. Orders under the “residence abroad” ground must be tailored to objectively justified enforcement barriers, whether country‑specific or litigant‑specific. The Court deployed this to show that, even if residence abroad were the only route, there were rational, objective, litigant‑specific enforcement risks justifying security.
Keary Developments Ltd v Tarmac Construction [1995] 3 All ER 534; Al‑Koronky v Time‑Life Entertainment [2006] CP Rep 47; Hutchinson Telephone (UK) Ltd v Ultimate Response [1993] BCLC 307; Jones v Environcom Ltd [2010] Lloyd’s Rep IR 190; Brimko Holdings Ltd v Eastman Kodak Co [2004] EWHC 1343: These authorities informed the discretion and affordability analysis—security should be just, not stifle genuine claims, and can be set at any non‑nominal level up to the full amount, with scrutiny of the party’s means and access to assistance.

Legal Reasoning

1) The Applicable Regime: CPR 25, Post‑2025

The appellants invited the Court to retain the pre‑Brexit security‑for‑costs constraints (i.e., excluding residents in Brussels/Lugano states) for the 2020 Action pursuant to the Civil Procedure Rules 1998 (Amendment) (EU Exit) Regulations 2019. The Court rejected this: the 2025 Rules replaced Part 25 from 6 April 2025, and no transitional provision preserved the pre‑Brexit carve‑out for claims issued before 31 December 2020. There was no legal route to read such a carve‑out back into the 2025 regime. This point applies to both actions and to all appellants.

2) Stage One Conditions

Residence abroad (CPR 25.27(b)(i)): Satisfied for all three appellants (Switzerland and New York). The 2025 rules applied across both actions.
Corporate inability to pay (CPR 25.27(b)(ii), as to Phoenix): On Phoenix’s own 2023 accounts, the heavy inventory was contradicted by its disclosed stock list and witness evidence suggesting minimal stock; its primary debtor (Electrum) was in severe financial difficulties creating an irrecoverable shortfall even after set‑off; Phoenix had low cash and constrained borrowing capacity. Taken together, this was ample evidence to believe it would be unable to pay adverse costs if ordered.
Steps making enforcement difficult (CPR 25.27(b)(vi), all appellants): The Court identified concrete asset‑related dealings: disposal for no consideration of interests (including bearer shares in Tanis); unexplained monthly payments (CHF 30,000) to Ali Aboutaam; and failures to disclose assets (including under a worldwide freezing order). By contrast, generalized allegations of dishonesty or a risk of future dissipation were insufficient. Notably, the existence of equity in valuable real property in Geneva and New York did not answer enforcement concerns because both properties were exposed to very substantial competing claims by local creditors (including a US$9m judgment in New York and a c. £3.5m Swiss customs claim). Any equity was therefore precarious and not a reliable enforcement asset for the respondents; indeed it might be consumed by imminent local enforcement.

3) Stage Two: Discretion and Justice

The Court exercised discretion to order security, emphasising:

Findings already made in the WFO context that there was a risk of dissipation (not a freestanding ground for security, but relevant to discretion).
A history of poor asset disclosure and tardiness in paying past costs orders, generating a realistic concern about enforcement post‑appeal if the appellants were unsuccessful.
No suggestion that security would stifle the appeal (an important Keary/Al‑Koronky consideration).

4) Non‑Discrimination: Residence Abroad in a Post‑Bestfort World

Security orders under the residence‑abroad condition must be justified by rational, objective enforcement obstacles (Bestfort; Nasser). The Court observed that, if it had been necessary to rely on residence abroad alone, the appellants’ own circumstances—lack of readily available assets after accounting for heavy local creditor pressure, failures of disclosure, and a realistic risk of asset‑shielding—would have supplied a sufficient, litigant‑specific objective justification. That is, obstacles need not be country‑level (e.g., non‑recognition of English judgments); they can be tied to the specific foreign litigant and still satisfy non‑discrimination principles. In this case, however, the order was independently justified under inability and “steps” grounds, so the point was not determinative.

5) Quantum: Confined to the Costs of Resisting the Appeal

The respondents’ projected costs (~£225,000) were described as disproportionately high for a short, single‑issue appeal. Two important principles emerge:

Security should reflect the costs of responding to the appeal—not the costs of inviting the appellate court to determine the underlying merits via a respondent’s notice, especially where, if the appeal succeeded, the merits would likely be remitted to the High Court and would not have attracted security there in any event.
Where line‑by‑line apportionment is unavailable, the Court may adopt a broad‑brush approximation of reasonable, proportionate appeal costs. Here, £70,000 was assessed as appropriate to resist the appeal itself.

