Background
The applicants, Belmont Park Investments, are leading a funded class action against credit rating agency Fitch Ratings. The suit alleges that Fitch engaged in fraud and dishonesty related to events that occurred approximately two decades ago. The underlying proceedings are complex, high-value, and carry significant consequences for Fitch.
This judgment deals with an interlocutory application by Fitch for security for its legal costs, seeking $12,450,702.19. The applicants conceded that security should be provided but argued for a much lower amount. Their primary objection was that Fitch had delayed for roughly 18 months after the applicants first indicated a willingness to provide security before formally bringing the application to court. The applicants contended this delay should prevent Fitch from recovering security for costs incurred during that period (“past costs”).
The Court’s Holding
Justice Jackman granted Fitch’s application in full, ordering the applicants to provide security for costs in the amount of $12,450,702.19, to be paid in four tranches. The Court acknowledged the general principle that applications for security for costs must be brought promptly and agreed that Fitch’s delay in filing was “substantial.”
However, the Court found this to be an “exceptional case” where the delay should not reduce the security award. The deciding factor was the applicants’ early and explicit confirmation that they were “willing to provide reasonable security for costs in tranches.” Because the applicants had agreed in principle from the outset, they were on notice and could not claim to have been prejudiced by the delay. They had not incurred costs under a false assumption that Fitch would not seek security.
Having dismissed the delay argument, the Court also accepted the reasonableness of the cost estimates provided by Fitch’s solicitor. It found the proposed legal resourcing for trial, including multiple senior lawyers and experts, was not excessive given the complexity of the fraud allegations. The Court therefore ordered the full amount sought, including security for past costs and the costs of the application itself.
Key Takeaways
- A substantial delay by a defendant in applying for security for costs will not automatically disentitle them to security for costs incurred during the period of delay.
- The court’s primary focus when considering delay is whether the plaintiff has suffered prejudice, such as incurring costs they would have avoided had the application been made promptly.
- A plaintiff’s early, in-principle agreement to provide security can effectively neutralize a later argument based on the defendant’s delay, as it puts the plaintiff on notice that security will be required.
Why It Matters
This ruling highlights a key strategic consideration in large-scale litigation, particularly for funded class actions. It demonstrates that while courts expect defendants to act promptly when seeking security, the rule is not absolute. The decision underscores that the rule’s purpose is to prevent prejudice to the plaintiff, not to punish a defendant’s procedural tardiness for its own sake.
For plaintiffs and litigation funders, this case serves as a warning. An early agreement to provide security, while potentially a sign of good faith, may waive their right to later object to a delayed application. Defendants, in turn, may be able to rely on such an early concession to overcome their own lack of promptness, ensuring they remain protected against adverse cost orders in complex and expensive proceedings.