CoA orders Sebastian Holdings to pay $250m to Deutsche Bank or lose appeal

The Court of Appeal has threatened to strike out Travers Smith client Sebastian Holdings’ (SHI) appeal against Deutsche Bank unless it pays over $250m to the bank.

The Turks & Caicos registered company owes Freshfields Bruckhaus Deringer client Deutsche Bank over £146m after losing an $8bn counterclaim against the bank last year but has not paid anything so far (13 November 2013).

Today (30 July) Lord Justice Tomlinson ruled that SHI could only pursue an appeal and counterclaim against Deutsche’s $243m win at the High Court last year if it paid the $250m judgment debt to Deutsche Bank (7 January 2013). SHI has also been ordered to pay £1.7m in security for costs by tomorrow.

Tomlinson LJ said: “It is in my judgment difficult to think of a case which could present more compelling reason for making the order sought.

“Accordingly I would order SHI to pay into court the judgment sum, together with interest accrued to the date of this judgment, as a condition of further pursuit of the application for permission to appeal and, if permission is granted, the appeal.  

“I would further direct that SHI’s Appellant’s Notice and its application for permission to appeal be struck out if payment is not made within 28 days. The application for permission to appeal should be stayed in the interim.”

The bank has turned to Freshfields partners Andrew Hart and Tom Snelling for its four-year battle with the company owned by Norweigan multi-billionaire Alexander Vik. Hart and Snelling instructed Essex Court’s David Foxton QC and 3 Verulam Buildings’ Sonia Tolaney QC.

SHI turned to Travers Smith partner Andrew King, instructing Fountain Court’s David Railton QC and Brick Court’s Thomas Plewman.

SHI and Deutsche have been locked in a four year battle of eye-watering proportions over losses made on foreign exchange trades on Vik’s account with the bank. Deutsche Bank pursued SHI for compensation for losses incurred by trades that plummeted in value during the recession (7 January 2013). SHI countered that the bank had breached its contract and demanded $8bn in compensation.

In November Mr Justice Cooke threw out an $8bn counterclaim brought by SHI and upheld Deutsche Bank’s $243m compensation claim. 

Rejecting the claim, Cooke J said parties had been warned at the outset of the case that unnecessary costs would not be tolerated. The litigants that did not pass the “red face test”, he said, would be hit with indemnity costs.

SHI was ordered to pay $240m in compensation to the bank as well as £51m in indemnity costs, including an interim payment of £32m plus VAT within a fortnight. So far SHI has paid nothing and the Court of Appeal ruled today that unless SHI pays $250m by the end of August it will lose its right to appeal and counterclaim.

In a separate application this year Deutsche Bank brought an application to make Vik personally liable for the costs awarded at trial and succeeded in winning interim costs from Vik this month. Vik is appealing that order.

The trial is planned to go ahead in November 2014 if SHI complies with today’s judgment. SHI is bringing simultaneous proceedings in New York. 

The legal line up

For appellant Sebastian Holdings

Fountain Court’s David Railton QC, Brick Court’s Simon Birt, Thomas Plewman, Oliver Jones and Max Schaefer instructed by Travers Smith partner Andrew King 

For the respondent Deutsche Bank

Essex Court’s David Foxton QC and 3 Verulam Buildings’ Sonia Tolaney QC leading Fountain Court’s Henry King, 3 Verulam Buildings’ James MacDonald, instructed by Freshfields partners Andrew Hart, Tom Snelling and Christopher Robinson