Farol Holdings Limited & Ors v Clydesdale Bank PLC & Anor

An indemnity costs order requires conduct or circumstances taking the case out of the norm. Serious and weak allegations pursued to trial, particularly where they form the centre of extensive litigation and publicity intended to exert commercial pressure, may justify indemnity costs for the litigation as a whole.

An interim payment on account should be a cautious estimate of likely recovery, allowing for uncertainty, duplication and unreasonable expenditure. Interest at the Judgments Act rate should begin by reference to an objective date allowing the paying party to assess the costs claim. A misrepresentation claim requires an actionable statement made by the defendant to the claimant, or an indirect statement intended to be passed on and relied upon.

The ruling followed an earlier judgment dated 19 March 2024, by which the claimants in two related lead claims were ordered to pay the defendants’ costs. The claims concerned break costs, fixed-rate representations, an unfair relationship claim and alleged misrepresentation by Clydesdale Bank PLC and National Australia Bank Limited.

The court was asked to determine the basis of assessment of costs, interim payments on account, the date from which interest should run, whether NAB was liable in misrepresentation concerning the Break Costs Representations, and permission to appeal against parts of the earlier judgment.

1. Costs. The court applied the agreed approach that indemnity costs require conduct or circumstances taking the case out of the norm. The claimants’ deceit allegations were weak, inherently flawed and pursued to trial despite substantial evidential and logical difficulties. They were central to the claims, were publicly advanced to recruit further claimants and exert settlement pressure, and formed part of litigation representing more than 900 stayed claims. These circumstances justified indemnity costs for the whole litigation rather than an issues-based order.
2. Interim payments. Applying the approach in Excalibur Ventures LLC v Texas Keystone Inc, the court used the defendants’ costs actually incurred as the starting point, then allowed for premium counsel fees and a risk of duplication between the banks. Payments on account were fixed at £7.9 million for CB and £11.2 million for NAB.
3. Interest. Interest at the Judgments Act rate was ordered on the interim payments from the costs order. For the balance, it was to run from the earlier of 28 days after service of the bills of costs or 19 September 2024, adapting the objective benchmark discussed in Involnert Management Inc v Aprilgrange Ltd to the unusually large sums involved.
4. NAB misrepresentation. A claim based on indirect representations required NAB to have made a statement to CB intending that it be passed to and relied upon by customers. That case was neither pleaded nor proved. Providing CB with a break-cost figure calculated under the CNH did not represent that CB had a contractual entitlement to charge customers that sum. Where an NAB employee communicated directly with a customer, the customer reasonably understood the employee to be acting for CB, the contracting lender. The claim against NAB therefore failed.
5. Permission to appeal. Permission was granted on grounds 1 and 2 concerning construction of clause 8.2. Permission was refused on grounds 3, 4 and 5, concerning the alleged hedging-arrangement finding, the Fixed Rate Representations and the unfair relationship claim.

The ruling was a further consequential judgment following the High Court’s judgment of 19 March 2024. The judgment does not state a citation for that earlier decision.