Sharp & Others v Blank & Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Nugee |
| Judgment Date | 12 April 2016 |
| Neutral Citation | [2016] EWHC 776 (Ch) |
| Court | Chancery Division |
| Docket Number | >Case No: HC-2014002092 HC-2014001387 HC-2014001388 HC-2014001389 HC-2015000103 HC-2015000105 |
| Date | 12 April 2016 |
[2016] EWHC 776 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice, Rolls Building
Fetter Lane, London EC4A 1NL
Mr Justice Nugee
>Case No: HC-2014002092
HC-2014001010
HC-2014001387
HC-2014001388
HC-2014001389
HC-2015000103
HC-2015000105
Alan Steinfeld QC & Stuart Adair (instructed by Harcus Sinclair UK Limited) for the Claimants
Helen Davies QC & Tony Singla (instructed by Herbert Smith Freehills) for the Defendants
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
I now have to deal with the costs of various matters. The parties have submitted very detailed and helpful written submissions, and I have been invited to deal with the costs on paper without a hearing, which I am content to do. Because of the many points raised by the submissions this judgment is more elaborate than a judgment on costs would normally be; but there are significant sums in issue and I accept that the parties are entitled to a fully reasoned judgment.
The relevant matters are as follows:
(1) the Defendants' application, by application notice dated 15 July 2015, for summary judgment in relation to certain allegations in the Particulars of Claim, and/or for parts of the claim to be struck out ( "the summary judgment application");
(2) the Claimants' application, by application notice dated 29 September 2015, for specific disclosure ( "the specific disclosure application");
(3) the Claimants' application, made in the course of the second case management conference ( "CMC"), for permission to amend the Particulars of Claim ( "the amendment application");
(4) the second CMC itself, which dealt with a miscellany of matters.
It is agreed that the costs of the CMC should be costs in the case. I agree and will therefore make an order to that effect. The other matters are however more contentious.
The summary judgment application
This sought summary judgment or a strike out in relation to a number of discrete allegations in the Particulars of Claim. I heard it initially over 3 days from 21 to 23 October 2015; that left one remaining part of the application which was adjourned and heard on 24 and 25 February 2016. There were 6 parts to the application which were argued, and on which I gave judgment, separately.
These 6 concerned the following allegations in the Particulars of Claim (in the order in which I heard them):
(1) An allegation that Lloyds would not have had to raise additional capital if it had not proceeded with the acquisition of HBOS ( "the recapitalisation issue"). I gave an oral judgment on 23 October 2015 declining to grant summary judgment on this part of the application.
(2) An allegation that the Director Defendants were aware that HBOS (through its subsidiary Bank of Scotland) was manipulating its LIBOR submissions ( "the LIBOR issue"). I handed down a reserved judgment on 12 November 2015 declining to grant summary judgment on this part of the application.
(3) An allegation which relied on statements in the Prospectus as giving rise to a duty of care in tort ( "the prospectus issue"). I gave an oral judgment on 22 October 2015 upholding this part of the application.
(4) Allegations that (i) the Director Defendants owed a broad range of fiduciary duties; (ii) that the Director Defendants owed a duty in tort to take all reasonable steps to prevent the Claimants from suffering loss and damage; and (iii) that the Director Defendants had acted in breach of duty in putting the proposed acquisition of HBOS to an EGM ( "the duties issue"). I gave a reserved judgment on 12 November 2015 largely, but not entirely, upholding these aspects of the Defendants' application.
(5) An allegation that the Defendants had included numerous misleading and tricky statements in their documents ( "the tricky issue"). The Defendants' application was for these to be particularised. I gave an oral judgment on 23 October 2015 requiring particulars to be given.
(6) Allegations that HBOS was valueless at the time it was acquired, and that the exchange of Lloyds shares for HBOS shares constituted a gross overvaluation of HBOS ("the valueless issue"). This was argued at the adjourned hearing in February and I gave an oral judgment on 25 February 2016 refusing summary judgment on this part of the application.
