Harrington & Charles Trading Company Limited (In Liquidation) & Ors v Mehta & Ors

Thursday, 19 February 2026 MASTER KAYE

1. The Active Defendants (D1 to D4 and D6) issued an application seeking security for costs on 14 November 2025. Although an ATE Policy was in place by that stage for a sum of £6 million, the Active Defendants considered it was deficient both as to its terms and the level of cover. The application sought security by way of a payment into court or bank guarantee from first class London bank in the sum of 12 million within 28 days of the date of any order.

2. The application was issued pursuant to the CMC3 order of 7 October 2025, which provided that any applications to be heard at CMC4, listed in a window commencing 8 December, had to be issued 21 days before that hearing.

3. It was supported by a witness statement from Mr Felton, his 14th witness statement. It is now apparent that some of the information contained in Mr Felton's witness statement did not accurately record the history of the parties' engagement on the question of security.

4. Some of those inaccuracies were identified by Mr Thompson in his evidence in response, dated 17 December. Mr Felton then responded to that witness statement with a further witness statement dated 7 January.

5. Between 16 October 2025, when the issues around security were raised, and this hearing, the claimants have sought to resolve the issues identified by the Active Defendants in respect of the terms of the existing ATE Policy and the level of cover. Some the changes to the ATE Policy requested by the Active Defendants were accepted and dealt with; others were ones which the claimants say they have acceded to on a pragmatic basis.

6. The effect of that, however, is that the ATE Policy has been amended and extended with additional endorsements and an increase in cover, and in that revised form the Active Defendants have accepted it. The Active Defendants say that adequate security was only therefore provided on 4 February 2026. Subsequent to that, an additional endorsement was requested in relation to a waiver which was provided on 10 February 2026.

7. The parties are agreed that the security for costs application has therefore been resolved by provision of that amended ATE Policy, and the only outstanding issue is costs.

8. We received extensive written submissions from both Active Defendants and the claimants on costs issues, some of which descended into the merits of the underlying security for costs application itself.

9. We have been asked to pre-read not only the application and the witness evidence in support, but substantial inter partes correspondence relating to the negotiations in respect of the ATE policy.

10. The Active Defendants say that in the events that have occurred, albeit they have not obtained either a payment into court or a bank guarantee, they now have the benefit of a satisfactory ATE Policy with cover for some £13 million which they did not have before they issued the application. They have been successful and should have the costs order in their favour.

11. The claimants say that the application was issued prematurely. They had already engaged with the Active Defendants on the issues raised in October about the terms of the ATE Policy and the level of cover. They say they have taken a pragmatic approach to the issues raised by the Active Defendants and a revised policy that addressed their concerns has been incepted. They say the appropriate order for costs is costs in the case.

12. The court has a very broad discretion in relation to costs, which includes whether to exercise its discretion to make an order for costs at all. If it decides to make such costs order at all, it needs to identify who is the successful party, and whether to apply the general rule that the unsuccessful party pays the successful party's costs, or whether there are some factors or reasons why the general rule should not apply and a different order should be made. See CPR 44.2(1) and (2). This is approached on a broadbrush commonsense basis which looks at the overall balance between the parties and the substance and reality of who was the overall successful party.

13. That, of course, highlights the difficulty where the substance of an application has been compromised, but the parties have not agreed the incidence of costs.

14. Where an application has been compromised, as I have alluded to at previous hearings, it is rarely appropriate for the court to engage in the underlying merits of that application. The court should be alive to the fact that parties compromise applications for many different reasons, sometimes pragmatic and commercial, and they should be encouraged to do so rather than penalised for doing so.

15. It is neither reasonable, proportionate nor consistent with the overriding objective to have an arid debate about what the outcome might have been if the application had been fully argued. It is not our role to make predictions about what the outcome would have been if the application had been argued. It wastes both the parties' and the court's valuable resources. Indeed, even the costs submissions we have heard today have already taken up about an hour and a half.

