Dr Sven-Holger Undritz & Ors v D’Amico Tankers DAC

On an application for security for costs, the court must decide whether an order is just in all the circumstances. Relevant considerations include the genuineness and prospects of the claim, any admission of liability, oppressive use of the application, and whether the claimant’s lack of means was caused by the defendant. The court should avoid an unsafe merits investigation on an interim application. Where future costs are uncertain, it may remove costs that can confidently be disregarded and apply a broad-brush percentage reduction. Insolvency does not create an automatic presumption that security would stifle the claim. The court may also expect parties to devote appropriate resources to settlement and alternative dispute resolution.

The claimant, acting as insolvency administrator for four German ship-owning companies, brought four claims for sums exceeding USD 1 million under charterparties. The defendant intended to plead limitation and contractual set-off defences. The particulars of claim had apparently been served late, and applications concerning retrospective extension of time and reverse summary judgment had been stayed.

The defendant applied for security for costs under Civil Procedure Rules 1998, rule 25.27. The issues were whether the claimants fell within the relevant gateway, whether security should be ordered, the appropriate amount, and the method of provision.

1. Gateway. The court proceeded on the parties’ substantive concession that the claimants fell within CPR 25.27(b)(ii). Applying English law in the absence of evidence of German law, the claims would be brought by the companies because an English liquidator could sue in the company’s name under paragraph 4 of Schedule 4 to the Insolvency Act 1986. The late attempt to withdraw the concession was inappropriate.
2. Whether security was just. The court applied the guidance in Sir Lindsay Parkinson v Triplan [1973] 2 WLR 632. There was no evidence that the companies could not pay or raise security, as distinct from evidence concerning the administrator personally. The claim was bona fide, but its merits were unclear because the limitation and set-off defences had not been fully determined. It was therefore unsafe to investigate the merits further. The application was neither cynical nor oppressive, and its timing was unobjectionable.
3. The court explained Absolute Living v DS7 [2018] EWHC 1432 (Ch) as distinguishing between the gateway condition concerning inability to pay costs at the end of proceedings and the separate question whether an order for security would stifle the claim. Insolvency did not itself establish the latter.
4. Quantum. The just amount was assessed by first removing costs confidently capable of being disregarded, including costs of unserved defences, the security application, the hearing, and a mathematical error. The remaining costs were reduced by a broad-brush 40 per cent discount, producing security of £90,000. The court found no proper basis for concluding that this would stifle the claims.
5. Security could be paid to the claimant’s solicitors subject to an undertaking, although the parties were left to discuss that arrangement. The costs of the application were reserved for separate determination if not agreed.
6. The court expected substantially greater future efforts toward settlement and ADR. CPR 29.2(1A), applied in the Circuit Commercial Court by CPR 59.11, and the changes following Churchill v Merthry Tydfil [2023] EWCA Civ 1416 supported that expectation.