Ashley Cukier discusses Sarpd Oil International Ltd v Addax Energy SA and another  EWCA Civ 120; a significant decision of the Court of Appeal for companies that are reticent to reveal their financial position.
“(a) it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order; and
(i) One of more of the conditions in paragraph (2) applies; or,(ii) An enactment permits the court to require security for costs.”
“if it appears by credible testimony that there is reason to believe that the company will be unable to pay the defendant’s costs if successful in his defence”.
“it is not sufficient for the court or the defendant to be left in doubt about a claimant’s inability to pay the defendant’s costs if the claimant loses. Nor is it sufficient […] to paraphrase the wording of the rule[…] The court must simply have reason to believe that the claimant will not be able to pay [the costs]”.
(Sarpd v Addax, at paragraph 13.)
“If a company is given every opportunity to show that it can pay a defendant’s costs and deliberately refuses to do so there is, in our view, every reason to believe that, if and when it is required to pay a defendant’s costs, it will be unable to do so. The judge said that the obvious explanation of the refusal was that Sarpd wanted, for the purposes of settlement negotiations, to leave Addax in doubt about whether it would recover its costs, even if it defeated the claim. But the thinking behind that is that it is permissible for Sarpd to give Addax reason to believe it will be unable to recover its costs, but at the same time assert that there is no reason for the court so to believe. That is illogical and unacceptable.”
(Sarpd v Addax, Sales LJ at paragraph 17.)
“arrangements can always be made by the court if a litigant has legitimate business reasons for keeping something confidential. No application was made for the court to sit in private or to avoid referring in public to relevant financial amounts.”
(Sarpd v Addax, at paragraph 18.)
“Any evaluation has to be made on the totality of the evidence before the court; part of that totality is the absence of relevant evidence from the only party who is able to provide it. If therefore there were to be a practice of the Commercial Court (as to which we cannot express a view from our own experience) that security for costs will often be granted against a foreign company who is not obliged to publish accounts, has no discernible assets and declines to reveal anything about its financial position, our view is that the practice is a sound one and, as Lewison LJ noted, is an important point of practice which should either be upheld or rejected at appellate level. We would uphold it.”
(Sarpd v Addax, Sales LJ at paragraph 19.)
Conclusions to be Drawn