Taha Pharmaceuticals v Capsugel Belgium NV

LORD JUSTICE COULSON Introduction

1. By an order dated 4 June 2025, the applicant’s claim in these proceedings was struck out by Mr Alan Bates, sitting as a Deputy Judge of the High Court (“the judge”). The applicant applied to set aside that order, alternatively sought relief from sanctions. The judge called that the Reinstatement Application. He refused the Reinstatement Application on 1 August 2025, with written reasons. The applicant then applied to vary/revoke the order of 1 August 2025. The judge called that the Revocation Application. He refused the Revocation Application by order dated 13 August 2025, again with written reasons.

2. The applicant now seeks permission to appeal against the orders of 1 August and 13 August 2025. When I first considered that application on the papers, I decided to call it in for an oral hearing. That was partly because there were some matters which were not clear from the papers; partly because I was conscious there had not been a hearing before the judge to address either the application to strike out or the application for relief from sanctions; and partly because the applicant was acting in person. I had hoped that, by calling the application in, the applicant would instruct counsel. That is what has happened, and I should express my gratitude to Mr Lambert and Mr Courcha for their assistance. I also note that many more documents, including some that tell important parts of the story in this case, have been provided to the court for the first time for this hearing. The Factual Background

3. The applicant is the claimant in these proceedings. The re-amended particulars of claim allege that, in March 2017, the applicant bought from the defendant a LEMS70 capsule sealing machine for use in its business. The claim is primarily put as a claim for breach of contract, it being alleged by the applicant that the LEMS70 was comprised of components that, at the time of supply, were used or in poor condition. There is an alternative claim that the defendant represented to the applicant that the LEMS70 was a new machine when it was not. It is said that those representations were made dishonestly.

4. The claim form was issued on 20 February 2023, a month before the expiry of the relevant limitation period. For a claim of this type, where (absent the unparticularised claim for consequential losses) the amount claimed is less than £1 million, the TCC would ordinarily reckon to case manage the litigation and ensure a trial had been concluded within about 15-18 months of the issue of the claim form. Ordinarily, therefore, this case should have been concluded by the end of 2024.

5. That it was not, and that instead the case has not gone beyond the pleading stage, is entirely the fault of the applicant. It is unnecessary to set out the procedural history in detail here. The history up to September 2024, and the repeated delays on the part of the applicant, is set out at paragraphs 15-24 of the defendant’s skeleton argument for the hearing before the judge on 21 January 2025.

6. There was also an ongoing issue as to security for costs. That history is set out at paragraphs 53-74 of the same skeleton argument. Although the applicant had been ordered by Eyre J to provide security in January 2024, nothing was initially done by the applicant to comply with that order. As a consequence, the proceedings were the subject of a lengthy stay. Eventually, the applicant provided a total sum of £200,000 by way of security, but repeatedly accepted that that was not enough and promised that more would be provided. By January 2025, that had not yet happened. The Unless Order of January 2025

7. A variety of issues arising out of these delays came before the judge at a hearing of 21 January 2025. Amongst them was the issue of security for costs. In the light of the previous delays on the part of the applicant, and the earlier order of Eyre J, the judge made an Unless Order in the following terms: “ Security for Costs

1. The Claimant shall provide further security for the Defendant’s costs by the Claimant paying monies into the Court Funds Office, or by providing a solicitor's undertaking or a first-class London bank guarantee on terms acceptable to the Defendant, or in any other form acceptable to the Defendant, in the total sum of £800,000 by 4pm on 21 May 2025.

2. In default of compliance with paragraph 1 above: (i) the Claimant must by 4pm on 21 May 2025 (a) provide £50,000 by way of further interim security for costs by the Claimant paying monies into the Court Funds Office, or by providing a solicitor's undertaking or a first-class London bank guarantee on terms acceptable to the Defendant, or in any other form acceptable to the Defendant, and (b) make an application on notice, supported by evidence, for an extension of time for compliance with paragraph 1 above. (ii) if the Claimant fails to comply with paragraph 2(i) above, the Claim shall be struck out. (iii) If the Claimant complies with paragraph 2(i) and the Claimant’s application for an extension of time is not consented to, the Claimant’s application is to be listed at the earliest availability before Deputy High Court Judge Alan Bates or, if he is not available, another TCC High Court Judge.

3. The Claim be stayed until the provision of the security required under paragraph 1 above or, if the Claimant makes an application under paragraph 2(i) above, the determination of that application.

