Baker Botts (UK) LLP v Carbon Holdings Limited & Anor

Baker Botts (UK) LLP (“BB”) is the English branch of an international law firm, headquartered in Texas. It makes a number of applications to the Court and, in considering them, I will refer to the four hearing bundles A to D (with tab and page references):

The proceedings involve a complex series of claims and cross-claims by the parties. The primary claim by BB is to recover an outstanding costs liability owed in respect of legal work performed for CHL and associated companies, including sums due for payment back to July 2019. Although it is said that Mr El-Baz, the individual behind the CHL group has accepted from time to time that the sums are due, the Defendants have brought a Part 20 claim against CHL’s subsidiary, EHC.

BB submits that these proceedings are no more than an attempt to avoid liability and the Part 20 claims have been brought in order to enable EHC to bring a new and unmeritorious professional liability claim against BB. This is disputed by the Defendants.

BB also submits that EHC is in a weak financial position (with regular refinancing taking place on unclear terms) and there is reason to believe that it will not be able to pay BB’s costs if ordered to do so.

With regard to the CHL Group:

For ten years prior to the first engagement of BB by CHL, CHL had a close working relationship with Ms Poupak Anjomshoaa (“PA”). This included PA working “in-house” for CHL as its general counsel and, subsequently, as client care partner for CHL at Norton Rose Fulbright. When PA moved to BB as a partner, CHL moved their instructions to BB.

BB contends that it was retained by CHL and its affiliates under a series of engagement letters (“the Engagement Letters”) but that the retainer was an agreement by CHL to be responsible for BB’s costs:

The Engagement Letters were accompanied by and incorporated BB’s General Terms in the form in force at the dates of engagement [B/18/1056] (“the General Terms”).

BB’s case is that it was engaged, pursuant to the March 2019 Engagement Letter, to represent EHC in arbitration proceedings between EHC and Trammo Inc. (“the Trammo Arbitration”) concerning a low-density ammonium nitrate project in Egypt. The Trammo Arbitration was settled in March 2020, shortly before a final hearing, on terms that led to the parties resuming commercial relations on new terms and Trammo agreeing to lend EHC US$10m.

The settlement of the Trammo Arbitration forms the subject of EHC’s Part 20 claim against BB.

BB also agreed, pursuant to the 2019 Engagement Letter, to work on the refinancing of EHC. In June 2021 Mr El-Baz and PA agreed that BB would continue to work on the EHC Project on a “double or nothing basis”, the terms of which appeared in a letter from BB dated 25 June 2021. The parties dispute the effect of that letter, the Defendants contending that it was an unlawful conditional fee agreement (“CFA”).

BB claims that invoices remain outstanding under the Engagement Letters in the sums set out in POC/24 and Annexes 1-3 and that, despite their efforts to obtain payment without resorting to proceedings, and despite assurances from Mr El-Baz that payment would be made, substantial fees remained unpaid.

On 16 January 2024 BB issued the current claim seeking from CHL c.£4.4m of unpaid fees plus interest on the basis that CHL is liable to pay the fees under the 2019 and 2021 Engagement Letters and that both Defendants are jointly and severally liable to pay the fees under the 2020 Engagement Letter.

The Defendants accept that the 2019 Engagement Letter was signed by Mr El-Baz and agreed by him on CHL’s behalf. They admit that they have not paid the invoices but dispute liability for the Main Claim on the grounds (summarised in the Defendants’ Skeleton Argument“DSA” at para. 22) that:

CHL, pursuant to its Part 20 claim, joined one of its own subsidiaries, EHC, to the proceedings (“the Contribution Claim”). CHL alleges that EHC is jointly and severally liable to pay BB’s fees due under the 2019 Engagement Letter under the terms of the collateral contract claimed by the Defendants or, alternatively, that EHC is liable in restitution to reimburse CHL for any liability to BB.

BB submits that the Contribution Claim is no more than a device to enable EHC to bring a cross-claim against BB within the same proceedings and to manufacture a defence of set-off against BB’s fees claim: see e.g. BB’s Skeleton Argument (“CSA”) at paras. 17 and 18.

In EHC’s Part 20 claim dated 3 May 2024 (“EHC’s Part 20 Claim”), EHC claims -

EHC claims that it was assured by PA that it could reasonably expect to recover US$50-100m in the Trammo Arbitration. EHC has not quantified EHC’s Part 20 Claim, but claims that the difference between the value of the outcome it could have achieved in the Trammo Arbitration and the value of the actual settlement is at least US$150m plus interest. EHC contends that the value of its counterclaim against Trammo will be a matter for expert evidence in due course.

EHC also claims US$3.7m as its costs of the Trammo Arbitration which it claims that Trammo would have had to pay had the arbitration continued and EHC succeeded.

BB submits that EHC’s Part 20 Claim was simply a tactical response to the main claim. It is common ground that EHC raised no complaint either about the Trammo settlement, or BB’s performance of its retainer, until EHC’s Part 20 Claim, some 4 years after settlement.

Greenwoods Legal LLP acted for both CHL and EHC in respect of all the claims, including the Contribution Claim until July 2024. Greenwoods continue to act for both parties, but Aston Bond Law Limited has been instructed to act for CHL in respect of the Contribution Claim, to avoid any conflict of interest in Greenwoods acting for both sides of the Contribution Claim.

Aston Bond has recently suggested that the Contribution Claim should be stayed pending the outcome of the resolution of the other claims [D/29/1435] but BB submits that no proper reason is advanced for this and it simply emphasises the artificiality of both Part 20 claims.

BB denies in its Defence and Counterclaim to EHC’s Part 20 Claim (“the DCC”) that it breached any duty to EHC. It contends that it was under no obligation to act on a conditional or deferred payment basis and was entitled to seek payment of its unpaid fees. EHC decided to settle the Trammo Arbitration at a value that BB advised was less than the commercial settlement value of the case, because EHC had pressing concerns about cash flow and wished to resume commercial relations with Trammo. BB’s Counterclaim (“the Counterclaim”) seeks the unpaid fees incurred by EHC in the event that BB’s contention that CHL is primarily liable for the same is rejected.

On 14 October 2024 EHC served a Request for Further Information (“RFI”) pursuant to CPR 18.1 in respect of BB’s DCC which was amended two days later to include a further request. EHC’s RFI contains 44 Requests. BB has refused to answer EHC’s RFI pending the resolution of its SFC Application and the provision of any security. On 5 February 2025 EHC applied for an order that BB be compelled to respond to EHC’s RFI. EHC sought to have that application listed at this hearing but there was insufficient time to accommodate it. That application is listed for a separate hearing.

