Claim No: CL-2023-000687 - [2025] EWHC 1157 (Comm)

Fecha: 14-May-2025

H aving regard to all the circumstances of the case it is just to make an order for security for costs?

Having regard to all the circumstances of the case it is just to make an order for security for costs?

66.

I did not understand RSUK to suggest that if Barclays agreed to transfer the funds out of the RSUK USD Client Account to RSUK’s office account, RSUK would be unable to apply that fund to discharge a costs order made in its favour against the Claimants (the Claimants having confirmed in correspondence that they do not oppose such a course, albeit I will ask the Claimants to give an undertaking to this effect before finally disposing of the security for costs application).

67.

In these circumstances, the court must look with care at the suggestion that Barclays would not make such a transfer for the purpose of discharging an order made by this court in RSUK’s favour, and that, for this reason, the Claimants who have already transferred over USD11m of money into a bank account in this jurisdiction, which neither RSUK nor Barclays contend is “theirs” in an economic sense, should be required to transfer a further USD6m to provide security for the costs which RSUK and Barclays will incur in these proceedings.

68.

I have already summarised the material relied upon by RSUK as to Barclays’ likely attitude in such circumstances at [52] above. It is fair to say that I have found that limited material far from compelling:

Barclays’ initial response was a letter from its solicitors stating that complying with an instruction (presumably from RSUK) to apply the Balance in these circumstances “may damage its reputation or break a law, regulation or sanction, for similar reasons to those that apply in respect of the payment instruction that is the underlying subject matter of proceedings” (emphasis added).

ii)

I found that a surprising statement. The underlying subject-matter of the proceedings was a refusal to make a payment to the Claimants, one of whom is an OFAC sanctioned entity. However, a payment of funds to an RSUK account for the purpose of indemnifying RSUK against the costs it had itself incurred, or applying the funds to Barclays itself to discharge any costs liability RSUK may have to Barclays, would appear to be a very different thing from the circumstances of the payment instruction in issue in the litigation. Further, to the extent that Barclays are currently resisting RSUK’s payment instruction on the basis of a failure to provide information about the Claimants, similar issues are unlikely to arise in relation to payment to RSUK, an established customer.

iii)

When asked in correspondence how it would respond if the English court made an order for payment of the Balance or part of it to RSUK in discharge of any costs order, Barclays offered a very general response about needing “to satisfy itself that any costs order requiring it to deduct an amount from the Escrow Funds in order to make a payment to your client would not result in the risk of prosecution in another jurisdiction, and that the terms of such an order contained adequate provision (including liberty to apply) for any relevant party to seek and obtain any licenses or consents necessary to comply with the order”.

iv)

However, the position taken in the correspondence, sent in the context of a proposed application by RSUK for security for costs, goes appreciably further than Barclays’ pleaded case on this issue, which does not mount any positive challenge to RSUK’s pleading that if it wins in the main action, it will seek a court order to this effect (see [26]-[28] above).

When considering the limited information provided in two short solicitors’ letters as to why Barclays might refuse to pay a debt due to RSUK for the purpose of enabling RSUK to obtain the discharge of an order of this court, it is important to remember that the legal jeopardy referred to arises by reason of foreign laws which have no territorial application in this jurisdiction, in circumstances in which Barclays has agreed that the English court has exclusive jurisdiction over disputes arising in relation to the RSUK USD Client Account which is held here.

vi)

When faced with arguments of this kind, the English court carefully scrutinises the realities of the risk of foreign legal jeopardy relied upon, generally on the basis of expert evidence the cogency of which can be tested by the court. That can be seen when procedural orders by the English court are opposed on this basis (see e.g. O v C [2024] EWHC 2838 (Comm) in relation to an order to pay the proceeds of sale into court following the sale of cargo under s.44 of the Arbitration Act 1996 and Bank Mellat v HM Treasury [2019] EWCA Civ 449, [63] and the authorities collected in that case in relation to orders for disclosure). That same approach was adopted by Miles J when a trustee sought to resist an order requiring it to pay the trust fund into court for the purpose of making some part of it available to a sanctioned beneficiary in Petrosaudi Oil Services (Venezuela) Limited v Clyde & Co LLP [2021] EWHC 444 (Ch), [58]. However, there is no evidence of this kind in this case.

vii)

Further, in explaining its concerns to date, Barclays has laid significant emphasis on the need to convert USD into sterling for the purposes of transferring the Balance or part of it into Zaiwalla & Co Limited’s GBP office account or RSUK’s GBP office account. This is on the basis that conversion would involve the use of Barclays’ personnel and offices in New York, within the territorial scope of US sanctions as recognised by English law. However, it is not clear to me whether RSUK has a non-client USD office account with Barclays in this jurisdiction as well as the RSUK USD Client Account, and, if not, whether it could open one. It has been noted in litigation concerning previous US sanctions purporting to have extra-territorial effect that an intra-bank transfer between two accounts of the same branch of a London bank will not involve any acts on US territory. In Libyan Arab Bank v Bankers Trust Co [1989] QB 728, 750-52, Staughton J noted:

“If Bankers Trust held an account with the A bank which was in credit to the extent of at least $131m, and the Libyan Bank also held an account at the A Bank, it would require only book entries to achieve an account transfer … The obligation of Bankers Trust is extinguished and the obligation of A bank to Bankers Trust extinguished or reduced; the obligation of A bank to the Libyan Bank is increased …
This is quite simple, as has been explained. It involves no action in the United States. But it cannot take place unless the Libyan Bank are able to nominate some beneficiary who also has an account with Bankers Trust London.”

viii)

This possibility was not addressed in the correspondence, no doubt because it was not raised before the hearing. However, it is a reminder that major UK banks have been navigating the issues raised by US sanctions which purport to have extra-territorial effect for some years, and have accumulated significant know-how. This is a case in which effort and ingenuity must be applied in the attempt to search for means by which the Balance could be made available to discharge any costs order made by this court, not solely in the search for difficulties.

