Norway’s Sebastian Holdings pays £60m to German banking giant Deutsche
£60m – it will buy you 133 million bags of crisps, 18 Lamborghini Veneno Roadsters (the most expensive car in the world) or one $8bn legal battle against Deutsche Bank.
That was the experience of Norwegian outfit Sebastian Holdings, owned by Norwegian billionaire Andrew Vik, which was landed with £60m in indemnified costs for Deutsche Bank after its mammoth case against Germany’s largest bank was thrown out by Mr Justice Cooke last month (8 November).
It was a huge battle, the largest the Commercial Court has seen in years. Spinning out of the collapse of the financial markets in October 2008, the case was originally meant to run for 14 weeks from October 2012. Instead, the parties fought for a four-month trial. Evidence was taken from about 20 factual and 16 expert witnesses from the US, Switzerland, Asia and the UK, and a wealth of documents was produced.A costs order of this size is rare and usually only awarded if one of the feuding parties has wasted court time by relentlessly following pointless claims.
In the end Mr Justice Cooke produced an 800-page judgment, emphatically declaring Deutsche Bank to be the winner.
It comes as no surprise that this was an expensive trial, the kind that engulfs mammoth teams of lawyers working long hours just to get the due diligence completed on time.
Cooke J reflected just that when he said: “The costs figures which appear in the pre-trial checklists are huge. The parties were represented by four and five counsel respectively and the volume of work conducted by both firms of solicitors and experts was enormous.”
Tackling spiralling costs is top of the agenda for the civil judiciary following the implementation of Lord Justice Jackson’s reforms, which overhauled how civil cases are run and made proportionate costs a priority.
Cooke J carefully considered the mega costs issue at hand and issued warnings to both sides about the dangers of witness manipulation.
But first, the big battle: Sebastian claimed that Deutsche Bank had breached its contract in dealings with the company and had put through trades it should not have. Sebastian argued that trades made on behalf of the company were unauthorised and refused to pay more money to cover the losses – known as margin calls.
Deutsche countered that it was owed $116.9m (£72.2bn) for Vik’s FX currency trading account with the bank and $118.6m for his equity account.
Cooke J concluded that Deutsche had not breached its contract with Sebastian, ordering Sebastian to pay the amount in full.
The parties had been warned that they would need to pass a ‘red face test’ on costs, and those that failed the test would be landed with indemnity costs and would have to cover the winning side’s legal disbursements.
“The costs are so large,” the judge said, “it may be that it would be appropriate in this case to treat pursuit of some of the issues as ‘outside the norm’ and to make indemnity costs orders in respect of them, in the probably forlorn hope that it may discourage other litigants from pursuing hopeless points.”
As well as being ordered to pay over $240m in compensation to the bank, Sebastian was told to hand over indemnity costs of £60m to cover the cost of Deutsche’s legal team.
Vik was “not a reliable witness”, the judge said, adding that his evidence was “incapable of acceptance on the crucial issues”.
The judge continued: “I have concluded that in some respects he was simply dishonest.”
It could have been worse for Sebastian had the judge awarded total costs to Deutsche as requested by the bank’s counsel, David Foxton QC of Essex Court. There was a discount because the judge found some of the bank’s witnesses were “dishonest and hid the true position”.
The Commercial Court is grappling with costs issues as the wider judiciary decides whether to lift the budgeting limit on cases valued above £2m. It is taking a hard line on parties that raise legal bills unnecessarily as it seeks to maintain competitiveness in the international market.
£60m may be a drop in the ocean to a billionaire like Vik, but this is a case that will put costs at the forefront of litigators’ minds.