Contratti derivati: Provincia di Crotone vince contro banca Dexia Crediop

High Court of Justice di Londra

Sentenza 18 ottobre 2013

IN THE HIGH COURT OF JUSTICE

QUEEN‟S BENCH DIVISION

COMMERCIAL COURT

[2013] EWHC 3363 (Comm)

Folio 801 of 2012

Royal Courts of Justice

Rolls Building

Friday, 18th October 2013

Before:

MR. JUSTICE HAMBLEN

B E T W E E N :

DEXIA CREDIOP SPA Claimant

- and -

PROVINCIA DI CROTONE Defendant

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__________

MR. J. WILLAN (instructed by Berwin Leighton Paisner LLP) appeared on behalf of the Claimant.

MR. C. SAMEK QC and MR. J. BARNARD (instructed by Pini Franco LLP) appeared on behalf of the Defendant.

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JUDGMENT

(Approved)

MR. JUSTICE HAMBLEN:

Introduction

1 This is an application by the claimant, Dexia Crediop SpA (“Dexia”), for summary judgment in respect of the claims made by the defendant, Provincia di Crotone (“Crotone”), in misrepresentation. There is a cross-
application by Crotone for permission to amend its defence and counterclaim.

2 The summary judgment application was listed with an estimate of one hour, endorsed by counsel. That was a wholly insufficient estimate. Time estimates for ordinary applications are meant to include time for judgment and consequential matters, which would imply that this was a case which could be opened within half an hour. That was completely unrealistic. In the event, it took nearly two hours for Dexia‟s counsel to open the case.

3 There appears to be an increasing tendency for parties to provide unrealistic estimates in order to obtain or hold hearing dates. That practice is to be deprecated, and parties should be reminded of para.F10.9 of the Commercial Court Guide, which states as follows:
“If it is found at the hearing that the time required for the hearing has been significantly underestimated, the judge hearing the application may adjourn the matter and may make any special costs orders (including orders for the immediate payment of costs and wasted costs orders) as may be appropriate”.
Factual background

4 Crotone is an Italian public authority in Calabria, Italy. It is authorised under Italian law to carry out certain investment activities. It was classified by Dexia as a “Retail Customer” for the purposes of MIFID.

5 Crotone had a series of outstanding loans with the Cassa Depositi e Prestiti amounting to €27,912,000, together with other indebtedness. As at 31st March 2006, Crotone had entered into a number of swaps transactions in relation to its indebtedness; namely (1) six swaps with Banca Nazionale del Lavoro SpA “(the BNL swaps”), and (2) a cap and floor transaction with Banca OPI SpA.

6 Crotone was concerned about future risk connected with possible increases in interest rates. Accordingly, Crotone issued a Call to Tender pursuant to Resolution No: 22693 dated 22nd May 2007 for the purpose of selecting a party with whom “to enter into derivative transactions to restructure Crotone‟s debt and limit interest rate related risks”.

7 By the Call to Tender, interested banking and financial institutions were invited to conduct a study of Crotone‟s overall debt position, and to formulate proposals for

the rescheduling of its debt “by way of transactions which are appropriate to reduce the cost and limit the risk connected with possible increases in interest rates”. Crotone expressly required that the proposals submitted by interested parties contained four specific elements, identified as (A) to (D) in the Call to Tender, which would form the basis of the selection by Crotone of the party.

8 (A) to (D) in the Call to Tender provided as follows:
“A) A study of the possible solutions to reschedule the overall debt described at attachment A. This study shall:
1) describe the proposed strategies and technical solutions, and specify the financial model for each suggested strategy, with a specification of indicative costs;
2) highlight the interest rate curve (maximum of ten days before the deadline for submitting the proposal).
B) the nature of the service offered in terms of consultancy and assistance for the entire duration of a derivative transaction, with a specific commitment to readily provide, at any time upon the request of the Provincial government, an advancement report on the mark-to-market figures and to provide onsite counselling when requested;
C) any costs in respect of commissions, expenses and other charges to be borne by the Provincial government, to be detailed analytically;
D) self-certification to be signed by a pro tempore legal representative of the bidding company, pursuant to Articles 46 and 47 of Decree of the President of the Republic….”

