Sharp & Ors v Blank & Ors

Costs ordinarily follow overall success. Success on an individual issue does not justify an issue-based costs order unless an objective consideration, grounded in justice, distinguishes that issue from the ordinary incidents of litigation.

An interim payment should not exceed the likely recovery after allowing an appropriate margin for error. An approved costs budget normally provides the starting point for budgeted costs.

The Arkin cap does not bind judges determining a commercial funder’s liability for adverse costs. The court retains a complete discretion, taking account of the funder’s investment, prospective return and other relevant circumstances.

Following dismissal of approximately 5,800 shareholders’ claims under a group litigation order, the court determined consequential matters between the claimants, the defendants and the claimants’ commercial funder, Therium Finance No.1 IC.

The issues were the defendants’ entitlement to costs, the allocation of common costs among the claimants, an interim payment, interest, Therium’s third-party liability and the claimants’ application for permission to appeal the disclosure rulings in the merits judgment, [2019] EWHC 3096 (Ch).

1. Costs followed the event. The claimants had failed overall. Their success in establishing two breaches of disclosure duties was small when measured against the broad case advanced, and they had failed on causation and loss. Partial success alone did not justify departing from the general rule in Rule 44.2(2)(a) of the Civil Procedure Rules 1998. An issue-based departure required an objective ground, based on justice, which distinguished the issue from ordinary unsuccessful arguments. No such ground existed.
2. The claimants were severally liable for the defendants’ common costs, to be assessed on the standard basis. Each share had to be calculated under paragraph 10(4) of the group litigation order. The costs order could not replace that agreed quarterly allocation with an allocation by reference to a single date.
3. An interim payment of £17 million was ordered. A reasonable payment on account could not exceed the likely recovery after an appropriate allowance for estimation error. The incurred costs were discounted by 50%. The approved budget was a reliable starting point for budgeted costs because the costs-management process had already assessed reasonableness and proportionality. A 10% discount adequately covered the remaining risks.
4. Pre-judgment interest was payable at the applicable Bank of England base rate from payment of each invoice. The absence of interest from costs budgeting did not transfer responsibility for insuring against that ordinary exposure to the defendants. Judgment-rate interest under the Judgments Act 1838 was postponed until 13 November 2020 because of the likely complexity of assessment, the insurance arrangements and the defendants’ receipt of commercial-rate interest meanwhile.
5. Therium was jointly and severally liable. The Arkin cap was guidance rather than a binding rule. The court retained complete discretion over a commercial funder’s liability, and could consider both the amount invested and the prospective return. Therium’s funding exceeded the interim payment, so it was ordered jointly and severally to pay that sum. Whether its ultimate liability should be capped was adjourned.
6. Permission to appeal was refused. The proposed disclosure grounds had no real prospect of success because the causation findings addressed the detailed disclosure sought by the claimants. A regulatory breach of the Listing Rules did not itself found a damages claim by an individual against a listed company or its directors. Nor was there a compelling reason for an appeal.

• High Court (Chancery Division): By the merits judgment, [2019] EWHC 3096 (Ch), the court dismissed the claims. This judgment determined consequential costs, interest, third-party funding and permission-to-appeal issues.