England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		17 May 2004

Mr Justice Gross :

INTRODUCTION

1. This is an application by the Defendant for security for costs in the amount of £500,000 or such other sum that the Court deems appropriate, brought pursuant to CPR 25.13(1)(a) and (2)(a) and/or (c).
2. CPR 25.13 provides as follows:

"(1) The court may make an order for security for costs … if-

(a) it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order; and

(b) (i) one or more of the conditions in paragraph (2) applies…

(2) The conditions are-

(a) the claimant is-

(i) resident out of the jurisdiction; but

(ii) not resident in a Brussels Contracting State, a Lugano Contracting State or a Regulation State, as defined in section 1(3) of the Civil Jurisdiction and Judgments Act 1982;

….

(c) the claimant is a company or other body (whether incorporated inside or outside Great Britain) and there is reason to believe that it will be unable to pay the defendant's costs if ordered to do so….."

3. The application was opposed by Mr. Swaroop, who appeared for the Claimant, on the following grounds:

i) The Claimant was resident within the jurisdiction;

ii) It had not been shown that the Claimant would be unable to pay the Defendant's costs;

iii) As a matter of discretion, relying, inter alia, on Nasser v United Bank of Kuwait [2001] EWCA Civ 556 [2002] 1 WLR 1868 (CA), no such order should be made;

iv) If any order was to be made it should be in a minimal or reduced amount.

4. For present purposes, the factual background is helpfully summarised in the initial skeleton argument of Mr Wheeler, who appeared for the Defendant:

" 5. The Defendant ('Cairn') is a Scottish company which is in the business of exploring for hydrocarbon reserves around the world. The Claimant ('Texuna') is a Hong Kong registered company which principally trades as 'importers, exporters and marketing agents'. Cairn and Texuna together bid for oil exploration rights in the part of the Caspian Sea within the territory of Turkmenistan. The bid was unsuccessful and has given rise to Texuna's claims against Cairn in these proceedings.

6. …..Texuna originally claimed only US$550,000 by way of repayment of US$1,000,000 which was drawn down by Cairn under a letter of credit issued on behalf of Texuna. However, Texuna's claim has been expanded by amendments and, since the service of Further Information by Texuna on 22 August 2003, Texuna's claim for damages has been substantially higher, with the amount claimed now exceeding US$121 million."

Without more ado, I turn directly to the principal issues.

(I) RESIDENCE

5. Realistically, the question here is simply whether the Claimant is resident in Hong Kong, as submitted by the Defendant, or in England, as contended for by the Claimant. The burden of proof rests on the Defendant to show that the Claimant is resident out of the jurisdiction and not in a relevant Contracting or Regulation State.
6. The meaning of "resident" in this context was dealt with by Lindsay J., in In re Little Olympian Ltd [1995] 1 WLR 560, esp. at pp. 566-569. The inquiry is as to the location of the company's central management and control or, put another way, as to where its real business is carried on. The inquiry is factual; all the circumstances need to be taken into account and given such weight as is appropriate.
7. Various factors here pointed to a Hong Kong residence. First, the Claimant was incorporated there; secondly, its principal office was in Hong Kong; thirdly, its accounts were prepared in Hong Kong dollars and audited in Hong Kong. Conversely, the Claimant placed reliance, in particular, on the residence in this country of Mr. and Mrs. Agarwal, directors said to manage and control the working of the company.
8. On balance thus far, I would already have been inclined to prefer the Defendant's argument that the Claimant was resident in Hong Kong. However, there is, to my mind, a further matter which resolved this issue plainly in favour of the Defendant. The Claimant has paid no corporation tax here; on that footing, the only legitimate working assumption is that the Claimant was not resident here. Had the Claimant been resident here, it would have been liable to corporation tax: see, ss. 6, 8 and 11 of the Income and Corporation Taxes Act 1988 and Halsbury's Laws of England (4^th ed., reissue), vol. 23(1), at paras. 835 and 836.
9. For my part, I can see no good reason why the working assumption on which the Claimant's tax position is based should be displaced for the purposes of this application. In the light of such considerations, Mr. Swaroop ultimately did not press this point. In the event, I am amply satisfied that the Claimant is resident in Hong Kong and therefore out of the jurisdiction and not in a relevant Contracting or Regulation State. It follows that threshold condition CPR 25.13(2)(a) is satisfied.