9 Dexia responded to the Call to Tender by submitting a proposal dated 31st May 2007 (“the May proposal”). In the May proposal, Dexia made a number of statements under the heading “Management of Debt and Derivative Instruments”. These included the following:
“The service provided for the management of the debt for the Province is based on Dexia putting at the Province‟s disposal a highly specialised team and a complete range of instruments for financial and statistical analysis which are currently the most effective:
A) Team: a specialist financial team and a legal team.
B) Economic and financial analysis services:

1. A foundation in macroeconomic and financial analysis (positioning in respect of the economic cycle and historical financial data: level and the gradient of the yield curve level of fluctuations).

2. Static flow analysis (composition of the debt, amortisation, comparative analysis).

3. Dynamic flow analysis (average cost, benchmarking analysis).

4. Sensitivity analysis what if.

5. Mark-to-market.

6. Optimisation of the debt portfolio in light of the analysis at points 1-5”.

10 Later on, under the same general heading, it provided as follows:

“B.6 Optimisation of the Portfolio
- The ability to structure solutions for the management of the debt portfolio, from the most simple to the most complex, derives from the Bank‟s experience.
- The quality of service is guaranteed through the use of a specialised team dedicated exclusively to the restructuring of products for the management of debt of Italian public authorities.
- Trading room activities are an integral part of the advisory process and restructuring of the debt portfolio.
- The market prices are used to identify the most efficient optimisation strategies.
- The approach adopted in the search for solutions is never standardised (automatic application of predefined strategies in similar cases) but is always determined on the basis of a study of each specific case”.
In relation to costs, the proposal said this:
“Dexia Crediop SpA does not request any commission to be paid for the management of the debt and for entering into the derivatives”.

11 On 9th August 2007, Dexia submitted another bid, and then a further bid was submitted on 27th November 2007. Dexia‟s final bid was dated 18th December 2007 (“the December bid”). The December bid contained the following statements:
“The recipient of this proposal must ensure that it has understood the nature of the financial instruments and transactions discussed and the risks related to transactions involving financial instruments. It must exclusively rely on its own evaluation or the evaluation of its advisors in consideration of the suitability of the transaction in relation to its needs and requirements, taking into account its circumstances and financial situation”.
Further on it was stated:
“The financial instruments which are the object of this proposal have been identified as one of a basket of products suitable for the client in accordance with the applicable law. In any event, please note that the simultaneous provision by Dexia Crediop of advisory services and negotiations on its own behalf may result in a conflict which is detrimental to your interests”.

12 Further on in the document, under the heading “Strategy, Objectives and Method” it was stated:
“Objectives:
- Bringing the swaps into line with the underlying.
- Obtaining of a single product for the entire debt.
- Obtaining savings in the following years.
- Streamlining the management of the debt”.
Under the heading “The Restructuring of the 6 Swap BNL” it was stated:
“a) Termination of all the existing swaps with payment of the MTM (through entering into Maturity Swaps, the Province receives from Dexia Crediop an amount equivalent to the value of the MTM value of the existing derivatives)”.

13 The December bid went on to refer to three upfront payments which were to be received by Crotone in sums respectively of Euros: 150,000, 185,000 and 250,000. It was stated in relation to the last of these three envisaged payments that this was “equivalent to1 per cent of the notional amount” (of the swap).

14 On 21st December 2007, Crotone entered into three swaps transactions with Dexia (“the transactions”) on the basis of Dexia‟s proposals in the December bid. Crotone executed an ISDA Master Agreement and Schedule. On the same day, Dexia sent Crotone three confirmations in relation to the swaps. The BNL swaps were also terminated. The MTM paid by Crotone to BNL to terminate the BNL swaps amounted to a total sum of €589,600, whereas the upfront payment received by Crotone from Dexia amounted to €540,000.

