Excalibur Ventures LLC v Texas Keystone Inc & Ors, England and Wales High Court (Commercial Court), Judgment, Law, casemine.com

Citation Codes

Equivalent Citations

citation codes

Advocates

MR R ESCHWEGE (instructed by Memery Crystal LLP) for the first, second, third and fourth Costs Claimants.
MR J WARDELL QC and MR R CARPENTER (instructed by Withers LLP) for the first and second Costs Defendants

Judges

LORD JUSTICE CHRISTOPHER CLARKE

See more information ...

Click here to read the full judgment

Excalibur Ventures LLC v. Texas Keystone Inc & Ors

Smart Summary

Factual and Procedural Background

This opinion concerns the determination of the order to be made following a previous judgment dated 23 October 2014 regarding section 51 costs applications. The court addresses the draft order prepared by the costs claimants and resolves disputes related to interest on costs, apportionment of costs among multiple costs defendants (funders), interim payments on account of costs, and permission to appeal certain aspects of the costs order. The proceedings involve several groups of costs defendants, referred to as funders, and complex issues regarding their liability and the calculation and allocation of costs and interest.

Legal Issues Presented

Whether interest at the Judgment Act rate should run from an earlier date than 23 October 2014 in respect of the costs payable by the funders.
The appropriate rate and commencement date for interest on costs under the Judgment Act 1838, specifically in relation to litigation funders.
Whether the funders should be ordered to pay indemnity costs despite not conducting the litigation or being personally guilty of misconduct.
The appropriate apportionment of costs liability among multiple funders who contributed at different times and amounts.
The reasonableness and quantum of interim payments on account of costs and interest.
Whether permission to appeal should be granted on specified grounds relating to the costs orders.

Arguments of the Parties

Costs Claimants' Arguments

The funders should pay interest at the Judgment Act rate from 13 December 2013, the date Excalibur became liable for interest at that rate, to avoid an undeserved windfall for the funders.
The funders took a gamble on whether they would be ordered to pay costs and on what scale; having lost, they should make good any shortfall.
The funders should be liable for costs on an indemnity basis despite not conducting the litigation themselves.
The appropriate interim payment on account of costs should be a high percentage (initially 85%, reduced to 80% by the court) reflecting the scale and complexity of the litigation.
The apportionment of costs should be pragmatic, with a 50:50 split between two groups of funders based on their respective contributions and involvement.

Funders' Arguments

The funders dispute the date from which interest at the Judgment Act rate should run, arguing it should not be backdated before any order was made against them.
The 8 per cent Judgment Act rate is penal in nature and should not be applied from an earlier date than the court’s judgment.
The funders contest liability to pay indemnity costs absent personal misconduct or direct involvement in the litigation.
The apportionment of costs should consider the amount and timing of each funder's contribution, and the total funding provided, to avoid unfairness or double counting.
The Platinum funders resist paying 100% of costs claimed for interim payments, arguing some figures are excessive or disproportionate.
In the event of a funder’s default on payment, the loss should not necessarily lie where it falls, but be shared proportionally among remaining funders.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Colour Quest Limited v Total Downstream (UK) Limited [2009] EWHC 823	Postponement of accrual of 8% Judgment Act interest rate to avoid unjust windfall.	The court noted this authority where interest was postponed for six months but distinguished it as it involved postponement after judgment, not bringing the rate back before judgment.
London Tara Hotel v Kensington Close Hotel [2011] EWHC 28	Postponement of Judgment Act interest rate due to proportionality and reasonableness concerns.	Referenced as an example of judicial reluctance to apply 8% interest immediately after costs judgment; court found it inapplicable to the present issue.
SCB v Ceylon Petroleum Corporation [2011] EWHC 2094	Similar postponement of Judgment Act interest rate.	Cited as part of the line of cases considering delay in applying 8% interest rate; court distinguished on facts.
Schlumberger Holdings Limited v Electromagnetic GO Services [2009] EWH 733	Declined to postpone 8% interest rate accrual.	Cited to show judicial divergence on applying or postponing the Judgment Act interest rate.
Cranway Limited v Playtech Limited [2009] EWHC 823	Declined to postpone 8% interest rate accrual.	Used to illustrate differing judicial approaches to interest accrual timing.
Mars UK Limited v Teknowledge Limited [2000] SFR 138	Principle that payment on account of costs should be a reasonable estimate likely to be recovered.	Adopted by the court as a guiding principle for determining a reasonable interim payment on account of costs.
Beach v Smirnov [2007] EWHC 3499	Reference to the "irreducible minimum" principle for costs on account.	Discussed by the court but rejected as the sole test; court preferred "reasonable sum" standard under CPR 44.2(a).
Blakemore v Cummins [2010] 1 WLR 983	Wide discretion under CPR to avoid keeping parties out of money due longer than necessary.	Referenced to support the court’s discretion in awarding interim payments.
United Airline Inc v United Airways Limited [2011] EWHC 2411	Payment on account should be a reasonable estimate, not just an irreducible minimum.	Adopted by the court as a more appropriate approach to interim costs payments.
Gollole v Pryke (unreported, 29 November 2011)	Followed United Airline on reasonable estimate for costs on account.	Noted as consistent authority supporting the court’s approach.
Kellie v Wheatley & Lloyd Architects Limited [2014] EWHC 2886	Followed Gollole and United Airline on interim costs payments.	Referenced as recent authority supporting the court’s reasoning.
Football Association Premier League Limited v Berry [2014] EWHC 726	Followed Gollole on costs on account.	Noted as consistent with the court’s approach.
Mehjoo v Harben & Barker [2013] EWHC 1669	Followed Gollole on costs on account.	Referenced in support of the court’s approach.
VTB Bank v Skurikhin [2014] EWHC 3522	Referenced Mars UK and interim costs payment rules.	Discussed in relation to the change in CPR rules; not central to court’s final conclusion.
Hospira UK Ltd v Genentech Inc [2014] EWHC 1688	Principles applicable to payments on account of costs.	Disagreed with by the court on the exclusive use of "irreducible minimum" test.
Rovi Solutions Corporation v Virgin Media Limited [2014] EWHC 2449	Considered irreducible minimum as test for interim payments.	Referenced but court preferred a broader "reasonable sum" approach.
Teva UK v Leo Pharma [2014] EWHC 3522	Considered "fair irreducible minimum" for interim payments.	Referenced in court’s discussion of appropriate interim payment sums.