(II) INABILITY TO PAY

10. I come next to the question raised by CPR 25.13(2)(c), namely whether there is reason to believe that the Claimant "will" be unable to pay the Defendant's costs if ordered to do so. In the light of the decision of Sir Donald Nicholls V-C (as he then was) in Re Unisoft Group Ltd (No.2) [1993] BCLC 532, the test here was common ground: the burden was on the Defendant to show that the Claimant will be unable to pay. For the reasons given by Sir Donald Nicholls V-C, that test is not "watered down" by the presence of the wording "reason to believe". I emphasise that the inquiry is whether the Claimant "will be unable" to pay the Defendant's costs if ordered to do so – not whether it might be unable to pay them.
11. For the Defendant, Mr Wheeler's argument, which sought to rely on an investigation conducted by accountants Robson Rhodes, proceeded as follows:

i) While they could not be ignored, not much weight could be given to the unaudited management accounts of 31^st March, 2004. Accordingly, the audited accounts of 31^st March, 2003 were critical.

ii) Having regard to the balance sheet, by far the most valuable asset was an interest in and joint venture with an associated company ("Crotex"), which in turn owns a Moscow shopping mall or superstore. However, the Claimant's auditors, Peter Y.H. Lam & Co., Certified Public Accountants, Hong Kong ("the auditors") themselves spoke of the "fundamental uncertainty" in respect of the value of that interest by reason of it not having been subject to any or any proper audit. Moreover, there was no explanation for the dramatic upwards revaluation of the Crotex interest in the Claimant's books – a revaluation from some HK$12 million at cost to HK$245 million in the balance sheet.

iii) As to other current assets, prepayments by the Claimants were properly classified as such as assets – but, the moneys having been paid away, would not be realisable to pay a substantial bill for costs.

iv) Having regard to current liabilities, the current bank balances and cash were negative; they revealed a dependence on overdraft or borrowing facilities.

v) What remained were trade and other receivables ("receivables") which, in net terms on the balance sheet, amounted to some HK$30 million; even if reduced further by the amount of the previous year's bad debts, these came to some HK$20 million; but matters did not rest with the balance sheet.

vi) While, given the audited accounts, it had to be assumed that the receivables represented moneys likely to come in, there was no basis for thinking that they would be available to meet a bill for costs. Having regard to the profit and loss statement ("the P&L statement") and the figures for cash flow from operating activities, it was apparent that, but for the interest in Crotex, the Claimant was trading as a loss.

vii) Therefore in summary, the Claimant's ability to pay an order for costs hinged on the receivables but there was no basis for thinking that those would be available to discharge such an order, given that, the Crotex interest apart, the Claimant was trading at a loss. As no reliance could be placed on the management accounts, there was nothing to correct this picture, as presented by the 31^st March, 2003 audited accounts.

12. For the Claimant, Mr. Swaroop responded as follows:

i) There was no basis for any conclusion that the Claimant would be unable to pay the costs of the proceedings if ordered to do so.

ii) Though there was, he said, no need to do so, he was content to exclude from consideration all amounts attributable to Crotex, prepayments and bank balances.

iii) Robson Rhodes - unlike Mr. Wheeler – had not grappled with the receivables; the points made by Mr. Wheeler in that regard were therefore unsupported by accountancy evidence.

iv) In any event, there was no sound basis for Mr. Wheeler's approach; as at the 31^st March, 2003, the receivables constituted an asset properly designated as such in the balance sheet; the figures from the P&L statement and cash flow calculations had already been factored in, serving to reduce the bank balances and cash figure; unless the Defendant was to mount a challenge to the audited accounts (which it had not done), there was no basis for concluding that the receivables did not represent assets which would be available to satisfy an order for the payment of the costs of the proceedings.