The application for SFC followed correspondence on 5 August 2024 requesting financial information concerning EHC which was provided on 13 and 28 August, EHC stating that it was solely responsible for the costs of its cross-claim. Further requests regarding EHC’s financial position of EHC were raised on 30 August 2024 with replies dated 6 and 13 September and 17 October 2024 [C/24/1195, 1197, 1998]. This led to a request for the provision of SFC in Clyde and Co’s letter dated 30 October [C/24/1199] at that time in the sum of £1,806,177, and on 8 November Clyde and Co, having failed to receive a response, notified EHC’s solicitors that an application would be made to the Court. That application now seeks security in the sum of £2,016,777.45.

CPR 25.26 and CPR 25.27 set out well-known conditions for ordering security for costs. Baker Botts’ application is made under two conditions:

EHC is incorporated in Egypt, which is not a signatory to the Hague Convention on Choice of Court Agreements. The key issue in dispute is that under CPR 25.27(b)(ii).

The principles on which security for costs should be considered was usefully summarised by Peter MacDonald Eggers KC, sitting as a Deputy High Court Judge, in Explosive Learning Solutions Ltd v Landmarc Support Services Ltd [2023] EWHC 1263 (Comm):

“17.

First, the basis of the jurisdiction being that there is a ‘reason to believe’ that the claimant will be unable to comply with a costs order, if made, signifies that the defendant does not have to prove that there is a likelihood or probability that the claimant will be unable to pay (Jirehouse Capital v Beller [2009] 1 WLR 751, para. 26-35). That said, the Defendant must establish that there is reason to believe that the Claimant will not be able to pay the ordered costs. Furthermore, there must be justification for the reason for that belief and evidence for that justification. It is not sufficient if there is no more than a doubt that the Claimant is able to pay or if it is established that the Claimant might be unable to pay (Phaestos Ltd v Ho [2012] EWHC 662 (TCC), para. 71; Abbotswood Shipping Corporation v Air Pacific Limited [2019] EWHC 1641 (Comm), para. 17).

18.

Second, the burden of proof rests on the … applicant for security for costs. The court's inquiry is not to be addressed as to the claimant's current inability to pay a costs order (unless the costs order is imminent), but an order requiring costs to be made at some future time, often after the trial of the action (Guest Supplies Intl Ltd v South Place Hotel Ltd [2020] EWHC 3307 (QB), para 65). If, however, the defendant establishes legitimate concerns about the claimant's financial position, and if the claimant provides no evidence to override those concerns, the court may be justified in concluding that the claimant will be unable to pay the costs order which might be made. The Court therefore will take into account the totality of the evidence, including the absence of relevant evidence from the Claimant (considering that the Claimant is in most cases in the best position to provide such evidence) and the lack of any adequate explanation for any discrepancies between accounting documents (Abbotswood Shipping Corporation v Air Pacific Limited [2019] EWHC 1641 (Comm), para. 17; Guest Supplies Intl Limited v South Place Hotel Limited [2020] EWHC 3307 (QB), para. 95). However, the Court will not ordinarily assess the merits of the Claimant’s claim in deciding whether to grant security for costs (Keary Developments Ltd v Tarmac Constructions Ltd [1995] 3 All ER 534, 540; Commercial Court Guide at Appendix 10, para. 4)."

BB submits that there is reason to believe that EHC will be unable to pay costs if ordered to do so and relies on the second witness statement of Thomas White [C/23/1178 at 1181-1186]. Mr White states:

“13.

EHC has a long history of defaulting on its obligations to pay debts owed to lenders and other parties:

13.1.

EHC’s pleaded case against Baker Botts is that it had “special vulnerability” in early 2019 as a result of its serious financial difficulties with numerous creditors pressing for payment. [footnote EHC’s Part 20 Particulars of Claim section D].

13.2.

EHC’s 2022 and 2023 financial statements record that EHC was unable to meet principal and interest instalment payments owed to its lenders (TW2/16 and 60). EHC therefore had to negotiate a settlement with its (unidentified) lenders, which was recorded in an agreement dated 20 June 2023 (the “Settlement”) (TW2/107).

13.3.

EHC then defaulted on its obligations under the Settlement, and so had to renegotiate terms with the lenders. Those revised terms were recorded in an annex to the Settlement dated 31 July 2024 (the “Annex”) (TW2/119).

14.

In terms of the present position, EHC’s profit and loss account for the seven months ended 31 July 2024 (TW2/183) and a balance sheet as at 31 July 2024 (TW2/184) show that:

14.1.

EHC’s net loss was $18,848,000, compared to a budget showing a net profit of $5,676,000;

14.2.

EHC’s ammonium nitrate sales were $55,918,000, compared to a budget of $114,089,000; and

14.3.

as at 31 July 2024, EHC’s current liabilities exceeded its current assets by $343,557,000.

15.

It therefore appears that as at 31 July 2024, EHC was unable to meet its current liabilities as they became due.

16.

EHC has provided projected cashflows for the three months ended 31 December 2024 (TW2/202) which assume that EHC’s monthly ammonium nitrate sales will increase from $10,596,155 in September 2024 to $13,346,700 in November 2024. It also assumes that EHC’s only operating payments will be feedstock payments representing 39.5% of the sales receipts. Based on these key assumptions it is suggested that EHC’s cash position will increase by $3,356,863 from $499,706 as at 30 September 2024 to $3,856,569 as at 31 December 2024.

17.

However, EHC’s projections do not appear reliable:

17.1.

EHC’s actual monthly average ammonium nitrate sales were only $7,988,000 during the seven-month period ending 31 July 2024. That is just 60% of the figure which it suggests it can achieve in November 2024.

17.2.

Its cost of sales as a percentage of the sales for the same period ended 31 July 2024 was 59.4% - a substantially greater proportion than the 39.5% provided for in EHC’s cashflow projection.

17.3.

The projection does not include any selling and marketing or general and administration expenses, nor does it include any allowance for the costs of this litigation. In the profit and loss account for the seven-month period ended 31 July, 2024, EHC’s sales and marketing and general and administration expenses averaged $1.23 million per month. At that rate, these expenses will be greater than EHC’s forecasted cash increase of $3.36 million in the quarter to December 2024.

17.4.

There has been no update to those projected cashflows to reflect developments in [sic.] since 31 July 2024.”

