Seakom Ltd & Anor v Knowledgepool Group Ltd

An appellate court may order security for costs where the applicable jurisdictional conditions are met and the evidence shows a real risk that the respondent’s costs will be unrecoverable. Under CPR 25.13, this includes inability to pay and steps making enforcement more difficult.

The court must then consider whether security would probably stifle the appeal. The party resisting security bears that evidential burden. The court may consider previous litigation funding, asset disposals, available equity, business income and the ability of the party or a third party to provide security. The amount ordered should be just and proportionate, taking account of costs incurred, likely future costs and enforcement costs.

Seakom Limited and Seakom International Limited appealed against Carr J’s judgment in the Chancery Division, which had rejected their broad construction of a commission-sharing agreement and directed an account of sums due. The appeal concerned the proper interpretation of the agreement and the availability of a commercial-absurdity analysis.

Pending that appeal, Knowledgepool Group Limited applied for security for costs under CPR 25.13 and CPR 25.15. The application relied on the second appellant’s residence outside the jurisdiction, the appellants’ apparent inability to pay an adverse costs order, and steps said to make enforcement more difficult. The central issues were whether the jurisdictional thresholds were met and whether security would stifle the appeal.

Application granted. Lady Justice Gloster ordered the appellants to provide security for the respondent’s appeal costs in the sum of £50,000 and summarily assessed the application costs at £16,000.

1. The condition in CPR 25.13(2)(a) was satisfied in relation to Seakom International Limited. It was incorporated in the British Virgin Islands and managed in Hong Kong, so enforcement of a costs order would involve additional costs in those jurisdictions.
2. The condition in CPR 25.13(2)(c) was also satisfied. There was every reason to believe that the appellants would be unable to pay the respondent’s costs if the appeal failed. Seakom appeared insolvent and dormant. International’s financial information was limited and suggested a substantial deterioration. The appellants’ litigation costs were being funded through Mr Durcan, mortgage borrowing and an associated company.
3. The condition in CPR 25.13(2)(g) was satisfied because the appellants had taken steps concerning assets which would make enforcement more difficult. These included transfers of the Coursemonster trade mark and domain names to Mr Durcan’s mother, together with arrangements involving another associated company.
4. The principles stated by Gibson LJ in Keary Developments Ltd v Tarmac Construction Ltd [1995] 3 ALL ER 534 remained relevant under the CPR, as confirmed by Al Koronky v Time - Life Entertainment Group Limited [2006] EWCA Civ 1123. The appellants had to provide sufficiently strong evidence that an order would probably stifle the appeal.
5. That burden was not discharged. The evidence of asset disposals, property equity, business turnover, deferred commission and previous funding indicated that the appellants, Mr Durcan or a third party might be able to provide security.
6. It was just and proportionate to order security. The figure of £50,000 properly reflected the respondent’s costs incurred to date, likely future appeal costs and the costs of enforcement in Hong Kong and the British Virgin Islands.

• Court of Appeal (Civil Division): Lady Justice Gloster granted security for the respondent’s costs of the appeal under CPR 25.15 in the sum of £50,000 and awarded £16,000 for the application.
• High Court of Justice, Chancery Division: Carr J gave judgment against the appellants on their commission claim in [2013] EWHC 4007 (Ch), directed an account, and made the order from which permission to appeal was granted.