v) Further, there was no or no good reason to discount the 2004 management accounts; on that basis the Claimant's profitability had improved; although, as Mr Wheeler had pointed out, the bank balance remained negative, net current assets had (if anything) increased and now showed a surplus of some HK$90 million; in essence, the Claimant was financing itself on the basis of ongoing trading. At all events, nothing in the 2004 management accounts suggested that the conclusions to be drawn from the 2003 audited accounts no longer held good.

vi) In summary, therefore, neither on the basis of the 31^st March, 2003 figures nor on the later figures could the Defendant make good its case under sub-rule (c).

13. Conclusions as to sub-rule (c): I readily confess to having doubts about the Claimant's financial position. Crotex by itself represents so major an area of uncertainty, that I cannot avoid the suspicion that the Claimant's position is not nearly as robust as a first blush view of the financial statements would suggest. But, on the evidence as a whole, I cannot properly go beyond saying that the Claimant might be unable to pay an order made against them for the Defendant's costs; I could not go further and say that the Claimant would be unable to pay, the relevant test in accordance with Unisoft (supra). First, there has been no suggestion that it would be appropriate to disregard or go behind the March 2003 audited accounts. Secondly, it is not apparent to me that Robson Rhodes addressed the question of the receivables, shown in the 2003 audited accounts, properly or at all; in any event, I think that Mr. Swaroop is correct in his approach to those receivables. Accordingly, even taking the receivables on their own – and without having any regard to the prepayments or Crotex (thus an assumption favourable to the Defendant) – there is on the evidence an asset prima facie available to the Claimant to satisfy an order for the payment of the Defendant's costs. Thirdly, while it is right to approach the 2004 management accounts with a degree of scepticism, there has been no suggestion that they have been dishonestly compiled; absent any such suggestion and even heavily discounted, the management accounts do nothing to undermine the picture presented by the 2003 audited accounts or otherwise to assist the Defendant's case; to the contrary, given the apparent increase in net current assets, they lend some further support to Mr Swaroop's contention that on the evidence there would be assets available to satisfy any order for the payment of costs. In the circumstances, notwithstanding the Defendant's readily understandable concerns, I am unable to accept that the Defendant makes good its case under sub-rule (c).

(III) DISCRETION

14. In the light of the conclusions thus far reached, I come to the question of discretion, on the basis that the Defendant has satisfied the threshold test of residence but not the threshold test of inability to pay.
15. As is clear on the authorities, the power to order security for costs is discretionary and not automatic. Moreover, the power is now to be exercised in a manner which is not discriminatory to claimants whose residence is outside a relevant Contracting or Regulation State: see, Nasser (supra), a decision of the Court of Appeal, by which I am bound. I shall return to that decision presently.
16. Leaving what I may term Nasser considerations to one side, I would have no hesitation in ordering security for costs in this case. With respect to the various matters raised by Mr Swaroop, I think they lack substance. The lateness of the present application is readily explicable in the light of the Claimant's dramatic amendment – increasing its claim from some US$550,000 to US$121 million. The fact that the Claimant's claim is or is to be assumed as arguable is, in the circumstances, neither here nor there. Moreover, though it cannot be said that the Claimant "will" be unable to pay the Defendant's costs if ordered to do so (hence my conclusion on sub-rule (c)), there is certainly a risk that the Claimant might not be able to do so. The suggestion that, somehow, Mr. and Mrs. Agarwal would personally be liable for costs, turned out, upon analysis, to be no more than a recognition that there might be arguments under s.51 Supreme Court Act 1981 to make them so liable – arguments which if they ever came to be advanced would doubtless be vigorously resisted; further and despite being given an opportunity to do so, no offer of a personal guarantee in a satisfactory form has been forthcoming.
17. Accordingly, it is necessary to revisit Nasser. Does Nasser preclude an order for security or limit the amount of security which I can order?
18. In Nasser, the leading judgment was given by Mance LJ., with whom Simon Brown LJ. (as he then was) agreed. For present purposes, the key passages in the judgment of Mance LJ were these:

