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

His Honour Judge Bird : Introduction

1. By 4 sets of proceedings issued in November 2024, the claimant (in effect for each claim, the shipowner) seek sums of a little in excess of USD 1 million, due under 4 charterparties from a single charterer. The effective claimants are the companies incorporated under the laws of the Federal Republic of Germany. Each is in a German insolvency process and so the named claimant in each of the claims is Dr Sven-Holger Undritz acting as “ insolvency administrator regarding the assets ” of each company.

2. The Particulars of Claim in each case appear to have been served late and there are as yet no filed Defences. The Defendant charterer has made clear that it will advance 2 defences: first that the claims are time barred and secondly, by reason of an agreement reached with each shipowner, it has the right to set off against the debt, sums due to it under separate but related charterparties.

3. An application for a retrospective extension of time to serve the Particulars of Claim and an application for reverse summary judgment have been issued by the parties. The summary judgment application relates to the limitation defence. Neither has yet been listed. Each has been stayed pending the outcome of this application. The Application

4. This is an application by the charterer for security for costs. By CPR 25.27: The court may make an order for security for costs if— (a)it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order; and (b)either an enactment permits the court to require security for costs, or one or more of the following conditions apply— (i)…. (ii)the claimant is a company or other body (whether incorporated inside or outside England and Wales) and there is reason to believe that it will be unable to pay the defendant’s costs if ordered to do so;

5. Two outline estimates of costs have been served. The application for security relates to the costs to be incurred to the conclusion of the summary judgment application. The outlined sums set out in the latest estimate total £236,794.54 made up as follows: Pre action costs fees £35,138.00 Disbursements £24,713.24 Issue and statements of case fees £14,153.75 Disbursements £24,446.35 extension of time fees £3,512.50 disbursements £3,525.00 security for costs Fees to 10 October 2025 Fees after 10 October 2025 £19,634.75 £12,650 disbursements to 10 October 2025 disbursements after 10 October 2025 £13,270.50 £18,500 summary judgment fees £8,930 Fees for hearing and consequentials £19,000 disbursements £13,707.95 Disbursements for hearing and consequentials £25,500 Settlement fees £112.50

6. It is common ground that 4 questions arise: a. Does the Claimant in each case fall within the category identified at CPR 25.7(b)(ii)? b. If so, should I exercise the power to award security for costs? c. If so, in what sum? d. And how should security be given? The claimant problem

7. The parties invited me (at least initially) to proceed on the basis that the first question is agreed. After a draft of the judgment was circulated the Claimants sought to resile that approach. I have come to the conclusion that I ought to proceed on the basis of the concession the substance of which was common ground at the hearing. I do so in spite the fact that in each case the claimant is named an individual and not a company for the following reasons: a. I have had no factual evidence of the position under German law. In those circumstances I proceed on the basis that I should apply the law of England and Wales. I am satisfied, as the claim is a debt claim, it would in England and Wales be brought by a liquidator in the name of the company. The liquidator’s power to bring a claim in the name of the company is set out at paragraph 4 of schedule 4 of the Insolvency Act 1986 . The power to bring proceedings in their own name would not apply (see paragraph 3A of the same schedule which refers to actions under certain provisions of the 1986 Act ). It follows that in English law the claims would be treated as claims brought by the companies. b. This approach is entirely consistent with the common position adopted by the parties earlier this year when the prospect of security for costs was first raised. That common approach relieved both parties of the need to go to the trouble and expense of advancing evidence of the German law position. c. Finally, the change of heart comes too late. As Mr Pearce KC has reminded me, submissions should be made once and for all at the relevant hearing. Making fresh submissions, particularly when they contradict the approach taken at the hearing, is inappropriate, save perhaps in the most extreme circumstances.

8. There is an obvious disjoint between having Dr Undritz as Claimant and the pursuit of security for costs against the companies. In his fifth witness statement, Mr Keates, Dr Undritz’s solicitor, suggests that “ It will stifle the claim if the claimant is required to provide security in the amount now sought. The company in respect of which the claimant is administrator is insolvent and as I explained above the claimant would not be able to put up security of £236,794.54 if ordered to do so .” In context, Mr Keates is plainly referring to Dr Undritz’s inability as the individual office holder. He is plainly not referring to the companies. The Discretion

9. The next question is, should I exercise the power to order security for costs? Although the authorities have more to say on the subject I take the guidance set out in Sir Lindsay Parkinson v Triplan [1973] 2 WLR 632 : “some of the matters which the court might take into account [include] whether the company's claim is bona fide and not a sham and whether the company has a reasonably good prospect of success. Again, it will consider whether there is an admission by the defendants on the pleadings or elsewhere that money is due. If there was a payment into court of a substantial sum of money (not merely a payment into court to get rid of a nuisance claim), that, too, would count. The court might also consider whether the application for security was being used oppressively - so as to try to stifle a genuine claim. It would also consider whether the company's want of means has been brought about by any conduct by the defendants, such as delay in payment or delay in doing their part of the work.