15 On 19th October 2010, Crotone appointed a consultant specialising in derivatives to analyse the transactions. A preliminary report, entitled “Swap Analysis”, was provided to Crotone on 25th November 2010, and this indicated that there was an unjustified financial imbalance in the transactions, in that, as at the trade date of the transactions on 21st December 2007, the MTM had a negative value to Crotone and a positive value to Dexia, in the sum of €3,538,250. It is Crotone‟s case that the sum of €3,538,250 represented costs of the transactions to Crotone, and fees or commissions generated for the benefit of Dexia, which were undisclosed by Dexia to Crotone. These are referred to as “the hidden costs”.

16 Dexia commenced this action for declaratory relief on 14th June 2012. Crotone‟s defence and counterclaim was served on 16th October 2012. Dexia served a reply and defence to counterclaim on 15th January 2013.

17 The summary judgment application relates to Crotone‟s case in misrepresentation and specifically paras.28(a) to 36(a) of the draft amended defence. The draft amendments have been made to clarify the nature of the misrepresentation case, but, save for one alleged representation which has been withdrawn, the substance of the allegations made remains essentially the same. Although the application as issued related to the original defence, the reality is that it now relates to the draft amended defence, and the argument before the court has proceeded on that basis.
The relevant legal principles

18 Summary judgment is governed by CPR Part 24.2 and guidance is provided by the notes thereto in the White Book.

19 The overall burden of proof rests on the applicant to establish that there are grounds to believe that the respondent‟s defence has no real prospect of success, and that there is no other compelling reason for trial - see ED&F Man Liquid Products Limited v. Patel [2003] All ER (D) 75, at para.9.

20 The test of whether a case (or issue) is fit for trial is whether there is a real prospect of the claim or defence, as the case may be, succeeding. „Real‟ is equivalent to „realistic‟ and is to be contrasted with „fanciful: see Swain v. Hillman [2001] 1 All ER 91 at 92 (per Lord Woolf MR) quoted by Lord Hutton in Three Rivers v. Bank of England [2003] 2 All ER 513, at para.134. „Fanciful‟ connotes „entirely without substance‟: see Three Rivers per Lord Hope, at para.95.

21 Permission to amend is governed by CPR Part 34.2.

22 Permission to amend should not be granted unless the amended pleading discloses a case which has a realistic prospect of success. The test for this purpose is the same as on an application for summary judgment - see Bleasdale v. Forster [2011] EWHC 596 (Ch) (Henderson J.).
The alleged representations

23 These are set out in paras.28A to 36A of the draft amended defence, which provide as follows:

“28A By reason of Dexia‟s statements in the Proposal pleaded in paragraph 24(1), (2), (2A) and (2B) above and from which Dexia did not ever resile, Dexia expressly or impliedly represented that (i) the Transactions had been devised by Dexia so as to achieve an optimisation of Crotone‟s debt portfolio having regard inter alia to Mark-to-Market, and (ii) and after it had conducted a detailed assessment of market prices of the Transactions.

29. Further or alternatively, by reason of Dexia‟s statements in the Proposal pleaded in paragraph 24(1), (2), (2A) and (2B) above and from which Dexia did not ever resile and by reason of its express reference in the December bid to Crotone‟s objectives of bringing the Swaps into line with the underlying indebtedness and of obtaining savings, the light of Crotone‟s objectives, as identified by Dexia in its each of its bids and referred to in paragraphs 27(1)(a), 27(2) and 27(3) above, by submitting the bids referred to in paragraphs 27(1)(a), 27(2) and 27(3) above, Dexia impliedly represented that the Transactions its proposed restructuring had been devised by Dexia so as to achieve an optimisation of Crotone‟s debt portfolio having regard to the said objectives, alternatively were and constituted an optimisation of Crotone‟s debt portfolio having regard to the said objectives. would achieve Crotone‟s objectives and also result in a re-alignment with Crotone‟s underlying indebtedness. By that, Dexia intended to mean that the notional amounts under the swaps to be entered into as part of Dexia‟s proposed restructuring would be aligned with the principal amount of Crotone‟s indebtedness to Cassa Depositi e Prestiti and Banca OPI and the amortisation of such indebtedness.

