Vadetech Corporation v Seagate Software Information Management Group Ltd

On an application for security for costs by an overseas company, the court should assess what is just in the circumstances. Under Part 25.13(2)(b), the principal concern is the additional cost, delay or difficulty of enforcing an English costs order abroad, rather than automatic protection against ordinary insolvency risk. A Part 36 offer is a relevant consideration, particularly where it provides funds within the jurisdiction, but its significance depends on the claims to which it relates. Where the evidence does not permit a reliable assessment of the parties’ merits, the court should not speculate. Security should be assessed cautiously at an early stage and may be revisited if circumstances change.

Vadetech Corporation appealed from an order of Lightman J in the Chancery Division refusing to discharge earlier security for costs and ordering a further £141,750. The claimant was a Japanese company litigating against a United Kingdom company. The dispute concerned alleged contractual, copyright, unjust enrichment and quantum meruit claims arising from the translation and marketing of software.

Permission to appeal against some earlier orders had been refused. The issues before the Court of Appeal included the further security, the relevance of a Part 36 offer, the merits of the parties’ cases, human-rights considerations, costs, and the order for a split trial.

1. The appeal was allowed and paragraph 14 of Lightman J’s order, requiring further security of £141,750, was discharged. The court treated approximately £300,000 as sufficient security at that stage, comprising existing security, sums admitted or offered, and the Part 36 offer.

2. The judge was entitled to treat the strength of the parties’ cases as neutral. The pleadings and documents did not justify concluding that either the claimant’s claims or the Part 20 claim was likely to succeed. Merits should not be determined without evidence and trial.

3. In considering security under Part 25.13(2)(b), the court is concerned with the risks arising from enforcement abroad. Those risks may include additional costs, obstacles and delay compared with enforcement against a domestic claimant or a claimant within the Brussels or Lugano regimes. The amount of security should be proportionate to that risk.

4. The Part 36 offer was relevant because it provided substantial value connected with one claim and contributed to the security available within the jurisdiction. Since the trial had been postponed and a third party had recently been joined, caution was appropriate and the security position could be reconsidered later.

5. The human-rights issue was not decided because it had not been argued before Lightman J and the court had not heard full argument. The decision in Nasser v United Bank of Kuwait [2001] EWCA (Civil) 556 was noted as relevant to future applications.

6. The order for a split trial was a case-management decision within the judge’s discretion and would not be disturbed. The costs provisions were varied so that the relevant costs were costs in the cause before Lightman J; the other costs orders and appeal costs were dealt with as stated in the final order.

• Court of Appeal (Civil Division): Appeal allowed. Paragraph 14 of Lightman J’s order was discharged. The costs provisions were varied.
• Chancery Division, High Court: Lightman J refused to discharge earlier security for costs and ordered further security of £141,750 on 9 May 2001.
• Permission stage: Chadwick LJ refused permission to appeal against the earlier security orders and the order concerning the £60,000 payment, but adjourned the application concerning the further security.