Andrew Lawrence Hosking v Apax Partners LLP & others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Hildyard |
| Judgment Date | 18 October 2018 |
| Neutral Citation | [2018] EWHC 2732 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: 2011013638 |
| Date | 18 October 2018 |
[2018] EWHC 2732 (Ch)
Mr Justice Hildyard
Case No: 2011013638
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
7 Rolls Building, Fetter Lane, London
EC4A 1NL
Joe Smouha QC, Stephen DaviesQC, Ciaran Keller, Tom Ford, Stephen Donnelly (instructed by Norton Rose Fulbright LLP) for the Applicants
Robert Miles QC, Andrew de Mestre (instructed by Clifford Chance LLP) for the APAX Respondents
Richard Jacobs QC, David Peters (instructed by PCB Litigation LLP) for the TPG Respondents
Hearing date: 5 th March 2018
The issue for adjudication: costs
This judgment concerns the denouement of litigation on a grand scale which was suddenly concluded, not by settlement or adjudication, but by discontinuance after four days of what had been envisaged to be six weeks of evidence and submission.
The central issue for adjudication is whether the Claimants should be liable for costs, not on the standard basis provided for in the event of discontinuance by CPR 38.6(1) (and which the Claimants cannot avoid), but on the indemnity basis. The Respondents contend that an order for standard costs would not properly reflect the conduct of the joint Liquidators (“the Liquidators”) in pursuing and then suddenly abandoning these proceedings. They say that the circumstances of the case take it well outside the norm so as to justify the indemnity basis.
The adjudication of that issue will also inform the appropriate approach to the ancillary issue as to the quantum of any payment on account.
The importance of these issues in monetary terms is illustrated by the fact that the payments on account sought in aggregate exceed �8 million, representing an estimated 70% of the costs in issue.
Factual background
The proceedings concerned a Luxembourg entity called Hellas Telecommunications (Luxembourg) II SCA (“Hellas II”).
Hellas II was the immediate parent company of TIM Hellas, which was at all material times the 3 rd largest mobile telecommunications company in Greece. Hellas II also had an indirect shareholding, acquired through TIM Hellas in 2006, in Q-Telecom, the fourth largest Greek mobile phone operator.
Hellas II is in compulsory liquidation, following on from its administration, in each case in this jurisdiction. Until August 2009, Hellas II had no material connection with this jurisdiction. However, in August 2009 Hellas II moved its centre of main interest from Luxembourg to England partly or primarily in order to take advantage of the administration regime under the Insolvency Act 1986.
Hellas II went into administration on 26 November 2009, having formally defaulted on its debts on 15 October 2009. At the commencement of that process, Hellas II had external debts in excess of €1.2 billion. The administration process failed.
Hellas II has been in compulsory liquidation since an order of Sales J (as he then was) made on 1 December 2011. Thus, these proceedings are brought by the Liquidators.
The Respondents are corporate entities and individuals connected with two global private equity houses which I shall call Apax and TPG respectively. The first eight Respondents are or were at material times connected with Apax (“the Apax Respondents”); the 9 th to 42 nd Respondents are or were connected with TPG (“the TPG Respondents”). For present purposes I shall simply refer to them as “Apax and TPG”.
Claims in other jurisdictions before these
In these proceedings, commenced in November 2015, the Liquidators have claimed approximately €1 billion from the Respondents as being the entities and individuals responsible for a transaction allegedly at an undervalue which they contended placed intolerable financial strain on Hellas II and caused its commercial demise.
This jurisdiction is the natural ‘home’ for such proceedings. But the Liquidators did not originally choose to sue here, and fought repeatedly to have their alleged rights adjudicated elsewhere.
They started with Luxembourg, where proceedings were brought against Hellas I, Hellas and the six individuals who formed the Board of Managers of Hellas. These included Messrs Aliberti and Bottinelli from the Apax side. These proceedings were unsuccessful, resulting in the Commercial Court in Luxembourg giving judgment against the Liquidators in December 2015. All of the allegations (including of fraud) were rejected: the Court in particular finding that the December 2006 recapitalisation had taken place in “ utter transparency”. That decision is under appeal.
