Justice Investments v Visalia Energia: Security for Costs and the Stifling Test [2026] EWHC 676 (KB)
security for costs — 2026-03-23
Mrs Justice Eady orders £250,000 security for costs where claimant company fails to provide full, frank and unequivocal evidence on beneficial ownership and financial position, reducing the defendants request of £771,939 by approximately two-thirds.
Overview
Date: 23 March 2026
Judge: Mrs Justice Eady DBE
Court: High Court of Justice, King's Bench Division
Citation: [2026] EWHC 676 (KB)
Case No: KB-2023-001638
Nature of Proceedings: Multiple interlocutory applications including security for costs, strike out, disposal hearing, and CPR 31.22(2) restriction on use of disclosed documents
Key Issues:
- The threshold test for security for costs under CPR 25.27(b)(ii)
- The stifling test: what constitutes "full, frank, clear and unequivocal" evidence
- Whether the court can investigate beneficial ownership when assessing the stifling argument
- Quantum of security: broad brush reduction from £771,939 sought to £250,000 ordered
- CPR 31.22(2): restricting use of disclosed documents where a party misrepresents court transcripts to third parties
---
In Justice Investments Ltd v Visalia Energia SL (t/a Nace) & Ors [2026] EWHC 676 (KB), Mrs Justice Eady DBE handed down judgment on a raft of interlocutory applications in complex commercial proceedings. For costs practitioners, the case is notable for its detailed treatment of the security for costs jurisdiction under CPR 25.27(b)(ii), and in particular the court's rigorous approach to the stifling test where the claimant's true beneficial ownership and financial position are opaque.
---
The Facts
Justice Investments Limited ("C"), a holding company whose sole director and shareholder was Mr Martin Haschka, brought claims against six defendants arising from a commercial relationship involving loan agreements, share purchases, and joint ventures connected to a Spanish energy company. The claims included breach of contract, inducing breach of contract, unlawful means conspiracy, and breach of fiduciary duty, with damages ultimately said to be in the region of £377 million.
The first and second defendants ("D1" and "D2") defended the claims and, following a period in which the proceedings had been stayed, applied for security for costs. D1 and D2 contended that C was a company with no assets, controlled not by Mr Haschka alone but also by a Mr Ian Andrews, who had represented C at hearings as its "assistant company secretary" and who had a 2005 conviction for tax fraud.
C's claim had a turbulent procedural history, including default judgment against the third, fourth, and fifth defendants (who never appeared), an interim payment order of £468,136.61 against the fifth defendant (which remained unenforced), two strike out applications by C, and correspondence sent by C to Spanish entities misrepresenting court observations as adverse judicial findings against D1 and D2.
---
1. The Threshold Condition: "Reason to Believe"
The first question for the court was whether D1 and D2 had established the threshold condition under CPR 25.27(b)(ii): that C was a company in respect of which there was "reason to believe" it would be unable to pay the defendants' costs if ordered to do so.
Mrs Justice Eady confirmed the established principles. The threshold conditions are "matters of fact, not discretion" (citing Infinity Distribution Ltd v Khan Partnership [2021] EWCA Civ 565). The standard does not require proof on the balance of probabilities but only that there is "reason to believe" the claimant will be unable to pay (citing Jirehouse Capital v Beller [2008] EWCA Civ 908). The assessment is forward-looking, asking what the claimant may be expected to have available "in the form of cash or other readily realisable assets" at the likely time of any substantive costs award (citing Thistle Hotels Ltd v Gamma Four Ltd [2004] EWHC 322 (Ch)).
On the evidence, C had effectively no liquid assets. Although C pointed to two potential sources of funds: the unenforced interim payment of £468,136.61 against D5, and monies potentially due under an assignment of a loan agreement, the court was unpersuaded. On the interim payment, the court noted C had failed to enforce it since September 2024 despite Spanish court proceedings, and that D1 had itself experienced "very real difficulties" in seeking to enforce a judgment debt against D5 over nearly 24 months.
The court concluded:
> "I am satisfied that D1 and D2 have met the burden upon them, having established, as a matter of fact, that C is a company in respect of which it is reasonable to believe that it will be unable to pay their costs incurred in these proceedings if ordered to do so."
---
2. The Stifling Test: Full, Frank, Clear and Unequivocal Evidence
Having established the threshold, the court turned to the discretionary question: whether it was just to make the order, having regard to all the circumstances.
Mrs Justice Eady set out the core principle: if the effect of a security for costs order would be to stifle the claimant from continuing its claim, then security should not be ordered (citing Goldtrail Travel Ltd v Aydin [2017] UKSC 57). However, the burden lies squarely on the claimant to prove that this will be so, and the court will not take the refutation at face value.
