Steenbok Newco 10 Sarl v Formal Holdings Ltd
| Jurisdiction | England & Wales |
| Judge | Christopher Hancock |
| Judgment Date | 11 May 2023 |
| Neutral Citation | [2023] EWHC 1112 (Comm) |
| Docket Number | Case No: CL-2021-000321 |
| Court | Queen's Bench Division (Commercial Court) |
Christopher Hancock KC
Sitting as a judge of the High Court
Case No: CL-2021-000321
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Andrew Dinsmore (instructed by RPC) for the Claimants
Bobby Friedman and Tara Taylor (instructed by DLA Piper UK LLP) for the Defendants
Hearing dates: 29 March 2023, followed by written submissions filed on 5 April 2023, 14 April 2023 and 19 April 2023
This judgment was handed down by the Judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be 14:00 on Thursday 11 May 2023.
Christopher Hancock KC:
Introduction.
This was an application for an uplift in the amount of security for costs to be awarded to the Defendants. I heard argument on the questions of principle in this matter on 29 March 2023. The application was made in the light of paragraph 2 of the Order of Robin Knowles J dated 30 June 2022, which provided that “ The amount(s) and date(s) for payment of any further security (including in respect of matters not referred to in the Precedent H, where the assumptions underlying the Precedent H prove to be incorrect, or if there are material changes in the litigation) shall be determined by the Court in the absence of agreement….”.
On that earlier occasion, I decided that, on the true construction of the Order of Robin Knowles J dated 30 June 2022, the Defendants were correct in their contention that the Order envisaged that there would be an uplift in security if there were matters not provided for in the Schedule provided to the Court at that time, or where the assumptions underlying that Schedule proved to be incorrect, or if there had been a material change in circumstances after that date. My decision on that occasion was reflected in the recital agreed between the parties in the Order submitted to the Court following the CMC (the “ CMC Order”). I left over, in view of lack of time, considerations of the amount of the Uplift, and questions of costs.
The sums agreed by the Claimants to be paid pursuant to the original Security Order were a little under £4.5 million. The Defendants now seek an Uplift of £1,743,883.59 (the “ Uplift”). That Uplift represents (1) 60% of the headline uplift in the Defendants' costs if the higher hourly rates for DLA Piper UK LLP (“ DLA”) are applied, on a headline uplift figure of £2,906,472.65; or (2) 69.93% of the Defendants' costs if DLA's previous (old) hourly rates are retained (on a headline uplift figure of £2,493,930.20). On either basis, the Defendants submit that this figure is more than justified. The reason for referencing this latter set of figures is that I indicated my provisional view on the previous occasion that a decision by the Defendants' solicitors to increase their hourly rates did not justify a further award of security. I address this question in more detail below.
My starting point in relation to the question of the amount of security is the wording of the CPR itself. CPR Part 25.13(1) states that: “The court may make an order for security for costs under rule 25.12 if – (a) it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order”. In this regard, and in the light of the lengthy and detailed submissions made by both parties in writing, I set out in this judgment the considerations I have taken into account in deciding how to exercise my discretion in this regard. I deal with matters in the following order:
(1) The correct basis for assessment – standard or indemnity costs?
(2) The general approach to be adopted.
(3) The question of rates.
(4) The question of prejudice.
(5) Individual stages of the litigation.
The basis for assessment.
I start with the correct basis for assessment of costs, and thus the correct starting point in an application for security. The Defendants rely on the statement in Re Ingenious Litigation [2020] EWHC 235 (Ch), where it was held at [100] that, “ the appropriate percentage in a case where there is a realistic prospect of indemnity costs is 75%”.
As for costs on the standard basis, Re Ingenious stated that, “ 65% or 2/3 is more typical”. In Danilina v Chernukhin [2018] EWHC 2503 (Comm) at [17], the range of 60–70% was said to be appropriate for standard basis costs.
The Defendants submitted that in this case there is clearly a realistic prospect of indemnity costs. The Claimants make extremely wide-ranging allegations of fraud, of the utmost seriousness, against the Defendants. They say that Re Ingenious makes clear at [92] that, “ to accuse people of fraud or dishonesty is a high-risk strategy, and if such allegations are made but not established, that can certainly in my judgment be a factor justifying indemnity costs [following trial], whether the claimants have lied or not. Of course it is not an automatic consequence as all the relevant circumstances as they appear after trial have to be taken into account, but it is certainly a highly material consideration”. At [93], the Court noted that the causes of action “ at the forefront” were “ fraudulent misrepresentation and deceit”, and held at [94] that “ This in my judgment certainly makes the possibility of indemnity costs a real one”.
