Case No: 2011013638
Neutral Citation Number: [2018] EWHC 2732 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

7 Rolls Building, Fetter Lane, London
EC4A 1NL

Date: 18/10/2018

Before:

MR JUSTICE HILDYARD

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Between:

	(1)	Andrew Lawrence Hosking
(2)	Bruce Mackay
(as Joint Liquidators of Hellas Telecommunications (Luxembourg) II SCA) (In Compulsory Liquidation)
	Applicants	
	- and –
		
	Apax Partners LLP 
& others	Respondents	

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Joe Smouha QC, Stephen Davies QC, Ciaran Keller, Tom Ford, Stephen Donnelly (instructed by Norton Rose Fulbright LLP) for the Applicants
Robert Miles QC, Andrew de Mestre (instructed by Clifford Chance LLP) for the APAX Respondents
Richard Jacobs QC, David Peters (instructed by PCB Litigation LLP) for the TPG Respondents

Hearing date: 5th March 2018

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Judgment
Mr Justice Hildyard : 
The issue for adjudication: costs
1.	This judgment concerns the denouement of litigation on a grand scale which was suddenly concluded, not by settlement or adjudication, but by discontinuance after four days of what had been envisaged to be six weeks of evidence and submission. 
2.	The central issue for adjudication is whether the Claimants should be liable for costs, not on the standard basis provided for in the event of discontinuance by CPR 38.6(1) (and which the Claimants cannot avoid), but on the indemnity basis. The Respondents contend that an order for standard costs would not properly reflect the conduct of the joint Liquidators (“the Liquidators”) in pursuing and then suddenly abandoning these proceedings. They say that the circumstances of the case take it well outside the norm so as to justify the indemnity basis. 
3.	The adjudication of that issue will also inform the appropriate approach to the ancillary issue as to the quantum of any payment on account. 
4.	The importance of these issues in monetary terms is illustrated by the fact that the payments on account sought in aggregate exceed £8 million, representing an estimated 70% of the costs in issue.
Factual background
5.	The proceedings concerned a Luxembourg entity called Hellas Telecommunications (Luxembourg) II SCA (“Hellas II”). 
6.	Hellas II was the immediate parent company of TIM Hellas, which was at all material times the 3rd largest mobile telecommunications company in Greece. Hellas II also had an indirect shareholding, acquired through TIM Hellas in 2006, in Q-Telecom, the fourth largest Greek mobile phone operator. 
7.	Hellas II is in compulsory liquidation, following on from its administration, in each case in this jurisdiction. Until August 2009, Hellas II had no material connection with this jurisdiction. However, in August 2009 Hellas II moved its centre of main interest from Luxembourg to England partly or primarily in order to take advantage of the administration regime under the Insolvency Act 1986. 
8.	Hellas II went into administration on 26 November 2009, having formally defaulted on its debts on 15 October 2009. At the commencement of that process, Hellas II had external debts in excess of €1.2 billion. The administration process failed.
9.	Hellas II has been in compulsory liquidation since an order of Sales J (as he then was) made on 1 December 2011. Thus, these proceedings are brought by the Liquidators. 
10.	The Respondents are corporate entities and individuals connected with two global private equity houses which I shall call Apax and TPG respectively. The first eight Respondents are or were at material times connected with Apax (“the Apax Respondents”); the 9th to 42nd Respondents are or were connected with TPG (“the TPG Respondents”). For present purposes I shall simply refer to them as “Apax and TPG”.
Claims in other jurisdictions before these
11.	In these proceedings, commenced in November 2015, the Liquidators have claimed approximately €1 billion from the Respondents as being the entities and individuals responsible for a transaction allegedly at an undervalue which they contended placed intolerable financial strain on Hellas II and caused its commercial demise. 
12.	This jurisdiction is the natural ‘home’ for such proceedings. But the Liquidators did not originally choose to sue here, and fought repeatedly to have their alleged rights adjudicated elsewhere.
13.	They started with Luxembourg, where proceedings were brought against Hellas I, Hellas and the six individuals who formed the Board of Managers of Hellas.  These included Messrs Aliberti and Bottinelli from the Apax side.  These proceedings were unsuccessful, resulting in the Commercial Court in Luxembourg giving judgment against the Liquidators in December 2015.  All of the allegations (including of fraud) were rejected: the Court in particular finding that the December 2006 recapitalisation had taken place in “utter transparency”. That decision is under appeal.   
14.	Then, but in effect in parallel with their proceedings in Luxembourg, the Liquidators pursued proceedings in the Bankruptcy Court in New York against a wide range of defendants, including initially the Apax Respondents, alleging fraudulent conveyance under New York law.  However, these claims were dismissed as against all parties on choice of law (and other) grounds and as against the Apax Respondents for lack of personal jurisdiction.
15.	Amended claims under sections 423 and 213 of the Insolvency Act 1986 were then brought against the remaining defendants in New York, alongside an existing claim for unjust enrichment.  Thereafter the New York Court also summarily dismissed the claims against a number of parties (being the First to Ninth Respondents- which include the persons which the Liquidators’ written opening identifies as "the Prime Movers") over whom it concluded it did not have personal jurisdiction. 
16.	Only then, and with the imminent expiry of a limitation period in this jurisdiction, did the Liquidators issue proceedings in England against the First to Ninth Respondents. Even then, however, the Liquidators showed no appetite for prosecuting those proceedings. On the contrary, and remarkably, they fought hard to obtain a stay of the English proceedings (to which the alleged Prime Movers were parties), so that the New York Proceedings (against parties who were indirect recipients of proceeds of the December Recap) could be concluded first. The Chancellor of the High Court rejected the Liquidators' application for such a stay. 
17.	Following the Chancellor’s decision, the New York Court stayed the proceedings before it on forum conveniens grounds. The essential logic of that decision was that England is both the proper (and an available) forum for the resolution of the Liquidators' claims under the English Insolvency Act. It is and always has been their natural home.
The transaction the Liquidators sought to impugn
18.	The transaction in question in these proceedings, as in the previous foreign proceedings, was an element in a recapitalisation (“the Recap”) by which the Hellas group of companies raised monies through a debt issuance, and paid approximately €978m of those monies up to its investors (and therefore out of the group). 
19.	There was no substantial factual dispute about the structure or execution of the Recap. There was also no dispute that it resulted in the relevant creditors' money being used in precisely the manner which they were told it would be: that is, to provide a return to the then investors.
20.	The particular element of the Recap which the Liquidators have nevertheless sought to impugn is the redemption of some Luxembourg-law debt instruments known as CPECs (“the Redemption”). 
21.	They contended that the Redemption took place at an undervalue, alleging that the enterprise value (“EV”) of Hellas II was only some €2.4 billon (as opposed to the figure of €3.2 billion used for the purposes of the transaction). They contended that this beggared Hellas II, leaving it with unsustainable debts whilst the recipients of the Recap proceeds received very considerable profits.  
22.	The Liquidators’ claim here was brought pursuant to section 423 of the Insolvency Act 1986 (“section 423”). That was the only claim before me for trial. The Liquidators had originally also included allegations of fraudulent trading contrary to section 213 of that Act (“IA 1986”); but although they maintained the latter until October 2016, it was dropped in December 2016 after new Consolidated Particulars of Claim were provided, signed by new Counsel.
23.	 No other cause of action was asserted and no other claim was made in this jurisdiction, whether in negligence or for breach of duty or for recovery of any payment under Luxembourg law. Whether projections developed by the Deal Team were objectively reasonable or not, or whether Luxembourg company law was breached in fact, were not matters necessary or required to be determined.  There was never, in this jurisdiction at least, a question as to the existence and breach of a duty of care.
24.	Accordingly, to succeed in their claim the Liquidators had to show
(A)	That the December 2006 Recap was a transaction at an undervalue within the meaning of section 423(1);
(B)	That, in participating in the CPEC Redemption, and in the December 2006 Recap generally, Hellas II was acting for the substantial purpose of placing assets beyond the reach of its creditors and/or of otherwise prejudicing the interests of such creditors within the meaning of section 423(3) ("the Statutory Purpose");
(C)	That it was appropriate in all the circumstances for the court to grant the Liquidators the relief they sought in relation to the Recap.

