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British Sky Broadcasting Group Plc & Ors v Digital Satellite Warranty Cover Ltd & Ors

[2012] EWHC 3679 (Ch)

Case No: HC10C01262
Neutral Citation Number: [2012] EWHC 3679 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 19 December 2012

Before :

SIR WILLIAM BLACKBURNE

Between:

(1) BRITISH SKY BROADCASTING GROUP PLC

(2) BRITISH SKY BROADCASTING LIMITED

(3) SKY SUBSCRIBERS SERVICES LIMITED

(4) SKY IN-HOME SERVICE LIMITED

Claimants

- and -

(1) DIGITAL SATELLITE WARRANTY COVER LIMITED (IN LIQUIDATION)

(2) NATIONWIDE DIGITAL SATELLITE WARRANTY SERVICES LIMITED (IN LIQUIDATION)

(3) BERNARD FREEMAN

(4) MICHAEL SULLIVAN

(5) PAUL MARROW

(6) DAVID STEELE T/A DALTONS DATA

(7) MICHAEL WATERS T/A LONDON DATA

(8) MICHAEL SIBBALD

(9) DAVID REYNOLDS (IN BANKRUPTCY)

(10) STEVEN LEE

Defendants

Mr Thomas Moody-Stuart and Tom Shepherd (instructed by Herbert Smith Freehills LLP) for the Claimants.

Mr Daniel Bayfield (instructed by Berwin Leighton Paisner LLP) for the First and Second Defendants.

Mr Aubrey Craig (instructed by Brabners Chaffe Street LLP) for the Third and Fourth Defendants.

Mr Paul Marrow, the Fifth Defendant, appeared in person.

Ms Kelly Pennifer (instructed by McKays Solicitors) for the Sixth Defendant.

Mr Michael Waters, the Seventh Defendant, was not represented.
Mr Michael Sibbald, the Eighth Defendant, did not appear.
Ms Genevieve Parke (instructed by Sillett Webb Solicitors) for the Ninth Defendant.
Mr Steven Lee, the Tenth Defendant, appeared in person.

Hearing dates: 6 and 7 November 2012

JUDGMENT

COSTS JUDGMENT

Sir William Blackburne:

Introduction

1.

This judgment deals mainly with costs issues arising out of my judgment (“the judgment”) in this matter (at [2012] EWHC 2642 (Ch)) delivered on 1 October 2012. In addition relief is sought against the first and second defendants, Digital and Nationwide. The order which I made on 1 October also left another matter for later decision. This judgment deals with those other matters as well.

2.

Representation and appearances before me have been as at the trial and I shall continue to refer to the parties in the same manner as I did in the judgment. The only difference has been that Digital and Nationwide are represented before me on this occasion. They have done so acting by their joint liquidators. They appeared by Daniel Bayfield. For reasons which will shortly appear Mr Bayfield also appeared for Satellite Services acting by its joint liquidators. Satellite Services was the partnership previously carried on by Mr Freeman and Mr Sullivan. The same two persons are the joint liquidators of all three entities. The other point to note is that the estate of Mr Waters has been unrepresented. It will be recalled that he died in the period between the conclusion of the trial and the handing-down of the judgment.

3.

I will deal first with the issues affecting Digital and Nationwide. Next I will deal with the outstanding matter arising out of the judgment. Last I will deal with costs where several issues arise. I preface what follows by stating that there were no applications for permission to appeal.

Digital and Nationwide

4.

The issue here is whether it is appropriate to grant Sky relief against these two companies notwithstanding that they took no part in the action. Mr Moody-Stuart submits that the court can and should. Mr Bayfield submits that it would be wrong to do so.

5.

Two things in particular are to be noted about the two companies. The first is that an appeal to the Supreme Court against the order to wind up Digital is shortly to be heard. Satellite Services is also appealing. For some reason Nationwide is not. All three entities were wound up on public interest grounds and not because they were insolvent. The second is that, as explained in paragraph 31 of the judgment, Arnold J, in a reserved decision delivered on 27 October 2011 ([2011] EWHC 2662 (Ch)), granted Sky declarations, as against Mr Freeman, Mr Sullivan and Mr Marrow (who between them owned or controlled 75% of the shares in Digital and Nationwide and were its only officers – see paragraph 9 of the judgment), that the two companies and Satellite Services were liable for breach of confidence, database right, trade mark infringement and passing off. However, as noted in paragraph 32 of the judgment, he declined to grant any relief against the two companies themselves. This was because of the statutory stay imposed by section 130(2) of the Insolvency Act 1986 arising in consequence of the fact that the two companies were in compulsory winding-up. (As that paragraph further noted, he did grant relief against Mr Freeman and Mr Sullivan in their capacity as partners trading as Satellite Services, lifting the statutory stay for that purpose although not for the purpose of financial recovery against any partnership assets.) As against Mr Freeman, Mr Sullivan and Mr Marrow the trial before me was concerned to establish their liability for the wrongful acts which Arnold J had found the two companies to have committed. But the two companies themselves were unrepresented before me and no relief was sought or, in view of the statutory stay, could be sought against them. No attempt was made to lift the stay.

6.

Against that background Sky now seeks, belatedly, to revisit its earlier decision. It applies to lift the statutory stay against the two companies and enter judgment against them for declaratory, injunctive and other relief in all respects as if at the trial before me the stay had been lifted, the action had proceeded against the two companies (as well as against the other defendants) and their liability established. In effect it seeks on the current application (concerned, as I have said, with the form of order I should make following the conclusion of the trial and how I should deal with costs) to obtain summary judgment against the two companies and thus to make good its previous inaction.

7.

Mr Moody-Stuart accepted that the relief he was seeking could have been sought at the trial or earlier and that to that extent he was seeking to make good that omission and to do so in a wholly summary and informal manner (there was before me no formal summary judgment application or application to lift the stay). He submitted nevertheless that there were good reasons why the court should accede to this unusual course. The first was a concern over what might happen if Digital’s appeal to the Supreme Court should succeed and the winding-up order (which for that reason he described as “precarious”) be set aside. Were that to happen, he submitted, it would be open to Digital, restored to the control of Mr Freeman, Mr Sullivan and Mr Marrow, to deal with its assets unconstrained by any judgment let alone any injunctive or other relief designed to protect any judgment. Sky wished, he said, to avoid that possibility by obtaining judgment here and now, including injunctive and other relief to protect such judgment. What is more, he said, Sky wished to pursue Mr Freeman, Mr Sullivan and Mr Marrow for financial redress for the wrongs which at the trial it had established against them, either by an inquiry as to damages or by an account of profits (it had yet to make an election) and it was concerned that it should not find, having made its election and pursued that election to judgment, that it then faced having to go over the same ground against Digital and Nationwide once it had entered judgment against them. If that were to happen there would, said Mr Moody-Stuart, be a risk of inconsistent outcomes to what was likely to be a difficult and complex inquiry or account (depending on which was elected), to say nothing of the undesirability of incurring additional costs. Moreover, he submitted, given the findings made by Arnold J against Mr Freeman, Mr Sullivan and Mr Marrow in respect of the two companies’ wrongful conduct and given the findings of their responsibility for these wrongs at the trial before me, it was wholly unrealistic to suppose that the two companies had any defence to the claims against them. He drew my attention to decided authority concerned with the purpose of the statutory stay and the circumstances in which it will be lifted. He emphasised that Sky had no intention, having obtained judgment and established the quantum of its loss (or the amount of profit to be recovered), of seeking to enforce that judgment to the prejudice of other creditors. He pointed out that the orders Sky were seeking were drafted with this in mind.

8.

Mr Bayfield submitted that what Sky was seeking was both premature and unprincipled. It was premature, he said, because pending determination of the appeal to the Supreme Court the liquidators have unsurprisingly done little in the way of winding up the affairs of the two companies beyond securing their assets and have not yet even established whether there will be sufficient assets to make any distribution to creditors, let alone invited creditors to submit proofs of debt. It was wrong therefore for Sky, under the guise of a hearing to determine the form of order following the trial and deal with costs, to seek to force the liquidators either to submit to judgment on claims which had deliberately not thus far been pursued or else advance reasons now why judgment should not be entered against the two companies. It might very well be, he said, indeed it was quite likely given the earlier findings both before Arnold J and before me, that the liquidators when they come to examine Sky’s claims will conclude that there is no defence to them. But it was wrong in the events that have happened and faced with an imminent resolution of Digital’s appeal that the liquidators should be forced into any decision at this stage and in this manner. It was wrong in principle, he said, having regard to the statutory scheme laid down for the winding up of companies. That scheme includes the stay of proceedings against the company in liquidation (except by the leave of the court) provided by section 130(2) of the 1986 Act and the function of the liquidator in a winding up by the court to secure that the company’s assets are got in, realised and distributed as set out in section 143 of the 1986 Act. The purpose of the stay was to avoid a multiplicity of actions against the company in liquidation which it would or might be both expensive and time-consuming, as well in some cases as unnecessary, for the liquidator to have to deal with. Instead, the scheme provided, once it was established that there would be assets available for distribution to creditors, for those with claims against the company to submit proofs of debt which the liquidator, as an officer of the court, was then required to examine and either admit or reject (either in whole or in part). The scheme provided a right of appeal in the case of rejection. It was wrong in principle, said Mr Bayfield, that Sky should attempt, by inviting the court to enter judgment against the two companies in the manner sought, to circumvent this process and no grounds had been advanced why the court should lift the stay and permit this to occur.

