Texuna International Ltd v Cairn Energy Plc

Security for costs is discretionary. A claimant’s residence outside the Brussels, Lugano or Regulation zone does not, by itself, justify an order, because access to justice must not be discriminatory.

The relevant justification is a realistic risk that enforcement abroad will involve additional obstacles, costs or delay. The court may consider where the claimant’s assets are located, not merely its country of residence. The applicant must ordinarily provide an evidential basis for that risk, although obvious realities and commonsense inferences may suffice. The quantum should reflect the additional enforcement burden, rather than automatically equalling the likely costs of the proceedings.

The defendant sought security for costs of £500,000 under CPR 25.13. The claimant, a Hong Kong company, argued that it was resident in England, that it had not been shown that it would be unable to pay costs, and that the discretion should not be exercised or should produce only minimal security.

The court found that the claimant was resident in Hong Kong and therefore satisfied CPR 25.13(2)(a). It rejected the defendant’s case under CPR 25.13(2)(c), because the evidence showed only that the claimant might, rather than would, be unable to pay. The central issue was how the discretion and quantum of security should be assessed in light of Nasser v United Bank of Kuwait.

1. Residence. The inquiry under the security-for-costs rules is factual. It concerns the location of a company’s central management and control, or where its real business is carried on, having regard to all the circumstances. The claimant was resident in Hong Kong. CPR 25.13(2)(a) was therefore satisfied.
2. Inability to pay. Under CPR 25.13(2)(c), the defendant had to show that the claimant would be unable to pay the defendant’s costs if ordered to do so. The wording “reason to believe” did not dilute that test. The evidence established only a possibility of non-payment. The audited accounts and receivables provided a prima facie asset available to meet a costs order.
3. Discretion. Following Nasser v United Bank of Kuwait, residence outside the relevant zone could not alone justify security. The surviving rationale was the risk of additional obstacles or burdens in enforcing the judgment abroad. There was no inflexible assumption that such difficulties would exist.
4. The relevant comparison was enforcement within the zone and enforcement in the country where enforcement would realistically be pursued, whether the claimant’s country of residence or the location of its assets. Asset location was relevant and this was not discriminatory where the consideration was connected to enforcement.
5. The applicant ordinarily had to provide some evidential basis for a realistic risk of additional enforcement burdens, although the court could rely on obvious realities or commonsense inferences. The quantum should be related to that additional burden. Hong Kong enforcement was not impossible, but likely to involve substantial additional costs. A further sum was justified for the lower-probability risk of enforcement extending to Russia.
6. Security for the defendant’s costs was ordered in the sum of £100,000. The court invited submissions on the form and timing of security and related costs matters.