4. If paragraph 1 is complied with without any application having been made under paragraph 2(i) above, the Defendant’s solicitors shall inform the Court that paragraph 1 has been complied with and shall specify the date of compliance and therefore the date upon which the stay has been lifted.”

8. The judge set out in writing his detailed reasons for the Unless Order. He first dealt extensively with the factual background, and noted that Tunisia operated currency controls, which meant that consent from the Ministry of Finance was needed for large transfers of funds out of the country. He then sought to balance the competing needs and interests of the two parties. He said at [18] that the court was keen to do substantive justice between the parties who had chosen England as the forum for their disputes. He said the court did not want to “stifle a claim due to genuine difficulties in providing security which are outside the claimant’s control”. He said that, if the evidence had showed that the applicant was doing the very best it could to progress matters with the Ministry of Finance then he might have been inclined to grant a period of time simply for enquiries to be made (and therefore not to make an unless order). But he went on at [19] to find that that was simply not the case here. He said that the correspondence showed that the applicant had been slow to engage with the question of security and slow to advance positive proposals.

9. In addition, the judge said that Dr Zghidi’s witness statement, served on behalf of the applicant and going to these matters, was a very unsatisfactory document. The judge did not accept the explanations given in that statement. One point should be highlighted now. Dr Zghidi stated that, because this was a “criminal case”, more stringent investigations were required by the Central Bank of Tunisia. As the judge pointed out, he omitted to mention that it had been the applicant itself who had sought to initiate criminal proceedings against the defendant in Tunisia. On one view, therefore, the applicant’s decision to initiate such proceedings was made in the knowledge that it would make the provision of security for costs harder rather than easier.

10. The making of the Unless Order, and the reasons for it, are of the utmost importance to this application for permission to appeal. That is partly because, at least as a general rule, the court will not reconsider or re-open any question about the proportionality of the Unless Order itself when considering an application for relief from sanctions: see The Commissioner of Police of the Metropolis v Abdulle [2015] EWCA 1260 at [15]. I should note that Michael Wilson & Partners v Sinclair [2015] EWCA Civ 774 is not authority to the contrary. Wisely, Mr Lambert did not seek to challenge the proportionality of the Unless Order in the present case. Events after January 2025

11. The applicant’s conduct after the making of the Unless Order was, in the circumstances, very dilatory. Over the next four months, there was minimal contact with the defendant and no contact with the court. The correspondence with the Ministry/Central Bank was intermittent. In one letter to the Ministry, dated 10 February 2025, (which post-dated an earlier letter from Kennedys, the applicant’s then-solicitors) the applicant said that the £800,000 “shall be paid to the opposing party which defrauded the company TAHA PHARMA”. It went on to say that the legal procedure in England “states that no anticipation or pre-judgment is allowed, even when it is already known that the opposing party committed fraud by selling a used machine containing worn out parts.” The judge was understandably troubled about this letter, and I return to it below.

12. On 21 May 2025, the day that the Unless Order expired and the claim stood to be struck out, the applicant’s then solicitors, Kennedys, wrote to the court in the following terms: “We refer to the Court’s order of 21 January 2025 (the “Order”). In advance of deadlines in clauses 1 and 2 of the Order, our client has requested that we send the attached papers to Court with a request that they be put before the Judge for his consideration. It is out client’s position that despite numerous communications and meetings, the Ministry of Finance has not provided its permission to transfer any money out of the jurisdiction in respect of security for costs. The Judge is asked to consider the above ahead of any further Orders.” The ‘attached papers’ were simply the few exchanges between the applicant and the Central Bank/Ministry of Finance.

13. Following expiry of the deadline, the defendant sought an order striking out the claim. The judge made that order on 4 June 2025. Amongst his reasons, at paragraph 1, the judge said: “I agree with the observations made in the letter from Osborne Clarke LLP dated 28 May 2025 regarding the documents provided by the Claimant by way of evidence of its attempts to obtain authorisation from the Tunisian Ministry of Finance so as to enable the Claimant transfer funds in order to pay the further tranche of interim security for costs pursuant to the Order made on 21 January 2025. Those documents fall very far short of showing diligent efforts by the Claimant to obtain such authorisation. Indeed, it appears that the Claimant reduced the prospect of obtaining such authorisation, by misleading the Ministry of Finance that the interim security sum was to be paid directly to the Defendant (which the Claimant also unhelpfully described as being a company that had perpetrated a fraud), rather than making clear that the funds were, in fact, ordered to be paid into the Court Funds Office.”

