Background
Shenzhen SKE Technology Co. Ltd, a Chinese e-cigarette manufacturer, sued Vapepen London Ltd, two individuals and Bargain Busting Limited for infringement of UK Registered Design No. 6213529 and passing off concerning CRYSTAL-branded e-cigarettes. The defendants denied liability, challenged the design’s validity, and disputed that SKE had goodwill. The liability trial was listed for January 2027.
The defendants sought £880,000 security for costs under CPR 25.27, relying on SKE’s residence outside England and Wales and an asserted inability to meet an adverse costs order. SKE accepted that it was outside the jurisdiction, but relied on its UK subsidiary and financial material concerning its majority shareholder, as well as previous payments of costs and security.
The Court’s Holding
Deputy Master Dovar ordered SKE to provide staged security for the defendants’ future costs, but not the £880,000 sought. The court held that the overseas-residence gateway was met and that, because SKE had not disclosed its own accounts or sufficient direct evidence of its financial position, there was reason to believe it might be unable to satisfy an adverse costs order.
The court rejected the defendants’ separate enforcement case as a basis for security for all costs. The evidence did not establish significant obstacles to enforcing an English money judgment for costs in China: the defendants had concentrated too heavily on enforcement of IP-rights judgments, rather than a costs order, and the likely additional enforcement expense was not proportionately significant. The defendants’ delay meant security should be confined to future costs.
SKE was ordered to pay £77,000 by 11 September 2026, £42,039 three weeks before the pre-trial review, and £450,000 three weeks before trial. Default would trigger an automatic stay, with the defendants permitted to apply to strike out the claim.
Key Takeaways
- A foreign corporate claimant’s failure to provide its own financial accounts can justify security for costs, even where related companies appear well resourced.
- Funds or assets held by a parent or subsidiary do not, without a binding obligation or straightforward route to recovery, establish that the claimant can pay an adverse costs order.
- For an overseas-residence application, the relevant issue is practical enforcement of a costs judgment, not enforcement of the substantive IP relief.
Why It Matters
The decision distinguishes between the two CPR 25.27 routes. SKE’s Chinese residence alone did not demonstrate a real enforcement risk warranting full security, but inadequate direct evidence of its finances justified protection for the defendants’ future costs.
It also illustrates a tailored remedy: staged security tied to remaining budgeted litigation phases, an automatic stay on default, and no immediate strike-out.