Background
HKA Group Holdings Limited (HKA UK) alleged that three individuals—Tanner Courrier, Hansell Pasco, and Christopher Beirise—conspired with Accuracy US LLC to breach a “nominee deed” by recruiting HKA’s staff to a competitor. The deed contained exclusive jurisdiction and English law clauses. Courrier and Pasco filed for negative declaratory relief in the English High Court; HKA UK sought permission to serve the third and fourth parties in the United States.
Master Eastman granted permission to serve out (9 July 2025) and alternative service (6 September 2025). The applicants sought to discharge and set aside both orders. In the substantive judgment ([2026] EWHC 1318 (KB), 3 June 2026), the court found that HKA UK had breached its duty of full and frank disclosure (FFD)—specifically by failing to disclose a Delaware court interim decision—but nevertheless upheld the service orders on their merits. This judgment addresses the costs consequences and procedural directions.
The Court’s Holding
Justice Dias held that while HKA UK succeeded overall in the inter partes set-aside application, the FFD breach must be reflected in costs, but not as severely as the applicants contended. The court rejected an indemnity basis award, finding that the breach did not constitute conduct “out of the norm.” Instead, the breach amounted to an error of judgment—HKA UK wrongly assessed the interim decision as immaterial—rather than a deliberate or reckless omission.
The court emphasised that the seriousness of FFD breaches varies by context. Service out applications carry lower potential for harm than freezing orders. Here, the parties had notice of the application, and one party received the application papers pre-issue. The interim decision, while material enough to disclose, was not so central to the merits that its omission would have changed the Judge’s permission decision. HKA UK’s unreasonable conduct at the inter partes hearing—maintaining that the interim decision was irrelevant—warranted a costs sanction, but not a draconian one. The applicants also failed to prove two of three alleged disclosure breaches, limiting the scope of misconduct.
The court accordingly ordered: (1) HKA UK bears its own costs of the ex parte application; (2) the applicants pay 50 per cent of HKA UK’s costs of the inter partes application on the standard basis (not indemnity); (3) proceedings stay pending the applicants’ potential appeal to the Court of Appeal.
Key Takeaways
- FFD breaches trigger costs consequences even when the underlying order is upheld on the merits; the order is not set aside merely for procedural breach.
- Indemnity basis costs require conduct “out of the norm”; a genuine error of judgment in assessing materiality, absent deliberate concealment or bad faith, does not ordinarily qualify.
- The nature of the ex parte application matters: service out orders are treated as less serious than freezing orders, affecting the proportionality of sanctions.
- A respondent’s unreasonable conduct at the inter partes hearing—persisting in the view that disclosed material was immaterial—is a relevant aggravating factor, distinct from the initial breach itself.
- Courts must observe proportionality and a sense of proportion in costs sanctions, balancing deterrence against the culpability found.
Why It Matters
This judgment clarifies the middle ground in costs remedies for FFD breaches. English courts have discretion to continue orders despite procedural violations and may do so via a proportionate costs deduction rather than outright discharge and regrant. Justice Dias rejected the “usual practice” argument that FFD breaches automatically result in indemnity costs or full forfeiture of costs; each case turns on its facts. Practitioners should note that failure to disclose a peripheral matter—even if technically material—may attract a reduced costs award if the underlying case remains sound and the breach reflects error rather than culpability.
For respondents, the decision signals that procedural violations do carry a price even in success, particularly when coupled with unreasonable conduct post-breach. For applicants seeking to impeach orders, proving the actual prejudice and materiality of non-disclosure remains crucial; general allegations of procedural unfairness do not automatically defeat a serviceable order. The judgment also reinforces that service out applications, being less intrusive than freezing orders and often made on notice, receive different treatment in the costs calculus—a distinction relevant across common law jurisdictions.