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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Excalibur Ventures LLC v Texas Keystone Inc & Ors (Rev 2) [2014] EWHC 3436 (Comm) (23 October 2014) URL: https://www.bailii.org/ew/cases/EWHC/Comm/2014/3436.html Cite as: [2014] EWHC 3436 (Comm) |
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QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
EXCALIBUR VENTURES LLC |
Claimant |
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- and - |
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(1) TEXAS KEYSTONE INC. (2) GULF KEYSTONE PETROLEUM LIMITED (3) GULF KEYSTONE PETROLEUM INTERNATIONAL LIMITED (4) GULF KEYSTONE PETROLEUM (UK) LIMITED - and - (1) PSARI HOLDINGS LIMITED (2) MR ANDONIS LEMOS (3) BLACKROBE CAPITAL PARTNERS LLC (4) BLACKROBE AEO I INVESTORS LLC (5) PLATINUM PARTNERS VALUE ARBITRAGE FUND LP (6) HAMILTON CAPITAL LLC (7) JH FUNDING LLC (8) HURON CAPITAL LLC (9) PLATINUM PARTNERS CREDIT OPPORTUNITIES MASTER FUND LP |
Defendants/ Costs Claimants Costs Defendants |
____________________
John Wardell QC and Jamie Carpenter (instructed by Withers LLP) for the 1st and 2nd Costs Defendants
Ian Croxford QC and Nicholas Medcroft (instructed by Orrick, Herrington & Sutcliffe (Europe) LLP) for the 5th to 8th Costs Defendants
The 3rd, 4th and 9th Costs Defendants were unrepresented and did not take part in the trial.
Hearing dates: 11th, 12th and 13th June 2014
____________________
Crown Copyright ©
LORD JUSTICE CHRISTOPHER CLARKE
The funders
The initial funding Mr Lemos and Psari
The 1st Psari Funding Agreement
The first security for costs application
The 2nd Psari Funding Agreement
Security is ordered
The 1st Hamilton Funding Agreement
The 1st Blackrobe Funding Agreement
Psari NewCo
The Inter-Creditor and Pledge and Security Agreements
Novation
The 2nd Blackrobe Funding Agreement
The second funding round
The 2nd Hamilton Funding Agreement
The 3rd Blackrobe Funding Agreement
The 2nd Inter-Creditor Agreement
The Huron Participation Agreement
The third funding round
January 2013 funding
The 3rd Psari Funding Agreement
The second security for costs application
The 4th Psari Funding Agreement
The Facility Agreement with JH
The Agreement between JH and Huron
The 3rd Inter-Creditor Agreement
The upshot
Funder | Costs | Security | Total |
Psari | £ | 9.75 m | £ | 4.0 m | £ | 13.75 m |
Hamilton | £ | 0.5 m | £ | 6.5 m | £ | 7.0 m |
Blackrobe | £ | 1.0 m | £ | 3.0 m | £ | 4.0 m |
Huron | £ | 3.0 m | £ | 3.0 m | £ | 6.0 m |
JH | £ | £ | 1.0 m | £ | 1.0 m | |
Totals | £ | 14.25 m | £ | /b>17.5 m | £ | 31.75 m |
Funder | Date | Amount | Purpose |
Psari | November 2010 | $ 10,000,000 | Costs |
March 2012 | £ 3,000,000 | Costs | |
January 2013 | £ 500,000 | Costs | |
March 2013 | £ 4,000,000 | Security | |
Hamilton | 2 April 2012 | £ 6,500,000 | Security |
(PPCO) | 29 January 2013 | £ 500,000 | Costs |
Blackrobe | March 2012 | £ 500,000 | Security |
July 2012 | £ 2,500,000 | Security | |
(repaying Psari Newco) | (repaying Psari Newco) | ||
October 2012 | £ 1,000,000 | Costs | |
Huron | October 2012 | £ 3,000,000 | Costs |
(PPVA) | March 2013 | £ 3,000,000 | Security |
JH | March 2013 | £ 1,000,000 | Security |
(PPCO) |
Funder | Costs | Security | Total |
Hamilton | £ 3.5 m | £ 6.5 m | £ 10 m |
JH | £ 4 m | £ 4 m |
What the Funders stood to gain
(i) under the 1st Psari Funding Agreement | 10.0% |
(ii) under the 2nd Psari Funding Agreement | 4.8%[1] |
(iii) under the 3rd Psari Funding Agreement | 0.8%[2] |
(iv )under the 4th Psari Funding Agreement | 6.0%[3] |
21.6% |
The applications
a) Should any of the Costs Defendants be ordered to pay any of the Defendants' costs on an indemnity scale?
