Excalibur Ventures LLC v Texas Keystone Inc. and Others (Defendants/Costs Claimants) Psari Holdings Ltd and Others (Costs Defendants)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Christopher Clarke |
| Judgment Date | 23 October 2014 |
| Neutral Citation | [2014] EWHC 3436 (Comm) |
| Docket Number | Case No: 2010 FOLIO 1517 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 23 October 2014 |
and
[2014] EWHC 3436 (Comm)
Lord Justice Christopher Clarke
Case No: 2010 FOLIO 1517
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Richard Waller QC and Richard Eschwege (instructed by Memery Crystal and Jones Day) for the 1 st to 4 th Costs Claimants
John Wardell QC and Jamie Carpenter (instructed by Withers LLP) for the 1 st and 2 nd Costs Defendants
Ian Croxford QC and Nicholas Medcroft (instructed by Orrick, Herrington & Sutcliffe (Europe) LLP) for the 5 th to 8 th Costs Defendants
The 3 rd, 4 th and 9 th Costs Defendants were unrepresented and did not take part in the trial.
Hearing dates: 11 th, 12 th and 13 th June 2014
On 17 December 2010 Excalibur Ventures LLC ("Excalibur"), a Delaware corporation, began this action against Texas Keystone Inc. ("Texas"), Gulf Keystone Petroleum Limited and other Gulf Keystone companies ("the Gulf Defendants"), together "the Defendants". In it Excalibur claimed to be entitled to an interest in a number of oil fields in Kurdistan, which are potentially extremely profitable, and of which the Shaikan field is the most important. The claim was for specific performance of the Collaboration Agreement pursuant to which Excalibur claimed its entitlement to an interest in the fields or to damages which, as finally put, were said to be of the order of US $ 1.6 billion. On some unknown date Excalibur entered into some form of conditional fee agreement with Clifford Chance LLP ("Clifford Chance"), their solicitors.
On 10 September 2013 I read out in court the concluding paragraph of my judgment. On 13 December 2013 I handed down the full judgment. Its effect was that the claim failed on every point. On the same day I ordered that the claim be dismissed and that Excalibur should pay the Defendants their costs to be assessed on the indemnity basis. The reasons why I did so are set out in the judgment which I gave on that day ("the costs judgment").
I ordered Excalibur to make a payment on account of the Defendants' costs in the sum of £ 10,700,000 in respect of the Gulf Defendants, and £ 6,800,000 in respect of Texas. The sum of £ 17,500,000 which had been paid into Court as security was to be paid out to the Defendants forthwith in satisfaction of the payments on account which I had ordered.
I also ordered Excalibur to provide additional security for the Defendants' costs in the total sum of £ 5,612,010, failing which I gave the Defendants leave to join some of the funders of the action to the proceedings. That security was never provided. Leave was given to join the remainder of the funders subsequently.
Excalibur is but a nameplate for Rex and Eric Wempen. It could not have brought this action unless it had been financed by a number of different persons who at different times and in different amounts produced the monies necessary to start and, later, to continue the action. That included providing or contributing to the funds which were required to be paid into court by way of security for costs. In return the funders were to share, to differing extents, in the fruits of the action if it succeeded.
The funders
The funders divide into four groups. The initial funder was Mr Andonis Lemos ("Mr Lemos"). He is the sole shareholder of Psari Holdings Limited, a Cayman Island company, which is the vehicle through which he agreed to provide funds to Excalibur, initially in November 2010. The company was not set up for that purpose but in order to invest in, inter alia, litigation funds, managed by an experienced team.
In March 2012 further groups of funders and their parents appeared on the scene. The second group was Hamilton Capital LLC ("Hamilton"), a Delaware corporation formed on 9 January 2009, which is a 99% subsidiary of Platinum Partners Credit Opportunities Master Fund LLP ("PPCO"), a Delaware limited partnership, formed on 25 June 2008. (Excalibur was Hamilton's eighth funding engagement). The remaining 1% is shared equally between Mr Jack Simony ("Mr Simony", who is a portfolio manager for Hamilton and other associated legal entities and PPVA (see [9] below) and Mr Harvey Werblowsky ("Mr Werblowsky"). He was the Chief Legal Officer for PPCO and PPVA (see [9] below) and a Portfolio Manager for Hamilton and JH (see [10] below). PPCO is a master fund, whose partners include feeder funds which themselves are funded by individual investors.