The Liquidators’ claims and the Respondents’ defences in more detail
25.	I turn to outline the parties’ respective positions, with particular reference to the three points identified in the preceding paragraph. 
26.	In summary as to these three issues the Liquidators contended that:
(A)	The test of undervalue was met because 
(1)	the CPECs were not redeemed in accordance with their terms and conditions and the Hellas II CPEC Redemption was for that reason a misapplication and gratuitous disposition of Hellas II’s assets;
(2)	the Hellas II CPEC Redemption was voluntary and discretionary at the option of Hellas II, with no consideration flowing to it;
(3)	the Hellas II CPEC redemption was contrary to provisions of Luxembourg substantive law, namely Article 72 of the Luxembourg law on Companies, (which gives effect to EC Directive 77/91/EEC (“the Second Directive”)) and was for that reason a misapplication and gratuitous disposition of Hellas II’s assets;
(4)	the Optional Redemption Price was not calculated in accordance with the terms of the CPECs and/or was wrongly overstated; and
(5)	the nature and pricing of the Hellas II CPEC Redemption made it an obvious transaction at an undervalue where the inequality of exchange from the point of view of Hellas II was represented by: (1) a payment away of almost all its assets—€978m in cash—which had been borrowed for the purpose; in return for (2) the redemption of CPECs which would not mature for 30 years, were non-interest bearing, non-tradeable, subordinated to the rights of all other creditors and, even then, had an aggregate par value of less than €28m.
(B)	The Statutory Purpose could and should be inferred because
(1)	The Redemption was a voluntary disposition by Hellas II in favour of its shareholder. Even if, contrary to the Liquidators’ case, it was effected in accordance with the Hellas II CPEC Terms and Conditions and did not constitute an unlawful distribution, Hellas II was under no obligation at all to effect an Optional Redemption of the CPECs;
(2)	The objective of the Recap was certainly to extract money from the company to give to investors, including each of the Respondents, and it was done at the risk and to the prejudice of creditors. The Optional Redemption of the CPECs using borrowed funds was a transaction which inherently was capable of benefitting only Hellas I and, through it, the private equity firms and their investors. It could not in any real sense benefit either Hellas II or its creditors;
(3)	Hellas II was not a trading business. It was a holding company. Unlike an ordinary trading transaction, where increasing the risk to creditors may be merely an undesirable collateral consequence, here there was no wider legitimate commercial purpose from the perspective of Hellas II in voluntarily redeeming the CPECs early, still less at a price so vastly in excess of par;
(4)	Further, Hellas II would be dependent on the operating company (TIM Hellas) to pay up dividends to enable it to service the debt, which debt had been raised not for the benefit of TIM Hellas but to enable money to be paid up to the parent and out of the Hellas Group;
(5)	If, after the Hellas II CPEC Redemption, Hellas II was clearly able to satisfy its future obligations to creditors (i.e. to pay interest and repay principal, each when due) then it caused those creditors no prejudice. However, if the Hellas II CPEC Redemption materially impaired the ability of Hellas II to meet its financial obligations, a fortiori if it created a risk of insolvency, the enrichment of Hellas I and its ultimate owners, and the removal of the risk to their investment in relation to the CPECs being redeemed, had as its inevitable corollary prejudice to creditors;
(6)	By the Hellas II CPEC Redemption, Hellas II borrowed in excess of €1 billion to pass up voluntarily to its shareholder. The debt burden assumed was the 2nd highest of 147 telecoms companies across Europe. This inevitably involved the Statutory Purpose unless Hellas II, after proper investigation, was entirely confident that it thereby created no real risk of inability to service the interest on and/or repay the principal of the new debt or its other substantial debts. The mere fact that it was not known that Hellas II would definitely be unable to pay its debts as they matured and fell due is irrelevant;
(7)	From the inherent risk and the personal enrichment should be inferred the purpose. Thus, if the Hellas II CPEC Redemption and/or the December 2006 Re-Cap was carried out in circumstances where Hellas II knew there was a risk that it would be overleveraged or unable to pay its debts (both interest and principal) as they matured and fell due as a result of or following the transactions, it had as its purpose both the enrichment of Hellas I and its ultimate owners and causing prejudice to the creditors. The two purposes are inseparable. They are opposite sides of the same coin;
(8)	No compensating benefits to Hellas II were identified or even suggested to exist (actually or potentially) from the December 2006 Recap—the only reason to do it being to extract money for the benefit of the Sponsors and their investors and the key consideration being the amount that could be borrowed.
(C)	The Court should grant relief under section 425 to restore so far as possible the position of Hellas II to what it would have been if the Hellas II CPEC Redemption and/or the December 2006 Re-Cap had not taken place and to protect the interests of the creditors of Hellas II.
27.	Apax and TPG, on the other hand, have always rejected any suggestion that the Recap or any element within it constituted a transaction at an undervalue. They have contended throughout that the Liquidators’ claims pursuant to section 423 failed to satisfy the statutory ingredients and were plainly unsustainable.
28.	The background story has been presented by Apax and TPG as a prosaic and conventional one. Put very summarily:
(1)	Apax and TPG identified an undervalued and undermanaged company (TIM Hellas) as an investment opportunity for funds they advised, arranged for its purchase by those funds, and helped to turn it round, with the result that the funds benefited from its improved value.  
(2)	They then oversaw the return of some of that enhanced value to the funds by means of the Recap and shortly afterwards returned further value following the sale of the business to another provider called Weather Investments S.p.A (“Weather”) in February 2007, just after the Recap.  
29.	As regards each element of the Liquidators’ case the Respondents contended that the Liquidators’ case was plainly and obviously flawed.
30.	As to (A), no undervalue had been established:
(1)	In seeking to demonstrate undervalue, the Liquidators had sought to rely on a retrospective, theoretical valuation carried out by their expert witness, who put the value of the business at €2.4 billion as compared to the value of €3.2 billion used for the Recap. This valuation was inherently and inevitably difficult to sustain: it was theoretical, and around €1 billion lower than the price, €3.4 billion, for which the asset was actually sold to Weather in February 2007, just after the Recap;
(2) Secondly, other market evidence was provided by the Respondents which tended further to undermine the Liquidators’ case on the valuation issues. This evidence included that from about July 2006, a wide range of investment banks well experienced in the valuation of businesses such as the Hellas Group produced valuations of that business which ranged on average from €3.3 billion (on the low case) to €3.9 billion (on the high case). Further, when the Hellas Group was offered for sale in the autumn of 2006, potential bidders were provided with a wide range of information about the Hellas Group, including a detailed Information Memorandum ("the IM") and an independent review by McKinsey & Company which concluded that the business plan of the management of TIM Hellas was “robust and credible” ("the McKinsey Report").  A number of bids were received in the first round of bidding.  In the second round of bidding, Providence Equity Partners (“Providence”), a leading private equity firm with a particular focus on telecoms and which had been interested in purchasing the business in 2005, made a fully-financed cash bid of €3.2 billion on 30 November 2006 which was subject only to legal and technical due diligence and the terms of a share purchase agreement. This bid was below the price at which Apax Partners was prepared to recommend that the AEVI Fund should sell its investment and so the Recap ultimately went ahead.
(3)	Although the bid from Providence was not accepted, their bid documents showed that it was based on a structure with essentially the same level of debt as the Recap (therefore showing that a sophisticated third party and its lenders also considered such debt to be sustainable by the Hellas Group) and was at a value for the assets which was the same €3.2 billion EV used for the redemption of the CPECs in December 2006.   
(4)	An additional offer of €3.4 billion was received on or around 18 December 2006 from BC Partners, another well-known private equity house which had previously shown interest in the business.
31.	As to (B), the Respondents rejected the allegation that the Recap was entered into for the purpose of prejudicing the holders of the subordinated debt issued by Hellas II as part of that Recap. They pointed to the following difficulties as being unsurmountable:
(1)	 First, there was no dispute that those bondholders knew that the money they were lending would be paid straight out to the funds and would not become working capital or otherwise be available to repay their bonds. They consented to becoming creditors on that basis. 
(2)	Secondly, and in consequence, there was no depletion of assets that would otherwise have been available to them and none of those concerned in the transaction had the purpose of removing assets of Hellas II from the creditors' reach or otherwise prejudicing them.  
(3)	Thirdly, the bondholders also consented to leave their debt in the business under new owners, rather than being fully repaid with a premium, when that business was sold a few months later. 
32.	Further, the Respondents stressed that the claim had to overcome the following counter-indications:
(1)	There was nothing in the documentary record hinting that the Recap was motivated by the required unlawful purpose; 
(2)	The transaction, including the payment of the Recap monies to the funds, took place openly: the level of debt of the Hellas Group both before and after the Recap and the use to which the proceeds would be put, including the redemption of the CPECs, and the risks associated with the level of debt, were clearly disclosed to potential purchasers of Hellas II’s debt in a detailed Offering Memorandum (“the OM”) produced for the purposes of the Recap and in a presentation prepared for use at meetings with potential purchasers of that debt.  There were also credit ratings for the debt published by the credit ratings agencies, which explained the purposes to which the monies raised would be put;
(3)	 The Apax and TPG funds retained an interest in the business and their expected future returns depended on the business being able to continue to pay its debts.  The funds’ interests were therefore aligned with those of the creditors – both wanted the business to continue to flourish;
(4)	There was an offer of €3.2 billion from a credible third party (Providence) on the table.  The Apax and TPG funds would have made a significantly larger immediate return (at least €100 million) from a sale to that third party.  If there had been any concern about the viability of the business, the question is why that offer was not accepted, and the proffered reason that it was not because, contrary to the claim, the business prospects were considered good was always going to be difficult to gainsay;  
(5)	the Hellas Group in fact made all required payments on its debt, including that issued as part of the Recap in December 2006, for nearly three years after that refinancing.   Hellas II only defaulted on 15 October 2009 after the Hellas Group had been seriously adversely affected by the unforeseen, and unforeseeable, global financial crisis which hit Greece (and the mobile phone market there) particularly severely – mobile phone revenues in Greece collapsed by more than 50% between 2008 and 2014 (from over €4 billion to €2 billion).  Before that crisis fully hit home, Hellas had continued its strong financial performance;
(6)	The evidential record revealed considerable and transparent analysis and projections by the ‘Deal Teams’ for Apax and TPG (comprising individuals nominated to review the matter on a day to day basis) supportive of the Respondents’ case that they considered that the business was worth more than €3.2 billion; that the debt which was being proposed for the Recap was sustainable; and that the business was likely to generate growing returns;
(7)	it would have been counterintuitive for the Deal Team to have recommended that the AEVI Fund should retain its investment in the Hellas Group if they had believed that the Hellas Group would be rendered insolvent by the Recap.
Summary of the rival submissions as to the merits
33.	In such circumstances, the Respondents contend now that 
(1)	the Liquidators’ claim was always, if not hopeless, speculative, weak, opportunistic and thin; and that
(2) a claim pursued in such circumstances and with such limited prospects, particularly one based on allegations of commercial impropriety, which was discontinued without explanation after four days of trial when attempts to settle had failed, should attract upon such discontinuance an order for indemnity costs.
34.    The Liquidators, on the other hand, dispute this and contend that the Court                 is not in a position, and should not attempt, to decide what it would have determined at the end of the remaining 6 weeks of trial without having heard the relevant factual and expert evidence and legal argument. That, they submit, would not be fair or proportionate; and it would undermine the simplicity and purpose of the specific rules in the CPR on discontinuance which they maintain are exhaustively there set out. 
35.	The Liquidators emphasise especially that the Court has:
(1)	heard “brief oral opening submissions”, but no detailed argument on the law or the law as applied to the facts, which were matters for closing submissions;
(2)	heard the complete evidence of only one of 12 live factual witnesses, Mr Halusa, lasting less than half a day;
(3)	heard part, but not all, of the oral evidence of one member of the Apax Deal Team;
(4)	not heard any evidence from the Apax Deal Team members with responsibility for the financing (Mr Ehmer) or operational modelling (Mr Singh);
(5)	not heard any evidence from any of the senior members of the Board of Managers, whom the Respondents contended were required to have the Statutory Purpose;
(6)	not heard any evidence at all from any TPG witness;
(7)	not heard any of the expert evidence on (1) Luxembourg law, (2) accountancy, (3) insolvency and valuation, or (iv) the wireless telecommunications industry;
(8)	not received the detailed written closing submissions which the Court indicated that it would find helpful; and
(9)	not heard the 4 days of closing argument the parties agreed were appropriate.
36.	Especially in these circumstances, the Liquidators pray in aid what Chadwick LJ stated in In re Walker Wingsail Systems plc [2006] 1 WLR 2194 at para 12:
“[I]t is no part of the function of a court on an application to discontinue to attempt to reach a decision whether or not the claim would succeed”.

