Ablaise Ltd v Nettec Plc & Anor

On an application for security for costs, the court has a complete discretion. It must balance the injustice to a claimant whose proper claim may be stifled against the injustice to defendants who may be unable to recover their costs. A claimant resisting security on the ground of stifling must satisfy the court that the order would probably prevent continuation of the litigation. The inquiry includes resources available from directors, shareholders, backers and third-party funders, not merely the company’s own assets. The mere fact that security may deter or stifle litigation does not, without more, justify refusing or substantially reducing the order.

The defendants applied for further security for costs in a patent infringement action. An earlier order had provided security up to the case management conference, and the present application concerned the period from the conference to trial. The defendants sought approximately £320,000, based on estimated future costs of £490,000. The claimant accepted that it could not itself meet the amount sought and argued that the order would stifle the action. The central issues were the reasonableness of the defendants’ cost estimate, whether the claimant had shown that the litigation would be prevented, and the significance of resources available from shareholders, directors or other funders.

1. Security and discretion. The court applied the guidance in Keary Developments Ltd v Tarmac Construction Ltd [1995] 3 All E.R. 534. The court has a complete discretion and must weigh the injustice to the claimant if a proper claim is prevented against the injustice to defendants who cannot recover costs if the claim fails.
2. Costs estimate. The claimant’s evidence challenging the defendants’ estimate was not expert evidence capable of displacing the defendants’ evidence. The court therefore proceeded on the basis that future costs of £490,000 were reasonable and that security of approximately £320,000 was appropriate.
3. Stifling. The burden was on the claimant to show that the order would make continuation of the litigation impossible. That inquiry required consideration of resources available from shareholders, directors, other backers and third-party funders. The claimant’s evidence disclosed substantial assets among shareholders and did not establish that funding was unavailable.
4. The possibility that an order would deter or stifle the claim was not, without more, a sufficient reason to refuse security. Otherwise the statutory provisions permitting security against companies with inadequate assets would be defeated. The claimant had not shown that the order would prevent continuation of the action, and the balance of justice favoured protection of the defendants.
5. Order. Security for costs was ordered in the sum of £320,000.