Taha Pharmaceuticals v Capsugel Belgium NV [2026] EWCA Civ 38

March 28, 2026

Security for costs, unless orders and the limits of relief from sanctions:Taha Pharmaceuticals v Capsugel Belgium NV [2026] EWCA Civ 38

Introduction

In Taha Pharmaceuticals v Capsugel Belgium NV [2026] EWCA Civ 38, Coulson LJ, with whom Lewison LJ agreed, refused Taha Pharmaceuticals permission to appeal against orders which left standing the strike out of its claim following non-compliance with an unless order for security for costs. The decision is a firm application of the three-stage approach in Denton v TH White Ltd [2014] 1 WLR 3926 in a case marked not by an isolated procedural lapse, but by prolonged delay, prior non-compliance, and a failure to take timely and practical steps either to satisfy the order or to engage properly with the court’s built-in extension mechanism.

The decision matters because the court proceeded on the footing that Taha’s claim was to be treated as a bona fide claim. Even so, that was only one factor in the applicant’s favour, and it did not justify relief from sanctions. What mattered was that the applicant had not shown true impossibility, had not acted with the necessary diligence, and could identify no realistic route by which the litigation could progress if relief were granted.

Factual background

The claim arose from Taha’s March 2017 purchase from Capsugel Belgium NV of a LEMS70 capsule sealing machine. In the re-amended particulars of claim, Taha alleged that the machine comprised used or poor-condition components at the time of supply. The primary claim was in contract, with an alternative allegation that Capsugel had dishonestly represented that the machine was new when it was not. Proceedings were issued on 20 February 2023, about a month before expiry of the relevant limitation period. Coulson LJ observed that a TCC claim of this kind, involving a claim of less than £1 million absent the unparticularised consequential loss claim, would ordinarily have been case managed to trial within about 15 to 18 months. Instead, by early 2025 the litigation had still not moved beyond the pleading stage.

The Court of Appeal’s view was that this state of affairs was the applicant’s own responsibility. Eyre J had already ordered security for costs in January 2024. Taha did not initially comply, and the proceedings were stayed for a lengthy period. Although Taha eventually provided security totalling £200,000, it repeatedly accepted that the sum was insufficient and indicated that more would be provided. By January 2025, that had still not happened.

Against that background, at the hearing on 21 January 2025, Mr Alan Bates, sitting as a Deputy Judge of the High Court, made an unless order requiring Taha to provide further security of £800,000 by 4 pm on 21 May 2025. The order was not framed on an all-or-nothing basis. If Taha could not comply with paragraph 1, it could still avoid strike out by the same deadline if it provided £50,000 by way of further interim security and made an application on notice, supported by evidence, for an extension of time. The claim was to remain stayed pending compliance or determination of any such application.

In giving reasons, the judge recognised Tunisia’s currency controls and the court’s reluctance to stifle a genuine claim where difficulties were truly outside the claimant’s control. However, he found that the evidence did not show that Taha was doing its best to progress matters with the Ministry of Finance. On the contrary, it had been slow to engage with security and slow to advance positive proposals. He also regarded Dr Zghidi’s evidence as unsatisfactory, including the assertion that this was a “criminal case”, without acknowledging that it was Taha itself which had sought to initiate criminal proceedings in Tunisia.

Matters then deteriorated. Over the following four months there was minimal contact with the defendant and no contact with the court. The correspondence with the Tunisian authorities was intermittent. Particularly damaging was Taha’s letter of 10 February 2025, which stated that the £800,000 would be paid to the opposing party which had defrauded it, and asserted that English procedure prohibited anticipation or pre-judgment even where fraud was already known. On 21 May 2025, the day the unless order expired, Taha’s then solicitors wrote to the court merely asking that the attached exchanges with the Ministry and Central Bank be placed before the judge. No compliant application under the unless order was made. The defendant then sought strike out, and the judge made that order on 4 June 2025.

On 24 June 2025, Taha sought to set aside the strike out order under CPR 3.5 and, alternatively, relief from sanctions under CPR 3.9, contending that it had acted diligently and in good faith but had been prevented from complying by external sovereign regulatory constraints beyond its control. The judge refused that reinstatement application on 1 August 2025, with reasons, and later refused a further application to vary or revoke that order on 13 August 2025. Taha then sought permission to appeal. Coulson LJ noted, speaking personally, that it would have been better if the relief from sanctions application had been dealt with at an oral hearing, particularly because it was determinative and Taha was by then acting in person. That observation, however, did not affect the merits.

The issues before the Court of Appeal

The real issue before the Court of Appeal was whether the judge had been wrong to refuse relief from sanctions. Stage one of the Denton analysis was effectively unanswerable. The applicant accepted that the breach was serious and significant, and Coulson LJ regarded it as serious and significant to a very high degree. The real debate concerned stages two and three, namely whether the default had truly been caused by matters outside the applicant’s control, and whether the judge had properly evaluated all the circumstances of the case, including proportionality and the bona fide nature of the claim.

The Court of Appeal’s reasoning

The court had no difficulty at stage one. The breach was of the highest degree of seriousness. The failure to provide proper security had prevented the litigation from being conducted efficiently and at proportionate cost for over two years, and in three years the case had progressed no further than the pleading stage. There had also been a prior failure to comply with Eyre J’s original security for costs order, and unpaid costs orders of £139,000. Coulson LJ distinguished Michael v Lillitos [2019] Costs LR 1615 on the basis that the breach there had been at the bottom end of seriousness and had not impeded the efficient conduct of the litigation, whereas the position here was the opposite.

