Gulf Azov Shipping Company Ltd & Anor v Idisi & Ors

A court may consider varying an order for security for costs to permit a bank guarantee, but only after the proposed instrument has been produced and scrutinised. The alternative security must provide protection effectively identical, or almost identical, to payment into court. The court should reject a guarantee containing material uncertainty about liability, enforcement, interest, interim payments, service, or jurisdiction. It is not the court’s function to draft an acceptable guarantee for the parties.

The defendants sought variation of an order requiring them to provide £57,500 by payment into court as security for the claimants’ costs of an appeal or application for permission to appeal from an order of Langley J in the Commercial Court.

The defendants proposed a document issued by Deutsche Bank AG’s London branch, described as both a bond and a guarantee. The claimants opposed variation, relying on defects in the document and concerns about the practical enforceability of the proposed security. The central issue was whether the document gave protection equivalent to the existing payment-into-court order.

1. Application refused. The earlier order did not absolutely exclude a later application based on a satisfactory guarantee. It did, however, require a concrete application supported by a bank prepared to provide security on acceptable terms.
2. The proposed document was unacceptable. If construed as an English-law guarantee, it lacked expected protective provisions and described the bank as surety. Its wording also created uncertainty concerning when the obligation arose or ended, consideration, and the effect of later costs orders.
3. The guarantee was materially less protective than payment into court. It was capped at £57,500 and did not cover interest accruing on money in court or a possible interim payment. Its demand provisions could require service on defendants whose conduct had made service difficult, and it did not clearly ensure that the security could be operated entirely within the jurisdiction.
4. Further defects concerned demands supported by court orders rather than agreed costs, and the absence of an exclusive jurisdiction clause. In those circumstances the court was not required to assess whether individual defects could be cured or to draft a replacement instrument.

The application for variation was refused. The respondents were awarded half their costs, with the balance to be costs in the appeal.

• Court of Appeal (Civil Division): A security-for-costs order made by Lord Justice Mance required payment of £57,500 into court. The subsequent application to vary that order by permitting a bank guarantee was refused.
• Commercial Court, Queen’s Bench Division: The application arose from an order of Langley J. No citation for that order was stated in the judgment.