Versloot Dredging BV v HDI Gerling Industrie Vesicherung Ag

Security for costs need not take the conventional form of a first-class London bank guarantee. The essential question is whether the proposed security provides real security. This requires a promise likely to be honoured, given by an entity with the means to pay and against which enforcement can readily be obtained. The court must adopt a pragmatic and realistic approach. An indemnity from a reputable and creditworthy insurer may therefore be acceptable, provided it gives the defendant adequate protection and does not cause unacceptable prejudice. The overriding objective may support varying an existing security order so that the dispute is resolved on its merits rather than defeated by the form of security.

The claimant had previously been ordered by Beatson J to provide security for costs for the first tranche in the form of a first-class London bank guarantee. After an extension of time, it offered a deed of indemnity from QBE Insurance (Europe) Limited instead. The defendant opposed the substitution, relying on the contested nature of the original order, the absence of an appeal, the late production of the deed and the alleged inferior reliability of insurer security.

The claimant sought to rely on the specific liberty to apply concerning any after-the-event insurance it might obtain. The issues were whether the application fell within that liberty and whether the deed provided acceptable security.

1. Application permitted. The application fell within the specific liberty to apply relating to after-the-event insurance. The proposed deed of indemnity arose in relation to the ATE insurance obtained, even though the deed, rather than the policy itself, was offered as security.
2. Applicable approach. There was no magic in requiring security from a first-class London bank. The court had to take a pragmatic and realistic view. The essential question was whether the proposed security provided real security. That required a promise likely to be honoured, an entity with the wherewithal to pay, and an entity against which enforcement could readily be obtained.
3. Application to QBE. QBE was a reputable and creditworthy insurer with a London presence. Its A-plus credit and financial-strength ratings, its financial standing relative to relevant banks and underwriters, and evidence that its indemnities had been accepted by litigants supported the conclusion that the deed was equal to or better than security from many first-class London banks. The possibility that insurers, like banks, may fail was relevant but not determinative.
4. Order. Accepting insurer security was ultimately a matter of judgment. In the circumstances, the deed provided acceptable security for part of the amount ordered. Varying the order was consistent with the overriding objective because it promoted resolution of the dispute without unacceptable prejudice to the defendants.

The judgment concerned an application to vary an earlier security-for-costs order made by Beatson J on 11 September 2012. Burton J subsequently extended time for provision of security by consent. The present court allowed the claimant to substitute a deed of indemnity from QBE Insurance (Europe) Limited for the first-class London bank guarantee required for the first tranche.