SFO slammed over “flawed” security for costs action as Tchenguiz defence bill rockets

The Serious Fraud Office (SFO) could rack up legal bills of more than £18.5m defending claims totalling £300m from the Tchenguiz brothers, Robert and Vincent.

The case was launched following the arrest of the brothers in a botched investigation in March 2011.

The agency, which has instructed Slaughter and May partner Jonathan Cotton to defend the claims, told the High Court earlier this week that it had already spent £8.13m defending the case.

In the most recent pre-trial outing, the SFO sought £6.25m by way of security for costs to defend a £300,000 suit from investment vehicle R20, which is owned by Robert Tchenguiz.

Blackstone Chambers’ James Eadie QC, instructed for the SFO, came under fire from the court after his opposing counsel, Essex Court Chambers’ Joe Smouha QC, contended that the SFO argued “it would be appropriate and proportionate […] to spend £9m of public money” defending a £312,000 claim.

Mr Justice Eder criticised Eadie for “fundamental flaws” in cost estimates for the SFO, which the barrister referred to as being “rough and ready”.

Eder J responded: “You are being kind to yourself Mr Eadie. I was going to say fundamentally flawed but, if you want to say rough and ready, I don’t find but it is fundamentally flawed.”

He continued: “Yet I don’t think it is appropriate for me now to take your rough and ready and start shaving it, and washing it, and putting it in and out, and ironing it, and coming out with a different figure because it seems to me fundamentally flawed.”

He warned Eadie to reconsider the application: “Mr Smouha is right in general terms that you application is fundamentally flawed. I think that remains my view. It was my view when I read the papers and it remains my view. Perhaps you might consider overnight how best – one position might be you are going to try and persuade me I am wrong.”

No conclusion was reached on the application yesterday (8 April) when Robert Tchenguiz , who has instructed Shearman & Sterling partner Josanne Rickard, hit back by making an application to amend his claims to include misfeasance.

Accepting the application the costs were awarded against the SFO, which was told to hand over 75 per cent of claimant application fees. Eder J said the application to amend the claim, which the SFO had demanded the claimants put before the court, was unecessary.

The added costs will likely push fees up further than the £18.5m already estimated by the SFO.

The brothers and their companies are seeking damages for trespass, wrongful arrest, human rights breaches, misfeasance in public office and malicious prosecution (6 January 2014).

It marks the latest in a stream of High Court criticism for the SFO, which landed in hot water last month over its actions in a trial against Victor Dahdaleh (26 March 2014).

The SFO budget has been slashed from £53.3m to £30.8m since 2008-09 and spiraling litigation forced it to ask for £19m of additional funding from the Treasury in January to cope with blockbuster cases.

The legal line-up

For the claimant (3) Rawlinson & Hunter Trustees (4) Vincent Tchenguiz (5) Vincos Ltd (6) Euro Investments Overseas Inc (7) Amora Investments Ltd

Fountain Court’s Bankim Thanki QC leading Rosalind Phelps, James Duffy and Chris Langley, all of the same set, instructed by Stephenson Harwood partner Sean Jeffrey

For the claimant (1) Robert Tchenguiz (2) R20 Ltd

Essex Court Chambers’ Joe Smouha QC and Alex Bailin QC of Matrix leading Essex Court Chambers’ Anton Dudnikov and Essex Court’s John Robb instructed by Shearman & Sterling partner Josanne Rickard

For the defendant the Serious Fraud Office

Serle Court’s Dominic Dowley QC and Blackstone Chambers’ James Eadie QC leading One Essex Court’s Simon Colton, Blackstone Chambers’ James Segan, instructed by Slaughter and May partner Jonathan Cotton