9.

I am in no doubt that Mr Bayfield is right. No good reason has been put forward why I should accede to Sky’s proposed course. I am not persuaded that there is any real risk, if Digital’s appeal should succeed, that its assets, in particular its database which I accept is largely if not wholly made up of information wrongly obtained from Sky, will be dealt with to Sky’s detriment. I come later to the undertaking that the liquidators have offered and the other orders that I am willing to make to help ensure that this does not happen. I see no reason to think that, if the appeal is dismissed and, in effect, the liquidators are confirmed in office (their position in Nationwide is not under challenge in any event but the reality, I suspect, is that the benefit to creditors lies mostly in Digital) they will not deal properly with Sky’s claims. I think it unlikely that this will not have happened in good time to avoid any duplication of effort in Sky’s pursuit of damages or an account of profits (depending on which it elects) which, as Mr Moody-Stuart submitted (and I accept) is likely to raise difficult matters of proof which may be far from easy to determine. In short I am not aware of any steps that Sky has in contemplation to make good its financial claims which provide grounds for acceding to the relief which, belatedly as I have mentioned, it now seeks against the two companies.

10.

In the circumstances, therefore, I am not willing to grant the relief sought by paragraphs 1 (judgment against Digital and Nationwide) and 2 (injunctive relief against them) of the proposed draft order. On the other hand I am willing to accept an undertaking by the joint liquidators on behalf of both Digital and Nationwide in the terms of paragraph 2 subject only to a minor amendment to paragraph 2(i) to insert the words “other than to the claimants” after the words “custody and control”. It follows that it will not be open to Sky to pursue against Digital or Sky the inquiry as to damages, alternatively the account of profits, provided for by paragraph 5 of the draft. But there is otherwise no reason why I should not give Sky liberty to pursue one or other remedy against Mr Freeman, Mr Sullivan and Mr Marrow. It will also follow that it is inappropriate that the paragraph should go on to deal with the recovery against Digital, Nationwide or, as I presently consider, Satellite Services of any amount found to be due on the account or inquiry.

11.

Paragraph 6 of the draft order provides for disclosure to Sky of information listed in a schedule to the draft order. This is designed to allow Sky to elect between an inquiry and an account. See Island Records Ltd v Tring International Plc [1996] 1 WLR 1256. The joint liquidators do not oppose the purpose of such relief. Rather than deal with the matter in the manner set out in the draft order they and Sky have come to an alternative arrangement whereby the liquidators will give Sky access to the books and records of the two companies and Satellite Services to enable it to obtain any information which falls within the scope of the matters set out in the schedule. I am content that the matter be dealt with in this way. On this footing there will be no need for the statutory stay to be lifted as set out in paragraph 7. That paragraph is by its terms confined to the Islands Records v Tring relief sought by the preceding paragraph.

12.

That leaves as against Digital and Nationwide simply the question of Sky’s costs. It seeks an order for their payment up to 16 November 2010 which was when the two companies and Satellite Services were placed in provisional liquidation and the statutory stay came into force. Mr Moody-Stuart submitted that up to 16 November 2010 Digital and Nationwide joined in the fraudulent defence put forward by Mr Freeman, Mr Sullivan and Mr Marrow and that the acts of the two companies have been held to infringe Sky’s rights. He submitted that Sky was prima facie entitled to its costs of those claims up to the stay and that there was no reason why the court should not so direct. Since I am not allowing Sky to pursue its claims against the two companies at this stage so that the statutory stay will remain it is premature in my judgment to deal with Sky’s costs so far as they have been incurred in its pursuit of the two companies up to the time of the stay. Unless and until Sky recovers judgment against them Sky’s costs of pursuing them remain wholly at large. I am not persuaded that I should make any order for them (even if limited to those incurred up to 16 November 2010) at this stage simply because the case against the two companies is to all appearances such a strong one. That being so I do not need to embark upon the subsidiary but important question of whether those costs would in any event be provable or whether for reasons which it is unnecessary to explore in this judgment they fall into what Mr Bayfield described as a “black hole” (see Glenister v Rowe [2000] Ch 76). The relevance of this is that if I had been minded to order their payment I would have needed to ensure that the order was worded so as not to prejudge any issue concerned with the recovery of the amount in question. Wrapped up in this is the possibility that the law on this topic may change in the light of an appeal which will be before the Supreme Court some time in 2013.

13.

There is one final matter which I should mention in connection with Digital and Nationwide. That is that, in addition to the worldwide freezing orders that Sky obtained against Mr Freeman, Mr Sullivan and Mr Marrow (see paragraph 29 of the judgment), the joint liquidators of the two companies have also obtained freezing orders against those three persons (limited in their cases to £925,000 each). Mr Bayfield stated, and I therefore record, that the liquidators would not oppose variations being made to those orders to permit Sky or anyone else in these proceedings who obtains a costs order in its or his favour against any of Mr Freeman, Mr Sullivan and Mr Marrow from having those variations made to enable the costs in question to be paid. I understand that the amounts frozen as a result of the orders that Sky obtained are such that it is very unlikely that payment of Sky’s costs and the costs of any others in these proceedings out of the amounts frozen would reduce the assets in question below the limits protected by the orders obtained by the joint liquidators.

The outstanding point on the form of order

14.

On handing down the judgment on 1 October 2012 there was an issue, left for later decision, concerned with the scope of the injunctive relief to which Sky was entitled to prevent dealings in any databases of Digital, Nationwide and Satellite Services. To an extent the matter turned on the attitude that would be adopted by the liquidators of the two companies. I have dealt with this in the second sentence of paragraph 10 above. That left the scope of the injunction as against Mr Freeman, Mr Sullivan and Mr Marrow. The order sought is set out in paragraph 3 of the draft order. It restrains Mr Freeman, Mr Sullivan and Mr Marrow from "using or otherwise dealing in the databases (or the contents thereof)” of Digital, Nationwide and Satellite Services.

15.

Mr Craig objected to the width of paragraph 3. He submitted that as Sky's own evidence did not suggest that more than 70% of the data in the databases (I refer to them simply as "the defendant databases") operated by the three entities derived from Sky it could not be right that his clients should be restrained from using or dealing in any of the data in those databases.

16.

Mr Moody-Stuart pointed out, however, that Sky's inspection of the defendant databases took place some time after the dates of extraction so that any data on those databases which had been changed in the meantime (for example by being updated or cleansed) would not have appeared as a match when the inspection occurred. The fact that 30% of the data did not appear as matching Sky's did not therefore mean that some or all of the 30% did not derive from a Sky database. Moreover, said Mr Moody-Stuart, the defendant databases contained, or very probably contained, data about customers obtained as a result of the acts of trademark infringement and passing off which had been established in the course of these proceedings. In all of the circumstances, he submitted, it could fairly be said that the whole of the defendant databases had become tainted as a result of the wrongs to Sky which these proceedings had established and therefore that the injunction rightly extend to all of the databases.

17.

I am satisfied, for the reasons given by Mr Moody-Stuart, that the injunction sought by paragraph 3 is not unnecessarily wide and, subject to one point, should remain as drafted. That one point is that it is entirely possible that parts of the defendant databases were in fact obtained quite legitimately. On the evidence I heard it was not clear what the legitimate source of those parts might have been but I accept that it might be shown to be so. I therefore mentioned to Mr Moody-Stuart and Mr Craig that it would probably be appropriate, in order not to exclude this possibility, to add to the paragraph a liberty to Mr Craig's clients or either of them (and also Mr Marrow should he wish) to apply to the court on seven days' prior written notice to Sky for permission to deal with any part or parts of the defendant databases which the applicant under the liberty could show had not derived from any wrong done to Sky. It was pointed out - as I accept - that in practice any dealing with the defendant databases is only likely to arise if either Digital or Satellite Services is successful in its forthcoming appeal to the Supreme Court and the relevant liquidation set aside. It is only in that event that the relevant database is likely to return to the control of one or both of Mr Craig's clients (or possibly Mr Marrow) and be available to be used or dealt with by them. I propose therefore to qualify the liberty by providing that it is only to arise and be exercisable if the appeal succeeds and then only in relation to the database of the successful appellant.

Costs: introduction

18.

