Chemistree Homecare Ltd & Ors v Roche Products Ltd

On an application for security for costs, the court must be satisfied that there is reason to believe the claimant will be unable to pay an adverse costs order and that security is just in all the circumstances. The first requirement is lower than proof on the balance of probabilities, but it requires a conclusion based on the totality of credible evidence, including conflicting evidence. A claimant alleging that security would stifle its claim must show both that it cannot provide security itself and that appropriate assistance cannot be obtained from a third party. Security may be ordered in stages and must be proportionate to the costs reasonably expected to be incurred.

Roche applied under Civil Procedure Rules 1998, rule 25.13(2)(c), for staged security for costs in proceedings brought by three companies concerning the supply of pharmaceutical products. The claim alleged breaches of the Medicines for Human Use Regulations 2005 and competition law.

The application was initially sought for the costs of the whole action, but before Kitchin J it was limited to costs already incurred and those expected up to the conclusion of an interim injunction application. The claimants opposed security, contending that it would stifle their claim and that their businesses were financially viable. The issues were whether there was reason to believe they would be unable to pay Roche’s costs, whether an order was just, and what amount was proportionate.

1. Applicable principles. The court had to determine whether there was reason to believe that the claimants would be unable to pay Roche’s costs if ordered to do so and, separately, whether it was just in all the circumstances to make an order. The approach in Jirehouse Capital v Beller [2008] EWCA Civ 908 was applied.
2. The phrase “will be unable to pay” requires more than doubt about payment. The court must assess the totality of the evidence, including conflicting evidence. The threshold is lower than proof on the balance of probabilities, since the court need not reach a final conclusion about what will probably happen.
3. On the evidence, including substantial liabilities, poor or incomplete financial information, deteriorating financial indicators and the forensic accountant’s analysis, there was reason to believe that the claimants would be unable to pay an adverse costs order.
4. The allegation that security would stifle the claim did not prevent an order. The claimants had not shown either that they could not provide the security sought or that they could not obtain appropriate assistance from a third party. The application had also been made and pursued with reasonable diligence.
5. Although the litigation was complex, Roche’s estimate was excessive. A fair and proportionate award was 60 per cent of the relevant estimate. Security was therefore ordered in the sum of £450,000 for the applicable tranche.

First-instance decision. No appellate history was stated in the judgment.