Abouraya v Sigmund & ors

This is a case management judgment in group litigation concerning claims by subscribers to the Royal Bank of Scotland rights issue alleging defective prospectus disclosure and seeking statutory remedies under section 90 of the Financial Services and Markets Act 2000. The principal legal questions decided relate to the allocation and practical management of costs across many heterogeneous claimants subject to a Group Litigation Order (GLO).

The court applied the CPR default principles for group costs (in particular CPR 46.6) as the starting point but held that, for fairness given the very large disparity in claim sizes, adverse costs and claimants' common costs should be several and apportioned by reference to each claimant's acquisition/subscription cost rather than by treating claimant groups as the relevant unit. The court approved agreed arrangements between lead claimant groups that each lead group will bear its own litigation costs in respect of active conduct, approved (subject to detailed implementation) shared contribution to lead solicitor costs on the same pro rata basis, and confirmed that prospective claimants cannot expect an observer or 'parked' status free of cost exposure. The court set aside the GLO cut-off date, required the defendants to plead to causation and loss within a limited time, dismissed as premature an application for detailed cost budgets but directed exchange of past costs figures and indicative forward cost estimates by set dates, and made ancillary directions about pay-as-you-go, reviewability and future case management.

Background and parties

• This judgment arises from group litigation under a Group Litigation Order in relation to RBS's 2008 rights issue (subscription price 200p; rump placement 230p) where many subscribers suffered severe loss after RBS required public support and was effectively nationalised. Claimants assert the prospectus was inaccurate or incomplete and seek statutory remedies under section 90 FSMA and, in some cases, claims against directors.
• Multiple claimant action groups emerged: the BB Action Group (retail and some corporate/institutional members), the SL Group (institutional), the LK Group (retail) and the QE Group (large investors). The litigation is high value and heterogeneous in claimant size.

Nature of application and procedural posture

• The hearing was a three-day case management conference focused primarily on costs allocation and management under the GLO, together with further directions on participation, cost budgeting, split trials, and pleadings on causation and quantum. The GLO had been made and sealed in December 2013.

Issues framed by the court

1. How liability for defendants' common costs (adverse costs) should be shared among claimants;
2. How claimants' own common costs and lead solicitor costs should be allocated;
3. How actual payment (cash calls / "pay as you go") should be managed;
4. Whether costs/risk directions should be reviewable and on what basis;
5. Whether the GLO cut-off date should remain; and
6. Whether the defendants should now be ordered to plead to causation and loss.

Court's reasoning and decisions

• The court started from CPR 46.6 but emphasised the judge's wide case management latitude and the need for fairness when claimant exposures vary hugely.
• The court rejected the proposal that adverse costs be shared equally between claimant groups (the BB Group proposal) because groups are not legal entities against whom enforcement can be taken, the proposal would yield unfair mismatches between risk and reward and create perverse incentives, and numbers of actual litigating members differ from group membership figures.
• Instead the court adopted the LK/SL proposal: adverse costs liability should be several and apportioned pro rata by each claimant's acquisition/subscription cost (subscription price being the practical and fair proxy). That apportionment applies to present and future claimants, subject to variation for material change of circumstances.
• The court approved the inter-group agreement that lead groups (BB and SL) will each bear their own costs for active conduct of the litigation and approved that lead solicitor administrative costs and other claimant common costs are to be shared pro rata by subscription cost; the court accepted that pay-as-you-go contributions should be required in principle but deferred implementation until the shape and membership of groups were clearer and collection procedures worked out.
• The court rejected the QE proposal to allow unissued, 'parked' claimants to avoid cost exposure and emphasised that observer status without risk would undermine the GLO and public policy on limitation; prospective claimants must register and will be subject to the GLO regime.
• The court concluded the GLO cut-off date should be set aside rather than fixed to a particular date because a fixed cut-off might mislead potential claimants about limitation and offer false assurance.
• On case management and pleading, the court ordered the defendants to plead to causation and loss within a limited time (six weeks from circulation of the draft judgment) because the earlier temporary suspension of such pleadings was no longer justified and pleading would assist consideration of a split trial.
• On cost budgeting the court dismissed the BB Group's application for immediate formal Precedent H budgets as premature but directed limited reciprocal exchanges: (a) a composite statement of costs actually incurred up to 31 December 2013 to be exchanged by 31 January 2014 and (b) an indication of likely areas of expert evidence and estimated costs by 31 March 2014. The court invited submissions on a split trial.

Ancillary directions: suspension for the present of test-claim provisions in the September 2013 order; a Reply deadline of 11 April 2014 (subject to further order); the Fourth CMC to be relisted after Replies; and other practical directions about preparation of an order and limited further hearings on discrete cost issues.

First instance case management judgment: the court made a series of case management orders. In particular the court (i) determined that adverse costs liability should be several and apportioned pro rata to each claimant's acquisition/subscription cost (declining to apportion equally by claimant group); (ii) approved agreed arrangements that each Lead Litigating Group will bear its own active litigation costs and that claimant common costs and lead solicitor costs be shared pro rata by subscription cost; (iii) set aside the GLO cut-off date; (iv) required the defendants to plead to causation and loss within a limited time; (v) dismissed as premature a detailed cost-budgeting application but ordered reciprocal exchange of past costs and indicative future cost estimates by set dates; and (vi) made further case management directions to control future participation and potential split trial. The orders were justified by considerations of fairness, practicality and the objectives of the GLO.