16. That is why, where an application has been compromised and only the costs remain outstanding, the court may consider that it is fairer as between the parties either to decline to decide the costs at all or to make no order as to costs, particularly where the answer is not obvious. See, for example, BCT Software Solutions Limited v C Brewer & Sons Limited [2003] EWCA Civ 939 in particular at 23 to 26; Powles v Reeves [2016] EWCA Civ 1375 at 18 and 19.

17. Whilst those relate to compromised claims, the principles apply equally to interim applications. More recently, His Honour Judge Paul Matthews considered the very same issues in one of his many decisions in Guy v Brake: see [2023] EWHC 3179 Ch .

18. In that case where the court had not determined the merits of an application, but where the litigation had been going on for some time, he determined that the appropriate order would be no order for costs.

19. If the court considers, for example, that it is plain and obvious what the outcome would have been, it may be prepared to consider making a costs order, but even then, it will only do so by taking a high-level and broad-brush approach.

20. What then to do on this application?

21. Mr Dhillon would urge on us that latter course. He says that it was reasonable and necessary to issue the application on 14 November, because that was the only course open to the Active Defendants to obtain their security for costs, and that the claimants had been resistant to it.

22. Mr Parker says that the application is premature and was not necessary because as set out above the claimants had engaged with the issues raised. But he also says that the claimants wanted to keep their options open so had not fully conceded in the correspondence in November 2025 that they would agree to provide security subject to form and amount.

23. Of course, these types of argument come back to the underlying merits which we will not be determining.

24. This claim has a very long history. The parties have changed legal representation on a number of occasions over the course of the claim, and it appears that that may be part of the cause of the late issuing of the application. To the best of my recollection, the claimants are on their third set of solicitors and second full set of counsel. The Active Defendants are also on their third set of solicitors and have changed counsel more frequently. Gardner Leader, representing the Active Defendants, are now the most long-standing legal representatives in relation to these proceedings.

25. Whilst it might therefore be understandable that the historic knowledge of all the detail of these hotly contested, complex proceedings may not be at the fingertips of the current representatives, it appears to me that it is a significant oversight on the part of the Active Defendants to not have recalled either themselves or through those advising them that an ATE Policy had been in place since 2022, and that their original legal representatives have had a copy of it in June 2022.

26. Likewise, it is at least unfortunate that the claimants' legal representatives, when asked for a copy of the ATE Policy again, instead of responding saying that the Active Defendants had it, resisted providing a copy. Although it does not appear that the refusal to provide a copy was followed up by the Active Defendants at the time.

27. The security for costs timeline, very briefly, is therefore that in May 2022, an ATE Policy was incepted for £5 million, and a copy was provided by Eversheds, then representing the claimants, to Jones Day then acting for D1 to D4 (the Family Defendants) in June 2022.

28. Although Jones Day intimated a potential application for security, none was advanced at the time. I do not know whether there was any subsequent discussion at the time. The parties have not identified any.

29. Funding was a live issue throughout the worldwide freezing order and the jurisdiction applications in 2022 and 2023. Indeed, Mr Grant for the Family Defendants sought information from the claimants on numerous occasions about their funding, including by an informal application to Edwin Johnson J in March 2023.

30. Inter partes correspondence at the time indicated that the information about the claimants' funder was required to enable the Family Defendants to consider security for costs.

31. Given the Family Defendants had the ATE Policy, it was unclear why, if there was a genuine concern about cover, those issues were not raised then.

32. In April 2023, Miles J and I heard the consolidation application and consolidated various claims, resulting in Docklands becoming C9 and defendants 6 to 8 becoming parties. Cover was extended to £6 million to cover IIA. But it now appears that in error at the same time, the policy was not extended to cover Docklands as it should have been.

33. No issues about security for costs were raised by the Family Defendants at that time.

34. In July 2023, Miles J and I heard the Family Defendants' strike-out and summary judgment applications. Funding was again a live issue. During the course of the hearing, the claimants' counsel referred to the existence of the ATE Policy and that no application for security had been made.

35. Mr Grant for the Family Defendants, though raising the funding issues, did not engage with the questions of security or the ATE Policy, which was intended to provide cover for the Family Defendants' costs. It does not appear from the evidence available that the Family Defendants sought any further clarification following consolidation and the failure of their strike-out applications about the nature or extent of cover. There may have been good reasons why they did not do so, but it is certainly not the fault of the claimants that they did not do so.

