Clydesdale Bank: Higher costs than claimant
A claims management company’s allegations of fraud, whose purpose was to pressure a bank to settle a £400m case that ultimately failed at trial, justifies awarding indemnity costs, a High Court judge has ruled.
Mr Justice Zacaroli said the manner in which RGL Management publicised the claim “undoubtedly raised the stakes” and supported an award of indemnity costs.
The defendants’ costs top £33m and the claimants have been ordered to make an interim payment of £19m.
In March, the judge dismissed claims brought by four SME businesses arising out of losses suffered from taking out fixed-interest-rate loans between 2002 and 2010 with Clydesdale Bank (CB), which traded as Yorkshire Bank in Yorkshire.
Under 2016, CB was owned by National Australia Bank (NAB), which was also a defendant. It is now part of Virgin Money.
A further 900-plus claimants had had their claims stayed pending the outcome. RGL put together the case and retained London law firm Fladgate.
In his consequentials ruling, Zacaroli J said that an important factor in his decision about whether to order the claimants to pay costs on the standard or indemnity basis was that the claimants “put fraud at the front and centre of their case”.
He stressed that there was nothing improper in their lawyers’ behaviour in pleading and pursuing the claims in deceit but added that this was not an answer to the claim for indemnity costs.
The allegations of deceit were “weak and subject to inherent flaws, but were nevertheless pursued to the bitter end”.
The judge continued: “An additional factor which points towards an award of indemnity costs is where large-scale and expensive litigation is pursued in circumstances calculated to exert commercial pressure on the defendants. That accurately describes the circumstances here.”
RGL conducted “a concerted publicity effort”, with its own dedicated website (sueclydesdale.com) and extensive use of social media posts and press releases.
“There is nothing intrinsically wrong with this, but the manner in which it has done so has undoubtedly raised the stakes and – in my judgment – is something which supports an award of indemnity costs.
“Importantly, the publicity generated by RGL has not been merely for its own sake, but was part of a concerted effort to put pressure on the banks to settle.”
Zacaroli J cited comments from RGL’s chief executive, as well as from the website, that expressly laid this out as part of the plan.
“Part of that strategy was widely publicising the serious allegations, including of fraud, against the banks in order to attract more customers or former customers of CB to join the litigation.”
He concluded that, overall, these considerations took the case out of the norm so as to justify an indemnity costs order.
The claimants spent £11.5m on their claim, while Clydesdale’s costs were £14.7m and National Australia Bank £18.8m. The defendants sought a payment on account of 70%.
Zacaroli J accepted that, the claimants having chosen to sue NAB in addition to CB, each bank was entitled to separate representation, and that in relation to major aspects of this case, notably disclosure and preparation of witness evidence, they had the greater burden of the work.
The banks submitted that the claimants’ objections to the amount of their costs were adequately catered for by the ‘normal’ 30% discount.
But the judge decided two factors meant the starting figure should be reduced. First were the fees of CB’s first leading counsel at trial, Bankim Thanki KC, being approximately £1.5m more than those of his counterparts for the claimants and for NAB.
Accordingly, he decided that CB’s overall costs should first be reduced by £1.5m.
Second, notwithstanding the additional burden on the defendants, “the discrepancy in the figures remains enormous” and there was a “significant risk of duplication of work and costs” between the two banks.
Zacaroli J factored in a “small but significant discount (of 15%)” to cater for this before applying the 70%.
This led to a figure of £19.1m, which he observed was slightly less than the claimants’ after-the-event insurance cover.
According to RGL’s sueclydesdale website, it had the backing also of an unnamed litigation funder that paid an initial ATE insurance premium of around £5m.
Zacaroli J concluded by granting the claimants permission to appeal on two of the five grounds submitted.
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