The court cited the Al-Koronky standard: the claimant must provide "full, frank, clear and unequivocal evidence" before the court should draw any conclusion that a particular order will have the stifling effect. The test is whether it is "more likely than not" that the order would stifle the claim.
Critically, Mrs Justice Eady emphasised that the court's investigation "will not stop with the legal entity that is itself bringing the claim." Applying the principles from Keary Developments Ltd v Tarmac Construction Ltd [1995] 3 All ER 534 and MV Yorke Motors v Edwards [1982] 1 WLR 444 (HL), the court is entitled to consider whether a company might be able to call upon the assistance of shareholders, directors, or other backers. As Lord Diplock observed in MV Yorke Motors:
> "The fact that the man has no capital of his own does not mean that he cannot raise any capital; he may have friends, he may have business associates, he may have relatives."
---
3. Beneficial Ownership: Piercing the Corporate Veil on Stifling
The most significant aspect of the judgment for practitioners is the court's willingness to investigate the true beneficial ownership and control of the claimant company when assessing the stifling argument.
Mrs Justice Eady found that C's evidence had not been "full, frank, clear or unequivocal" in four key respects.
Third-party funding. C had explored third-party funding in January 2024 but provided no explanation for why no further steps had been taken, despite the case strengthening after default judgment (February 2024) and the interim payment award (September 2024).
Nominee shareholders. The Nardello forensic report adduced by D1 and D2 strongly suggested that Mr Nivard, C's former joint shareholder, acted as a professional nominee. This inference was supported by his subsequent resignation and disposal of shares for nominal consideration. C's response, dismissing the allegations as "misconceived" without substantive engagement, was insufficient.
Complex and opaque relationships. The evidence showed links between Mr Haschka and Mr Andrews suggesting a relationship going well beyond a paid advisory role. The court found evidence of:
> "(i) relating to D6 (a wholly owned subsidiary of C until September 2019) that strongly suggests real control of that company vested in Mr Andrews; (ii) supporting the view that there are complex and opaque relationships between the various companies referenced; and (iii) that suggests a practice (on the part of Mr Andrews and/or Mr Haschka) of using nominee shareholders and shadow directors."
Lack of financial transparency. Mr Haschka's contention that he had no assets "sits uneasily with his long career in finance" and his continuing involvement in other companies. Mr Andrews' suggestion that his wife's assets were irrelevant due to a pre-nuptial agreement was not supported by disclosure of that agreement.
The court's conclusion was stark:
> "I am not persuaded that C's claim would necessarily be stifled by a SFC order in this case. I am not satisfied that I have been given the true picture as to who owns or controls C, or as to who might stand to benefit from C's pursuit of this litigation. Ultimately, I have reached the conclusion that, if a SFC order is made, it will largely be a matter of choice — not inevitability — should the decision then be made (by Mr Haschka and/or Mr Andrews) as to whether or not to comply with that order and to continue these claims."
---
4. Quantum: The Broad Brush in Practice
D1 and D2 sought security in the sum of £771,939.26, representing 70% of their estimated total costs to trial. The 30% reduction had been applied to account for the possibility of early settlement and challenge on detailed assessment.
Mrs Justice Eady ordered security of £250,000, a reduction of approximately two-thirds. She noted several factors: the costs had not been subject to any costs budgeting exercise and "may include sums that would not ultimately be allowed"; the order should not be merely nominal (as that would defeat the purpose of a security order); but equally, the court is "not bound to make an order of a substantial amount" (citing Keary Developments).
The court applied the Pisante v Logothetis [2020] EWHC 3332 (Comm) approach: the court will not attempt a detailed assessment but will approach the evidence "on a robust basis and applying a broad brush." The court must also take into account "the amount that the respondent is likely to be able to raise" and "should not normally make continuation of their claim dependent upon a condition which it is impossible for them to fulfil."
C was given 42 days for payment into the Court Funds Office, with all proceedings stayed until security was provided and liberty to D1 and D2 to apply to strike out C's claims if the order was not complied with.
---
5. CPR 31.22(2): Restricting Use of Disclosed Documents
Although not strictly a costs issue, the court's treatment of D1 and D2's application under CPR 31.22(2) is of broader interest to litigation practitioners.
C had sent letters to 14 Spanish entities and 5 Cyprus entities, enclosing proceedings documents, witness statements, and a forensic accounting report. The letters characterised observations made during argument at case management hearings as adverse judicial findings against D1 and D2 (which they were not), and made "serious, but baseless, allegations" against D1 and D2's counsel and solicitors.
