Global Energy Horizons Corporation v The Winros Partnership (formerly Rosenblatt Solicitors)
| Jurisdiction | England & Wales |
| Judge | Master James |
| Judgment Date | 20 August 2020 |
| Neutral Citation | [2020] EWHC B27 (Costs) |
| Date | 20 August 2020 |
| Docket Number | Case No: SCCO Ref JJ1602737 |
| Court | Senior Court Costs Office |
[2020] EWHC B27 (Costs)
IN THE HIGH COURT OF JUSTICE
SENIOR COURTS COSTS OFFICE
Court 95, Thomas More Building,
Royal Courts of Justice,
Strand WC2A 2LL
Master James
Case No: SCCO Ref JJ1602737
Mr Benjamin Williams QC (instructed by Eversheds Sutherland) for the Claimant
Mr Andrew Post QC and Mr Adam Zellick QC (instructed by Rosenblatt Limited) for the Defendant
Hearing dates: (fact-finding/preliminary issues phase): 5, 6, 7, 10, 11, 12, 13, 14 December 2018, 28 March and 10 May 2019; further written submissions from the parties on 16 August and 16 September 2019.
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
I heard this matter in December 2018, March and May 2019; there were subsequent written submissions in August 2019 (Defendant) and September 2019 (Claimant) on two cases raised by me as being of possible relevance (dealt with below from paragraph 118). I then requested sight of the Defendant's timesheets, which it was initially prepared to produce to the Court. However, the Claimant then indicated that if the Court was going to have sight of this evidence, it should have sight of it as well, to which the Defendant took exception. As will be seen below, Disclosure has been a contentious matter in these Part 8 proceedings and when the parties indicated that they both took the view I did not need to see the timesheets in order to decide the issues, I sent a message in January 2020 indicating I would proceed without the timesheets.
On any reading this Judgment has taken a long time to produce; the two main reasons for this are the fact that both sides submitted that the other was being untruthful, so that I have had to reach a decision upon the veracity of professional persons upon which not only substantial sums of money but (per their submissions) personal bankruptcy and potentially career-ending consequences, might depend, and the fact that the Claimant's submissions in relation to the invalidity of the retainers, sits uncomfortably alongside its acknowledgment of the sterling job done by the Defendant on its behalf. I have put a great deal of thought into both of these issues and I recognise the potentially swingeing effect of this decision upon either side.
Even so, I sincerely apologise to both parties for the length of time this has taken to produce and thank them for their patience and forbearance throughout. To assist in reading the following, the matters are addressed in the following order:
Brief Introduction
| Description | From paragraph | |
| Brief introduction | 4 | |
| Section 70 proceedings | 17 | |
| Part 7/Part 8 | 26 | |
| GEHC's motivation | 32 | |
| Witness Evidence and Credibility | 41 | |
| Scope issue | GEHC | 52 |
| RS | 63 | |
| Court's decision | 76 | |
| Other issues decided on evidential points | 109 | |
| Notice of Funding/ reduction to success fee | 110 | |
| Court's decision | 122 | |
| Reduction from 95% to 70% success fee | 138 | |
| Oral variation to a written retainer | 147 | |
| Conduct including conflict of interests between RS and GEHC | 151 | |
| Advice of Reed Pope | 169 | |
| Erroneous invoice | 171 | |
| Retainer/CFAs | CFA1 | 173 |
| CFA2 | 181 | |
| CFA3/invoices | 200 | |
| CLSA and validity of CFAs 1, 2 and 3 | 207 | |
| Court's decision | 232 | |
| Other issues of fact re: the CFAs | 240 | |
| RS advice to GEHC on whether CFA2 had ended/a new CFA was necessary | 243 | |
| RS advice to GEHC on whether there had been a win under CFA3 | 260 | |
| November 2015 costs estimate – mere device? | 271 | |
| August 2015 Agreement | 277 | |
| Breach of August 2015 Agreement | 286 | |
| Bird & Bird/Termination | 300 | |
| Court's decision | 324 | |
| Conclusion | 329 |
The Claimant, Global Energy Horizons Corporation (“ GEHC”), is a venture capital corporation which had invested in new technology in the oil and gas industry; the precise details of that technology are commercially sensitive and beside the point as far as these proceedings are concerned, but suffice to say it would be not only “green” technology but also potentially very lucrative indeed. Mr de Clare of GEHC believes the technology to be worth at least hundreds of millions of dollars. Whilst GEHC's former Solicitors, the Winros Partnership (formerly known as Rosenblatt Solicitors) (“ RS”) now say the technology is worth a fraction of that, they do agree that money accruing from its use should rightfully accrue to GEHC, which outcome they sought to achieve in proceedings on GEHC's behalf.
