CL-2024-000082 - [2025] EWHC 2292 (Comm)

The question then arises as to what, if any, regard I should have to the amendment application. As I have said, this was made on 29 August in circumstances where the claimants had clearly had the point in mind from at least 27 June, since it was relied upon as a basis for seeking adjournment on 4 July of the defendants’ applications and a retrospective extension of time for putting in responsive evidence.

It is fair to say that Bright J, who heard that application, was wholly unimpressed with the last-minute application made days before the hearing. He granted the adjournment and extension of time with evident reluctance, and only on condition that the defendants’ costs were secured by 14 August, failing which the claimants would be debarred from serving evidence in response to the applications. He adjourned the hearing to today’s date.

Bright J was even less impressed when a further application was made by the claimants at the end of July for an extension of time for putting up the security. He commented that the claimants should have had in mind from the outset any potential difficulty in getting money out of Ukraine in the current circumstances, and commented that today’s hearing should take place “come hell or high water”. He also increased the amount of security to be provided.

In the event, security was not provided, which means that the claimants have been debarred from relying on any evidence in response to the applications and are confined to making legal submissions. In these circumstances, they are obliged to rely on the charm and persuasiveness of Mr Béar. However, that cannot disguise the fact that they have offered no explanation or justification as to why their application was not made much earlier. The obvious time to bring the application would have been at the date of the first application before Bright J on 4 July, or at least at the date of the second application to Bright J made on 25 July.

Being charitable, I infer that they were not in a position to do so because they had only recently instructed new solicitors at the end of June, that this was a point which had been raised for the first time by those solicitors, and that they had had insufficient time to get to grips with the case and explore it properly. However, I also note that those were the claimants’ third solicitors since February. Moreover, they came off the record themselves two weeks ago to be replaced by yet another, fourth, set of solicitors. Whilst the court might normally be prepared to allow a degree of latitude to a client who has been forced to change horses at a critical juncture, one is entitled to wonder whether getting through four sets of solicitors in less than eight months betokens something more than mere misfortune.

I accept Mr Béar’s submission that the evidence does not permit the courts to determine whether this was due to bad luck, bad management or bad faith, but it hardly inspires confidence that the claimants even now have a proper grip of this case. At all events, there has been plenty of time to make the application since the point was first aired. There is no good reason why it could not have been made at least by the end of July, and leaving it to the eleventh hour is simply unacceptable.

Moreover, the issues raised by the amendment application are not straightforward. Both Mr Quest and Mr Head have raised formidable arguments as to why even the reformulated claim cannot succeed. Many of the points taken in relation to the original claims apply equally to the derivative claim, but there are also further points, which I outline in summary only.

First, there is the question of the restructuring. It is not controversial that five out of six series of Notes have been restructured and that, as part of that restructuring, BNYM was replaced as Trustee and existing Events of Default were waived. The sixth series is apparently also due to be restructured, subject only to resolution of a dispute as to how that is to be achieved, that dispute being listed for hearing in the English courts in October.

If that is right, then the special circumstances on which the claimants rely in order to bring the derivative claim – namely the inability or unwillingness of the tTrustee to act – evaporate. Mr Béar sought in argument to cast some aspersions on the restructuring. He pointed to what the claimants say is suspicious timing. There may or may not be anything in this point. I cannot possibly decide that at this juncture, although I cannot say that the balance of evidence, as opposed to assertion or speculation, clearly tilts in the claimants’ favour.

Secondly, and in any event, since the claimants are not Noteholders, they cannot say that the Trustee is holding the note security on trust for them directly. At best, they are beneficiaries under a sub-trust, and so any claim would have to be a double derivative claim, for which it is said they would have to show special circumstances in respect of each link in the chain.

Thirdly, it is said that there is a substantive requirement for the Trustee to be joined to the claim, but that this is no part of the proposed amendment. Mr Béar argued to the contrary that joinder was a purely procedural matter. The weight of authority seems to be that it is a substantive requirement, although I accept that the absence of the Trustee does not necessarily invalidate proceedings and that the Trustee could in principle be joined later.

Be that as it may, however, there will on any view be substantial issues for determination in relation to the proposed amendment, which will require factual evidence as well as legal submission. Plainly, there has been insufficient time since service of the application for the defendants to address those matters properly. In these circumstances, it would be wholly improper to determine the application now, as I have been invited to do by Mr Béar. Indeed, it seems to me that it would be grossly unfair to do so in circumstances where the logic of Bright J’s order was that the defendants’ costs should be secured before they were put to the expense of dealing with any responsive evidence served by the claimants.

