Deutsche Bank AG v Sebastian Holdings Inc

This is an application made by Mr Alexander Vik to set aside an order made against him on paper by Sir Jeremy Cooke on 10 October 2016 (“the Order”). Because the Order was made on paper and without a hearing and not with his consent, Mr Vik was given express permission to apply to vary or set it aside.

As explained in more detail below, Mr Vik was the individual behind the Defendant in the substantive proceedings, namely Sebastian Holdings Inc. ("SHI") a Turks and Caicos company. The proceedings concerned a claim by the claimant bank, Deutsche Bank AG ("DB") for monies due to it in respect of a number of very large trading transactions on which SHI had made huge losses. After a 44-day trial, Cooke J gave judgment for DB for US$243m and dismissed SHI’s counterclaim for US$8bn. He also awarded to DB 85% of its costs on an indemnity basis.

In his judgment given on 8 November 2013, Cooke J described Mr Vik and SHI as follows:

He also made severe criticisms of SHI’s conduct of the litigation and Mr Vik, whom he found had lied and fabricated documents. Hence the indemnity costs order. He also made some criticism of DB though by no means of the same order.

Thereafter, DB applied for a non-party costs order (“NPCO”) against Mr Vik. In a lengthy judgment handed down by Cooke J on 24 June 2014, he granted that application and said as follows:

“103.

In all the circumstances I consider that it is entirely just that a non-party costs order be made against Mr Vik so that he is liable for all sums owed by SHI to DBAG in respect of costs awarded by me in my order of 8 November 2013.

104.

It follows also that absent any special considerations of which I am unaware, that the costs of the non-party costs application… should be paid by Mr Vik to DBAG.

105.

The form of the order may be capable of agreement between DBAG and Mr Vik but if there are issues which I need to resolve, I will do so.”

Pursuant to that judgment, on 2 July 2014 Cooke made an order which included the following provisions:

“1.

Pursuant to s. 51 Senior Courts Act 1981, Mr Vik is to pay DBAG the sum of
£36,204,891 by 4pm on 8 July 2014.

2.

DBAG's costs of the Non-Party Costs Application are to be paid by Mr Vik…

9.

Liberty to restore.”

(“the July Order”).

Although this was the obvious consequence of his judgment, the July Order did not expressly contain a more general order that Mr Vik was liable to pay all of the costs payable by SHI to DB. But that was in my view implicit in the interim payment order at paragraph 1.

Mr Vik made the interim payment within two days. At that stage, he made no application for a stay of the July Order whether pending an appeal or otherwise. Appeal he did, however, but following a three-day hearing, the Court of Appeal dismissed that appeal on 21 January 2016 ([2016] 4 WLR 17). It referred to the appeal being against the order that Mr Vik make the interim payment as it obviously was. That said, the Court of Appeal dealt in detail with the judgment of Cooke J, considering, as it did, that Mr Vik should be liable for all costs payable by SHI. There can be no doubt that the Court of Appeal dealt in principle with Mr Vik’s liability to pay all the costs, even though the order in question concerned the interim payment only. Thus, it upheld the finding that “Mr Vik was the real party” and that he “had a full opportunity to deal with” all of the facts relevant to that finding and so there was “no reason in principle… why [Mr Vik] should not be required to pay the whole of the costs for which [is SHI] is liable.”

An application by Mr Vik to the Supreme Court for permission to appeal from the Court of Appeal was dismissed on 19 July 2016 on the ground that no arguable point of law of general public importance had been raised.

In the light of the exhaustion of Mr Vik’s rights of appeal, DB’s solicitors wrote a series of letters asking him to agree to pay the various specific costs orders made specifically against SHI including the balance of DB’s general costs of the action awarded as against SHI by the order of Cooke J on 8 November 2013. On 12 August 2016, his solicitors replied saying that they would take further instructions and would respond within 14 days. They did not do so and on 6 September 2016, DB’s solicitors said that they would now commence work on the assessment of costs due under the specific costs orders made against SHI and an application to restore the application that he pay the outstanding costs orders as against SHI.

The application itself was made by DB on 13 September 2016 and it included a witness statement in support with a long exhibit. The application sought:

The enclosed draft order was to the same effect.

On 16 September 2016 Mr Vik’s solicitors wrote to say that they needed more time but would be in a position to say whether he consented to the application being dealt with on paper within 14 days i.e. at the end of September.

However, nothing further was heard from Mr Vik’s solicitors by the end of September and so on 4 October 2016 DB’s solicitors wrote to the Court setting out the history and saying that, for its part, DB was content for the matter to be dealt with on paper while recognising that if Mr Vik objected to any of the orders sought it would be necessary to have an oral hearing. This letter was copied to Mr Vik’s solicitors who wrote to the Court on 5 October 2016 saying that the delay in responding was due to Mr Vik’s dealing with other litigation commenced by DB and Counsel’s availability. However the letter said that he would respond substantively to the application by 14 October 2016 and also say by then whether he consented to it being dealt with on paper.

In fact, and in the meantime, the application was dealt with on paper by Sir Jeremy Cooke on 10 October 2016. His order in full reads as follow:

“UPON the Claimant (DBAG) having applied on 5 December 2013 for a non-party costs order against the Second Defendant (Mr Vik);

AND UPON the judgment of Cooke J dated 24 June 2014;

AND UPON the order of Cooke J dated 2 July 2014;

AND UPON having reviewed DBAG's Application dated 13 September 2016 (the Application) to restore its application dated 5 December 2013:

IT IS ORDERED THAT:

1.

