National Bank of Kazakhstan & Anor v The Bank of New York Mellon Sa/nv, London Branch [2018] EWHC 300 (Comm)

[2018] EWHC 300 (QB)Case No FL-2017-000013IN THE HIGH COURT OF JUSTICEBUSINESS AND PROPERTY COURTSOF ENGLAND AND WALESQUEEN'S BENCH DIVISIONFINANCIAL LIST (COMMERCIAL COURT)Venue Royal Courts of Justice, Rolls Building, Fetter Lane, London, EC4A 1NLDate 20/02/2018
Before
THE HON. MR JUSTICE POPPLEWELL
Between
(1) NATIONAL BANK OF KAZAKHSTANClaimants(2) THE REPUBLIC OF KAZAKHSTANClaimantTHE BANK OF NEW YORK MELLON SA/NV, LONDON BRANCHDefendant
David Quest QC and William Edwards (instructed by Stewarts Law LLP) for ClaimantsChristopher Butcher QC and Rupert Allen (instructed by Linklaters LLP) for Defendant
Judgment ApprovedThe Hon. Mr Justice Popplewell :
[1]By my Order of 21 December 2017, the Defendant (“BNYM”) was ordered to pay the Claimants’ costs of its unsuccessful jurisdiction challenge and stay application; and the Claimants to pay BNYM’s costs of the Claim. Two matters were left over for decision on written submissions namely:(a) the basis upon which BNYM’s costs are to be assessed; and(b) the question whether there should be any payment on account of costs in favour of BNYM.

Basis of Assessment

[2]BNYM seeks to have the costs of the Claim assessed on an indemnity basis. This is not, it is to be emphasised, by way of criticism of the Claimants’ conduct of the Claim or on discretionary grounds, but solely on the ground that clause 13(d)(i) of the Global Custody Agreement dated 24th December 2001 (“GCA”) provides such a contractual entitlement. BNYM reserves its position as to whether such entitlement would also arise under clause 13(d)(ii) in the event that the Court makes further findings.[3]The Court should generally exercise its discretion in relation to costs in accordance with a party’s contractual entitlement. The question which arises is whether clause 13(d)(i) entitles BNYM to its costs of this Claim on an indemnity basis.[4]Clause 13(d)(i) is in the following terms:
“except insofar as the same may result from the negligence, wilful default or fraud of [BNYM]…, [NBK] agrees to indemnify [BNYM] on demand against each loss, liability and cost suffered or incurred by [BNYM] including without limitation any legal fees and disbursements arising directly or indirectly: (i) from the fact that any Securities are registered in the name of or held by [BNYM] or a nominee or a Sub-custodian or Securities System;” (i) from the fact that any Securities are registered in the name of or held by [BNYM] or a nominee or a Sub-custodian or Securities System;”
[5]I have concluded that this indemnity applies to the costs of the Claimants’ claim for relief in these proceedings. The Belgian and Dutch Orders were addressed to BNYM as a result of the relevant securities being held by BNYM in its name or at its London branch. The freezing of the GCA assets by BNYM, and the Claimants’ proceedings against BNYM for declarations which effectively challenged the freezing of those assets, arose, at the very least indirectly, from “the fact that any Securities are registered in the name of or held by [BNYM]” within the meaning of clause 13(d)(i). There is at least an indirect causal link between the legal costs incurred by BNYM in defending the Claimants’ claim and the fact that these securities were registered in its name or held by its London branch. Accordingly, the costs of BNYM in relation to the Claim will be assessed on the indemnity basis.

Payment on account

[6]BNYM’s total costs of the claim, including the applications, are put at a little over £750,000. That figure includes its costs of the jurisdiction challenge and stay application, in respect of which I ordered that it should not recover its costs and should pay the Claimants’ costs. Doing the best I can, I would attribute £100,000 to the jurisdiction challenge and stay application, leaving £650,000 as referable to the other costs of the Claim. My general practice is to use a figure of 50% for payments on account of costs, but given that assessment is to be on the indemnity basis, an appropriate proportion to award by way of a payment on account would be 60%, which gives a figure of £390,000. Against this, account must be taken of the fact that BNYM will have to pay the Claimants’ costs which are referable to the jurisdiction challenge and stay application. I would attribute the same figure to those costs, namely £100,000 on a solicitor and own client basis, subject to assessment, on a standard basis, which for these purposes I will estimate will reduce them by 35%, i.e. to £65,000.[7]Accordingly, there will be a payment on account of costs by the Claimants to BNYM of £325,000.