Robert Paterson
- Partner
- Insolvency & Restructuring
Undritz v D’Amico Tankers DAC
The English Courts recently decided a substantial security for costs application brought against four German companies, acting by their insolvency administrator.
The claimant in charterparty proceedings was a German individual, but acting as insolvency officeholder of four insolvent German companies. The defendants applied for security for costs. The court applied English law to save the costs of adducing expert evidence on German law. If the claimant was a German insolvency professional, would that be treated as a “company” for security of costs purposes? Would security for costs in an insolvency situation be in the public interest?
The judgment of His Honour Judge Bird, sitting as a High Court Judge, in Undritz v D’Amico Tankers DAC [2026] EWHC 157 (Comm) concerns an unusual application for security for costs.
The claimant (in effect the shipowner) brought four sets of proceedings for sums of just over US$ 1 million said to be due under four charterparties. The “effective claimants,” as the judge put it, were companies incorporated under the laws of the Federal Republic of Germany. Each was in a German insolvency process, so the claimant in each of the claims was named as Dr Sven-Holger Undritz acting as “insolvency administrator regarding the assets” of each company.
The charterer applied for security for costs under CPR 25.27 which provides:
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…
It was common ground between the parties that four questions arose:
(a) Did the claimant in each case fall within the category identified at CPR 25.7(b)(ii)?
(b) If so, should the court exercise the power to award security for costs?
(c) If so, in what sum?
(d) And how should security be given?
The judge concluded, albeit on the basis of a concession (see below), that the first question should be answered in the positive, in spite of the fact that in each case the claimant named was an individual and not a company, He had no evidence before him of the position under German law.
“In those circumstances,” he said, “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.”
He went on to say that that approach was consistent with the common position adopted by the parties when the prospect of security for costs was first raised, an approach which had been adopted to relieve the parties of the need to go to the trouble and expense of advancing evidence as to the position under German law. The judge noted, however, what he described as an “obvious disjoint” between having Dr Undritz as claimant and the pursuit of security for costs against the companies over which he had been appointed.
As to the exercise of the discretion, he rejected the office holder’s submission that it should be exercised against ordering security to be given. He took into account a number of factors:
(a) There was no explanation as to why the companies would not be able to pursue their claims in the event of an order for security for costs being made: “The evidence at its highest… 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 claims were far from clear, although the judge accepted that the claims were bona fide and not a sham. It would, however, be unsafe to explore the merits at this stage.
(c) There was no admission that money was due, as referred to in the well-known case of Sir Lindsay Parkinson & Co Ltd v Triplan Ltd.
(d) There was no basis on which it could be said that the application for security was cynical or being pursued oppressively.
(e) Although the judge accepted that an order requiring an office holder to provide security in respect of an insolvent claimant company would be “entirely contrary to the public interest in the insolvency regime that exists in this jurisdiction” (see Absolute Living Developments Ltd v DS7 Ltd) he did not accept that the principle would be infringed if the court were 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) There was no issue with the timing of the application (i.e. it had not been made at a late stage in the proceedings).
In the circumstances, the judge was satisfied that an order for security for costs should be made and that it was just to do so. He ordered security to be given in the sum of £90,000 (on the basis that the likely recoverable costs would be in the region of £150,000), leaving the parties to agree the mechanics as to how it should be given.
Although the application for security was successful in this case, it is submitted that the case is far from being authority for the proposition that a foreign (or any) office holder is usually to be equated with the company in respect of which he or she has been appointed for the purpose of security for costs. The judgment records that the parties had invited the court (at least initially) to proceed on the basis that the first question ((a) above) had been agreed. After a draft of the judgment was circulated the claimants sought to resile from that, but the judge declined to allow them to do so, holding that it was appropriate to proceed on the basis of the concession, the substance of which had been common ground at the hearing. The result may have been different if the concession had not been made and/or if evidence as to the nature of the office holder’s status under German law had been adduced.
This article is for general information purposes only and does not constitute legal advice or a comprehensive statement of the law. Specific legal advice should always be sought in relation to individual circumstances.
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