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	England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Palmali Shipping S.A. v Litasco S.A. [2018] EWHC 2634 (Comm) (05 October 2018) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2018/2634.html Cite as: [2018] EWHC 2634 (Comm)

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IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice, Rolls Building Fetter Lane, London, EC4A 1NL
		5th October 2018

MR JUSTICE ANDREW BAKER:

1. The presentation of the security for costs application by the defendant in these cases at today's case management conference has not been entirely satisfactory because, as has become increasingly not uncommon, the claimant has only been able, at the very last minute, to put forward evidence of funding arrangements with associated after the event insurance that it will wish to contend or may wish to contend will enable the court to conclude that there is not a real risk of a future main costs order in the proceedings in favour of the defendant going unsatisfied. It is also the case that, in putting forward such evidence as it was then able to put forward, but only as recently as Tuesday of this week, the claimant did not in evidence even assert, let alone provide any particularisation or verification, that, in the absence of the court accepting the sufficiency of those arrangements as avoiding the need for security for costs, the claim would or might be stifled at all, let alone at any early horizon from now.
2. As matters stand, it is a plain case for security, subject only to either the funding and insurance arrangements that are, hopefully, in the course of being finalised proving ultimately sufficient to allay the concern that presently exists as to the satisfaction of future costs orders in favour of the defendant, or any possible future contention backed by evidence as to the risk of stifling the claim. As Mr Munby for the defendant submits, all of that must be seen in the particular context that, although there is strong evidence supporting the proposition that, come late 2020, there may well be real difficulties in the defendant recovering from the claimant a costs order, which, if the defendant succeeds at trial is likely to be a costs order of the order of certainly £5 million if not more, yet at the same time, the claimant continues in business as a substantial operating entity generating, it is likely to be, cash flow that is significant in absolute terms. Part of the evidence going to the overall concerns as to the claimant's financial position does include reference to some degree of seeming default on some payment obligations. However, it must be the case that, at least in general, it is sufficiently cash flow solvent to be continuing properly to trade.
3. In those circumstances, Mr Munby presses that the court must be very cautious before accepting even the possibility that there might prove to be a serious issue as to stifling the claim, let alone any issue that the mere making today of an order for security for costs, otherwise justified by the evidence as it stands today, might stifle the claim.
4. All that said, I have to deal with the practical reality that I do not doubt the sincerity with which Miss Wells, on instructions, indicates that this is a case in which issues of the possible stifling of the claim may well arise if the funding and insurance arrangements do not come to a finalised position satisfactory to the defendant or, in default of that, sufficient for the court not to make a final conclusion that security should be granted; and that there is an earnest willingness on the part of the claimant and the funder now supporting it in the litigation to achieve a finalised insurance arrangement that will be, in that sense, satisfactory.
5. In those circumstances, pragmatically, the choice that we have debated at some length this morning has been between a range of options, all of which, in one form or other, preserve the ability or would preserve the ability of the claimant to be back in court by reference to finalised arrangements which either have proved sufficient to satisfy the defendant or, even if they have not, are ripe for proper consideration by the court of any remaining concerns raised by the defendant.
6. The principal options which seem to me to be workable in that regard are:

a. firstly, as Mr Munby urges me to order, that I make now an order for security for costs covering, broadly, the remainder of these proceedings, with security to be provided in tranches, in the form of funded undertakings from the claimant's solicitors in the manner of a first tranche of security for costs that has been provided by agreement, but provide liberty to the claimant to apply, which would, clearly, have to be understood and, perhaps, expressed, for the avoidance of doubt, to be wide enough as to encompass a liberty to apply to discharge the entire order if the claimant's position finally was that it had finalised insurance arrangements that should be regarded as sufficient;

b. secondly, as for her part Miss Wells urges me to order, that I simply adjourn the application for security for costs to a date later this term, by when it would be anticipated that the debate between the parties triggered by the provision, since Tuesday, of possible insurance arrangements, as to their sufficiency, will have either culminated in agreement or, if not that, then a properly formulated ability to present matters to the court to resolve; and

c. thirdly, an order today on the basis that, as matters stand, the inevitable conclusion of the court is that security is appropriate, the claimant not having put the court in the position to say otherwise, by reference either to its insurance arrangements, as proposed, or by any properly evidenced suggestion of stifling the claim, but requiring in that regard only a tranche or tranches of security for costs to be provided in the form hitherto provided, subject to a liberty to apply, between now and the end of this term, so as to hold the ring and then to adjourn the application for security beyond those ordered tranches to a further hearing later this term.