Pursuant to s. 51 Senior Courts Act 1981, Mr Vik is to pay DBAG's costs awarded against the First Defendant (SHI) pursuant to paragraphs 3 and 4 of the order of Cooke J dated 8 November 2013 plus interest accrued thereon.

2.

Mr Vik shall be made a party to any detailed assessment of the costs awarded to DBAG against SHI pursuant to paragraphs 3 and 4 of the order of Cooke J dated 8 November 2013.

3.

Mr Vik shall be entitled to set off the sum of £36,204,891 from any amount payable under paragraph 1 above.

4.

Mr Vik is to pay DBAG's costs of the detailed assessment of the costs awarded to
DBAG against SHI pursuant to paragraphs 3 and 4 of the order of Cooke J dated
8 November 2013.

5.

Mr Vik is to pay DBAG's costs associated with the Application, to be the subject of summary assessment if not agreed.

6.

Liberty to apply within seven days of the date of this order. In particular, liberty to the Second Defendant to apply as, despite request, he has failed to consent to the Application being considered on paper.”

I should add that, on DB’s case, the balance of the costs could be as much as £16m, although Mr Vik says that little or nothing further remains to be paid after an assessment i.e. the £36m interim costs order already paid represents all or most of what DB could hope to achieve on a detailed assessment.

The application made before me by Mr Vik is to set aside the Order and to stay the prior application made by DB for the balance of the costs together with any detailed assessment as against SHI and/or Mr Vik, alternatively simply to stay the assessment in any event, pending the outcome of an application made by Mr Vik to the ECHR in Strasbourg, on 28 November 2016 ("the ECHR Claim").

The ECHR Claim argues that the NPCO originally made (and any ancillary orders thereafter) was in breach of Mr Vik’s Article 6 rights. The essential reason for this was said to be that during the substantive trial he was unaware that, when it came to an end and if SHI lost, DB would or might make an NPCO application against him. So he did not realise during the trial, at which he appeared as the sole witness for SHI (unsurprisingly, being its prime mover) that he might be exposed to a personal liability thereafter and that, in a real sense, he was therefore on trial himself. That being so, he was deprived of his right to adversarial proceedings under Article 6 in respect of which the court must grant him an opportunity to have knowledge of and comment upon the observations filed or evidence adduced by the other parties.

Also, Mr Vik said that there was no equality of arms because he had not been given a reasonable opportunity to present his case and for the most part he (as distinct from SHI) was not legally represented at the trial. Further, he was deprived of the right to an impartial tribunal - i.e. Cooke J, having heard the main trial and having found against SHI and having rejected the evidence given by Mr Vik, would now and did, prejudge the later application against him for an NPCO. Mr Vik further says that had all of this been put before Sir Jeremy Cooke in October 2016, a different result would have obtained i.e. the order that he now seeks. In fact, it is not necessary for me to speculate on what might have happened before Cooke J because it is common ground that pursuant to the permission to apply within the Order, this is now in effect a rehearing of DB’s original application.

Before turning to other matters, I should say a little more about Mr Vik’s Article 6 points as previously dealt with by the Court of Appeal. As to the issue that Mr Vik had not been warned in advance that he might be the subject of an NPCO application, the Court dealt with this first at common law. I make no apologies for quoting this in extenso not least because it also covers the Court’s ruling on Mr Vik’s application to adduce before it new evidence on the point. The judgment of the Court of Appeal was given by Moore-Bick LJ.

“30.

A recurring theme of Mr Cogley's submissions was the Bank's failure to warn Mr Vik that it might seek an order for costs against him. Basing himself on the third of the guidelines in Symphony v Hodgson, Mr Cogley argued that it was essential that a third party be warned that an order for costs might be sought against him if injustice were to be avoided. In the absence of a warning he would be deprived of the opportunity of protecting his interests, for example, by modifying his approach to the proceedings or by applying to be joined as a party in order to contest the evidence and arguments that might affect him. Mr Cogley repeatedly emphasised that, despite later developments in the law relating to the exercise of the court's jurisdiction in relation to costs, the guidelines to be found in Symphony v Hodgson had not been diluted in any material respect and it was a short step from that to arguing that a warning is an essential pre-requisite of a successful application of this kind. He also submitted that since the Bank had failed to warn Mr Vik of the risk that he faced, it was incumbent on it to explain why it had not done so, if it wished to persuade the court that he would not suffer injustice as a result of the adoption of a summary procedure. It had not attempted to do so, however, and therefore the lack of a warning made it unjust to hold Mr Vik bound by the judge's findings and unjust to make an order for costs against him.

31.

… the Symphony guidelines… are not ostensibly directed to a case such as the present, in which an order for costs is sought against a third party who can properly be regarded as the real party to the litigation. The truth is that Mr Vik had every opportunity to contest the Bank's factual and legal case and took full advantage of it. We agree with the judge, therefore, that the only advantage that a warning could have given him would have been an opportunity to reconsider his own position in relation to the proceedings.

32.

Although Mr Cogley formally disavowed any suggestion that it is necessary for an applicant to have warned the third party that he is at risk of being ordered to pay the costs if an application of this kind is to be successful, many of his submissions came very close to adopting that position. For example, he submitted that, unless the Bank could provide a good explanation for its failure to warn Mr Vik of the risk he was exposed to, it could not be heard to say that he would suffer no injustice if he were bound by the findings of fact in the main action. As was made clear in Dymocks, however, that is to read too much into the Symphony guidelines. The importance of a warning will vary from case to case and may depend on the extent to which it would have affected the course of the proceedings: see per Lord Brown at para 31. If the third party against whom an order for costs is sought is the real party to the litigation, the absence of a warning may be of little consequence. We should make it clear that we do not accept Mr Cogley's submission that the Bank was under an obligation to explain why it had not warned Mr Vik of the risk he faced. The fact that he had not been warned was all that was relevant and the judge duly took it into account……

35.

