Catalyst Investment Group & Ors v Lewinsohn & Ors [2009] EWHC 3501 (Ch) (16 November 2009)

Neutral Citation Number: [2009] EWHC 3501 (Ch) Case No: HC08CO3158 IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION Royal Courts of Justice Strand, London, WC2A 2LL 16 November 2009 B e f o r e : THE HONOURABLE MR JUSTICE BARLING ____________________ (1) CATALYST INVESTMENT GROUP LIMITED (2) ANASAZI PARTNERS III LLC (a company incorporated in Delaware) (3) ANASAZI PARTNERS III OFFSHORE LIMITED (a company incorporated in the British Virgin Islands) (4) CHRISTOPHER BAKER (5) EVA-MARIA BUCHER (6) DANIÈLE BURCKHARDT (7) CHRISTOPH DIETSCHE (8) MARTIN GYGI (9) MICHAEL MELICH (10) MORRIS HOLDING LTD (a company incorporated in Gibraltar) (11) TFI PARTNERS LLP (a limited liability partnership registered in Texas, USA) Claimants - and - (1) MAX LEWINSOHN (2) MAXIMILLIAN & Co (a firm) (3) MICROPOWER GLOBAL LIMITED (1) CATALYST INVESTMENT GROUP LIMITED (2) TIM ROBERTS - and - (1) MAX LEWINSOHN (2) MAXIMILLIAN & CO (a firm) ARM ASSET-BACKED SECURITIES S. A. Claimant - and - (1) MAX LEWINSOHN (2) MAXIMILLIAN & CO (a firm) ____________________ Digital Transcript of Wordwave International, a Merrill Communications Company 101 Finsbury Pavement London EC2A 1ER Tel No: 020 7422 6131 Fax No: 020 7421 6134 Web: www.merrillcorp.com/mls Email: mlstape@merrillcorp.com (Official Shorthand Writers to the Court) ____________________ HENRY FORBES SMITH (instructed by Messrs Fulbright & Jaworksi International LLP) appeared on behalf of the First Claimant CAMILLA BINGHAM (Instructed by Messrs Forsters LLP) appeared on behalf of the Second Claimant TIM PRUDEAU (instructed by Messrs Mark Taylor & Co) appeared on behalf of the Defendants ____________________ HTML VERSION OF JUDGMENT ____________________ Crown Copyright © Monday, 16 November 2009 MR JUSTICE BARLING: This judgment on costs follows on from, and should be read alongside, my judgment of 31 July 2009, Neutral Citation [2009] EWHC 1964 (Ch) ("the Main Judgment"). The background to these matters is complicated and fully set out in the Main Judgment. I do not therefore propose to rehearse any of it here. I will adopt the same abbreviations and defined terms. In the Main Judgment I dismissed four Part 11 applications relating to three separate claims: the Catalyst Declaratory Proceedings, the ARM Declaratory Proceedings and the Noteholder Proceedings. Those applications sought to persuade me to decline jurisdiction in those actions on grounds of forum non conveniens and lis alibi pendens . Following my dismissal of the applications in the Main Judgment in July 2009, there were certain developments in both the Catalyst Declaratory Proceedings and the ARM Declaratory Proceedings. These are set out in the second witness statement of Lista Makimson Cannon behalf of ARM and the fourth witness statement of Caroline Anne Bassett on behalf of Catalyst and Mr Roberts. Those matters are subject to comment in the fourth witness statement of Richard Mark Taylor on behalf of the defendants. In short it seems that on about 24 September this year, a day or two before defences in those claims were due to be lodged by the defendants, the solicitors acting for ARM and Catalyst respectively received a notice of admission dated 11 September 2009 conceding liability for the entirety of those companies' claims in both sets of declaratory proceedings. Those claims were, of course, more or less the mirror image of, and had been made about one month after and in response to, the Utah Fraud Proceedings brought in the Utah courts by the defendants along with two other Utah-based plaintiffs. On 13 October 2009, the Utah court, at the request of the plaintiffs in those proceedings (who include Mr Lewinsohn, the defendant in these actions) dismissed the Utah Fraud Proceedings without prejudice and each party to bear its own costs and fees. There would, of course, normally not be any costs order in that jurisdiction. Thus, Mr Lewinsohn, and the other Utah plaintiffs, have abandoned the US action for alleged fraudulent or negligent misrepresentation against Catalyst, Mr Roberts and ARM and have also submitted to judgment on the declarations sought in the English mirror-image proceedings. Those declarations include declarations to the effect that no fraudulent or negligent misrepresentations were made by ARM or by Catalyst or by Mr Roberts to Mr Lewinsohn or any of the Noteholders. The claimants in both sets of declaratory proceedings now seek orders for costs against the defendants, including, of course, the costs of the unsuccessful Part 11 applications brought against them. Further, they seek those costs on an indemnity basis, rather than a standard basis, and they seek a payment on account pursuant to CPR 44.3(8) pending a detailed assessment of costs. To that end schedules of estimated costs have been put before me. In addition, the first claimant in the Noteholder Proceedings, namely Catalyst (who is to be distinguished from the second to the eleventh claimants in those proceedings, who only became claimants after the conclusion of the Part 11 applications), seeks its costs of the defendant's unsuccessful Part 11 application in the Noteholder Proceedings. Again, it seeks those costs on an indemnity basis and a payment on account. Once more, a schedule of estimated costs has been provided to me. The Noteholder Proceedings have not been terminated and, one must assume, are going to proceed to trial. A defence and counterclaim and a reply and defence to counterclaim have recently been served. Issues are joined on these various cost applications as follows. In relation to the ARM Declaratory Proceedings the defendants accept that they must pay to ARM its costs of those proceedings, and they