Unfortunately, a Mr Robert Gray, described as formerly a Partner of GEHC, took the technology for his own and derived a profit from it. GEHC, through RS, sued Mr Gray for an account of the profit he had derived from the technology and ultimately for that profit to be disgorged to GEHC as its rightful owners (the “ Gray Proceedings”). I use the foregoing abbreviations in place of “Claimant” and “Defendant” to avoid confusion between the two sets of proceedings.
GEHC has accepted in open Court through Mr Benjamin Williams QC, that RS (and in particular Mr Justin Nimmo, the Partner acting) did a sterling job on their behalf and achieved a famous victory in hard-fought litigation against Mr Gray, who not only defended the proceedings on the merits but attempted to conceal his assets and/or put them beyond the reach of his creditors. Hence the case involved RS not only proving who was entitled to the technology, and how much it was worth, but how much Mr Gray had to satisfy any award of costs or damages.
Mr Gray was found liable to GEHC for having wrongfully appropriated the technology, however, only at this point (some years into the litigation) was the technology or the profit derived from it, valued. Expert Evidence obtained by RS valued it at a fraction of the (minimum) hundreds of millions that Mr de Clare asserts it is worth; instead it was said to be worth only $15 million or thereabouts. At that point, the views of GEHC and RS as to the merits of the case, were placed suddenly and greatly at odds.
The matter was being funded under a Conditional Fee Agreement (“CFA”); there were in fact several retainers, including CFAs, one after another. Funds for upfront payments or for ongoing disbursements et cetera were raised by GEHC through its investors. This model would work admirably if the technology were worth hundreds of millions; even given a litigation spend getting towards eight figures there was potentially a great deal to be gained so that the investors could be repaid and rewarded for their support, and GEHC could still recover a very substantial sum over and above its legal costs and investors' compensation. However, if the valuation of the claim really was only $15 million or thereabouts it was likely that nothing would be left once legal costs had been accounted for, and in fact the investors who had funded the case so far would be unlikely to recover their costs outlay, let alone any compensation for supporting GEHC.
RS's case is that the valuation at around $15 million, was accurate and that, whilst the firm was prepared to continue to act, they were concerned that to continue to fight on against Mr Gray on such returns, would expose them to a risk of not recovering their costs even though GEHC had already obtained Judgment on liability. They also expressed concern on behalf of GEHC's investors, whose identities they do not know. I do not believe RS stated in terms that they wished to go over GEHC's head to put the Expert Evidence before the investors, but there was reference to the ethical issue RS perceived, in knowing that investors were being approached for funds in a case where (per the Expert Evidence) the “investment” in the Gray Proceedings, was unlikely to produce any profit.
On behalf of GEHC they assert that the technology is worth a great deal more than the valuation, and that Mr Gray (or those backing him) are worth sufficient sums of money to make it worthwhile proceeding and entirely proper to ask the investors for the necessary funds to press on. However, GEHC stated that due to a shift in the focus of the litigation at the quantum stage (towards Patents Law) they wished to bring in a new firm, namely Messrs. Bird & Bird, who had the requisite expertise in that specific area.
RS took issue with Bird & Bird being involved, particularly given indications from GEHC that RS had to take instructions from Bird & Bird from now on, and that RS would remain liable for disbursements. For RS it was said that this created an untenable situation as Bird & Bird could have incurred disbursements of which RS had no prior knowledge and would not necessarily have approved, but RS would still have been expected to pay for them. In effect, RS asserted that they were being asked to write a blank cheque and were having all autonomy taken out of their hands. This they regarded as untenable and it was suggested that GEHC were deliberately making RS's position impossible so that they would have to walk away thereby (per the latest iteration of the CFA) potentially forfeiting their Success Fee.
For GEHC it was asserted that they intended Bird & Bird to work in tandem with RS; Bird & Bird focusing upon the Patents Law regarding the disputed technology, and RS presumably continuing to display the Litigation expertise gratefully acknowledged by GEHC in open Court in these proceedings. They asserted that there was never any intention to make RS's position untenable, and that contemporaneous documents showed, for example, Bird & Bird backing Mr Nimmo of RS and Counsel instructed by RS, as to strategy and tactics being recommended by Mr Nimmo.
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Global Energy Horizons Corporation v The Winros Partnership (Formerly Rosenblatt Solicitors)
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