"58. The exercise of the discretion conferred by rule 25.13(1) and (2)(a)(i) and (b)(i) raises … different considerations. That discretion must itself be exercised … in a manner which is not discriminatory. In this context at least, I consider that all personal claimants … before the English courts must be regarded as the relevant class. It would be both discriminatory and unjustifiable if the mere fact of residence outside any Brussels/Lugano member state could justify the exercise of discretion to make orders for security for costs with the purpose or effect of protecting defendants…against risks to which they would equally be subject, and in relation to which they would have no protection, if the claim … were being brought by a resident of a Brussels or Lugano state. Potential difficulties or burdens of enforcement in states not party to the Brussels or Lugano Convention are the rationale for the existence of any discretion. The discretion should be exercised in a manner reflecting its rationale, not so as to put residents outside the Brussels/Lugano sphere at a disadvantage compared with residents within. The distinction in the rules based on considerations of enforcement cannot be used to discriminate against those whose national origin is outside any Brussels or Lugano state on grounds unrelated to enforcement.

61. Returning to rules 25.15.1 and 25.13.1 and (2)(a) and (b), if the discretion to order security is to be exercised it should therefore be on objectively justified grounds relating to obstacles to or the burden of enforcement in the context of the particular foreign claimant or country concerned. The former principle was that, once the power to order security arose because of foreign residence, impecuniosity became one along with other material factors: …Thune…[1990] 1 WLR 562… This principle cannot …survive in an era which no longer permits discrimination in access to justice on grounds of national origin. Impecuniosity of an individual claimant resident within the jurisdiction or in a Brussels or Lugano state is not a basis for seeking security. Insolvent or impecunious companies present a different situation, since the power under CPR r 25.13(2)(c) applies to companies wherever incorporated and resident and is not discriminatory.

62. The justification for the discretion under rules 25.13(2)(a) and (b) and 25.15.1 in relation to individuals and companies ordinarily resident abroad is that in some – it may well be many – cases there are likely to be substantial obstacles to, or a substantial extra burden (eg, of costs or delay) in, enforcing an English judgment, significantly greater than there would be as regards a party resident in England or in a Brussels or Lugano state. In so far as impecuniosity may have a continuing relevance it is not on the ground that the claimant lacks apparent means to satisfy any judgment but on the ground (where this applies) that the effect of the impecuniosity would be either (i) to preclude or hinder or add to the burden of enforcement abroad against such assets as do exist abroad or (ii) as a practical matter, to make it more likely that the claimant would take advantage of any available opportunity to avoid or hinder such enforcement abroad.

63. It also follows…that there can be no inflexible assumption that there will in every case be substantial obstacles to enforcement against a foreign resident claimant in his or her (or in the case of a company its) country of foreign residence or wherever his, her or its assets may be. If the discretion under rule 25.13(2)(a) or (b) … is to be exercised, there must be a proper basis for considering that such obstacles may exist or that enforcement may be encumbered by some extra burden (such as costs or … simply delay).

64. The courts may and should, however, take notice of obvious realities without formal evidence. There are some parts of the world where the natural assumption would be without more that there would not just be substantial obstacles but complete impossibility of enforcement; and there are many cases where the natural assumption would be that enforcement would be cumbersome and involve a substantial extra burden of costs or delay. But in other cases … it may be incumbent on an applicant to show some basis for concluding that enforcement would face any substantial obstacle or extra burden meriting the protection of an order for security for costs…..If, for example, there is likely at the end of the day to be no obstacle to or difficulty about enforcement, but simply an extra burden in the form of costs …or moderate delay, the appropriate course could well be to limit the amount of the security ordered by reference to that potential burden.