The approach in determining the basis of costs
37.	The standard basis of costs is, as its description denotes, the norm. Only if the case is ‘out of the norm’ may the indemnity basis be justified.
38.	An award of indemnity costs is valuable to a receiving party for two separate reasons: (1) the burden of persuasion as to reasonableness is shifted to the paying party, and (2) the paying party does not have the benefit of the limitation that only costs which were proportionate to the matters in issue are recoverable: see Digicel (St. Lucia) Ltd and others v Cable and Wireless PLC and others [2010] EWHC 888 (Ch), para [9] (Morgan J).
39.	The decision of Morgan J. in Digicel contains a useful review of prior authority at paras [14] – [19]: see in particular paragraph [19] where Morgan J. asked whether the 
“conduct of the paying party was at a sufficiently high level of unreasonableness or inappropriateness to make it appropriate to order indemnity costs”. 
40.	More recently, the Court of Appeal said the following on the subject in Excalibur Ventures v Texas Keystone & Others (No.2) [2017] 1 WLR 2221 at [21]:
“The principles which should guide the court in exercising its discretion as to the basis upon which a costs order should be made are too well known to require restatement. They are accurately summarised in the judge's costs judgment, to which the judge referred at para 60 of the judgment which is the subject of this appeal. CPR Pt 44 makes clear, as the judge noted at para 62, that the conduct of the parties is one, but only one, of the circumstances to be taken into account. The discretion is to be exercised in the light of all the circumstances of the case. To award costs on an indemnity scale is a departure from the norm and one therefore looks for something, whether it be the conduct of the relevant party or parties, or the circumstances of the case, which takes the case outside the norm. The judge cited in his costs judgment some of the many cases which attempt to collect examples of circumstances which may take a case out of the norm—such as his own judgment in Balmoral Group Ltd v Borealis (UK) Ltd [2006] EWHC 2531 (Comm), my judgment in Three Rivers District Council v Governor and Company of the Bank of England [2006] 5 Costs LR 714 and the judgment of Gloster J in Euroption Strategic Fund Ltd v Skandinaviska Enskilda Banken AB [2012] EWHC 749 (Comm) .”

41.	In the passage from her Judgment in the Euroption case which is referred to above, Gloster J (as she then was) said the following:
“There was virtually common ground between the parties as to the principles to be applied by the court in making its choice between the two bases of assessment. The principles are well-known and have been exhaustively rehearsed in the relevant authorities. The following is no more than a headline summary.

First, on either basis, the receiving party is only entitled to recover costs which it has actually incurred, and, further, is only entitled to receive costs which were reasonably incurred and were reasonable in amount. Second, the standard basis is the normal basis of assessment: see Reed Minty v Taylor [2002] 1 WLR 2800 at [28]; Excelsior Commercial & Industrial Holdings Ltd v Salisbury Hammer Aspden & Johnson [2002] EWCA (Civ) 879 at [19]. This means that there has to be something in the conduct of the action, or about the circumstances of the case in question, which takes it out of the norm in a way which justifies an order for indemnity costs: see Excelsior ( supra ) and Noorani v Calver [2009] EWHC 592 (QB) at [9], per Coulson J. Third, cases vary very considerably, and the Court of Appeal has declined to lay down guidelines on the subject: see Excelsior ( supra ) at [32]. It is obvious from a reading of the authorities that each case is highly fact-dependent. Fourth, to demonstrate that a case has gone outside the norm of behaviour, it is not necessary to show that the paying party's conduct lacked moral probity or deserved moral condemnation in order to attract recovery of costs on an indemnity basis: see Balmoral Group Ltd v Borealis (UK) Ltd [2006] EWHC 2531 (Comm) at [1], where Christopher Clarke J said:

“… The basic rule is that a successful party is entitled to his costs on the standard basis. The factors to be taken into account in deciding whether to order costs on the latter basis have been helpfully summarised by Tomlinson, J., in Three Rivers District Council v The Governor and Company of the Bank of England [2006] EWGC 816 (Comm). The discretion is a wide one to be determined in the light of all the circumstances of the case. To award costs against an unsuccessful party on an indemnity scale is a departure from the norm. There must, therefore, be something — whether it be the conduct of the claimant or the circumstances of the case — which takes the case outside the norm. It is not necessary that the claimant should be guilty of dishonesty or moral blame. Unreasonableness in the conduct of the proceedings and the raising of particular allegations, or in the manner of raising them may suffice. So, may the pursuit of a speculative claim involving a high risk of failure or the making of allegations of dishonesty that turn out to be misconceived, or the conduct of an extensive publicity campaign designed to drive the other party to settlement. The making of a grossly exaggerated claim may also be a ground for indemnity costs.”

