Concept Elite Inc v (Thames Enterprises Ltd & Ors

The court considered an application for security for costs brought by the first to seventh respondents in proceedings under section 994 of the Companies Act 2006. The application was dealt with under Civil Procedure Rule 25.13, relying on paragraphs (2)(a) (foreign domicile) and (2)(c) (reason to believe inability to pay costs). The judge applied the established balancing exercise in Keary and related authorities, giving regard to the risk that a successful respondent would be unable to recover costs, the absence of evidence of the petitioner’s resources or of those behind it, and uncertainties as to the value and realisability of the petitioner’s asserted assets (notably its 20% shareholdings in the company and in Otley Riverside Holdings Ltd).

The court rejected arguments based on delay and on a mini-merits review: delay was not sufficiently prejudicial and the merits did not meet the high threshold required to decide the petition’s fate on a security application. Given the risks of non-enforcement in Liberia and the uncertain value and enforceability of the petitioner’s assets (including unsettled planning and contractual issues affecting the Guernsey company asset), the court held there was reason to believe the petitioner would be unable to pay costs and ordered security for costs to be provided by payment into court or a suitable bank guarantee.

Background and Parties:

• The petitioner is Concept Elite Incorporated, a Liberian company holding 20% of Auger Investments Limited (the Company). The respondents include Thames Enterprises Ltd (first respondent) and other family-controlled companies and individuals. The petition is an unfair prejudice petition under section 994 Companies Act 2006 concerning alleged conduct over 25 years across multiple entities and jurisdictions.

Nature of the application: The first to seventh respondents applied for security for costs under CPR 25.13(1) and (2), relying on paragraph (2)(a) (the petitioner is domiciled in Liberia) and paragraph (2)(c) (reason to believe the petitioner will be unable to pay the respondents’ costs).

Issues before the court:

• Whether the court had jurisdiction to order security for costs under CPR 25.13(2)(a) and whether the conditions in (2)(c) were satisfied.
• Whether delay in bringing the application or the merits of the petition precluded an order.
• Whether the petitioner had assets within the jurisdiction (notably its 20% shareholding in the Company and its 20% shareholding in Otley, a Guernsey company with a potential land sale) that made security unnecessary or enforceable.

Reasoning and findings:

• The court accepted that the petitioner is domiciled in Liberia and that enforcement in Liberia and against Liberian companies would be problematic, supporting CPR 25.13(2)(a) jurisdictional basis.
• On paragraph (2)(c), the court found that, in the absence of any meaningful disclosure of the petitioner’s financial position or of backers, and given the Company’s adverse valuations and the deficient shareholder funds reported in its accounts and independent valuations, there was reason to believe the petitioner would be unable to pay the respondents’ costs.
• The court examined the Otley asset and the related contract with Barratts: substantial uncertainty remained as to whether the contract would complete at the Minimum Purchase Price of £8m because of unresolved planning (section 106) and contractual construction issues, and the petitioner’s interest is in a Guernsey company rather than direct English land, complicating enforcement.
• The court rejected delay objections because the application was made promptly in the context of the litigation timetable and the applicants had obtained valuations before applying. The court also declined to undertake a detailed merits inquiry, noting the high threshold for considering merits on a security application and that the petition did not show a high degree of probability of success sufficient to preclude an order.

Disposition: The application for security for costs was allowed. The court ordered security to be provided either by payment into court or by a suitable bank guarantee unless the parties agreed another form of security.

The court allowed the applicants' application for security for costs. The judge found that the petitioner, a Liberian company, had not shown means or backers and that there was reason to believe it would be unable to pay the respondents' costs if ordered to do so; delay and merits did not preclude an order. Security was ordered to be provided by payment into court or a suitable bank guarantee unless the parties agree otherwise.