Bend Weld Engineering SDN. BHD v FMC Technologies Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Roger ter Haar |
| Judgment Date | 07 November 2023 |
| Neutral Citation | [2023] EWHC 2782 (TCC) |
| Court | King's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-2023-000210 |
[2023] EWHC 2782 (TCC)
Mr Roger ter Haar KC
Sitting as a Deputy High Court Judge
Case No: HT-2023-000210
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (KBD)
Royal Courts of Justice
Rolls Building
London, EC4A 1NL
Lauren Adams (instructed by Freeths LLP) for the Claimant
Marc Lixenberg (instructed by Burness Paull LLP) for the Defendant.
Hearing date: 20 October 2023
APPROVED JUDGMENT
This judgment was handed down by the court remotely by circulation to the parties' representatives by email and released to The National Archives. The date and time for hand-down is deemed to be 7 November 2023 at 10.30am
Mr Roger ter Haar QC:
The application before the Court is the Defendant's application for security for costs.
Background
The Claimant (“BWE”) is a fabricator and supplier of metal components based in Malaysia.
The Defendant (“FMC”) is a company specialising in industrial manufacturing including constructing and/or managing the construction of the metal structures required for offshore petroleum and natural gas extraction.
Between April 2019 and July 2020, the parties entered into a series of contracts under which BWE was engaged by FMC to fabricate and supply metal structures for use in its offshore oil and gas projects.
It is BWE's case that by a letter dated 22 July 2020 FMC wrongfully terminated all open purchase orders. It is also BWE's case that there were a number of unpaid invoices.
The unpaid invoices amount to US $85,958. The larger part of the claim relates to sums said to be payable in respect of purchase orders wrongfully cancelled or terminated on 22 July 2020. This part of the claim is in the sum of US $1,496,459.33. There is a further claim for US $144,000 in respect of storage charges for the cancelled items.
These proceedings were issued on 15 June 2023.
The issue of proceedings triggered an almost immediate response on behalf of FMC. On 19 June 2023 Burness Paull LLP, FMC's solicitors, wrote seeking security for costs:
So far as the application for security itself is concerned, the conditions at CPR 25.1.3(2)(a) and (c) are both satisfied in this case. We anticipate it being uncontentious that such conditions are satisfied but would welcome your confirmation in this regard.
As to CPR 25.13(2)(c), we note that based on your client's most recent set of accounts to 30 June 2022 (using rounded-up figures and an exchange rate of c. RM 5.7 to GBP 1):
1. Your client's total revenue is 2022 was RM 5.8m (£1m);
2. Your client made a pre-tax loss of RM 3.39m (£0.6m) (on top of a pre-tax loss of RM 2.6m (£0.46m) in the previous year;
3. Your client was propped up by a cash loan of RM 4m (£0.7m) from a holding company) and
4. Your client only has cash/cash equivalents of RM 238k (£42k) (down from RM 854k (£151k) the previous year).
Our client only intends to pursue its counterclaim in the event that your client's claim is pursued. Moreover, our client would consent to the dismissal of its counterclaim (assuming the timing were such that it had been brought), in the event your client's claim were dismissed for failure to put up security.
Please confirm that your client would in principle be agreeable to providing security for our client's costs ….. We intend to prepare a draft Precedent H costs budget in order that the quantum of such security may then be agreed, alternatively determined by the Court.
On 22 June Freeths LLP, solicitors for BWE, responded:
Our client also confirms its agreement in principle to provide security for your client's costs. However, in order to consider the same our client will need to understand your client's projected costs.
On 26 June Burness Paull wrote:
We welcome your client's co-operative approach signalled by way of your letter.
….
We enclose a copy of our client's draft Precedent H costs budget. Please note that we have not included any costs in respect of a security for costs application on the basis that, in light of your letter, we do not anticipate at this stage that such an application will be necessary. However, should it not be possible to reach agreement in relation to the amount of any security, we shall separately seek our client's costs of any application.
In accordance with the attached, we invite your client to agree to provide security for costs in the sum of £800,223.