In the circumstances of this litigation, deciding who should recover what costs and from whom is far from straightforward. The amounts involved are considerable: Sky’s are estimated at £1.348 million, Mr Steele’s at £119,000 and Mr Reynolds’ at £314,000. I was not told what the costs of the others amount to. The position is complicated because Sky only succeeded against some of the defendants and failed against others: it succeeded against Mr Freeman, Mr Sullivan, Mr Marrow and Mr Lee; but it failed against the other four (non-corporate) defendants. I shall deal first with liability (who is to be responsible for whose costs) and with the basis of assessment, then (in a section entitled “apportionment”) with how assessment is to be approached and finally, as far as it is possible without further argument, with orders for payment on account.

19.

I begin by summarising the parties’ respective positions. I do not need to deal with any order against Digital and Nationwide. I have already dealt with that, so far as it is proper to do so at this stage, in the preceding part of this judgment.

Costs: a summary of the rival contentions

20.

Sky seeks to recover all of its costs. (I am not concerned with costs orders previously made, notably the orders made by Arnold J at the conclusion of the cross-applications for summary judgment and of the application by Mr Freeman, Mr Sullivan and Mr Marrow for the trial of a preliminary issue in October 2011.) Sky seeks all of its (other) costs notwithstanding that it obtained no relief on its claims against Mr Steele, Mr Waters, Mr Sibbald and Mr Reynolds. Except as regards its costs of Mr Reynolds’ withdrawn application for summary judgment and of his unsuccessful application for specific disclosure (“the Reynolds’ applications”), both of which Sky says that Mr Reynolds should pay, Sky does not seek to recover anything from Mr Reynolds: it accepts that Mr Reynolds should recover his costs (except those incurred in making those two applications) but contends that they should be paid jointly (and directly) by Mr Waters' estate and by Mr Freeman, Mr Sullivan and Mr Marrow. It contends that it should not be ordered to make any payment of those costs. Although it also failed against Mr Steele, Mr Waters and Mr Sibbald, it contends that it should not have to pay their costs. On the contrary, it contends that Mr Freeman, Mr Sullivan and Mr Marrow should pay the costs of its claims against them and also that those three should be responsible for the costs of its claims against Mr Steele and Mr Sibbald (jointly with Mr Steele himself) and of its claims against Mr Waters (jointly with Mr Waters' estate). It claims from Mr Lee the costs of its claim against him and does not suggest that anyone else should share that liability. It seeks to have all of its costs, except those incurred in suing Mr Lee and its costs of the Reynolds’ applications, assessed on the indemnity basis. It has proposals, based on its assessed costs incurred during defined phases of the litigation and the percentage distribution of those costs for each phase between the paying defendants, for how its costs should be apportioned among those whom it seeks to make responsible for them. It seeks interim payment orders on account. That is Sky's position.

21.

Mr Freeman and Mr Sullivan accept that they must pay Sky's costs incurred in suing them to judgment but suggest that those costs should not be on the indemnity basis. They also accept that they are liable for Sky's costs of suing Mr Steele and Mr Sibbald and also Mr Waters and Mr Reynolds but only those incurred up to 6 January 2012 ("the cut-off date").

22.

Mr Marrow likewise accepts that he must pay Sky’s costs of suing him to judgment and, like Mr Freeman and Mr Sullivan, seeks also to escape an indemnity basis of assessment. In contrast to those two he contends that he should not have to share in any responsibility for Sky's costs over and above those incurred in suing him.

23.

Mr Steele contends that he should not have to pay any of Sky's costs. On the contrary, he contends that Sky should pay his costs and that at most there should be a small discount in the amount recoverable by him to take into account that (a) some of his own costs are attributable to the fact that he was found to have advanced a dishonest case (and therefore that he should not recover the part so attributable) and (b) some of Sky’s costs were incurred in having to deal with and challenge that case (and therefore Sky should recover that part). As a fall back Mr Steele contends that there should be no order as to costs as between him and Sky and that each should bear its/his own. He further contends that he should not have to pay any part of Sky’s costs of pursuing Mr Sibbald. But if Mr Steele is to be ordered to pay Sky's costs of pursuing him and Mr Sibbald then he contends, first, that it would not be right, in view of the disproportionately large amount (as Mr Steele sees it) that Sky claims, that those costs be assessed on the indemnity basis - his concern being to be able to argue on the assessment that some of those costs were disproportionate in amount – and, second, that in all the circumstances costs should be assessed on an issues rather than, as Sky seeks, a percentage basis. Mr Steele also contends that if (contrary to his primary contention) he is to pay any of Sky’s costs then Mr Freeman, Mr Sullivan and Mr Marrow should be ordered to share that liability. It should not be subject to any cut-off date. If, further, Mr Steele is left to bear any part of his own costs he contends that Mr Freeman, Mr Sullivan and Mr Marrow should contribute to them. He seeks a variation of the freezing orders in place against those three to enable any payments due to him from them to be made.

24.

As I have mentioned, Mr Waters’ estate was not represented before me and I do not know what stance it would have taken if it had been. The same is true of Mr Sibbald. But his costs can only have been very small in amount and no one has suggested that he should bear anyone else’s costs.

25.

Mr Reynolds’ position is that, having succeeded, his costs should be paid in full. For some reason he does not seek to recover any costs incurred before he instructed solicitors – perhaps there were none. That was on 25 April 2012, just prior to the PTR. Given that concession references in this judgment to his costs are to costs incurred by him since instructing his solicitors. His primary case is that Sky should pay his costs. He contends that his costs should be assessed on the indemnity basis. He is resistant to the idea that Sky should be permitted to claim those costs from others (effectively, all or any of Mr Freeman, Mr Sullivan, Mr Marrow and Mr Waters’ estate) and is opposed to an order that, if Sky is to be permitted to claim over against any of those others, the court should short-circuit the matter by ordering that his costs should be paid by those others alone. Alternatively, he contends that if for some reason Sky is not to be made liable for his costs then he should recover them on an indemnity basis from Mr Freeman, Mr Sullivan, Mr Marrow and Mr Waters’ estate. Separately, he resists Sky’s claim to be paid the costs of what I have described as the Reynolds’ applications. He contends instead that he should be paid his costs of one of them and that there should be no order on the other. If he is to pay them he contends that it would be unjust to order him to pay any summarily assessed amounts except by way of set-off against what he is entitled to recover from Sky (assuming he obtains an order against Sky for any payment). He seeks a payment on account.

26.

Mr Lee did not wish to advance any contentions on costs but was content to leave this to the court.

Costs: the relevant rules

27.

It is important to have the relevant rules in mind. They are set out in CPR Part 44.3. In summary, the court has discretion whether to make any order as to costs, the amount of those costs and the time when they are to be paid. The general rule is the starting point which is that costs should follow the event, namely that the unsuccessful party will be ordered to pay the costs of the successful party. In deciding whether to make any and if so what order about costs the court must have regard to all the circumstances which may include the conduct of the parties both before as well as during the proceedings, the reasonableness of raising or pursuing particular issues and the manner in which a party has pursued or defended his case or a particular allegation or issue.

28.

A particular feature of this case is that I have found that two of the successful defendants, Mr Steele and Mr Waters, advanced cases which I have found to have been dishonest. But, as Ms Pennifer pointed out, the general rule remains the usual starting point even if the successful party has been dishonest in the conduct of his case. She drew my attention to what was said by Pitchford LJ, giving the leading judgment in the Court of Appeal in Hutchinson and Penning v Neale and Neale [2012] EWCA Civ 345 at [28]:

“There is no general rule that a finding of dishonest conduct by the successful party will replace the usual starting point. What is required is an evaluation of the nature and degree of the misconduct, its relevance to and effect upon the issues arising in the trial, and its tendency to create an unwarranted increase in the costs of the action to either or both of the parties. ”

29.

At [30] Pitchford LJ asked whether the grounds upon which the unsuccessful claimants in that case had brought their claim had been “infected” by the defendants’ misconduct. Earlier he had referred with approval to what had been said by Briggs J in Bank of Tokyo-Mitsubishi UFJ Ltd and Anor v Baskan Gida Sanayi Ve Pazarlama AS and Others [2009] EWHC 1696, [2010] 5 Costs LR 657:

“…(ii) The court’s powers in relation to the putting forward of a dishonest case include (a) disallowance of that party’s costs attributable to proving that case, (b) an order that he pay the other party’s costs attributable to proving that dishonesty, and (c) the imposition of an additional penalty which, while it must be proportionate to the gravity of the misconduct, may in an appropriate case extend to a disallowance of the successful party’s costs, or an order that he pay all or part of the unsuccessful party’s costs. (iii) In framing an appropriate response to such misconduct, the trial judge must constantly bear in mind the effect of his order upon the process of detailed assessment which will follow, in the absence of agreement, in particular to avoid unintended double jeopardy… (iv) There is no general rule that a losing party who can establish dishonesty must receive all his costs of establishing that dishonesty, however disproportionate they may be…”

30.

