Excalibur Ventures LLC v Texas Keystone Inc & Ors

Under CPR 44.2(a), an interim payment on account of costs is presumptively required unless there is good reason not to order it. The statutory test is a reasonable sum, not an irreducible minimum. It will commonly be an estimate of likely recovery, reduced by a suitable margin for uncertainty.

Interest at the judgment rate should not ordinarily be imposed on a non-party costs payer before the order establishing that payer’s liability and its scale. Where several litigation funders are liable for different periods, their inter se contribution should reflect the funding supplied in each relevant period, without repeatedly counting earlier funding.

This was a consequential costs judgment following the court’s judgment of 23 October 2014 on section 51 costs applications. The defendants, as costs claimants, sought orders against the litigation funders of Excalibur Ventures LLC.

The court had to settle the draft order. The disputed matters included the date from which judgment-rate interest should run, the proper interim payment on account of costs, apportionment between funders, costs of interlocutory applications, service out, and permission to appeal.

The central issues were whether the funders should bear judgment-rate interest before the costs order against them, what constituted a reasonable payment on account under CPR 44.2(a), and how the funders’ respective liabilities should be apportioned.

1. Orders made. The court ordered the funders to pay judgment-rate interest only from the date of the October 2014 judgment. It rejected the submission that the rate under the Judgment Act 1838 should be backdated to 13 December 2013. Although Excalibur had become liable then, the funders had not yet been ordered to pay costs or had the scale of their liability determined. The commercial rate of 1.5 per cent remained appropriate until the judgment rate began.

2. Payment on account. CPR 44.2(a) requires a reasonable sum on account unless there is good reason not to make an order. The court rejected an irreducible-minimum test. A reasonable sum will often be a conservative estimate of likely recovery, allowing a margin for assessment uncertainty. Relevant matters include likely recovery, recoverability, appeal prospects, the parties’ means, the timing of assessment, delay, and the ability to recover an overpayment. On the facts, 80 per cent of the sum claimed was reasonable.

3. Apportionment. The funders’ contributions between themselves should be apportioned in each period by reference to the funding provided in that period. That method prevents a funder from being liable for pre-funding costs, reflects the duration and amount of its participation, and avoids double counting earlier funding. If a funder defaults, the others should bear the shortfall between themselves in their appropriate proportions, with liberty to apply.

4. Permission to appeal. Permission was granted. The issues concerning indemnity costs against funders without personal misconduct, and whether the Arkin cap includes security for costs, had a realistic prospect of success and wider public importance for litigation funding.

High Court (Commercial Court): This consequential judgment followed the court’s judgment of 23 October 2014 on the section 51 costs applications. It settled the consequential costs order and granted the funders permission to appeal.