In the present case the judge expressed himself entirely satisfied that a warning at an earlier stage would have made no difference to the conduct of the proceedings. He accepted that Mr Vik had probably been unaware of his potential exposure to an order for costs, but held that it did not lie in his mouth to say that his evidence would have been different or that he would have conducted the case in a different way. In our view that judge was entitled to reach that conclusion. He was, of course, uniquely well placed to understand the way in which the litigation had been conducted on behalf of Sebastian and to assess Mr Vik, both as a litigant and a witness. Mr Vik's case before the judge was that he could not be identified with Sebastian and was doing no more than conducting the proceedings on behalf of the company in the manner that best served its interests. He now seeks to argue that, if he had been warned that he might be at risk of having an order for costs made against him personally, it would have influenced his approach to the litigation, but it is not open to him, without conceding that Sebastian was little more than a puppet, to say that he would have caused it to act differently in order to protect his own interests. Similarly, Mr Vik put himself forward as a witness of truth. He cannot now be heard to say that he would have given different evidence if he had known that he might be made personally liable for the Bank's costs. This case is unlike Equitas v Horace Holman in that the facts which establish that Mr Vik was the real party in issue were all relevant to the issues that arose in the action, either on the claim or the counterclaim and he had a full opportunity to deal with them.

36 In the court below the judge drew attention to the fact that there was no evidence from Mr Vik to support a suggestion that his approach to the proceedings would have been different if he had been warned of the risk to his position. No doubt for that reason Mr Cogley sought on the appeal to rely on fresh evidence in the form a further statement from Mr Vik, made since the conclusion of the proceedings below, in which he described for the first time a number of respects in which a warning would have cause him to act in a different way. The most significant of them was the assertion that it would have been possible for Sebastian to compromise the Bank's claim on terms that did not expose him personally to an order for costs and that if he had been aware of the risk to his personal position he would have ensured that it did so.

37 We have reached the conclusion that it would not be appropriate to admit that evidence. In the first place, we do not think it is credible. If there had been any opportunity of settling the Bank's claim (which seems very likely), it was obviously not on terms that appealed sufficiently to Mr Vik. If, as the judge found, Sebastian was simply his vehicle, he must have concluded that it was in his own interests to press ahead rather than settle on the terms acceptable to the Bank. If, on the other hand, he was conducting the litigation in the best interests of the company, his decision to press ahead would have been uninfluenced by his own position. It is difficult to escape the conclusion that Mr Vik preferred to fight on in the hope of obtaining a substantial personal benefit and take the chance of losing.

38 Quite apart from that, however, no satisfactory explanation was put forward for the failure to adduce this evidence below. It is clear from the written submissions before Cooke J that the question of adducing evidence to support an argument that Mr Vik would have caused Sebastian to act in a different way was present to the minds of those acting on his behalf and that a decision was taken not to do so. It is said that Mr Vik was labouring under the misapprehension that he was not entitled to refer to negotiations between Sebastian and the Bank, but those acting for him would certainly have known the extent to which it was possible to refer to them and in any event that was only one of several respects in which he said that he would have acted differently. In our view, it is not appropriate to allow Mr Vik to adduce fresh evidence relating to that issue on appeal.

39 The judge considered that in the circumstances of this case the failure to warn Mr Vik that he might face an order for costs against him personally was of very little weight at all. We agree.”

Then, in paragraph 57, the Court dealt with the same point but in the context of Article 6:

“Since the right to a fair trial is an essential ingredient of the common law, it is not surprising that Mr Cogley accepted that the arguments based on article 6 added little, if anything, to his other points. For the reasons we have given we do not think that there was any unfairness to Mr Vik in this case. The judge was right to regard Mr Vik as the real party to the main action. He had a full opportunity, through Sebastian, on whose behalf he gave evidence, to contest all the issues of fact in the action. As a witness he had an opportunity to give a full and honest account of all those aspects of Sebastian's affairs which he had been concerned with or with which he was familiar. It is difficult to see in what respect Mr Vik did not have a fair opportunity to contest all the matters on which the Bank relied in support of its application. There is nothing in the veiled suggestion that the judge did not conduct the proceedings fairly or that Mr Vik's article 6 rights were infringed.”

Finally, in paragraphs 52-56 the Court dealt with the separate Article 6 argument that Cooke J should not have determined the NPCO application against Mr Vik since he had been the trial judge and had made adverse findings against him. It rejected that submission comprehensively.

Both sides agree that a claim to the ECHR made (as it must be) only after exhaustion of domestic remedies, including any appeals, is not itself a yet further appeal from the original decisions impugned. Not only is it not an appeal but even if the claim were successful, any remedy, for example compensation (which is far from automatic), would be directed to the other party i.e. the UK Government as opposed (here) to DB. The best that Mr Vik might hope for is that he could in some way persuade the Court of Appeal to re-open the previous appeal and then reverse the original decision of Cooke J to make the NPCO in the first place. I deal with that below.