14. On 24 June, the applicant sought to set aside the order of 4 June pursuant to CPR 3.5 and CPR 3.9 (relief from sanctions). It was said that the applicant had acted diligently and in good faith and had been prevented from complying with the Unless Order “by external sovereign regulatory constraints beyond its control.” It appears that, amongst the material relied on in support of that application, was a letter from the Central Bank of Tunisia dated 22 May 2025 which set out a number of reasons why the transfer of the money was not approved. The particular points that it made was that the purchase price of the machine was €570,000; that the applicant had already paid £350,000 in legal fees; that the amount of the guarantee requested (the £800,000) exceeded the value of the machine in question; and that there was no information as to the date or conditions for a possible refund of the amount to be paid.

15. The judge decided the Reinstatement Application on the papers. His Order was dated 1 August 2025, and he set out the reasons why he was not granting relief from sanctions. Speaking personally, I consider that it would have been better to have had an oral hearing. If the application for relief from sanctions failed, it meant that the claim was irrevocably struck out, and given that by this stage the applicant was acting in person, it would have been appropriate to give the applicant a final chance to be heard.

16. That said, the judge set out detailed reasons for refusing the Reinstatement Application. Paragraph 1 set out, at some length, the factual background to the application. Paragraph 2 noted that, given that background, the Reinstatement Application could only have merit if it provided i) a reasonable explanation as to why the applicant did not apply, in advance of the deadline of 21 May 2025, for an extension of time or a relevant variation; and ii) documentary evidence showing the applicant’s diligent efforts to persuade the Ministry of Finance to provide the requisite authorisation. The judge found on the facts that the applicant had failed to do either of those things.

17. The judge found in paragraph 4 that nothing in the evidence came close to providing a satisfactory explanation of why the applicant could not have made an application to the court prior to 21 May 2025 for an extension of time and/or for a variation of the relevant provisions. At paragraph 5, he explained why the correspondence fell far short of providing evidence that the applicant was making diligent bona fide attempts to persuade the Ministry to grant the necessary authorisation. He sets out details of his criticism of the applicant’s conduct at paragraphs 6, 7 and 8.

18. At paragraph 9, the judge then dealt with the three-stage test from Denton v White . As to stage one, he found that there was a serious and significant breach. As to stage two, he found that the default occurred because of a lack of diligence on the part of the applicant for which there was no reasonable justification. As to stage three, namely the evaluation of all the circumstance of the case, he said at paragraph 9(c) that his assessment of the relevant circumstances “is provided above” (which was a reference, amongst other things, to the detailed background that he had set out in paragraph 1 of his Reasons). He concluded that, in those circumstances, there was no good reason for granting relief from sanctions. The applicant had been on notice of the importance that the court attached to the Unless Order and had simply failed to show the necessary diligence in seeking to comply with it.

19. The applicant sought to vary or revoke the Order of 1 August 2025. The judge rejected the Revocation Application on 13 August 2025. Although the present application for permission to appeal covers that Order too, it did not seem to me to add anything of substance: either the judge was right to refuse the relief from sanctions element of the Reinstatement Application by his Order of 1 August 2025, in which case permission to appeal will be refused, or he was arguably wrong to make that Order, in which case permission to appeal will be granted. The subsequent arguments about the second Order were therefore immaterial either way. Mr Lambert properly accepted that at paragraph 6 of his skeleton argument. The Law

20. The law can be simply stated. CPR r.3.9 provides as follows: “(1) On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need – (a) for litigation to be conducted efficiently and at proportionate cost; and (b) to enforce compliance with rules, practice directions and orders. (2) An application for relief must be supported by evidence. ”

21. The correct approach to an application for relief from sanctions has been definitively set out by this court in Denton & Others v TH White Limited [2014] 1 W.L.R 3926. It involves a three-stage test. First, the judge must identify and assess the seriousness and significance of the failure to comply with (in this case) the court Order; secondly the judge must consider why the default occurred; and thirdly, the judge must evaluate all the circumstances of the case so as to enable the court to deal justly with the application, including the factors in r.3.9 (a) and (b).