accept that there should be a payment on account to ARM. What is in dispute is the basis of assessment, and it is also disputed that the amount of the payment of account suggested by ARM, namely sixty per cent on an indemnity basis or fifty per cent otherwise, is inappropriate and the defendants suggest forty per cent instead. So far as the Catalyst Declaratory Proceedings are concerned, the defendants distinguish between Mr Roberts' situation and that of Catalyst. As far as Mr Roberts is concerned, the defendants' position is the same as for ARM which I have just mentioned, except that they say that there should be an apportionment of costs between Mr Roberts and Catalyst on a 50/50 basis. In other words the payment on account for Mr Roberts should, in their view, be fifty per cent of the forty per cent of the total estimated costs. Their position in relation to Mr Roberts is also subject to another point that I shall mention in a moment. So far as Catalyst's position in those proceedings is concerned, the defendants accept that in principle Catalyst is entitled to its costs of the Catalyst Declaratory Proceedings, but they dispute the basis of assessment claimed, namely the indemnity basis, they also make the same point about apportionment of costs between Mr Roberts and Catalyst, and they say no payment on account should be made to Catalyst prior to the determination of an application for summary judgment which has apparently been issued in this court in relation to the defendants' counterclaim in the Noteholder Proceedings. This counterclaim is based on Maximillian's (Maximillian is Mr Lewinsohn's alter ego, or trading name) counterclaim for unpaid expenses incurred in its capacity as Collateral Agent. Mr Phillips QC, who continues to represent the defendants, submits that the court should exercise its discretion not to make a payment on account in favour of Catalyst until this summary judgment application has been determined. Further he says that this point also affects my discretion to order a payment on account in favour of Mr Roberts as, although he accepts that Catalyst and Mr Roberts are jointly and severally liable for all their solicitors' costs, having been jointly represented by the solicitors, nevertheless as Catalyst has actually paid the costs to the solicitors he submits that I should take that into account and not favour Mr Roberts with an interim payment. In any event, of course, the size of the payment on account is contentious, as it is in Mr Roberts' case. Turning now to what is in issue in the Noteholder Proceedings, where Catalyst is the only claimant, here the battle lines are drawn as follows. The defendants accept that Micropower, the third defendant in those proceedings, must pay the costs of its unsuccessful Part 11 application. In his skeleton argument Mr Phillips submitted that it should only pay those costs "insofar as they relate to it", ie, there should be liability for only a percentage of the costs incurred. One problem with that submission is that the defendants had accepted at the main hearing that Micropower's position was such that it stood or fell with the other defendants insofar as jurisdiction was concerned. Of course, all three defendants in the Noteholder Proceedings were jointly represented and all the points made were made on behalf of all of them, including Micropower. When this point was put to Mr Phillips in argument on Friday, he, in effect, indicated that he would not press the apportionment point in relation to Micropower and therefore it was accepted that Micropower should be liable to costs without apportionment, subject, of course, to the issues about basis of assessment and the amount of the payment on account. As far as the other two defendants in the Noteholder Proceedings are concerned, that is Mr Lewinsohn and Maximillian, in relation to them Mr Phillips raised a separate issue, not relevant to Micropower's position. The argument again related to Maximillian's counterclaim as Collateral Agent in the Noteholder Proceedings. The contractual indemnity in the Inter-creditor Agreement which is relied upon in that counterclaim, is prayed in aid in opposition to Catalyst's costs application. Mr Phillips says that it is sufficient if there is an issue to be tried in that counterclaim as to whether the costs of the unsuccessful Part 11 application are covered by the contractual indemnity in the Inter-creditor Agreement. If that is a legitimate issue then he submits that I should not exercise my discretion to make an order for costs against Mr Lewinsohn or Maximillian at all, but should defer that matter until after the contractual issue has been determined in the Noteholder Proceedings. In addition to that point he also raises the points about the basis of assessment and the amount of any payment on account. Those, then, are the main issues that I have to determine in order to deal with these costs applications. I have received skeletons from all three sets of representatives and there have been three new witness statements, which I have already mentioned. I have also been shown quite a few authorities dealing with the principles to be applied in deciding whether to award costs on a standard or an indemnity basis. These principles and authorities were, naturally enough, not really in dispute, and in these circumstances I do not propose to burden the judgment with copious citations from the cases. The effect of awarding costs on an indemnity basis is agreed to be as follows. Firstly, it entitles the successful party to recover all its reasonable costs, not just its reasonable and proportionate costs. It therefore removes proportionality from the equation. Secondly, that basis of assessment entitles the successful party to the benefit