As a matter of form, this is an application to vary or set aside the Order pursuant to paragraph 6 thereof. But in substance however, and as noted above, it is a rehearing of DB’s applications which led to the making of the Order. In other words, and dealing at this stage with orders in the form of paragraphs 1-3 of the Order, I should not make them at all (i.e. set them aside) and in effect adjourn the underlying applications generally, pending the outcome of the ECHR Claim. This is Mr Vik’s primary application. Alternatively, if I make the orders, I should immediately stay execution thereof. In practical terms that means staying the detailed assessment of the costs. Subject to the appropriate governing CPR rules and principles, both applications are, of course, matters for the discretion of the Court.

SHI has not paid any part of the judgment debt which is now over 3 years old. Furthermore, there is little doubt that Mr Vik has engaged in systematically depleting SHI of its assets. Back in 2014 and in an earlier judgment of the Court of Appeal which considered SHI’s appeal against the conditions imposed for its substantive appeal against Cooke J’s judgment of November 2013, Tomlinson LJ (with whom Longmore LJ agreed) said this:

“9….the judge nonetheless made an unequivocal finding that on and after 13 October 2008, when Mr Vik had a clear idea that SHI's trading liabilities ran to many hundreds of millions of dollars, he caused US$896m of funds and assets to be transferred from SHI either to himself or to companies closely associated with him or with his family. In particular, very substantial sums were transferred to CM Beatrice, Inc. ("Beatrice"), and to VBI Corporation ("VBI"'). The judge found that Mr Vik procured these transfers for no bona fide commercial reason, and that he did so with a view to depleting SHI's assets and making it more difficult for DB to seek recovery of the amounts owed to it by SHI. The judge concluded, at paragraph 1461:

"I therefore find that all these funds were available to SHI (some US$896M) prior to transfer and that, moreover, Mr Vik could, at a moment's notice, procure the transfer of those funds back to SHI should he have chosen to do so. There was no good bona fide commercial reason for the transfers….”

36 It is right to point out that Mr Vik gave no guarantee for the liabilities of SHI to DB, and that is a point which he is entitled to stress and does stress. However there is no evidence to suggest that Mr Vik is not still the sole owner and director of SHI as he was in 2008. SHI apparently observed no corporate formalities. Given the judge's findings as to the manner in which Mr Vik treated SHI and its assets as his own, it is difficult to think that there can be a more appropriate case in which to take into account that he could, if minded to do so, pay the judgment debt. However, it is not in my judgment necessary to go that far. On the basis on which I approach the case SHI could itself pay the judgment debt into court if Mr Vik chose to procure it to do so. That does not involve Mr Vik funding SHI or paying the judgment debt on its behalf. It involves Mr Vik taking steps to restore to SHI what are rightfully its assets.”

An example of this was the transfer by Mr Vik of all his shares in SHI to a close associate which he then used as one basis for denying that he could not provide documents sought by DB under CPR 71 in respect of SHI’s means as a judgment debtor. That transfer, and Mr Vik’s resignation as a director of SHI, took place once week after DB had applied for this order. In his judgment given 7 October 2015 ([2015] EWHC 2773) Cooke J rejected this at paragraph 11, observing that:

“the whole history of these proceedings against SHI, Mr Vik's creature company ...reveals attempts by Mr Vik ... to avoid liability, to deceive the court and conceal the true state of SHI's financial affairs.”

(see also paragraphs 13 and 49 of the judgment).

More recently, and in a judgment relating to forthcoming committal proceedings against Mr Vik, Teare J noted at paragraph 29 of his judgment that the history of this case demonstrated that Mr Vik was a man who would do what is necessary to prevent DB obtaining its judgment debt.

As a starting point, this requires an analysis of the true status of paragraphs 1-3 of the Order. Mr Vik’s primary application pre-supposes that, on the footing that they are set aside, the “case” against Mr Vik, namely that he should be liable as a non-party for all the costs due from SHI, has not been decided at all. In other words, the situation before me would be akin to one where there has not yet been the substantive trial or other hearing by which the Court has pronounced on the merits. Thus this case is susceptible to a stay or adjournment pending the outcome of the decision of another court. I do not accept that the position is so straightforward.

Although Mr Matthews QC tended to refer to paragraphs 1-3 of the Order as “new” orders, and said that no actual order in those terms had been made before, this is only partially correct. As noted above, it is plain from the terms of the original judgment of Cooke J (and indeed that of the Court of Appeal), cited above, that what he had decided was that Mr Vik should be liable for all of DB’s costs of the action that were due from SHI, just like SHI. On his findings, Mr Vik always was the human being standing behind SHI and its litigation. There was no basis to time-apportion his liability as a non-party for costs.

Further, any NPCO like that made here entails the making of a detailed assessment of the costs in question. Indeed that follows from the primary costs order made against SHI. Nor, of course, would a court order a payment on account of costs unless there was going to be a detailed assessment thereof (absent agreement by the parties).

Accordingly, in my judgment, in substance, Cooke J actually made the NPCO order which would include the need for a detailed assessment, upon making his judgment in June 2014. Therefore, to view paragraphs 1 and 2 of the Order as somehow new orders is to mis-state the position. Although they were not made as such until 10 October 2016 they were in fact an inevitable consequence of the earlier judgments. There was nothing left to consider on their merits by 10 October 2016. The fact that paragraphs 1 and 2 appeared only in the Order and not at an earlier stage, and indeed that they were applied for subsequently, cannot alter the position. Indeed, it is only because of the happenstance of the sequence of orders here that Mr Vik could make his primary argument at all. Had the orders been made at the time of the original judgments, he would have been in the same position as any other defendant faced with a judgment of which he now complains to the ECHR where he could only apply for a stay of execution.

