Sharp & Ors v Blank & Ors [2017] EWHC 141
It is always the case that costs issues will be particularly acute in hard-fought group actions. In the HBOS/Lloyds litigation, the Court was invited to make a costs management order for future costs. Important comments were made in respect of proportionality – one can consider it not only by reference to the overall cost of the proceedings compared to the overall amounts at stake but also by reference to the complexity of the issues at stake. However, arguments as to proportionality were rather more subsidiary to the overarching concern which was where should the burden of the adverse costs (said to be £14.75m) fall if the action failed. Should it fall on the claimants or the funders, given that the claimants had been told that they would not have to contribute anything towards the costs of bringing the claim. Given that there was jurisdiction to make costs orders against the funders, there was also jurisdiction to order the funders to provide further security for costs. It appeared that there could be between £2.3m and £4.75 of exposure that was not insured, and the evidence suggested that the cost of insuring this gap could be three or four times the amount insured. On this basis, the Court was persuaded that it was important that the claimants had certainty as to what exposure they faced such that a costs management process was to be undertaken.
Funders of course like costs management – indeed it is part of their own processes. It is a positive when the Court therefore orders it. In a case like HBOS/Lloyds, there is the obvious point to be made that it came rather late in the day, and that what could be said is that it was better late than never. The case highlights just how important it is to go through a robust budgeting process at the outset of a case. A funder must assume that security for costs could be ordered, and that an ATE policy is not going to be sufficient security. Decisions that are expected to be taken once the case is well underway are inevitably going to lead to tension. Far better to evaluate these risks at the outset, when no damage has been done and when the assessment can be made objectively.