I have divided the application into 6 parts; it is always possible to subdivide an issue further and the Claimants have identified 7 issues by treating the duties issue as comprising a fiduciary duties issue and an EGM issue (although accepting these were closely connected), whereas the Defendants have identified 8 issues by also splitting out the prevention of loss duties (both fiduciary and tortious) from the duties issue. I do not think this level of subdivision is necessary: I think it is more appropriate to regard the general fiduciary duties, the prevention of loss duties and the calling of the EGM as all tied up together, as is reflected by the fact that they were argued together, and as comprising different aspects of what was really one overall issue.
It can be seen that the Defendants' application had mixed success. The Claimants' overall submission is that I should make an estimated apportionment of the costs attributable to the parts of the application on which they were successful and order the Defendants to pay those costs. The Defendants' overall submission is that having regard to the issues on which they were successful and those on which they were not, the appropriate order is costs in the case.
On either view it is necessary for me to identify who is the successful party on the relevant issues and to form some view of the proportion of costs spent on the different issues.
Certain aspects are relatively straightforward. It is not disputed that the Defendants were the successful party on the prospectus and tricky issues. So far as the prospectus issue is concerned, the Claimants point out that I said in my judgment that it is doubtful whether striking it out would make any practical difference to the trial, but this is a point which cuts both ways: however unimportant the point may have been, the fact remains that the Claimants opposed this part of the application, and argued against it, and lost. They also point out that so far as the tricky issue is concerned, I did not accede to the Defendants' suggestion of an unless order; but I regard this as not materially detracting from the fact that in substance the Defendants obtained what they sought, namely an order requiring the Claimants to particularise the allegation.
I also take the view that the Defendants were the successful party in relation to the duties issue. They succeeded in obtaining a strike out both of the broad fiduciary duties pleaded (other than those consistent with the sufficient information duty admitted in Paragraph 37(f) of the Defence), including in particular the duty pleaded to prevent shareholders from suffering loss, and of the tortious duty to take all reasonable steps to prevent shareholders from suffering loss. These latter two duties, the prevention of loss duties, were ones that they had specifically taken issue with in their Defence (at Paragraph 37(h)). The Claimants suggest that their success did not have any practical effect on the claim or narrow the issues. I do not accept this submission which I think understates the potential significance of the point: it seems self-evident that a prevention of loss duty, whether framed as a fiduciary duty or as a duty of care in tort, is much more wide-ranging than the sufficient information duty, or the various tortious duties pleaded, and I can well understand why the Defendants wished to dispose of the prevention of loss duties, and indeed the broad range of fiduciary duties pleaded, at an early stage.
The Claimants also suggest that overall the parties were drawn on the duties issue, once allowance is made for the fact that the Defendants did not entirely succeed in striking out the allegations in Paragraphs 121, 122(2) and 127 relating to the calling of the EGM. Again I disagree. The Defendants' overall concern, as Ms Davies made clear in argument, was that the combination of the duties pleaded and the plea that it was a breach of duty to call the EGM might be intended to lay the groundwork for a causation argument that would avoid the need for the Claimants to prove what would have happened had fuller or different information been given. Although I took the view that this causation argument was not open to the Claimants, it was I think a legitimate concern on the way the pleadings were framed; and I did agree with the application to strike out Paragraphs 121 and 127 in which it was pleaded that the holding of the EGM was a breach of duty. Taken as a whole my judgment achieved what the Defendants sought to achieve. In these circumstances, the fact that I left in Paragraph 122(2), and the fact that I was subsequently persuaded to allow the Claimants to reintroduce Paragraph 121 (once it had been redrafted), do not seem to me to amount to reasons for regarding the Defendants as unsuccessful on the EGM point, or for treating the duties issue as having resulted in a draw overall.
There is no dispute that the Claimants were the successful party on the valueless issue.
In relation to these four issues the position on costs seems to me to be relatively straightforward. Although contained in one...
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