On 30 June 2023 Freeths responded. I do not set out the letter in full. It made two major points: first that the assumption should be that costs should be assessed on a standard basis, suggesting taking 65% of FMC's Precedent H costs. Second, that because it appeared that FMC was intending to put forward a counterclaim, allowance should be made for those costs attributable to the counterclaim. On those bases it was said:
As previously indicated, our client is willing in principle to provide security in respect of your client's costs but only for those that are reasonable and proportionate and which relate to the defence of our [client's] claim (but not those costs that relate to your client's counterclaim).
In light of the above, our client would agree to making a payment into Court for your client's security of costs as follows:
• costs relating to the expert report phase should be excluded, leaving £657,973.00;
• on the basis that your client's counterclaim is 141% of our client's claim in terms of quantum (based on the figures set out in the Pre-Action Protocol correspondence), it seems a reasonable assumption that the majority of your client's costs will be spent on the counterclaim. We would expect the ratio between the costs of the defending the claim compared to dealing with the counterclaim are likely to be in the order of 1: 3, so 33% of £657,983.00 leaves £217,131.09; and
• we have assumed a 65% recovery of the above sum representing costs assessed at the standard basis should your client successfully defend our client's claim. This leaves £141,135.21.
On 5 July Burness Paull made a counterproposal:
3.1 In light of the position you have adopted regarding the ‘basis of assessment’, we propose agreement in line with the enclosed draft Consent Order.
3.2 We consider it ought to be possible to reach agreement in relation to the quantum of security up to and including the CMC stage of the proceedings.
3.3 Rather than effectively having an arguable premature debate as to our client's Precedent H costs budget, the attached proposal will enable the parties to agree (alternatively for the Court to determine) the question of costs budgeting in the usual manner – and then for the quantum of further security to be easily resolved against the background thereof at the first CMC.
3.4 We have calculated the total sum in respect of security (£162,078.40) (for the stages of the proceedings in respect of which we propose security is provided at this point) in the following manner:
3.4.1 80% of incurred Pre-action costs (£114,098) in the sum of £91,278.40).
3.4.2 100% of Issue/statement of case costs in the sum of £45,250.
3.4.3 100% of CMC costs in the sum of £25,550.
3.5 We consider the above to be a reasonable position that we anticipate would be accepted by the Court if disputed.
3.6 Insofar as there is any modest quantum disagreement between the parties surrounding the above proposed figure of £162,078.40, we suggest that the parties agree that such disagreement be resolved by the Court (subject of course to the Court's agreement) based on brief written submissions. Indeed, to the extent that you were able to take issue with the said figure, as well as explaining the basis for doing so, we respectfully invite you to confirm your client's incurred and estimated costs in respect of the same initial stages of the proceedings.
In response, on 10 July Freeths declined to confirm BWE's incurred and estimated costs, and made the following proposal in respect of security up to the CMC stage of proceedings:
• Pre-action costs: £114,098 x 33% x 65% = £24,474.02; plus
• Issue/statements of case: £45,250 x 33% x 65% = £9,706.13; plus
• CMC: £25,550 x 33% x 65% = £5,480.48
TOTAL: £39,660.63.
Thus the parties' positions were defined and remained the same before me save that before me Ms. Adams on behalf of BWE challenged FMC's entitlement on the evidence before the Court to any order for security for costs at all.
Entitlement
CPR 25.12 provides:
(1) A defendant to any claim may apply under this Section of this Part for security for his costs of the proceedings…
(2) An application for security for costs must be supported by written evidence.
CPR 25.13 provides:
(1) The court may make an order for security for costs under rule 25.12 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) (i) one or more of the conditions in paragraph (2) applies …
(2) The conditions are:
(a) the claimant is –
(i) resident out of the jurisdiction …
(c) the claimant is a company or other body (whether incorporated inside or outside Great Britain) and there is reason to believe that it will be unable to pay the defendant's costs if ordered to do so.
In support of his application, Mr. Lixenberg relied upon a decision of Mr Peter MacDonald Eggers KC in Explosive Learning Solutions Ltd v Landmarc Support Services Ltd [2023] EWHC 1263 (Comm) in which he said:
17. First, the basis of the jurisdiction being that there is a “ reason to believe” that the Claimant will be unable to comply with a costs order, if made, signifies that the Defendant does not have to prove that there is a likelihood or probability that the Claimant will be unable to pay ( Jirehouse Capital v Beller [2008] EWCA Civ 908; [2009] 1 WLR 751, para. 26–35). That said,...
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