Indeed, on the face of it, there could be no objection to the commencement of the detailed assessment of costs as against SHI but Mr Vik contends that this should not happen either since it would not be appropriate to have two separate assessments and anyway Mr Vik has been ordered to be a party to that as against SHI. So it is accepted that what is sought is a stay against the assessment altogether.

The only way that the earlier judgments could be deprived of their binding force is if they were reversed. I deal with that below.

Paragraph 3 of the Order is slightly different because there had been no prior decision of Cooke J on that specific point although the position was agreed to be such in the Court of Appeal. But Mr Vik’s present objection is not to paragraph 3 of the Order - indeed he would want it - it is to the logically prior provisions contained in paragraphs 1 and 2. Those paragraphs must be viewed against the background I have just set out.

All of this means that the distinction between the approach of the Court to an application to stay the underlying claim on the one hand, and one to stay execution of judgment thereon, on the other, drawn by Collins J (as he then was) in particular 29 of his judgment in Re Whitbread [2001] Eu LR 150 is not of much assistance here.

I accept that the Court has the power in an appropriate case to adjourn or stay it pending the decision of another court. So for example, it can (and must) do so where it has ordered a reference to the ECJ. It may also do so where there is a case pending before the ECJ which will decide the very legal point in issue in the instant case – see for example, Johns v Solent [2008] EWCA Civ 790, although the essential question there was whether the tribunal chairman had been right to refuse such a stay because he thought there was no real prospect of the ECJ decision going in the other side’s favour.

I also agree that where there is a test case proceeding in a court here, this is likely to entail the stay or adjournment of many other cases turning on the same point. I further accept, as Evershed MR put it in Re Yates [1954] 1 WLR 564 at 567:

“It may well be that if an important case is known to be subject to appeal to the House of Lords, or to appeal from a judge of first instance to the Court of Appeal, a judge may reasonably and properly think that it is in the public interest not to decide another similar case until the result of the case under appeal has become known: whether he should so decide depends very much on all the circumstances of the particular cases;”

In fact, in that case, the Court of Appeal reversed the judge’s order for a stay.

None of those cases dealt with a pending claim in the ECHR. However, Mr Matthews QC submits that Sparks v Harland [1997] 1 WLR 143 is an example of a case where the court effectively stayed or suspended the making of the underlying order so as to await the outcome of an ECHR claim, and that case is analogous to this one. I disagree. The essential facts of that case, far removed from this, were these: the claimant’s claim for compensation for the sexual abuse perpetrated by the defendant was clearly time-barred under existing law. Accordingly, the defendant sought to strike out the claim. Under the operative former RSC Order 18 rule 19 (1) the consequential remedy, where a claim or part thereof was struck out, was to stay or dismiss the action or enter judgment. The Master upheld the strike-out application and dismissed the claim. On appeal, the Judge was invited to stay rather than dismiss the claim. The claimant had pointed to the existence of a pending ECHR case where the European Commission on Human Rights had already held the relevant claim to be admissible and, if the ECHR agreed with the claim, there would have to be consequential amending legislation in England, which would be retrospective. In that event, any limitation problem faced by the claimant would disappear.

As a matter of limitation, therefore, the claimant could simply start afresh with a new writ. However, the Judge accepted that there could be a problem with that course because a fresh writ might be met with an abuse of process argument since an earlier identical writ had been issued and then dismissed.

To avoid a problem of that kind, the Judge allowed the appeal to the extent of substituting a stay for the dismissal of the action. This was the context for his reference to not making the claimant go back up the hill again i.e. starting all over again and running the risk of an abuse of process argument. Such an expression cannot be meaningfully applied in our case so as to suggest that the original applications should be adjourned generally.

Sparks has no bearing on the case before me. First, there could be no stay on the enforcement of the strike-out there because it makes no sense to say that the strike-out or any dismissal is itself stayed. Further, a stay rather than dismissal was one of the remedies expressly conferred upon the Court in this situation. And from the defendant’s point of view, there was no practical difference between the two remedies. As matter stood and unless there was any change in legislation, the offending action was no more. This decision is not authority for the proposition, which in truth Mr Vik needs to make good in order to maintain his primary submission before me, that after a judgment on the merits, the court can or should in an appropriate case decline to make any consequential order upon it pending a claim to the ECHR. Moreover, a critical distinguishing feature in Sparks was that a successful outcome in the ECHR would lead to further legislation which would then have the effect of reversing the limitation position (just as a successful outcome in the Court of Appeal would reverse the judgment below). That is not so here.

Mr Vik submits that notwithstanding all that, if the ECHR decided that there had been a violation of his Article 6 rights, a Court here then considering whether to make orders in the form of paragraphs 1-3, would have to take it into account, even if no change in domestic legislation resulted. He relies for this on the points made in footnote 10 of his Skeleton Argument. But I cannot see that any such ECHR decision would be regarded as a definitive ruling which was part of a series of ECHR decisions on the law which must be given effect here. Rather it is much more likely to be an application of Article 6 to the particular facts in circumstances where the Article 6 arguments have already been made the subject of final judgments here. Moreover, there is a very real question as to whether the curing of any found breach of his Article 6 rights would have made any difference, a point which the ECHR itself might very well not decide. I consider that matter further below, in the context of the question of re-opening the appeal.

There is also the additional complication that the interim payment order for the £36m has on any view been made and enforced. It cannot therefore be affected by anything decided by the ECHR. Mr Matthews QC says that this does not mean that any Court deciding the remaining questions should permit yet further breaches of Article 6. I see that but in my view, the facts surrounding the payment of the £36m (and Mr Vik’s failure to seek a stay then and indeed his failure to make any application to the ECHR until well after Sir Jeremy Cooke had made the Order) are discretionary factors against him.

