Deutsche Bank (Suisse) Sa v Gulzar Ahmed Khan & Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Hamblen |
| Judgment Date | 25 April 2013 |
| Neutral Citation | [2013] EWHC 1020 (Comm) |
| Docket Number | Case No: 2011-403, 2011-1110, 2011-1109,2011-1111,2011-1107,2011-1105,2011-1108,2011-1106 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 25 April 2013 |
[2013] EWHC 1020 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building, London, EC2A 1NL
Mr Justice Hamblen
Case No: 2011-403, 2011-1110, 2011-1109,2011-1111,2011-1107,2011-1105,2011-1108,2011-1106
Michael Pryor (instructed by Simmons & Simmons LLP) for the Claimant
Nigel Jones QC and Emily Betts (instructed by Richard Slade & Co) for the Defendants
Hearing date: Friday 19 April 2013
The various orders which the Claimant seeks consequential upon my judgment are set out in the draft order before the court. I shall address the issues raised under the headings below.
The Money Judgment
The money judgment sought is set out in paragraphs 1–3 of the draft order, and is based on a schedule updated and certified by the Claimant on 12 April 2013. No issue is taken as to the details of the amounts there set out and I accordingly make an order in the terms requested.
The Counterclaims
The order includes dismissal of various of the counterclaims which were dealt with at the trial together with the stay on agreed terms in relation to the outstanding counterclaims. I make the order in the terms requested in paragraphs 5 and 14 of the draft order with the amendment suggested by the Defendants.
Costs
A number of costs issues arise and in particular:
(1) Whether the Defendants are liable for costs on a joint and several basis.
(2) Whether the Claimant is entitled to costs on an indemnity basis.
(3) The terms of any payment on account of costs.
(1) Whether the Defendants are liable for costs on a joint and several basis.
The first ground upon which the Claimant contends that costs should be on a joint and several basis is clause 16 of the Facility Agreement which provides that:
"The Borrowers hereby undertake to indemnify the Bank forthwith upon demand from and against all costs, fees, charges, taxes, expenses, liabilities and other amounts which the Bank may incur, sustain or pay in connection with the preparation, negotiation, registration, implementation or enforcement of this Agreement and/or the Security Documents and/or in connection with the preservation or protection of the Bank's rights hereunder or there under and/or in connection with any consent or approval of the Bank required or requested under the provisions of the Agreement or any of the Security Documents and including (in particular but without limiting the generality of the foregoing) the fees and expenses of the Bank's solicitors and VAT thereon and of the Bank's surveyors and VAT thereon."
The Claimant contends that the reference in clause 16 to the "Borrowers" is in clear distinction to elsewhere in the Facility Agreement where each "Borrower" is referred to. The Claimant submits that the reference being made is to all the parties to the Facility Agreement and that they are all liable in relation to the costs there referred to.
The Defendants contend that on the proper construction of clause 16 each Borrower is liable for any costs properly recoverable only in respect of its tranche and not in respect of all the other loans. It submits that the reference to "this Agreement" in clause 16 is to the series of loans to each Borrower and is in fact, eight distinct Agreements. It points out that the Claimant has accepted this analysis in relation to the individual loans in these proceedings. It emphasises that if there had only been a default by one Borrower under one loan, one would not expect costs of enforcement in relation to that Borrower and that loan to be recoverable against all the other Borrowers.
I agree with the Claimant that the Facility Agreement does distinguish between the obligations of each Borrower and the obligations of the Borrowers collectively.
Clause 16 appears to be addressing general charges which can be recoverable against all the Borrowers. For example, it includes costs concerned with the preparation, negotiation, and registration of the Agreement. Those will be general costs which one can well understand should be recoverable generally, rather than on some unspecified pro-rated basis. Equally, in relation to enforcement, and bearing in mind that any event of default means that the entire Facility loan becomes repayable, it is understandable that costs of enforcement should be recoverable generally rather than on a loan by loan/Borrower by Borrower basis.
In my judgment, the natural reading of this clause is that the "Borrowers" means just that, namely all the Borrowers, not each individual Borrower. That is also supported, for example, by the similar reference to "Borrowers" in clause 15 where they have to bear the cost of a valuation "of the Properties". That again would appear to be referring to a general, shared liability rather than a Borrower by Borrower or pro-rated liability.
I therefore accept the Claimant's case that under the contract the Defendants' liability for costs is joint and several.
The Claimant further submits that joint and several liability should be imposed under the CPR in any event. It points out that in substance the role of the first to twelfth Defendants in advancing the defence and counterclaims is indistinguishable, so that they should be treated as advancing the various cases individually and as part of the team of Defendants of which they are constituents. In this regard the Claimant points to various parts of the pleadings which make it clear that the case being advanced is on behalf of all the Defendants together, that is the Khan Family and the corporate borrowers. I accept that on the pleadings the position in relation to all the main causes of action is that a common case was being made on behalf of all Defendants, without distinction between them.
The Claimant further points out that the aspects of the case which generated the greatest amount of work and the largest volume of disclosure, were those which were being advanced expressly by both the Khan Family and the corporate borrowers and in particular: pre-Facility misrepresentation; inducement of the First Supplemental Agreement; consumer protection legislation and Breach of Contract.
The Defendants stress that these pleadings were drafted at a time when the entire claim was being made against all the Defendants, and that it was only about ten days before the trial that the Claimant finally abandoned its claim against the Khan Family that they were jointly liable in respect of the loans under the Facility Agreement. That meant that the claim they were facing went from one of about £50,000,000 to one of less than £50,000. In those circumstances, it is submitted it would be quite wrong for the Khan Family to be liable for all the costs of the claims, notwithstanding the common front presented in the proceedings. It is submitted, that where a party only recovers a very small amount relative to the costs incurred, that party should pay the other's costs or at most there should be no order as to costs. In this connection I was referred to the cases of Hooper v Biddle & Co [2006] EWHC 2995 and also Painting v Oxford University [2005] EWCA Civ161.
It is correct that there was a major change in relation to the monetary claims being made against the Khan Family shortly before the trial. However, the reality of this litigation throughout has been that the real party interested in the proceedings is the Khan Family, whether the claims were being made against them individually or against the corporate SPVs which they own and control. The way in which the case was run, both in the pleadings and at the trial, was on the basis that effectively all the Defendants were in it together and were presenting a common front in relation to virtually all issues.
Further, although the ultimate claim against the Khan Family was for a small amount, at no stage did they seek to protect their position or extricate themselves from the proceedings by making an offer to cover the amount due, either before or after the claim was reduced in amount.
In all the circumstances, in my judgment this was a collectively run case and it is appropriate to make a costs order that reflects that, which means a joint and several order. For similar reasons it would not be appropriate to exercise any discretion to disallow costs and override the contractual agreement that costs should be on a joint and several basis, even if I was otherwise minded to do so.
I...
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