Deutsche Bank wins $8bn court battle against Sebastian Holdings

Norwegian company Sebastian Holdings has been ordered to pay $240m (£146m) to Deutsche Bank after the High Court threw out an $8bn compensation claim against the bank.

The 800-page ruling handed down on Friday (8 November) follows a four-month trial at the High Court. Deutsche Bank has been pursuing Sebastian for compensation for losses incurred by trades that plummeted in value during the recession (7 January 2013)

Sebastian countered that the bank had breached its contract and demanded $8bn in compensation.

Freshfields Bruckhaus Deringer partners Andrew Hart, Tom Snellings and Christopher Robinson led the battle for Deutsche Bank, instructing Essex Court’s David Foxton QC and 3 Verulam Buildings’ Sonia Tolaney QC.

Sebastian Holdings, which is owned by Norweigian multi-billionaire Andrew Vik, turned to Travers Smith partner Andrew King to launch the $8bn claim.  Fountain Court’s David Railton QC was instructed as counsel.

Sebastian claimed that Germany’s biggest lender had breached its contract in dealings with the company and had put through trades it shouldn’t have done. 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.

But Deutsche Bank argued that it was owed $116.9m for Vik’s FX currency trading account with the bank and $118.6m for his equity account. Ruling Mr Justice Cooke concluded that Deutsche Bank had not breached its contract with Sebastian and ordered Sebastian pay the amount in full.

Costs have not yet been decided for the case but are expected to reach dizzying heights.

Cooke J 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.” 

He continued: “I warned the parties very early on about issues which did not pass the “red face test” and the possibility of indemnity costs being awarded in respect of them. Whilst such a sanction is of very limited force in an action involving sums of the size in question here and where the costs are also so large, 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.”

The hearing follows a 2010 Court of Appeal hearing bought by Sebastian who wanted to have the case heard in New York while Deutsche Bank wanted to bring a case in England. It was found that cases could be bought in both jurisdictions with Deutsche Bank’s claim bought in the High Court and Sebastian’s counter claim heard in the New York Supreme Court (2 January 2012).

Evidence was taken from around 20 factual and 16 expert witnesses from the US, Switzerland, Asia and the UK and a wealth of documents were produced.

The overwhelming number of written submissions involved in the trial was criticised by Mr Justice Cooke, who said the court had not been able to fully challenge or probe arguments made. He said: ”It would be highly regrettable, in my view, if in future substantial litigation, the oral tradition was subverted and replaced by lengthy submissions of the kind with which the Court was faced here.”

The hearing is the second time Freshfields has represented the bank in hefty trading cases in the last month. The bank lost a landmark Court of Appeal hearing against Indian property company Unitech last week, leaving it open to claims over rigged Libor-rate based security trades (8 November 2013).

For the claimant 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

For defendant 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