Background
Yodel Delivery Network Limited sought consequential relief following the court’s dismissal of a counterclaim brought by Shift Global Holdings Limited and Corja Holdings Limited. Yodel had incurred substantial costs defending an injunction application, an appeal, and the trial of the counterclaim. The court ordered Shift and Corja to pay Yodel’s costs on an indemnity basis and made an on-account costs payment of £2,752,591.57. Security of £1.525 million had been paid into court pursuant to an earlier order. Shift and Corja sought to release this money to satisfy the on-account payment, arguing that their investors would fund any further costs liability through additional fundraising.
Yodel opposed release of the security and sought (1) retention of the existing security for costs not yet assessed; (2) additional security for the costs of the detailed assessment proceedings; (3) a personal costs order against Jacob Corlett, the first defendant, under section 51 of the Senior Courts Act 1981; and (4) disclosure of the identities and terms of non-party funders of Shift and Corja’s litigation. The disputed applications raised questions about the proper deployment of security for costs and the court’s power to reach non-party funders.
The Court’s Holding
Mr Justice Fancourt held that security for costs paid into court is held by the court to protect a defendant against the risk it will be unable to enforce a costs order, and that a successful defendant is entitled to retain sufficient security until all liability in respect of which the security was ordered has been satisfied. The security was ordered for all of Yodel’s counterclaim costs, not merely the interim payment already made. If the money were released, Yodel would face up to £1.375 million in unsecured costs exposure following detailed assessment. Shift’s financial position—dependent entirely on investor funding and seeking to sell subsidiaries to raise cash—demonstrated that the threshold conditions for ordering security for costs remained satisfied. The court therefore refused to release the money, granting instead an extension of time to 31 July 2026 for payment of the outstanding £1.511 million. The judge noted that Shift and Corja could re-apply for payment out once the interim costs were paid in full, at which point circumstances might have changed.
On the application for security to cover the costs of the detailed assessment itself, the court rejected ordering those costs on an indemnity basis, as the assessment proceedings are separate proceedings to be decided by reference to conduct in those proceedings. The court ordered security of £48,000 on the standard basis (65% of estimated costs), giving credit for a potential surplus in the existing security. Failure to provide this security within 28 days would result in being barred from participating in the assessment proceedings. The court also held that Jacob Corlett could be made personally liable for costs under section 51, though the High Court lacked jurisdiction over appeal costs. Finally, the court found it reasonable and proper to order disclosure of the identities and terms of non-party funders, particularly given Shift’s prior failure to comply with a court order requiring such disclosure.
Key Takeaways
- Security for costs remains in place to protect against the full liability for which it was ordered, not merely interim payments already made. A debtor cannot dictate which part of its liability to discharge first by appropriating security.
- A successful defendant may retain security throughout the detailed assessment process where the debtor’s financial position remains uncertain and depends on external funding sources.
- Courts have discretion to order additional security for the costs of detailed assessment itself, calculated on the standard basis rather than indemnity basis, as those are separate proceedings.
- Non-party funders of litigation can be made personally liable for costs under section 51, and disclosure of their identities and funding terms is an appropriate ancillary order where the debtor’s solvency is in doubt.
- A failure to comply with prior court orders for disclosure of funders weighs heavily in favour of ordering such disclosure at a later stage.
Why It Matters
This judgment clarifies important procedural principles governing security for costs in cases with external funding. It establishes that security protects creditors against the genuine risk of non-recovery when debtors lack independent financial resources and depend on third-party funders. The decision confirms that courts should not release security prematurely merely because an interim payment has been made, particularly where substantial further costs liability remains to be assessed and a lengthy assessment process lies ahead. The judgment also affirms that courts have broad discretion to order disclosure of non-party funders and to make them liable for costs, a development of considerable practical importance in litigation-funding arrangements.
For practitioners, the case demonstrates that reliance on investor funding, standing alone, does not satisfy the threshold for release of security for costs. Where a party lacks independent resources and its investors have already committed substantial sums, the court will readily infer that additional fundraising carries real risk. The decision also signals that parties should comply promptly with court orders for disclosure of funders and that failure to do so will likely result in compulsory disclosure at a later stage. The court’s refusal to order indemnity-basis costs for the assessment itself may also be of note to costs practitioners.