OUTER HOUSE, COURT OF SESSION
 CSOH 163
OPINION OF LORD HODGE
in the cause
TOTAL CONTAINMENT ENGINEERING LIMITED
TOTAL WASTE MANAGEMENT ALLIANCE LIMITED
Pursuer: Sandison QC; Morton Fraser LLP
Defender: O'Brien; Maclay Murray & Spens LLP
6 September 2012
 This is a motion by the defender for an order for caution for expenses of £63,000. The pursuer is a Maltese company and is the assignee of two patents. It sues the defender for an alleged infringement of European Patent number EP 1 144 869 B1 which concerns
"An apparatus and method for mixing drill cuttings in a tank and transferring them therefrom."
The defender is an engineering company based in Aberdeen which provides integrated drilling waste services to the oil industry both offshore and onshore. The pursuer claims damages of £12 million.
 The patented apparatus and method involves the placing within a tank containing waste materials and drill cuttings of an apparatus which slurries the materials and cuttings and transfers them to other containers. The defender's "cuttings collection distribution system" performs a similar function but uses a device which is located below a hopper. It relies on gravity to place the materials and cuttings into the slurrying device. Mr O'Brien for the defender submitted that it would require a very expansive interpretation of the patent before the court could hold that the defender's product fell within its claims.
 The pursuer, which was incorporated in 2008, is the proprietor of two patents which it obtained by assignation. In its accounts to 31 December 2010 it is stated that its principal activities are to own, develop, trade or deal in any type of intellectual property rights. Its sole income in the years to 31 December 2008, 2009 and 2010 was bank interest in the sums of 18 Euros, 10 Euros and 7 Euros respectively. As a result of administrative expenses and finance costs it has been loss-making in each of those years. The latest published accounts, which are for the year to 31 December 2010, stated that the pursuer had total assets of 2,831 Euros and liabilities of 18,784 Euros. In each of the three years it was absolutely insolvent. Mr Sandison conceded that its liabilities continue to exceed its assets so that it remained balance sheet insolvent.
 Mr Sandison acknowledged that if the pursuer had been a British company the defender would have met the threshold test for the award of caution under section 726(2) of the Companies Act 1985. He explained that a Ms Maureen Hepburn was funding the action. She had ultimate control of the pursuer through Intellectual Property Holdings SA, a company registered in Luxembourg ("IPH"). The pursuer was not a sham or device but was incorporated in Malta to obtain the tax advantages which that country offered to intellectual property companies. Because the pursuer was a Maltese company the defender could rely only on the common law in seeking caution and it was well established that impecuniosity alone was not a sufficient ground to justify an order for caution.
 Mr O'Brien submitted that the court had power at common law to order caution in this case. The pursuer was a shell company with no funds to pursue the action or to meet an award of expenses. The auditor's report dated 30 June 2011 in its accounts for the year ended 31 December 2010 expressed doubt about the company's ability to continue as a going concern. Its parent company, IPH, also had limited assets. The latest accounts of that company, to 31 December 2010, showed that it was loss-making and had a balance sheet deficit. It also could not fund the action. The pursuer was established not to use the patents which it owned by exploiting the technology but to make money by enforcing the patents or selling them. It had sought to sell the patent in this case to the defender. It could only pursue the action with the assistance of a funder, in this case Ms Hepburn, who was seeking to obtain economic benefit through the pursuer's court action but without exposure to liability in expenses. He submitted that the common law grounds for the ordering of caution extended to those circumstances and referred me to an opinion of Lord Hamilton, Fallimento La Pantofola D'Oro SpA v Blane Leisure Ltd (No 2) 2000 SLT 1264 and an opinion of Lord Drummond Young, Gaelic Seafoods (Ireland) Ltd v EWOS Ltd 2009 SCLR 417.
 It is likely that the pursuer's claim and the defence will involve complex issues of fact and law. Both parties have engaged both senior and junior counsel and also patent agents. It is likely that both will lead the evidence of expert witnesses if the case goes to proof. The defender has produced an estimated account of its solicitor's fees and outlays which it may incur up to the conclusion of a two-day debate. It shows expenses of £62,800. It is stated on an agent and client basis. Mr Sandison informed me that the pursuer's law accountant estimated that the successful party was likely to recover about £25,000 in the expenses of the action to that stage on a party and party basis.
 The pursuer is a Maltese company which owns the relevant patent but does not have the funds to pursue this action. It was incorporated and the patent was transferred to it to obtain the tax advantages which Malta offers. It is not a device or a sham but is "a real thing" (Salomon v Salomon & Co Ltd  AC 22, Lord Halsbury at 33). Mr O'Brien did not seek to argue otherwise; on the contrary, it was because the pursuer was a limited company without means that the defender sought an order for caution.
 The court has a discretion whether to order the provision of caution and exercises that discretion in the interests of justice. The purpose of the order is to protect a defender who is successful in his defence from an inability to enforce a resulting award of expenses. In relation to pursuers who are individuals and are not formally insolvent it is well established that mere impecuniosity is not sufficient of itself to warrant an order for caution (Will v Sneddon, Campbell & Munro 1931 SC 164, Lord Justice-Clerk Alness at 168). There must be further circumstances which cumulatively justify the order, such as the weakness of his pleaded case, his failure to obtemper a decree for payment in another cause or other evidence that he cannot meet his obligations, whether current or becoming prestable during the expected currency of the action. See for example, Kennedy v Hamilton Brothers Oil and Gas Limited 1986 SLT 110.
