Background
Bargain Busting Limited, a UK seller of electronic cigarettes under the “Crystal Bar” brand and owner of three registered trade marks incorporating the word “CRYSTAL,” brought a trade mark infringement claim against six defendants including Chinese manufacturer Shenzhen Ske Technology Co. Ltd, its UK subsidiary, a distributor, and major retailers Tesco, Booker, and Morrisons. The claimant alleged infringement under sections 5(1) and 5(2) of the Trade Marks Act 1994. The defendants responded with a range of challenges to the marks, including revocation for non-use, invalidity on grounds of descriptiveness, deceptiveness, bad faith, and on relative grounds.
Between July and November 2025, all six defendants issued separate applications for security for costs under CPR 25.27(b)(ii), on the basis that Bargain Busting Limited, as a company, would be unable to pay their costs if ordered to do so. The total security sought across all applications was approximately £3.18 million. Rather than address its financial position directly, the claimant indicated it was obtaining After the Event (ATE) insurance as an alternative to paying funds into court or providing a bank guarantee.
The ATE policy was entered into on 2 December 2025 — well after the applications were issued — and was initially provided to the defendants in heavily redacted form. The defendants identified three significant deficiencies in the policy wording: the anti-avoidance endorsement did not expressly exclude the insurer’s right to avoid for fraud; it did not provide that the endorsement would prevail over conflicting policy terms; and the policy did not restrict the insurer’s ability to assign or novate the policy. Only on the eve of the December 2025 CCMC hearing did the claimant agree to seek amendments addressing these concerns. At the hearing, the claimant gave an undertaking to use best endeavours to obtain the amendments, and the applications were largely stayed on that basis.
The Court’s Holding
Master Clark held that the defendants were entitled to their costs of the security-for-costs applications. The claimant’s argument that it was the successful party — because the ATE policy ultimately demonstrated it could meet an adverse costs order — was rejected. The court found that the defendants were justified in issuing their applications promptly once the relevant facts were known, consistent with the general principle that such applications should be made without delay. The claimant had not argued that the defendants would have been unable to obtain security in the absence of the ATE policy.
The court further held that the defendants were justified in pursuing their applications until the ATE policy was in a form that sufficiently protected their interests. The purpose of security for costs is to protect involuntary defendant parties against the risk that a successful claimant will be unable to meet any adverse costs order, and the settlement outcome — the amended ATE policy — achieved precisely the protection a formal security order would have secured. The conduct of the third defendant (Phoenix Wholesale) in waiting until the insurer had formally signed off on the amendments was held not to be unreasonable.
On quantum, Master Clark declined to conduct a summary assessment of the defendants’ aggregate costs claim of £317,571.59, finding the overall level too high for that process. He ordered a detailed assessment but directed the claimant to make an interim payment on account, calculated on a broad-brush basis at approximately three times the claimant’s own unassessed costs of £58,705, producing a total of £176,124.15, apportioned among the defendants in proportion to their individual costs claims.
Key Takeaways
- A claimant that delays obtaining and tendering adequate ATE insurance in response to security-for-costs applications risks bearing the defendants’ costs of those applications, even if security is ultimately avoided through the insurance route.
- The court confirmed that ATE policies offered as an alternative to conventional security must meet specific drafting standards — including an anti-avoidance endorsement that excludes avoidance for fraud, a precedence clause, and restrictions on assignment — consistent with the guidance in Lloyds Developments Ltd v Accor HotelServices UK Ltd [2025] EWHC 1238 (TCC).
- When assessing a reasonable payment on account of defendants’ costs across multiple co-defendants sharing solicitors and counsel, the court may benchmark the aggregate against a multiple of the claimant’s own costs rather than accepting claimed figures, particularly where significant work was shared and a single counsel appeared for multiple parties.
- Applications for security for costs should be made promptly once the relevant facts are known; a claimant’s assertion that an application is premature will not succeed merely because costs budgets have not yet been filed.
Why It Matters
This decision is a practical warning for claimants who intend to rely on ATE insurance as a substitute for conventional security for costs. The judgment makes clear that defendants are entitled to scrutinise ATE policy wording closely, and that a claimant who only agrees to remedy deficiencies on the eve of a hearing — after months of correspondence — will ordinarily be treated as the losing party on costs, regardless of the ultimate outcome of the applications. The reference to, and implicit endorsement of, the ATE drafting standards set out in the Lloyds Developments litigation provides useful guidance on the minimum wording courts expect to see in such policies.
For defendants in multi-party intellectual property disputes — including the major retailers caught up in supply-chain infringement claims — the case illustrates both the availability of security-for-costs protection and the courts’ willingness to apportion costs sensibly where defendants have co-ordinated their litigation through shared solicitors and counsel, rather than awarding full duplicative costs to each party.