The Commercial Court’s decision in Undritz v D’Amicco Tankers DAC provides a nuanced and thought-provoking exploration of security for costs in the context of cross-border insolvency. While the outcome itself may appear straightforward, the reasoning exposes important doctrinal tensions and practical risks for litigants, particularly where foreign insolvency regimes intersect with English procedural law.

The Unusual Procedural Posture

At first glance, the case appears to concern a routine application for security for costs. However, its unusual feature lies in the identity of the claimant.

Dr Sven-Holger Undritz, a German insolvency administrator, brought four claims arising out of charterparties. Each claim related to a separate German company in insolvency. Critically, the proceedings were issued in his name, rather than in the names of the companies themselves.

This immediately created a structural tension:

• Formally, the claimant was an individual;
• Substantively, the claims belonged to insolvent corporate entities.

This distinction became central to the defendants’ application under CPR 25.7.

The Threshold Issue: Who is the “Claimant”?

Under CPR 25.7(1)(b)(ii), security for costs may be ordered where:

• The claimant is a “company or other body”; and
• There is reason to believe it cannot pay the defendant’s costs.

The key issue was therefore whether an insolvency officeholder – acting in a representative capacity – falls within that definition.

The Court’s Approach

Rather than undertaking a detailed conflict-of-laws analysis, the court adopted a pragmatic shortcut. In the absence of expert evidence on German law, it applied English law by analogy.

Under the Insolvency Act 1986:

• A liquidator ordinarily brings claims in the name of the company;
• Proceedings brought in the officeholder’s own name are limited to specific statutory causes of action

On that basis, the court concluded that the claims should be treated as if brought by the companies. This brought the case squarely within CPR 25.7.

A Pragmatic but Imperfect Solution

This reasoning was efficient – but not entirely satisfactory. It effectively sidestepped the true legal question: what is the status of a German insolvency administrator under German law?

Instead, the court relied on:

• Procedural convenience; and
• A concession by the parties.

The judge himself acknowledged the resulting “disjoint” between the formal identity of the claimant and the target of the security order.

The Role of Party Concessions

A striking feature of the case is the extent to which the outcome was shaped by party agreement. The parties initially proceeded on the basis that CPR 25.7 applied. Only after circulation of the draft judgment did the claimants attempt to withdraw that concession.

The court refused to allow this, emphasising that:

• The issue had been treated as common ground at the hearing;
• It was appropriate to decide the case on that basis.

This serves as a clear warning: early concessions on threshold issues can be decisive, and attempts to reverse course late in proceedings are unlikely to succeed. In cross-border cases especially, parties should think carefully before relying on English legal analogies instead of foreign law evidence. A fully contested approach might have led to a different result.

Discretion and the Public Interest in Insolvency

Even where jurisdiction exists, the court must still decide whether ordering security is just. The claimant argued that security would undermine insolvency policy by hindering claims brought for creditors’ benefit, relying on authorities such as Absolute Living Developments Ltd v DS7 Ltd.

The judge accepted the principle but confined its scope. He distinguished the case on the basis that the application was directed at companies rather than the officeholder personally, and there was insufficient evidence that the claims would be stifled.

The decision reflects a nuanced position: insolvency does not provide automatic protection, particularly where financial position, funding options, and claim strength are unclear.

Evidential Gaps and Their Consequences

A recurring theme in the judgment is the lack of evidence. The claimant provided no clear evidence of financial position, inability to obtain funding, or that security would prevent the claim proceeding.

This proved critical. In practice, courts expect concrete, evidence-based explanations of financial incapacity, and bare assertions are unlikely to suffice. The absence of evidence will often tip the balance in favour of ordering security.

Annecto Legal has been asked by insolvency professionals to provide detailed feedback on the market, and what options are / would be available in a given situation. This can be invaluable in assessing options, but also reassuring regulators and creditors that the appropriate market research has been done. Furthermore, the ability to meet a Security for Costs application using cost-effective insurance options can be a difference maker in insolvency disputes.

Quantum and Commercial Reality

The court ordered £90,000 in security against an estimated £150,000 exposure, reflecting a typical Commercial Court approach. Security is rarely set at the full amount but at a reasonable proportion, balancing fairness to both sides. The method of providing security was left to the parties to agree.

Broader Implications

The decision does not establish a general rule that insolvency officeholders will be treated as companies under CPR 25.7. Rather, it highlights how procedural context and party conduct can shape classification, particularly where foreign law is not fully explored.

It also underlines the importance of adducing expert evidence on foreign law – without it, courts may default to domestic analogies that do not accurately reflect the legal position.

From a practical perspective, insolvency practitioners should be ready to demonstrate how claims will be funded and anticipate security applications early. For defendants, the case confirms that security for costs remains a powerful tool, especially where claimants provide limited financial disclosure.

Insolvency Litigation Funding Options

Litigation funding, the assignment of claims and/or ATE insurance can play a pivotal role in assisting insolvency practitioners (IPs) in meeting their obligations. Insolvency practitioners in insolvency litigation can make use of the following funding methods:

After-the-event (ATE) legal insurance – ATE insurance is generally used to protect from adverse costs risk & Security for Costs requirements. After-the-Event (ATE) legal expenses insurance is perhaps best thought as similar to a ‘swap’. For either no upfront fee or a small upfront fee, the insurer takes on all of the risk of the potential adverse costs award. The claimant has swapped their obligation to pay the defendant in the event of a loss, with the obligation to pay the insurer in the event of a win.

This ‘swap’ is generally an attractive swap as the client is likely to be in a better financial position following a loss. Also, the payment to the insurer will only be a percentage of the adverse costs rather than the whole amount.

Third party litigation funding – In some cases, third party litigation funders may be willing to provide funding for an insolvency dispute claim in exchange for a percentage of any financial settlement or damages awarded. This option can be attractive for individuals who cannot afford to pay legal fees themselves but have a strong case. ATE insurance is often used in conjunction with this type of funding.

Assignment of litigation – Some types of disputes can be assigned to a third party, usually for an upfront payment and a share of recoveries (after costs). This model can be useful on small cases when the ATE and CFA model would not deliver value. But giving up control can sometimes be costly, especially on larger disputes. Working with a broker can be an effective way to understand the options and evaluate the best course of action, as well as providing the insolvency with a written record of the process undertaken.

How can Annecto Legal assist?

Disputes arising in insolvency proceedings can be costly and procedurally challenging. Annecto Legal regularly assists licensed practitioners and liquidators who are involved in the administration or liquidation of a company.

We assist a wide range of clients in finding the appropriate insolvency litigation funding, assignment options and after-the-event (ATE) insurance. We ensure you meet your professional obligations in a cost-effective manner and provide written reports to place on file.

If you are in the process of pursuing or defending an insolvency dispute and want to find out whether we can assist in helping you fulfil your obligations and secure the right deal, then contact Annecto Legal.