Impact

Immediate applicability of CPR Part 25 (2025) to legacy claims: Parties cannot rely on the pre‑Brexit Brussels/Lugano carve‑out in older actions when seeking or resisting security post‑April 2025. This will streamline and standardise security applications across vintages of claims and appeals.
Residence‑abroad orders and non‑discrimination: The decision refines Bestfort by underlining that “objective justification” may rest on the particular foreign litigant’s circumstances (e.g., asset concealment, competing local creditors, precarious equity) rather than on systemic country‑level enforcement obstacles.
Proof under “steps in relation to assets”: The Court provides a practical roadmap—real transactions without consideration, unexplained cash flows, and failures under WFO/disclosure duties are potent indicators. Mere allegations of dishonesty or a generalised risk of dissipation will not suffice.
Corporate inability to pay: Accounts can be challenged by the party’s own contradictory disclosures. Courts will look beyond headline net assets, scrutinising inventory realism, debtor quality, set‑off mechanics and liquidity to assess “reason to believe” inability.
Quantum discipline on appeal: Security must be proportionate to the work of resisting the appeal. Respondents cannot bootstrap security for substantive merits advocacy via a respondent’s notice that expands the scope beyond the appellate point at issue.
WFO findings feed the discretion stage: While not a stand‑alone statutory ground, an extant WFO and its predicate findings (e.g., risk of dissipation) will weigh heavily at stage two, especially combined with late payment histories and non‑compliance.

Complex Concepts Simplified

Security for costs: A payment or guarantee ordered from one party (typically an out‑of‑jurisdiction or impecunious party) to ensure that, if they lose, the winner’s legal costs can be recovered.
Residence‑abroad ground: A basis for ordering security when a party is resident outside the jurisdiction; after Bestfort/Nasser, the court must ensure the order is not discriminatory by tying it to objectively justified enforcement difficulties.
Inability‑to‑pay ground: For companies, security can be ordered where there is reason to believe they will be unable to pay a costs order—not just that they might be unable to do so.
Steps in relation to assets: Past dealings with assets which objectively make future enforcement harder (e.g., transfers for no consideration, concealment, or opaque payments). The court focuses on effect, not motive.
Worldwide freezing order (WFO): An injunction restraining a party from dissipating assets worldwide up to a value, typically granted where there is a good arguable case and a real risk of dissipation. Findings supporting a WFO inform the discretion to order security.
Debarment/strike‑out: Sanctions for serious procedural default (e.g., disclosure failure), preventing a party from defending and leading to their defence being struck out.
Summary judgment: Judgment without trial where the claim (or defence) has no real prospect of success and there is no other compelling reason for trial.
Respondent’s notice: A procedural step by which a respondent supports the order below on additional or alternative grounds. Costs of advancing new merits arguments via such a notice are not automatically within the scope of appeal security.
Pre‑Brexit carve‑outs (Brussels/Lugano): Under the old CPR regime, residents of certain states were shielded from security orders based on residence. The 2025 substitution of Part 25 does not preserve that carve‑out absent express transitional savings.

Conclusion

This decision is a significant waypoint in modern security‑for‑costs jurisprudence post‑the 2025 CPR amendments. First, it confirms that the wholesale replacement of Part 25 applies to security applications regardless of when the underlying claim was issued; the pre‑Brexit residence carve‑out is not preserved by implication. Second, it clarifies how non‑discrimination principles operate in practice: objectively justified, litigant‑specific enforcement risks can support residence‑abroad orders. Third, it sharpens evidential expectations under the “steps in relation to assets” ground, distinguishing real asset‑related steps (and disclosure failures) from mere allegations. Finally, it delivers practical discipline on quantum in appeals—security must be proportionate and confined to the costs of resisting the appeal itself, not an expanded merits debate via a respondent’s notice.

On the facts, security was rightly ordered against all appellants, but calibrated to £70,000—reflecting a short, single‑issue appeal and excluding costs that properly belong to a remitted or separate merits determination. The ruling provides clear guidance for practitioners on framing and opposing security applications in the era of CPR Part 25 (2025), and on the careful demarcation between legitimate appeal costs and merits advocacy in the appellate forum.