36. It was not until 4 April 2024 that the Active Defendants raised any issues about security again. By this stage, Gardner Leader were representing the Active Defendants. They did not make a request for security in any particular amount or identify any deficiencies in the existing ATE Policy. It appears the Active Defendants did not appreciate that they already had it, instead, seeking confirmation of its terms and a copy. It was now two years since Jones Day had been provided with a copy of the ATE Policy in June 2022. No queries had been raised about its terms of the extent of cover. As the claimants noted in 2024, the previous focus had been on how the claimants were funded and not on security itself.

37. The April to May 2024 correspondence was shortly before the first CMC which took place before me over three days in June 2024. It was, of course, an obvious time to make an application for security, and, indeed, it is why the Active Defendants say that the issue was raised. But they did not make an application for security, and the correspondence ran into the sand on 23 May 2024 with the claimants having declined to provide a copy of the ATE Policy. The question of security was not resurrected until 16 October 2025.

38. However, there was evidence at CMC1 in June 2024 as to the extent of the Active Defendants' spending on living expenses and legal costs. The figures are set out in my judgment of October 2024. By May 2023, the Family Defendants had already notified £6 million in legal costs and living expenses since May 2022 when the worldwide freezing order was obtained. Their continuing burn rate from May 2023 was said to be between US$2.4 million per annum and US$3 million per annum.

39. Although not all of that will have been for legal costs of these proceedings, it ought to have been clear to the Active Defendants that the £5 million/£6 million cover under the ATE Policy was likely to run out/be exhausted. It is a curiosity for which there is no explanation in the evidence, that it does not appear that the Active Defendants had appreciated, not only that they had already received the ATE Policy, but also that they were running out of head room/space in respect of the level of cover.

40. It is also a curiosity that the claimants' then solicitors did not recall that the ATE Policy had already been given to the Active Defendants. There is fault on both sides.

41. In June 2024, I fixed a trial timetable which would result in the trial being listed in April 2026. That is now only two months away. This hearing was originally fixed to be the PTR but directed by us to be a further CMC at CMC4 in December 2025.

42. Substantial costs were incurred by the parties undertaking disclosure in the latter part of 2024 and early 2025 which will have substantially increased the Active Defendants’ burn rate that was then running at about $3 million per annum.

43. CMC2 took place on April 2025, CMC3 in October 2025. On neither occasion was an application for security advanced nor did the Active Defendants even indicate that it might be advanced. Despite Mr Felton's two witness statements in support of this application, there is no explanation for the delay from May 2024 until 16 October 2025, and we consider that that is significant, given the difficulties that then arose in October and November 2025.

44. The correspondence from 16 October 2025 was the first time that the Active Defendants properly grappled with the security for costs, explaining that they had incurred legal costs £6.5 million up to CMC3. They explained that their future costs would be such that the total legal costs might be as high as 15 million. They sought a copy of the ATE Policy and raised concerns about what they thought it covered, based on correspondence between Eversheds and Jones Day. They said they would issue an application for the next CMC (CMC4).

45. The claimants engaged with the Active Defendants correspondence but did not themselves have the historic correspondence seeking copies from the Active Defendants. They noted it was six months before trial. There was still resistance from the claimants to providing the ATE Policy. They eventually provided a copy in late October. In a letter dated 6 November 2025, the Active Defendants raised a considerable number of concerns about the ATE Policy and whether it provided adequate cover including noting for example that there did not appear to be an anti- avoidance clause. The claimants sought further information about costs but at quite a granular level.

46. Although the claimants say they took a pragmatic approach some of the points raised by the Active Defendants were obviously ones that should have been addressed, such as the Docklands issues and some of the anti-avoidance issues.

47. The difficulties with the security were not therefore all one-sided. It seems tolerably clear that the ATE Policy had at least some shortcomings that would need to be addressed even if the claimants maintain that not all of the issues raised by the Active Defendants needed to be addressed.