of any doubt in deciding whether its costs have been reasonably incurred or are reasonable in amount. The practical effect, therefore, is that an award on an indemnity basis makes it more likely that a successful party will recover more of its actual costs. The displacing of the element of proportionality on the assessment can be a very significant help to a receiving party. In Lownds v Home Office [2002] EWCA Civ 365 , Lord Woolf CJ, explained how an assessment on the standard basis applies the proportionality principle. He said this at paragraph 31 of his judgment: "In other words what is required is a two-stage approach. There has to be a global approach and an item by item approach. The global approach will indicate whether the total sum claimed is or appears to be disproportionate having particular regard to the considerations which CPR r 44.5(3) states are relevant. If the costs as a whole are not disproportionate according to that test then all that is normally required is that each item should have been reasonably incurred and the cost for that item should be reasonable. If on the other hand the costs as a whole appear disproportionate then the court will want to be satisfied that the work in relation to each item was necessary and, if necessary, that the cost of the item is reasonable. If, because of lack of planning or due to other causes, the global costs are disproportionately high, then the requirement that the costs should be proportionate means that no more should be payable than would have been payable if the litigation had been conducted in a proportionate manner. This is turn means that reasonable costs will only be recovered for the items which were necessary if the litigation had been conducted in a proportionate manner." As to the principles to be applied to the question of which basis is appropriate, again there is not really any dispute and I will therefore just try to summarise the main features of those principles. The starting point, of course, must be the CPR themselves, and in particular rules 44.3, 44.4 and 44.5. These are well known and I do not propose to set the terms of those provisions out in this judgment. Beyond that, the Court of Appeal has on more than one occasion declined to give general guidance on the exercise of the jurisdiction to order costs on an indemnity basis, and has chosen instead simply to draw attention to the words of CPR 44 and to the extensive breadth of the discretion for which that rule provides. In this regard see, for example, Excelsior Commercial & Industrial Holdings Limited v Salisbury, Hammer, Aspden & Johnston (A firm ) [2002] EWCA Civ 879 at paragraph 32. However, over the years some guidance has been forthcoming. First of all, the normal order is an order for standard costs. In deciding whether to order indemnity costs, ultimately the question will always be whether there is something in the conduct of the action or in the circumstances of the case which takes the case out of the normal in a way which justifies an order for indemnity costs: see the Excelsior case also at paragraph 39 by Waller LJ. Secondly, it is now clear that indemnity costs are not reserved for cases where there has been a lack of probity or conduct deserving of moral condemnation: see for example, May LJ's remarks in Reid Minty (A firm) v Taylor [2001] EWCA Civ 1723 at paragraphs 27 and 28. Thirdly, an award of indemnity costs is not penal but compensatory, the question in all cases being, what is fair and reasonable in all circumstances of the case: see again Reid Minty at paragraphs 20, 22 and 25. As for the principles on which an order for payment on account should be made, this jurisdiction derives from CPR 44.3(8), which states: "Where the court has ordered a party to pay costs, it may order an amount to be paid on account before the costs are assessed." The rationale for this is that the receiving party is entitled to something by way of costs and that he should be paid it without delay: see Ryan Beech v Demitri Smirnoff [2007] EWHC 3499. The general practice is to order interim payment, at least in circumstances where the judge has heard and adjudicated the relevant lis and is thus well placed to assess the likely ultimate costs recovery; but the court has a discretion and, as with other discretions, it must take into account all the circumstances of the case, including the likelihood of any appeal and the financial circumstances of the parties. The general approach in relation to the amount of any payment on account of costs is to order a sum which the court is confident will ultimately be recovered in that regard. I turn then to deal with the issues that I have identified. First, in relation to ARM's claim for costs in the ARM Declaratory Proceedings. Here, as I have said, the defendants accept there should be an award of costs and a payment on account; the only issue is the basis of assessment and the amount of any payment. Even at this late stage, it remains something of a mystery why ARM was joined as a defendant in the Utah Fraud Proceedings. ARM was alleged to have been guilty of fraudulent misrepresentation on the basis that Mr Roberts, as a director of Catalyst, was acting as ARM's agent in writing and sending the December Letters which form the basis of the Utah Fraud Proceedings. Those letters were on Catalyst notepaper and were admittedly written by Mr Roberts. Ostensibly they came from Catalyst. There was nothing to suggest that ARM was involved in them. Despite many opportunities to identity some justification for the involvement of ARM in the US proceedings, in the course of this litigation no proper reason has ever been put forward for the allegation that Mr Roberts was acting as ARM's agent. The nearest to an explanation