22. The other cases cited on behalf of the applicant are primarily first instance cases in which the principles in Denton have been applied to a range of facts. It is not necessary to refer to any of them except Michael v Lillitos [2019] Costs LR 1615 a decision of Steyn J DBE. Mr Lambert relied heavily on this decision in his written submissions. However, Michael can be easily distinguished on the facts. In that case, the judge considered that the breach was at the bottom of the range of seriousness, in particular because the breach did not prevent the litigation being conducted efficiently and at proportionate cost. She also found that, although the breach was of an Unless Order, there was no underlying breach of a rule or another court order. There was also a particular point in the appellant’s favour on the facts, because he had made a payment by cheque of three months’ rent, which had already been held for a month by the respondent’s solicitors without any indication that they intended to return it.

23. By contrast, in the present case, the seriousness and significance of the breach was of the highest degree. The failure to provide proper security has prevented this litigation being conducted efficiently and at proportionate cost for over two years: indeed, in three years, the entire litigation has got no further than the pleading stage because of the applicant’s default. Moreover, there had been prior breaches of at least one court order, namely the applicant’s failure to comply with the original order for security for costs made over two years ago by Eyre J. In addition, £139,000 is owed by the applicant to the defendant by way of unpaid costs orders. In this way, the position here is entirely different to that in Michael .

24. It is of course right that not every breach of an unless order will lead to the striking out of the claim in a case of the claimant’s non-compliance. But since the proportionality of an unless order cannot usually be re-opened, and where (as here) the breach of that order is very serious and significant, an application for relief from sanctions based on stages 2 and 3 of Denton v White can be something of an uphill task. The Issues

25. It is agreed that the application before the judge raised the three-stage test in Denton v White . It is conceded by the applicant that the default was serious and significant, so that the first stage of the Denton v White test is made out. I have already said that, in my view, the breach was serious and significant to a high degree. There are, however, issues in relation to stages two and three. Although the primary argument raised by Mr Lambert went to stage three, which I deal with below, it is logical to take stage two next. The Issues in respect of Stage Two of Denton

26. Stage two of Denton is concerned with why the default occurred. It is the applicant’s case that the default was not its responsibility, and that it has been the actions of the Central Bank/Ministry of Finance that has made it impossible for the applicant to comply with the Unless Order. It is said that that was a powerful reason for granting relief from sanctions.

27. As I have noted, the judge found that the default occurred due to the lack of diligence on the part of the applicant in obtaining security. In addition, the judge referred in his Reasons, which formed part of the order of 1 August, to the applicant’s “wholly unnecessary conduct” in describing the defendant to the Ministry as being a company that had perpetrated fraud. The judge found that that “was not the kind of conduct I’d expect to see from a company that was genuinely seeking to persuade the Ministry to authorise transfer of funds for the purposes of the proceedings.”

28. In my view, the argument that the judge’s approach to stage two was wrong, and that the applicant is in some way the diligent victim of circumstances beyond its control, has no real prospect of success. There are a number of strands to that conclusion.

29. First, it seems to me unarguable that the applicant failed to deal with the question of security diligently or properly after the making of the Unless Order. That order had only been made at all because of the applicant’s casual attitude to the whole question of security, and its prior failure to comply with the order of Eyre J of January 2024. That had in turn caused unacceptable delays to the litigation. But matters did not improve after the making of the Unless Order, as evidenced in particular by the failure to keep the defendant and the court informed as to what was going on, and the desultory correspondence with the Ministry.

30. Secondly, I am of the view that the judge was quite entitled to conclude that, on the limited correspondence that he did have, the applicant’s conduct was not that of a company genuinely seeking the transfer of this large sum of money. This was a defects case, plain and simple, and that is how it should have been explained to the Ministry. Portraying the claim for what it was, namely an ordinary commercial dispute, would have given the application to the Ministry the best chance of success. To emphasise instead the additional claim put by way of dishonest misrepresentation would inevitably have set alarm bells ringing at the Bank/Ministry; it was also wholly unnecessary, because the misrepresentation claim added nothing to the claim for breach of contract. No different or separate damages were said to flow from the misrepresentation case. For these reasons, this claim should never have been portrayed as a fraud case.

31. The judge had also found, in his reasons for striking out the claim on 4 June, that it was misleading to suggest to the Central Bank, as the applicant did, that the £800,000 would be paid directly to the defendant. I agree with that. It was wrong as a matter of fact, and it gave the worst possible impression of the position that the applicant was in. No explanation for this fundamental error has ever been provided.

