Bargain Busting Limited v Shenzhen Ske Technology Co. Ltd & Ors

An application for security for costs should generally be made promptly once the facts justifying it are known. Where a corporate claimant is likely to be unable to pay an adverse costs order, defendants are entitled to pursue security until adequate protection is provided. Where proceedings settle without determination of the merits, costs liability may be assessed by considering the settlement result, the parties’ conduct, reasonable settlement offers and any clear indication of likely success. Costs may be ordered on a broad-brush basis and assessed in detail where summary assessment would be inappropriate.

The claimant brought trade mark infringement proceedings concerning the mark CRYSTAL for e-cigarettes and vapes. The defendants applied for security for costs under Civil Procedure Rules 1998, rule 25.27(b)(ii), on the basis that the claimant was a company and might be unable to pay their costs.

The claimant subsequently obtained after-the-event insurance and undertook to use its best endeavours to amend the policy to address the defendants’ concerns. The applications were therefore not pursued or were stayed, but the parties disputed liability for the costs incurred. The central issues were whether the applications had been premature, whether the defendants were justified in pursuing them, and the appropriate sum to be paid on account pending detailed assessment.

1. The defendants were entitled to their costs. The applications were not premature. The general principle is that an application for security for costs should be made promptly once the facts justifying the order are known. The claimant did not dispute its solvency or the defendants’ entitlement to security absent the insurance policy. The defendants were therefore justified in issuing the applications.
2. The defendants were also justified in pursuing the applications until the claimant had obtained an after-the-event policy in a form which sufficiently protected their interests. The purpose of security for costs is to protect an involuntary defendant against the risk of being unable to recover the costs of the proceedings, as explained in Bestfort v Ras Al Khaimah [2016] EWCA Civ 1099.
3. Although the applications were not determined on their merits, it was appropriate to decide costs liability. The court applied the approach identified in Powles v Reeves [2016] EWCA Civ 1375, considering the result achieved, the parties’ conduct, any reasonable settlement offers and whether it was tolerably clear which party would have succeeded. The court did not adopt the approach in BCT Software v Solutions v C Brewer & Sons [2004] FSR 150 of declining to undertake the costs exercise in a complex case.
4. The defendants’ costs were too high for summary assessment. They were ordered to be assessed in detail under Civil Procedure Rules 1998, rule 44.2(8). The claimant was ordered to pay £176,124.15 on account, apportioned between the defendants.