Interoil Trading SA v Watford Petroleum Ltd: Watford Petroleum Ltd v Interail Trading SA (2003)
The court refused to order security for costs against the defendants where the defendants had been unable to put full financial affairs before the court due to circumstances that may have been caused by the claimants.
Two applications for security for costs by Interoil Trading SA ('Interoil'): (i) in respect of a petition under s.459 Companies Act 1985 presented by Watford Petroleum Ltd ('Watford') in respect of Watford Petroleum Ukraine Holdings Ltd ('the company'), with Interoil and its directors being respondents to that petition; and (ii) in a claim brought by Watford against Interoil seeking sums due under a joint venture agreement or damages. Interoil submitted that, in the event it was successful in its actions, there would be an injustice as it would not be able to recover its costs from Watford. Watford argued that the Interoil faction had somehow obtained control of one of the company's bank accounts with PrivatBank Cyprus ('the bank') resulting in the company being unable to obtain information from its bank about its financial position and therefore being unable to finalise or file its accounts since December 2000.
It was common ground that Watford had no assets and would be unable to fund Interoil's costs. It was beyond controversy that the bank had not behaved like an ordinary banker of a company. That the company was unable to obtain the requisite financial information was a wholly remarkable and bizarre circumstance for which there was no rational explanation other than that it was caused by Interoil. Watford was not in a position to put its full financial state of affairs before the court. Had this been a conventional case, the other factors raised by Watford in support of refusing the application would not have been sufficient to tip the scales in favour of no order. However the matters apparently caused by Interoil turned this case. It was well-settled that if a person was not in a position properly to provide security by reason of the activities of the other side that was a very significant factor in favour of refusing security. The factors raised by the bank's behaviour were sufficient to tip the scales in favour of no security.