Shezhen Ske Technology Co. Ltd v Vapepen London Ltd & Ors

An overseas claimant’s residence outside the jurisdiction satisfies the residence gateway for security for costs, but does not itself justify an order. The court must assess whether enforcement abroad presents a real risk of non-enforcement or material obstacles; a mere possibility is insufficient. A separate inability-to-pay gateway is met where there is reason to believe the claimant will be unable to pay when costs fall due. Balance-of-probabilities proof is unnecessary, but indirect evidence must show more than a possibility. Parent or subsidiary resources do not ordinarily establish ability to pay without a binding obligation or direct financial evidence. If security is justified, quantum is set robustly and broadly, with approved budgets a strong guide. Delay may be reflected by securing future costs in stages.

Shenzhen SKE Technology Co. Ltd, a Chinese e-cigarette manufacturer, brought claims against Vapepen London Ltd and three other defendants for alleged registered-design infringement and passing off. The defendants applied for £880,000 security for costs under the Civil Procedure Rules 1998, relying on SKE’s overseas residence and alleged inability to meet an adverse costs order. SKE accepted the residence gateway but disputed enforcement risks, financial insufficiency, delay and quantum. The court had to decide whether security was just under either gateway and, if so, the appropriate amount and form.

Application granted in part. Security for costs was ordered under the inability-to-pay gateway, but not on the basis of overseas residence alone. The staged security totalled £569,039.

1. General approach. The court applied the underlying principle described in Axiom Stone (London) Ltd v Heathfield International LLC [2021] EWCA Civ 1242: successful litigants should ordinarily recover their litigation costs, while recognising the difference between voluntary claimants and defendants who are compelled to litigate.
2. Residence abroad. The residence gateway was established. Following Bestfort Developments v Ras Al Khaimah Investment Authority [2016] EWCA Civ 1099, security required a real risk of non-enforcement or material enforcement obstacles, rather than a mere possibility. The expert evidence did not establish significant obstacles to enforcing a money costs order in China. The reciprocity approach indicated by Guiding Case No. 235 supported enforcement, and any additional costs or delay were not sufficiently substantial. Ground (i) therefore did not justify security.
3. Ability to pay. The relevant threshold was whether there was reason to believe that SKE would be unable to pay when the costs became due. Proof on the balance of probabilities was unnecessary, but more than a mere possibility was required. SKE’s failure to disclose its own accounts, debts and security over assets was significant. Parent and subsidiary resources did not establish ability to pay because there was no binding obligation to meet an adverse costs order and realising subsidiary assets would not be straightforward. The court also applied by analogy the disclosure principle in Keary Developments Ltd v Tarmac Construction Ltd [1995] 3 All ER 534, requiring candour about relevant finances. Ground (ii) was satisfied.
4. Discretion and quantum. The court declined to assess the merits of a claim listed for a 14-day trial where no summary determination was sought. Delay was not sufficiently significant to defeat the application, but justified adjusting security towards future costs. Applying the robust, broad-brush approach in Pisante v Logothetis [2020] EWHC 3332 (Comm), the court ordered £77,000 by 4 pm on 11 September 2026, £42,039 three weeks before the PTR, and £450,000 three weeks before trial. An automatic stay would apply on default, with permission for the defendants to apply to strike out the claim.

not stated in the judgment.