However, as Mr. Shivji emphasised, by reference to paragraph 8 of the decision in Noorani (supra), conduct must be unreasonable “to a high degree” to attract indemnity costs. “Unreasonable” in this context does not mean merely wrong or misguided in hindsight: see per Simon Brown LJ (as he then was) in Kiam v MGN Limited (No 2) [2002] 1 WLR 2810 . In each case, it is a fact dependent question as to whether or not the paying party's conduct has been unreasonable to a high degree.”
42.	The emphasis is thus on whether the behaviour of the paying party or the circumstances of the case take it out of the norm. The merits of the case are relevant in determining the incidence of costs: but, outside the context of an entirely hopeless case, they are of much less, if any, relevance in determining the basis of assessment. 
43.	The cases cited show that amongst the factors which might lead to an indemnity basis of costs are (1) the making of serious allegations which are unwarranted and calculated to tarnish the commercial reputation of the defendant; (2) the making of grossly exaggerated claims; (3) the speculative pursuit of large-scale and expensive litigation with a high risk of failure, particularly without documentary support, in circumstances calculated to exert commercial pressure on a defendant; (4) the courting of publicity designed to drive a party to settlement notwithstanding perceived or unaddressed weaknesses in the claims.
Application of the approach in the particular context of discontinuance
44.	In my view, the like considerations apply in the context of discontinuance; but their application is made the more difficult because at that stage the Court will not itself have assessed all the evidence and reached an adjudication, and the reasonableness (or not) of the way the case has been conducted may be more difficult to assess. For example, it may well be difficult to dismiss a claim which has not proceeded to adjudication as “unwarranted”.
45.	Discontinuance connotes (in the absence of agreed terms or particular different explanation) that the discontinuing party no longer considers its claim to be worth pursuing, or that it can no longer afford to pursue it. However, whether that is on a cost/benefit analysis, or because of funding difficulties, or changed strategic priorities, the Court is unlikely to be in a position to know or determine. Discontinuance does not necessarily connote an acceptance that the case was, is or has become hopeless; and a fair assessment of the merits will be difficult, if not impossible, at least if there remains any real issue by the date of discontinuance. 
46.	I accept also, in light of Chadwick LJ’s statement quoted at paragraph [36] above, that in the ordinary course, and given these uncertainties, any adjudication of the merits will ordinarily not be the court’s function at the discontinuance stage. 
47.	However, I do not read that statement as precluding the Court from considering whether in the particular circumstances the sudden discontinuance confirms that a claim, though perhaps not susceptible to summary determination at an earlier stage, lacks or has come to lack any real vitality; nor is it precluded from examining the particular circumstances, including the documentary record, to assess whether it appears that it has been continued, not with a view to its adjudication on its merits, but with a view to extracting a settlement on account of its nuisance, expense, and any uncertainty as to the result inherent in almost all litigation.   
48.	Further, I do not accept that the Court cannot assess whether the fact of discontinuance, where no other explanation is offered and no change in the forensic landscape which might excuse a change of perception or tack is apparent, raises an inference in all the circumstances that the discontinuing party has not only recognised weaknesses such as no longer in its perception justify pursuit of the claim but that such weaknesses were always an incident of that claim. 
49.	By the same token, there is, in my view, no reason for particular reluctance, at the stage of discontinuance, to award an indemnity basis of costs if the conduct of the parties or the circumstances of the case are by then revealed as being ‘out of the norm’. In that context, I do not accept the suggestion put forward on behalf of the Liquidators at the hearing of consequential matters that the fact that the express provision in the CPR for discontinuance provides for the payment of standard costs places some higher hurdle, or tips the balance, against an award on the indemnity basis. The CPR simply caters in this context for the norm: it does not fetter the Court in determining the appropriate response to cases which it is persuaded are ‘out of the norm’. If anything, the sudden, unexplained discontinuance of a large claim, carried on for days at trial after enormous expense, invites the question whether it was reasonable to pursue it at all, or at least, so far.
Hallmarks of cases falling ‘outside the norm’
50.	As is apparent from paragraph [41] above, a recurring theme of these considerations, and a hallmark of cases falling ‘out of the norm’ in the relevant sense, is that the proceedings in question have been high risk, and apparently pursued, and usually publicised, to exert pressure in the hope of extracting a settlement, with frail evidential support and little regard to their prospects of success at trial or any real and realistic objective of securing vindication by adjudication. 
51.	Whilst that may not technically amount to abuse, it is close to it, since the Court is intentionally, though in the event, unsuccessfully, being used as an anvil for settlement rather than as an adjudicator; and it may cause the Court to set aside, in assessing costs of the victim, the ordinary constraints of proportionality and reasonableness, precisely because the court is persuaded that the victim has been pursued and subjected to legal process in a way and for a reason which is neither proportionate nor reasonable. 
52.	If the Court reaches the conclusion that this was, or at some point became, a fair depiction of the proceedings, discontinuance should not deter the Court in a case ‘out of the norm’ from an order of costs which better fits such circumstances. On the contrary, especially where by discontinuance of the proceedings without explanation the victim in such a case is deprived of any prospect of vindication in which very serious allegations of impropriety or worse have been advanced, pursued, intentionally widely publicised and suddenly abandoned, it is right in my judgment for the Court to be inclined towards an indemnity basis of costs. 
53.	Whilst I would accept that neither Three Rivers DC v The Governor & Company of the Bank of England [2006] 5 Costs LR 714 per Tomlinson J (as he then was) at [24], nor Jordan Grand Prix v Vodafone Group [2003] 2 Lloyds Rep 874 (which he cited) is directly in point, since the one went to the question of whether there was a sufficient issue remaining, after the claimants had already abandoned their claims and agreed to pay costs on an indemnity basis, to warrant the Court making observations as to the substance of the case, and the other went to the question whether the Court should give judgment after discontinuance, both illustrate the Court’s reluctance to permit parties which have invoked its jurisdiction and pursued proceedings for purposes or in a manner of which the Court disapproves to withdraw silently and deprive the other party of some proper recompense or vindication.
54.	That sharpens focus on why this claim, which was pursued all the way and yet suddenly dropped after four days of trial without apparent reason beyond the fact of failed negotiations, was pursued until then, and whether there are factors relating to the way it was so pursued which take it ‘out of the norm’.
The Respondents’ principal factual points
55.	I turn, therefore, to consider the particular points made by the Respondents in support of their application for an indemnity basis of assessment.
56.	Citing in particular the Excalibur case, both Apax and TPG identified the following “striking features” or egregious factors as justifying that characterisation of this claim: 
(1)	there were wide ranging allegations of fraud (which were abandoned before trial) and of serious commercial impropriety (abandoned at trial); 
(2)	the claims were forced Procrustes-like into an incongruous cause of action; 
(3)	the case shifted about as the Liquidators attempted to force the facts into some kind of coherent shape; 
(4)	the Liquidators and bondholders standing behind them courted publicity for their claims and used the press to seek to apply pressure on the Respondents; 
(5)	the factual averments made in the claims were not consistent with the documentary record, and their proof appeared to rely on demonstrating that record to be false by cross-examination; 
(6)	the Liquidators did not even put their pleaded case to the first two witnesses who were called by the Respondents; 
(7)	the Liquidators sought to bolster a weak case with improbable and unwarranted expert evidence which was difficult to square with the factual evidence; and
(8)	after aborted settlement talks which were presented to the Court as justifying an adjournment of the continuation of the trial, the Liquidators then peremptorily gave up the case, without explanation, and without withdrawing any of the allegations they were making, at around 1am on Friday 23 February 2018.   
Allegations of serious commercial impropriety
57.	As to point (1), although the Liquidators disclaimed any allegation of dishonesty, and emphasised (citing, for example, Pena v Coyne (No 1) [2004] BCLC 703) that unlike the provisions that section 423 replaced, that section does not require proof of dishonesty, the fact is that their claims initially pleaded actual fraud, and at all times were founded on serious commercial impropriety. 
58.	Further, the Liquidators only confined their case to impropriety some time after having to abandon their claims of dishonesty and fraud in New York. The Liquidators' Amended Complaint in the New York proceedings contains a litany of the most serious allegations concerning the Respondents' conduct. Set out below is a mere sample of the types of allegations contained in that document and their highly-coloured presentation:
At paragraph 1 
The Joint Compulsory Liquidators bring this action... to obtain redress for one of the very worst abuses of the private equity industry.
...
Less than two months after that fraudulent transfer [a reference to the Hellas II CPEC Redemption] TPG and Apax disposed of the Company and its subsidiaries, pocketing a windfall and leaving behind an insolvent company staggering toward bankruptcy. Consistent with their code names for the initial transactions through which they later secured their windfall, TPG's and Apax's duplicitous and catastrophic plunder of the Company is evocative of the sack of Troy.

