Contis v Swipewallet: Court orders protective measures to supplement ATE insurance

Case summary

The Commercial Court’s decision in Contis Group Ltd v Swipewallet Holdings Ltd[1] illustrates the Court’s approach (in a somewhat complex scenario) to its discretionary case management powers when assessing whether after‑the‑event (ATE) insurance provides adequate security for costs.

From November 2021, Contis and its Lithuanian affiliate, UAB, provided card services for a crypto‑to‑fiat VISA debit programme. Customers holding cryptocurrency on an exchange could make fiat purchases (mainly euros). The Claimants supplied cards and processed transactions through a UAB‑operated master account funded by Swipewallet or related entities, with corresponding amounts debited from customers’ crypto accounts. The Claimants’ fees were calculated by reference to transaction volumes, subject to monthly minimums. The relationship was governed by a Framework Agreement, a Participation Agreement and a Deed of Guarantee (the “Agreements”).

In 2023, operational issues arose, including VISA compliance concerns, Bank of Lithuania AML fines, and the need for additional KYC for existing accounts. On 13 October 2023, Swipewallet purported to terminate the Agreements (by notice) in particular for alleged material breaches (and repudiatory breach on the part of the Claimants at common law) which prevented Swipewallet from carrying out their contractual obligations. The Claimants denied any right to terminate, treated the notice(s) as repudiatory, and advanced a primary debt claim of €144 million said to be payable on termination under clause 17.3 of the Framework Agreement via the “minimum‑fees” mechanism. The fact of termination of the contractual arrangements was common ground, but liability and remedies were disputed. At this stage, the Court addressed two applications.

The split trial application

The Claimants sought a liability‑first trial, arguing that construction and termination issues (including whether the “minimum fees to term” clause created an enforceable debt or an unenforceable penalty) could be decided without full quantum evidence. Swipewallet opposed this, citing risks of higher costs and uncertainty, the overlap between liability and quantum in terms of evidence required, the prospect of impeded settlement opportunities, and prejudice to counterclaim (and costs) recovery given concerns about the Claimants’ overall financial position. The Claimants had ceased trading and the litigation was being funded by a parent company loan.

The judge accepted that bifurcation carried some risk but gave greater weight to the prospect of significant cost savings if liability were resolved in the Claimants’ favour (estimated to some £1,000,000)[2]. He also considered that an early determination of liability would likely facilitate rather than hinder settlement and viewed any alleged prejudice to Swipewallet as speculative and contingent. Any such risk did not outweigh clear cost benefits, and bifurcation was ordered.  

The security for costs application 

The Defendants applied for a security for costs order, with the central contention being that the ATE policy was not as reliable as cash or a bank guarantee because (based on the tests applied in previous case law) there was a real, not a “fanciful”, risk that the ATE policy might not respond in full[3] when needed. Despite the Claimants producing an ATE “Endorsement” which provided that a claim on behalf of Swipewallet would be “honoured in full irrespective of…any exclusions or provisions of the [ATE] Policy””, Swipewallet asserted that four material risks remained:

1. Merits‑based cancellation: insurer could cancel if prospects drop below 51% or if costs exposure/contingent premium dynamics change.
2. “Consent gaps”: cover for interim applications/settlement depended on insurer’s written consent, which could be refused or overlooked.
3. Change of solicitors: cover would terminate if the current solicitors’ retainer ended without insurer consent.
4. Endorsement limits: it preserved cancellation rights, offered only notice and “to date” protection, and did not cure non‑arising cover (such as, absent consent or on change‑of‑solicitors termination).

In response, the Claimants relied on the following features of their ATE policy:

1. It had already been recognised the court’s starting position should be that a properly drafted ATE policy provided by a substantial and reputable insurer is a reliable source of litigation funding.
2. Similar wording from the Endorsement had been accepted in previous authority, with notice and “to date” protection on cancellation.
3. Premiums: payable premiums were up to date and the contingent premium was only payable from recoveries on success, reducing any premium mechanics risk.
4. Cancellation/consent risks were theoretical: the insurer had long been aware of the proceedings yet had not cancelled; cooperation and commercial incentives supported obtaining consents.

Counterclaim 

Swipewallet argued the “Crabtree”[4] overlap principle (which established that the Court would not issue a security for costs order if the same issues arise on the claim and counterclaim), should not deprive them of security because the overlap between claim and counterclaim is “far from complete”, and in any event it would undertake not to pursue the counterclaim if the claim were stayed for failure to provide security. The Court considered this an appropriate means to avoid unfairness where issues overlap and directed that the undertaking be given.

Conclusion 

The Court held that Swipewallet was adequately secured to date and that the risks of avoidance ab initio or loss of cover for individual applications were minimal. However, the risk of future termination was not fanciful, but was realistic. Additional targeted protection was therefore justified.

The Court supplemented the ATE insurance as security for costs with three measures:

1. Notice to be given to Swipewallet of any ATE insurance termination.
2. Evidence of insurer consent to be provided for any interim application and any settlement.
3. Claimants to provide £300,000 by way of security to protect against termination risk and enable swift reconsideration if cover fell away.

This case highlights three areas to consider:

• Bifurcation: can be a cost‑effective case‑management tool where liability issues can be isolated to avoid heavy quantum costs.
• ATE insurance as security: is still recognised, but gaps matter. The Court considered the impact of real‑world risks, such as the prospect of a future termination and consent‑based threats to coverage.
• Creative protections: taking into account the key undertakings offered, the Court ordered prompt notice of any ATE termination, evidence of insurer consent to interim applications and settlement, and a limited cash “bridge” to cover the risk of future termination.