EHC’s accounts for 2022 and 2023 [C/24] show significant accumulated losses and the Auditors’ Report included in the 2023 accounts dated 28 August 2024 states [C/24/1250]:

“Emphasis of matter

We draw attention to Note (2) of the notes to the financial statements that Company has accumulated losses balance amounting to USD 384 313 103 as of 31 December 2023 (2022: 368 809 262) and a negative working capital balance amounted to USD 677 391 355 (2022: 683 666 348). Further the Company has outstanding debt of USD 648 772 427 as of 31 December 2023 (2022: 678 917 208) The Company has been unable to meet the principal and interest instalment payments and is in breach of financial covenants. These conditions, along with other matters set forth in Note (2) indicate the existence of a material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern. Notwithstanding the above facts, the financial statements have been prepared under the going concern basis as the management of the Company has initiated certain actions, including signing a recovery and debt settlement agreement dated June 20, 2023 and signing an annex to settlement agreement dated July 31, 2024 detailed in Note (2), to meet the obligations, as they fall due within the coming twelve months from audit report date and also enhance the Company's ability to generate cash flows. Our Opinion is not modified in respect of this matter.”

The notes to the 2023 accounts also refer to previous issues with financial difficulties [C/24/1287]:

“In March 2019, the Company was unable to make the payment of loan installments according to the repayment schedule as per the latest amendment dated 8 October 2018. Therefore, on the 25^th of May 2019, the lenders decided to cancel the facility amendments and started to apply the previously agreed contract dated 4 December 2014 using the average rate of the facility applied by the bank is 6-month LIBOR plus an applicable margin of 6.25% per annum result on average of 8.78% during 2019.

On the 21st of May 2020, the Company entered into a Working Capital Facility Agreement "WCF" with Banque Misr S.A.E. Commercial International Bank (Egypt) S.A.E. and Banque du Caire S.A.E. for an amount of USD 30 million over three tranches:

-

Tranche A: L.C. facility for local and forging raw material suppliers for an amount of USD 15 million for 120 days with 1.5% commission and quarterly commission of 0.5%.

-

Tranche B: Credit Facility for an amount of USD 10 million to finance the Company's operating expenses to be paid within 180 days from the date of withdrawal.

-

Tranche C: Short term loan for an amount of USD 5 million to be paid over three installments; 1st installment amounting to USD 1.2 million after eight months from the agreement signature date, 2nd installment amounting to USD 1.2 million after ten months from the agreement signature date and 3rd and last installment amounting to USD.2.6 million after 10 months from the agreement signature.

For Tranches B will be C, in case of utilization in USD an interest rate of LIBOR three months plus a margin of 4. 75% applied and in case of utilization in EGP, an interest of lending corridor plus a margin of 3% in addition to a monthly commission of 0.5% for the highest debit balance.

On 2 September 2020, the Company signed a Standstill Agreement with the lenders in which the Lenders will temporarily suspend the application of clause (17.2) of the existing loan facility (events of default). Based on the agreement, the lenders agree not to, and not to instruct the Facility Agent and the Security Agent to, take or progress any Enforcement Action against any or all of the Obligors provided that before the occurrence of the Standstill Termination Date (31 December 2020) to allow the Borrower to undertake a restructuring of the project through securing funds through new financing or an increase of its capital from Potential Financing Parties.

The new lenders' who are planning to refinance current debt and financing expansion of EHC have requested that the Company sends the existing lenders a request for extension for the standstill agreement until 30 June 2021 the company signed with existing bank a debt settlement agreement dated June 20, 2023 (refer to Note (2-c.6)”

The recovery and debt settlement agreement and a subsequent addendum which was then entered into is described by the Auditors earlier in the 2023 accounts [C/24/1262-4]. The addendum dated 31 July 2024 [C/24/1306] (“the Addendum”) appears to have been required in 2024 due to an early failure to comply with the original settlement agreement [C/24/1308]:

“The lending banks have agreed to settle the debt owed by the company and a debt settlement contract dated 7/19/2023 was drawn up between them, in accordance with the terms and conditions detailed in the aforementioned settlement contract.

Due to the company's failure to fulfil its obligations contained in the settlement contract drawn up on 7/19/2023, it submitted a request on 2/25/2024 to re-settle the debt owed by it, the value of which is referred to in the aforementioned settlement contract, after deducting all the funds paid by the company in 2023, in addition to any new and emerging returns and commissions from that date until full payment. The content of the re-settlement request is summarized as follows:

- Capitalization (converting part of the debt into capital):

- Capitalization of $150,000,000 (one hundred and fifty million US dollars) of accrued revenue

- Capitalization of US$50,000,000 (fifty million US dollars) of the loan principal.

The total amount to be capitalized is 200,000,000 US dollars (two hundred million US dollars) in exchange for the banks obtaining a share of 45.68% of the company's capital, after increasing the company's capital and the entry of lending banks as new shareholders.

• The company shall be evaluated within one year from the date of issuing the new shares (completion of capitalization) and a maximum of one year and three months from the date of signing this contract, by an accredited financial evaluator, and accepted by the lending banks.

• Rescheduling the remaining of the principal loan after capitalization, amounting to US$335,600,000 over eight years.”

It is of obvious concern that within a year of the original debt settlement agreement, there had been a failure to comply with the obligations and the Addendum had then to be entered into, some 4 months before the application for security for costs.

Mr James for the Defendants submitted that while it is accepted that EHC was in financial difficulties up to the end of July 2024 its position has since been transformed by:

Peter Skelley’s evidence for the Defendants [C/26/1403] gives reasons why BB is incorrect to raise doubts over EHC’s ability to meet any future costs liability, and provides evidence on the matters referred to by Mr James in his submissions: see paras. 16-21. I note that while Mr Skelley states at para. 1 -

“I am a Senior Manager in Carbon Holdings Limited {the majority shareholder of Egypt Hydrocarbon Corporation SAE ("EHC")). I support the EHC Senior Management team daily with (i) the procurement of ammonia (being EHC's main feedstock ("Feedstock")) and (ii) managing EHC's relationship with its main product offtaker, Yara AB ("Offtake Partner'')”

- he does not explain in any further detail how he has direct knowledge of all the matters within his statement in particular EHC’s finances generally given his specific role as described above.

Although it is said that the financial performance of EHC’s business has improved recently (Skelley para. 16) by reference to under-performance as against budget in Q1/Q2 for 2024 (due to conflict in the Middle East). However, the EHC Management Report (July 2024) [C/24/1342] compares actual sales and turnover against budget [C/24/1355] for Q1 and Q2 2024/5 :

“AN Sales January 24 = 17,830 tons vs 25,740 in the budget.

AN Sales February 24 = 11,000 tons vs 27,230 in the budget.

AN Sales March 24 = 15,000 tons vs 29,280 in the budget.

AN Sales April 24 = 20,800 tons vs 27,750 in the budget.

AN Sales May 24 = 23,240 tons vs 29,740 in the budget.

AN Sales June 24 = 13,980 tons vs 27,770 in the budget.

AN Sales July 24 = 30,095 tons vs 31,530 in the budget.

YTD Actual July 24 = 131,945 tons vs 199,040 tons in the budget.”

