The ECU Group Plc v HSBC Bank Plc & Ors

Factual and Procedural Background

This judgment concerns an application by the Defendants ("HSBC") pursuant to Section 51 of the Senior Courts Act 1981, seeking an order requiring Therium Litigation Finance Atlas AFP IC ("Therium") to pay the Defendants' costs on an indemnity basis and to pay the outstanding balance of a payment on account ordered against the Claimant, ECU Group PLC ("ECU"). The substantive proceedings resulted in a judgment in favor of the Defendants on 1 November 2021. Subsequently, by order dated 26 November 2021, Therium was added as a party for costs purposes only, and ECU was ordered to pay the Defendants’ costs on an indemnity basis, including a payment on account of $11 million. The payment deadline was extended to 29 December 2021, and the Defendants have received approximately $9,995,985.89 to date.

Therium provided litigation funding pursuant to a Litigation Funding Agreement ("LFA") signed on 19 September 2019, committing approximately £6.6 million for funding up to the liability trial, including adverse costs insurance premiums, with a further £2.7 million for the quantum stage. Therium also agreed to reimburse ECU for certain costs incurred since 30 November 2018. Therium's funding share is disputed, with Therium asserting a share between 53% and 64%, while HSBC contends it is significantly higher.

The LFA included provisions relating to adverse costs insurance and funding tranches, with Therium having certain rights to information and consent regarding litigation conduct. Therium also entered into a priorities agreement governing the order of payments from recoveries, prioritizing reimbursement to Therium and other funders before ECU.

Additional sources of funding for the litigation included Class 1 Bonds, an escrow amount funded by a bondholder, an escrow arrangement fee, deeds of indemnity, and funding for retaining counsel. Therium disputes some characterizations of these funds and their usage. The Defendants now seek an order making Therium jointly and severally liable with ECU for the costs of the proceedings, including the outstanding payment on account.

Legal Issues Presented

1. Whether Therium's liability for costs should be limited to costs incurred after the date of the Litigation Funding Agreement (19 September 2019) or extend to costs from an earlier date (30 November 2018).
2. Whether Therium should be jointly and severally liable with ECU for the costs or liable only for a proportion corresponding to its funding contribution.
3. The appropriate level and quantum of costs for which Therium should be liable.
4. Whether Therium should receive credit for the proceeds of adverse costs insurance and escrow amounts already paid to the Defendants.
5. Whether Therium should be required to contribute to the payment on account ordered against ECU.

Arguments of the Parties

Defendants' Arguments

• Therium should be liable for costs incurred from 30 November 2018, as it agreed to fund retrospectively from that date.
• Therium funded more than 85% of ECU's costs and paid nearly all costs since 30 November 2018.
• Therium stood to gain substantial profits from the litigation and effectively controlled the proceedings.
• It would be unjust to limit Therium's liability to a proportional share; joint and several liability is appropriate to avoid forcing the Defendants to pursue multiple funders.
• Therium should be liable for the outstanding balance of the payment on account, reflecting its joint and several liability.
• Causation is not a necessary precondition for a third-party costs order, relying on authorities such as Total Spares & Supplies Ltd v Antares SRL and Turvill v Bird.

Therium's Arguments

• Liability for costs should be limited to those incurred after the date of the LFA (19 September 2019), as Therium did not cause earlier costs.
• If liable for earlier costs, liability should be proportional to its funding share (approximately 53.7% to 66.26%).
• Therium should receive credit for the £5 million adverse costs insurance and £2.5 million escrow amounts already paid to the Defendants.
• Therium should not be required to contribute to the payment on account ordered against ECU.
• Joint and several liability is unusual and not justified; Therium accepts joint liability only to the extent of its contribution.
• Therium has not caused the Defendants to incur costs prior to the LFA and should not be liable for those costs.
• It would be unjust to fix Therium with full liability without joining other funders, some of whom funded earlier stages.

Table of Precedents Cited

Court's Reasoning and Analysis

The court exercised its broad discretion under Section 51 of the Senior Courts Act 1981 to determine the extent of Therium's liability for costs. It considered whether Therium's liability should be limited to costs incurred after the LFA date (19 September 2019) or extend to costs from 30 November 2018. The court found that although Therium did not cause costs prior to the LFA, it agreed to fund costs retrospectively from 30 November 2018 and to receive contingency fees based on all funded costs including those from that earlier date. Therefore, it would be unjust for Therium to avoid liability for those costs given the contractual arrangement and potential upside.

The court rejected Therium’s argument that it should only be liable for a proportionate share of costs, holding that joint and several liability was appropriate. This was based on Therium's dominant financial interest, effective control over the litigation, and the practical considerations that it would be unjust to force the Defendants to pursue multiple funders for individual shares, causing delay and additional expense.

The court addressed the issue of causation, emphasizing that while causation is a usual approach, it is not a necessary precondition for a third-party costs order. The court distinguished this case from authorities where causation was critical, noting the contractual acceptance of retrospective funding by Therium.

Regarding the level of costs and the payment on account, the court held that detailed assessment of costs was appropriate at a later stage, not on this application. The court also rejected Therium's submission that it should receive credit for adverse costs insurance and escrow amounts already paid to the Defendants, reasoning that these amounts reduce the recovery but do not reduce Therium's liability to pay costs, as that would constitute double counting.

Finally, the court ordered Therium to be jointly and severally liable with ECU for costs incurred from 30 November 2018 on an indemnity basis, including the outstanding balance of the payment on account, subject to the agreed proportion of costs incurred after that date (90.8%).

Holding and Implications

The court GRANTED the Defendants' application, ordering that Therium is jointly and severally liable with ECU for the Defendants' costs of the proceedings incurred from 30 November 2018 on the indemnity basis. Therium is also liable to pay the outstanding balance of the payment on account amounting to US$1,004,014.11, subject to the agreed limit reflecting the proportion of costs incurred after 30 November 2018.

This decision ensures that the Defendants can recover their costs efficiently without the burden of pursuing multiple funders separately, reflecting Therium's dominant role and control in funding the litigation. No new precedent was established beyond the application of existing principles concerning third-party costs orders, causation, and joint and several liability in the context of litigation funding agreements.