Mrs Justice Eady found this constituted an abuse of process:
> "I am unable to see any legitimate reason for C to send out these letters, and draw the inference that this has been done with the intention of in some way damaging the business interests of D1/D2 and/or putting pressure on them in this litigation."
The court granted a restriction order under its inherent jurisdiction, preventing C from using court documents, disclosed documents (including those read in court or referred to at a public hearing), or hearing transcripts, in communications with the entities listed in the annex to the order. Mrs Justice Eady characterised this as "a proportionate response: it addresses the abuse without impacting on C's ability to advance its case" and "a minimal derogation from the open justice principle."
---
6. Strike Out and Disposal Hearing: Both Dismissed
In addition to the costs applications, C had sought to strike out D1 and D2's defence and to proceed with a disposal hearing on damages against D3, D4, and D5.
The strike out application was dismissed as wholly without merit. The court applied the Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) principles and found that issues of document dating and metadata, while concerning, were matters for trial, not summary determination. A defence that is provisional pending completion of disclosure does not become incoherent for that reason alone.
The disposal hearing application was similarly dismissed. The court found that a damages assessment against D3 to D5 would "extensively overlap with factual and legal issues arising in claims by C against D1/D2" and would "inevitably require the court to investigate and to make findings in relation to issues yet to be litigated." Dealing with all issues together would be "less wasteful of the court's resources" and "avoid the possibility of inconsistent judgments."
---
Practical Implications
For Costs Lawyers
1. Stifling evidence must be comprehensive. The court will not accept bare assertions that a security for costs order would stifle a claim. Claimants must provide detailed evidence about all potential sources of funding, including from directors, shareholders, associates, and third-party funders. Failure to engage substantively with the defendant's evidence will undermine the stifling argument.
2. Beneficial ownership is fair game. Where there are indications of nominee arrangements, shadow directors, or opaque corporate structures, the court will investigate the true ownership and control of the claimant company. Costs lawyers advising claimants who face security for costs applications should ensure their clients understand the obligation of full disclosure.
3. Quantum is genuinely discretionary. The reduction from £771,939 to £250,000 (approximately 32% of the amount sought) illustrates that the court will apply a meaningful discount, particularly where costs have not been budgeted. For defendants, the lesson is that even a well-evidenced costs schedule may be substantially reduced.
4. Unenforced judgments are not assets. The court gave no weight to C's unenforced interim payment award of £468,136 against D5. When assessing whether a claimant can meet a costs order, the court looks to "cash or other readily realisable assets," not theoretical entitlements.
For Litigation Practitioners
1. Misusing disclosed documents has consequences. Sending misleading letters to third parties based on proceedings documents, particularly letters that misrepresent case management observations as judicial findings, will be treated as abuse of process. The court has the power under CPR 31.22(2) and its inherent jurisdiction to restrict future use.
2. Company representation requires proper authority. CPR 39.6 permits a company to be represented by a duly authorised employee with the court's permission, but the company must be transparent about the representative's status, employment, and background. Ad hoc arrangements made on the eve of hearing will attract judicial scrutiny.
3. Strike out remains a last resort. Even where documents have suspicious metadata and a defence contains provisional elements, the "extreme sanction of striking out" will not be imposed where the issues are properly matters for trial after disclosure.
---
Conclusion
Justice Investments v Visalia Energia provides a thorough and instructive treatment of the security for costs jurisdiction. The case reinforces the principle that the stifling test is not a mere procedural hurdle to be cleared with minimal disclosure: claimants must lay bare their true financial position and corporate structure, including the roles of those standing behind the litigation. Where the court detects nominee arrangements, opaque ownership, or evasive financial evidence, it will draw adverse inferences and conclude that any inability to pay security is a "matter of choice, not inevitability."
The quantum reduction from £771,939 to £250,000 also serves as a useful reminder that the court retains broad discretion. The Pisante v Logothetis broad brush approach permits significant reductions, particularly where the costs relied upon have not been subject to budgeting and may include items that would not survive detailed assessment.
For costs lawyers, the judgment is a valuable reference point when advising on security for costs applications, both for defendants seeking to maximise the protective effect of such orders and for claimants seeking to resist them. The message is clear: transparency is not optional.
---
Citation: Justice Investments Ltd v Visalia Energia SL (t/a Nace) & Ors [2026] EWHC 676 (KB)
Full judgment available at: BAILII
Related Specialist Support
View all case law updates | Our services | Contact us