No detailed budgetary information is available from EHC for a later period against which to compare the figures referred to by Mr Skelley at para. 16.3 for Q3 of 2024/5. Moreover, the monthly tonnages in his table for September to December 2024 (inexplicably omitting August), which range from 16,990 MT to 24,590 MT are not significantly better than those for January to July 2024 which are said to have been affected by conflict in the Middle East. Indeed, the highest figure (November 2024) of 24,590 MT is similar to that for May and less than that for July. I reject the contention that they demonstrate an improvement in sales.

While it is true that the Addendum was entered into in July 2024, it does not appear that this would alter the trading performance of EHC, and the evidence of trading performance later in 2024 does not support such a conclusion in any event, as Mr Lawrence KC submitted.

As Mr White noted:

Whilst Mr James referred to EHC’s much improved financial position, he accepted that what Mr Skelley sets out at his para. 16.4 concerning the balance of assets over liabilities is no more than his evidence and there is no supporting evidence and nothing to explain his calculations. In the absence of such evidence, it is difficult to understand how it lies within Mr Skelley’s own knowledge given his specific role with CHL.

Further, with regard to the debt/equity swap under the Addendum [C/24/1308] there has been no evaluation of how EHC is performing by the required accredited financial evaluator under the Addendum terms, or any information concerning such. Whilst, to use Mr James’ terminology, it may show the banks have “skin in the game”, more is required since they may not be willing to continue especially given the need for an expert assessment and given the failure to meet the terms of the 2023 agreement.

Mr James also accepted that the names of the old shareholders had been redacted (other than Mr El-Baz) and there was no information about their financial standing. Mr Skelley states at para. 15:

“This agreement on the part of EHC's old shareholders to underwrite any liability arising out of the proceedings (comprised of the Main Claim, and Part 20 Claim) necessarily extends to coverage of reasonable ancillary costs arising out of the same. This includes (but is not limited to) an adverse costs order, should such be made against EHC in the Part 20 Claim.”

However, there is no evidence of the unnamed old shareholders’ ability to pay, and none as to how much they would be able to pay if they did have financial resources.

Whilst it is correct, as Mr James submitted, that the banks have supported the company and provided additional support and financing in the Addendum it is far from clear that this should be put in a positive light. In my judgment, this is probably little more than an attempt by the banks to limit their losses given the considerable indebtedness of EHC prior to 2024 as shown by its accounts and the failure to meet the 2023 terms. If the current arrangements prove to be unsuccessful, it is uncertain whether the banks will permit EHC to continue or, if they do, on what terms. This seems to be underlined by the need for the independent expert evaluation under the Addendum as to which no evidence has been given.

While there is also the WFC [C/26/1413] the terms are translated and the WCF is subject to Egyptian Law, for which no evidence has been provided, so terms used in the agreement, while they may seem clear enough in translated English terms, may not be clear as to their effect under the governing law. Further, as Mr Lawrence KC points out:

I therefore reject Mr Skelley’s claim at para. 21 that -

“That liquidity necessarily invalidates any need for an order for security for costs to be made pursuant to the SfC Application.”

In my judgment, considering the evidence in the round, including both the positive and negative aspects of EHC’s own evidence, the SFC Application succeeds on the basis that there is reason to believe that the Part 20 Claimant will not be able to meet BB’s costs if ordered to pay them.

I reach that conclusion having regard to:

In view of my conclusions on the main issue, it is not necessary to consider the merits of the claim even if relevant.

I will deal with the terms of the SFC order following consideration of the application for summary judgment.

The application is made by BB [B/16/120] for summary judgment on its claim against the Defendants pursuant to CPR 24.3 and/or to strike out the Defence pursuant to CPR 3.4. In the event that the application is successful, BB seeks an order requiring CHL to pay BB the sum of US$6,482,290.82 and EHI to be jointly and severally liable for US$1,082,513.94 (both figures inclusive of interest).

The principles on which summary judgment applications are determined are well-established and were set out by Lewison J (as he then was) in Easyair Ltd (t/a Openair) v Opal Telecom Ltd [2009] EWHC 339 (Ch), at paragraph 15:

“The correct approach on applications by defendants is, in my judgment, as follows:

i)

The court must consider whether the claimant has a “realistic” as opposed to a “fanciful” prospect of success: Swain v Hillman [2001] 1 All ER 91;

ii)

A “realistic” claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8];

iii)

In reaching its conclusion the court must not conduct a “mini-trial”: Swain v Hillman;

iv)

This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10] ;

v)

However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550;

vi)

Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63;

vii)

On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725.”

This passage was approved by the Court of Appeal in AC Ward & Sons Ltd v Catlin (Five) Ltd [2009] EWCA Civ 1098 at [24].

There have been further expressions of judicial opinion concerning the need to avoid mini-trials e.g. Lord Hope in Three Rivers District Council v Governor and Company of the Bank of England (No 3) [2003] 2 A.C. 1 at [94]-[95]

“The simpler the case the easier it is likely to be to take that view and resort to what is properly called summary judgment. But more complex cases are unlikely to be capable of being resolved in that way without conducting a mini-trial on the documents, without discovery and without oral evidence … It is designed to deal with cases that are not fit for trial at all.”

See also Lord Hamblen in Okpabi v Royal Dutch Shell plc [2021] WLR 1294 at [21] repeating that it is “important to observe judicial restraint and to avoid mini-trials”.

I have also been referred by Mr James to Colman J’s judgment in DeMolestina v Ponton [2002] 1 Lloyd's Rep 271, 280 para 3.5, referring to the difficulty of basing summary judgment on inferences of fact in a complex case:

“'…, as Three Rivers District Council shows, where the application in such complex cases relies on inferences of fact, the overriding objective may well require the claim to go to trial in the interest of a fair trial. That is because the relevant inference could not be safely drawn without further discovery and oral evidence at the trial. It is thus necessary, where such inferences are relevant, to guard against the temptation of drawing them as a matter of probability, because the achievement of the over-riding object requires a much higher degree of certitude. Where in a complex case, as may often be the situation, the frontier between what is merely improbable and what is clearly fanciful is blurred, the case or issue should be left to trial.'”

The basis of the claim is set out in Mr Thomas White’s first witness statement [B/17/124] and he responds to the Defendants’ contentions pleaded in the Defence subsequently supported in the witness statement of Mr Basil El-Baz [B/20/1094].

The Defendants raise a number of defences, not necessarily consistent with each other:

A number of these defences have no substance and are not pursued:

The primary issues which require my attention on this application are the issue of the terms and effect of the various engagement letters, the identity of the contracting parties and whether there was a collateral contract, estoppel in the alternative, and the claimed set-off.