Since it was clearly contemplated at the time of Mr Justice Bright’s order that any evidence in response would encompass the matters now put forward by amendment – if the point were to be run – it seems to me that to allow the amendment application to be deployed in opposition to the jurisdictional challenges would permit the claimants effectively to circumvent the requirement for security by the back door.

I accept in principle the proposition derived by Mr Béar from NML Capital Ltd v Republic of Argentina [2012] 1 All ER (Comm) 1081 that, other things being equal, if there is an arguable basis for the claim, the court should not make the claimant go back to the beginning when it would serve no useful purpose to do so.

However, all things are not equal in this case. For the reason I have just given, there is a concern that allowing reliance on the amendment would circumvent at least the spirit, if not the letter, of the order for security made by Bright J. It seems to me, therefore, in order to be able to rely on the proposed amendment in response to these applications, I would have to be satisfied that it was so compelling as to override that concern.

To that extent, I cannot avoid a consideration of the merits of the application. I have some sympathy for the claimants’ predicament in finding themselves holding interests in Loan Participation Notes which have been unpaid for several years, but that does not begin to excuse the less than satisfactory, not to say chaotic, conduct of their claim against the first and second defendants to date.

While I am not prepared to say that the putative amendment is so weak that I should accede to the defendant’s invitation simply to dismiss it peremptorily here and now, by the same token I am unable to say that it is so obviously meritorious as to justify refusing to set aside service in respect of the existing claims. The balance might have been altered if limitation had been in play, but that is not a factor in this case. More than that I will not say about the merits: that will be a matter for the judge hearing the amendment application in due course.

In these circumstances, I do not consider it unfair to limit the claimants to their pleaded case for the purpose of determining the jurisdictional challenges. They are not shut out altogether, although the condition of further pursuit will involve fairly stringent conditions as to the payment of costs.

Subject to hearing counsel, I would therefore propose to proceed in the following way: first, to set aside service of the claim form on the first and second defendants, but otherwise leaving the claim form in existence; secondly, to direct that the amendment application be listed for a determination on a date after the hearing of the dispute relating to the appointment of the new Trustee for Series 6; direct that the claimants should serve any evidence in support of the application within 14 days of today’s date; to order that all costs thrown away should be paid on the indemnity basis within 21 or 28 days and security for the costs of the amendment application provided; that the defendants should be entitled to serve responsive evidence no later than 14 days in advance of the hearing, but that they should not be obliged to do so unless the costs have been paid and the security provided; and make provision for the claimants to reply no later than 7 days prior to the hearing of the amendment application; and that there should be liberty to apply for a peremptory order or other relief in the event that the costs are not paid and the security not provided.

It is unnecessary, given my conclusions, to deal with the extensions of time. I merely emphasise that whether or not there was strictly a duty of full and frank disclosure on the claimants in respect of any one of those applications, it was nonetheless incumbent on them to give a proper explanation of why an extension was needed in relation to each of the first and second defendants, including an explanation of the delays to date and why, if their case was that no permission was in fact required, the defendants had not already been served.

I confirm that I will be making an order to set aside service. On reflection and on careful consideration of the submissions made by all counsel, I am, contrary to my initial inclinations, persuaded that the best and most efficient course in accordance with the overriding objective and in the interests of clarity and simplicity is that the claim form also should be set aside as against the first and second defendants, notwithstanding that it remains live as regards defendants three and four. I will therefore also make a declaration that the court has no jurisdiction over the first and second defendants in relation to that claim.

Part of the reason for changing my initial views is this: if only service is set aside, the inevitable consequence is, as Mr Head pointed out, that the claim form has lapsed and can no longer be validly served. That must mean that the defendants are no longer party to the proceedings and therefore, there is no obvious procedural mechanism for allowing them to contest the amendment application, should it be pursued and that would be unsatisfactory. The proceedings will therefore be set aside altogether against the first and second defendants and if the claimants wish to pursue a claim against them on whatever basis, they will have to commence fresh proceedings. That, to a certain extent, simplifies matters greatly because it removes the need to make any consequential directions about the amendment application.