10. The Claimants invited me to take the following points into account and submitted that a proper weighing of these matters would result in the application being dismissed: a. The claim will be stifled if security is ordered; b. The merits of the claim are strongly in the Claimants’ favour; c. The application is oppressive and cynical; d. It is made too early; e. As a matter of public policy office holders should not be asked to provide security.

11. Looking at the context of the application and the points raised by the parties I am unable to accept the Claimants’ submissions. I reject them for these broad reasons: a. There is no substantive explanation as to why the companies would not be unable to pursue the claim in the event an order for security for costs is made. The evidence at its highest (see paragraph 8 above) is that Dr Undritz as office holder would be unable to meet an order for the payment of £236,000. There is no evidence about the ability of the companies to pay any sum or to raise any sum. b. The merits of the claim are far from clear. There is a reverse summary judgment application in respect of the limitation defence, and the set-off defence has not yet been pleaded out. I have not seen the evidence relied on in the summary judgment application. I am prepared to say the claim is bona fide and not a sham. On an interim application of this nature, it would be unsafe to explore the merits and beyond what I have set out, I decline to do so. c. I do not accept that there is an admission of the type referred to in Sir Lindsay Parkinson . Whether there is such an admission is often a simple matter to determine (for example where the admission is formally made in the defence). In this case it is not. Determination of the issue requires an exploration of the merits (to understand the apparent acknowledgment in context). For the reasons I have set out, I am not prepared to embark on such an exercise. d. I can see no basis on which it can be said the application is cynical or being used oppressively. The best the Defendant can do is suggest that some of the costs set out in the informal costs schedule may not be recoverable or are exaggerated. That is not enough. Indeed, taking the companies to be the claimants, the situation in which this application is made is (as was pointed out) the paradigm situation for security for costs. e. I accept that an order that in practice requires an office holder to provide security in respect of an insolvent claimant company would be (see Absolute Living at paragraph 33(5)(c)) “ entirely contrary to the public interest in the insolvency regime that exists in this jurisdiction ”. I do not accept that the principle would be infringed if I was to make an order for security in this case. This point further underlines the difficulty caused by the application being made against companies but the claimant being an insolvency office holder. f. I can see no issue with the timing of the application.

12. I should deal with a further point. It was submitted that Marcus Smith J in Absolute Living v DS7 [2018] EWHC 1432 (Ch) had suggested that a presumption of stifling arose in respect of an insolvent company when an order for security is made. Dealing with whether the claim in that case would be stifled, the Judge at paragraph 33 (in 6 detailed sub paragraphs) summarises the position as he has found it to be in that case. He says this: (1) The Claimant is an insolvent company in liquidation. The presumption, in the ordinary course, is that it would not be able to pay any costs if those were ordered at the conclusion of these proceedings. (2) On the evidence that I have seen, it is possible to go further than the mere presumption. I find, on the evidence before me, that there is no prospect of the Claimant being able to pay of itself any sum by way of security. (3) The question, therefore, arises, what would happen if I were to make, notwithstanding these findings, an order that security for costs be paid? Were I to make such an order, the only possible outcomes are the following three: (a) The claim would not proceed any further. (b) The liquidator would, contrary to all normal practice, herself cause to have paid from her firm the amount of security ordered. (c) The liquidator would seek to persuade the 514 creditors to whom I have referred each to put up some money to enable the security to be provided.

13. The following sub-paragraphs (4), (5) and (6) deal with 3 options outlined in (3). It seems to me to be clear that (1) is not referring to security for costs. The paragraph refers to costs payable at the end of the proceedings. It follows that it is plainly referencing the gateway condition of inability to pay. The fact that the sub-paragraph appears at the end of a section in the judgment dealing with stifling does not alter that obvious and plain meaning.

14. I do accept that sub-paragraph (2) appears to suggest that the presumption in (1) does relate to security for costs. Viewed in context that again does not alter what is in my view the plain meaning of (1). In my view (2) simply records the Judge’s finding that on the evidence before him the company would not be able to meet any order for security for costs. Thus, he was prepared to go further than the (different) presumption at (1). Paragraph (3) follows from the conclusion expressed in (2).