Another issue – it arises in the case of Mr Reynolds’ costs – is concerned with the circumstances in which it is appropriate to order one defendant, against whom the claimant has succeeded, to pay the costs of another defendant, against whom the claimant has failed and, in particular, the circumstances in which it is appropriate to order the unsuccessful defendant to pay the successful defendant’s costs directly as opposed to those cases where it is appropriate to order the claimant to pay them leaving the claimant to recover them (if he can) from the unsuccessful defendant, so that, in effect, the unsuccessful defendant pays the successful defendant’s costs but does so indirectly as part of the claimant’s costs of the action. There was once much learning on the topic and the forms of order to which it gave rise were known as Sanderson (in the case of direct) and Bullock (in the case of indirect) orders. (See Sanderson v Blyth Theatre Company [1903] 2KB 533 and Bullock v London General Omnibus Co. [1907] 1 KB 264.) As Mr Moody-Stuart explained, the jurisdiction to make such orders survived the advent of the CPR, being permitted under Part 44.3, and was discussed in Irvine v Commissioner of Police for the Metropolis [2005] EWCA Civ 129 at [22] to [31]. I think it is sufficient only to refer to what was said in Moon v Garrett [2006] EWCA Civ 1121 by Waller LJ who, after considering the authorities including Irvine, summarised the jurisdiction as follows (at [38] and [39]):

“38.

It seems to me that the above citation demonstrates that there are no hard and fast rules as to when it is appropriate to make a Bullock or Sanderson order. The court takes into account the fact that, if a claimant has behaved reasonably in suing two defendants, it will be harsh if he ends up paying the costs of the defendant against whom he has not succeeded. Equally, if it was not reasonable to join one defendant because the cause of action was practically unsustainable, it would be unjust to make a co-defendant pay those defendant’s costs. Those costs should be paid by a claimant. It will always be a factor whether one defendant has sought to blame another.

39.

The fact that cases are in the alternative so far as they are made against two defendants will be material, but the fact that claims were not truly alternative does not mean that the court does not have the power to order one defendant to pay the costs of another. The question of who should pay whose costs is peculiarly one for the discretion of the trial judge. ”

31.

As to the circumstances in which it is appropriate to award costs assessed on the indemnity basis I need do no more than refer, but do not need to set out, the summaries of the relevant propositions to be found in LB Southwark v IBM UK Ltd [2011] EWHC 653 (TCC) at [4] (per Aikenhead J) and Three Rivers District Council and Others v The Governor and Company of the Bank of England [2006] EWHC 816 (Comm), [2006] 5 Costs LR 714 at [25] (per Tomlinson J) to which Ms Parke referred me.

32.

With that guidance in mind I now consider the various contentions. Because they both seek orders that Sky should pay their costs it is convenient to deal first with Mr Steele’s position and then with Mr Reynolds’.

Mr Steele

33.

Mr Moody-Stuart submitted that the general rule on costs should not apply and, although unsuccessful against Mr Steele, Sky should not be required to pay Mr Steele’s costs: on the contrary he should not only pay his own costs but should pay Sky’s as well, that is to say, Sky’s costs of suing him and Mr Sibbald. He submitted that Sky only failed because Mr Steele lied. If he had been telling the truth he would have lost the action. His conduct of the litigation, including the false identification of Mr Sibbald as a supplier, led directly to Mr Sibbald’s joinder as a defendant. He lied in his defence and in his witness statements and on oath before the court and procured his legal team unwittingly to put forward untrue statements on his behalf. As a result the question of what had happened with the supply of data to Digital (and later Satellite Services) remained hopelessly confused. Significant time at the trial was needed to explore these matters. Mr Steele’s steadfast adherence to his false involvement cast doubt on the truth of Mr Freeman’s and Mr Sullivan’s retraction of their account of the supply of data via Mr Steele and Mr Waters. Mr Steele also put Sky to proof on the subsistence of database right and until well into the trial kept his options open on the issue of confidentiality of Sky’s data. These points were either abandoned or resolved in Sky’s favour.

34.

Ms Pennifer emphasised that as Sky was the unsuccessful party as against her client the general rule should apply and the only question therefore was the extent to which this rule should be departed from, and Mr Steele’s recoverable costs reduced, to cover the costs both he and Sky incurred in consequence of his pursuit of a case which the court found to be dishonest. She submitted that Mr Steele’s costs had been increased by only a minor amount by these matters. She submitted that, even assuming that the court’s finding was that Mr Steele had been a party to the conspiracy to mislead the court, there was no finding that Mr Steele was a party to this at the time that Mr Sullivan served his first witness statement on 10 May 2010. As support for this she pointed to various matters, including the discrepancies between what Mr Sullivan stated in his witness statement and Mr Steele’s subsequent evidence. The importance of this was that the die had been cast in the sense that Sky had applied to join Mr Steele to the action before seeing his witness statements. It was, she said, essentially a causation issue in that Sky would have pursued its claim against him until trial even if he had told the truth in his witness statements. Sky would have done so as, with some justification, it was not prepared to take as read what any of the witnesses or parties said was the correct position. She drew my attention to the fact that Sky was aware as early as September 2010 that Mr Freeman and Mr Sullivan were maintaining that Sky’s only suppliers of data were others (including Mr Lee), not Mr Steele (as confirmed in the January 2012 witness statements), and that Daltons Data (the supposed reference to Mr Steele’s supplies) did not really exist and indeed was a fabrication, a matter confirmed in cross-examination before Arnold J in October 2011. She pointed to the fact that Sky proceeded to trial against Mr Sibbald and, more tellingly, against Mr Reynolds notwithstanding that each of these two had denied any involvement, Mr Reynolds consistently so. It would therefore have made no difference, she said, if Mr Steele likewise had consistently told what the court has found to be the truth. It was also to be noted that, given an apparent shortfall in data supplies according to available accounting information from Digital and Nationwide, Sky spent much time at the trial, both in cross-examination and in submission, attempting to establish that the original version of events put forward by Mr Sullivan was correct. In short, she said, Sky was well aware from as early as September 2010 that there was an issue as to whether Mr Steele was ever involved in any of the matters raised in the claim yet proceeded to trial in the hope of establishing his liability. It failed in this attempt and, as a result, the claim against him was dismissed.

35.

For those reasons, Ms Pennifer submitted, Mr Steele should get his costs and should only suffer a reduction to the extent that costs were increased by the pursuit by him of a case which the court has found to be dishonest. The only costs savings, if Mr Steele had told what the court has found to be the truth, would have been a marginal saving in the costs of the preparation of his main witness statement (it would simply have denied any involvement) and of his defence, the avoidance of any need to deal with Sky’s (informal) request for further information (which flowed out of the account of events which the court found to be untruthful) and the preparation of a supplemental witness statement by Mr Steele, a marginal saving of time in cross-examining relevant witnesses with a view to establishing the conspiracy and the costs of preparing closing submissions on the conspiracy. Sky would still have incurred costs and time would have been taken up at the trial dealing with the truthfulness or otherwise of Mr Sullivan’s first witness statement given the data shortfall apparent from the available accounting information (see paragraphs 109 and 110 of the judgment). Ms Pennifer submitted that these savings accounted for no more than about £6,000 (or 5%) of Mr Steele’s total costs which should be the measure of the appropriate discount. Accepting further that Sky’s own costs were increased by having to deal with the dishonesty of which he was found guilty and accepting further that Mr Sibbald would not have been joined if Mr Steele had simply denied any involvement, she submitted that it was difficult to see that any further discount should be greater than, say, an amount equivalent to 10% of Mr Steele’s total costs making an overall reduction of 15% of his recoverable costs.

36.

Finally, even if the court was against awarding Mr Steele his costs (discounted to reflect the costs of the dishonest case which, as the court has found, he put forward) the correct course would be to make no order as to costs, leaving Sky to bear its own and likewise Mr Steele. It would be wrong, she submitted, to go to the other extreme by denying Mr Steele any of his costs and awarding Sky all of its costs of pursuing its claims against Mr Steele and Mr Sibbald.

37.