30. In the light of (a) the stipulations referred to in sub-paragraphs 21(1) and 21(4) above that any bid must (i) specify the financial model for each proposed strategy and specify indicative costs of the financial model(s) and (ii) detail analytically any costs in respect of include a detailed breakdown of commissions, expenses and any other charges to be borne by Crotone, (b) Dexia‟s statement in the Proposal pleaded in paragraph 24(4) above and (c) Dexia‟s submission of the December bid which contained no details of any of the said types of costs as referred to in (i) and (ii) above, by submitting the bids referred to in paragraphs 24, 27(1), 27(2) and 27(3) above, Dexia expressly and/or impliedly represented that, with the obvious exception of any possible future negative cash flows from Crotone to Dexia arising from the operation of the Transactions themselves, there were no such costs. commission, expenses and other charges relating to the proposed transactions other than those identified in each of its bids. Paragraph 24(4) above is repeated. In each case, Dexia made a continuing and material representation, intended to be relied upon by Crotone.

31. Further, on 18 December 2007, Dexia provided Crotone with a calculation in which it expressly or impliedly represented to Crotone that its proposed restructuring would result in an estimated total saving to Crotone of €2,205,091.00 (between 2007 and November 2010). That was a continuing and material representation, intended to be relied upon by Crotone.

32. In breach of the representation at paragraph 31 above, as at 25 November 2010, rather than having saved an estimated amount €2,205,091.00, Crotone had incurred losses of €2,238,739, being the total of the outflows from Crotone in respect of the Transactions from 21 December 2007 to 25 November 2010 and the negative MTM which was paid on termination of the BNL Swaps less the upfront amounts received by Crotone from Dexia.

33. Further, by in its December bid, Dexia expressly represented to Crotone that, on termination of the existing BNL Swaps and the execution of the proposed restructuring, Crotone would receive at the time of completion of the Transactions from Dexia would pay an amount equivalent equal to the MTM value of the BNL Swaps to Crotone. That was a continuing and material representation, intended to be relied upon by Crotone.

34. As at 21 December 2007, the MTM value of the BNL Swaps was €589,600. As at the date of the purported entry into the Transactions, Dexia only paid Crotone an upfront amount of a total of €540,000. In the premises, breach of the representation referred to in paragraph 33 above was false. the amount of €540,000 only partially offset the MTM value on the termination of the BNL Swaps.

35. Further, in each of the November and the December bids, Dexia expressly represented “the financial instruments which are the object of this proposal have been identified as one of a basket of products suitable for the client in accordance with applicable law.” In each case, that was a continuing and material representation, intended to be relied upon by Crotone.

36. The financial instruments referred to in paragraph 35 above were the Transactions. In breach of the representations at paragraph 35 and for the reasons set out below, the Swaps Transactions were not suitable for Crotone and/or were not in accordance with the applicable law.

36A. Further or alternatively, in relation to the representations pleaded in Paragraphs 28A, 29, 30, 33 and 35 above and pleaded in paragraph 79 below, Dexia impliedly represented that (a) at the time of making the said representations, it believed alternatively reasonably believed that what was being represented was true and / or that (b) facts existed which reasonably justified the said representations”.

Dexia contend that there is no real prospect of Cortone establishing any of these alleged representations.

Preliminary points

24 The following preliminary points may be made regarding the application.

25 First, Crotone‟s case is that the proper law of its misrepresentation claims is Italian law. Crotone has identified the provisions of the Italian Civil Code on which it relies (see para.103 of the defence and counterclaim).

