Security for costs upheld despite discrimination concerns in international art fraud appeal

The Court of Appeal has granted security for costs of £70,000 in Qatar Investment and Projects Development Holding Co & Anor v Phoenix Ancient Art S.A. & Ors [2025] EWCA Civ 1300, a case involving allegations of fraudulent art sales, whilst significantly reducing the sum sought by the respondents.

Background to the dispute

The claimants brought two actions against the appellants—Phoenix Ancient Art S.A. (a Swiss company) and two individuals resident in Switzerland and New York—alleging that artefacts purchased from Phoenix were forgeries. The claims included rescission of contract, deceit, and conspiracy. Following the appellants' failure to comply with disclosure orders, Garnham J struck out their defences and granted summary judgement in favour of the claimants. The appellants obtained limited permission to appeal, challenging whether summary judgement was properly granted on the basis of deemed admissions.

The claimants subsequently applied for security for costs of approximately £169,000 under three grounds: the appellants' foreign residence (CPR 25.27(b)(i)), Phoenix's inability to pay (CPR 25.27(b)(ii)), and steps taken by the appellants regarding their assets that would hinder enforcement (CPR 25.27(b)(vi)).

Application of the two-stage test

Lord Justice Zacaroli confirmed that all three conditions were satisfied. Phoenix's 2023 financial statements showed inventory valued at CHF 5.4 million, yet subsequent evidence indicated actual stock worth only CHF 183,000. Combined with substantial uncollectable debts, Phoenix appeared heavily insolvent. The Individual Appellants had disposed of valuable assets without consideration and failed to provide complete asset disclosure, despite obligations under freezing orders.

Crucially, whilst both Individual Appellants disclosed equity in properties in New York and Geneva exceeding £1 million each, they also faced local creditor claims worth millions of pounds. This rendered their remaining equity "precarious at best", vulnerable to imminent enforcement proceedings in their respective jurisdictions.

The appellants argued that ordering security based on foreign residence would be discriminatory, citing Bestfort Developments LLP v Ras Al Khaimah Investment Authority [2016] EWCA Civ 1099. They contended that the enforcement difficulties arose from lack of assets and dissipation risks—factors that would not justify security against domestic appellants.

The Court held that the anticipated difficulties related to the appellants' own circumstances: insufficient available assets, deficient asset disclosure, and demonstrated risk of steps to prevent enforcement. These provided "rational and objective justification for discrimination against non-Convention state residents". However, the Court noted that security was independently justified under the inability to pay and asset dissipation grounds, making it unnecessary to reach a definitive conclusion on the residence condition alone.

Proportionality and quantum

The Court significantly reduced the security sought from £169,000 to £70,000. The claimants had sought to justify higher costs by reference to their respondent's notice, which addressed the merits of summary judgement. Lord Justice Zacaroli rejected this approach, noting a "conceptual difficulty": if the appeal succeeded, the parties would revert to an extant summary judgement application—proceedings for which security for costs would not ordinarily be available. The same principle should apply whether this Court remitted the matter or determined it directly.

The judgement emphasises that security for costs must be proportionate to the specific appeal being heard, rather than incorporating costs properly attributable to substantive applications that remain to be determined.