Skilfully as these points were put by Ms Pennifer I am not persuaded that I should order Sky to pay any of Mr Steele’s costs. The inescapable fact is that, as Mr Moody-Stuart put it, the single issue on which Mr Steele was successful, namely whether he acted as a courier, depended entirely on his own evidence being disbelieved. In the absence of that issue he simply would not have been a defendant. His involvement in the action depended on him establishing that basic fact. The other issues between him and Sky were either not pursued by him or were decided against him. Once Mr Sullivan had retracted his initial assertion that Mr Steele was a courier, and in the absence of any documentary or other evidence to link Mr Steele to the activities of which Sky complained, the only unwavering evidence of his involvement was his own. I do not accept Ms Pennifer’s point, which is critical to her submissions, that Sky would have pursued Mr Steele to trial, no matter what he might say, as the decision to do so had been made before he had become entangled with Mr Sullivan and before he had agreed to do the latter’s bidding by putting forward a false story. My unwillingness to accept Ms Pennifer’s submission is not dependent on showing that already by the time that Mr Sullivan made his initial witness statement Mr Steele was a party to a conspiracy to mislead Sky and lay a false trail. Indeed, as Ms Pennifer pointed out, I am in no position to say whether he was involved from that point or only after Sky had decided to join him and taken steps to do so. The view I take is that if Mr Steele had said right from the outset that he had nothing whatever to do with the transmission to Digital or Nationwide of any data or other material, that any assertion that he had so acted was entirely without foundation, that his own business was wholly unrelated to the activities of Digital and Nationwide and that he was willing to submit to any reasonable questioning and other enquiry to support his denial, I do not consider that Sky would have pursued its action against him. It is true that a denial of any involvement did not avail Mr Reynolds in that Sky pursued him to the very end. But there is, as it seems to me, an important difference between Mr Reynolds and Mr Steele. Sky had previously sued Mr Reynolds successfully to judgment. His business had been in the same field as Digital and Nationwide. He had been identified by Mr Waters who had previously worked for him. Mr Waters’ retraction (in his second witness statement served in late April 2012) was self-serving and open to serious question. Towards the end of the period during which the deliveries were supposed to have taken place Mr Reynolds was sentenced to prison for money laundering and VAT offences. In short, the cards were well and truly stacked against him. I do not therefore consider that Sky’s approach to Mr Reynolds provides any kind of guidance as to how it would have acted if Mr Steele had been honest from the start.

38.

The result, in my judgment, is that this is a case where the general rule, otherwise applicable to Mr Steele, should yield to the consequences of his own dishonest conduct which was central to his continued presence as a defendant. Mr Steele’s defence only succeeded, and Sky’s action against him only failed, because he lied. It is just therefore not only that he should not recover his costs – any of them – from Sky but also that Sky should recover from him all of its costs of pursuing him and Mr Sibbald as well. It follows that I do not accept that there should be no order as to costs.

39.

Ms Pennifer submitted that if the court were to order Mr Steele to pay any of Sky’s costs it would be right that Mr Freeman and Mr Sullivan should be ordered to bear them jointly with him and that, in that event, it would not be appropriate to limit such joint liability to costs incurred prior to the cut-off date (as they contended should happen). She submitted that it could not be said that Sky acted unreasonably after January 2012 in not accepting what was set out in the January 2012 witness statements and that Sky was perfectly entitled, given the previous history, not to accept the new position put forward. Even if, at that stage, Mr Steele had confessed to not having been involved Sky would quite reasonably have wanted to test that evidence by cross-examination, as it did. Finally, she submitted, it would also be right (if Mr Steele is unsuccessful in persuading the court that he should recover his own costs from Sky) that he should be entitled to recover some at least of those costs from Mr Freeman and Mr Sullivan. They were the main protagonists and, on their own evidence, had invited him to lie for them. Allowing for his own participation he should recover at least 80% of those costs.

40.

I will deal later with the extent to which Mr Steele’s liability for Sky’s costs should be shared by Mr Freeman and Mr Sullivan, in particular whether their liability for them should extend beyond the cut-off date, when I have reviewed Mr Craig’s submissions on all aspects of his clients’ costs liability. But I can say at this stage that I reject the suggestion that those two should contribute to Mr Steele’s own costs. His decision to fall in with them and put forward a false case was his own. I do not think that the “lingering feeling” referred to at the end of paragraph 120 of the judgment provides anything approaching a sufficient basis for ordering them to contribute.

41.

I am satisfied that Mr Steele should pay Sky’s costs assessed on the indemnity basis. He conspired with Mr Sullivan to mislead the court and Sky. It matters not whether this arose before Mr Sullivan made his May 2010 witness statement or later. Mr Steele persisted in his false account to the bitter end.

Mr Reynolds

42.

It is appropriate that I deal with Mr Reynolds’ costs before I consider the position of Mr Waters. It was the evidence of Mr Waters that landed Mr Reynolds in these proceedings. Mr Waters’ position hinges in part on what I decide about Mr Reynolds.

43.

It is not in dispute that, having successfully defeated Sky’s claims, Mr Reynolds is entitled to be paid his costs. The only exceptions to this are (1) Mr Reynolds’ costs incurred while he acted in person (that is to 25 April 2012) which he does not seek and (2) the costs of the Reynolds’ applications (both Mr Reynolds’ and Sky’s) which Sky does not accept that he should recover. The issues that are in dispute are therefore: (1) liability for Mr Reynolds’ costs and Sky’s costs of its claim against Mr Reynolds (other than their costs of the Reynolds’ applications) together with the basis of assessment of Mr Reynolds’ recoverable costs and (2) liability for the costs (both Sky’s and Mr Reynolds’) of the Reynolds’ applications.

(a)

Who is to pay Mr Reynolds’ costs?

44.

Mr Moody-Stuart submitted that although Sky’s claim against Mr Reynolds failed the general rule should not apply in so far as it requires Sky as the unsuccessful party to pay the costs of Mr Reynolds as the successful party. He did not dispute that Mr Reynolds should recover his costs. The point simply was that Sky should not pay his costs. Instead, he said, the costs should be paid by Mr Freeman, Mr Sullivan, Mr Marrow and Mr Waters. Fundamental to this was that Sky only sued Mr Reynolds as a result of the deceitful behaviour of the other defendants and it was only fair therefore that they should foot the bill for this. He submitted that Sky’s claim against Mr Reynolds was sufficiently connected with its claims against those other defendants to justify (if otherwise appropriate) the making of a Sanderson form of order and that the only question was whether it was reasonable to make such an order. He submitted that it was. The alternative would be an order in the Bullock form with Sky claiming from those others the costs it pays to Mr Reynolds. But there were practical reasons which weighed against that course. He accepted that either course required him to demonstrate that it was reasonable for Sky to have pursued Mr Reynolds to the point of judgment even though in the result the claim did not succeed. On that the issue was not whether it was reasonable for Sky to have initiated a claim against Mr Reynolds – neither Mr Reynolds nor the other defendants contended that it was not – but whether it was reasonable for Sky to have continued to pursue Mr Reynolds up to the end of the trial. He submitted that it was. The conduct of Mr Freeman, Mr Sullivan and, perhaps to a lesser degree, Mr Marrow in dishonestly implicating Mr Waters together with the conduct of Mr Waters in dishonestly implicating Mr Reynolds made it reasonable that they should pay Mr Reynolds’ costs. It was relevant that none of those four “came clean” about the conspiracy which they had entered into until the trial. Even then there were aspects of the story that remained unclear. As for Mr Waters, he could never quite get himself to admit to the wrongfulness of his conduct. For example he sought to find excuses – quite dishonestly as the recording of his conversation with Mr Reynolds disclosed – in his state of health at the time he made his first witness statement. His self-exculpatory second witness statement scarcely helped. Relevant also to Sky’s approach was Mr Steele’s adherence to his involvement in the other fabricated data supply line: the fact that Mr Steele was so adamant in challenging the retractions by Mr Freeman and Mr Sullivan cast doubt on the extent to which those retractions were reliable. Also material was that if Mr Reynolds had himself told Sky what he knew from his conversation with Mr Waters as early as August 2010, namely that he had been dishonestly implicated, Sky might have had a clearer view as to the truth or falsity of the various stories that it was being fed. But he did not. That is not a criticism of Mr Reynolds; it goes rather to the state of Sky’s knowledge and therefore to the reasonableness of its decision to continue to press its case against him. The result was that, despite the retractions contained in the January 2012 witness statements, there was confusion right up to the trial as to exactly where the truth lay. Sky was justified in wanting to test the truth of the various (and conflicting) accounts by cross-examination at the trial. In all the circumstances Sky behaved reasonably in continuing to pursue Mr Reynolds right up to the trial.

45.

Mr Moody-Stuart went on to submit that there was no jeopardy to Mr Reynolds if a Sanderson form of order was made. Between them Mr Freeman and Mr Sullivan had ample assets to meet any of Mr Reynolds’ costs, and Sky’s costs as well. That was shown by the evidence of the nature and value of the assets caught by the freezing orders. Moreover a Sanderson form of order avoided the element of circuity inherent in a Bullock form of order if Sky was no more than an interim payer with the ultimate burden falling on Mr Freeman and the others. A Sanderson form of order also ensured that, if it was just to do so, Mr Reynolds could recover his costs on an indemnity basis. He could scarcely do so if as between him and Sky his costs fell to be assessed on the standard basis.

46.