26 Dexia‟s application for summary judgment proceeds on the basis that the misrepresentations are governed by English law. The application is not based on the proposition that, as a matter of Italian law, there is no prospect of Crotone establishing the misrepresentations. It follows, on the face of it, even if Dexia succeeds in striking out Crotone‟s misrepresentation claim in English law, Crotone‟s misrepresentation in Italian law will still survive. If so, the necessity for a trial on the issue of whether Dexia made the misrepresentations will not be obviated, nor will the burden of preparing for trial or the burden of the trial itself be substantially reduced.

27 Dexia‟s answer to this was (i) to raise the argument that the proper law governing the misrepresentation claim is English law, and (ii) to submit that, because the summary judgment application relates to the issue of whether the misrepresentations were made, that is an issue of fact, which will be unaffected by Italian law.

28 In relation to (i), this issue was raised in the claimant‟s skeleton and in the authorities provided overnight prior to the hearing. It is wholly unsatisfactory for an issue of this kind to be raised in this manner. The issue of Italian law governing the misrepresentations is clearly set out in the pleadings, and indeed, in the list of issues. If part of Dexia‟s application was to be a challenge to the assertion that Italian law was the governing law, then that should have been made part of their summary judgment application. It was not.

29 In any event, I agree with Crotone that the issue of proper law does raise factual questions, which it would be inappropriate to deal with summarily. In this connection, I was referred, in relation to the application of sections 11 and 12 of the Private International Law (Miscellaneous Provisions Act) 1998, to the guidance provided in the case of VTB Capital Plc v. Nutritek International Corporation [2012] 2 Lloyd‟s Rep 313, at paras.148 to 149, in which the Court of Appeal set out the principles to be considered in relation to the application of those sections. The principles there set out highlight a number of factual matters which potentially arise in relation to any consideration of these issues.

30 In relation to (ii), although it is asserted that Italian law will not affect the issue of whether representations were made, there is before the court no relevant Italian law which bears on this question, one way or the other. The court is simply not in a position to know whether there are Italian law provisions which may affect the question of the making of representations. It is not satisfactory for a matter of this kind to be dealt with simply by means of assertion.

31 The second preliminary point is that, although Dexia seeks to attack Crotone‟s misrepresentation claims, the only representations which it challenges are those in paras.29A to 36A of the defence and counterclaim. It does not challenge Crotone‟s claim in para.79 that there was an implied representation as follows:
“Prior to and in respect of each transaction, in failing to disclose the hidden costs of that transaction or the implications of those hidden costs to Crotone, in circumstances where it was obliged by the TUF and Consob Regulations to do so if there were any, Dexia impliedly represented that there were none”.
Thus, Dexia does not in its application challenge this misrepresentation claim, even on the assumption that its proper law is English law.

32 It follows that the court will, as matters stand, have to deal at trial with the following:
1) Crotone‟s Italian law claims based on all the alleged misrepresentations having been made.
2) Crotone‟s English law misrepresentation claim based on the existence of the hidden costs set out in para.79.
3) The issue of whether there were any hidden costs in the context of an in relation to Crotone‟s Italian law claims, based on Article 119 of the Italian Constitution, Article 41 of the Italian Law 448/2001, and Article 3 of Decree 389.
4) The further consequences in Italian and English law of there being hidden costs and breach of any of the aforementioned Italian law provisions.
In any event, there is, therefore, much which will have to be considered at trial which relates to or overlaps with the issues of misrepresentation.
Whether the representation claims have no real prospect of success

33 Before considering the individual representations alleged, four general points may be made.

34 First, the test for implied representation is conveniently summarised in the judgment of Popplewell J. in the case of Moto Mabanga v. Ophir Energy Plc [2012] EWHC 1589 at 21 to 30. In summary:
1) Whether any, and if so what, representation was made has to be judged objectively according to the impact that whatever is said may be expected to have had on a reasonable representee in the position, and with the known characteristics of the actual representee.
2) In respect of an express representation, the court has to consider what a reasonable person would have understood from the words in the context in which they were used.
3) In the case of an implied representation, the court has to consider what a reasonable person would have inferred was being implicitly represented by the words and conduct in their context.
4) Statements of opinion are not normally actionable if they consist of no more than contentions or arguments as to the effect of a document whose terms are equally known to both parties.

