BL-2020-001417 - [2025] EWHC 2487 (Ch)

On the basis of the above, the issue of counter-restitution does not arise, at least as regards the costs and expenses incurred incidental to the Musst v Astra action. That is because the claim fails as regards a share relating to the performance fees. In case there were scope for a share of the amount recovered by Musst in respect of the performance fees, I shall set out what I would have found as regards counter-restitution.

If this were a claim for services only, then it would have accrued on the failure of the basis, that is after the failure to enter into an agreement between Matrix. Then the argument would be as to the value of the services conferred on Musst. However, as analysed above, this is an end-product case. If there is an obligation to pay, it is by reference to the end-product, that is an expectation that Matrix would be paid a percentage of the moneys received by Musst.

The subtle shift in the case of MRL from the opening to the closing does not assist Matrix. I do not accept that the benefit was the entitlement to sue Astra. If that were the case, that would be valued at the point when that entitlement arose. That does not seem to be consistent with an end-product. There is no “end-product” that Musst would have the “incontrovertible benefit” of something which could only be realised by hazardous litigation in the High Court. It was litigation against a determined opponent in which the issues only grew and which incited a counterclaim in defamation.

It was litigation where Musst as a BVI company had to provide security for costs. It was litigation which Musst required the assistance of ATE insurance because of the exposure in the event that it lost. It was litigation where Musst turned to litigation funders at great expense in order to prosecute the action. I do not have to consider what would have happened if there was an open and shut case against Astra in the event that Musst irrationally decided not to proceed with the claim. This is not the case: any analysis of the judgments in this case at first instance and in the Court of Appeal will demonstrate that it was far from being open and shut.

Matrix has analysed the position by reference to counter-restitution. This is at para. 45 of its written opening in which it said:

“45.

Musst says it is entitled to claim counter-restitution in relation to any unjust enrichment claim on two bases:

45.1

For the assistance which it says it and SS provided to Matrix on ‘other matters’ in respect of which, it is alleged, LR had agreed with SS that fees would be discussed later (Defence paragraph 41(3)(a) [A/5/76]); and

45.2

For any unrecovered or irrecoverable costs which Musst has had to incur to make any recovery from Astra (Defence paragraph 41(3)(b) [A/5/77]), and in particular: unrecovered legal costs; the third party funding costs; and ATE insurance.”

The word “counter-restitution” is not mentioned in the Defence and is a characterisation of MRL. It might have been applicable to the first part which refers to some service said to have been provided to Matrix by Mr Siddiqi on other matters. The problem with that part of the case of Musst is that the other matters are not identified and/or are, if they exist, so closely connected to impeach or reduce the claim for restitution. There is no evidence to substantiate it.

The second part (para. 45.2) is, in my judgment, not properly called counter-restitution. Using the case cited by Matrix of School Facility Management Ltd v Christ the King College [2021] EWCA Civ 1053, Popplewell LJ at [83] said that the counter-restitution principle was “that the benefits for which the claimant must give credit are those which are sufficiently closely connected with the benefits provided to the defendant that justice requires him to do so. … The formulations used by the editors of Goff & Jones of benefits “in exchange”, and by Lord Burrows in his Restatement of “reciprocal benefits”, capture the flavour of benefits which will be sufficiently closely connected, but cannot be an infallible guide:….”

This involves a cross-claim analysis between the incontrovertible benefit on the one hand and the benefit conferred the other by the defendant on the claimant for which the claimant must give credit if sufficiently closely connected to the subject matter of the claim. The point in this case is that there is no cross-claim analysis or benefit conferred on Matrix by Musst. Leaving aside para. 45.1 of the Defence which has been discounted, para. 45.2 does not involve any reciprocal benefit. There was no benefit conferred on Matrix by Musst for which Musst must give credit.

The plea in para. 41.3(b) of the Defence was not characterised as counter-restitution because it was not such. It was stated as follows:

“Further, such sum must take into account (a) the assistance provided to MMM and Matrix, and (b) All the unrecovered costs (including legal costs, insurance fees and litigation funding fees) which the defendant has had to incur to make any recovery from Astra.”