Court's Reasoning and Analysis

The court began by considering the appropriate interest rate and commencement date for interest payable on costs. It acknowledged the absence of precedent regarding the Judgment Act interest rate applied to litigation funders. The court rejected the costs claimants' submission that interest should run from the date Excalibur became liable (13 December 2013), reasoning that the 8% Judgment Act rate is significantly above commercial rates and has a penal character. It would be inappropriate to backdate interest to before any order was made against the funders, particularly as the funders were not bound to pay costs until the October 2014 order. The court therefore ordered interest at the Judgment Act rate to run from the date of its judgment in October 2014.

Regarding interim payments on account of costs, the court analyzed the applicable CPR rule requiring payment of a reasonable sum unless good reason exists not to do so. The court reviewed relevant case law and rejected the "irreducible minimum" as the sole test, favoring a "reasonable sum" standard that accounts for uncertainty and estimation. Considering the scale and complexity of the litigation, the court fixed the interim payment at 80% of the claimed costs, allowing for estimation error and risk of overpayment.

On apportionment of costs among multiple funders, the court evaluated competing methodologies. The Psari funders proposed apportionment based on total costs liabilities without regard to the limiting proviso, while the Platinum funders suggested apportionment proportional to funding contributions across periods. The court identified flaws in both approaches, particularly the risk of double counting funding contributions under the Platinum funders' method. The court adopted a refined approach apportioning costs in each period according to the amount of funding provided in that period, ensuring no funder is liable for costs incurred before their funding and reflecting causation and proportionality.

The court also addressed the event of a funder's default in payment, rejecting the notion that loss should lie where it falls. Instead, it held that remaining funders should share the shortfall proportionally among themselves, with liberty to apply for further directions if necessary.

Finally, the court granted permission to appeal on two principal grounds: whether it was correct to order funders to pay indemnity costs absent personal misconduct and whether the Arkan cap should include sums provided as security for costs. The court recognized the public interest and wider importance of these issues despite some doubts about the appellants' prospects.

Holding and Implications

The court's final decision is to ORDER that:

Interest on costs payable by the funders shall run at the Judgment Act rate from the date of the court's judgment in October 2014, not earlier.
An interim payment on account of 80% of the claimed costs and interest is reasonable and ordered.
Costs shall be apportioned among the funders based on the amount of funding provided in each relevant period, avoiding double counting and ensuring fairness.
In the event of a funder's default in payment, the remaining funders must proportionally cover the shortfall among themselves.
Permission to appeal is granted on specified grounds relating to indemnity costs liability and the Arkan cap.

The implications of this decision directly affect the parties' liabilities and the procedural management of costs and interest in complex litigation involving multiple funders. The court did not establish new precedent on the application of the Judgment Act interest rate to funders but provided a reasoned approach reflecting the penal nature of the statutory rate and the practicalities of litigation funding. The decision also clarifies the approach to apportioning costs among multiple funders and the handling of defaults, promoting fairness and judicial efficiency.