35 It will be apparent from that citation that whether an implied representation has been made will depend on the context and the representee‟s known characteristics. It will involve the court considering the genesis of the transaction, and the mutual knowledge and understanding of the parties. In this case, there is no evidence as to that, other than the fact that Crotone was classified as being a “Retail Customer”. The court is being invited to consider these implied representations and determine whether they were made in an abstract manner, and on the basis of the documents alone.

36 Secondly, as Dexia accepted, the May proposal and the December bid are to be regarded as part of a continuum, and statements in both may therefore be relied upon. They were a package, of which the proferred services were always a part.

37 Thirdly, Dexia places considerable reliance on disclaimers contained in the proposal, and in the ISDA Master Agreement, one of which I have already cited. The thrust of these disclaimers is to put the burden of evaluation of the transaction on Crotone, but none of the disclaimers relied upon expressly addresses the question of representations. Arguably, they do not apply where the evaluation which it is said should be carried out by the other party has been influenced by representations made. Arguably, they also do not apply where the underlying complaint made relates to what has been hidden, rather than a matter which would be apparent on evaluation.

38 Fourthly, there is, in any event, a pleaded case here in fraud, and none of the disclaimers would, on the face of it, apply in the case of fraud.

39 I turn then to consider the specific representations alleged.
(1) The objectives representation
“Further or alternatively, by reason of Dexia‟s statements in the Proposal pleaded in paragraph 24(1), (2), (2A) and (2B) above and from which Dexia did not ever resile and by reason of its express reference in the December bid to Crotone‟s objectives of bringing the Swaps into line with the underlying and of obtaining savings, Dexia impliedly represented that the Transactions had been devised by Dexia so as to achieve an optimisation of Crotone‟s debt portfolio having regard to the said objectives, alternatively were and constituted an optimisation of Crotone‟s debt portfolio having regard to the said objectives”.

40 Crotone‟s case is that the existence of the hidden costs entailed that the transactions had not been so devised; alternatively, that the transactions were not an optimisation of the debt portfolio. The existence of the hidden costs is, Crotone argues, inconsistent with the truth of the alleged representation.

41 Dexia says that the proposed representation lacks the definition required to found an actionable representation of fact. It asks rhetorically “What is an optimisation of the debt portfolio?” However, this is a reflection of Dexia‟s own words, used more than once in its May proposal, and it lies somewhat ill in the mouth of Dexia to contend that its own words have no real or identifiable meaning.

42 In my judgment, considering in particular the context in which the actual words relied upon were used, the alleged representations are at least arguably capable of being actionable.

43 Next, it is said by Drexia that Crotone had to rely on its own evaluation, and reference is here made to the various disclaimers in the documents. However, as already pointed out, arguably these are of little assistance in relation to the issue of whether a representation was made in the first place, and to issues of whether any evaluation may have been influenced by such representation.

44 Dexia made further submissions in relation to the proposed amendment to the objectives representation to the following effect, that:
“The transactions had been devised by Dexia so as to achieve an optimisation of Crotone‟s debt portfolio, having regard inter alia to mark-to-market, and (ii) and after it had conducted a detailed assessment of the market prices of the transactions”.
Again, it submitted that this is not a meaningful representation of fact. However, it is picking up on Dexia‟s own language and the language of its own documents and I consider that it is capable of being both meaningful and actionable.

45 Then it is said that these representations form part of the proposal that was dealing with services, rather than debt rescheduling. However, as Dexia acknowledges, the services were at all times part of the package, and it is unrealistic to seek to separate out what was being described in this way.

46 For these reasons and for those set out in Crotone‟s skeleton argument, I am not satisfied that it has been shown that there is no real prospect of establishing this alleged representation.

