The New Lottery Company Limited & Anor v The Gambling Commission

Indemnity costs require conduct which takes the case out of the norm. The touchstone is unreasonableness to a high degree, rather than mere error or misguided judgment. The court may assess the cumulative effect of highly unreasonable conduct throughout the proceedings. Where that conduct has caused substantial prejudice and disruption, indemnity costs may be ordered for the whole proceedings rather than confined to particular issues or periods. A party whose conduct warrants indemnity costs may lose the benefit of proportionality arguments on costs assessment. A proposed departure from the general rule that the losing party pays the winner’s costs requires proper evidence, notice and a fair opportunity to respond.

The claimants had lost substantial proceedings concerning the procurement process and subsequent modifications relating to the National Lottery. At a consequentials hearing, it was common ground that they should pay the defendant’s and interested parties’ costs on the standard basis. The defendant and interested parties sought indemnity costs for the entirety of both claims. The claimants also sought a reduction in the defendant’s costs, alleging that disclosure had increased costs unreasonably. The court therefore considered whether the claimants’ conduct was sufficiently outside the norm to justify indemnity costs and whether there was a proper basis to depart from the general rule that the winning party recovers its costs.

1. Indemnity costs. The court applied the principles summarised in Three Rivers DC v Bank of England [2006] EWHC 816 (Comm), Excelsior Commercial and Industrial Holdings Ltd v Salisbury Hammer Aspden & Johnson [2002] EWCA Civ 879 and Hislop v Perde Kaur [2018] EWCA Civ 1726. The conduct must take the case out of the norm and be unreasonable to a high degree. It must not be judged merely by hindsight.
2. The claimants’ inadequate and unparticularised pleadings, serious allegations, repeated abandonment and reformulation of issues, unpleaded allegations, weak and speculative claims, and the prejudice and disruption caused to the other parties were highly unreasonable individually or cumulatively. The conduct ran through the proceedings and justified indemnity costs for the entirety of both the Process Claim and the Modifications Claim. The court declined to divide the costs by issue or period.
3. The court rejected the submission that the defendant’s allegedly disproportionate costs justified refusing indemnity costs. It considered that a party whose highly unreasonable conduct warrants indemnity costs has forfeited reliance on proportionality, and in any event the proportionality arguments would not have altered the result.
4. Departure from the general rule. The court considered the principles in TMO Renewables v Timothy Yeo [2021] EWHC 2773 (Ch), [2021] Costs Lr 947. No reduction was ordered. The application was made too late, was inadequately evidenced, and gave the defendant no proper opportunity to respond. Disclosure difficulties were within the ordinary scope of complex litigation and could be addressed, if necessary, on detailed assessment.
5. The parties’ agreed list of issues delineated the interested parties’ involvement. The claimants could not go behind that delineation at the costs assessment stage.

Not an appeal. The judgment concerned consequential costs issues following the substantive proceedings.