Ms Parke submitted that neither a Sanderson nor a Bullock form of order was appropriate and that Sky should be ordered to pay Mr Reynolds’ costs without recourse to others. She submitted that the court could not be confident that, if Mr Reynolds were required to look to Mr Freeman and the others directly for his costs (under a Sanderson form of order), he would recover them all. She submitted that the risk of their insolvency was, in her words, “unknown and unknowable”. Apart for the amount that Mr Reynolds and Sky were together claiming (if allowed in full their costs totalled £1.66 million) there was, she said, the possibility of other claims emerging and of fines having to be paid. It was not therefore safe to assume that Mr Reynolds could recover in full if he must look to those others for payment rather than to Sky.

47.

Coming to the more important question – whether Sky reasonably pursued Mr Reynolds to the end of the trial – Ms Parke submitted that by the time that Mr Reynolds instructed solicitors to act for him on 25 April 2012 (there being no claim by him to be paid his costs, assuming he incurred any, prior to that date) Sky either knew or should have known that it had no case against him. By persisting with the claim after that date, Sky behaved unreasonably and his costs should be recoverable – in such circumstances from Sky alone - on the indemnity basis. In support of this Ms Parke took me to a number of documents and events in the lead-up to and immediately after that date. She submitted, with force, that Mr Reynolds had consistently protested to Sky his innocence of any involvement in the data supply chain, had suggested more than once that he should be dropped from the claim and had offered to help Sky in any way he could. She took me to a letter to this effect which he wrote from prison on 7 December 2010 and also to emails in late January and March 2012 in which he referred to Mr Waters’ “fabrication”. She said that his communications with Sky were often not answered or were not properly considered. She submitted that Sky should have reviewed the strength of its case against him as the truth gradually unfolded, initially with the service of the retraction witness statements by Mr Freeman and Mr Sullivan in January 2012 and, by mid-April 2012, when Mr Waters served his second witness statement. She submitted that once the circumstances in which Mr Waters had made his first witness statement became apparent to those advising Sky (owing to reasons of confidentiality which I do not need to explain those within Herbert Smith who were engaged by Sky, together with Mr Moody-Stuart, did not see the documents until the beginning of May 2012) it was or should have been apparent that Mr Waters had cooperated with Mr Freeman and Mr Sullivan, and had done so in breach of the court’s order, to put together his first witness statement and that no reliance could be placed upon it. By 26 April 2012 Sky’s solicitors stated (in a witness statement concerned to challenge a claim to privilege by Mr Freeman and Mr Sullivan) that the emails setting out those circumstances demonstrated that Mr Sullivan, and also Mr Freeman and Mr Marrow, “fed an entirely false account of the sources of [Digital’s] and [Nationwide’s] customer data…” and that they showed that Mr Waters “was involved in that conspiracy to concoct a false account”. That showed that on Sky’s side it was realised that the only evidence implicating Mr Reynolds had been “concocted”. At the PTR on 27 April 2012 Sky attempted to transform its case against Mr Reynolds by alleging that confidential Sky customer data had been supplied to Mr Reynolds, rather than by him (as the case against him had been pleaded up to that time). When that attempt was disallowed by the court, there was really nothing left in the claim. Ms Parke submitted that this was evident in the lack of any clearly articulated basis for the claim against him in the manner in which Sky opened its case against Mr Reynolds at the start of the trial. She submitted that the only reason for not dropping its claim was Sky’s wish to cross-examine him. This was neither necessary nor appropriate. What Sky should have done was discontinue against him and enlist his assistance as a witness, if necessary by means of a witness summons.

48.

So much for the various submissions.

49.

Ms Parke’s concern that the court should not make either a Sanderson or a Bullock form of order puzzled me. It was almost as if Mr Reynolds wanted to be paid his costs (which nobody challenged) but only if they were paid by Sky. I had difficulty in understanding why, provided he was paid his costs (I leave out of account the costs of the Reynolds’ applications which fall to be considered separately), it mattered to him where ultimately the burden of them might lie. The questions rather were (1) whether Sky’s pursuit of him to the end of the trial was reasonable and if not whether from the point when it had no longer been reasonable for Sky to pursue him Sky should be required to pay his costs on an indemnity basis and (2) whether any of Sky’s and Mr Reynolds’ costs should be borne by some or all of Mr Freeman, Mr Sullivan, Mr Marrow and Mr Waters’ estate, either directly pursuant to a Sanderson form of order or indirectly pursuant to Bullock form of order. This last point seemed to me to be more for those others and Sky to argue rather than for Mr Reynolds.

50.

I am of the view that Sky acted quite reasonably in pursuing Mr Reynolds to trial and that it would be wrong therefore to order Sky to pay his costs without recourse to those who, by falsely implicating Mr Reynolds, were responsible for the fact that Sky took this course. Ms Parke herself accepted, when I asked her, that Sky was not to be criticised for maintaining Mr Waters as a defendant. If Sky is not to be criticised for so doing it is difficult to see why it is to be criticised for maintaining Mr Reynolds as a defendant as well, when Mr Waters had identified him as the supplier (admittedly in the teeth of Mr Reynolds’ denials). The reality, as it appears to me, is that Sky was faced with conflicting statements from Mr Freeman, Mr Sullivan and Mr Marrow (initially implicating Mr Steele and Mr Waters and later retracting that evidence), the first statement from Mr Waters implicating Mr Reynolds (and doing so in a manner that seemed entirely plausible) followed shortly before trial by a second witness statement that sought to withdraw what he had earlier stated but in a manner which left unclear just what his role – and therefore Mr Reynolds’ - may have been. In these circumstances Sky could properly take the view that it would not be sensible to assume that, consistently with Mr Reynolds’ denials of involvement, the later evidence of Mr Freeman and Mr Sullivan was to be preferred to their earlier and therefore that the claims against Mr Waters and Mr Reynolds should be discontinued. Indeed, it would have been a bold action for Sky to have taken in the light of the fact that, on any view, untruths had been told. The veracity of the retractions of January 2012 was challenged by Mr Steele. Until he went into the witness box and, under cross-examination, his account of events was shown to be unworthy of belief, there was no basis, simply from a reading of his statements, for concluding that his adherence to his original account implicating himself and Mr Sibbald was to be disbelieved and the retractions of Mr Freeman and Mr Sullivan to be preferred. That is to have the benefit of hindsight having seen how he gave his evidence. Nor was there reason for Sky to assume, merely because Mr Lee had been correctly identified by Mr Freeman and Mr Sullivan (along with named others) as a source, that Mr Steele, Mr Waters and the sources they had each originally named should be dismissed from further consideration, not the least when one of those so named continued to assert the truth of his and his source’s involvement. Nor do I think that Mr Reynolds’s continued protestations of innocence, and his repeated statements of willingness to assist, although a factor, should have made a difference. It is to be remembered that Mr Reynolds had brushed with Sky in the past, that Mr Waters had been employed by him (or one of his companies) and that Mr Reynolds was in prison for activities concerned with his former business. It may well have been, as Ms Parke was at pains to remind me, that because he had this unenviable track record he was an obvious person to identify when the false trail was laid. But why should Sky have had some special insight into his innocence? Nor was the 15th witness statement of Mr Joel Smith (of Herbert Smith) stating that Sky had been fed an entirely false account of Digital’s and Nationwide’s sources of customer data and that Mr Waters had been involved in a conspiracy to concoct a false account (with the implication that Mr Reynolds had been falsely identified) a conclusive factor against the continued pursuit of Mr Reynolds.

51.

In my judgment Sky was entitled to look sceptically at all of this and wonder just where the truth lay. In short there existed ample justification for the stance to be found in paragraph 16 of Mr Moody-Stuart’s skeleton argument for the trial in which the following was stated:

“Mr Reynolds’ position that he never provided data to Digital (whether via Mr Waters or otherwise) is inconsistent with the account originally put forward by Mr Waters and is contradicted by documentary evidence (for example invoices to Mr Waters as London Data which Mr Waters says were created by Mr Reynolds). Mr Waters’ most recent account leaves much unexplained even it taken at face value. Mr Freeman and Mr Sullivan’s evidence for trial still identifies Mr Reynolds as a source of some data provided via Mr Waters. [There is a footnote reference to paragraph 29 of Mr Freeman’s 9th witness statement and to paragraph 26 of Mr Sullivan’s 9th witness statement.] In order for Mr Reynolds’ account to be true, other defendants must have conspired to falsely identify him as a source of data and apparently forge documents in support of that claim. This may in fact be the case, but Sky (and the court) cannot decide this issue in the absence of cross examination and the other defendants being given an opportunity to explain the position further.”

52.

In the circumstances I reject Ms Parke’s submission that it should have known, much less that it did know, by 25 April 2012 that it had no case against Mr Reynolds and should have discontinued then and there. As I can discern no basis for saying that Sky prosecuted its claim against Mr Reynolds unreasonably in any respect it further follows that I see no ground for awarding Mr Reynolds his costs against Sky assessed on the indemnity basis.

53.

