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Jersey Unreported Judgments |
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You are here: BAILII >> Databases >> Jersey Unreported Judgments >> MB & Services Limited and Golovina v United Company Rusal PLC [2020] JRC 151 (03 August 2020) URL: http://www.bailii.org/je/cases/UR/2020/2020_151.html Cite as: [2020] JRC 151 |
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Companies - application by the Respondent for an interim payment on account of costs
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Before : |
Sir William Bailhache, Commissioner, sitting alone |
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Between |
MB & Services Limited |
Representors |
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Tatiana Golovina |
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And |
United Company Rusal PLC |
Respondent |
Advocate W. A. F. Redgrave for the Representors.
Advocate D. Evans for the Respondent.
judgment
the COMMISSIONER:
1. On 27th February, 2020, the Court sat to consider an application by the Representors for an Order restraining the Respondent from making an application to the Jersey Financial Services Commission (the "Commission") for the purpose of re-domiciling from Jersey pursuant to Article 127(H) - 127(T) of the Companies (Jersey) Law 1991 ("the Law"). Those provisions of the Law anticipate a process by which an application for re-domiciliation can be made to the Commission, with an opportunity provided to creditors to object. At Article 127(R)(3) there is specific provision for a creditor who gives notice and whose claim has not been discharged to apply to the Court for an Order restraining an application of this kind by the company to the Commission and at Article 127(4) the test is set out as follows:-
2. The Representors are currently contingent creditors in the sense that there is an outstanding claim for damages, but nothing turned on that for the purposes of the application being made or the decision taken.
3. Proceedings between the parties are continuing. I note that the Court considered and dismissed an application by the Respondent for a stay of the proceedings earlier this year - see MB & Services Limited and another v United Company Rusal PLC [2020] JRC 034, and there is a detailed factual background at paragraphs 12 - 37 inclusive of that judgment. The Court dismissed the application for a stay because it concluded that there was evidence of a real risk that the Representors would not obtain justice if the case were tried in Russia, because the Court was troubled by the influence which Mr. Deripaska might have behind the scenes. Advocate Redgrave sought to rely on the Court's findings in this connection to justify concerns expressed about the possibility of a re-domiciliation of the Respondent to Russia notwithstanding that Mr. Deripaska was no longer able to control the Company's business directly. His assertion was that if the Representors were successful in their application for damages, enforcement of the judgment debt would prove to be extraordinarily difficult because the assets of the Respondent were represented by shares held in subsidiary companies with underlying assets in Cyprus or in Russia.
4. As became apparent in the course of argument before us in February the problems of enforcement would exist whether the Respondent re-domiciled to Russia or not. Mr. Redgrave accepted that, absent a declaration of désastre, the only remedy which was available in Jersey was a potential disqualification of directors, which was a real potential remedy in circumstances where the Respondent is a public company, listed on the Hong Kong Stock Exchange.
5. A declaration of désastre, particularly perhaps in the context of a public company, would obviously be a very significant remedy indeed and the question then arose as to whether that was a realistic possibility if the Respondent had re-domiciled. The Representors were concerned that there was a lack of clarity as to whether the Respondent was doing business in Jersey for the purposes of Article 4(b), and that Article 4(d) of the Bankruptcy (Désastre) (Jersey) Law 1990 would be unavailable to provide the Representors with a basis for making an application for a declaration of désastre if the Respondent had re-domiciled to Russia.
6. The argument for the Representors could only succeed if it showed that the interests of the creditor would be unfairly prejudiced by the proposed continuance in another country, but the question of prejudice required an assessment of the remedies available to them if they succeed in their claim. Once the Respondent had confirmed that it was in fact doing business in Jersey because it was holding shares in Jersey in respect of the subsidiary companies in the group, it was then apparent that the Representors would have the status to apply for a declaration of désastre under Article 4(b) of the 1990 Law.
7. The complexities of argument in relation to potential difficulties of enforcement in Russia and Cyprus therefore fell away and were not directly relevant to the argument before the Court, and indeed on receipt of the unequivocal confirmation by the Respondent that it was doing business in Jersey as a result of its being a holding company incorporated here, the Representors withdrew their application. The Representors were given some additional comfort by the execution of a Cyprus contract and guarantees supplied in relation to the acceptance of the jurisdiction of the Cyprus courts in respect of potential enforcement proceedings.
8. On 28th February 2020, I gave judgment (unpublished) awarding costs in favour of the Respondent against the Representors jointly and separately in relation to the application which had been withdrawn. My reasons for doing so were that:-
(i) The Respondent had won the argument. The burden was always on the Representors to show unfair prejudice and that had not been discharged.
(ii) The allegations of misconduct, against persons other than the present board of the Respondent, were not thought to be relevant. Furthermore, the present board would have their own reputations to take into account, and would be subject to disciplinary investigation by the Hong Kong Stock Exchange in the event of serious misconduct.