was Mr Phillips' recent suggestion made during this costs application last Friday, that there was a "close relationship" between ARM and Catalyst. That is it. There is, quite simply, nothing from which it could be inferred that the allegation had substance. It was, on the other hand, a very serious allegation involving dishonesty. ARM is a Luxembourg company dealing in financial products, and it is not disputed that an allegation of dishonesty of this kind could have very serious repercussions for ARM's reputation and business. As mysteriously as the allegation was made it was dropped by Mr Lewinsohn when he terminated the Utah Fraud Proceedings this September after having submitted to the negative declarations in this court to which I have referred. Interestingly, Mr Taylor's fourth witness statement at paragraph 8 asserts that Mr Lewinsohn remains of the view that Catalyst and Mr Roberts made fraudulent misrepresentations, but he says nothing about ARM. The declarations submitted to by Mr Lewinsohn in the ARM Declaratory Proceedings in this court accept that ARM owed no duty and made no misrepresentations, fraudulent or otherwise. There may be force in the suggestion made in the course of argument that ARM was joined in the allegation in Utah as a pawn in the wider battle against Catalyst and as a means of damaging Catalyst by involving a close Luxembourg business associate of Catalyst. Whatever the truth of that suggestion, it seems to me that ARM was faced with an extremely damaging, potentially disastrous and, on the face of it, entirely unsubstantiated accusation brought before a jury in proceedings in a foreign jurisdiction in Utah, where there was the power to award penal damages in such a case. In these circumstances it was crucial for ARM to do everything within its ability to dispute and ultimately defeat the accusation. Further, the defendants maintained the position against ARM to the point of making a Part 11 application against ARM in relation to the ARM Declaratory Proceedings, and maintained that situation throughout most of 2009, including throughout the lengthy Part 11 application itself. They maintained it until some time after that application was unsuccessful, until just before a pleading, which would had to have been signed by counsel and would have had to contain a statement of truth, would have been expected to be lodged by way of a defence. It seems to me that, even without examining the other aspects of the defendants' conduct relied upon by ARM in this regard which is set out very fully in ARM's skeleton argument and in Miss Cannon's witness statement, to which there has been no response, what I have already described in relation to the circumstances and the defendant's conduct are sufficient to take the matter out of the norm in a manner which justifies the assessment of costs on an indemnity basis. In my view it is wholly appropriate for ARM to be compensated for the costs incurred on a basis which does not require it to establish proportionality and which puts the burden of establishing that costs were unreasonably incurred or excessive in amount squarely on the defendants. As to the other matters relied upon by Miss Cannon, Mr Phillips for the defendants properly accepted that the evidence in relation to ARM had been presented in an unsatisfactory manner and that so far as the jurisdiction application was concerned there had been no focused evidence relating to ARM, the evidence being generic and mainly relating to Catalyst. He implicitly accepted that this approach would have increased ARM's costs, but that this would be recoverable anyway. I need not consider this further in view of the conclusion that I have already indicated. Therefore, in the exercise of my discretion I order that ARM have its costs and that they be subject to a detailed assessment on an indemnity basis. For the avoidance of doubt this order applies to all its costs, including the costs of the cost application itself. I now turn to ARM's application for a payment on account. It is not disputed that there should be a payment on account in favour of ARM; the issue is as to the appropriate percentage of the costs estimate provided. The estimate is appended as a schedule to Miss Cannon's second witness statement. The grand total, including the costs of the hearing on Friday, amounts to £310,680.51. No specific point is taken by the defendants as to the size of any particular item in the schedule, other than to suggest that the total is on the high side and therefore that I should be cautious. I am, of course, required to take account of all the circumstances and to be satisfied that any amount ordered on account will be recovered in due course pursuant to a detailed assessment. I am satisfied that, applying due caution, and even having regard to the substantial amount of the estimate, which does not include certain heads of costs which may ultimately prove to be recoverable on assessment, that the appropriate percentage to apply to it for the purposes of a payment on account is sixty per cent. The payment should be made within 14 days, subject to any further submissions on time. I now turn to the Catalyst Declaratory Proceedings and the claimants' cost application in those proceedings. Looking first at Mr Roberts' position, it is accepted by the defendants that there should be an order for costs and a payment on account, subject to costs being on a standard basis and apportioned between Mr Roberts and Catalyst. As far as apportionment is concerned, Mr Phillips agrees that in principle both Mr Roberts and Catalyst are jointly and severally liable for their solicitors' charges, but he says that as Catalyst appears actually to have been paying, some apportionment should be made; this, together