The third group was Blackrobe AEO I Investors LLC ("Blackrobe"), a Delaware company, which is a fund administered by Blackrobe Capital Partners LLC ("Blackrobe Capital"). Blackrobe has acknowledged service but neither it nor Blackrobe Capital has taken any part in the proceedings.
In October 2012 a fourth group appeared, consisting of Huron Capital PLC ("Huron"), formed on 17 August 2011 as a 100% subsidiary of Platinum Partners Value Arbitrage Fund LP ("PPVA"), a Cayman Islands limited partnership, formed on 17 December 2002. PPVA's business is to invest and trade in US and non-US securities on what is described as a "multi strategy basis". It, too, is a master fund like PPCO.
Last of all came JH Funding LLC ("JH"), a Delaware company, incorporated on 7 March 2013. It is a 99% subsidiary of PPCO with 0.5% being owned by Mr Simony and Mr Werblowsky respectively. Mr Simony acted as Portfolio Manager for it.
PPCO and PPVA and their subsidiaries operate out of the same office in New York. PPCO has not acknowledged service although the other Platinum entities (i.e. those in [7], [9] and [10] above) have. The Defendants suspect that the reason why they have not done so is to enable them to attempt to resist enforcement of any order on technical grounds. The Defendants seek a determination against PPCO on the merits and not a judgment in default.
The funding was provided in different tranches and for different purposes. I set out below the sequence.
The initial funding – Mr Lemos and Psari
The 1st Psari Funding Agreement
By the 1 st Psari Funding Agreement of 24 November 2010 Psari agreed with Excalibur to advance, and did advance, US $ 10,000,000 in respect of costs. It also agreed to advance a further $ 5 million for security for costs should that be ordered. In return Psari was, in the event of success, to obtain a 10% working interest in such interest as Excalibur received in the Shaikan field (with the option of monetisation after a certain period) or 10% of any damages in respect of Shaikan. (Later funders were not to get an interest in Excalibur's interest).
The 10% figure was to be increased by a further 2.5% if the $ 5 million was drawn down, and pro rata to any lesser sum. In the event the $ 5 million facility was not utilised. If the proceedings were resolved by settlement Psari was to receive either the 10% figure, or, if it was greater, $ 20 million if the settlement was within 12 months, $ 25 million if it was within more than 12 but less than 24, and $ 30 million if it was more than 24 months after the date of the Agreement. The Agreement contained a definition of " Material Adverse Change" which included the value of the claim falling below $ 350 million. In the event of such a change Psari could call back such of the Advance as remained unspent and uncommitted. Under the Agreement Excalibur undertook to use Clifford Chance until such time as its obligations to Psari were discharged in full.
The first security for costs application
In December 2011 Texas and the Gulf Defendants applied for security for their costs. The hearing of the application was scheduled for 14 March 2012.
The 2nd Psari Funding Agreement
A letter agreement dated 9 March 2012 between Psari and Excalibur contained a Security for Costs Facility and an Expenses Facility. Under the Security for Costs Facility Psari agreed to provide Excalibur with up to £ 7 million for security for costs in respect of the claim as ordered by the court or agreed between the parties, conditional upon Excalibur obtaining a further £ 2 million from alternative sources for security, which was to be used first, come what may. The facility was to be a bridging facility; and Excalibur undertook to use its best endeavours to repay any sums drawn down as soon as possible.
Excalibur agreed to increase Psari's recovery under the 1 st Psari Agreement by 1% for each further $ 1 million supplied under the Security for Costs Facility and not repaid by 1 October 2012. It may be that an amount of £ 2.5 million i.e. circa $ 4 million was drawn down under this facility on 27 April 2012: see [24] below. If so it was repaid on 6 July 2012. Excalibur also agreed to pay Psari a commitment fee varying in an amount according to when the draw down was repaid. If it was not repaid by 13 June 2012 the fee was to be 150% of the amount drawn down. Whether that fee of about $ 6 million was paid is unknown. The Security for Costs Facility discharged Psari's obligation to supply the Security Advance under the 1 st Psari Funding Agreement.
Under the Expenses Facility Psari agreed to provide up to £ 3 million in respect of the expenses of prosecuting the claim to judgment. In return Excalibur agreed to increase Psari's recovery under the 1 st Psari Funding Agreement by 1% for each further $ 1...
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