32. Mr Lambert suggested that the judge attached undue weight to this aspect of the correspondence. For the reasons that I have stated, not only do I reject that criticism, but I also consider that the applicant’s misrepresentations to the Ministry significantly undermine the applicant’s case that it was the innocent victim of circumstances beyond its control. In my judgment, the only possible explanation for these misrepresentations to the Central Bank/Ministry is that the applicant wanted the authorisation to be refused, in order that it could continue to litigate without having to find the necessary security for costs. That explanation is also consistent with Dr Zghidi’s acknowledgement that it knew that its decision to initiate criminal proceedings in Tunisia would make the necessary authorisation more difficult to obtain.

33. Thirdly, the points taken by the Central Bank in refusing authorisation seem to me to have been entirely valid. This is agreed to be a machine which, as they put it, was “old, used and non-functional”. They pointed out that the applicant had already paid out 70% of the value of the machine by way of legal fees, so that the payment of another £800,000 by way of security for costs simply made no economic sense. That seems to me to be a proportionate and sensible conclusion. The Central Bank/Ministry were not therefore being unforeseeably obstructive; in the circumstances, they were being foreseeably realistic.

34. Putting that point another way, if, despite these sound reasons for refusing to sanction the transfer, the applicant still wanted to purse its claim in the TCC, it had to find another way of providing security which did not require the Ministry’s authorisation. If such had been the applicant’s genuine intention, it could have sought to provide security in a myriad of other forms: bank guarantees, or parent company guarantees, or a solicitor’s undertaking, or the like. The options were all identified in the Unless Order. But there was no evidence that the applicant had ever tried to obtain security in any other way, even though such forms of security are commonplace, and even though the applicant is said to be a large business operating far beyond the borders of Tunisia. That only reinforces the impression that the applicant was looking to the Ministry to provide it with a ‘get out of jail free card’ by refusing authorisation for the transfer, and was not interested in finding other ways of complying with the Unless Order.

35. Fourthly, I reject absolutely the suggestion made by Mr Lambert that the applicant was unable to explore those other options as a result of the terms of the Unless Order. His argument was that the term at paragraph 2(1) permitting the applicant to seek an extension of time (and/or a variation) of the Unless Order was not open to the applicant because of the requirement that it first provide £50,000 by way of further interim security for costs. Mr Lambert’s submission was that, because it could not obtain authorisation for the transfer of this money, the judge’s carefully-drafted safety valve was of no assistance to the applicant.

36. But that argument depends entirely on there being evidence that the applicant was not able to transfer the £50,000 (or provide a solicitor’s undertaking or a first class London bank guarantee on terms acceptable to the defendant). There is no such evidence. The correspondence with the Ministry of Finance and the Bank solely related to the £800,000: as I have indicated, it is that potentially disproportionate amount that led to the Bank’s refusal. There is no record of any attempt to seek authorisation from the Ministry for the payment of just £50,000, so that the applicant could explore the other methods suggested by the Unless Order. The inevitable conclusion is that, if the applicant had wanted to, it could have sought to comply with the term at paragraph 2(i) so as to seek more time or possibly vary the Unless Order. It chose not to do so.

37. For all these reasons, therefore, I conclude that the judge was right to say that the failure to comply with the Unless Order was a lack of diligence on the part of the applicant. He was also right to conclude that the applicant, for its own reasons, was not genuinely seeking to persuade the Ministry to transfer the funds. In consequence, this was not a case of ‘impossibility’ at all.

38. Accordingly, that leaves stage three of Denton and the consideration of all the circumstances of the case. The Issues in respect of Stage Three of Denton

39. As I have indicated, stage three was the principal battleground identified by Mr Lambert. He suggested that the judge failed to stand back and carry out the necessary balancing exercise required by stage three by looking at all the circumstances of the case. In particular, he submitted that the judge had closed his mind at the end of stage two to the possibility that anything other than dismissal of the Reinstatement Application was open to him. In addition, he submitted that the judge failed to consider a number of important features, in particular proportionality.

40. For the reasons outlined below, I consider that these criticisms are unfounded. They seek to apply a narrow, structuralist approach to the judge’s judgment, and they fail to consider the Reasons of 1 August 2025 in context. They also fail to take into account what the judge actually said and did over a number of careful assessments of the overall position between January and August 2025. i) Closing His Mind

41. First, it is suggested that the judge did not consider all the circumstances of the case with an open mind. This is because of what the judge said in paragraph 2 of his Reasons for the Order of 1 August, where he said that, to avoid the effect of the Unless Order, the applicant would have to demonstrate i) a reasonable explanation for the absence of any application for an extension of time before 21 May and ii) documentary evidence showing the diligent efforts to persuade the Ministry of Finance to authorise the payment of the money. Because he did not also refer to the overall circumstances of the case in this paragraph, Mr Lambert submitted that the judge closed his mind to them and did not undertake a proper assessment under stage three.