48. As set out above, however, when asked to concede that the claimants would provide security (even if it were subject to form and amount), the claimants, kept their powder dry. They made soothing comments, but in the end resisted it that concession. As Mr Parker said, if the ATE Policy that they were talking to their insurers about could not be obtained in a form that was acceptable to both them and the Active Defendants, they did not want to limit themselves to form and amount but wanted to be able to run all the arguments on the merits of the security for costs application, including whether security should be granted at all.

49. As I have already indicated, it is no part of our role today to determine whether any of those arguments would be successful, but what it does highlight is that it is important to recognise that there are reasons why parties enter into compromises.

50. Time ran out for the Active Defendants. At CMC3 in October of 2025, I had set a date by which any applications that the parties wanted to be considered at the next CMC should be issued. This was to avoid a problem that has arisen in this case on numerous occasions where multiple applications are made very late which is disruptive both to the parties and the court. Indeed, this is a CMC at which that has occurred again.

51. Having left raising the security for costs issues until 16 October 2025, six months before trial, one can understand why the Active Defendants felt they had to issue the application. The combination of the time constraints set by me in October 2025, the timing of the trial, and the fact that the claimants had, for perfectly understandable tactical reasons, kept their powder dry left the Active Defendants in a bit of a bind.

52. It was a choice not to have engaged with the claimants on this issue earlier, and a decision no doubt about where to focus resources. It was not the fault of the claimants that it was only on 16 October 2025 that the Active Defendants sought to reactivate the correspondence about security and raise a number of issues in relation to the ATE Policy when they eventually received it. But that was why the application was issued on 14 November rather than earlier whether in 2023, 2024 or just earlier in 2025.

53. Mr Dhillon seeks to classify the issuing of the application on 14 November as a reasonable and necessary response. It is only reasonable and/or necessary because the Active Defendants had not taken steps earlier. It was only reasonable and necessary because they had a deadline by which they had to issue the application – 14 November 2025. It was not reasonable and necessary to have got themselves into a position where they were forced to issue the application before there had been appropriate time period for parties to engage in the security for costs issues that then arose.

54. Although the claimants did continue to engage with the Active Defendants about the terms of the policy and the extension to funding and the endorsements, those were not finalised, as I have said until 4 February, with the additional requirements resolved on 10 February. It remains the claimants' position that this was a pragmatic solution to a problem, and they still do not concede that had the application been argued, that they would necessarily have been forced to provide security.

55. On the other hand, they have conceded a number of the points which the Active Defendants raised in relation to the ATE Policy, some of which, we can accept, are points on which, had the ATE Policy been part of an application on security, we would have considered needed to be addressed for the ATE Policy to be considered sufficient.

56. The resolution of the security issues took some time. It is not possible to say whether the existence of the application was a catalyst to the resolution or whether the correspondence commenced in October 2025 would have been successful without it.

57. Our starting point and our end point is therefore that consistent with the authorities, it is not appropriate to determine the substantive application. It has been compromised. It would be a waste of the court resources and the parties' time to delve into the depths of it. We have already heard substantial submissions on the costs in any event.

58. It seems to us, therefore, in those circumstances, and against the background set out above, that there is simply no proper basis on which it would be appropriate to make and order that the Active Defendants should be entitled to their costs of the application, even without considering the merits of that application.

59. The claimants have proposed costs in the case, but it seems to us that an order for costs in the case would not only be overly generous to whichever party were ultimately successful, given the history of the security and the shortcomings on both sides. Further, as Mr Dhillon submitted it would be inappropriate for a discrete application in relation to security for costs to ride with the outcome of the trial in any event.

60. Whether we take into account the history of the security for costs engagement between the parties over the last four years and their conduct, or whether we approach the question of costs on the basis that the parties have compromised the application other than costs, and it is not appropriate for the court to therefore undermine that, the appropriate order on this application, consistent with the exercise of our broad discretion under CPR 44.2(1), (2) and (4), good case management and the overriding objective of dealing with cases justly, efficiently and proportionately, including as to costs, is to make no order for costs on the security for costs application, and that is the order that we make ______________