At stage two, the Court of Appeal held that the judge had been plainly entitled to conclude that the default resulted from Taha’s own lack of diligence. The unless order itself had only become necessary because of the applicant’s earlier casual approach to security and its prior failure to comply with Eyre J’s order. Matters did not improve after January 2025. There was a failure to keep either the defendant or the court informed, and the correspondence with the Ministry was desultory.

Coulson LJ also held that the judge was fully entitled to view Taha’s communications with the Tunisian authorities as materially undermining its case on impossibility. This was, as he put it, a defects case, plain and simple, and it should have been presented as an ordinary commercial dispute. Instead, Taha chose to emphasise the dishonest misrepresentation allegation and to portray the case as involving fraud, even though the misrepresentation claim added nothing distinct by way of damage. The court considered that this presentation was wholly unnecessary and likely to make authorisation less, rather than more, attainable. That conclusion was reinforced by the evidence that Taha had itself initiated criminal proceedings in Tunisia, knowing that this would make authorisation more difficult.

The court further held that it was misleading to tell the Tunisian authorities that the £800,000 would be paid directly to the defendant, when the order contemplated payment into the Court Funds Office. Coulson LJ agreed that this was wrong as a matter of fact and liable to create the worst possible impression of the applicant’s position. He went further, concluding that the only plausible explanation for those misrepresentations was that Taha wanted authorisation to be refused so that it could continue litigating without having to provide the necessary security for costs.

The court also rejected the suggestion that the Tunisian authorities had acted capriciously or unforeseeably. Their stated concerns were coherent and commercially intelligible: the machine had been described as old, used and non-functional; the purchase price had been €570,000; Taha had already paid £350,000 in legal fees; the requested guarantee exceeded the value of the machine; and there was no information as to any possible refund. Coulson LJ treated those concerns as realistic. He also held that, if Taha genuinely wished to keep the claim alive, it could have explored other forms of security identified in the unless order, including a solicitor’s undertaking, a first-class London bank guarantee or some other acceptable arrangement. There was no evidence that it had seriously attempted to do so.

That conclusion connected directly with the safety valve built into the unless order. Taha argued that the route under paragraph 2(i), requiring £50,000 by way of interim security and an application for more time, was illusory because it could not secure authorisation even for that amount. The Court of Appeal rejected that argument. There was no evidence that Taha had ever sought authorisation for £50,000, and no evidence that it could not provide that smaller amount, or some other approved form of security, by another route. The documentary material related only to the much larger figure of £800,000. The court’s conclusion was that Taha could have attempted to comply with paragraph 2(i) if it had wished to do so, but chose not to.

The stage three challenge failed no less decisively. The applicant argued that the judge had not stood back and considered all the circumstances, but had effectively closed his mind once stage two went against it. Coulson LJ described that criticism as wholly unfounded. Read fairly and in context, the judge’s reasons showed that he had the overall history of the litigation firmly in mind. The fact that the claim was to be treated as a bona fide claim was recognised as an important factor in the applicant’s favour, but it was the only such factor, and it had already been expressly considered when the unless order was made in January 2025. Beyond that, there was nothing further in the applicant’s favour.

The proportionality argument failed for the same reason. The balancing exercise had already been undertaken when the unless order was made, and the proportionality of that order could not usually be reopened on the later relief application. In any event, nothing that happened after January 2025 made it unfair or disproportionate to enforce the sanction. On the contrary, the continuing delay, the misrepresentations to the Ministry, the failure to pursue alternative forms of security, and the absence of any prompt and proper application all supported the conclusion that strike out remained proportionate.

The attempt to shift responsibility onto the applicant’s solicitors also failed. Solicitors are ordinarily the client’s agents for procedural purposes, and in any event the critical correspondence with the Ministry was conducted by Taha itself. Kennedys had only been asked, on 20 May 2025, to make an unspecified application to avoid the consequences of the unless order. On the material before the court, there was nothing to suggest negligence on Kennedys’ part.

The decision

The Court of Appeal refused permission to appeal. The proposed appeal had no real prospect of success. The breach was grave, the explanation inadequate, and the surrounding circumstances all pointed in the same direction.

Coulson LJ also identified a further practical reason why relief from sanctions would have achieved nothing useful. Even if relief had been granted and the claim reinstated, the proceedings would simply have remained stayed because Taha still could not demonstrate any ability to comply with the unless order. This was not a case of late compliance, substantial compliance or a workable roadmap to future compliance. The applicant could offer nothing except continuing default.

Why the decision matters

The judgment is a useful authority on three related points. First, security for costs orders are not procedural theatre. A claimant with a bona fide claim is not protected from the consequences of persistent non-compliance where security has properly been ordered. Secondly, assertions of impossibility will be scrutinised closely. A party relying on foreign regulatory constraints must show real diligence, candid engagement with the difficulty, and serious attempts to pursue alternative routes to compliance. Thirdly, a carefully drawn unless order, particularly one containing an express interim route and extension mechanism, is likely to make a later application for relief from sanctions especially difficult where that opportunity has simply been ignored.

For claimants and their advisers, the lesson is plain. If compliance is genuinely threatened, the response must be proactive and pre-emptive. The court will expect a prompt application before the deadline, proper evidence, candour as to the obstacle relied upon, and a realistic proposal by which the litigation can move forward. Without those features, relief from sanctions is unlikely to be granted.

Further Reading

• Security for Costs in England & Wales: Guidance for Corporate Claimants and Defendants
• Morris v Knights [2026] EWHC 524 (Ch): Disclosure Strike Out
• Typical Litigation Claim Process in England & Wales (2025)
• Commercial Litigation

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