THE ECU GROUP PLC v HSBC BANK PLC & Ors

Under Senior Courts Act 1981, section 51, the court has a broad discretion to make a non-party costs order where it is just to do so. A commercial funder may be liable for costs incurred before the funding agreement if it expressly agreed to fund those costs and obtained benefits calculated by reference to them. A funder may be made jointly and severally liable with the funded party where it had the dominant financial interest and effective control, even though other funders existed. Insurance proceeds and escrow funds reduce the amount requiring payment but do not provide a further credit against liability. Liability for a payment on account should reflect the proportion of costs falling within the relevant period.

The defendants obtained judgment in the substantive proceedings and an order requiring ECU to pay their costs on the indemnity basis, together with a payment on account. Therium, a commercial litigation funder, had been joined for costs purposes.

Therium accepted that it should bear some liability, but disputed the period of liability, sought several rather than joint and several liability, claimed credit for adverse-costs insurance and escrow funds, and opposed liability for the unpaid balance of the payment on account. The central questions were whether it was just to impose liability for costs incurred before the litigation funding agreement, whether liability should be apportioned between funders, and how the interim payment should be calculated.

1. Section 51 discretion. The jurisdiction under section 51 of the Senior Courts Act 1981 is broad. The question is whether, in all the circumstances, it is just to make an order against the non-party funder.
2. Period of liability. Therium was not liable for costs incurred before 30 November 2018, because it had not agreed to fund them. It was liable from that date, although the costs had been incurred before the funding agreement was signed, because the agreement expressly assumed responsibility for those costs and Therium’s contingent fee was calculated by reference to them. It would be unfair to accept the potential upside while avoiding the corresponding downside.
3. Joint and several liability. Therium was jointly and severally liable with ECU for the relevant costs. It had the dominant financial interest and effectively controlled the proceedings through staged funding and contractual rights. It was unjust to require HSBC to pursue numerous other funders or resolve allocation disputes before recovering its costs. Therium could seek contribution from other funders later.
4. Insurance and escrow. The adverse-costs insurance and escrow arrangements reduced the amount outstanding but did not create a further credit against Therium’s liability. A further reduction would amount to double counting.
5. Payment on account. Therium was jointly and severally liable for the proportion of the payment on account corresponding to costs incurred from 30 November 2018. That proportion was agreed to be 90.8%, subject to a limit of US$9,988,000 and the rule against aggregate recovery exceeding the payment on account. Therium was therefore liable for the unpaid US$1,004,014.11.