67. The risk against which the present defendants are entitled to protection is thus not that the claimant will not have the assets to pay the costs, and not that the law of her state of residence will not recognise and enforce any judgment against her for costs. It is that the steps taken to enforce any such judgment in the United States will involve an extra burden in terms of costs and delay, compared with any equivalent steps that could be taken here or in any other Brussels/Lugano state. Any order for security … should be tailored in amount to reflect the nature and size of the risk against which it is designed to protect."

It will be appreciated that though CPR 25.13 has since been amended, for present purposes at least, its substance remains the same.

19. Mr Swaroop said that either Nasser tells against the making of any order for security, alternatively, that it limits the amount of security to be ordered to a minimal amount. In his submission, the decision in Nasser means that security cannot be ordered beyond such if any extra burden of costs and delay attributable to enforcement of an order for costs in Hong Kong rather than here; the Court is therefore bound to limit any order for security for costs by reference to that additional burden. In the present case, there would not be any real obstacle to enforcement. A judgment or order of this court could be enforced in Hong Kong, by action. Only limited defences would be available. The consequence is or ought to be a nil or minimal order.
20. When the hearing was first before me, it became plain that the Defendant was not in a position to deal with the matter adequately on the footing that Nasser was applicable. In the interests of justice it seemed right to adjourn the hearing, to give Mr Wheeler the opportunity of addressing me further on the ramifications of Nasser and the quantum of security if Nasser served to limit the amount of security to be awarded. In the event, both parties have taken advantage of that opportunity to introduce further evidence and to develop their arguments – though, in essence, Mr. Swaroop's remained as already summarised.
21. At the resumed hearing, Mr Wheeler's submissions as to Nasser may be summarised as follows:

i) Given the extra burden of enforcement abroad, Nasser did not tell against security being ordered as a matter of the court's discretion. In particular, Mr Wheeler emphasised the need to enforce any order by action, the fact that the Claimant's assets might well not be in Hong Kong but elsewhere (for example, Crotex was in Russia); further, the Claimant's impecuniosity was likely to make such enforcement more difficult and result in the Claimant doing its best to resist enforcement of any order. Additionally, all this would of course produce delay.

ii) Nasser was only relevant to the exercise of discretion to order security, not to the quantum of security to be ordered once the decision has been taken to exercise the court's discretion; for this proposition, Mr. Wheeler relied on the observations of Clarke LJ in the unreported case of Hammond Suddard v Agrichem [2001] EWCA Civ 2065, at [26].

iii) Alternatively, the starting point for any order remained the costs of the action (put by the Defendant at some £500,000). While it may be that, if Nasser was applicable, any order must be related to the extra burden of enforcement abroad, Nasser did not require the order to be limited to the extra costs of enforcing abroad. Accordingly, the correct approach to the quantum of security was to award such proportion of the costs of the action as was necessary to protect the Defendant against the difficulties of enforcement elsewhere.

iv) On any view, a substantial award of security was appropriate to provide the necessary protection to the Defendant, given the likely difficulties of enforcement.

22. I should add that, at the resumed hearing, both the Claimant and the Defendant refined their submissions as to the relevance of the location of the assets against which a judgment could be enforced. The Defendant's submission was that the location was relevant; reliance was placed on the unreported judgment of Mr. Gabriel Moss QC, sitting as a Deputy Judge of the High Court, in Aims Asset Management v Kazakhstan Investment Fund, Ch./2002/App/0198, 22^nd May, 2002, esp. at pp. 4-9 of the transcript. The Claimant retorted that the location of the assets was irrelevant and that it would be discriminatory to have regard to them; reliance was placed on the unreported judgment of Jacob J. (as he then was) in Somerset-Leeke v Kay Trustees [2003] EWHC 1243 (Ch), 1^st May, 2003, esp. at [6] – [11].
23. In my judgment, having regard to Nasser, together with the other authorities to which I was referred, the following approach is warranted – given the range of the argument before me, I have set the matter out at somewhat greater length than would otherwise have been the case:

i) In the light of the Human Rights jurisprudence and, in particular, Art. 14 of the European Convention on Human Rights, discrimination in access to justice is not permitted on grounds of national origin.