Para. 41(3)(a) can be ignored because this refers to para 45.1 of the defence, which has been rejected. Para. 41(3)(b) is not about counter-restitution. It is about the costs incurred by Musst in order to obtain the end-product payment from Astra. It did not involve conferring a benefit on Astra. In my judgment, these were costs incurred in order to obtain the incontrovertible benefit for Musst, namely the payment from Astra to Musst.

Given the absence of a cross claim or a benefit the other way, there is no scope to apply the analogy with the claim to recover from a wrongdoer damages in the nature of indemnity costs, but where there is a line of authority saying that the recovery is limited standard costs: see British Racing Drivers Club Ltd v Hextall Erskine & Co [1996] 3 All ER 667. It is not necessary to consider this controversial area and a line of authority which may or may not be followed, but of which McGregor on Damages 22^nd Ed. is critical (Footnote: ²). It does not arise for consideration because this is not a case of valuing a claim for damages or a claim for counter-restitution. It affects the value of the incontrovertible benefit. In my judgment, this is to be calculated as a net sum after deducting the costs incurred in order to obtain the benefit. Those costs incurred include (a) the funding costs, (b) the ATE premium, and (c) the actual costs paid to lawyers to pursue the action. It is not to the point that funding costs may not be capable of being recovered against the wrongdoer in litigation or that there are restrictions in the way of recovering those costs against a wrongdoer in respect of damages.

The point here is that if, contrary to the foregoing, there was an incontrovertible benefit in the nature of a share of the performance fees at the expense of Matrix, this did not arise without these costs and expenses. It therefore follows that it is necessary to deduct these sums from the recoveries because the incontrovertible benefit is net of these costs and expenses. The gross sum never got into the hands of Musst. Its solicitors would have been bound to account to the litigation funders and the ATE insurers out of the moneys received by them, and likewise there would have been an entitlement of the solicitors to deduct their true costs subject to any solicitor and own client assessment.

In the evidence of Ms Galligan, she said the following at para. 180-181 of her statement as follows:

“ 180. Musst received a total of $784, 367.51 from Octave and Astra in respect of LGT and the Observatory fees until Astra stopped paying in 2016. Musst was then successful in litigation against Astra in respect of the fees relating to The Observatory’s 2B account, and LGT’s Crown I account. Following that claim Musst’s solicitors held approximately £3.95million on behalf of Musst, comprised of sums received from Astra following judgment in that claim (made up of USD$4,100,240.81 and £675,725.64.) Of that, approximately £2.2million was paid to Musst’s litigation funder; approximately £475,000 was paid to its insurer; and approximately £1.2million to its lawyers. Musst has also received US$29,876.27 in respect of fees post-judgment in the Musst v Astra litigation.

181.Needless to say, Saleem and I have spent a huge amount of time in the last 9 years prosecuting the claim against Astra. We have had to liaise regularly with lawyers throughout this time and trawled through vast volumes of documents. The claim against Astra involved several interim applications including over disclosure, expert evidence and security for costs. The trial lasted 3 weeks and then there were subsequent hearings and an appeal hearing in the Court of Appeal.”

It is not for the Court in these circumstances to analyse whether it was necessary to obtain litigation funding or ATE insurance or whether the costs incurred by Musst were too high. It is simply to calculate the amount of the benefit. In fact, if Matrix had been trading instead of going into liquidation, or if the assignment had been obtained at a much earlier stage, then Matrix could have seized the initiative and encouraged Musst to proceed with its funding of the action obviating in whole or in part the need for litigation funding or ATE insurance. Instead, that did not arise. I am satisfied that the extent of any incontrovertible benefit is limited to the amount received that was available to Musst after discounting the expenses incurred in order to obtain the benefit, in this case, the cost of the litigation funder, the cost of the ATE insurance and the legal costs. This is provided that these expenses will not be recovered on the detailed assessment of costs against Astra. The issue which would arise if these items were being brought into account as damages by reference to costs do not arise for the reasons set out above.