7. At the slight risk that this is a classic compromise solution that dissatisfies everyone equally, in my judgment the fairest solution is that third solution. I say that particularly because, as I have said, although Mr Munby's forensic cynicism as to the claimant's position is understandable, and I do not criticise him for inviting the court to share a degree of cynicism, I am not in a position to doubt, at this stage, the sincerity with which the claimant puts forward what Miss Wells, on instructions, says are real concerns as to the claimant's ability to pursue this claim if, for the longer term, it is not in a position to put in place insurance arrangements that avoid the need for the full extent of security that would take the matter through to trial. In those circumstances, although, of course, any prediction of the future cannot be certain, it seems to me so likely that were I today to order full security through to the end of the trial, there would inevitably have to be a further hearing unless, in the meantime, agreement was reached, that I ought not to grant such an order in the first place which pretends to the idea that no further hearing might be necessary.
8. At the same time, and for the reasons I have indicated, on the basis of Mr Munby's submissions as to the present continuing trading activity of the claimant, I certainly am not persuaded that it would be appropriate to adjourn the matter with no order for security in the meantime, on any basis at all that the court perceives a difficulty with a stifling of the claim in the very short-term if security is ordered to be provided. I say that, in particular, taking account of the fact that, in keeping with the normal practice at least in this court, the order that would be made today will not have attached to the requirement to provide a next tranche or tranches of security any immediately applicable sanctions for failure of the claimant to provide it. That is of course no invitation whatever to the claimant not to comply with the order that I will make. However, it is a pragmatic recognition of the reality that if security is ordered but not provided, on the one hand, the reasons why will, and will need to be, explained in full by the claimant, it may be as part and parcel of its evidence for any further hearing; and, on the other hand, it will not have any instantaneous consequence on the continuation of the action.
9. I wish to make it clear -- and this we should build into the order that we draw up -- that, notwithstanding what I have just said, the defendant must be at liberty, for its part, to apply, upon any failure to supply the security that will now be ordered, for a stay of the claim or other sanctions as it may be advised to seek.
10. Between now and the end of term, whilst I do not suppose it will be the parties' only significant activity in the case, it is clear to me that the real focus of the parties' effort in the case will be the work required towards the disclosure deadline which they propose to be a date in March next year. In the light of the discussion we have had as to the estimated costs on both sides of the entire disclosure exercise, in my judgment it would be appropriate to proceed for today's purposes on the basis that the defendant is highly likely to incur cost between now and the end of term at a level such that at least £750,000 in recoverable costs is likely to be generated by the disclosure exercise. In circumstances where, as I have said, I anticipate that is likely to be the main focus of the parties' activity, but it will not be the exclusive extent of their activity, and, indeed, there may well be significant further costs now to be incurred in the security for costs application itself, in my judgment the appropriate amount of security to be required between now and the end of term is £900,000.
11. Whether or not full security for the action as a whole, through to trial, is ordered to be provided in monthly tranches or in different stages, if it is required at all, it seems to me that the immediate order for security I have just indicated would appropriately be one which requires that security to be provided in three tranches on the date proposed by the defendant.
12. Subject to any fine-tuning of the detail of the order, which I would ask counsel to prepare in draft and agree if possible (and if there are any disagreements of wording, I would resolve those via e-mail through my clerk), the order today is that the claimant provide further security by payment into court or by undertaking from the claimant's solicitors in terms materially similar to the undertaking previously given -- I cannot remember the date but that can be reflected in the order -- in the total sum of £900,000 in three equal tranches to be provided by 31 October, 28 November and 27 December 2018, and that the application be otherwise adjourned for further consideration of additional security to a date to be fixed within this Michaelmas term. I will discuss with counsel in a moment a time estimate.
13. There must be liberty to the claimant to apply, at any stage, as to the form of security ordered.

LATER

14. It seems to me, on this proportionately small point within this large scale litigation, that, whilst the protective nature of the inclusion of a range of claims, quite a few of which were, on the face of things, unsustainable, is, perhaps, understandable, it is a case in which that demonstrates that, under that pressure of time and the issuance of claims, to some extent, just to protect time, there was inadequate consideration of the sustainability of at least some of those claims. That, in and of itself, would not have caused me to direct that the costs of and occasioned by those claims, that is to say the claims now withdrawn, be assessed in due course on an indemnity basis; but what should then have happened, an awareness on the claimant's side being present that the matter had, in that sense, been slightly rushed through, is that the claimant should then have done an anxious exercise, having issued the claim, of double-checking whether it had in fact included, on that protective basis, a set of claims all of which were at least arguably sustainable.
15. Instead, what happened is that the claimant both put the defendant to the trouble of digging out the documentation and reviewing it for each and every claim, many of which now are relatively historic, and, what is more, took a somewhat high-handed attitude in correspondence as to the defendant's entirely reasonable request for a bit more time to complete that exercise across what was originally 80-odd individual claims.
16. It does seem to me, and although I said at the outset this is all a proportionately minor exercise in the context of this litigation, that does take the claimant's conduct out of the norm. It would be impossibly impracticable to try to separate out those of the withdrawn claims that suffer from the difficulty I have identified from some of them that may not have suffered from that difficulty for reasons indicated by Miss Wells, for example the claims that it turns out were the subject of ongoing arbitration proceedings.
17. The appropriate order, in my judgment, is for the relevant subset of costs within the litigation to be assessed, in due course, on the indemnity basis. By the rules, that assessment will not take place until the end of the litigation and no request has been made to vary that.
18. There will be a payment on account. Taking on board the concerns expressed on the claimant's side as to quantum, on the other hand also the response to those concerns that has been put in evidence, and the fact that the order is for those costs to be assessed on an indemnity basis in due course, in my judgment the appropriate quantum of that payment on account is £60,000.

LATER

19. In relation to the security for costs application, in my judgment, it has been an entirely successful application as of today. The degree to which it did not succeed in full, in the sense that full security for the entire action has not, in fact, been ordered, is the result, as in my judgment Mr Munby accurately described it, of the offering or throwing to the claimant of a judicial lifeline, notwithstanding the unacceptable lateness with which, in the event, the possibility emerged, not yet established, that it might, in the future, show that additional security beyond that ordered today should not be required.
20. In those circumstances, the appropriate order on the application notice of 6 September, which also included applications which have succeeded in relation to other matters, although they will not have generated very significant separate costs, the appropriate order is that the costs of and occasioned by that application notice up to and including today are to be paid by the claimant to the defendant in any event, in relation to which I have a costs schedule.