At paragraph 5
In the light of day, however, "Project Troy" and "Project Helen" can be seen for what they were- a state-of-the-art Trojan Horse designed to financially infiltrate TIM Hellas and Q-Telecom and then systematically pillage their assets from within by piling on debt in order to make large distributions to the equity owners

At paragraph 14
Based on these and other facts, it is apparent that the Company's December 2006 CPEC Redemption was carried out with the fraudulent intent to put assets beyond the reach of actual or potential creditors of the Company, and in particular the holders of the Sub-Notes, and with the knowledge that the December 2006 CPEC Redemption would harm such creditors”.

59.	Of course, this Court must adjudicate on issues relating to the proceedings here by reference to the case as pursued here. However, the antecedent proceedings in New York, as well as the reluctance of the Liquidators to bring their proceedings in a more natural jurisdiction where their accusations would have to be more confined and prosaically expressed, serve to illustrate that the Liquidators consistently sought to depict the Respondents as being guilty of conduct falling far short of the commercially acceptable. 
60.	There seems to me to be no real doubt that the Liquidators selected a forum where trial is by jury (whose members may be more susceptible than a judge to highly coloured presentation) and abandoned that forum, and the most lurid presentation of their claims, reluctantly, and only when the forum became unavailable and their more extravagant claims faced revelation as unsustainable. Even when effectively forced to litigate in the natural ‘home’ for the claims, the first version of the Liquidators' Particulars of Claim in these proceedings included a claim for fraudulent trading under section 213 of the Act. It also included certain very serious allegations, including an allegation that the OM was deliberately doctored so as to remove certain facts which would have caused creditors not to purchase the FRSNs, with the result that they were induced to do so "on a false basis". These allegations were subsequently, and without explanation, dropped; but not before the Liquidators had strived to achieve publicity for them (see below).
61.	The surviving claims were less luridly expressed; but they still asserted commercial impropriety of a serious nature, and the Liquidators never abandoned the sub-text that the impugned transaction was allegedly a particularly noxious example of abuse in the private equity industry.
Procrustean or incongruous nature of the claims: the cap did not fit
62.	As to point (2) (see paragraph [56] above), section 423 was always a difficult vehicle for the Liquidators’ claims. The difficulties have already been foreshadowed. Most importantly:
(1)	The claims being made simply did not fit within the section. In particular, they did not involve anything being done to an asset of Hellas II which would otherwise have been available for use in the business of the Hellas Group and the payment of its creditors. Rather, the monies lent by purchasers of the subordinated notes issued as part of the Recap were always intended to be used to make payments to Hellas I and then on to the investors in the Hellas Group. 
(2)	Further, the nature of the Recap and the use to which the monies would be put were disclosed to the very people who would become creditors of Hellas II by purchasing the subordinated notes.  
(3)	The recapitalisation was carried out at a value of €3.2 billion which was consistent with the offer on the table from Providence in early December 2006 and lower than the offers from BC Partners and Weather received as the recapitalisation was taking place.  The latter resulted in the sale of the Hellas Group at an enterprise value of €3.4 billion.      
(4)	After the recapitalisation, the Apax and TPG funds retained an interest in the business and their expected future returns depended on the business being able to continue to pay its debts.  The funds’ interests were therefore aligned with those of the creditors: both wanted the business to continue to flourish. 
Shifting case
63.	The difficulty the Liquidators faced in shoe-horning their complaints into section 423 led to undisguised inconsistencies and tensions in various reiterations of the case. Thus, for example, the original Particulars of Claim asserted that the redemption of the CPECs in December 2006 “subtracted from the property which was the proper fund for the payments of the debts and future debts of Hellas II, an amount...”.  The CPoC continued to allege that the purpose of the recapitalisation was to put assets beyond the reach of Hellas II’s creditors.  However, by the time that the Liquidators’ case was opened, it was accepted that:
“the transaction was not about moving away an existing asset to frustrate enforcement or feared enforcement by present or future creditors”
and the case was reduced to a much more nebulous idea that the purpose behind it was to prejudice the creditors, but without apparently affecting any asset which would have otherwise been available to them.  
64.	Another example already referred to above is the inconsistency in the Liquidators’ case in relation to the projections produced by the Apax Deal Team.
65.	There was likewise apparent inconsistency in the Liquidators’ approach to the question of who within the Deal Teams had the Statutory Purpose.  The TPG Respondents provided a telling example of this by reference to the Liquidators’ case, such as it was, against the two most senior individuals within TPG, namely Mr. Coulter and Mr. Bonderman. In that regard:
(1)	The contemporary documents (which were shown to the court during TPG’s opening) indicate that the Recap was decided upon by the Deal Team. There is only one relevant document to and from Mr. Bonderman in the critical period of October to December 2006. This shows that he had no involvement in the December Recap. There are a very small number of documents to or from Mr. Coulter. These show that he did not decide upon the Recap, but rather raised questions as to one aspect of it (the PIK notes). These questions were on the basis that he thought that the Recap was too beneficial to creditors.
(2)	Mr. Coulter was deposed in the New York proceedings. The substance of his evidence was that he was not involved in the Recap. The Liquidators asked to depose Mr. Bonderman. But they subsequently decided that this was not necessary: the obvious explanation being that there was nothing to suggest his involvement.
(3)	When the Liquidators’ case was pleaded here, there were no allegations of “statutory purpose” against Mr. Coulter or Mr. Bonderman.
(4)	The first time that allegations were made against them was in the Reply. The allegations were that they knew or ought to have known that the CPEC redemption was made in the absence of distributable reserves, and “knew or were on notice of” the existence of the Statutory Purpose. It is difficult to see how, in view of the contemporary documents showing their lack of involvement, these allegations could properly have been made. 
(5)	When the timetable for the hearing was being considered prior to and at the PTR, the Liquidators (again without any basis) described Mr. Bonderman and Mr. Coulter as the “decision-makers”. They submitted that their evidence should be taken together with Mr. Halusa, on the basis that he was the decision-maker for Apax.
(6)	None of these allegations was pursued in the Liquidators’ written opening. No case of Statutory Purpose was advanced against either individual. In oral opening, the Liquidators’ case was that the relevant individuals, whose knowledge was to be attributed to TPG, were those in the Deal Teams, and not either of those individuals. Yet in the meantime, the Liquidators had obtained an order from Snowden J. that both these persons attend for cross-examination.
The claim was calculated to maximise publicity
66.	The tensions and difficulties beg the question as to why the Liquidators sought to deploy the section in unpromising circumstances. It is difficult to avoid the conclusion that the Liquidators’ imperative was to seek to continue here what they had instigated first in New York; to benefit from the publicity generated there; and to develop commercial pressure by casting the claims in the dark clothes of defeating creditors, rather than the more anodyne trappings of a negligence claim. 
67.	It is important to emphasise at the outset that the Liquidators have strenuously denied that they have “courted publicity” and have derided the evidence said to support the suggestion as consisting of “a few press cuttings”.
68.	The Liquidators accepted that the “press had been very inquisitive”; but they contended before me that “It might be thought unsurprising that the press is interested in disputes relating to the collapse of a major telecoms player leaving it €1 billion in debt, or that creditors might feel strongly about it, or indeed might contact the press. But that is not something that can be laid at the Liquidators’ door, and it is certainly not a justification for an order that they pay costs on the indemnity basis.”
69.	The fact remains, however, as is evident from the quotations from it at paragraph [58] above, that the Liquidators’ Amended Complaint in the New York Proceedings was, to put it lightly, highly coloured. Certainly the claims achieved publicity. 
70.	When the claims in New York were first filed in March 2014, the Financial Times reported that the complaint had been filed after consultation with Hellas II’s creditors’ committee (an early indication of the role of the bondholders) and quoted one of the Liquidators, Mr Hosking, as saying that the lawsuit was intended to seek redress for “one of the very worst abuses in the private equity industry.”  The proceedings in this jurisdiction were, of course, a continuation of those originally commenced in New York.
71.	Subsequently, this was repeated in an article in The Economist in June 2015 which also quoted the Liquidators describing the events as a “duplicitous and catastrophic plunder” and as having said that Hellas II was “systematically pillage[d]”.
72.	These themes were picked up in subsequent press articles including, on the day of the Luxembourg trial, 28 October 2015, in the Independent newspaper.  That article, under the subheading “Luxembourg court to hear allegations that Apax and TPG ‘plundered’ for profit”, repeated the phase quoted in The Economist that the December 2006 recapitalisation represented “duplicitous and catastrophic plunder”. Presumably quoting the claim in the US (see paragraph [58] above), it went on to refer to the Liquidators' claim as being that the entire investment by the Apax and TPG Funds in the Hellas Group was:
“a state of the art Trojan horse designed to financially infiltrate TIM Hellas and Q-Telecom and then to systematically pillage their assets from within by piling on debt to make large distributions to equity owners.” 