with the summary judgment application in the defendants' counterclaim against Catalyst in the Noteholder Proceedings, should lead me to exercise my discretion not to make an interim award of costs to Mr Roberts. In my view, these points are non-starters. There is nothing in evidence as to how much has been paid by way of costs, or what arrangements have been made between Mr Roberts and Catalyst generally, or between either or both of them and their solicitors in this regard. Without more I consider this to be of little interest to the court in deciding the appropriate order. I certainly do not consider there is any justification as things stand for me to do other than order that Mr Roberts should have an order in his favour. Clearly there cannot be double recovery, vis-à-vis Catalyst, so the defendants are protected in that respect. No apportionment is appropriate, even if it were feasible. The reality is that the costs would have been likely to be more or less the same regardless of whether one or both were involved. As to the argument relating to a summary judgment application against Catalyst in different proceedings, there is no conceivable justification on that ground for denying Mr Roberts the order for costs, or any payment on account, to which he would otherwise be entitled. He is not a party to the proceedings in question and the outcome of any summary judgment application in it cannot affect him. I now turn to the basis of assessment in the Catalyst Declaratory Proceedings. Neither party attempted to distinguish the position of Catalyst and Mr Roberts in this regard, correctly in my view. The same basis should apply to both. I will therefore refer merely to Catalyst in the interests of brevity. In relation to this matter Catalyst relies primarily on what Miss Bassett has called the defendants' volte face in the declaratory proceedings, namely the notice of admission served at about the time Catalyst was expecting to receive a defence. Allied to this was the corresponding withdrawal by the defendants of their mirror-image Utah Fraud Proceedings. Catalyst argues that this shows that the Utah Fraud Proceedings and the defendants' Part 11 applications were part of Mr Lewinsohn's campaign to damage Catalyst, along with an attempt to discredit Catalyst with ARM and other service providers - the context of the battle being, of course, the struggle for Eneco's IP rights. In support of this characterisation of the Utah Fraud Procedings and the defendants' conduct of these proceedings, Catalyst refers to the fact that the fraud claim was in respect of only certain unspecified and unquantified legal costs which were inferentially relatively trivial in amount. Similarly, the choice of Utah as a forum was designed to make Catalyst's position difficult. As against this Mr Taylor, in his fourth witness statement, denies any such intent and says that his client is still of the view that Catalyst and Mr Roberts made fraudulent misrepresentations to Eneco and that Utah was not an unnatural forum for that claim. He explains the abandonment of the claim in Utah and the submission to judgment here on the basis that the claim was relatively small and Eneco's substantive claim had been sold and proceedings are on foot in Utah by the purchaser of them. Typically, but not universally, indemnity cost awards are made in circumstances where there has been a trial and the judge has had an opportunity to gauge the conduct of the parties over the course of the whole litigation. Here neither the Utah Fraud Proceedings nor these proceedings have actually got very far down the track. There has been nothing approaching a trial. There have been the Part 11 jurisdiction applications, and the subsequent capitulation by the defendants bringing the proceedings to an end. As I have said in the Main Judgment, it is perfectly clear that the immediate litigation is part and parcel of a battle between Catalyst and Mr Lewinsohn involving what can only be described as trench warfare. The relationship is clearly a very bitter one. One senses that there is no love lost between them. This feature of the litigation distinguishes the position of Catalyst from that of ARM. Catalyst has been embroiled for some time in this war with Mr Lewinsohn, litigating both here and in Utah on a number of occasions in different courts. ARM's involvement, on the other hand, appears to have been in the nature of collateral damage caused by that battle. Another feature which distinguishes Catalyst's position from ARM's is that the Utah Fraud Proceedings were brought on the basis of the December Letters, admittedly written by Mr Roberts on behalf of Catalyst. Had the matter proceeded instead of being terminated, those letters would have been at the centre of Mr Lewinsohn's case. I remind myself that all other things being equal, I should be rather wary of placing much weight on the mere fact of capitulation by the defendants. To rely upon such capitulation as a factor pointing to a less favourable basis of assessment of costs for the party capitulating could be seen as non-conducive to achieving early resolution of litigation, and inconsistent with the overriding objective. One must also bear in mind that there can be many reasons for abandoning proceedings. In all the circumstances, I do not consider that in Catalyst's and Mr Roberts' case, there are sufficient grounds for me, in the exercise of my discretion, to order that costs be assessed on other than the normal standard basis and I so order. As in ARM's case, those costs will be the costs of the proceedings, including the relevant Part 11 application. I will hear further argument if necessary as to whether the costs of Friday's hearing should be included, given my decision on the