All applications for security for costs begin with a simple proposition. A defendant has been brought involuntarily into litigation, may spend a substantial sum defeating the claim, and should not be left with a costs order which is worthless because the claimant cannot pay it. That proposition is easy to state. Its application is less straightforward. The jurisdiction is protective, not punitive. It is not intended to enable a defendant to stifle an arguable claim by requiring the claimant to put its litigation budget beyond use.
After-the-event insurance therefore presents an obvious difficulty. If a substantial insurer has undertaken to meet an adverse costs order, the risk which security is designed to meet may already have been transferred. But insurance is not cash. Cash in court does not cease to exist because the claimant misrepresented a fact, breached a policy condition, rejected advice, committed a fraud, or allowed cover to lapse. An insurer may, unless the contractual arrangements say otherwise.
The present jurisdiction is contained in CPR 25.26 and 25.27, following the substitution of Part 25 with effect from 6 April 2025. For commercial litigation, the familiar condition in CPR 25.27(b)(ii) is that the claimant is a company or other body and there is reason to believe that it will be unable to pay the defendant’s costs if ordered to do so. Even then, the court must consider whether it is just to order security.
The starting point remains Keary Developments Ltd v Tarmac Construction Ltd [1995] 3 All ER 534. The Court of Appeal required the court to weigh the injustice to a claimant if security stifles a genuine claim against the injustice to a defendant which defeats the claim but cannot recover its costs. Keary is often treated as a case about stifling, but its broader importance is that security is not an entitlement to the best possible protection at the claimant’s expense. The court is trying to achieve justice between the parties, not to confer a collateral tactical advantage.
ATE insurance enters the analysis at two different stages. In Premier Motorauctions Ltd (in liquidation) v PricewaterhouseCoopers LLP [2017] EWCA Civ 1872, the Court of Appeal accepted that an appropriately framed policy could be relevant to whether there was reason to believe that an insolvent corporate claimant would be unable to meet an adverse costs order at all. If the claimant has a reliable contractual entitlement to have the defendant’s costs paid, the premise of inability to pay may be undermined.
But Premier Motorauctions rejected the simpler proposition that the existence of a policy ends the enquiry. The policies there were capable of avoidance for misrepresentation or non-disclosure. The defendants were entitled to some assurance that this was not a realistic risk. The case therefore established the essential point: ATE may answer a security application, but only after examination of the obligations the insurer has actually assumed.
That examination may reveal that an ATE policy has an impressive indemnity limit while still leaving substantial risk with the defendant. Cover may terminate if prospects fall below a stated percentage. Costs incurred before inception may be excluded. Particular applications may fall outside the policy. Cover may be vulnerable to breach of conditions, misrepresentation, non-disclosure, fraud or dishonesty. The indemnity may be capable of exhaustion by other insured liabilities. The proceeds may even be payable to the claimant, introducing the possibility of diversion or insolvency. None of those matters is answered by saying that the insurer is solvent.
The courts have therefore moved towards a functional enquiry: what, in practical terms, is the defendant actually protected against? Michael Phillips Architects Ltd v Riklin provided an early framework. ATE can in principle provide some security; it will rarely be as good as cash; the claimant must demonstrate that it provides real protection; and the amount of conventional security may be reduced to reflect the extent to which the policy reliably covers the costs exposure. More recently, in Asertis Ltd v Bloch [2024] EWHC 2393 (Ch), the court treated the governing question as whether there was a real, rather than fanciful, risk that the policy would not respond.
That is an important distinction. A defendant cannot defeat ATE by pointing to every theoretical possibility of non-payment which can be imagined under a contract. If that were enough, insurance could never suffice. Equally, a claimant cannot rely upon the headline value of the policy while ignoring the machinery by which cover can disappear. The court is concerned with the substance of the protection, not the label attached to it.
The same principle also restrains tactical use of the jurisdiction by defendants. Cash paid into court is cash which cannot be used to fund experts, disclosure, solicitors or counsel. A demand for cash may therefore do more than protect against credit risk: it may affect the claimant’s ability to litigate. In Recovery Partners GB Ltd v Rukhadze [2018] EWHC 95 (Comm), the court accepted that where two forms of security provide equal protection, all else being equal, the less onerous form should be preferred.
That does not mean a claimant is entitled to offer second-rate security because it is cheaper. Recovery Partners itself refused to replace superior existing cash-backed undertakings where no material hardship justified doing so. But once adequate protection against the relevant risk has been offered, the jurisdiction does not require a claimant to provide something more onerous merely because the defendant would rather have cash.
Modern ATE security has developed by stripping out the features of ordinary insurance which create uncertainty. Recovery Partners provides a useful illustration. The insurer executed a deed under which it unconditionally and irrevocably undertook to pay costs directly to the defendants, including costs determined by summary assessment, detailed assessment and orders for payment on account. It acted as principal debtor rather than merely as surety.
The Lloyds Developments litigation took the exercise further. In Lloyds Developments Ltd v Accor HotelServices UK Ltd [2025] EWHC 1238 (TCC), Constable J required close attention to termination, notice, fraud and the terms of the anti-avoidance endorsement. The defendant was not entitled simply to say that cash was preferable and save its substantive objections for the hearing. If the proposed security was defective, the defects should be identified so that they could, where possible, be cured.
The second judgment, [2025] EWHC 2011 (TCC), records what the cure looked like. The approved wording made the secured cover non-voidable and non-cancellable, prevented the insurer from refusing payment by relying upon exclusions or upon fraud, dishonesty, misrepresentation or non-disclosure by relevant persons, directed payment to the secured party, preserved protection through insolvency, restricted adverse amendments, provided direct enforcement by the defendant, and subjected the insurer to English law and jurisdiction.
By that stage, the policy had begun to look less like ordinary insurance and more like an on-demand financial obligation. That is the direction in which the authorities have travelled. The closer ATE comes to conventional security in substance, the weaker the principled objection to accepting it.
Contis Group Ltd v Swipewallet Holdings Ltd [2025] EWHC 3065 (Comm) shows that the court need not choose between accepting the policy wholesale and rejecting it wholesale. The policy was accepted as security for costs already incurred and for future costs while it remained in force. But the possibility of termination if merits deteriorated was treated as a real risk. The answer was a £300,000 layer of conventional security, together with notification and evidential safeguards.
That residual-risk approach is attractive because it asks what the ATE reliably covers, identifies what it does not, and orders conventional security for the gap. It avoids treating cash as an end in itself. Bargain Busting Ltd v Shenzhen SKE Technology Co Ltd [2026] EWHC 1476 (Ch) points in the same direction. Defendants were justified in pursuing security until ATE cover sufficiently protecting their interests had actually been put in place. The jurisdiction is not satisfied by a promise that acceptable wording may arrive later. But equally, once it does arrive, the court should assess the protection which exists rather than insist upon a particular label.
ATE insurance therefore lies on a spectrum. At one end is an ordinary policy whose continued value depends upon the conduct of an impecunious claimant and a series of contractual conditions which the defendant cannot control. At the other is an irrevocable, non-avoidable and directly enforceable obligation by a creditworthy insurer to satisfy identified costs orders.
The practical question is not whether ATE is “as good as cash” in some abstract sense. Usually it is not. The question is whether the instrument offered gives the defendant real protection against the risk which justifies security in the first place. An ordinary policy which leaves a material risk of non-payment should not suffice. But once the material risks have been removed, the defendant is not entitled to cash simply because cash is better, cleaner or more painful for the claimant to provide.
By that point the insurance may still be called ATE. Functionally, however, it has become security. And that is what the jurisdiction is concerned with.