73.	Now I accept of course that I have no reason not to accept the Liquidators’ denial that they actively promoted such publicity; and the Liquidators in such circumstances cannot be answerable for the unilateral activities of the press. However, the fact of such highly coloured press commentary cannot be causally divorced from the way that the Liquidators chose to proceed, or from their statements, or from their repeated tendency to plead and depict the claim in highly coloured terms. The way the claims were presented courted publicity. Further, having (in effect) depicted the claim as out of the norm, it is difficult for them to gainsay that characterisation now.
No supporting documentary record
74.	The Respondents’ fifth point focuses on an arresting feature of the way the case was pleaded and advanced, which is that the Liquidators found so little, if anything at all, which they felt able to rely on in their presentation to me by way of even slight corroboration for their claims in the documentary evidence. 
75.	Thus, none of the documents shown to the Court during the course of the trial suggested that any members of the Deal Teams held the Statutory Purpose. On the contrary, the case was pursued by the Liquidators notwithstanding contemporaneous documentation which showed that the Deal Teams (a) carefully considered the risks presented by the December 2006 Recap (including issues of debt serviceability); and (b) determined that the Hellas Group would be able to service the New Debt with considerable headroom, and would, despite having taken on that debt, be capable of being sold for more than the €3.2bn offered by Providence in November 2006. 
76.	An example of a fundamental difficulty arising in consequence was provided in the second day of trial. The documentary record included projections produced by the Apax Deal Team.  These appeared to corroborate Apax’s case. If the documents were genuine documents, and did genuinely record the views of the Deal Teams (as the Liquidators ultimately conceded), they would compel the conclusion that the Deal Teams did not believe that creditors would be prejudiced, even on a downside case. 
77.	The Liquidators, in their Skeleton Argument for Trial, had suggested that nevertheless the Deal Team had not themselves believed or given credence to the projections. However, when pressed by the Court, the Liquidators were compelled to confirm at trial that no case was being made that the documentary record did not reflect a genuine record of the Deal Team’s thoughts and actions.  The inevitable impression left was that the Liquidators simply hoped that something would turn up on cross-examination.
78.	It is relevant to note also that as the Respondents inevitably emphasised as point (5) in paragraph [56] above, this was a claim for which the Liquidators had all of the relevant material before they commenced the proceedings in this jurisdiction. I was informed that the Liquidators had obtained disclosure of some 1.5 million pages of documentation, had exchanged expert evidence and had taken more than 10 depositions in the New York proceedings before they commenced the proceedings. There was an extensive documentary record which set out what the Apax Deal Team had been thinking and intending throughout the recapitalisation.  
The Liquidators did not put the case they had pleaded to the two first witnesses
79.	The Respondents elaborated their sixth point (see paragraph [56(6)] above) as follows. The only witnesses cross-examined before discontinuance were Mr Halusa and Mr Nathoo (whose cross-examination was not completed). The Respondents drew attention in this context to what Mr Miles described as the extraordinary gap between the way the case was pleaded and the way that these cross-examinations took place.
80.	Thus, in the case of Mr Halusa, it was alleged in the Claimants’ pleadings that he knew or must be taken to have known that Hellas II was over-leveraged, over-stretched and would not be able to repay its debts. Yet none of this was put to Mr Halusa; and indeed Mr Davies, when cross-examining on behalf of the Liquidators, appeared to accept that Mr Halusa himself believed that the company would be able to repay. His witness statement as to the actual purpose of the recapitalisation, and indeed, most of his statement, was left entirely unchallenged.  
81.	Similarly, the pleaded case was that Mr Nathoo (who was primarily responsible for modelling) had adopted unreasonable assumptions, including unrealistic multiples; but he was not taken through or challenged on any of them in cross-examination. Whilst Mr Davies sought in his submissions on costs to explain that this was because he and his team regarded the main modeller as having been revealed to be Mr Singh and not Mr Nathoo, so they had determined to keep their powder dry until cross-examining Mr Singh. But that was not the way of the pleading; and it was the fact that Mr Singh was fairly junior and Mr Nathoo was his boss. Mr Miles dismissed the suggestion that it was proper to say no more to Mr Nathoo and put the entire matter to Mr Singh as “frankly absurd”. Likewise, Mr Miles dismissed as “a travesty” the suggestion to which Mr Davies resorted that in the last available half-hour of the slot for Mr Nathoo’s cross-examination he could have put these points.
82.	I do not think it fair to reach a concluded view of this aspect beyond this: the impression I was left with was that the Claimants had no documentation with which to confront either witness, made little or no progress with either of them, and at least whilst there was any prospect of settlement, preferred not to expose their case further to compelling rebuttal by two moderate and impressive witnesses.  Of course, subsequent cross-examination might have rescued the position: but the decision to discontinue once settlement prospects had failed speaks for itself in that regard.
Expert evidence of doubtful utility and consistency
83.	As to point (7) in paragraph [56] above, the two days of cross-examination before me also suggested notable inconsistencies with the Claimants’ voluminous expert evidence, the relevance of which was itself not easy to follow.
84.	As to inconsistency, the TPG Respondents pointed out that Mr Nathoo was cross-examined on the basis that (a) the best source of information for any projection of the future performance of the TIM Hellas Business was the management of that business; and (b) an appropriate downside case would therefore have been flat EBITDA of around €430m per annum. This line of cross-examination was not consistent with the Liquidators’ expert case to the effect that (a) information emanating from management was unreliable, and ought to be disregarded; and (b) a reasonable downside case ought to have assumed performance which was worse than the 2006 EBITDA of €380m. Mr. Nathoo was also cross-examined on the basis that it was right to acknowledge that “the way things were in February 2005 doesn’t tell us very much about the way things were in mid-2006 and going forward.” Yet the expert evidence of Mr. Furchtgott-Roth was replete with analysis based on Apax’s original 2005 DQM. 
85.	As to relevance, although Mr. Furchtgott-Roth’s report (for the Liquidators) spent many hundreds of pages attacking the assumptions which were used in the model, none of these criticisms were put to Mr. Nathoo during the course of cross-examination. That seems surprising, even allowing for the rationale suggested by Mr Davies that they had determined that Mr Singh, his subordinate, was the man to ask. 
86.	Further as to relevance, and more generally, my pre-trial reading broadly confirmed the Respondents’ submission that the Claimants’ expert evidence was really directed to a case of negligent modelling rather than such a departure as might suggest the Statutory Purpose. The Claimants’ two experts sought to advance a case that the projections produced by the Apax Deal Team were objectively unreasonable: but it was not explained or apparent to me how such evidence would assist the Court to determine whether or not the Deal Team acted with the Statutory Purpose. 
87.	Again, I accept that I cannot foreclose the possibility that all might have been revealed in the end; but the impression with which I was left was that there was a confusion between negligent projection and proof of the Statutory Purpose unlikely to be bridged by judicial inferences, even if perhaps a jury might perhaps have been expected to be less particular had the case proceeded in the United States, as the Liquidators had planned.
Whether inferences may be drawn from the fact of discontinuance
88.	As to point (8) in paragraph [56] above, I accept that the Liquidators were under no obligation under the CPR to explain their sudden decision to seek the permission they required to discontinue (since undertakings had been given earlier in the proceedings), and, the application being unopposed, they have not sought to do so. 
89.	However, in circumstances where there had been, to use the phrases deployed in oral argument by Mr Miles, “no change in the forensic landscape”, and no “explanation for the abandonment of the case”, there is little to contradict the suggestion that “the reason they gave up is that it was obvious they were going to lose” and “more than that, it would, if they carried on, apart from the additional costs that would be incurred,…potentially damage their campaign of litigation elsewhere” (and, in particular, on appeal in Luxembourg).
90.	For the Liquidators, Mr Smouha rejected this process of reasoning as simplistic and misplaced, and submitted that it would be wrong for the Court to draw any inferences such as had been suggested, or seek to ascertain from the Liquidators their reasons for seeking to discontinue. 
91.	Mr Smouha submitted that if it had been the intention of the CPR that an unexplained discontinuance should bring the inference sought by Mr Miles and result accordingly in an indemnity basis of costs, the rules would (adopting now Mr Smouha’s phrases) “have been set up in a different way”; and that, as to the apparently unchanged forensic landscape, that could only mean no change “that your Lordship sees or can be told”. He continued “…the court should not be requiring the discontinuing party to explain to the court and justify, by reference to matters which are very likely to put it in a difficult position in which it would be unable to provide that information because it would obviously go into privilege[d] areas…”.
92.	Mr Smouha submitted that in the context of a discontinuance, and having regard to the public interest in facilitating the cessation of claims which a claimant no longer feels able or wishes to pursue, no order for indemnity costs should be made “save in extreme circumstances where the court is in a position to see that the case should never have been brought, something extreme in that way…”.
93.	As acknowledged previously, I accept that there may well often be reasons against drawing an inference from the fact of discontinuance that the case has been recognised belatedly to be hopeless. There may be other reasons or drivers to which reference cannot safely or properly be made. However, in this case, the fact of discontinuance after the collapse of settlement negotiations directed to the compromise of the Liquidators’ proceedings abroad as well as here, taken together with all the circumstances to which I have previously referred, seems to me to support the thesis that the case was belatedly pursued in this jurisdiction with the aid of earlier-engineered publicity, not by reference to its perceived intrinsic merit, but as a last available means (apart from the appeal in Luxembourg) of forcing a world-wide settlement despite the failures in Luxembourg and New York, and the refusal of a stay here. This seems to me clearly to add weight to the conclusion that this is a case ‘out of the norm’.
94.	Further, the lack of any explanation for discontinuance must be weighted in all the apparent circumstances. These seem to me to include in particular 
(1)	the monetary forfeit of discontinuance (in that an order for adverse costs is a corollary) in any event; in this case the size of the forfeit suggests, no other explanation having been offered and in light of (2) below, that the applicants held a very dismal view of the prospects;
(2)	the signs that it is not some funding restraint that has caused the discontinuance: for the Liquidators intend to proceed in Luxembourg, and it is no secret that they have enjoyed bondholder support;
(3)	the nature of the claims and their reputational significance, which means that their sudden abandonment entails that the Respondents have not had the opportunity for vindication and yet would pay for the insult to the extent that their costs are irrecoverable;
(4)	the abandon with which the Liquidators have sued in three jurisdictions, including an unsuitable one (New York) for a claim under the Insolvency Act against a company with its COMI here, and marshalled quantities of expert evidence, ramping up the costs of and pressures on the other parties;
(5)	the overall fairness in the apparent circumstances of restricting the Respondents to recovery of costs on a standard basis, and of thereby reserving to the claimants the twin benefits of (a) any doubt as to reasonableness having to be resolved in their favour and of (b) the proportionality test, whilst denying the Respondents any prospect of vindication. 
Conclusions
95.	The Liquidators submitted, and I agree, that neither of the following matters can be said of themselves to take a case ‘out of the norm’: 
(1)	Pursuit of a case to judgment which fails (even resoundingly);
(2)	Pursuit of an arguable case raising issues of law and fact which could not be resolved without a trial, even if the court considers with hindsight that the case was unlikely to succeed.
96.	They further submitted that their claim was plainly arguable and had a real prospect of success; that in any event the Court could and should not make a fair assessment of the merits; and that “once their attack on the merits is stripped away, the Respondents’ grounds for seeking an order for indemnity costs are thin at best.”
97.	I accept that I should not seek at this stage summarily to determine the merits of the abandoned claims. But I do not accept that I should not make an assessment as to the purposes of pursuing the proceedings, or discount an overall view, after exchange of skeleton arguments, introduction of the primary documentation, four days of trial, and the sudden unexplained discontinuance, as to the weight of the difficulties in the way of establishing liability and more generally the egregious features of the case. Further, I consider that I am in a position to assess in broad terms the reasonableness of the pursuit and the manner of presentation of these proceedings having regard to the earlier proceedings abroad and the frailties and difficulties they had to overcome, and the sustained efforts to avoid the natural or ‘home’ jurisdiction. Put shortly, and in any event, I consider that I am in a position to determine in all the circumstances already apparent to the Court whether the case is such as fairly and properly to be characterised as ‘out of the norm’.
98.	My assessment is that this was high-risk litigation aggressively and very expensively pursued after failure of one sort or another in multiple jurisdictions, without demonstrable support in the contemporaneous documentary evidence; that the shape of the proceedings abroad, and the publicity the claims seem to have been calculated to attract, committed the Liquidators to an inappropriate form of action, it being difficult, perhaps impossible, to force the complaints into the structure of section 423; that the case always depended on extracting in cross-examination support for a thesis which had no or no material support in the contemporaneous documentation and which it clearly contradicted; and that whilst the ultimate consequences of the Recap and its fall-out might elicit the support of a jury, the claims had a much lesser chance of success before a judge in this jurisdiction. 
99.	In my assessment, the attempts to litigate anywhere but in the natural home for the relevant claims seem to me to indicate an appreciation of the severe difficulties of establishing the case here.   Further, the case appears to me to have been launched and pursued with a view to a settlement which the very hostile publicity against the Respondents which the way the proceedings were formulated had engendered in the USA, and the continuing echoes of that publicity in this jurisdiction, might have led the Claimants to suppose might be on the cards, whatever might be the merits of the claims in law. The desire for a jury trial in New York, which remained even after the issue of proceedings here (as demonstrated by the extraordinary and unsuccessful application for a stay of these proceedings), reinforces my perception that the Liquidators and their funders were wary of strict legal adjudication of their claims.
100.	Moreover, and in any event, I consider the following factors (all elaborated above) take this case well ‘out of the norm’:
(1)	The pursuit to the doors of the Court, and four days beyond, of serious allegations of commercial impropriety, which were suddenly abandoned only when settlement talks failed, and then without explanation and without visible change in the forensic landscape;
(2)	The changing nature of and inconsistencies in the case, both internally and with the expert evidence put forward;
(3)	The publicity attending the case, stoked up by the prior proceedings in the USA and the highly-coloured way in which the case was presented both there and in this jurisdiction;
(4)	The overall unfairness of preserving for the Claimants the twin benefits of the ordinary basis of assessment whilst exposing the Respondents, having had to respond to an expensively presented case, to the twin detriments of facing a shortfall in costs recovery and being denied the chance of vindication without explanation.
101.	In such circumstances, I do not consider the standard basis of costs would reflect the extraordinary nature of the case and its sudden discontinuance or provide a fair balance in the circumstances. I direct the costs payable by the Claimants to be assessed on the indemnity basis accordingly. 
102.	I do not, however, feel able to accede to the submission that I should state that the allegations of commercial impropriety made against the 6 TPG individuals were unwarranted. That should not be taken as an indication that I had been persuaded they had a real prospect of success: on the contrary, they appeared to me to be thin. But what is sought is in the nature of an adjudication of the merits summarily: and I do not consider that would be proper. Further, as previously indicated, the ultimate commercial consequences of the Recap are such as to give rise, and indeed have given rise, to real disquiet; and that is so even though the claims made in respect of the circumstances were inappropriately framed.
Payment on Account
103.	CPR 44.2(8) now provides that 
“Where the court orders a party to pay costs subject to detailed assessment, it will order that party to pay a reasonable sum on account of costs, unless there is good reason not to do so.”