Having reached that conclusion I must next consider whether I should make an order in the Bullock form requiring Sky to pay Mr Reynolds his costs and permitting Sky to claim those costs from Mr Freeman and the others or whether I make an order in the Sanderson form so that Mr Reynolds must look to Mr Freeman and the others (and not to Sky) for payment. It is to be noted – and this was a point made by Mr Moody-Stuart - that if I make an order in the Bullock form Mr Reynolds will be limited to costs on the standard basis which is the basis on which, as between him and Sky, I would direct costs to be assessed. If, on the other hand, I make an order in the Sanderson form I am not so constrained: I can take into account the conduct of those who will be paying. It is to that issue that I next turn after dealing with the costs of the Reynolds’ applications and setting out Mr Craig's submissions on behalf of Mr Freeman and Mr Sullivan.

(b)

The costs of the Reynolds’ applications

54.

Mr Moody-Stuart submitted that as Mr Reynolds abandoned the application for summary judgment and lost the application for specific disclosure Sky should be paid its costs of both and that Mr Reynolds should be left to bear his own. Ms Parke submitted that as Sky’s claim against her client failed he was justified in applying for summary judgment even though in the event the application was not pursued because it was adjourned to the trial by which time there was no point in pursuing it. In all fairness, therefore, he should be paid his costs of the application by, as she put it, “rolling” them into his costs of the action. She submitted that although the application for specific disclosure was dismissed Sky’s failure to explain why it was not suing Mr Hicks justified disregarding the general rule and instead directing that there should be no order as to the costs incurred on either side.

55.

I am satisfied that as the application for specific disclosure was dismissed on its merits Sky should be paid its costs of that application. It was accepted, and in any event I direct, that those costs should be assessed on the standard basis. Coming to the summary judgment application, the fact that at the trial Sky failed to establish its claim against Mr Reynolds does not of itself mean that that application was well founded. If it had been pursued it might or might not have succeeded: I suspect that, in the light of the evidence as it then stood, it would not have succeeded. But I can see arguments the other way. The amount of costs involved is very small (Sky’s costs are said to be £750). I consider that there should be no order so that each side will bear his/its own costs of the application. It must also follow I think, and in any event I direct, that Mr Reynolds should not recover from any other party any part of his costs of the two applications. He must bear them himself.

56.

Ms Parke was concerned that Mr Reynolds should not find that he has to pay anything to Sky before he has recovered what is due to him from others for his costs of the action. This seems only fair. If necessary I can make it a term of the order that this should not happen. The discretion given by CPR 44.3 is wide enough to encompass such a provision.

Mr Freeman and Mr Sullivan

57.

There is no question but that these two must pay Sky’s costs of pursuing its claims against them. Mr Craig did not seek to suggest otherwise.

58.

Mindful, no doubt, of the shameful conduct of his two clients in seeking, by making deliberately untruthful witness statements, to put Sky off the correct trail, Mr Craig chose carefully how to suggest that the indemnity basis of assessing Sky’s costs might not in all the circumstances be appropriate. He submitted that while the facts “would clearly point to an assessment on the indemnity basis as the natural order”, it was to be noted that his clients and Mr Marrow had been ordered to pay the costs order of the summary judgment applications (before Arnold J) on the standard basis. He submitted that “by ordering an assessment on the standard basis when the indemnity basis would otherwise be appropriate, the court may recognize the fact that [Mr Freeman] and [Mr Sullivan] admitted their initial dishonesty and sought to exonerate those wrongly implicated prior to the trial”. This was a reference to their witness statements of early January 2012.

59.

The indemnity basis of assessing Sky's costs of pursuing Mr Freeman and Mr Sullivan to judgment is plainly the appropriate measure in the circumstances of this case. It is noteworthy that although in their January witness statements Mr Freeman and Mr Sullivan retracted much of their earlier evidence there was much that was left unexplained. It was only in the course of the trial that it clearly emerged that Mr Sullivan had conspired with Mr Steele to put forward the false story concerned with the Daltons Data source of supply. And much was left unexplained by them even by the end of the trial. I would have been more impressed by Mr Craig's point if his clients had shown full and open cooperation with Sky and its team.

60.

Turning to the claims by other defendants that his clients should bear some or all of the costs they incurred, Mr Craig accepted that, having falsely implicated Mr Steele and Mr Waters in the spurious data trails and having done so in the knowledge that the latter would falsely implicate others (in the event Mr Sibbald and Mr Reynolds), his clients should be liable for Sky's costs of pursuing those four persons. But he submitted that their liability should not extend beyond the cut-off date (6 January 2012) when they served their witness statements retracting their earlier evidence identifying Mr Steele and Mr Waters. Those retractions followed and confirmed what had already been discussed orally between his clients and Sky’s in-house lawyer the previous September. Once those witness statements had been served Sky should have looked realistically at the evidence of the involvement in the supply chain of Mr Steele, Mr Waters, Mr Sibbald and Mr Reynolds to evaluate just what the strength of that evidence was. Part of that evidence was that they were told by Mr Freeman and Mr Sullivan of the involvement of others in the supply chain who were quite unconnected with those four, in particular Mr Lee. Coupled with the retractions by Mr Freeman and Mr Sullivan Sky therefore no longer had any basis for pursuing either Mr Steele or Mr Waters, much less Mr Sibbald or Mr Reynolds, and should have realised that this was so. Not only, he said, was there no evidence that any Sky data had passed through their hands, there was no evidence that any data had passed from any of Mr Steele, Mr Waters, Mr Sibbald and Mr Reynolds to either Digital or Nationwide. It was true, he said, that Mr Steele persisted in his claim to have acted as a go-between for the delivery of material after Mr Sullivan had exonerated him from any involvement but the decision to do so in the face of his exoneration was entirely Mr Steele's, not his clients'; it provided no reason why his clients should bear any responsibility for Sky's costs, incurred after that date, of pursuing him or (though the amount of costs involved can only have been extremely small) the absent Mr Sibbald. The position was similar in the case of Mr Waters. In any event, said Mr Craig, Mr Steele’s evidence was (as he put it) “fragile”, “fanciful” and really not worthy of consideration. He submitted that if any ordinary litigant, lacking Sky’s ample resources, had asked himself on 6 January 2012 whether on the basis of the information then available to Sky there was a case against Mr Steele, Mr Waters, Mr Sibbald and Mr Reynolds which it was reasonable to pursue he would have said that there was not. By continuing after that date Sky was, in effect, going on a fishing expedition. That was unreasonable and the cost consequences of doing so should not be visited on his clients. He submitted that his clients should not in any event be required to bear any of Mr Reynolds’ costs because the only costs claimed by him were costs incurred on and after he instructed solicitors on 25April 2012 which was long after the cut-off date. He submitted that if his clients were to pay any part of Mr Reynolds’ costs it should be jointly with Mr Marrow and Mr Waters’ estate and should be under a Sanderson and not a Bullock form of order because that would enable them to participate in the assessment of the costs and have them assessed independently of Sky’s costs. He also submitted that if, contrary to his submissions, his clients were to be held liable for any part of Sky’s post cut-off date costs those costs should be on the standard basis even if the court were not minded so to limit them in respect of the period up to the cut-off date.

61.

Much of what Mr Craig submitted covered the same grounds as Ms Parke’s submissions had done. Indeed, by contending for the cut-off date as the date by which Sky should have realised that it had no case against Mr Steele and the others Mr Craig was going rather further than Ms Parke had done. Having rejected her submission that Sky should have realised by 25 April that it had no case against Mr Reynolds it necessarily follows, and in any event I find, that there is no basis for contending that Sky should have come to this realisation at this much earlier date. Mr Moody-Stuart submitted that it was quite erroneous to contend, as Mr Freeman and Mr Sullivan sought to do, that somehow the retractions in their January 2012 witness statements represented a watershed in how Sky should have approached its claims. The truth, he submitted, was that those statements were carefully worded, left much unexplained, failed to disclose the existence of any conspiracy (a circumstance which only came into the open when Mr Sullivan was cross-examined), failed to disclose the trail of false invoices (which only came into the hands of Mr Moody-Stuart and those from within his instructing solicitors who were engaged in the prosecution of Sky's claims in this action in May 2012) and left much in confusion as to where precisely the truth lay. I agree. Having chosen to involve Mr Steele in the scheme to mislead Sky and the court and having doubtless selected Mr Steele in the belief that, as happened, he would stand his ground, Mr Freeman and Mr Sullivan cannot be surprised if, when they sought to exonerate him, Mr Steele did indeed continue to stand his ground and did so stubbornly to the bitter end. So they cannot be surprised that, faced with these conflicting accounts, Sky decided to press on against Mr Steele and also against Mr Sibbald as the source whom Mr Steele had identified. I cannot see that this was in the least unreasonable. The truth, in my view, is that Mr Craig's clients have only themselves to blame for the fact that Sky was not prepared to discount their initial assertions, supported as they were, and to the very end, by an obdurate Mr Steele, and instead look elsewhere for the culprits. I therefore see no reason why Mr Freeman and Mr Sullivan should not bear Sky's costs of pursuing Mr Steele and Mr Sibbald up to the conclusion of the trial. In my judgment they should bear those costs jointly with Mr Steele himself.