Mr White’s response in his first witness statement (8 November 2024) to the main contentions pleaded in the Defence (other than the set-off which I will deal with later) is:

“12.

Paragraphs 6 to 10, 22.1.1 and 22.3.1 of the Defence effectively plead that the CHL Liability Arrangement was a sham intended to circumvent the need for the Claimant to ‘on-board’ subsidiaries of CHL. The Defendants assert in paragraph 9 of the Defence that, notwithstanding the clear terms of the written retainers, there was a collateral agreement that in fact only CHL’s subsidiaries would be individually liable to the Claimant for fees in respect of work done by the Claimant for their benefit. It is asserted that invoices would be emailed to CHL representatives who would then arrange for payment to be made by the relevant subsidiary. Alternatively, the Defendants assert in paragraph 10 of the Defence that the Claimant is estopped from relying on the provisions in its retainers which make CHL liable for all of the fees.

13.

It is not clear what the Defendants mean by the assertion in paragraph 7 of the Defence that the CHL Liability Arrangement was intended to “cut through the red tape” or how that would be achieved if in fact the terms agreed were as alleged by the Defendants (which they were not). If it is implied that the Claimant was seeking to simplify or avoid complying with its regulatory ‘know your client’ obligations, that is categorically denied, not least by reference to the fact that the Claimant did comply with those obligations, for instance by conducting appropriate due diligence on EHC in February 2019 (TW1/938). The agreements were structured as they were in order to make it clear that the Claimant was entitled to obtain payment from CHL rather than having to pursue its subsidiaries for fees.

14.

The Claimant denies that there was any collateral contract or other arrangement as alleged by the Defendants, but in any event the Defendants’ allegation that there was a collateral contract as to which entity or entities would be liable to pay the Claimant’s

fees is unsustainable in light of:

14.1.

the entire agreement provision at clause 22 of the Claimant’s General Terms which were expressly incorporated into the retainer by reference in the March 2019 Engagement Letter (TW1/924), and which read:

“The [2019] Engagement Letter sets out the entire agreement between us in connection with the services to be provided by us in relation to the Matter, and supersedes all prior agreements, understandings and arrangements. Any amendment or modification to the [2019] Engagement Letter shall be in writing and accepted by us and you”; and

14.2.

clause 2(c) of the General Terms in the 2019 Engagement Letter, which provided that “You [i.e. CHL] remain liable for all our fees and disbursements as they become due even if another party agrees or is ordered to pay your costs” (TW1/919) (emphasis added).

15.

The same clauses appeared in the General Terms incorporated into the 2021 Engagement Letters.

16.

The Claimant denies that any representation was made to the effect that only the subsidiaries would be liable for its fees, as alleged in very general terms by the Defendants at paragraph 9.2 of the Defence, and that CHL relied on any such representation. My firm’s review of the Claimant’s file in this matter has identified no written evidence to support the Defendants’ collateral contract / estoppel cases and I note that the Defendants have not sought to rely on any written evidence to support the same.”

However, Mr El-Baz states in his evidence (dated 24 January 2025):

“8.

Ms Anjomshoaa first became known to the Defendants, and Third Party / Part 20 Claimant, as an Associate at White & Case LLP. During the period 2003 – 2013, she worked on a broad variety of matters (contentious, and non-contentious) for the CHL group. During her tenure at White & Case LLP, Ms Anjomshoaa came to be fully aware of the CHL group policy that legal fees were to be paid by whichever company in the group sought and obtained the relevant legal advice/representation and not by the holding company CHL, irrespective of the entity identified for billing purposes (the “Group Policy”). Ms Anjomshoaa facilitated the acceptance and integration of the Group Policy at White & Case LLP. White & Case LLP’s invoices were addressed, in line with the Group Policy, to the relevant subsidiary.

9.

This Group Policy continued to be practiced throughout Ms Anjomshoaa’s tenure as General Counsel for the CHL group during 2013-2017. Ms Anjomshoaa implemented the policy daily when instructing various external firms of solicitors for and on behalf of companies within the CHL group. As part of her instructions, she informed those law firms appointed how to bill the relevant company within the CHL group.

10.

Further, as you would expect from in-house General Counsel, Ms Anjomshoaa was fully aware of the First Defendant’s status as a holding company only and one which had no sufficient liquid assets of its own. She therefore patently understood the need for the Group Policy, and ensured it was implemented with all due despatch.

11.

As a consequence of her explicit “on the job” understanding and practice of the Group Policy, upon taking up employment with Baker Botts in early 2019, Ms Anjomshoaa immediately sought to integrate the Group Policy into her day-to-day file management of, and invoice processes on, all CHL group matters in which Baker Botts were instructed, including (but not limited to) those provided for within the 2019 Engagement Letter.

12.

The mutual understanding of the Group Policy underpinned the discussions I had with Ms Anjomshoaa before I signed the March 2019 Engagement Letter. Naturally, I sought reassurance that the Defendants would not have to pay for work done for the benefit of other companies in the group. In a series of telephone conversations with Ms Anjomshoaa she reassured me that:

12.1

the structure of making CHL and EHI notionally liable for the liabilities of its subsidiaries was for administrative convenience only;

12.2

the invoices of Baker Botts would be sent to whichever subsidiary was instructing on and benefitting from the advice / legal representation given and not to CHL (unless the work was done for CHL);

12.3

the invoices would be paid by said instructing subsidiary and not CHL (unless the work was done for CHL); and,

12.4

notwithstanding the naming of CHL as a party to the March 2019 Engagement Letter, CHL would not be liable to pay for work done for any of its subsidiaries.

13.

Had these assurances not been given, I would not have signed the March 2019 Engagement Letter. I would have sought alternative legal representation. I did not want CHL and EHI to be liable for legal work done by other companies in the group. That would have represented a change in the group’s accounting practises with the potential to create havoc in our internal systems and with the intergroup accounting. Further, in the case of EHC, this company was not, at the time, fully owned by CHL. At the time CHL owed 59.3% of the shares in EHC as Ms Anjomshoaa well knew. Thus, it would make no sense for CHL/EHI to be obliged to pay 100% of EHC’s legal bills. I am advised by my lawyers that these facts amount to a collateral contract and/or an estoppel and I will leave it to them to advance this argument at the Applications Hearing.”.

There has been no further evidence adduced by Mr White to contradict the involvement of PA as Mr El-Baz explains (she was the signatory for BB on all the engagement letters and appears on numerous occasions in BB’s time sheets) and it is clear that his response rests on the written terms set out by BB and the absence of any other documentation existing in his firm as to this issue. I do not know whether disclosure will further clarify what was agreed with PA whilst at White & Case LLP and cast light on Mr El-Baz’s evidence or whether any records exist of the telephone conversations mentioned. Mr White’s evidence suggests not, referring to “no written evidence” in the file, but it is not clear whether the search related only to written documentation including emails.