(2) the charges representation

“By reason of (a) the stipulations referred to in paragraph 21 above that any bid must (i) specify the financial model for each proposed strategy and specify indicative costs of the financial model(s) and (ii) detail analytically any costs in respect of commissions, expenses and other charges to be borne by Crotone,

(b) Dexia‟s statement in the Proposal pleaded in paragraph 24(4) above and (c) Dexia‟s submission of the December bid which contained no details of any of the said types of costs as referred to in (i) and (ii) above, Dexia impliedly represented that, with the obvious exception of any possible future negative cash flows from Crotone to Dexia arising from the operation of the Transactions themselves, there were no such costs.”
In this connection, it is relevant to have regard to the fact that the allied representation alleged in para.79 of the defence and counterclaim is not being challenged.

47 Crotone‟s case is that the existence of the hidden costs rendered the alleged representation false.

48 Dexia states that, taking the documents relied upon at face value, there is no prospect of implying a representation that there were no implicit costs in the form of a negative mark-to-market value. It is said that the representation is express and unequivocal; no payment of commission, fees or charges was levied by Dexia, and there can be no suggestion that there were so levied.

49 However, Crotone‟s case is that the hidden costs are, in effect, a form of hidden commission, a turn being taken on the transaction without the knowledge of Crotone, and it is at least arguable that it was being represented that there were no such costs/commission.

50 Next, Dexia relies on the fact that, in the confirmations and in the execution policy, it is recorded that the price is inclusive of all costs incurred by Dexia, and that, in light of that express statement, nobody could have understood the implied representation was being made. However, as already stated, the essential complaint here is not so much in relation to costs, but in relation to hidden commission. That is not an issue expressly addressed by the relevant parts of the documents relied upon by Dexia.

51 Then it is said that the disclaimers and contractual estoppels preclude Crotone from raising this case on representation. As already pointed out, those disclaimers do not expressly address the issues of whether representations have been made, or what representations are or are not being made, or the consequence thereof.

52 For all those reasons and those given by Crotone in its skeleton argument, I am not satisfied that it has been shown that there is no real prospect of this alleged representation being established.
(3) the upfront payment representation
“Further, in its December bid, Dexia expressly represented to Crotone that, on termination of the existing BNL Swaps and the execution of the proposed restructuring, Crotone would receive at the time of completion of the Transactions from Dexia an amount equivalent to the final MTM value of the BNL Swaps as provided by BNL. That was a continuing and material representation, intended to be relied upon by Crotone.”

53 Crotone alleges that this representation was false because the upfront payment received was €540,000, and not €589,600. It is to be noted that this is an alleged express representation, and not an implied representation, and it reflects a statement made in the documents.

54 Dexia says that that is not the proper construction of the documentation as a whole, and that there are other statements made in the document which clearly qualify what was here being said. But Crotone is entitled, on the face of it, to rely on the literal meaning of the words used in Dexia‟s own documents, and what they are to be understood to mean in context is a matter depends very much on all the relevant background factual circumstances.

55 For these reasons and those set out in Crotone‟s skeleton argument, I am not satisfied that it has been shown that there is no real prospect of establishing this alleged representation.
(4) the legality representation Crotone contends that, by the December bid, Dexia represented that:
“Financial instruments which are the object of this proposal have been identified as one of a basket of products suitable for the client in accordance with the applicable law”.
Again, this is an express representation based on words used in the documents, not an implied representation.

56 Dexia‟s case is that these words were qualified by other statements in the documents and by the various disclaimers made in the documents, and that they do not found any actionable representation. Again, Crotone is here relying on Dexia‟s own words and I consider, for the reasons it gives in its skeleton, that it is at least arguable that the representation it alleges was made. I am, therefore, not satisfied that it has been shown that there is no real prospect of establishing this representation.
Conclusion on summary judgment

57 Having concluded that each of the allegations of representation has a real prospect of success, and having regard also to the other misrepresentation related issues which will be left over for trial, it follows that this is not an appropriate case for summary judgment. I, therefore, refuse the application.
Permission to amend

58 If its summary judgment application fails, Dexia contends that in any event one of the proposed amendments should be refused; namely an amendment making it clear that the claim for rescission is asserted as a matter of Italian law. Dexia contends that there is no real prospect of Crotone establishing that Italian law governs this issue. In this connection, I was referred to Dicey and Morris, para.32-118.

