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Freshfields wins Deutsche Bank $243m pay out from Sebastian Holdings

The UK Court of Appeal has ruled that investment fund Sebastian Holdings must pay Germany’s Deutsche Bank $243m after losing a case at the High Court last year, or risk its appeal being struck out.

Norwegian businessman Alexander Vik’s Sebastian Holdings will have its appeal against the decision, which awarded the German bank damages for forcing Deutsche to make large margin calls to cover Lehman Brothers in 2008, stayed for the next 28 days and has been warned that case will be struck out if payment is not made in that time frame.

The decision is a further blow to Sebastian Holdings, which is being advised by Travers Smith partner Andrew King, after failing with an $8bn counter-claim against the German bank last year.

Freshfields Bruckhaus Deringer litigation duo Andrew Hart and Tom Snelling, who instructed David Foxton QC of Essex Court Chambers and Sonia Tolaney QC of 3VB as counsel, succeeded in enforcing payment of the $243m together with accrued interested, along with an order that Sebastian Holdings pay £34.5m in costs and £1.9m as security for DB’s costs of the investment bank’s proposed appeal. Travers Smith instructed David Railton QC of Fountain Court Chambers.

The decision was handed down by Lord Justice Longmore and Lord Justice Tomlinson, both of whom agreed with Deutsche’s concern over how Sebastian Holdings had sought to dissipate its assets in order to avoid paying a judgment it knew the German Bank would have to seek.

Lord Justice Tomlinson said in the judgment: ‘Standing back from the arguments, it is in my judgment difficult to think of a case which could present more compelling reason for making the order sought.’

‘Accordingly I would order SHI to pay into court the judgment sum, together with interest accrued to the date of this judgment, as a condition of further pursuit of the application for permission to appeal and, if permission is granted, the appeal.  I would further direct that SHI’s Appellant’s Notice and its application for permission to appeal be struck out if payment is not made within 28 days.’

Should it succeed in its appeal, SHI intends to pursue its counterclaim in an amount of up to about US$600m. It does not pursue the entirety of the counterclaim which was advanced, without success, at trial in the sum of about $8bn.

Snelling said: ‘By forcing SHI to pay over $250 million into court to continue its appeal, today’s judgment rightly reinforces to parties litigating in the UK that orders of its Courts are to be respected. The Court of Appeal has said that it is unacceptable for SHI to try and pursue an appeal whilst at the same time continuing to disobey the orders of the court to pay the judgment debt and costs. The Court of Appeal considered it difficult to think of a case which could present a more compelling reason for making today’s decision.’

For more on key banking litigation landscape, see Hunting titans – the disputes outlook as watchdogs and claimants target banking giants