Freehold Estates Ltd v National Westminster Bank Plc & Anor

Where proceedings are settled on full and final terms which say nothing about costs, neither party may subsequently apply in those proceedings for costs relating to the settled claim. The same principle applies where only part of the proceedings has been settled. The usual rule following discontinuance remains appropriate for claims which have not been settled, unless there is a good reason to depart from it. Settlement through a review process, involving substantial payment and causing discontinuance, may constitute such a reason. Costs of an application covering both settled and unsettled claims should be dealt with consistently with the overall costs order.

The claimant brought proceedings concerning 27 interest-rate swaps, alleging mis-selling and misrepresentation. Seven claims were resolved through the bank’s review process and discontinued after an offer of £1.153 million was accepted. A further 13 claims were discontinued without settlement. The bank sought costs for the discontinued claims, its summary judgment application, and costs reserved at an earlier case-management conference. The central issues concerned the effect of the settlement on later costs applications and whether the usual rule on discontinuance should apply.

1. Seven settled swaps. The settlement provided full and final settlement of the claims and the proceedings relating to them, while saying nothing about costs. It was therefore inconsistent with the settlement for either party subsequently to apply for costs in respect of the settled claims. The same analysis applied because the settlement concerned only part of the proceedings.
2. Alternatively, there was a good reason to depart from the usual order on discontinuance. The effective reason for discontinuance was the bank’s substantial settlement payment, not an established recognition that the claims were time-barred or unlikely to succeed. No order as to costs was therefore made for the seven settled claims.
3. Thirteen unsettled swaps. The claims had been discontinued without settlement. The usual rule applied, so the claimants were to pay the additional costs incurred in relation to those claims.
4. Summary judgment application. The application concerned all 20 transactions, including the seven settled claims, and was issued when the bank knew that an offer concerning those claims was shortly expected. Its costs were therefore dealt with in the same way as the general costs.
5. Reserved CMC costs. The claimants had pleaded their case under section 14A of the Limitation Act. There was consequently no good reason to depart from the usual order for case-management costs, namely costs in the case.

The judgment was a first-instance costs ruling following an earlier case-management conference. No appeal history is stated.