The latest Judgment in SFO v Litigation Capital & 46 Others (In re Gerald Martin Smith) was handed down by Mr Justice Foxton on 21 October 2021, following substantial written submissions and a two day remote hearing, which determined how the costs of litigating complex and competing equitable proprietary claims should be apportioned (the “Costs Judgment”).
The Costs Judgment is likely to be of interest to practitioners dealing with the fallout of fraudulent activities which have led to equitable claims in favour of a number of parties, who are competing to establish their interest and / or priority, and who wish to see how the Court may approach costs liability at the conclusion of such cases.
The Costs Judgment followed the Trial Judgment earlier this year in which the Settlement Parties (the SFO, Enforcement Receivers, the Viscount of the Royal Court of Jersey, Harbour Fund II LLP, Stewarts Law and the Joint Liquidators of certain BVI companies) were successful in relation to the key issues in the case and established their equitable proprietary rights to a variety of different asset classes via different routes: see here.
The Costs Judgment had to take account of, inter alia: the difference between the Settlement Parties’ stance before and after their Settlement; a number of additional collateral settlements; the presence of several issues in the case which other parties suggested had been determined against the Settlement Parties or in the face of opposition; the unusual nature of the case where the SFO was seeking to establish that assets were “realisable property” in order to satisfy Dr Smith’s confiscation order; the obscure and complex transaction history; and the differing alliances of convenience between the parties on certain issues.
The Court rejected submissions from the main non Settlement Party groups that because their equitable proprietary claims did not engage all of the Settlement Parties’ arguments / equitable proprietary claims, no or only a minimal costs order should be made against them. The Court also declined the invitation to make issues-based costs orders, which “would necessitate an assessment exercise of fiendish complexity”. Instead, the Court recognised that a range of percentage deductions should be made which reflected the position of each non Settlement Party, as well as the costs which the Settlement Parties had incurred in contesting the arguments of other Settlement Parties before their settlement, and other costs which could properly be considered as irrecoverable.
The Court ordered substantial six and seven figure payments on account, and also rejected the submission that the SFO should have to pay the costs of one of the non Settlement Party groups. Certain costs have been reserved to Phase II of the litigation, which will consider additional points concerning tracing and defences to tracing.
Daniel Saoul QC (of 4 New Square Chambers) and Richard Hoyle acted for the Settlement Parties (with Kennedy Talbot QC (of 33 Chancery Lane) in relation to the application for costs against the SFO), instructed by Adam Zoubir at Harcus Parker Limited.
The Costs Judgment can be found here.
The Trial Judgment can be found here.