African Mining Services Mali SARL v Société des Mines de Komana (SMK) SA & Anor

On an application for security for costs based on alleged impecuniosity or illiquidity, the court must assess the totality of the evidence and the overall picture of the respondent’s likely ability to pay. Where the evidence is materially incomplete and the predictive exercise is unusually speculative, justice may require the application to be stood over rather than determined on a binary basis.

The court may prefer a further hearing when additional financial and operational data is likely to produce a safer assessment and dismissal with liberty to re-apply would create uncertainty, inefficiency or satellite disputes.

The claimant and third party applied for security for costs against the defendants in respect of an independent counterclaim. The application relied on the illiquidity gateway in CPR 25.13(2)(c), with relevant costs estimated at approximately £2.5 million and a trial costs order assumed at about £1 million.

The application had previously been stood over because the available evidence gave mixed indications of liquidity and the respondent’s business had not yet established a stable trading profile. Further financial and operational information remained incomplete, particularly concerning the respondent’s recently established mining operations and future financing obligations. The central issue was whether the court should determine the gateway immediately or defer the application pending further evidence.

1. The security application was stood over again to a hearing in September or October 2024. The court was not presently persuaded that there was reason to believe that Hummingbird would be unable to pay an adverse trial costs order, but the predictive exercise involved an unusual degree of speculation.

2. Under CPR 25.13(2)(c), the court must evaluate the totality of the evidence and ascertain the overall picture when predicting a respondent’s future liquidity. The assessment must include what evidence is present and what is conspicuously absent. The approach was derived from SARPD Oil International Ltd v Addax Energy S.A. [2016] EWCA Civ 120.

3. The available evidence pointed in both directions. Hummingbird had improved profitability and EBITDA, but also faced substantial financing repayments, high current liabilities, negative net cash and gold inventories, fluctuating production costs and insufficient operational history. More data was required before the court could make a safe prediction about liquidity in two years’ time.

4. A binary determination at that stage risked injustice to either side. Ordering security could unfairly burden a business that later flourished, while refusing security could make a later application vulnerable to objection as a second or third attempt. Dismissal with liberty to re-apply would also risk uncertainty and costly satellite disputes about material change in circumstances.

5. Standing the application over would allow further quarterly updates, interim results and audited accounts to test the credibility of Hummingbird’s current or subsequent predictions. The costs of the security application, including the earlier hearing, were reserved. No order was made requiring Hummingbird to provide its management accounts, but directions were made concerning the sourcing of financial and operational evidence.