basis of assessment which formed part of the argument on Friday. I now turn to deal with a payment on account so far as Mr Roberts is concerned. It is accepted that he should have such a payment. I have dealt with the apportionment point. Therefore the only matter left so far as he is concerned is the quantum of the payment on account. Having looked at the schedule and applied the test already referred to, I propose to order a payment on account representing fifty per cent of the total costs estimated, excluding the costs of Friday's hearing, namely fifty per cent of £189,454.39. The payment is to be made within 14 days, subject to any further submissions. As far as Catalyst's application is concerned, in view of the order I propose to make in relation to Mr Roberts, Mr Phillips' point about the effect of an application for summary judgment against Catalyst in the Noteholder Proceedings is probably academic: it cannot affect the defendants' liability to Mr Roberts. I shall deal with it very briefly. First, the summary judgment application has apparently only just been issued. I have not been taken to it. Secondly, it is quite clear from the pleadings in the Noteholder Proceedings, that the underlying counterclaim for expenses is going to be hotly disputed. This was confirmed at the hearing on Friday. The counterclaim will be disputed inter alia on the ground that the 1.4 million (dollars or pounds) which are being claimed as expenses, have already been spent by the Collateral Agent as part-payment for the IP Rights of Eneco, and that therefore the defendants are trying to use the money twice. I say nothing about the merits of this or any of the other points raised, but my superficial impression is that in relation to the counterclaim there are issues which are far from simple which will need to be litigated. This expression of view should have no weight at all when it comes to decide that summary judgment application if it is made. Thirdly, and perhaps more importantly, the defendants' primary submission in the Noteholder Proceedings is that Catalyst is not a party to the contractual provisions upon which the defendants would have to rely in order to obtain judgment, summary or otherwise, against Catalyst on the counterclaim. The defendants argue that Catalyst did not obtain a valid assignment of the relevant Notes, the terms of which would impose on Catalyst the contractual obligations asserted in the counterclaim. Finally, if the possibility of some future crystallisation of liability for a sum of money were sufficient to defeat an existing entitlement to costs and payment on account, this would, in effect, remove the ability to make such orders in a great many cases. Catalyst has established an entitlement to its costs of the proceedings, and the possibility of its being held liable on a counterclaim in other proceedings, does not in the circumstances of this case lead me to exercise my discretion against a costs order or a payment on account in Catalyst's favour. The order is therefore the same as that which I have indicated in respect of Mr Roberts. I now turn to the Noteholder Proceedings brought by Catalyst alone against Micropower, Mr Lewinsohn and Maximillian. I deal first with the basis of assessment in relation to the Part 11 applications by Micropower, Mr Lewinsohn and Maximillian in those proceedings. Here it will be recalled the proceedings remain on foot, at least in this jurisdiction, but not apparently in Utah. It seems that in the mirror-image proceedings the Utah court has declined jurisdiction in favour of this jurisdiction on forum conveniens grounds. Catalyst raises a number of grounds for seeking an indemnity basis of assessment. These are set out in Catalyst's skeleton and in Miss Bassett's witness statements, and I now deal with the main arguments raised. The first of these is that, as detailed in the Main Judgment, the defendants abandoned their jurisdiction argument based on Article 23 of the Regulation in the course of the Part 11 hearing before me, and that a good deal of costs were expended unnecessarily by Catalyst in seeking to meet a case which was not ultimately pursued. All that is certainly true. The defendants' intention to rely on the Article 23 point was signalled fairly late in the course of events, some time in May 2009, and was only abandoned after a day or so of a four day hearing before me. There can be no doubt that Catalyst should have its costs in relation to preparing to meet the abandoned issue. But in my view this kind of performance, though undesirable, wasteful and generally under par, does not individually take the case out of the norm so as to justify an order for indemnity costs. After all, the exclusive jurisdiction point was not an unarguable one. The next point taken by Catalyst is that Micropower abandoned two points just before the hearing. One in particular related to an assertion that Catalyst had failed to make full and frank disclosure when seeking ex parte leave to serve Micropower out of the jurisdiction. Again, the abandonment of points is not to be discouraged. It narrows the dispute between the parties and is far from uncommon. Such a step is usually visited with an order that the costs thrown away should be paid by the abandoning party, and that should be the result in this case when detailed assessment comes to be made. But taken in isolation I do not consider the matter so out of the norm as to justify an assessment on an indemnity basis. The next two points taken by Catalyst complain about the bulk and irrelevance of much of the evidence served by the defendants in support of the Part 11 applications, as well as the lateness of the defendants' voluminous evidence in reply served some three working days before the