Then, but in effect in parallel with their proceedings in Luxembourg, the Liquidators pursued proceedings in the Bankruptcy Court in New York against a wide range of defendants, including initially the Apax Respondents, alleging fraudulent conveyance under New York law. However, these claims were dismissed as against all parties on choice of law (and other) grounds and as against the Apax Respondents for lack of personal jurisdiction.
Amended claims under sections 423 and 213 of the Insolvency Act 1986 were then brought against the remaining defendants in New York, alongside an existing claim for unjust enrichment. Thereafter the New York Court also summarily dismissed the claims against a number of parties (being the First to Ninth Respondents- which include the persons which the Liquidators' written opening identifies as “the Prime Movers”) over whom it concluded it did not have personal jurisdiction.
Only then, and with the imminent expiry of a limitation period in this jurisdiction, did the Liquidators issue proceedings in England against the First to Ninth Respondents. Even then, however, the Liquidators showed no appetite for prosecuting those proceedings. On the contrary, and remarkably, they fought hard to obtain a stay of the English proceedings (to which the alleged Prime Movers were parties), so that the New York Proceedings (against parties who were indirect recipients of proceeds of the December Recap) could be concluded first. The Chancellor of the High Court rejected the Liquidators' application for such a stay.
Following the Chancellor's decision, the New York Court stayed the proceedings before it on forum conveniens grounds. The essential logic of that decision was that England is both the proper (and an available) forum for the resolution of the Liquidators' claims under the English Insolvency Act. It is and always has been their natural home.
The transaction the Liquidators sought to impugn
The transaction in question in these proceedings, as in the previous foreign proceedings, was an element in a recapitalisation (“the Recap”) by which the Hellas group of companies raised monies through a debt issuance, and paid approximately €978m of those monies up to its investors (and therefore out of the group).
There was no substantial factual dispute about the structure or execution of the Recap. There was also no dispute that it resulted in the relevant creditors' money being used in precisely the manner which they were told it would be: that is, to provide a return to the then investors.
The particular element of the Recap which the Liquidators have nevertheless sought to impugn is the redemption of some Luxembourg-law debt instruments known as CPECs 1 (“the Redemption”).
They contended that the Redemption took place at an undervalue, alleging that the enterprise value (“EV”) 2 of Hellas II was only some €2.4 billon (as opposed to the figure of €3.2 billion used for the purposes of the transaction). They contended that this beggared Hellas II, leaving it with unsustainable debts whilst the recipients of the Recap proceeds received very considerable profits.
The Liquidators' claim here was brought pursuant to section 423 of the Insolvency Act 1986 (“section 423”). That was the only claim before me for trial. The Liquidators had originally also included allegations of fraudulent trading contrary to section 213 of that Act (“ IA 1986”); but although they maintained the latter until October 2016, it was dropped in December 2016 after new Consolidated Particulars of Claim were provided, signed by new Counsel.
No other cause of action was asserted and no other claim was made in this jurisdiction, whether in negligence or for breach of duty or for recovery of any payment under Luxembourg law. Whether projections developed by the Deal Team 3 were objectively reasonable or not, or whether Luxembourg company law was breached in fact, were not matters necessary or required to be determined. There was never, in this jurisdiction at least, a question as to the existence and breach of a duty of care.
Accordingly, to succeed in their claim the Liquidators had to show
(A) That the December 2006 Recap was a transaction at an undervalue within the meaning of section 423(1);
(B) That, in participating in the CPEC Redemption, and in the December 2006 Recap generally, Hellas II was acting for the substantial purpose of placing assets beyond the reach of its creditors and/or of otherwise prejudicing the interests of such creditors within the meaning of section 423(3) (“the Statutory Purpose”);
(C) That it was appropriate in all the circumstances for the court to grant the Liquidators the relief they sought in relation to the Recap.
The Liquidators' claims and the Respondents' defences in more detail
I turn to outline the parties' respective positions, with particular reference to the three points identified in the preceding paragraph.
In summary as to these three issues the Liquidators contended that:
(A) The test of undervalue was met because
(1) the CPECs were not redeemed in accordance with their...
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