(iii) The Representors could without too much difficulty have reached the conclusion that the 1990 Law applied, regardless of the concession which Advocate Mackereth on behalf of the Respondent made in argument that the Company was doing business in Jersey.
(iv) I added that as to the other concessions which were made by the Respondent, I did not hold those against the Respondent for the purposes of costs. They were concessions made because the Respondent could see that re-domiciliation might have advantages and the concessions were intended to find a way through the possibility of not being successful in the case and were therefore in line with the overriding objective.
9. The Respondent now makes an application for an interim payment on account of costs, which have not yet been taxed. By agreement between the parties, this is a matter which I am dealing with on the papers and I have received full written submissions both from the Respondent and from the Representors.
10. In its application for a payment on account the Respondent claims that it has incurred costs of £715,630.79, excluding the costs of its Russian lawyers. The costs include an assumed Factor B uplift of 50% on the costs of the Jersey and English lawyers. The Respondent reserves the right on taxation to seek an award of costs in respect of the Russian lawyers and a higher Factor B uplift. The application is for an interim payment of £375,000.00, which represents approximately 52% of the overall costs. The Representors contend that the Respondent is in principle entitled to a payment on account of costs but that the amount claimed is far too high. It is said that the time spent is wholly unreasonable and there has been a massive duplication of work. It is said that the Representors' costs incurred for this argument were only £197,865.34, applying also a Factor B uplift of 50%. Although the Representors do not make submissions as to what the figure on account of costs ought to be, it is contended that it should be at a level very far below the figure sought.
11. In relation to the amount of the interim payment, the principles are clear from case law, as the parties seem to agree. In Crociani v Crociani [2014] (1) JLR 503, Beloff JA said:-
12. In Marange Investments (Proprietary) Limited v Le General de Carrière et des mines sarl [2013] JRC 119A, Clyde-Smith, Commissioner said this at paragraph 44:-
13. The Commissioner went on to indicate that it would be helpful to the court to be provided with a summary of the costs claimed, distinguishing between Factors A and B, with a summary of the time spent, the fee earners and rates claimed to enable serious issues as to the rates or the quantum to be raised. The Respondent has complied with that direction in the present case.
14. Nonetheless it is to be borne in mind that if the Court is to adopt a "rough and ready" approach, it follows that I should avoid a detailed review of the costs of the receiving party and I should not attempt to carry out any form of taxation myself.
15. In Francis v Jersey Financial Services Commission [2018] JRC 064A, Sir Michael Birt, Commissioner, said this at paragraph 27:-
16. The costs claimed here are very substantial indeed for what amounted to a prospective two-day hearing - although in fact it took less than a day - on a matter where the substance of the argument would turn on whether the Representors could establish there would be unfair prejudice to them if an application were made to the Jersey Financial Services Commission for the Respondent to re-domicile to Russia. Years ago, a very rough rule of thumb was that for every two days in court, one should allow four days by way of preparation. Such an approach at least had the advantage of ensuring that access to justice at a reasonable cost was generally possible. The Representors have described the claims for costs in the present case as "eye watering", and it is not hard to see why. The main elements of the Respondents costs break down as:-
(i) Messrs Ogier £215,700.00
(ii) Messrs Ashurst £184,300.00
(iii) English Counsel £161,100.00
(iv) Experts (in Russian and Cyprus Law) £150,500.00
(v) Translations £3,400.00
17. These figures are remarkable given the relatively straightforward point, namely the status of the Representors to make an application for a declaration of désastre, which lay at the heart of the application.
18. It is said by the Respondent that this is an appropriate case for the recovery of the costs of English solicitors and Counsel because the issues raised were complex and multi-jurisdictional. The representation itself is directly concerned with high value commercial litigation with a substantial amount at stake. The Respondent asserts that the Representors were seeking in effect security of £1 billion. They say that the legal issues were novel and potentially extensive, and therefore that required an extensive analysis of the provisions.
19. One of the difficulties in reaching a fair conclusion on this application is that there was a straightforward answer in Jersey law to the Representors' assertions that there was unfair prejudice to them, but neither the Representors nor the Respondent seem to have found it. As a result, both of them spent a considerable amount of time and money on analysing material which would have been relevant had the simple answer not been identified. By my award of costs in favour of the Respondent, I have already accepted that the Respondent should not be penalised for not finding the simple answer for itself, namely the concession that it was doing business in Jersey by virtue of holding shares in subsidiary companies. As I indicated at the time, the Representors could equally have found that answer but did not do so. In the context of this case therefore, it follows from the costs order already made therefore that, in principle, the costs of English solicitors, counsel, Russian and Cyprus lawyers are all capable of being claimed on taxation.