Accordingly, on any realistic view, it seems to me that the only way that the Court could, after a successful ECHR Claim decide not to make orders in the form of paragraphs 1-3 would be if such a result could or would cause the Court of Appeal to re-open its earlier decision, which of course would have to be done before DB’s applications were reheard.

The threshold criteria for so doing are strict. CPR 52.30 provides that the jurisdiction to re-open is available only where “it is necessary to do so in order to avoid real injustice” and “the circumstances are exceptional”.

This strictness was emphasised by the Court of Appeal in Lawal v Circle 33 [2014] EWCA Civ 1514, where the Vice-Chancellor said this:

“65…the jurisdiction under CPR 52.17 can only be invoked where it is demonstrated that the integrity of the earlier litigation process has been critically undermined. The paradigm case is where the litigation process has been corrupted, such as by fraud or bias or where the judge read the wrong papers. Those are not, however, the only instances for the application of CPR 52.17. The broad principle is that, for an appeal to be re-opened, the injustice that would be perpetrated if the appeal is not reopened must be so grave as to overbear the pressing claim of finality in litigation. Fourth, it also follows that the fact that a wrong result was reached earlier, or that there is fresh evidence, or that the amounts in issue are very large, or that the point in issue is very important to one or more of the parties or is of general importance is not of itself sufficient to displace the fundamental public importance of the need for finality….

It appears to me to be extremely difficult for Mr Vik to overcome that threshold, even if the ECHR Claim succeeds. First, the decision of the ECHR will not show that something had gone fundamentally wrong in the Court of Appeal - it would simply show that it had come to a wrong conclusion on the question of breach of Article 6 rights. But that is not enough - see paragraph 69 of the judgment in Lawal quoted above. And in fact, the Court of Appeal held that he had had every opportunity to contest the relevant facts.

Next, even if the appeal was re-opened, it is extremely unlikely that there would be a different outcome namely that an NPCO would not be considered appropriate, given all the evidence.

Mr Vik submits, however, that if the ECHR held that the lack of a warning was a breach of his Article 6 rights, then, if the appeal was re-opened, the Court of Appeal would still have to consider whether a warning would have made any difference. Even if so, it would not follow, in my judgment, that without more, the Court of Appeal would have to set aside the decision of Cooke J.

Indeed, insofar as the likelihood of a different outcome was considered, the Court of Appeal has already ruled that on the face of the existing evidence, there was no real basis for saying that this would happen and as for any new evidence sought to be introduced, it had been entirely correct to dismiss it for the reasons given in paragraph 37 of its judgment and to refuse to admit it on Ladd v Marshall principles anyway. See paragraph 20 above. It dealt specifically with the point made that had he been warned, Mr Vik could and would have settled with DB so as to avoid exposure to a personal costs order. That is extremely speculative involving how he might have been able to do so, for what sum, how much he would have had to pay over in costs and so on, and indeed at what stage. In paragraph 35 of its judgment the Court of Appeal pointed to the fact that he could really only say this if he was accepting that SHI was little more than his puppet which he did not at trial. Despite Mr Matthews QC’s criticism of its reasoning on this point it is, with respect, a good one in my view and in any case forms part of the Court’s final judgment. All of such speculation would have to be grappled with by a Court on a notional future re-hearing of the applications for orders in the form of paragraphs 1-3 since obviously, there would be no retrial of the substantive claim against SHI.

For all those reasons, I cannot see any real prospect of the Court of Appeal re-opening the appeal.

I am entitled to take into account as a factor going towards the exercise of my discretion, the strengths or otherwise of the ECHR Claim itself. I consider that it is a weak one in any event for the reasons given by Cooke J and the Court of Appeal. Mr Matthews QC argues that if the ECHR Claim passes the initial consideration then it must be viewed as a claim with a real prospect of success. As to that, (a) that is not the position at the moment and over 30,000 applications (i.e. the vast majority of them) are rejected as manifestly ill-founded every year and (b) just because the claim is not rejected as manifestly ill-founded does not mean that it is strong or even has a real prospect of success. In that regard, the extensive debate conducted before me as to what would or might happen at the initial stage did not assist. The fact that the ECHR may use the first stage to consider a claim in more detail and then to reject it as being manifestly ill founded does not mean that a failure so to reject it indicates that it is a strong case. Just as a refusal to grant permission to bring judicial review proceedings following a detailed and perhaps lengthy oral hearing does not mean that if permission is granted, it is necessarily a strong case.

Mr Matthews QC also suggested that to have a stay now might mean that in due course if somehow Mr Vik was later relieved of any obligation to pay the balance of DB’s costs following a successful result in the ECHR, this could relieve the public purse of compensation which might otherwise be payable by the UK government. I consider this to be so remote and involve so many imponderables at this stage as not to be a factor of any real weight.

For all the reasons given above, the prospect that this Court would actually come to a different view about paragraphs 1-3 of the Order, if its consideration of them were put off until after the decision of the ECHR (and any consequential attempt to re-open the decision of the Court of Appeal) is hopelessly unrealistic. It follows that Mr Vik’s key point, which is that if he can only obtain a stay of execution rather than a general stay, he will be prejudiced because only a general stay will allow him to avoid an order in terms of paragraphs 1-3 altogether, disappears.

Accordingly, there is in my judgment no basis for Mr Vik’s primary application and I dismiss it. I do so without even taking into account the further discretionary factors dealt with in the context of his application for a stay of the assessment (see paragraphs 67 - 77 below). But in fact, they apply with equal force here as well.

