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The Court of Appeal allowed a defendants’ appeal that the insolvent claimant company's after-the-event (ATE) insurance was not sufficient in respect of an application for security for costs. Matthew Weaver, of St Philips Stone, examines the Court of Appeal's answer in Premier Motorauctions v Pricewaterhousecoopers.
Premier Motorauctions Ltd (in liquidation) and another v Pricewaterhousecoopers LLP and another  EWCA Civ 1872,  All ER (D) 197 (Nov)
ATE insurance could, in principle, be taken into account in determining an application for security of costs if it gave a defendant sufficient protection. However, the Court of Appeal, Civil Division, held that, on the facts, the defendants did not have the assurance that the insurance had not been liable to be avoided for misrepresentation or non-disclosure and ordered the claimants to provide security of £4m.
What are the practical implications of this case? Can we expect to see an increase in defendants to claims brought by insolvent companies bringing security for costs applications?
Plainly, this decision, in reversing the decision below, will be disappointing to insolvency practitioners (IPs) as applications for security for costs are now a commonplace first line of defence for defendants facing claims from insolvent companies. However, it is right to point out that claims by office-holders in their own name are not impacted by this—only claims by insolvent companies are susceptible to security for costs applications.
In practical terms, insolvent companies will still be able to rely on ATE policies to oppose applications for security for costs and may well be able to do so successfully. As the Court of Appeal reinforced, it is the precise terms of each policy that will determine whether it is sufficient to remove the reason to believe that the company will be unable to pay a costs order. To this end, insolvent companies and their lawyers will need to be careful about the terms of an ATE policy. A policy which excludes avoiding
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Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.
Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.
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