The Edinburgh businessmen who challenged Lord Mandelson in court over the Lloyds takeover of HBOS, and who were last week told to find £35,000 in costs, are considering an appeal against the award.

The Edinburgh businessmen who challenged Lord Mandelson in court over the Lloyds takeover of HBOS, and who were last week told to find £35,000 in costs, are considering an appeal against the award.

The Merger Action Group (MAG) says it has "no regrets" over its legal battle to preserve the independence of HBOS, notwithstanding the subsequent publication of the bank's £10.8bn loss.

Ian McKerron, a spokesman for the group, said MAG had not been out to defend a collapsed institution. "The thrust of our case was not based on whether the merger was a good or bad thing but on the government's behaviour in waiving competition law," he said.

On the seemingly parallel media campaign to save the failed HBOS, and even reconstitute an independent Bank of Scotland, McKerron said: "There are people within MAG who would certainly express the view that they would have preferred HBOS to remain an independent Scottish institution, and there are other people, Lord Turner included, who since the merger took place have said that it would have been possible for the bank to have remained independent."

The Financial Services Authority chairman Adair Turner has echoed what FSA chief executive Hector Sants told a business audience last October, that, in theory, the government's bail-out package offered to Lloyds could have been made available to a free-standing HBOS.

McKerron said: "The rescue package which was launched after the merger was mooted would have been available for HBOS to take advantage of."

Edinburgh architect Malcolm Fraser, one of the six signatories to the appeal, said the merger had "proven to be an unqualified disaster".

He claimed support for the group's views from Lord Turner, and even from Sir Victor Blank the outgoing chairman of Lloyds on the grounds that "he admitted that very little due diligence had been carried out on the wisdom of the takeover".

Fraser added that Lord King, the governor of the Bank of England, had this month "raised questions about the whole concept of banks that are too big to fail".

McKerron said the case, though held in London, had been heard by the Competition Appeal Tribunal under Scots law and "The tribunal acknowledged that the litigants had brought a case of obvious public interest, and under Scots law they should not have had to pay costs".

McKerron said the defence fund built up by the group would comfortably cover the costs awarded, but it was considering whether to appeal to the Court of Session against the ruling.

At the conclusion of the two-day hearing last December, both HBOS and Lloyds TSB announced they would not pursue MAG for costs after the tribunal chairman Sir Gerald Barling QC said the group, supported by more than 700 bank customers, shareholders and staff, were "right and proper people to bring the action" even though the three-man panel found against them.

But lawyers acting for Mandelson's department said they would pursue the six signatories to the appeal, for costs.

Judges said last week that the government had not given MAG enough time to consider the request, and while rejecting Mandelson's claim for £62,000 in costs, still awarded £35,000.

The tribunal based its conclusion on the public statements by the Prime Minister and Chancellor, effectively giving the merger the green light and removing it from Mandelson's responsibility.