hearing window. Again, Miss Bassett in her fourth witness statement lists the wasted costs which were generated as a result of this. It is certainly the case that the evidence served in relation to the Part 11 applications was to quite some extent irrelevant; although both parties indicated that I ought to read it, it was of very little assistance to me. The defendants, as applicants in relation to the Part 11 issues, set the tone and Catalyst, perhaps understandably, followed that tone. It is right that Catalyst should benefit from a costs order in relation to these costs thrown away, but once more I do not consider that, taken in isolation, these unsatisfactory features of the litigation justify a special costs order. Finally, complaint is made about the defendants' preparation of the bundles for the hearing. The assertion is that they were late and badly organised. Additional inconvenience and expense was caused, allegedly, to Catalyst's advisers. I can confirm that the bundles were not particularly inspirationally put together, but sadly this is all too common and in my view is, of itself, insufficient, at least in the circumstances of this application, to justify an indemnity basis of assessment. I have considered whether if taken in combination the points made would justify a special costs award. Each of them is of a nature that, if the defendants had won the Part 11 applications instead of having been unsuccessful in them, it might have resulted in some discount off the costs awarded to them or a percentage of costs being disallowed. But taking everything into account I have come to the conclusion that even in combination the complaints do not justify an indemnity assessment in favour of Catalyst. Each feature relied upon is all too common in litigation. I must next deal with the discrete point raised by the defendants which does not concern Micropower's position but which is said to affect the exercise of my discretion to make a costs order against Mr Lewinsohn or Maximillian and which should lead me to defer dealing with costs against them until the contractual indemnity point raised in their counterclaim in the Noteholder Proceedings has been determined. Mr Phillips says that when one looks at the counterclaim there is an issue to be tried as to whether the costs with which I am dealing, namely the costs to be paid by Mr Lewinsohn and Maximillian to Catalyst, are covered by the contractual indemnity. He accepted that, in accordance with the dicta of the Court of Appeal in the case of Gomba Holdings UK Limited v Minories Finance Limited (No.2 ) [1993] Ch 171 at pages 194 to 195, there remained a discretion in relation to costs, notwithstanding a contractual obligation to indemnify. But he suggested that it would be appropriate for a court to exercise its discretion in accordance with such a contractual arrangement. It is certainly correct that, where the parties to litigation have agreed specifically how costs should be determined in that litigation, the court would probably exercise its discretion accordingly, all other things being equal. However, that is not this case. First, as already stated in relation to the summary judgment point, the contractual provision relied upon is in an agreement to which the defendants deny that Catalyst is a party. Second, before the contractual indemnity can be established there will admittedly be a number of issues to be determined. As with the summary judgment issue, the question arises why Catalyst should be kept out of costs to which it has established an entitlement pending resolution of a disputed counterclaim to a contractual indemnity which on the defendants' own case does not bind Catalyst. To defer dealing with these costs pending resolution of those matters, would, in my view, be wrong in principle. It follows that there should be an order for costs against Mr Lewinsohn and Maximillian in the same terms as that against Micropower, namely that Catalyst should have it costs of and incidental to the Part 11 applications and that such costs should be assessed on the standard basis. In my view, the test for a payment on account is satisfied too, and one should be ordered. As before I consider that the appropriate amount of the payment on account should be equivalent to fifty per cent of £249,502.62, that being the scheduled estimate of the relevant costs, excluding the costs relating to Friday's hearing. Again, no specific points were taken in relation to the listed items of estimated costs. As in the Catalyst Declaratory Proceedings I will hear further argument, if necessary, as to whether my order for costs here should include the costs of Friday's hearing given the result of this judgment. I hope that appropriate orders will be drafted to reflect this judgment and also to reflect anything that I decide in a moment when you address me on the question of Friday's hearing. MISS BINGHAM: I am very grateful to my Lord for sitting late to dispose of this matter. MR JUSTICE BARLING: I am sorry it had to be. MISS BINGHAM: May I address you very briefly on the issue of Friday. As to the Catalyst declaratory proceedings, we ask you for orders for costs of Friday on the standard basis. We say that have been substantially successful. We were successful on the three core issues which were debated on Friday. Firstly, the question of apportionment as between Mr Roberts and Catalyst. Your Lordship has found there was nothing in the argument on that point. Secondly, we have been successful in establishing an immediate entitlement to a payment on account, and thirdly, we have been successful as to quantum, in that we have put forward 50 per cent and that was the appropriate percentage, assuming your Lordship decided that the standard basis for assessment