Sarpd Oil International Ltd v Addax Energy S.A. & Anor

Security for costs under CPR25.13(2)(c) requires evidence giving reason to believe that a claimant company will be unable to pay an adverse costs order. Mere uncertainty about its finances, foreign incorporation, absence of publicly available accounts, or refusal to volunteer financial information is insufficient. Security may cover a defendant’s protective Part 20 costs, but not a third party’s costs or potential liability for them. Approved costs budgets ordinarily govern quantum under CPR3.18, absent good reason to depart.

Sarpd claimed damages or an indemnity from Addax for allegedly non-conforming gas oil. Addax brought a Part 20 claim against Glencore, its alleged supplier, and sought security for its defence costs, Part 20 costs, and possible liability for Glencore’s costs.

The application concerned the operation of CPR25.13(2)(c), the recoverability of Part 20 and third-party costs, and the relevance of approved costs budgets.

1. Application refused. The evidence did not establish the condition in CPR25.13(2)(c). Under Jirehouse Capital v Beller [2008] EWCA Civ 908, the issue was determined from the totality of the evidence. More than doubt was required, but proof on the balance of probabilities was unnecessary.

2. Foreign incorporation, absent public accounts, and financial reticence did not establish inability to pay. The reticence could reasonably reflect settlement strategy. The judge declined to follow any practice of ordering security merely in those circumstances.

3. If condition c had been satisfied, security would have been just because Sarpd showed no prejudice. Security could have included Addax’s protective Part 20 costs, as costs incidental to Sarpd’s proceedings. It could not include Glencore’s costs or Addax’s potential liability for them.

4. Had security been ordered, the approved costs budget would have governed assessment under CPR3.18, absent good reason or significant developments. The hypothetical amount would have been approximately £380,000.

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