Parsdome Holdings Limited v Plastic Energy Global SL

Where there is clear reason to believe that a claimant will be unable to meet a possible adverse costs order, the gateway for security for costs is satisfied. The court’s discretion should ordinarily require security with practical utility substantially equivalent to payment into court or a first-class London bank guarantee. In assessing alternative security, incomplete evidence of the financial strength of a proposed guarantor or indirect funding source will usually be insufficient. The court may err within reason in favour of the successful applicant where under-security would prejudice recovery, particularly where the claimant can provide the additional security without stifling its claim. Costs incurred on the application must nevertheless be reasonable and proportionate.

Parsdome Holdings Limited, a BVI company, brought proceedings against Plastic Energy Global SL. Plastic Energy applied for further security for costs. Parsdome had previously provided security in tranches but declined to provide satisfactory information or evidence about its own finances.

The proposed alternative security relied on incomplete information concerning a guarantor and assets potentially available indirectly through an individual connected with the claimant. The application concerned both whether the statutory gateway for security was met and how the court should exercise its discretion as to the form and amount of security. The court also addressed the recoverable costs of the application.

1. Gateway. The court was satisfied that there was a real and obvious reason to believe that Parsdome would be unable, during the relevant period through to the end of trial, to meet a costs order that might be made against it. The gateway for security for costs was therefore amply met.
2. Form of security. In exercising its discretion, the relevant question was whether the security offered had been established by substantial objective evidence to be substantially equivalent in practical utility to cash paid into court or a first-class London bank guarantee. The incomplete evidence concerning Blue Oil, Worth Capital and Petroleos del Sur did not meet that standard.
3. Prejudice and stifling. The court was entitled to take account of the different potential prejudice. Under-security could leave the defendant materially unable to recover costs after succeeding at trial, whereas the additional amount sought would impose only a marginal funding cost on the claimant. No case was advanced that the order would stifle the claim.
4. Amount and order. The previously agreed approach of securing 70% of incurred costs was not shown to be excessive. Recoveries of at least 70% on a standard basis were not unusual, and allegations of fraud and dishonesty might support indemnity costs if unsuccessful. The application was allowed. Parsdome was ordered to provide an additional £343,000 by payment into court or first-class London bank guarantee within 21 days.
5. Costs of the application. The defendant’s expenditure on counsel and solicitors was not reasonable or proportionate for a straightforward two-hour application. Recoverable costs were summarily assessed at £40,000, payable within 14 days.