was appropriate. Again, my Lord, in the noteholder proceedings, we have been substantially successful in that there was an argument again as to apportionment as between Micropower on the one hand and the other two defendants. That, your Lordship has found to be of no substance. Equally, my Lord, the lion's share of the argument on Friday concerned Mr Phillips' argument that the contractual indemnity afforded the defendants protection from a costs order simplicita . Again your Lordship has found against the defendants on that. We say, having succeeded on the applications in general, we should not be deprived of any portion of the argument on Friday. MR JUSTICE BARLING: You do not think you should be deprived of anything on account of having lost as to basis of assessment? MISS BINGHAM: We say, my Lord, in respect of Catalyst declaratory proceedings, that that did not occupy time. Really it rode on the coattails of Mr Wolfson, because the principal point, as your Lordship identified, was the abandonment of the proceedings, Mr Wolfson having made that argument we adopted it. So in the declaratory argument, we say that did not add to the time spent. In the noteholder proceedings, it must be conceded that our points as set out in the witness statement of Miss Bassett have not found favour with you. If your Lordship were minded to make a deduction in that regard, we would recommend it be no more than 25 per cent. MR JUSTICE BARLING: Thank you very much. MR PRUDEAU: Does your Lordship want to hear me on that? MR JUSTICE BARLING: If I could, yes. We might as well get this cleared up if we can. MR PRUDEAU: My point is a very short one. I would submit the correct order to be made in relation to Friday as regards Catalyst, would be a no order. Whatever is said as to the extent to which they rode the coattails of ARM, a good proportion of the morning, almost until lunchtime, was used by Catalyst, and much of the argument was focused upon the extent to which this went beyond a situation that is questionable on the question of indemnity costs. Much of their submissions was to how egregious the behaviour of the defendant had been to take it that far beyond the borderline of indemnity costs. The other point is on the question of timing. There is another point in relation to the impact of an indemnity and standard decision in relation to Catalyst's proceedings, the extent of Mrs Bassett's evidence, it was extremely voluminous and targeted specifically at why it was the defendants behaved in a way to take it to an indemnity situation. It is not as if we are simply having a distinction without a difference. It is going to have a very real impact at the assessment, because so much of the evidence that Mrs Bassett put in was specifically to the point of indemnity as compared to the standard basis. MR JUSTICE BARLING: There would probably have been a hearing anyway, would there? MR PRUDEAU: I accept that. There would have been a hearing. MR JUSTICE BARLING: Even if there had not been an issue about indemnity costs -- MR PRUDEAU: I have to accept that. MR JUSTICE BARLING: I doubt whether, given the track record, you would have agreed -- MR PRUDEAU: It is unlikely that there would have been agreement in any event. On the question of timing as to the payment, your Lordship could reasonably take a view on the amount of money that is going to have to be raised by the defendants and in those circumstances, I would suggest that 28 days is realistic and proportionately fair to those who are out of their monies and seeking reimbursement. MR JUSTICE BARLING: You ask for 28 days? MR PRUDEAU: Yes. MR FORBES SMITH(?): We would resist 28 days. There has been no suggestion whatsoever as to the difficulty that Mr Lewinsohn is going to take to get the money. It has been a considerable period of time. He has known about this for a long, long time this was going to come, and we would say that 14 days is the right period. MR JUSTICE BARLING: In the judgment I have just given, I asked for some further argument on the question of the costs of and incidental to these cost applications themselves in relation to the Catalyst Declaratory Proceedings and the Noteholder Proceedings. The position there is that it is submitted there would have been a hearing, not everything would have been agreed by the defendants in relation to costs. There were arguments, not just about the basis of assessment but also about the proportion of any payment on account and indeed whether a payment on account should be made at all in certain cases. It seems to me that the justice of the case is that Catalyst, both in relation to the Catalyst Declaratory Proceedings (that therefore means Catalyst and Mr Roberts in relation to those proceedings) and in relation to the Noteholder Proceedings should have 50 per cent of the costs of and incidental to last Friday's hearing. The orders that you draw up should reflect that as well. Mr Prudeau for the defendants has suggested that, in view of the amounts involved, he would ask and indeed if ordered he would accept 28 days for payment rather than the 14 days that I provisionally indicated in the judgment I have just given, and in all the circumstances I propose to grant 28 days, so the order should reflect that as well. For the avoidance of doubt, the order for costs that I have just indicated in relation to Friday's hearing forms no part of the payments on account. MISS BINGHAM: I am grateful, my Lord. I am just asked to clarify that when your Lordship speaks of the costs of Friday, you include in that the costs of today? MR JUSTICE BARLING: Yes, that must be right. MISS BINGHAM: I am grateful. MR JUSTICE BARLING: Is that everything? Thank you very much. BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII