Excalibur Ventures LLC v Texas Keystone Inc & Ors

The criterion for a payment on account of costs is a reasonable sum. An irreducible minimum is not the governing test. The court should estimate likely recovery, allow an appropriate margin for uncertainty and consider all relevant circumstances. Judgment-rate interest on a litigation funder's costs liability ordinarily begins with the judgment imposing that liability. The funded party's earlier liability does not itself justify backdating.

Apportionment between funders may reflect the funding supplied during each relevant period, avoiding repeated counting of contributions. Where funders have combined to finance litigation, an order may require the others to share a defaulting funder's shortfall between themselves in proportion to their allocated shares.

Texas Keystone Inc, Gulf Keystone Petroleum Limited, Gulf Keystone Petroleum International Limited and Gulf Keystone Petroleum (UK) Limited were defendants to proceedings brought by Excalibur Ventures LLC. In a judgment of 23 October 2014, the court had determined their applications for costs against Excalibur's litigation funders, subject to different starting dates and financial caps.

The funders comprised:

• Psari Holdings Limited and Mr Andonis Lemos, referred to collectively as the Psari/Lemos funders.
• Blackrobe Capital Partners LLC and Blackrobe AEO I Investors LLC, referred to collectively as the Blackrobe funders.
• Entities associated with the Platinum group: Hamilton Capital LLC, Huron Capital LLC, JH Funding LLC, Platinum Partners Value Arbitrage Fund LP and Platinum Partners Credit Opportunities Master Fund LP.

The present hearing settled the consequential order. The disputed matters included the commencement of judgment-rate interest, payments on account, the costs of the funder applications and apportionment between funders. The Psari/Lemos and participating Platinum funders also sought permission to appeal, principally concerning indemnity costs without personal misconduct and whether funding supplied as security for costs counted towards the Arkan cap.

The court settled the costs order, ordered payments on account and granted permission to appeal.

1. Judgment-rate interest was payable by the funders from 23 October 2014, when their costs liability was determined. Earlier interest at 1.5 per cent from payment of the relevant invoices was agreed. The funders did not automatically inherit Excalibur's judgment-rate liability from 13 December 2013. Backdating was unjust because they had no earlier obligation to pay, were entitled to challenge liability and the assessment basis, and had advanced reasonable grounds. The order was to use the prescribed rate under the Judgment Act 1838, rather than fix it at 8 per cent (paras [3]–[11]).

2. CPR 44.2(a) presumptively required a reasonable sum on account unless there was good reason otherwise. An irreducible minimum was not the governing test, although it might be the only reasonable sum in a particular case. The contrary formulation in Hospira UK Ltd v Genentech Inc [2014] EWHC 1688 was disapproved. The proper approach, reflected in United Airline Inc v United Airways Limited 2011 EWHC 2411, was to estimate likely recovery with an appropriate margin for error. Relevant circumstances included expected recovery, collection difficulties, appeal prospects, means, proximity of assessment, delay and recovery of any overpayment (paras [14]–[24]).

3. An 80 per cent payment on account of the action costs and interest was reasonable. Independent evidence supported the existing 85 per cent recovery estimate for indemnity costs, and a further margin allowed for estimation error. Any overpayment could probably be recovered from the costs claimants, while there were concerns about some funders paying. The further payment on account of the interim payments application costs was fixed at 60 per cent (paras [25]–[28]; [39]).

4. The main costs of the funder applications were allocated equally between the Psari/Lemos and participating Platinum funders, on the standard basis. Blackrobe's application costs were dealt with separately and summarily assessed on that basis. No costs order was made for the unnecessary disclosure application against Psari/Lemos; Platinum's disclosure and joinder costs remained included. The costs of the contested extensions of time followed the event (paras [29]–[38]).

5. Liability between funders was apportioned for each relevant period according to funding provided within that period. This accounted for both timing and amount, avoided pre-funding costs liability and prevented repeated counting of contributions. The continuing causative effect of early funding had limited weight in that exercise. The method was selected for the actual funding arrangements, and the order required adjustment to include JH Funding LLC's small share (paras [58]–[62]).

6. If one funder defaulted, the others were to share its shortfall between themselves in proportion to their allocated shares. Who introduced a funder did not affect that obligation. Liberty to apply was to be reserved to determine whether and to what extent default had occurred (paras [63]–[64]).

7. Permission to appeal covered indemnity costs without personal misconduct and inclusion of security-for-costs funding within the Arkan cap. Prospects were realistic, and the issues' wider public importance provided a compelling case for appeal. Related additional grounds were also permitted. Permission to serve out was granted, and time for filing an appeal notice was to be extended (paras [41]–[44]; [65]).

• High Court (Commercial Court): The judgment of 23 October 2014 determined the section 51 costs applications against Excalibur's funders. The present judgment settled the consequential order and granted permission to appeal.
• Earlier costs proceedings: Excalibur became liable for judgment-rate interest from 13 December 2013. In December 2013, the court also estimated likely recovery of indemnity costs at 85 per cent for the purposes of security for costs.