 Different considerations apply in relation to commercial corporations. Section 726(2) of the Companies Act 1985 provides that where a limited company is the pursuer in an action the court may order it to find caution if the court accepts evidence which gives it reason to believe that the company will be unable to pay the defender's expenses. This provision has existed since shortly after the statutory introduction of the limited liability company as it was introduced by section 24 of the Joint Stock Companies Act 1857 and consolidated as section 69 of the Companies Act 1862. It initially applied to all companies incorporated in the United Kingdom but since 1929 has applied only to companies registered within Great Britain. Northern Ireland has separate legislation to a similar effect. The statutory regime does not extend to foreign companies such as the pursuer and the motion for caution therefore rests on the common law.
 But that does not mean that the law in relation to commercial companies which pursue claims in our courts is the same as that relating to natural persons. In DSQ Property Co Ltd v Lotus Cars Ltd  1 WLR 127, which Lord Hamilton discussed in La Pantofola (above), Millett J stated (at.131 F-H):
"A limited company is not like an individual. It is a commercial concern with exclusively commercial debts and liabilities. Unlike an individual it can charge its whole undertaking to a secured creditor and leave nothing at all for unsecured creditors, even those having priority in a winding up. It is obvious that in some circumstances justice may require such a plaintiff to be required to give security for costs."
While Millett J in that case was exercising a common law power in relation to a company incorporated in Northern Ireland which was in receivership and liquidation, his reasoning applies also to companies which are not in a formal insolvency.
 It is not in doubt that the court can use powers at common law to order a limited company to find caution (Balfour Beatty Ltd v Brinmoor Ltd 1997 SLT 888), and those powers are available in relation to foreign companies (Kaiser Bautechnik GmbH v GA Group Ltd 1993 SLT 826; La Pantofola; and Gaelic Seafoods). The fact that a pursuer is a foreign company is not a sufficient ground for ordering caution (Medicopharma (UK) BV v Cairns 1993 SLT 386 and Kaiser Bautechnik). In Medicopharma and in Balfour Beatty counsel conceded that the test for ordering a company to provide caution at common law was more stringent than that imposed by section 726(2) of the Companies Act 1985. Counsel appears to have made a similar concession to Lord Drummond Young in Gaelic Seafoods (see para ). I have some doubts whether the concessions were well made and note that in La Pantofola and Gaelic Seafoods Lord Hamilton and Lord Drummond Young considered that it was not appropriate to apply without qualification the principles applicable to an individual to a limited company. In particular, Lord Drummond Young stated (in Gaelic Seafoods at para ):
"It is important that the court should ensure that a limited company is not used as a device to enable those who have the underlying financial interest in the litigation to conduct it without fear of an adverse finding in expenses. That consideration becomes particularly important when a company is admittedly insolvent; in such a case it seems to me that a defender should normally be entitled to obtain security for expenses, even at common law, in the absence of any countervailing consideration."
While in both La Pantofola and Gaelic Seafoods the judges were dealing with companies in formal insolvency, they relied on Millett J's reasoning which was stated more generally and Lord Drummond Young explicitly did not confine his comments to circumstances of formal insolvency.
 This approach avoids discrimination against British companies in our court. I see no good reason why it should be more difficult to obtain caution at common law against a non-British company than it is to obtain such security against a British company under section 726(2) of the 1985 Act. I turn therefore to the circumstances of this case.
 First, Mr Sandison was correct in his concession that the section 726(2) test would be met in relation to the pursuer if it were a company incorporated in Great Britain. It is also significant. I proceed on the undisputed basis that it is likely that the pursuer will not be able to meet the defender's taxed expenses should the defender succeed in its defence of the action.
 In addition I note that the pursuer does not have and has never had the financial resources to pursue court actions against alleged infringements of its patents. Its business model depends on outside funding to do so. That funding is provided by Ms Hepburn who has the ultimate economic interest in the pursuer's business and the exploitation of its patents. To acknowledge that in an assessment of an application for caution is not to treat the company as a device or a sham or to disregard the separate legal personality of both IPH and the pursuer. It is not argued that Ms Hepburn is a dominus litis. But she is in an analogous position by her "furnishing the sinews of war" (Hepburn v Tait (1874) 8 R 875, Lord Justice-Clerk Moncrieff at 877). In my view those matters are relevant considerations in the exercise of the court's discretion at common law when caution is sought from a limited company.
 In many cases the court makes a provisional assessment of the merits of the action when exercising its discretion whether to order caution. But beyond taking a view that the pursuer's claim is not straightforward and that both the pursuer and the defender have stateable arguments to advance, I do not have the information to assess even on a provisional basis the relative strengths of the parties' cases on the merits. Therefore I do not include Mr O'Brien's submission that the pursuer's case of infringement is weak in the balance of considerations.
 But I have regard to the likely complexity of the action and the expectation that it will involve each party in substantial expense. I take into account also that it was not suggested that an award of caution would stifle the pursuer's claim. I therefore see no countervailing considerations.
 I am therefore satisfied that it is in the interests of justice that I should order the pursuer to find caution.
 For the reasons set out above I do not accept Mr Sandison's submission that I am extending the common law by so doing. But if I am, it is a minor development which has regard to Parliament's approach from the early days of limited liability companies and draws on the more recent reasoning of Millett J, Lord Hamilton and Lord Drummond Young. I consider that in relation to a limited company the probability that it will not be able to pay the defender's expenses is an appropriate threshold criterion. After crossing that threshold, at common law and also under section 726(2) the court must weigh other factors in the balance in reaching its decision.
 I have to make a broad assessment of the sum which should be provided as caution. I have regard to the defender's estimate of its expenses to the conclusion of a debate on an agent and client basis and take account of a successful party's prima facie entitlement to party and party expenses. I also have regard to the estimate of the pursuer's law accountant. The latter may be an underestimate but the court can review the matter as the action progresses. I fix the sum to be provided as caution at £25,000. The pursuer is to provide the sum within six weeks.