As is well known, a stay pending appeal is not automatic (see CPR 52.16) or even usual unless there would be real prejudice to the defendant –in the sense of irremediable harm - if the judgment was enforced and yet it later won the appeal. Normally, this will be because in the interim, the defendant might become insolvent if it had to pay over the money thereby rendering nugatory any appeal decision in its favour and/or it has paid out the judgment sum to the claimant in circumstances where the latter could not repay it following the appeal. As summarised by Eder J in Otkritie International Investment Management Ltd v Urumov [2014] EWHC 755 (Comm), a stay is the exception rather than the rule, in order to obtain a stay, it is usually necessary to show solid grounds for the stay and the prospect of irremediable harm if the stay is not granted and finally a stay is not normally granted

“to prevent the kind of temporary inconvenience that any appellant is bound to face because he has to live, at least temporarily, with the consequences of an unfavourable judgment which he wishes to challenge in the Court of Appeal".

And in Hammond Suddard Solicitors v Agrichem International Holdings Ltd [2001] EWCA Civ 2065, the Court of Appeal stressed at paragraph 22 the discretionary nature of the exercise and stated that the essential question was whether there was a risk of injustice to one or both parties: “For example, what is the risk if the stay is not granted of the appeal being stifled or the appellant being unable to recover monies awarded to it? If the stay is granted, what is the risk?”

The context of appeals is of course that, if the appeal succeeds, the first instance orders will have to be changed to reflect it. That is not the necessary, and indeed not the usual, outcome of a successful claim in the ECHR (see above). This is in itself a powerful reason against granting a stay.

In Locabail (UK) Ltd v Waldorf Investments Corp. (No. 4) [2000] HRLR 623, the second defendant had claimed a prior beneficial interest in property which was subject to a charge. The Deputy Judge dismissed that claim and made a possession order in favour of the claimant chargee. Following that decision, the second defendant sought permission to appeal to the Court of Appeal on the grounds of apparent bias on the part of the Deputy Judge whose law firm had acted against her husband on other matters. The Court of Appeal refused permission so she made a claim to the ECHR. She stated that her Article 6 rights had been violated. She then made an application for a stay of execution of the warrant of possession pursuant to the order of the Deputy Judge pending the outcome of the ECHR claim.

Evans-Lombe J rejected that application. He pointed out that the ECHR is not a further court of appeal and even if the ECHR found in her favour, while that might lead to an award of compensation as against the UK government, it could not affect the warrant for possession. The Deputy Judge’s judgment remained fully binding and effective. He distinguished Sparks on the basis that the result of a successful ECHR claim there would have led to legislation directly affecting the parties’ rights.

There is an analogy with this case because again, there will be no directly applicable effect on any NPCO as a result of any successful ECHR claim made by Mr Vik.

The same approach was taken by Hart J in Westminster City Council v Dame Shirley Porter [2003] Ch 436. Having had summary judgment granted against her, in a sum approaching £26m on the basis of her wilful misconduct in public office, the defendant then sought a stay of execution. She did so on the basis that the law providing for the financial penalty which led to her being liable in such a large sum was itself a disproportionate interference with her Convention rights. It was said that, without a stay, execution of the judgment would now lead to the risk of further breaches of those rights, on the assumption that she succeeded in her claim thereafter.

Hart J refused a stay. First, he said that most of her Convention arguments had already been considered by a series of decisions here including by the House of Lords. Second, her further point on disproportionate penalty did not have much prospect of success. But third, and as a matter of law, the summary judgment decision would remain determinative of the defendant’s obligations in any event and a successful claim to the ECHR would make no difference. Unless there was a real prospect of legislation to reverse that decision being enacted here, following the ECHR decision, the latter would have no effect on the underlying judgment and hence there was no basis for a stay. And as with Evans-Lombe J in Locabail, Hart J found that the decision in Sparks was of no real assistance given the court’s discretion on procedural remedies to give effect to the strike-out.

It is therefore plain that in the usual course, the fact that there is a pending claim to the ECHR is not a basis for a stay of enforcement of the underlying judgment unless, at the very least, there is a real prospect of a change in legislation as a result of success in the ECHR which would directly affect the judgment in question. And all of that is before considering the various discretionary factors associated with the grant or otherwise of a stay. The reason for this is obvious - there is simply no point in having a stay if, whatever the outcome, the underlying judgment is not going to change.

Mr Matthews QC sought to distinguish those cases on the basis that a stay of the detailed assessment should not be viewed (merely) as a stay of execution but rather as a stay of the quantum stage of a trial where liability has been decided. That is because the only “trial” against Mr Vik concerns costs and nothing else. To the extent that this matters I disagree. Of course there was much more in the “case” against SHI but all this means is that the claim against Mr Vik was much more limited, being solely about costs. Costs orders and their calculation are usually seen as part of the execution of the judgment for the simple reason that the judgment has disposed of all substantive issues. Put another way, whatever points may have been relevant to the substantive issues they are not relevant to the assessment of costs.

Furthermore, on any view, Mr Vik can certainly be in no better position than if he had been seeking a stay pending appeal. The first question therefore would be whether he would suffer irremediable harm if the stay was granted. The answer is clearly no. If the process of preparing the bill of costs might take up to two years as DB suggests, then the problem might never arise because the ECHR Claim may have been rejected before then upon the initial consideration. And if it was not, Mr Vik would still not have to pay anything until after the detailed assessment which in my judgment is likely to take a considerable time following submission of the bill.