b) In determining for what (if any) proportion of the costs any of the Costs Defendants should be liable how, in the present case, should the Court apply the Arkin cap: see [70] below? In determining the extent of that cap should a distinction be made between monies that a Cost Defendant has put up for Excalibur's costs and expenses of prosecuting the action and monies put up to enable Excalibur to provide security for the Defendants' costs of defending it?
c) Should the Court differentiate between those who contributed from the beginning and those who did so only at a later stage?
d) Should the Court ignore, for these purposes, the 10 October 2012 Participation Agreement which transferred responsibility for £ 3 million of Hamilton's obligations in respect of costs under the 2nd Hamilton Funding Agreement to Huron and the March 2013 Agreement which transferred £ 3 million of JH's obligations in respect of security for costs to Huron?
e) Should the Court make any order against PPCO and PPVA, which provided their subsidiaries with the funds to support Excalibur, but did not themselves agree with Excalibur to do so?
f) Should the Court make any order against Blackrobe Capital? and
g) If an order is made against more than one Costs Defendant, how should their liability be apportioned inter se?
The parties agreed to my suggestion that the last issue should be left for later consideration after I have determined the others.
Discussion
"This case was 'well outside the norm' (emphasis added) for a 'considerable number of reasons'. In summary, the Court found that:
i) the claim was essentially 'speculative and opportunistic';
ii) the claim involved litigation 'gargantuan in scope', but based on 'no sound foundation in fact or law' which met with a "resounding, indeed catastrophic, defeat';
iii) the claims were 'replete with defects, illogicalities and inherent improbabilities;'
iv) the claims were 'spurious' and 'pursued relentlessly' to the 'bitter end;'
v) the Defendants were presented with a case that 'changed as the difficulties in its exposition became apparent;'
vi) the claim was 'grossly exaggerated' in quantum;
vii) the claim involved 'unsuccessful allegations of untruthfulness or dishonesty' against a chief executive of a publicly listed company, which was unsurprisingly picked up by the press;
viii) the claim was 'a major source of disruption to Gulf's business' and to a lesser extent Texas;
ix) the claim imposed an enormous drain on the resources of the Court;
x) Mr Wempen told lies and misleading statements from the outset;
xi) the prevention case was 'a dishonest case';
xii) Mr Park's conduct and failings as an expert were 'outside the norm';
xiii) Clifford Chance's correspondence was 'voluminous and interminable,' 'heavy-handed' and in some instances 'aggressive' and 'unacceptable in content' including making ill-founded allegations of criminal conduct;
xiv) In respect of disclosure, there were 'extravagant demands', and 'important documents were wrongly made the subject of claims for privilege.'"
The Senior Courts Act 1981
" 51 Costs in civil division of Court of Appeal, High Court and county courts.
(1) Subject to the provisions of this or any other enactment and to rules of court, the costs of and incidental to all proceedings in
(a) ..;
(b) the High Court
shall be in the discretion of the court.
(2) .
(3) The court shall have full power to determine by whom and to what extent the costs are to be paid."
"(4) In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including
(a) the conduct of all the parties;"
It is thus apparent that conduct of the parties is one, but only one, of the circumstances to be taken into account.
Principles
i) A costs order against a non-party is 'exceptional', but 'exceptional' means no more than outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense. The ultimate question in any such 'exceptional case' is whether "in all the circumstances it is just to make the order".
ii) The discretion will not generally be exercised against 'pure funders' but where:
"the non-party not merely funds the proceedings but substantially also controls or at any rate is to benefit from them, justice will ordinarily require that, if the proceedings fail, he will pay the successful party's costs. The non-party in these cases is not so much facilitating access to justice by the party funded as himself gaining access to justice for his own purposes. He himself is "the real party" to the litigation..."
iii) The most difficult cases are those in which non-parties 'fund receivers or liquidators (or, indeed, financially insecure companies generally) in litigation designed to advance the funder's own financial interests' (emphasis added). Lord Brown said this at [29]:
"In the light of these authorities their Lordships would hold that, generally speaking, where a non-party promotes and funds proceedings by an insolvent company solely or substantially for his own financial benefit, he should be liable for the costs if his claim or defence or appeal fails."
iv) Where a funder says that there was no impropriety in promoting a claim because it received 'encouraging advice' from its lawyers:
"This cannot, however, avail them. The authorities establish that, whilst any impropriety or the pursuit of speculative litigation may of itself support the making of an order against a non-party, its absence does not preclude the making of such an order."
