“Premature” bid for RBS case budget only penalised with 50% costs award

RBS: rights issue case

The action group that brought a premature application for budgeting in the RBS rights issue litigation will only pay half of the costs of the hearing at this stage, because “the basic proposition that a budgeting exercise would be appropriate may yet be vindicated”.

In February, Mr Justice Hildyard rejected the application brought by the action group represented by City firm Bird & Bird – called the BB Action Group – and the defendants argued for its costs.

He ruled in February that the application was brought too early, although budgeting and even costs capping might become appropriate later on.

Ruling on the costs of the exercise earlier this month, the judge said that as well as the starting point that costs should follow the event, other factors supported an order against the BB Action Group: the prematurity of the application and its pursuit, the defendants’ warnings before the hearing about the practical difficulties of providing a formal budget at this stage, and “some signs” that the application was pursued at this stage “to serve the BB Action Group’s internal needs rather than the needs of the litigation more generally”.

But Hildyard J said there were arguments going the other way too, including that the defendants sought to argue on a point of principle that costs budgeting should not apply as the claim exceeded the current £2m threshold – “of which I am presently not, in the context of a claim such as this, persuaded”.

Further, the airing of the issue had been “of utility”, even if the action group was wrong to press it at this stage, and a budgeting exercise may be needed later on.

The judge said: “Although there is obvious force in the defendants’ retort that subsequent developments should not logically affect the incidence of costs in respect of a past failure, I do consider that the time spent has not wholly been wasted in seeking to find practical ways forward in difficult and novel contexts, and the basic proposition that a budgeting exercise would be appropriate may yet be vindicated.”

As a result, he ordered the BB Action Group to pay 50% of the costs of the budget application, the balance to be costs in the case.

He rejected the suggestion that the award be treated as common costs for which the claimant group represented by Stewarts Law would also be responsible. This group “at most lent its qualified, lukewarm and informal support” to the application.

Hildyard J said there needed to be a detailed assessment of the defendants’ bill for £115,000 as it appeared disproportionate, but said a “cautious” payment on account of £20,000 was appropriate “to bring home to the BB Action Group the need for circumspection”.


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