Deutsche Bank A.G. v Sebastian Holdings Inc. and Another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Moore-Bick |
| Judgment Date | 21 January 2016 |
| Neutral Citation | [2016] EWCA Civ 23 |
| Docket Number | Case No: A3/2014/2344 |
| Court | Court of Appeal (Civil Division) |
| Date | 21 January 2016 |
[2016] EWCA Civ 23
Lord Justice Moore-Bick
Vice-President of the Court of Appeal, Civil Division
Lord Justice Lewison
and
Lord Justice Simon
Case No: A3/2014/2344
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
Mr. Justice Cooke
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr. Stephen Cogley Q.C. and Mr. Yash Kulkarni (instructed by Cooke, Young & Keidan LLP) for the appellant
Mr. David Foxton Q.C., Ms. Sonia TolaneyQ.C. andMr. James MacDonald (instructed by Freshfields Bruckhaus Deringer LLP) for the respondents
Hearing dates: 5 th, 6 th and 7 th November 2015
This is the judgment of the court on the appeal of Mr. Alexander Vik against the order of Cooke J. joining him to the proceedings as a defendant for the purposes of costs and ordering him to pay the respondent, Deutsche Bank A.G. ("the Bank"), £36,204,891 on account in respect of its costs of the proceedings against Sebastian Holdings Inc. ("Sebastian").
The background to the appeal lies in proceedings between the Bank and Sebastian relating to the operation of accounts maintained by Sebastian with the Bank for trading in foreign currencies, shares and financial products. Except to the limited extent identified later in this judgment, it is unnecessary for present purposes to describe the course of dealing on the accounts or the relationship between the parties, other than to say that in January 2009 the Bank began proceedings against Sebastian in this country to recover the sum of approximately US$250 million due principally in respect of amounts owed on the closing out of various trading positions. Sebastian brought a counterclaim against the Bank for approximately US$8 billion in respect of the losses it alleged it had suffered as a result of the Bank's breaches of contract in forcing it to close out certain open positions contrary to its wishes. In November 2013, after a trial lasting 44 days, Cooke J. gave judgment for the Bank on its claim in the sum of US$243,023,089 and dismissed Sebastian's counterclaim. The judge also ordered Sebastian to pay 85% of the Bank's costs, which are said to amount to about £60 million, on the indemnity basis. We shall refer to the proceedings between the Bank and Sebastian as "the main action".
The appellant, Mr. Alexander Vik, was at all material times the sole shareholder and sole director of Sebastian, a company incorporated in the Turks and Caicos Islands which he used as a personal investment vehicle. Sebastian, which is now said to have no assets, failed to make any payment in respect of the judgment or the Bank's costs and the Bank therefore applied to join Mr. Vik as a defendant with a view to obtaining an order that he pay the costs of the proceedings himself. The application was made on the basis that Mr. Vik owned and controlled Sebastian, that he had directed the litigation on its behalf, that he had funded the litigation, or had made funds available to enable Sebastian to pursue it, that it had been conducted for his personal benefit and that therefore he was the "real party" to the litigation. After a two-day hearing, at which Mr. Vik was represented by Leading and Junior Counsel, Cooke J. made the order to which we have referred. The order did not expressly state that the sum of £36,204,891 was to be paid on account of the Bank's costs, but it is clear from the opening paragraph of his judgment that that was what the judge intended.
The Bank's application was eventually served on Mr. Vik at his residence in Monaco and in due course he sought to have service set aside on the grounds that there were proceedings pending against him by the Bank in New York and Connecticut raising the same or similar issues (lis alibi pendens) and that the courts of this country were not an appropriate forum in which to determine his liability (forum non conveniens). The judge heard the challenge to the jurisdiction on 16 th June 2014 and the Bank's application for an order for costs against Mr. Vik on the following day. Since the applications raised similar issues he gave his reasons in the same judgment.