ii) As is common ground, the Court does not have power, without more, to order security for costs against a claimant (individual or corporate), resident within the jurisdiction or relevant Contracting or Regulation States ("the zone").

iii) Accordingly, where the only threshold condition satisfied for ordering security for costs is CPR 25.13(2)(a), i.e., residence outside the zone, the Court's discretion cannot be exercised so as to discriminate between claimants (individual or corporate), who reside within or outside the zone. In consequence, the mere fact of such residence outside the zone cannot by itself justify an order for security for costs; that would amount (directly or indirectly) to discrimination on grounds of national origin unrelated to enforcement.

iv) In passing, it may be noted that no such concerns arise in connection with threshold condition CPR 25.13(2)(c), i.e., inability to pay, as this provision applies equally to companies resident within and outside the zone.

v) The surviving rationale for exercising the discretion under CPR 25.13(2)(a), to make an order for security for costs against a claimant resident outside the zone, is that enforcement of a judgment or order outside the zone may involve extra obstacles or extra burdens in terms of costs and delay, compared with enforcement within the zone. The word "may" is to be noted; there can be no "inflexible assumption" that enforcement outside the zone will carry with it any such extra obstacles or burdens: Nasser, at [63].

vi) As a matter of the "obvious realities" (Nasser, at [64]), in some jurisdictions outside the zone, it may be effectively impossible to enforce an order for the payment of costs. In such cases, there would be objective justification for the court exercising its discretion to make an order for payment of the full amount of costs likely to be ordered against a claimant if unsuccessful in the litigation.

vii) In other jurisdictions, the additional obstacles and burdens standing in the way of enforcement may be less substantial or even minimal. For example, in certain jurisdictions, of which it is common ground that Hong Kong is one, a judgment of an English Court for the payment of costs is enforceable by action and can only be resisted on the familiar and narrow grounds available at common law. In respect of such jurisdictions, the risk against which the applicant for security is to be protected is the extra burden of enforcement (such as it may be) compared to that which would have been encountered had enforcement taken place within the zone.

viii) The relevant comparison is between enforcement within the zone and enforcement in the country where enforcement will or may realistically be pursued, whether that is the country of residence of the claimant or the country where his, her or its assets may be: Nasser, at [63]. Of course, in an appropriate case, enforcement may take place both in the country of residence and in the country (or countries) where a claimant's assets are located. Given the focus on enforcement, the location of the claimant's assets is relevant and it is not discriminatory to take it into account; alternatively its relevance is objectively justified on grounds related to enforcement. I cannot accept Mr. Swaroop's submission that Nasser requires (as it were) a line to be drawn at the country of residence. The demands of practical justice point the other way; for example, it would be absurd to refuse an order for security for costs against a company claimant, resident outside the zone, on the ground that the obstacles to enforcement are minimal in its country of residence when its assets are situated in another country where it is well-known that enforcement is impossible. In this regard, I respectfully agree with Mr. Gabriel Moss QC when he said, in Aims Asset Management (supra), at pp. 6-7:

" The relevant risk relates to the question of enforcing judgment.... that risk in relation to enforcement must, in order to give the question of risk a practical content, relate to enforcement where the assets of the [..claimant..] are or are likely to be..."

I do not, with great respect, read the judgment of Jacob J., in Somerset-Leeke (supra) as containing any disagreement with this proposition as such.

ix) As to the applicant for security demonstrating the risk (Nasser, at [67]) of additional obstacles to or burdens of enforcement in a country outside the zone, evidential requirements will necessarily depend on the facts of the individual case: Nasser, at [64]. Satellite litigation is undesirable so that in some cases the Court will no doubt be content to take notice of obvious realities or to draw commonsense inferences, without formal evidence. But, ordinarily, even if the Court is minded to take a broad brush, commonsense approach, it will be necessary for the applicant at least to show some evidential basis for the conclusion that there would be a realistic risk of additional obstacles or burdens in the way of enforcement in a country outside the zone; it will be recollected that Nasser, at [63], precludes the Court from making any inflexible, generalised assumption.