15. Taking each of these factors into account, bearing in mind the oral and written submissions I have heard and considered and having regard to all the circumstances of the case, I am satisfied that an order for security for costs should be made and that it is just to do so. Amount

16. I next consider the issue of quantum. I accept the following as the guiding principles when considering quantum. The overall question is what amount would be just in all the circumstances of the case?

17. In my judgment the sensible way to approach the exercise on the facts of this case and bearing in mind the evidence as to future costs I have is to first consider if there are costs that can confidently be disregarded at this stage. The next stage, having reduced the costs in that way, is to determine what happens to the rest. There is a choice: either to carry out a broad brush and robust examination of the remaining costs or to apply an across-the-board discount to take account of the many possibilities that may lead to an eventual reduction of the costs claimed on a detailed standard assessment. I prefer the second approach.

18. There is no hard and fast rule about the percentage to be applied. That is a matter of discretion.

19. Adopting this approach in my view the following costs must be removed: a. The sum of around £2,000 to account for a mathematical error. This point is agreed. b. The cost of drafting defences. Although I accept the work has been done, the defences have not yet been served. If the summary judgment application is successful the defences will not be required. These costs should be dealt with once it is clear the defences are required, until that time I cannot be satisfied that the costs have been properly or reasonably incurred. c. The costs of the security for costs application. The costs will be dealt with as part of the application.

20. The precise cost of drafting the defences has not been set out and I have not been given any indication of the cost or heard any submissions on how I should go about arriving at a sum. Taking the robust and broad-brush approach, I conclude it would be reasonable to deduct 50% of the Defendant’s suggested costs for “issue/statements of case” (£19,300).

21. The cost of this hearing and the application for security for costs are in total £64,054. They should be removed for the reasons I have given.

22. I am satisfied that none of the other claimed costs can be disregarded with any confidence. Whilst I was invited to remove the pre-action costs it seems to me that the position is not so clear that I can disregard them. I was referred to Lobster Group v Heidelberg Graphic [2008] EWHC 413 as authority for the proposition that the court should be slow to exercise its discretion to include pre-action costs in the amount required as security for costs.

23. The Judge in that case (Coulson J as he then was), noted that “ a considerable proportion ” of the claimed pre-action costs (paragraph 21 of the judgment) related to a mediation that had taken place a number of years before issue and in respect of which the parties had agreed to bear their own costs.

24. I am satisfied that pre-action costs at issue in this case are the type of pre-action costs that may well be awarded on an inter-partes basis at the end of the claim. I note there is no suggestion (unlike in Lobster ) that the parties had agreed that these costs would not be the subject of such an order.

25. After these deductions, the total sum of potentially recoverable costs over the relevant period to which this application relates is in the region of £150,000 (broadly £237,000 less £85,000).

26. In my view it would be safe and appropriate (and so just) to award 60% (or £90,000) of that sum by way of security for costs. That is a standard deduction (of 40%) to take account of reductions that may be made on a detailed assessment. It seems to me to be a figure that is proportionate at this stage to the sums in issue on what is a relatively straightforward claim.

27. In reaching that sum I must bear in mind (as a further check against the risk of stifling) that it is a sum the claimant (companies) can pay or raise. There is no proper basis on which I can conclude that the award of such a sum would stifle the claim. Method

28. The final issue is that of method. How should the security be provided? There was a late suggestion that it be paid to the Claimant’s solicitors and held by them on an undertaking to retain it pending further court direction or agreement. I cannot see why that arrangement would be objectionable but am content to leave it to the parties to discuss.

29. I will deal with the costs of this application separately if they cannot be agreed. Attempts to settle in the future

30. There is one further issue to raise. That concerns settlement. It is surprising that the costs put forward by the Defendant include virtually nothing in respect of the time spent on settlement discussion or consideration. The parties are required to help the court to further the overriding objective which expressly includes an obligation to promote or use ADR. CPR 29.2(1A) (applied in the Circuit Commercial Court by CPR 59.11) requires the court when giving directions to “ consider whether to order or encourage the parties to engage in alternative dispute resolution .” I appreciate that the Defendant’s summary of costs is retrospective. But past conduct is often a good indicator of future behaviour. I would expect from now on that the parties will devote far greater time and resources to exploring a sensible settlement of these claims. The changes to the overriding objective and to CPR 29 made in the light of the Court of Appeal decision in Churchill v Merthry Tydfil [2023] EWCA Civ 1416 require this change of approach.