104.	The Liquidators accept there should be a payment on account of costs. The only issues are (a) the quantum of the “reasonable sum” and (b) timing.
105.	In the present case the costs incurred by the Respondents are, inevitably, substantial.  Although costs management was not ordered by Snowden J, costs budgets were produced pursuant to an order made at the CMC in July 2017.  These showed that the estimated costs were, at that stage:
(1)	£9,329,857.27 for the Liquidators;
(2)	£7,012,899.70 for the Apax Respondents; and 
(3)	£4,819,023.11 for the TPG Respondents.
106.	The Apax Respondents have estimated that the actual costs which have been incurred are £6,990,000.  On the indemnity basis of assessment, they seek a payment on account of £5 million. 
107.	The TPG Respondents have estimated that their total costs of these proceedings are about £4.3 million. On the indemnity basis of assessment, they have sought an order for a payment account in the sum of £3 million (equating to approximately 70% of the total bill).
108.	The Liquidators contest these figures. They contend that this is a case in which there is, to say the least, a large degree of uncertainty as to what will be allowed on detailed assessment. They suggest that, in the round and on the indemnity basis of assessment, a 50% discount should be applied at this stage.
109.	As regards the Apax Respondents, the Liquidators contend that the costs estimate is too high, that this is illustrated by a comparison with the TPG Respondents’ costs claims and more particularly that it would appear from admittedly only outline information available that:
(1)	The costs budget assumed a total of £3.1 million for the 6-week trial, including weekends, and post-trial matters including hand-down of judgment, costs and consequentials. The estimated costs of refreshers, weekend work during trial and judgment and costs submission alone was over £575,000;
(2)	The costs claimed for trial preparation have nearly doubled, from c.£608,000 to £1.15 million;
(3)	The costs for the experts have nearly tripled, from c.£414,000 to £1.16 million, despite the fact they were not required to attend trial.
110.	Further, the Liquidators drew to my attention that on the face of Mr Kosky’s Witness Statement in support of the Apax Respondents’ application he states that “payments on account of costs which have already been ordered in respect of interim applications in these proceedings have been excluded”. It is of course not merely the payments on account of costs that should have been excluded, but the total costs claimed to which those payments on account relate, which are the subject of existing orders of the Court.
111.	The Liquidators submitted that (a) in arriving at a reasonable sum the appropriate starting point is substantially below the costs budget filed by the Apax Respondents pursuant to Snowden J’s order for the entirety of the trial, given that the claim was discontinued with over 5 weeks still to run; and (b) since the Liquidators have ATE insurance in place in the sum of £10 million there is no real prospect of the Respondents failing to recover their assessed costs, and they will have interest on the costs paid to their solicitors in the meantime.  
112.	The information provided to me does not enable precision; and in any event, the assessment of an appropriate interim payment on account inevitably is approximate, with an element of rough reckoning. I accept that there is a real prospect of some deduction in the fees claimed though I am not persuaded, in point of detail, that Mr Kosky was referring only to a deduction in respect of payments made on account. I consider that the payment on account to be made to the Apax Respondents should be £4.75 million.
113.	Turning to the TPG Respondents, the Liquidators took what they described as “an important preliminary point”. This was to the effect that none of the costs claimed in respect of the fees of a US law firm called Kasowitz, Benson, Torres and Friedman (“Kasowitz”) should be recoverable, since Kasowitz are not on the record and as foreign lawyers could not have been providing “legal services” for the purposes of CPR 46.5(3)(b). The Liquidators cited in this context [2016] 4 Costs LR 687, at [17] (David Foxton QC), where the judge said this:
“In my view, services provided by a lawyer qualified in another jurisdiction do not constitute “legal services” for the purposes of CPR 46.5(3)(b):
(1) I do not see any material difference between the position of a lawyer qualified in another jurisdiction, and the specialist tax advisers considered in Agassi. In each case, the provider of those services no doubt has valuable knowledge and expertise to provide, but in neither case are they authorised to conduct litigation, nor are they subject to the wasted costs jurisdiction of the court.
(2) While Dickinson Gleeson are qualified by reference to the law and procedure of their own jurisdiction, their position so far as English proceedings are concerned is that of lay persons. It seems clear that where a lay person such as a McKenzie Friend provides services of a kind which a lawyer would provide, their fees for doing so are not ordinarily recoverable in litigation from the opposing party (see for example Practice Note (McKenzie Friends: Civil and Family Courts [2010] 1 WLR 1881 at [27] to [29]).
(3) The use of lawyers qualified in another jurisdiction to provide “legal services” in relation to the conduct [of] English litigation seems to me to be very far from the “unbundling” of legal services which Lord Woolf had in mind in Access to Justice – Final Report (1999) Section II Chapter 7 para 45 (which contemplated a solicitor or barrister providing legal services in relation to aspects of litigation, without being instructed for the conduct of the litigation as a whole).”