x) Inescapably, Nasser is concerned both with the exercise of the Court's discretion and the quantum of security to be ordered. As to Mr. Wheeler's argument to the contrary, both the logic and language of Nasser are against him: see, for example, at [64]. For completeness, I am unable to accept that the observations of Clarke LJ in Hammond Suddard (supra), relied on by Mr. Wheeler, suggest otherwise. Clarke LJ said this:

" 26. It is not in dispute that the court has jurisdiction to make such an order under rr 25.13(2)(b) and 25.15(1). It is also conceded that it is appropriate for the court to make an order on the facts of this case. It follows that it is not necessary to consider the principles applicable to security for costs which are discussed in detail in ....Nasser. In the instant case the only issues between the parties under this head are in what amount security should be ordered and when. "

With respect, it seems plain that the Court of Appeal in Hammond Suddard was proceeding in the light of a concession there made (understandably, in the light of the application for a stay) and that Clarke LJ, had he intended a statement of principle as to the limits of Nasser, would not have confined himself to the observations in question.

xi) Nasser, where applicable, clearly points to relating the quantum of security to the extra burden of enforcement outside the zone, rather than to the likely costs of the case – though in jurisdictions where enforcement is effectively impossible, the two may be indistinguishable. It is neither here nor there that Nasser does not in all cases serve to limit the security to the amount of the extra burden; in certain situations, it may be wholly impractical to seek to do so. For the avoidance of doubt, save exceptionally, the Court is still likely to wish to have evidence of the likely costs of the case, (1) for reasons of proportionality, (2) as a cross-check and (3) because in some cases, as already discussed, it may remain appropriate to order security by reference to that sum.

