The Court of Appeal in London has refused to grant a defunct law firm security for costs, in what the judge described as a “mysterious” case, according to the Law Society Gazette of England and Wales.

The Gazette reports that Axiom Stone London Ltd (ASLL) – which formerly ran a solicitors' practice under the trading name Quality Solicitors Axiom Stone – is being sued by Heathfield International LLC.

The claimant argues that it is owed money by the now-dormant law firm, after providing medical reports for use in litigation. ASLL argues, however, that the written contract Heathfield relies on is fraudulent, and displays a forged signature.

‘Lack of explanation’

Last year, ASLL applied for security for costs. The application was refused by the High Court on the grounds that the judge did not understand how or why the former firm’s defence was being funded.

In Heathfield International LLC v Axiom Stone (London) Ltd & Anor, the Court of Appeal this week upheld the decision, citing the “the complete lack of explanation on both sides as to what was really going on, and why the litigation was being fought at all”.

Lord Justice Nugee said that there was “no explanation” as to why Heathfield was pursuing ASLL, adding that claimants did not usually bring claims against companies with no assets.

“And if they do, defendants do not usually defend them. In the present case ASLL was a dormant company with no more than £1,100 on its balance sheet, and there was no explanation why it was defending the action at all,” the Gazette quoted the judge as saying.

Assets of just £1,100

He also questioned who was bearing the risks of the litigation.

“We know that at the point at which it was sued, ASLL had no more than £1,100 in assets. Yet it is proposing to incur something like £200,000 in defending the action. It can only be risking £1,100 of its own money in doing so, for the simple reason that it does not have any more than that,” the judge said.

The court added that there was a distinction between corporate and individual defendants, as there was “usually nothing mysterious” about an individual defending a claim that they could not afford to meet, given that they could face bankruptcy.