42. I consider that criticism to be wholly unfounded. If we are just looking at the words of paragraph 2 of his Reasons, I note that the entire paragraph begins with the expression “given the background set out above”, which is a reference to the detailed recitation, in paragraph 1, of some of the many ways in which the applicant had failed to act properly and diligently over the course of the litigation, and why the order for security for costs was framed as an Unless Order in the first place. Those were critical elements of the circumstances of the case, and it is plain that the judge had them well in mind. The same analysis applies to the judge’s reference to “given the matters set out above” at the start of paragraph 9 of his Reasons, and “my assessment of the relevant circumstances…above” in paragraph 9(c) of his Reasons. The answer to stage three of the Denton test was not therefore pre-determined by the Judge. ii) Factors In the Applicant’s Favour

43. It seems to me plain that, when reading together i) the Reasons for the Unless Order of 21 January 2025; ii) the Reasons for the striking out Order of 4 June 2025; and iii) the Reasons for the Refusal of the Reinstatement Order of 1 August 2025, the judge took full account of all the relevant circumstances of the case at every stage. Although Mr Lambert complains at paragraph 24 of his skeleton argument that “not a single factor in the appellant’s favour is mentioned”, I cannot help but note that, in his skeleton argument, he did not himself identify any such factors. And that is in truth because there is just one, and it is one that the judge always had expressly in mind.

44. That factor, which Mr Lambert pressed in his oral submissions, was that the applicant had a claim which the court was bound to treat as being a bona fide claim. I accept that that is an important point in the applicant’s favour, and the judge here had it well in mind. In his Reasons for the Unless Order of 21 January, the judge expressly referred to the court’s desire to do substantive justice between the parties, and the fact that the court did not want to stifle a genuine claim. He then went on to explain why, despite those points, it was appropriate in all the circumstances of this case to make an Unless Order, which might in the future have just that effect. The Unless Order was therefore made by the judge in the full knowledge that further failures on the part of the applicant may lead to the claim being struck out. So the assumption of a bona fide claim was expressly referred to and taken into account by the judge. The difficulty is that no single further factor in the applicant’s favour has been or can be identified. There are none. iii) Rule 3.9 a) and b)

45. It is said that the judge only had regard to the two factors listed in r.3.9 (a) and (b) (namely the need for litigation to be conducted efficiently and at proportionate cost, and the importance of complying with Orders of the court), and so did not have regard to all the circumstances of the case. For the reasons I have already given, that is incorrect: the judge had regard to all the circumstances, including the fact that a bona fide claim might well be struck out if there was a failure to comply with the Unless Order. But the judge also had regard to many other features of this case not covered by r.3.9(a) or (b). To take just two examples: i) He found that the correspondence showed that the applicant did not have a genuine desire to persuade the Ministry to authorise the transfer of the £800,000; ii) He found that the application for relief from sanctions had not been made promptly, another specific matter identified by this court in Denton as part of all the circumstances of the case. iv) Proportionality

46. It is said that the judge did not have regard to proportionality. I have explained why that criticism is unfounded. I have also explained why it appears from the evidence that it was the Central Bank which had a good grasp of proportionality, and not the applicant.

47. But the fundamental problem with Mr Lambert’s argument as to proportionality is that it assumes that, merely because this must be taken to be a bona fide claim, it automatically follows that it would be disproportionate to strike it out because of the failure to comply with the Unless Order.

48. That is wrong in principle. If it were otherwise, a party could be ordered to provide security, refuse to comply with the Order and/or delay endlessly, and always be able to resist the striking out of the claim, because that would be disproportionate. That would make the entire security for costs regime redundant. In every case where security for costs is in issue, the court has to balance between, on the one hand, the possibility that a bona fide claim might fail because of the failure to provide security and, on the other, the general requirement to ensure that a defendant is properly protected if the claim fails. Civil litigation in England and Wales operates on the basis that the loser pays the winner’s costs. No claimant can assume (unless they are covered by a particular regime such as QOCS) that they are entitled to pursue a claim here without the risk of adverse consequences if they lose. The result of this balancing exercise will always depend on the circumstances of the case.