Much of what Mr Lawrence KC submits both orally and in the CSA is a powerful response regarding the primary issue of the contracting parties and the obligation to pay. As he points out:

Mr James submits that there are clearly facts to be tried and resolved in the collateral contract/parties dispute and draws attention to the fact that no evidence has been led by BB from PA to rebut Mr El-Baz’s evidence as to the basis of the agreement with PA and there is little in documentary terms currently available to demonstrate the extent to which BB did comply with its obligations when accepting a new client. He relied on Chitty 16-018 which supports the view that an entire agreement clause may not be determinative:

“It may be difficult to treat a statement made in the course of negotiations for a contract as a term of the contract itself, because the statement was clearly prior to and outside the contract, the incorporation of the statement is excluded by an entire agreement clause in the contract itself or because the existence of the parol evidence rule prevents its inclusion. Nevertheless, the courts are prepared in some circumstances to treat a statement intended to have contractual effect as a separate contract or warranty, collateral to the main transaction. In particular, they will do so where one party refuses to enter into the contract unless the other gives him an assurance on a certain point or unless the other promises not to enforce a term of the written agreement”

Further, Mr James submits that the collateral contract claimed was concurrent with the main contract and not prior to it. As 16-020 Chitty notes:

“Consideration for the collateral contract is normally provided by entering into the main contract, but a collateral contract may also be actionable even if the main contract is unenforceable, e.g. for illegality. Breach of the collateral contract will give rise to an action for damages for its breach, but not as a general rule to a right to treat the main contract as repudiated. However, the effect of a collateral contract may be to vary the terms of the main contract or to estop a party from acting inconsistently with it if it would be inequitable for him to do so”

In Vitol DA v Sterling Oil Trading Ltd [2012] EWHC 3108 (Comm) Cooke J held at [27]:

“As a matter of logic, it appears to me that a collateral agreement concluded at about the time of the Commercial Contract and Prepayment Supplement, and intended to run parallel to them, with a common intention, which continues in existence at the execution of those agreements, cannot be ruled out because of the terms of the written contracts, either on the basis that it is inconsistent with those terms, or because the terms of the written contract, on their face, preclude reference to material which lies outside those written documents, whether it be by reference to negotiations, or representations, or other instruments, materials or oral exchanges between the parties. Of course, questions of construction arise, and, of course, questions of fact arise, as to how these materials can be viewed together. If, however, it can be established that the parties only concluded the written agreements on the basis of an oral contract, whatever the evidential difficulties that may be presented by virtue of the entire agreement clause or the alterations clause, as a matter of logic, effect must be given to the collateral contract. An application for summary judgment cannot succeed if there is disputed evidence as to such a contract unless one party's evidence is so incredible as not to be susceptible of belief as opposed to merely improbable. The defendants' evidence here does not fall to be so characterised. It is credible and is supported not just by the affidavit of the third defendant but by the documentary evidence…”

With regard to the estoppel issue, Mr James submits that there clearly is an arguable case in the alternative given that Mr El-Baz’s evidence supports the estoppel defence in that:

The representations fall within the category of representations of mixed fact and law regarding the meaning and effect of the agreement that Mr El-Baz entered into. Since the representation is said to have been made by PA, the partner signing the engagement letters at BB, Mr James relies on Briggs  v Gleeds (Head Office) [2015] 1 Ch 212 where Newey J. (as he then was) held at [31]-[32]:

“32.

On the other hand, a statement as to the law will not always be just a statement of opinion. If, for example, a lawyer said that there is no requirement for a deed to be signed, he would surely be misstating the law rather than just voicing an erroneous opinion. Further, it is not difficult to think of circumstances in which it might be reasonable for a representee to rely on such a statement. That could be the case if, say, the lawyer made his remark in unequivocal terms to an unrepresented lay person whose interests were aligned with those of the lawyer's client. In such a case, moreover, it could not be said that “each party is in as good a position as the other to satisfy himself on what the law is” (to quote from Lyle-Meller v A Lewis & Co (Westminster) Ltd [1956] 1 WLR 29 , 41): the lawyer would clearly be better placed than the representee to know the law.

33.

To my mind, it is hard to see why the mere fact that a statement purely concerns law should invariably mean that it cannot give rise to an estoppel by representation…”

On the issue of set-off, Mr James submits that cl. 2(d) will not apply if the party seeking to rely on is in breach of contract which is the issue in EHC’s Part 20 Claim: see TMF Trustee Ltd v Fire Navigation Inc [2019] EWHC 2918 (Comm) at [41]-[42]. He points to Mr White’s first witness statement at para. 31:

“The Claimant strongly denies any liability to EHC for the reasons set out in its Defence and Counterclaim in respect of the Part 20 Claim. The Part 20 Claim was intimated only for the first time after the Claimant issued its claim for fees. The Part 20 Claim is riddled with factual and legal misstatements and is totally without merit. However, the Claimant accepts that it is not suitable for summary determination at this stage.”

It is also the case that if, as BB contends, CHL is primarily responsible for BB’s fees, cl. 2(d) will not bind EHC since it was not, on that basis, a party to the main contract with BB. This makes it all the more important to determine the issue with respect to the existence of a collateral agreement or estoppel.

Whilst I agree with Mr Lawrence that the existence of earlier arrangements with the former law firm may be irrelevant to what BB agreed, and that the allegations regarding collateral agreement and estoppel may have difficulties, the Defendants have countered them with reasonable arguments and evidence and I do not consider that they can be properly investigated and determined without disclosure and oral evidence, having regard to the strong warnings as to avoiding a mini-trial on the documents and the need for judicial restraint.

The difficulty with considering summary judgment and/or strike out in the present circumstances is that it requires a decision to be made on the documents and disputed evidence which as appears from Mr El-Baz’s evidence is likely to comprise a significant degree of oral evidence from himself and possibly PA for BB, in order to counter Mr El-Baz’s factual contentions. The issues relating to the main agreement, the question of collateral agreement and its interrelationship with the entire agreement clause, the alternative defence of estoppel and the claim of set-off arising from EHC’s Part 20 Claim are of greater complexity than the type of straightforward case which is appropriate for summary judgment. This is not an appropriate case to strike out given those circumstances.

However, even on the basis that the contentions supported by Mr El-Baz that the main contract was made with CHL’s subsidiaries, nonetheless it is not disputed that fees arise under the agreement for the work undoubtedly done for CHL and EHI. Under the invoices which have been provided these would amount to US$95,944.84 against CHL and US$930,108.83 against EHI, totalling US$1,026,053.67, subject to the issue of the reasonableness of the fees charged (below).