69.

In these circumstances, the argument that Barclays would resist making a payment from the Balance to RSUK for the purposes of satisfying a costs order of this court in RSUK’s favour appears thin, and its ability to resist such a payment in the face of an order of this court requiring transfer of the relevant part of the Balance for this purpose particularly so.

70.

In reply, Mr Khurshid KC effectively threw down the challenge as to the basis on which such an order might be made. It is not possible to provide a definitive response on this issue in the absence of argument on this point, but I am not persuaded that that forensic vacuum can be accorded much weight in the discretionary evaluation.

71.

The court is not unfamiliar with cases in which it is argued that a financial obligation is not amenable to execution by a third party debt order (or, I might add, set off) because it is not yet payable. The court’s power to appoint a receiver by way of equitable execution to take control of the asset and requiring payment to the receiver has been exercised in a variety of contexts to address similar issues, reflecting the strong public policy that satisfaction of judgments is not prevented by technical arguments.

72.

The width of the court’s powers under s.37(1) of the Senior Courts Act 1981 was emphasised by the Privy Council in Broad Idea International Ltd v Convoy Collateral Ltd [2021] UKPC 24, in which the two requirements for granting relief were (i) an interest of the applicant which merited legal protection and (ii) a legal or equitable principle which justified granting relief. While primarily concerned with the power to grant injunctions, the observations of the Privy Council are equally relevant to the power to appoint receivers (see Kerr & Hunter on Receivers and Administrators (22^nd), [2-46]).

73.

A receiver can be appointed over an asset which is not amenable to legal execution (Masri v Consolidated Contractors International (UK) Ltd (No.2) [2008] EWCA Civ 303). In Masri, a receiver was appointed over future debts which could be subject to attachment at law (debts which had yet to accrue, rather than simply debts which had accrued but were not yet payable). In JSC VTB Bank v Skurikhin [2015] EWHC 2131 (Comm), a receiver was appointed over assets over which the judgment debtor had de facto control. In Merchant International Company Limited v Natsionalna Aktsionerna [2015] EWHC 1930 (Comm), a bank held funds as principal paying agent for a note issue, in circumstances in which there was no debt due from the bank to the judgment debtor, but the bank itself claimed no interest in the fund (which had been paid to it by the judgment debtor). At [26], Stephen Hofmeyr KC addressed the argument “that, even if the contractual arrangements between [the judgment debtor] and the Bank have successfully prevented [the judgment debtor] acquiring any legally enforceable rights at all against the Bank, [the judgment debtor] nevertheless has a sufficient expectation of being paid by the Bank to make it appropriate for the court to appoint a receiver in respect of that expectation”. Mr Hofmeyr KC confirmed he would have been willing to appoint a receiver on this basis as an incremental development of the court's jurisdiction, although he did not find it necessary finally to decide the issue.

74.

The strong public policy of the English court that its orders (or awards of arbitral tribunals in that context) should be enforced is frequently identified as a factor justifying the appointment of a receiver (e.g. Cruz City 1 Mauritius Holdings v Unitech Ltd (No.2) [2014] EWHC 3131 (Comm), [21] and [47(a)] and Bacci v Green [2022] EWCA Civ 1393, [25]-[26]). It has been noted that the jurisdiction will normally not be exercised “unless there is some hindrance or difficulty in using the normal processes of execution” (B Football Assets v Blackpool Football Club (Properties) Ltd (formerly Segesta Ltd) [2019] EWHC 530 (Ch), [7]).

75.

Pulling these threads together, in this case the evidence that Barclays would face real legal jeopardy in making a payment from a bank account in this jurisdiction to RSUK to discharge a liability due to RSUK arising by reason of an order of this court is thin and unpersuasive. Further, to the extent a court order is necessary, there must be very strong prospects that, rather than throw up its hands in despair and do nothing, a court would be able to order relief, the effect of which would be to enable RSUK to discharge any costs order in its favour from a fund in a bank account in its name which neither RSUK nor Barclays contend is, for any relevant purposes, economically “theirs”, and which would involve the use of an asset to discharge the Claimants’ costs’ liability in which the Claimants have the principal economic interest.

76.

Against that background, I am not persuaded that it would be just to make the order for security for costs which RSUK seeks.

77.

I have not, for this purpose, placed reliance on any of the other factors relied upon by the Claimants as part of the discretionary mix. I am not persuaded that the application was “tactical” in any pejorative sense (and I would expect most steps in litigation to be tactical to some degree) nor, in the absence of any stifling argument, can it be said to be oppressive. This is not one of those cases where the merits are sufficiently clear to be a factor in themselves, and that includes the suggestion that RSUK are somehow the authors of their own misfortune.