It follows that the defendants must be entitled to the entirety of their costs of the proceedings to date and, as I have indicated, I propose to assess these summarily. As to the basis of assessment, it seems to me appropriate that in relation to the costs of defending the jurisdiction and adjournment applications, costs should be awarded on an indemnity basis; otherwise, any remaining costs should be awarded on the standard basis.

Simply commencing a claim which is subsequently found to be unmeritorious is not itself a ground for indemnity costs. Nonetheless, it seems to me that the adjournment and jurisdiction applications are in a different league because of the manner in which they were pursued, including, in particular, reliance by way of defence on a very late application which not only could but should have been made earlier, when an adjournment was sought specifically on the basis that this was a point which was likely to be advanced. The adjournment was granted conditional on the provision of security, and the claimants neither provided security nor made the application and now are effectively trying to get it in by the back door.

I do not accept Mr Béar’s argument that the amendment application did not add nothing materially to the length of the hearing because most of the points were in play in any event. The derivative claim itself took a discrete chunk of time to address, but more importantly, the impact of the amendment application on what would otherwise have been a very straightforward application by the defendants was quite considerable.

As to the mechanism of payment, I do not accede to Mr Béar’s submission that I should refrain from making any order for direct payment. He referred in somewhat elliptical terms to “geopolitical considerations” but these were not supported by any evidence. In any event, it is impossible to ignore the fact that it is the claimants who chose to sue these defendants in 2024, well after the war in Ukraine had started and well after the imposition of sanctions, and when it should have been obvious to them that there might be difficulties for them were they required to make any payments to the defendants during the course of the proceedings. It seems to me that if foreign litigants elect to come to England to litigate their disputes, particularly against a known background of sanctions, they must be prepared to abide by the rules. The fact that they may now find it difficult to get money out of Ukraine with which to meet their payment obligations does not absolve them from that obligation. The order will therefore be for payment in the ordinary way.

As to quantum on assessment, I have to say that the figures in play are simply eye-watering. I have the Court of Appeal’s comments in Saipem & Ors v Petrofac Limited [2025] EWCA Civ 821 well in mind. I am particularly troubled by some of the hourly rates applied and the sheer amount of time which is being claimed for proceedings that have not even progressed as far as service of points of claim. So far as these defendants are concerned, they should only have had to serve an acknowledgement of service and deal with the jurisdiction application and associated matters. I fail to understand how there can be any significant residual costs of the action.

In relation to the hourly rates, I accept that some uplift from the guideline rates is appropriate, but nowhere near as much as claimed. Obviously, the defendants can pay their solicitors whatever they choose – that is their prerogative – but even on an indemnity basis, they cannot recover more than is reasonable from the other side.

In this case, the litigation was moderately large, but not massive by Commercial Court standards and not, it seems to me, unduly complex. The transactions in question were standard for the international bond market and I fail to see anything that justifies anything other than a fairly moderate uplift. I would have considered something in the region of a 15 per cent uplift on the guideline rates to be appropriate, which in rough terms would be £650 for Grade A, £450 for Grade B, £345 for C, and £230 for D. But that is only a rough indication of the figures I have in mind.

In the case of the first defendant, it is true that they had a very slim team of instructing solicitors. On the other hand, these were both top-rate fee earners and, to a certain extent, those two factors balance out. But it still seems to me that there was an unreasonable amount of time spent, particularly in relation to the residual costs. I am also going to take an axe to counsel’s fees. There appears to have been an element of over-lawyering in this respect. Inevitably, any assessment can only be broad brush. On the headline figures provided by Mr Quest, the first defendant’s total costs were some £424,000, of which approximately £347,000 related to the jurisdiction and adjournment applications. Taking account of all the points I have mentioned, I reduce the indemnity costs element to £250,000 and the residual costs to £35,000, making a total of £285,000.

As regards the second defendant, the same considerations apply. In their case, the total costs incurred were £459,000, of which £334,000 related to the jurisdiction and adjournment applications. The hourly rates applied by these solicitors are not as objectionable, but counsel’s fees are extremely high. Given the rough comparability of both solicitor and counsel teams in terms of size and standing, I consider that the same figures are appropriate for the second defendant, so as to give likewise a total figure of £285,000.

Adding that up, the total for both defendants will come to some £570,000. It is purely coincidental that this is almost the same as the current figure for security ordered by Bright J. In those circumstances, it seems to me that the neatest course is to round the figure up to £580,000 across both parties, which is the same as the amount ordered by Bright J for security. In consequence the order for security will now be discharged.