Excelerate Technology Ltd v Cumberbatch & Ors (Rev 1)

A non-party costs order is exceptional, but the question remains whether it is just in all the circumstances. Funding proceedings, substantially controlling their conduct, and standing to benefit from them are important considerations. Indemnity costs may be ordered where conduct is reprehensible and takes the litigation outside the norm, including deliberate failures of disclosure and attempts to mislead the court. A costs budget cannot generally be increased retrospectively for costs already incurred without a proper variance application or contingency. The court may instead record its view on reasonableness and proportionality for detailed assessment. On an indemnity basis, an approved budget is a guide rather than a rule limiting recovery.

Following judgment on the merits in favour of Excelerate Technology Ltd, the claimant sought consequential costs orders. The applications concerned joining David Osmond as a defendant for costs, liability for the claimants’ costs, an increase in the approved costs budget, indemnity costs, and payment on account.

The court considered Mr Osmond’s control of Red Foot Technologies Ltd, his alleged funding and benefit from the defence, the defendants’ conduct and disclosure failures, and the effect of the costs-management rules. The central issues were whether the statutory discretion to order costs against a non-party was engaged, whether the defendants’ conduct justified indemnity costs, and what sum should be paid on account.

1. Non-party costs. Section 51 of the Senior Courts Act confers a wide discretion. Following Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No. 2) (New Zealand) [2004] UKPC 39 and Deutsche Bank AG v Sebastian Holdings Inc [2014] 4 Costs L.R 711, the fact that an order is exceptional means that it falls outside the ordinary run of litigation. The ultimate question is whether an order is just in all the circumstances. A person who funds proceedings, substantially controls them, and stands to benefit from them will ordinarily be liable for costs if they fail.
2. Mr Osmond had controlled Red Foot’s defence, had materially participated in the litigation, and stood to benefit as its principal shareholder. In light of the findings of dishonesty and misuse of the corporate structure, it was just to join him for the purposes of costs.
3. Budget. The court could not increase an approved budget retrospectively for costs already incurred where no variance application had been made and no contingency had been provided. However, the additional costs could be recorded as prima facie reasonable and proportionate for detailed assessment. The defendants were ordered to pay the claimants’ costs, subject to assessment.
4. Indemnity basis. The defendants’ deceitful conduct, deliberate non-compliance with disclosure obligations, concealment or destruction of relevant evidence, and resulting burden on the claimant and court took the case outside the norm. Indemnity costs were therefore appropriate under CPR 44.3. On that basis, the burden at detailed assessment was on the defendants to show that the costs were unreasonable.
5. An approved budget was not a rule limiting indemnity costs, although it could provide a practical starting point. The court ordered payment on account of £155,409.66, representing 90 per cent of the actual costs of £172,677.40, payable within 14 days.