20. I accept also that this was high value commercial litigation, which itself means that the parties can be expected to consider and examine a number of potential arguments that might be run. Although the receiving party needs to justify to the Greffier on taxation that the costs were reasonably and properly incurred, and has the burden of establishing therefore that the different arguments ought to have been researched and run, I can say that for the purposes of my assessment of a proper sum for payment on account, I accept that the areas of argument covered by the skeleton arguments were properly considered and researched. As I have indicated previously, I do not consider that the Respondent can be blamed for assuming that it had to prepare for and meet any other arguments from the Representors which might be raised.
21. So the question for the purposes of a payment on account is not the nature of the work done but an appropriate quantum.
22. I accept also that the absence of any authority as to the explanation of the statutory test of unfair prejudice in relation to a possible application to the Commission for continuance in a different country added to the complexity of the current proceedings. This is particularly relevant given the relatively few jurisdictions which appear to have similar statutory provisions enabling re-domiciliation to take place.
23. The Representors say that their costs are very much lower - approximately £198,000.00. In my judgment, this is a factor - but not the overriding factor - which I can take into account, and I have noted also that as it was the Representors' application, one might have expected their cost to be higher than those of the Respondent.
24. In terms of quantum, the objections from the Representors can be summarised as follows:-
(i) The Ogier legal team was over peopled with lawyers - six qualified lawyers and two trainees.
(ii) There was duplication between the work of Messrs Ogier and the work of London solicitors and Counsel - thus for example despite the fact that legal research and consideration was necessary in relation to the test that applied under the Companies Law to an application of this kind, it is said that over 200 hours of legal research has been carried out at a very senior level and will inevitably be reduced on taxation.
(iii) The combination of the English lawyers and Jersey lawyers means that there were simply too many lawyers on the legal team - put another way, it is a matter of choice for the Respondent as to whether it wanted to have such a large legal team, but it is a choice for which, if successful, the Representors ought not to have to pay in full.
25. The Representors point also to the difference in counsel fees. The Respondent has instructed senior and junior counsel at cost of £155,945.00; by contrast, the Representors instructed senior counsel only, and his fees totalled £6,000.00.
26. I consider, on a rough and ready broad brush basis, that there is likely to be a considerable reduction in the bill which has been submitted - or is being submitted - for taxation. In multi-jurisdictional cases of major litigation such as the present, one anticipates that there will be a need for a coordinating firm of lawyers responsible for running the litigation, whether those lawyers will be in Jersey or elsewhere. This means that in principle, one would not expect the paying party to pay for the costs of a substantial team of lawyers in both London and Jersey unless it could be shown that they were concerned with different pieces of the litigation in question. There might be some specifically Jersey law issues upon which advice was needed which will justify from time to time the greater number of Jersey lawyers being involved with the case. No doubt there will be some pieces of litigation where Jersey lawyers can say quite properly that they carry a responsibility for the case as a whole and therefore should have the overall coordinating responsibility - in those cases the involvement of London firms will be reduced. Similarly, there will be cases where the English solicitors in question will provide a sufficient expertise that the extent of counsel's involvement will be more limited, and other cases where in fact counsel will provide most of the external legal input to assist the Jersey lawyers. All these matters will be up for consideration with the client when the relationships for structuring the litigation are formed; and of course they may change from time to time during the litigation in question. I base my decision here on the premise that this piece of litigation between the parties ought on each side, to have been capable of being managed by one coordinating firm of lawyers, two Jersey advocates (whether in the same firm or not) and senior level legal input from English solicitors and counsel with expert foreign law advice in relation to enforcement in Russia an Cyprus.
27. Whereas in some of the cases, the Court has taken a figure of 50% of the claimed sum as being an appropriate sum to award for the purposes of an interim payment, I consider that that percentage would be too high in the present case for the reasons for which I have given. Taking a step back from the litigation, the sum claimed by the Respondent for what was thought to be a two day application is £715,000.00 (as it were without prejudice because it reserves the right to seek a higher sum on taxation). That seems to me to be too high a figure to start from for the purposes of the argument that was involved in this case, even making due allowance for the fact that this is major litigation. In the light of the complexities, I propose to take the sum of £350,000.00 as an overall starting point, and allow a 50% deduction against that. Accordingly, I make an Order that the Representors should pay the sum of £175,000.00 as an interim payment pending taxation. The parties are requested to agree a period within which this payment should be made or, in the absence of agreement, make written submissions to me as to why a period of 28 days from the date on which this judgment is handed down would be inappropriate. As to the costs of the argument over the extent of the payment on account, I am clear that the Respondent has not been successful in gaining the amount it sought. I have not seen any 'without prejudice' correspondence between the parties which might be relevant to the question of costs of this application. In those circumstances, I invite submissions within the next 21 days as to what, if any, Order ought to be made in respect of the costs of the application for a payment on account.