The Court therefore will allow the SJ application to the extent that there will be judgment in favour of BB for invoices for work which was done for CHL and/or EHI even on the case advanced by the Defendants. The sums payable under those invoices is to be the subject of a common law assessment of the reasonableness (see below). In respect of the balance of the application, it will have to be determined at trial.

There is an issue, raised late in the day by the Defendants [A/7/52] in their Points of Dispute, regarding the reasonableness of the costs referred to in the invoices. Mr Lawrence objects to the delay in producing these on the basis they were provided too late and relate to fees going back to 2019 and where the most recent invoice was dated 5 August 2022 (CSA paras. 67).

Mr Lawrence KC also relies on the principles for the assessment of solicitors’ costs under CPR Part 46 set out by the Court of Appeal as Ainsworth v Stewarts Law LLP [2020] 1 W.L.R. 2664. There, Asplin J held at [38]-[39]:

“38 Common sense dictates that the points of dispute must be drafted in a way which enables the parties and the court to determine precisely what is in dispute and why. That is the very purposes of such a document. It is necessary in order to enable the receiving party, the solicitor in this case, to be able to reply to the complaints. It is also necessary in order to enable the court to deal with the issues raised in a manner which is fair, just and proportionate.

39 As I have already mentioned, the complaint should be short, to the point and focused. As paragraph 8.2(b) of Practice Direction 47 indicates, that requires the draftsman not only to identify general points and matters of principle but to identify specific points stating concisely the nature and grounds of the dispute. In the case of a solicitor and own client assessment, it seems to me, therefore, that in order to specify the nature and grounds of the dispute it is necessary to formulate specific points by reference to the presumptions contained CPR r 46.9(3) which would otherwise apply, to specify the specific items in the bill to which they relate and to make clear in each case why the item is disputed. This need not be a lengthy process. Having explained the nature and grounds of dispute succinctly, the draftsman should insert the numbers of the items disputed on that ground in the relevant box. The principle is very simple. In order to deal with matters of this kind fairly, justly and proportionately, it is necessary that both the recipient and the court can tell why an item is disputed. The recipient must be placed in a position in which it can seek to justify the items which are in dispute.”

See also St Francis Group Ltd. v. Kelly [2025] EWHC 125 (SCCO) at paras. 58-61.

Mr James responds that on an application for summary judgment the court must take into account matters that can reasonably be expected to be available at trial (Easyair principle (v)), the burden of proving that the fees were reasonable remains with the solicitor charging, there is not requirement for a challenge to quantum to be in any particular form and the delay was in any event reasonable. He seeks permission to amend should it be required (DSA paras. 63-68).

Mr James also points out that the reasonableness of the sums charged require an assessment at common law. In Turner & Co v O Palomo SA [2000] 1 WLR 37 at pp. 51-52 the Court of Appeal reaffirmed the common law implied term of reasonableness (or that implied by the Supply of Goods and Services Act 1982) notwithstanding the expiry of the statutory period for review. Evans LJ (giving the judgment of the Court) held:

“The Act of 1843 introduced a taxation procedure, because it was regarded as more convenient and advantageous for the client, and perhaps for both parties, than the existing procedures were. Nothing in the Act, or its successors, takes away the need for the solicitor to prove that his fees are reasonable, if they are challenged, absent any express agreement as to what they should be. The Court of Appeal has held, three times, that the common law or "ordinary jurisdiction" of the court is not excluded, and these judgments are not in any way inconsistent, in our view, with the decision of the House of Lords in Harrison v. Tew [1990] 2 A.C. 523. Nor do we consider that the solicitor is disadvantaged by the possibility that the client is entitled to have the reasonableness of the charges assessed by the court after the statutory periods for taxation have expired. He can himself claim an order for taxation under section 70(2), without any time limit, and obtain a form of summary judgment when the taxation certificate is issued: section 72(4). The present issue arises only when that is not done.

…

Mr. Morgan submits that the legal basis for the solicitor's claim is found in section 15 of the Supply of Goods and Services Act 1982 in any case where a contract exists between the solicitor and client. The contract contains a statutory implied term "that the party contracting with the supplier will pay a reasonable charge," and what is a reasonable charge is a question of fact. This has to be read, in the case of a solicitor, subject to the terms of the retainer in the particular case and subject also to the statutory provisions which give the solicitor, as well as the client, certain additional rights. But we do not see any difficulty in holding that the solicitor's claim is for a reasonable sum, whether by statute or at common law, and not for a liquidated sum. Again in accordance with general principles, the burden of proving that the sum is reasonable rests upon him. This is supported, if authority is needed, by the judgments in In re Park, 41 Ch.D. 326 and Jones & Son v. Whitehouse [1918] 2 K.B. 61 which I have quoted above.”

Since judgment will be given on the claim for a significant tranche of BB’s bills for an amount to be determined by the Court , I will refer the assessment of the reasonableness of the fees claimed to the Costs Judge unless they can be agreed between the parties.

I agree with Mr Lawrence KC that the delay in the serving of the Points of Dispute regarding the invoices is highly unsatisfactory given that over 2 years had elapsed since the last invoice and it could reasonably be expected that BB would seek to enforce payment. The terms of the invoices and the nature of work undertaken did not simply appear with the issue of BB’s claim. However, given the implied term of reasonableness is pleaded at paras. 25 and 26 of the Defence and this requires BB to demonstrate their reasonableness either under the 1982 Act or at common law, the Defendants are entitled to make the points regarding alleged unreasonableness in any event, whether or not put into formal points of defence. Since the Points of Dispute provide BB with notice of the areas of dispute, and may in fact serve to confine the Defendants’ arguments on these points, I will give permission to amend the Defence to include (presumably to incorporate them by reference) the Points of Dispute. They will not preclude BB from raising the points Mr Lawrence KC has flagged up with regard to the approach to an assessment of solicitors’ fees. Issues in that respect and with regard to late service can be taken before the Costs Judge in respect of the costs of the assessment relating to summary judgment on the invoices set out above.

The quantum and basis on which SFC falls to be made are for the Court to determine having regard to what is just in all the circumstances of the case: CPR 25.13(1)(a) and White Book para. 25.26.11.

In Pisante v Logothetis [2020] Costs LR 1815, Henshaw J. summarised the principles at

“88.