The starting point is, therefore, the Defendants say, that the Defendants are entitled to 75% of the headline amount of the Uplift. However, acting conservatively, the Defendants have sought a figure of 60% of the total costs — or a little under 70% of the headline costs if the increased hourly rates of DLA are stripped out. On either basis, therefore, the Defendants are well within the level that should be permitted of 75%. The full Uplift should, therefore, be awarded.
The Claimants, for their part, argue that it is misplaced for the Defendants to assume that they will receive indemnity costs: it is clearly wrong to suggest that in every fraud case, indemnity costs are awarded. It will always depend on the full circumstances at the end of trial, including the basis on which such a claim was brought and the conduct of the litigation. They submit that there has been no application to strike out, and that it was for this reason, that the Defendants previously accepted a 60% percentage.
As to the authorities, the Claimants rely on the following statements of principle:
(1) Stokors, §5 and Vald Nielsen v Baldorino [2017] EWHC 1033 (Comm), §13, are clear that the appropriate amount is that likely to be awarded on a standard basis.
(2) Re Ingenious [2020] EWHC 235 (Ch) and Danilina v Chernukhin [2018] EWHC 2503 (Comm) were expressly rejected in Tulip Trading Limited v Bitcoin Association for Bsv [2022] EWHC 141 (Ch):
(a) At §14, Master Clark noted that Roth J in Phones4U Ltd (in administration) v EE Ltd [2020] Costs L.R. 1065 had rejected at §23 that Danilina and Ingenious express a general test for a higher level security as being simply that there is a “ real possibility” or “ reasonable possibility” of an ultimate award of indemnity costs. She noted that Stokors SA v IG Markets [2012] EWCA Civ 1706, §30 was not cited in either case, where Tomlinson LJ supported Popplewell J's conclusion at first instance that simply bringing a fraud claim was not a sufficient basis to assume indemnity costs for the purposes of quantifying the uplift.
(b) Indeed, at Stokors SA v IG Markets [2012] EWCA Civ 1706, §42 Tomlinson noted that “ The only basis for seeking 80 per cent of the estimate to which the judge referred in his judgment was the suggestion that the defendant might recover indemnity costs. For what it is worth, I have never heard of security for costs being awarded on a more generous basis for that reason, but in any event the judge here decisively rejected that suggestion at paragraph 31 of his judgment. He concluded that there was no material before him which would justify such an approach. Rightly, as I think, he declined to go into the merits of the case when considering what was the appropriate quantum of an order for security for costs, and in my judgment we should certainly not go down the path which the judge himself declined to tread.”
(c) At §18, Master Clark noted that “ the approach urged by the defendants would require me to consider the merits of the claim, without having heard any detailed argument on them, and where the judge hearing the Jurisdiction Applications will be required to carry out that task. It would in my judgment be wrong in principle for me to do so. Whether, if the defendants succeed, they will be entitled to indemnity costs will depend upon the basis of that success, and will be a matter for the Judge.”
(d) The Master continued at §19 that “ I am not willing therefore to determine the amount of security to be ordered in the defendants' favour on the basis that it would be assessed on the indemnity basis.”
Taking these authorities together, the Claimants submit that it is wrong to suggest that 75% is the “ starting point” in this case. Rather, the Court must assess all of the circumstances of the case to reach a conclusion on the most likely costs award following trial. They argue that the appropriate percentage figure here is that originally claimed, namely 60%.
In my judgment, the safest course is to assume that costs will be assessed on the standard basis, that being the likelihood, particularly since the only effect of an order for indemnity costs is to reverse the burden of proof on reasonableness and avoid the need for an inquiry into proportionality, which is an inquiry unlikely to be...
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...on the decision of Mr Christopher Hancock KC sitting as a judge of the High Court in Steenbok Newco 10 SARL v Formal Holdings Ltd [2023] EWHC 1112 (Comm) (at [8]–[13]) in which the judge had held that even in a case where allegations of fraud were advanced by the claimant, the appropriate ......