24. On the facts of this case, I am satisfied that, in the exercise of my discretion, it is appropriate to make an order for security for costs. As already foreshadowed, Nasser apart, that is plainly so. Having now taken Nasser into account, I remain of the view that security is to be ordered – but by reference to the realistic risk of an additional burden of enforcement outside the zone rather than the likely costs of the proceedings. My reasons follow.
25. First, as is common ground, enforcement in Hong Kong is by way of action and can only be resisted on familiar and limited grounds. Hong Kong is not therefore one of those jurisdictions where enforcement is effectively impossible. That said, I do think that, realistically, there is the likelihood of a relatively substantial extra burden arising from enforcement in Hong Kong rather than within the zone. I decline to make the assumption for which Mr. Swaroop contended, namely, that the matter should be assessed on the basis that there would be an uncontested summary judgment for costs. No doubt if there are no good defences, it would make sense for the Claimant not to resist enforcement of a judgment for costs. Faced, however, with a judgment for costs in the region of (say) £400,000, short term considerations of putting off the evil day may govern the Claimant's thinking. Accordingly, the risk against which the Defendant should be protected is that of the extra burden arising from the Claimant engaging in determined resistance to enforcement. I should add that the Defendant, in support of its submissions on this part of the case, invited me to have regard to conduct of the Claimant in some other proceedings some time ago. I am not sure that that is in any way persuasive; but, over and above the inherent risk of resistance to enforcement, I do have regard to the fact that in these proceedings the Claimant saw fit to contend (see above) that it was resident within this jurisdiction even though it had not paid corporation tax here – and it maintained this submission until beating a cautious retreat in argument.
26. Secondly, in my view, the "impecuniosity" of the Claimant remains material. I am unable to accept Mr. Swaroop's submission that no regard is to be had to the Claimant's financial position once the Defendant has failed to make good the criterion of inability to pay. For the reasons already given, I have concluded that there is a risk that the Claimant might not be able to pay the costs of the Defendant if ordered to do so. In that sense, "impecuniosity" remains relevant. As contemplated by Nasser (at [62]), impecuniosity may both add to the burdens of enforcement and encourage the Claimant to seek to resist enforcement. This factor too supports my conclusion as to the extra burden of enforcement in Hong Kong.
27. Thirdly, it is probable that enforcement efforts will be centred on Hong Kong. As already concluded, the Claimant's receivables constitute the asset prima facie available to satisfy a judgment that the Claimant should pay the Defendant's costs of the action. At the resumed hearing there was some debate as to what this would entail in terms of enforcement. The Defendant submitted that garnishee proceedings internationally against trade debtors were to be contemplated. The Claimant relied on (new) evidence that, given its trade finance arrangements, the proceeds of its commodity transactions would be paid into three identified bank accounts, in Hong Kong, Switzerland and London as and when received. I cannot help thinking that if the English and Swiss accounts had been sufficient to fund the payment of any order for costs by themselves, that would have been stressed from the outset; I do not therefore think that the evidence as to the existence of those accounts tells against the making of any order for security. Moreover, accounts and their locations can be changed. But, having regard to the evidence of receivables as a whole, including the presence of an account in Hong Kong, I think it more likely that enforcement would focus on attaching the balances in those accounts, concentrating in particular on the Claimant's Hong Kong base – rather than on an international trawl for trade creditors.
28. Fourthly, I cannot however exclude the risk that the Defendant might have to look further afield or take more expensive and time consuming steps to enforce any order for the payment of its costs. I assess this risk as low but realistic and not so low that it can be discounted. Should the risk materialise, the obstacles to and the burdens of enforcement would rise dramatically. This risk would materialise should, for example, a serious downturn in trade result in the banks' prior claims (of which there is evidence, having regard to the negative bank balances) rendering enforcement against the receivables impossible or impractical. If so, then the Defendant would likewise face real difficulties in seeking to enforce against the Claimant's rental stream from its Crotex interest, said to be paid into its Hong Kong bank account. In this situation, the Defendant might be driven to placing the Claimant into liquidation with a view, thereafter, to realising the value of the Claimant's interest in Crotex. On the essentially undisputed evidence before me, if the need arose for the taking of any such enforcement measures centred on Russia, they would be difficult, time consuming and expensive. Even the initiation of any such steps would add a significant burden of cost and delay. In my judgment, the likelihood of this risk materialising is not such as to warrant my ordering security in the amount of the likely costs of the action; but the consequences of this risk, should it materialise, are sufficiently grave as to warrant a significant sum featuring in my order so as to guard against it.

(IV) QUANTUM

29. Having set out the relevant principles and my proposed approach at some length, I can take the question of quantum shortly.
30. The Defendant's estimated costs of the action were said to be some £500,000. On the view which I take of the matter, it is unnecessary to consider this claim in detail. Suffice to say that, had it been material, I would have been inclined to favour a lower figure in the region of £400,000.
31. As to the extra burden of enforcement in Hong Kong, the evidence before me was that the costs of proceeding in Hong Kong by way of an action to enforce a judgment would be in the region of £64,000. This sum should be reduced to allow for the costs which would in any event have been incurred had enforcement taken place within the zone. In the result, I assess the extra costs of proceeding in Hong Kong as £50,000. Having allowed that sum, I do not think it right to add any additional sum in respect of delay.
32. As to the risk of enforcement becoming more complex or the Defendant having to proceed further afield, this is necessarily difficult to quantify. Provided only that I am correct in thinking that this risk is not to be dismissed, I am satisfied – as a matter of obvious reality or commonsense inference - that I will not be doing the Claimant any injustice by allowing an additional £50,000 in respect thereof. I do not award any larger sum given, as already explained, the low order of this risk.

CONCLUSION

33. In the result, in the exercise of my discretion, I conclude that an order should be made against the Claimant for security for the Defendant's costs of the action in the amount of £100,000.
34. For completeness, I mention that there has been no suggestion of an order for security serving to stifle the proceedings.
35. I will be grateful for the assistance of counsel as to the mode of security, the time within which it should be paid or provided, the consequences of a failure to do so and, generally, in the drawing up of the order and with regard to all questions of costs.