The relevant principles governing the quantification of an order for security for costs are summarised in note 25.12.7 in the White Book as including the following points:

i)

The appropriate quantum is a matter for the court’s discretion, the overall question being what is just in all the circumstances of the case. In approaching the exercise, the court will not attempt to conduct an exercise similar to a detailed assessment, but will instead approach the evidence as to the amount of costs which will be incurred on a robust basis and applying a broad brush (see also Excalibur Ventures v Texas Keystone [2012] EWHC 975 (QB) §15).

ii)

In some cases, the court may apply an overall percentage discount to a schedule of costs having regard to (a) the uncertainties of litigation, including the possibility of early settlement and (b) the fact that the costs estimate prepared for the application may well include some detailed items which the claimant could later successfully challenge on a detailed assessment between litigants. There is no hard and fast rule as to the percentage discount to apply. Each case has to be decided upon its own circumstances and it is not always appropriate to make any discount.

iii)

In deciding the amount of security to award, the court may take into account the “balance of prejudice” as it is sometimes called: a comparison between the harm the applicant would suffer if too little security is given and the harm the claimant would suffer if the amount secured is too high. The balance usually favours the applicant: an under-secured applicant will be unable to recover the balance of the costs which is unsecured whereas, if the applicant is not subsequently awarded costs, or if too much security is given, the claimant may suffer only the cost of having to put up security, or the excess amount of security, as the case may be (see also Excalibur §18).

iv)

In the Commercial Court, an order for security for costs may in appropriate cases be made on terms that the applicant gives an undertaking to comply with any order that the court may make if the court later finds that the order for security for costs has caused loss to the claimant and that the claimant should be compensated for such loss. Such undertakings are intended to compensate claimants in cases where no order for costs is ultimately made in favour of the applicant (Commercial Court Guide, Appendix 10, §5).

v)

In determining the amount of security, the court must take into account the amount that the respondent is likely to be able to raise. The court should not normally make continuation of their claim dependent upon a condition which it is impossible for them to fulfil.”

In considering submissions regarding common percentage reductions, Henshaw J. held at [90]:

“In Stockers v IG Markets [2012] EWCA Civ 1706 the Court of Appeal noted that Steel J at first instance had ordered security for costs in a sum which represented 60% of the amount sought. That was of course merely one example of a security order. It is commonly said that recoveries on detailed assessments of costs frequently turn out in the region of 60–70% of claimed costs, but that too must at best be a rough rule of thumb.”

On the facts of that case, Henshaw J. in awarding SFC to the defendants discounted the estimated costs and awarded approximately two-thirds of the estimate: see [90]-[93]. He took account of the fact at [91(ii)] that, as here, no comparative bill of costs for the litigation had been produced for those opposing the application:

“ii)

I note that the claimants have not produced, for comparison purposes, a schedule of their own estimated costs. Although they were under no obligation to do so, a possible inference is that such a schedule would not have supported the criticisms they make of the defendants’ schedule (see Popplewell J’s remarks in Excalibur at §§16–17).”

Whilst EHC has produced a general critique of BB’s costs schedule (see below) it has not advanced a draft estimate of its own costs so there is no comparator in terms of what the Defendants expect their own costs of proceeding to trial will be.

I have been provided with a schedule of anticipated costs of the litigation by BB [C/24/1394] which shows costs incurred to 28 October 2024 of £123,402.45 and anticipated costs of proceeding to trial as £1,893,375, totalling £2,016,777.45.

EHC contend that this sum should not be the basis of any SFC order. Its objections are set out in a review document which is stated to be a formal response to BB’s costs schedule and which was produced as an exhibit to Mr Skelley’s evidence on 24 January 2025 [C/26/1411, para. 23, and C/27/1425]. Having made a number of generalised objections it concludes:

“The costs claimed in this case far exceed what is reasonable or proportionate for a debt recovery matter with a counterclaim for professional negligence. They reflect an inflated approach that does not align with the principles of proportionality or the Court’s broader objective of ensuring fairness in costs assessments. The involvement of multiple Grade A fee earners, the inappropriate application of "London 1" rates, the excessive reliance on leading counsel, and the disproportionate allocation of costs to witness statements, expert fees, and hearings further highlight the unreasonableness of the Claimant’s schedule.

The Defendant invites the Claimant to revise their costs schedule, applying appropriate reductions to reflect the proportionality principles outlined in B J Crabtree and the established practices of the Commercial Court.

An annexed counter-proposal Schedule is provided, offering a more reasonable and proportionate assessment of the anticipated costs, including reductions to the incurred costs which will likely be applied on assessment, in light of the nature of the matter and the principles established in relevant case law.”

The budget analysis proposes an alternative costs figure of £1,024,707.80 (including incurred costs of c. £100,354.05).

Mr James submits (DSA paras. 91-97):

Alternatively, it is submitted that the sum should be restricted to the additional burden caused by the need to enforce in Egypt which should be in the order of £10,000.

Other than the alternative basis suggested, EHC submits that SFC should be awarded in the range of £1,025,000 to £1,230,693.70.

BB’s preliminary response is set out at CSA paras. 38-40 and sets out further objections:

I agree. It also appears to me to be relevant that the case was brought very late in the day, on 3 May 2024, some 4 months after the issue of BB’s claim, was not heralded at all prior to then, and was apparently a response to the main claim against the Defendants - although it concerns allegations of breach relating to the Trammo Arbitration settlement in March 2020 i.e. over 4 years prior to EHC’s Part 20 Claim. Whilst the merits fall to be determined at trial, and not at this time, the lack of any intimation of a claim for over 4 years does lend credence to BB’s concerns and is a factor relevant to assessing the prospect of costs recovery as is the fact that it is substantially distinct from the main claim.

I do not consider that this is a case where security should be limited to prospective costs only given that the EHC Part 20 claim was not made until May 2024: see White Book at para. 25.26.10. There was no significant delay since BB began seeking information as to EHC’s financial position in August with the application made in October once it had become clear to BB that EHC’s financial position was not satisfactory and that it was unwilling to provide security by agreement.

Taking the required broad approach and recognising that this is not a detailed costs budgeting exercise, I make allowance for the fact that this is complex litigation and that while a critique has been provided by EHC, it has not produced its own likely costs of the litigation. Subject to discounting, I start from a broad assessment of costs liability of £2,000,000.

I will discount the costs in the circumstances to reflect the uncertainty in the process and in the incurring of the costs, and have already pointed to the extent of the discount being not a rule of thumb but an assessment based on my judgment of the circumstances. In this case the just discount here appears to me to be 75% given the circumstances of EHC’s Part 20 claim and I therefore will make an order for security for costs in the sum of £1,500,000.

It appears to me that a banker’s draft should be appropriate security but I will hear the parties on the terms of the order including whether, and to what extent, the making of the security should be staged given the quantum and likely stages in the litigation.

I therefore:

The parties should provide a draft order and make submissions in writing with regard to any terms not agreed and the costs of the applications by 4 pm on 9 September 2025.

I do not consider that I should stay the main claim pending the determination of EHC’s Part 20 Claim, which should be the subject of further directions in due course including whether all the remaining claims should be determined together.