But even if he did have to pay whatever balance of the costs was assessed as payable, and even if that came after he had incurred the costs of dealing with the assessment (although there may be a question as to whether they should properly be regarded as SHI’s costs) and only later was he vindicated by the ECHR, there would still be no irremediable harm. That is because DB would simply repay him the money which he had previously paid to it in respect of costs and if necessary pay his costs of the assessment. No evidence was put before me that DB could not so repay and general remarks made by Mr Matthews QC that one cannot be sure because of the effect of the 2008 financial crash simply will not do. Equally, it was not suggested on behalf of Mr Vik that if ordered to pay the balance of the costs he would be unable to do so. Given his ability to pay £36m in just two days, I am not surprised that this suggestion was not made.

On the other hand, if a stay is granted (which could be for a very long period), DB will clearly suffer or may suffer prejudice, quite apart from being kept out of its costs in the interim. That is because of the evidence of the transfer of assets of and Mr Vik’s shares in SHI to Mr Vik or his family or associates. This leads to the risk of further dissipation including (now) the dissipation or transfer of Mr Vik’s own assets so as to put them all beyond reach of a judgment here. That is a realistic concern in my view.

But if that happens during the stay period then if (on this hypothesis) DB obtained its costs judgment against Mr Vik as to the balance of costs due, it will not now be able to enforce it, either in part or at all.

In a post-judgment submission, Mr Matthews QC submits that I should not make any observation about the risk of disposal of his own assets because Mr Vik had no opportunity to file evidence on the point. There is nothing in this. At paragraph 57 (3) of her Skeleton Argument dated 6 April 2017 (some 4 days before the hearing) Ms Tolaney QC had argued thus:

“Further, while Mr Vik paid the NPCO within two days, and appears to be a man of very substantial means, it is not clear what his current asset position is and there must be a risk, given his previous conduct, that he is taking or will take steps to put his personal assets out of DBAG's reach in order to frustrate any order for payment of the balance of costs due. The longer the time period before detailed assessment commences, the greater that risk.”

That point was then made orally (see pages 73 and 74 of the transcript).

It was not suggested before or at the hearing on 10 April 2017 that DB was not entitled to make that argument or that Mr Vik wished to adduce evidence on the point. It is far too late to make that submission now, just before judgment is due to be handed down. (Footnote: ¹)

Further, if Mr Vik is right about DB’s costs being excessive, in so far as they exceed £36m, he will not have to pay very much more anyway and he may well obtain a costs order in respect of the assessment.

I agree that if at the end of the day, all of these orders are reversed following the detailed assessment, then Mr Vik will have expended substantial costs which he may not be able to get back on a 100% basis. That may be so but the same applies in most cases where the result of a successful appeal is that the previous costs orders now run the other way. It is not a strong factor in favour of Mr Vik, in my view, even taking into account the scale of the assessment and costs involved here.

The balance of prejudice therefore clearly favours DB. And it is no answer to say that there is no immediate harm in granting a stay because until the bill has been prepared, the assessment proceedings have not commenced. Rather, the boot is on the other foot - if so there is no need for Mr Vik to apply for a stay, at this stage.

I appreciate that it is said that this is a case where the figures involved are extremely substantial even though they relate only to costs. But where Mr Vik is clearly able to afford to pay them this point does not much assist him.

What is of more significance in my view is that this is a case which has had a very long history punctuated by various attempts by Mr Vik to avoid judgments against SHI. The need for finality now is a strong factor against him as is the very long wait that may be involved before the outcome of the ECHR Claim (and any later attempt to re-open the appeal) is known.

For all those reasons the alternative application cannot succeed either. I should add that Ms Tolaney QC made it clear that it would be open to Mr Vik make a further application for a stay once the costs had been assessed, if there was a basis for it at that stage.

A different and discrete point arises here which I can dispose of briefly. The order made in paragraph 4 is said to be wrong in principle because it seeks to make Mr Vik liable for costs of the detailed assessment in any event even before the assessment has begun. Even if a paying party usually pays them, there can be other outcomes and all of this should be left to the costs judge.

In fact, and as clarified by Ms Tolaney QC in oral argument, the point of paragraph 4 was simply to make it clear, for the avoidance of doubt as it were, that Mr Vik’s liability to pay all of the costs for which SHI is liable, would include any costs order made against SHI at the assessment in respect of the costs thereof. In other words, if SHI was ordered to pay the costs of the assessment, then Mr Vik should be as well, so as to be consistent with the underlying judgment of Cooke J. I cannot at the moment conceive of how, if the costs of the assessment were awarded against SHI, they could and should not also be ordered to be paid by Mr Vik and no example of a different outcome was suggested to me. But so as not to lock Mr Vik into this position inevitably, I will redraw paragraph 4 so that it now reads (with the additions in italics)

“Subject to any further or other order of the Court upon the detailed assessment, Mr Vik is to pay DBAG's costs of the detailed assessment of the costs awarded to
DBAG against SHI pursuant to paragraphs 3 and 4 of the order of Cooke J dated
8 November 2013, insofar as such costs of the assessment are also ordered as against SHI.”

This amendment might deprive paragraph 4 of much of its force but it does at least have the value of prima facie aligning Mr Vik’s costs liability position with that of SHI which I think is important.

Accordingly, I do not set aside, or stay in any way paragraphs 1-3 of the Order but I will vary paragraph 4 as set out above.

I am most grateful to all Counsel for their excellent oral and written submissions and I will deal with all consequential matters upon the handing down of this judgment.