Ingenious Litigation, Re

In managed multi-claimant litigation, liability for adverse costs is a discretionary question of fairness. The court need not start from a presumption of joint and several liability, and a several-liability order is not a quid pro quo for security. Common costs should be borne by claimants potentially interested in the issues generating them. Where claim values differ substantially, costs should ordinarily be apportioned pro rata to cash contributions rather than per capita. Detailed cost categories may be deferred until the trial claims and their wider effect are clearer. Security against a commercial litigation funder requires a real, not fanciful, risk of non-payment assessed in the round. ATE insurance may reduce security, but its adequacy depends on matters including avoidance, termination, competing claims and priority.

The judgment concerned applications in managed litigation brought by more than 500 investors in Ingenious schemes. The claimants pursued claims against Ingenious entities and various professional and financial defendants. Some claimants were self-funded, while others were funded by Therium and protected by ATE policies.

The court determined whether adverse-costs liability should be several or joint and several, whether it should be apportioned per capita or pro rata to investment, how common costs should be identified, and whether Therium should provide security for costs. It also considered the adequacy of the available ATE policies and whether a cross-undertaking in damages was required.

1. Costs liability. The court made an order for several rather than joint liability. Costs are discretionary, and the question was what fairness required in the circumstances. There was no predetermined joint-and-several starting point and no requirement for the claimants to provide a quid pro quo. The application for several liability was logically separate from the security application, although each could be relevant to the other. The court was guided by Ward v Guinness Mahon plc [1996] 1 WLR 894.
2. Apportionment and common costs. Common costs were to be borne by claimants potentially interested in the part of the case generating those costs. The relevant claimants and the costs common to them would have to be identified in each instance. Costs incurred on lead or test claims might be common costs because their determination could benefit other claimants. Given the considerable disparity between investments, liability was to be apportioned pro rata to cash contributions, rather than per capita, aligning litigation risk with the potential reward.
3. Order structure. It was premature to impose a detailed costs-sharing architecture before it was known which claims would be tried and what effect the trial claims would have on others. A claimant register and accounting periods could be established, but detailed categories and recoverability provisions should be developed later.
4. Security for costs. Under section 51 of the Senior Courts Act 1981, the jurisdiction to order costs against a non-party was broad but had to be exercised on principled grounds. A commercial funder would ordinarily be exposed in respect of funded claims, but, absent unusual circumstances, Therium could not properly be required to provide security for costs attributable to self-funded claimants. Security depended principally on whether there was a real, not fanciful, risk of non-payment, assessed in the round and taking account of enforcement difficulties caused by several liability.
5. Quantum and ATE insurance. Serious and wide-ranging allegations of dishonesty created a realistic possibility of indemnity costs. The court adopted 75 per cent of estimated costs where that possibility existed and 70 per cent for the negligence claims. The ATE policies were given only partial value because of risks concerning avoidance, termination, competing defendants and priority. Therium was ordered to provide security of £1.85 million for the Ingenious Defendants, £600,000 for HSBC, £950,000 for UBS and £550,000 for SRLV, subject to specified confirmations, assignment and waiver arrangements. No cross-undertaking was required for the funder’s enhanced return, though external costs of providing security could be reconsidered.

not stated in the judgment.