Sopetra SA v Popco Naval and Energy Co Ltd

Security for costs may be ordered where the evidence establishes a real risk that an unsuccessful party will not meet a costs liability or may evade payment. A partial admission or a strong asserted merits case does not remove that risk or make security inappropriate. On a permission application, the court need not re-evaluate evidence accepted below where there is no realistic legal basis for challenging the order. A hearing is not unfair merely because an experienced judge proceeds shortly after reading the papers, provided both sides have been heard and the issues have been fairly considered.

Sopetra SA claimed demurrage and interest from Popco Naval and Energy Co Ltd. Popco brought a counterclaim concerning alleged overpayment and unpaid commission. Mr Justice Colman ordered Popco to provide £8,000 security for Sopetra’s costs of the counterclaim by bank guarantee, with the counterclaim stayed if security was not provided.

Popco applied for permission to appeal. It argued that the order prejudged the counterclaim, that the hearing had been rushed, and that the security requirement either gave insufficient weight to the company’s position or unfairly affected the counterclaim. The central issues were whether there was a sufficient evidential basis for security and whether the first-instance hearing had been procedurally unfair.

The application for permission to appeal was refused. Popco was given 28 days to provide security, with permission to apply to the Central London County Court for further time.

1. Security for costs. There was material before Mr Justice Colman supporting a real risk that Popco would not satisfy a costs order or might attempt to evade payment. Relevant material included the company’s recent registration, its failure to file accounts, evidence that it had ceased trading, and its Nigeria-based operations despite being English registered. The suggestion that the company was an alter ego of its director, against whom an unsatisfied County Court judgment was said to exist, also formed part of the material. The judge was entitled to rely on it.
2. Effect of the counterclaim’s merits. A partial admission of overpayment and the contention that the counterclaim was unanswerable did not eliminate the basis for security. The sum ordered was not excessive, and the order did not determine the merits of the counterclaim.
3. Permission and hearing fairness. There was no realistic legal basis for challenging the order on a full appeal. It was not appropriate on the application to re-evaluate the evidence accepted below. Nor did the transcript support the allegation that the hearing had been so rushed or truncated that it failed to do justice. An experienced judge’s pre-reading of the papers explained the limited need for oral repetition; the judge had heard and considered the matters requiring oral argument.
4. Alternative dispute resolution. The court expressed concern that adversarial conduct may have prevented meaningful consideration of alternative dispute resolution. The County Court was encouraged to reconsider that possibility, particularly in light of the apparent admission, but this observation did not provide a ground for permission to appeal.

1. Court of Appeal (Civil Division): refused Popco’s application for permission to appeal.
2. First-instance order: Mr Justice Colman ordered Popco to provide £8,000 security for Sopetra’s costs of the counterclaim, failing which the counterclaim would be stayed.