National Westminster Bank Plc v Rabobank Nederland

Where an anti-suit, jurisdiction or arbitration clause is breached, the innocent party may recover legal costs reasonably incurred in dealing with the resulting proceedings as contractual damages. Assessment follows ordinary damages principles, including causation, remoteness and mitigation. It is not confined to the standard costs basis under the Civil Procedure Rules 1998, because proportionality is distinct from reasonableness and may exclude costs that were reasonably incurred and reasonable in amount. Costs of enforcing the contractual obligation are ordinarily assessable on the indemnity basis where the breach involved an impermissible invocation of jurisdiction.

The claimant had established at trial that the defendant breached an anti-suit clause by bringing claims in California. The main judgment left damages to be assessed by a Costs Judge and reserved issues concerning the basis of assessment, interest and the costs of the claim.

The court was also asked to determine the basis on which damages ordered against Utrecht-America Finance Co. in related proceedings should be assessed. The central questions were whether costs incurred in defending the Californian proceedings were recoverable on the standard or indemnity basis, whether the claimant’s costs of enforcing the damages claim should receive indemnity costs, and what rate of interest should apply.

1. Costs incurred in the foreign proceedings. The costs of defending claims brought in breach of the anti-suit clause were recoverable as contractual damages. They were to be assessed on the indemnity basis, so that all costs reasonably incurred and reasonable in amount were recoverable. The burden of proving unreasonableness rested on the party in breach.
2. The standard-basis authorities, including The Tiburon [1992] 2 Lloyd's Rep. 26, British Racing Drivers’ Club Ltd v Hextall Erskine & Co. [1996] 3 All ER 667 and Lonrho plc v Fayed (No. 5) [1993] 1 WLR 1489, were materially concerned with English proceedings within the domestic costs regime. The introduction of proportionality into CPR 44.4 meant that reasonable costs could nevertheless be disproportionate. That defeated the former assumption that standard-basis costs were equivalent to the measure of damages.
3. The Californian costs regime permitted recovery of only limited categories of expenditure. There was no public-policy or double-recovery objection to an independent damages claim for the unrecovered shortfall caused by breach of the anti-suit clause. English proportionality rules could not be imposed retrospectively on foreign litigation to which the CPR did not apply.
4. Costs of enforcing the clause. The reasoning in A v B (No. 2) [2007] 1 Lloyd's Rep 358 was applied. Breach of an anti-suit clause was not materially different from breach of an arbitration or exclusive jurisdiction clause. The claimant was therefore entitled to its costs of pursuing the damages claim on the indemnity basis, provided that they were reasonably incurred and reasonable in amount. The arguability of the defendant’s submissions and its failed counterclaim did not alter that conclusion.
5. Interest and Utrecht. Interest under Supreme Court Act 1981, s 35A, was awarded at Base Rate plus 1 per cent simple from payment of the relevant costs or expenses until assessment of damages. The damages payable under the earlier Utrecht order were likewise to be assessed on the indemnity basis. The prior standard-basis costs order did not determine the separate damages assessment.

Following the trial, liability for breach of the anti-suit clause had been established and damages were left to assessment by a Costs Judge. The judgment also addressed the basis of assessment under an earlier order made by Mr Peter Gross QC in related proceedings.