49. That was the balancing exercise that the judge undertook in January 2025 when he made the Unless Order. The judge was very careful to spell out in his Reasons for the Unless Order why, notwithstanding the applicant’s bona fide claim, it was the right answer on the facts of this particular case. The proportionality of that Order cannot now be re-opened; in any event, it was, in the circumstances, entirely fair and proportionate.

50. Following the applicant’s failure to comply with the Unless Order and the application for relief from sanctions, the judge had to consider all the circumstances of the case before he refused or granted such relief. He carefully undertook that task too. The claim was still being treated as a bona fide claim. But nothing that happened after the making of the Unless Order demonstrated that it was or could be fair or proportionate to allow the applicant to avoid the consequences of failing to comply with the Unless Order. There was nothing else in the applicant’s favour. On the contrary, the applicant’s continuing dilatory conduct, the misrepresentations to the Ministry, and the failure to explore the other options for security, all support the conclusion that it was proportionate to strike out this claim, and to put it out of its lingering misery. So even allowing for a certain amount of counsel’s licence, Mr Lambert’s description of the Reasons for the Order of 1 August 2025 as “lopsided, blinkered and incomplete” is, I am afraid, wholly unjustified. v) The Role of the Solicitors

51. There is a criticism that the judge failed to take into account the role of the appellant’s solicitors. The suggestion is, I think, that the unhappy history was all the fault of the two different firms of solicitors who have acted for the applicant at various times, and not the responsibility of the applicant itself. As the defendant rightly pointed out, this is the second time that the applicant has made allegations of default against its own solicitors, although it appears that the first solicitors (who were involved before Kennedys and were the subject of the original criticisms) are now playing some sort of role in this application. But either way, the point is irrelevant. The solicitors are agents of the applicant, and their procedural failures (if any) will generally be ascribed to the applicant. Moreover, in the present case, it was the applicant who was conducting the critical correspondence with the Ministry of Finance, not Kennedys.

52. When asked to identify the relevant failure at the PTA hearing, Mr Lambert submitted that Kennedys should have applied for a variation of the Unless Order before 21 May. The difficulty with that argument is that Kennedys had received no instructions to make any such application, and had no basis on which to do so. It appears from documents provided to the court at the start of the hearing that it was only on 20 May that the applicant asked Kennedys to make an (unspecified) application to avoid the consequences of the Unless Order. Kennedys did their best to comply with those instructions by writing the letter to the court of 21 May (set out at paragraph 12 above) and attaching the correspondence with the Ministry of Finance. There did not appear to be anything else they could do. There was therefore no material before the judge (or before this court) which began to suggest any negligence on the part of Kennedys. vi) What Would Happen If Relief From Sanctions Had Been Granted?

53. There is one final point. The question arises as to what would happen here if relief from sanctions had been granted, and the case had not been struck out. This litigation has been stayed for most of its history because of the applicant’s failure to provide security for costs. The applicant sought permission to appeal the striking out but remains wholly unable to offer any evidence that it can or will comply with the Unless Order. On the contrary, the applicant’s case is that it cannot comply. So on that basis, if it were reinstated, this claim would remain stayed in legal limbo. That cannot be sensible, just or proportionate.

54. That is another reason why this case is so different from the norm. Usually when a party endeavours to obtain relief from sanctions, it can demonstrate that, albeit late or in some other imperfect way, it can comply with the spirit (if not the letter) of the original order, or can point to some sort of proportionate road map for the future conduct of the case. The applicant here can offer nothing but more of the same default. Conclusion

55. Although it is said that the judge failed to apply the Denton test properly, there is no explanation of how or why the judge should – or even might – have concluded that relief from sanctions was warranted here. It plainly was not. This was not a case of an isolated breach, or a breach that was not very serious or significant. This was a case of wholesale delay, breaches of orders, repeated dilatory conduct on the part of the applicant, and evidence that strongly supported the conclusion that the applicant’s failure to provide security was a deliberate attempt to conduct risk-free litigation. In consequence, the result of any balancing exercise or any consideration of all the circumstances of the case was never going to be in the applicant’s favour.

56. For all these reasons, therefore, I have concluded that the judge was quite entitled to strike out this claim in accordance with his earlier Unless Order. The application for permission to appeal must be refused. It has no real prospect of success. LORD JUSTICE LEWISON

57. I agree.