Application
"even where he has acted in good faith or without any impropriety, justice may well demand that he is liable in costs on a fact sensitive and objective assessment of the circumstances".
This was a departure from an earlier requirement of want of good faith or impropriety: Metalloy Supplies Ltd v M/A. (UK) Ltd [1997] 1 WLR 1613, 1620; an approach applied in Landare Investments Ltd v Welsh Development Agency [2004] EWHC 946 (QB). In Systemcare Lewison LJ drew attention to the "and/or" formulation. Both elements did not need to be present. In Sims v Hawkins [2007] EWCA Civ 1175 Rix LJ had referred to the principal question "whether the non-party (who renders himself liable to the regime, whether by funding or controlling the litigation or even in some other way)" was the "real party" to the litigation. The disjunctive is, also, apparent in the passage from Dymocks cited at para 65 (ii) above.
The Arkin cap
Indemnity costs
Securing funds from Mr Lemos
Approaching other funders
Indemnity costs against the other funders
Authorities
The application of the Arkin cap
Security for costs
Timing
" proof of causation is a necessary pre-condition of the making of a section 51 order against a non-party as to which there is ample authority and, as I understand it, no dispute"
"their Lordships are content to assume for the purposes of this application that a non- party could not ordinarily be made liable for costs if those costs would in any event have been incurred even without such non-party's involvement in the proceedings"
Huron
PPVA and PPCO
" ..the separate personality of a corporation, even a single-member corporation, is deeply embedded in our law. But its purpose is to deal with legal rights and obligations. By contrast, the exercise of discretion to make a non-party costs order leaves rights and obligations where they are. The very fact that the making of such an order is discretionary demonstrates that the question is not one of rights and obligations of a non-party, for no obligations exist unless and until the court exercises its discretion. Moreover the fact that the discretion, if exercised, is exercised against a non-party underlines the proposition that the non-party has no substantive liability in respect of the cause of action in question. Of course, it is not enough merely to say that Mr Whitney was a director of ECD, but in deciding whether or not to make such an order, the court is not fettered by the legal realities. It is entitled to look to the economic realities. It is in this sense that many of the cases pose the question whether the non-party is "the real party" in the case."
Result
i) Mr Lemos and Psari shall be jointly and severally liable to pay to (a) Texas and (b) the Gulf Defendants respectively their costs of and occasioned by the action, such costs to be assessed on the indemnity basis if not agreed;
ii) Hamilton, PPCO, Blackrobe and Blackrobe Capital shall be jointly and severally liable to pay to (a) Texas and (b) the Gulf Defendants respectively their costs of and occasioned by the action, such costs to be assessed on the indemnity basis if not agreed, insofar as those costs have been incurred on or after 30 March 2012;
iii) Huron and PPVA shall be jointly and severally liable to pay to (a) Texas and (b) the Gulf Defendants respectively their costs of and occasioned by the action, such costs to be assessed on the indemnity basis if not agreed, insofar as those costs have been incurred on or after 5 October 2012; and
iv) JH shall be liable to pay to (a) Texas and (b) the Gulf Defendants respectively their costs of and occasioned by the action, such costs to be assessed on the indemnity basis if not agreed, insofar as those costs have been incurred on or after 8 March 2013.
Provided that the amount due to the Defendants pursuant to this order shall not exceed the following amounts in respect of the following persons:
a) Psari/Mr Lemos | £ 13.75 million |
b) Hamilton/PPCO | £ 7 million |
c) Blackrobe/Blackrobe Capital | £ 4 million |
d) Huron/PPVA | £ 6 million |
e) JH/PPCO | £ 1 million |
£ 31.75 million |
Apportionment
Note 1 Taking £ 3 million to equate to $ 4.8 million. [Back] Note 2 Taking $ 789,100 the dollar equivalent figure in Psaris ledger. [Back] Note 3 Taking £ 4 million to equate to $ 6 million. [Back] Note 4 i.e. one of those with no personal interest in the litigation, who do not stand to benefit from it, are not funding it as a matter of business, and in no way seek to control it: Hamilton v Al Fayed (No 2) [2003] QB 1175. [Back] Note 5 Mr Waller QC suggested that he may have been told that he was liable up to the extent of his funding (as an explanation of the Arkin cap), which he took to mean that once he had funded he had no more exposure. There is no evidence of that but it is a plausible explanation. [Back]