In Virgo Marine and Nixie Marine Inc v Reed Smith LLP, Reed Smith LLP v Barclays Bank Plc [2025] EWHC 1157 (Comm), Mr Justice Foxton refused an application by Reed Smith for over £6m in security for costs to be ordered against the Claimants. Jacob Turner, instructed by Zaiwalla & Co, acted as sole counsel for the Claimants. Reed Smith was represented by Jawdat Kurshid KC and Anna Gotts of 7KBW, instructed by Clyde & Co.
Virgo and Nixie Marine were the intended buyers of an oil tanker vessel from a company called Kibaz Shipping LP. In advance of the sale, the buyers paid the purchase sum of over $13m into the account of the escrow agent, Reed Smith, which was also acting as solicitors for Kibaz. The purchase sum was held in the client account of Reed Smith at Barclays Bank, London. However, shortly before the sale was due to complete, Virgo was sanctioned by the US authorities under the Iran sanctions regime. Reed Smith took the view that its London office was required to comply with the relevant US sanctions and sent a message to Barclays, directing the bank to freeze all sums held by Virgo. Barclays froze those sums. Reed Smith later concluded that its London office was not subject to US sanctions and instructed Barclays to release the sums back to Virgo and Nixie. Barclays has refused to do so, with the result that the sums remain frozen in Reed Smith’s client account.
Virgo and Nixie commenced a claim against Reed Smith in negligence, breach of contract and breach of trust, seeking repayment of the purchase sum (less a deposit, which is subject to a separate arbitration). Reed Smith in turn sued Barclays for the bank’s refusal to release the sum despite Reed Smith’s request.
Reed Smith then applied for over £6m in security for costs against Virgo and Nixie, to cover both its and Barclays’ costs to trial. Virgo and Nixie resisted the application, arguing that adequate security was provided by the sum already held in Reed Smith’s client account, which could be re-designated to Reed Smith and/or paid over to Reed Smith by order of the Court in the event that the claim was unsuccessful. Mr Justice Foxton refused Reed Smith’s application on the grounds that it would not be just in all the circumstances, concluding among other things that the responses by Barclays to enquiries by Reed Smith were insufficient to demonstrate that there was proper cause for it to refuse a payment to be made to Reed Smith in due course, despite its apparent reservation of rights to do so based on foreign sanctions.
The judgment can be found here.