114.	They also cited Bühler AG v FP Spomax SA [2008] EWHC 1109 (Pat). There, at [10], Mann J considered the recoverability of the fees of Polish lawyers retained by Polish clients in addition to English solicitors in English litigation, in the context of an application for a payment on account of costs. Mann J noted that it was not the occasion on which to decide whether any of the costs of the Polish lawyers were recoverable as a matter of principle, but that there was “a serious question mark” as to whether they were. At [11] and [12] he disregarded those fees entirely for the purposes of the payment on account in so far as they related to legal costs, but allowed a small sum for interpretation and translation. 
115.	They submitted that therefore all of the actual and estimated Kasowitz fees should be stripped out of the costs estimate as a starting point, reducing the total sum to £3,121,000.
116.	The Liquidators submitted in this context also that this is a case in which there is, to say the least, a large degree of uncertainty as to what will be allowed on detailed assessment; but as against the TPG Respondents the focus of their attention was (apart from the points above) that there had not been provided a sufficient breakdown to enable any more detailed comparison of the costs now claimed and the cost budget filed; but that to take just one example, trial costs were estimated at £2,395,055, including refreshers, weekend work, post-judgment matters and 40% of expert fees. Yet the grand total now claimed is less than £300,000 under the costs budget filed for the whole of the 6-week trial.
117.	In the round, the Liquidators submitted that an interim payment on account to the TPG Respondents should not exceed about £1.6 million, even on the indemnity basis of assessment.
118.	In my judgment, that is too low, even accepting for present purposes, but without deciding, the irrecoverability of the bulk of the Kasowitz costs.  I consider that the payment on account to be made to the TPG Respondents should be £2.65 million. If a definitive ruling is sought from this Court as to the Kasowitz issue, application can be made under the liberty to apply. 
119.	As to timing, the Liquidators asked for 21 days (rather than the default 14 days) to pay any amounts ordered by way of interim payment, because (1) the amount to be ordered is on any view a very substantial sum and (2) the Liquidators have ATE insurance in place.  I am content with that.
Interest on Costs
120.	Both sets of Respondents have sought orders for interest on costs from the date of payment of those costs to their English solicitors on the record to the date when those costs become subject to Judgments Act interest, pursuant to CPR 44.2(6)(g), which also provides that the Court can order that interest is payable on costs from or until a certain date, including a date before Judgment.
121.	The Liquidators did not oppose an order for interest on costs but submitted that the rates sought were too high.  
122.	In the case of the Apax Respondents, the rate sought is 2% above base rate. The Liquidators argued that this is too high and unjustified; and that a rate of 1.5% would be more appropriate. I consider that the rate sought is appropriate, as was awarded in Marathon Asset Management LLP v Seddon & Ors [2017] EWHC 479, at least for the period up to the time of the hearing on costs. In light of my delay in providing this judgment I shall consider submissions, if sought to be made, in respect of any contention for there to be a higher rate after that date until the rate under the Judgments Act becomes payable.  
123.	The TPG Respondents have sought interest (1) by reference to US Libor, notwithstanding that their costs are claimed in sterling and (2) at 3% above that rate. Both limbs are opposed by the Liquidators. I consider that, as in the case of the Apax Respondents, the appropriate rate is 2% above Base Rate at least for the period up to the time of the hearing on costs. I shall consider submissions as indicated in the last sentence of paragraph [122] in the case of the TPG Respondents, if sought to be made.
Disclosure of Funder Contributions
124.	TPG applied for an order that the Liquidators provide the identities and details of each and every third-party funder who has provided funding which has in fact been used for the purposes of pursuing these proceedings and the amount of funding provided by each such funder. 
125.	The application affects the third-party funders and was not opposed by the Liquidators. The funders’ solicitors were notified of the application and of the hearing. I did not understand either of the two funders to oppose, though one firm, Rosenblatt, made in correspondence the point that the amounts of funding by their clients have already been disclosed to the Respondents in the context of an application against the funders for security for costs in December 2017.   
126.	If, contrary to my understanding, the other funder opposes this, an application can be made on paper in the first instance setting out why they do so.