The judge dismissed the argument based on lis alibi pendens on the grounds that an application for an order for costs under section 51 does not involve the assertion of a cause of action or an attempt to enforce legal rights but a request for the court to exercise a statutory discretion in relation to proceedings before it which cannot be exercised by any other court. The proceedings in the United States, on the other hand, involved an attempt by the Bank to enforce rights recognised by the laws of the relevant states. In relation to the question of forum non conveniens Mr. Vik submitted that he was not bound by the findings in the main action and that it was open to him to challenge the entirety of the factual basis on which the Bank's application had been made. He argued that the proceedings in the United States, in particular those pending in New York, provided the most appropriate forum in which to determine those issues following disclosure, oral evidence and cross-examination of witnesses. The Bank said that the judge's findings in the main action gave rise to issue estoppels against Mr. Vik, who was therefore bound by them, and that in any event it would be an abuse of process for him to seek to re-open them.
In the light of those arguments the judge felt himself obliged to deal with aspects of the law on issue estoppel, abuse of process, the admissibility of findings made in previous proceedings and witness immunity, which also formed a significant part of the submissions advanced on behalf of Mr. Vik on this appeal. He did so, however, only after he had rejected the need to carry out an investigation of that kind. In paragraph 17 of his judgment he said:
"17. In my judgment, it is not necessary for me to carry out any investigation of the kind which is suggested by Mr Vik in order to determine the section 51 Non-Party Costs Application. The reason for this is the nature of the relationship between [Sebastian] and Mr Vik to which I refer again later in this judgment. As is plain from my judgment in the action, Mr Vik was the sole shareholder and sole director of [Sebastian]. As is plain from statements made by his solicitors in interlocutory applications prior to trial and from evidence at the trial, Mr Vik controlled the conduct of the litigation on [Sebastian's] behalf. Although Mr Johansson may have had "the day to day running" of the litigation, every decision on the conduct of the proceedings had to be taken by Mr Vik himself. Mr Vik "called the shots". He was [Sebastian's] principal witness of fact, spent many days in the witness box and gave all of [Sebastian's] evidence on the issue of available funds and transfers. He stood to benefit from success in the litigation because of his shareholding and his ability and readiness to move [Sebastian's] funds for such purposes as he saw fit.
18. In these circumstances the authorities compel me to the clear conclusion that Mr Vik is a "privy" of [Sebastian] and that, not only are the findings in my judgment admissible evidence in the section 51 application against Mr Vik, but he is bound by my judgment as a matter of res judicata and by my findings in the judgment by reason of issue estoppel…."
Later, having referred to the decision in Symphony Group Plc v Hodgson [1994] Q.B. 179, to which we shall return, he said:
"20…. Here, in circumstances where Mr Vik was not only the controlling mind and will behind [Sebastian] (keeping, as it would appear from disclosure, no books of account or corporate records for the company which he directed) but also ran the litigation in England in the sense of making all important decisions when instructing [Sebastian's] lawyers and being [Sebastian's] only witness of contemporaneous fact, giving evidence over several days, it is clear that Mr Vik's connection with [Sebastian] is so close that he could not possibly be said to suffer any injustice as a result of the findings in the judgment against [Sebastian] being admissible against him personally.
In our view, it is quite clear from these passages that, although he dealt with many of the arguments raised by Mr. Vik, the basis of his order was the very close connection which he found to have existed between Mr. Vik and the proceedings in the main action, which was sufficient to justify holding him bound by the findings of fact in his judgment.
On this appeal Mr. Vik was represented by Mr. Stephen Cogley Q.C. and Mr. Yash Kulkarni, neither of whom had appeared in any of the proceedings below. Mr. Cogley's submissions can be grouped under three broad heads. First, although not couched in quite these terms, he submitted that proceedings of this kind are in substance separate from the main action, to which they are ancillary, and are therefore to be approached in substantially the same way as any independent proceedings between the applicant and a third party. He therefore submitted (as had been submitted below) that the established rules governing the admissibility in evidence of findings made in a previous action, such as the rules relating to issue estoppel, abuse of process and what is generally known as the rule in Hollington v Hewthorn (Hollington and F. Hewthorn & Co Ltd [1943] K.B. 587), applied in their full rigour to the present proceedings between the Bank and Mr. Vik. He therefore addressed us at length on questions such as whether, for the...
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