59 Crotone contends that this was always part of their pleading, as is reflected in the list of issues, and that the amendment is one of clarification one, rather than involving the introduction of a new basis of claim. I agree with that submission. In any event, I would not regard it as appropriate to seek to isolate one aspect of the conflict of laws issues which arise in this case and, to determine it summarily. They should all be dealt with together. I, therefore, grant the permission to amend which is sought.

LATER

60 In relation to costs, there were three matters before the court.

61 The first was the summary judgment application made by Dexia, which has failed.

62 The second was the application to amend. It is accepted that the costs of issuing the application and the witness statement in support of the application should be the usual costs order, namely costs of and occasioned by the amendment to be paid by the amending party; here, Crotone. But it is submitted, and I agree, that the costs of having a hearing to argue about the amendments and whether they should be allowed should be awarded to the successful party at the hearing of those arguments, which was Crotone. So the application costs are to be borne by Crotone, but the hearing costs, in principle, should be borne by Dexia, as it was the unsuccessful party.

63 The third is the CMC, and there was an element of preparation and hearing time taken up in relation to that, and costs in relation to those aspects should be costs in the case.

64 In relation to the costs bill which is put forward, it is in the total sum of some £57,908, which it is said is considerably less than Dexia‟s own bills. What is suggested is that 20 per cent is taken off these costs to reflect CMC costs, and a further £3,000 to reflect amendment costs, but the balance of the costs are costs which should be awarded to Crotone and summarily assessed.

65 The main points taken by Dexia are as follows. It is not disputed that, in principle, Crotone is entitled to the costs of the summary judgment application on which it was successful. But it is said that account should be taken of the fact that one of the representations originally alleged was withdrawn, and that another of the representations was, they say, substantially recast.

66 However, in my judgment, the costs relating to those matters will be essentially dealt with in the costs of the amendment application, which the defendant is paying, in any event. Any costs thrown away as a result of the representation being withdrawn will be caught by that, and I did not consider there would have been significant additional costs in relation to preparation for the hearing, over and above the costs otherwise incurred.

67 It is then said that the amendments were put forward at a late stage, and that this put Dexia in a difficult position. The brief fees would already have been agreed by that stage, and that this should be taken into account in arriving at the appropriate order.

68 However, the fact of the matter is that Dexia proceeded full steam ahead with its application in respect of all of the representations, amended as well as un-amended, and opposed the application to amend. There is no suggestion that a different course would have been taken had the amendments been provided slightly earlier. So the hearing costs remain costs which were incurred because Dexia persisted in its summary judgment application and its opposition to the application to amend. In those circumstances, in principle, Crotone is entitled to the summary judgment costs and the hearing costs.

69 Points are then taken to the effect that the CMC costs are likely to be rather more than the 20 per cent which has been allowed. Points are also made about the costs relating to application to amend costs, but those are catered for by the £3,000 deduction which has been proposed. Points are also taken in relation to the quantum of the costs and, in particular, counsels‟ fees and to the fact that two counsel were engaged.

70 However, this was an important application which would have had very serious consequences, had it been successful, and it was reasonable for Crotone to treat it seriously. Although two counsel have been engaged, the use of two counsel would, no doubt, have cut down on the time which one counsel would have otherwise had to spend on it, and also on solicitors‟ time.

71 Looking at the matter in the round, it is necessary to take a broad brush approach. The figure being claimed, if £3,000 is taken off the £46,000 figure, is just over £43,000. It seems to me that there should be some deduction from that. The estimation of 20 per cent of CMC costs is a somewhat rough and ready estimation and, no doubt, there would be some taxing down of these costs on any assessment. In all the circumstances, in the exercise of my discretion, I conclude that the appropriate amount to be awarded by way of costs to Crotone by way of summary assessment is the sum of £37,500.