62.

I can likewise see no reason why Mr Freeman and Mr Sullivan should not pay Sky’s costs of pursuing Mr Waters and Mr Reynolds to trial. Their conduct was no less dishonest and Sky’s conduct in persisting with those claims to trial no less reasonable than in the case of Mr Steele and Mr Sibbald. I have already explained at length why I have rejected Mr Reynolds’ contention that Sky continued unreasonably to sue him after 25 April 2012.

63.

The only question that remains is whether, as regards Mr Reynolds’ costs, I make an order in the Sanderson or in the Bullock form. I am of the view that it should be in the Sanderson form and I shall so direct. In so doing I have had fully in mind whether there is any real risk that Mr Freeman and Mr Sullivan at least will not be able to pay what is due when the assessment of costs has been completed. On the evidence that I have heard I do not consider that there is. Relevant to this are (1) that there was no evidence, merely speculation, that claimants of any substance, other than Sky, will emerge or criminal penalties will be imposed to render problematical their ability to pay, and (2) that Mr Reynolds is entitled to be paid a substantial amount on account of his costs pending their detailed assessment. On the first of those points it is material to note that Sky has first to pursue its account of profits or, at its election, an inquiry as to damages before it is in any position to seek recovery of what may be established. It is likely that long before then Mr Reynolds’ costs will have been assessed and paid. If necessary I can (I think) direct that, as between Sky’s claims (whether for costs or for what may be established on the account or inquiry) and Mr Reynolds’s claim for costs, Mr Reynolds’ claim should have priority. On the second of those two points Mr Bayfield mentioned that the liquidators would not and could not argue against allowing the assets of Mr Freeman and Mr Sullivan caught by the freezing injunctions obtained by the liquidators to be applied for such payment. And I take it that, in so far as the assets are caught by the freezing injunctions which Sky obtained, the same will apply. A payment on account will ensure that Mr Reynolds is put in funds with a minimum of further delay. In view of the disreputable attempt by Mr Freeman, Mr Sullivan and Mr Waters in the course of this litigation to identify Mr Reynolds as a data source, assessing Mr Reynolds’ costs on the indemnity basis seems to me to be a fair and appropriate course to follow and I shall so direct.

64.

I should add that Mr Craig also submitted that there was no basis for Mr Steele and Mr Waters to recover any of their costs from his clients. Instead, he submitted, they should bear their costs themselves. I agree with that. He said that Mr Sibbald was not present to claim his costs and, anyway, his participation in the action had been minimal. I agree. I do not propose to order that they pay his costs.

Mr Marrow

65.

Mr Marrow accepted that he should be liable for Sky's costs of pursuing him to judgment. Inasmuch as he did not suggest that anyone else should pay them he accepted that he must bear his own costs. But he submitted that he was no part of the conspiracy to lay a false trail and therefore that, whatever might be the fate of Mr Freeman and Mr Sullivan as regards liability for Sky's costs of pursuing any of the other parties, he at least should not be responsible for any of them. Mr Moody-Stuart submitted that, although not so deeply involved as Mr Freeman and Mr Sullivan, Mr Marrow should not stand in any different position in respect of those costs.

66.

I have carefully considered whether Mr Marrow's participation in the matters which have given rise to this action justifies treating him differently from Mr Freeman and Mr Sullivan when it comes to costs. Although, as my judgment explains, he was fully complicit in the various acts which, as Arnold J held, amounted to the wrongs to Sky by Digital and Nationwide of which Sky complained, I have to ask myself whether the evidence justifies the conclusion that, in addition, he was a party to the conspiracy to mislead Sky and the court when these proceedings were begun. It is true that he was informed of the evidence that Mr Waters intended to give by way of his initial witness statement and that he made witness statements which confirmed Mr Sullivan's initial (and misleading) witness statement of 10 May 2010. He appeared to be willing to go along with it all. But was he actively involved in the plot to mislead? By then or thereabouts, as I recall, he had left the business; he does not appear to have been involved in Satellite Services which in August 2010 took over from Digital the running of the business. Reviewing these matters I do not think the evidence I have heard quite justifies a finding that he was so involved. I shall not therefore order him to share with Mr Freeman and Mr Sullivan in having to pay Sky's costs of pursuing Mr Steele, Mr Waters, Mr Sibbald and Mr Reynolds.

67.

I do however order him to pay Sky’s costs of suing him assessed on the indemnity basis. Although I have found that Mr Marrow was not a party to the conspiracy to mislead Sky and the court once these proceedings had been launched, he was well aware of the sourcing of the data which Nationwide and later Digital were using but made no effort to come clean with the court about these matters once he had been joined to the action. On the contrary, he was willing to confirm as accurate what Mr Sullivan had said in his initial, and deliberately misleading, witness statement of 10 May 2010. When in January 2012 Mr Sullivan retracted what he had earlier stated Mr Marrow could do no better to explain his earlier confirmation than assert that his mind was “not on working” at the time. (See paragraph 34 of the judgment.) There is no question but that, although acting in person from December 2011, Mr Marrow’s willingness to go along with an account of events which he must have known was wrong justifies ordering that Sky’s costs of suing him to judgment be assessed on the indemnity basis. In this respect I see no reason for treating him differently from Mr Freeman and Mr Sullivan.

Mr Waters

68.

As I have mentioned his estate was not represented before me. Mr Moody-Stuart submitted that his conduct was as bad as Mr Steele’s and that he (strictly his estate) should therefore be treated in the same way as Mr Steele as regards his own and Sky’s costs. The estate, he submitted, should bear Mr Waters’ own costs and should be ordered to pay the costs Sky had incurred in suing both him and Mr Reynolds. Those costs, he said, should be assessed on the indemnity basis. He submitted that if at any stage before the start of the trial Mr Waters had made a plain retraction of his lies implicating Mr Reynolds, rather than lying (as he did in his second witness statement) to protect himself, Mr Reynolds might have been spared the need to attend the trial.

69.

In agreement with Mr Moody-Stuart I consider that, even though in the event Sky failed to pin any liability on him with the consequence that the action against him fell to be dismissed, his participation in the conspiracy to mislead Sky and the court as to the source of the data used by Nationwide and Digital, and falsely to implicate Mr Reynolds in this, justifies departure from the general rule by ordering him (it will be his estate) to bear Sky's costs incurred in proceeding against him, as well as his own. I agree that his position in this regard is very similar to Mr Steele’s. Unlike Mr Steele, Mr Waters did not continue to assert his involvement and did not go into the witness box to maintain that stance. But the retraction in his second witness statement of his earlier statement was sufficiently qualified, contained sufficient further untruths and raised sufficient questions over just what his evidence was, to provide ample justification for Sky’s decision to continue to pursue him as a defendant. He had only himself to blame for this.

70.

Mr Waters’ estate must also share with Mr Freeman and Mr Sullivan in paying Mr Reynolds' costs. For the reasons summarised earlier Mr Reynolds was in a particularly vulnerable position. Mr Waters must have known this. And yet he consciously and falsely implicated him. As to the assessment of Sky’s costs of pursuing him I am satisfied that these too should be on the indemnity basis.

Mr Sibbald

71.

He took virtually no part in the action and was unrepresented at the costs hearing. To the extent that he did it was to protest his non-involvement. The action against him was dismissed. Not surprisingly, no costs order is sought against him and, on the other side, he has made no attempt to apply for the payment by anyone else of such costs as he may have incurred. I propose simply to make no order as to his costs.

Mr Lee

72.

There is no dispute here. Sky's claims against him succeeded and it asks for and is entitled to its costs of pursuing him. Mr Lee who was present in person did not challenge that. Sky is content for its costs to be assessed on the standard basis. No order is sought that Mr Lee share in the payment of any other costs.

Apportionment

73.

The question which arises is how Sky’s costs are to be distributed among those who are to pay them. Aside from costs orders already made and Sky’s costs of the Reynolds’ applications which fall to be dealt with in the way mentioned earlier in this judgment and can be easily identified, the choice lies between an issues based approach (ascertaining what Sky’s costs are of pursuing each of the defendants) and the approach, put forward by Sky, of apportioning them on a broad percentage basis between the different defendants over different phases of the proceedings corresponding to the periods in which the various groups of defendants were joined to the action. The former is the approach which Ms Pennifer submitted, admittedly with some reluctance, was the appropriate course given what she described was a lack of detail of Sky’s costs. Sky favoured the latter in the interests of simplicity and cost. In his 17th witness statement, Mr Joel Smith (of Sky’s solicitors) explained, and I have no reason to doubt, that as some of the defendants are unlikely to be able to satisfy any costs order made against them it would be disproportionate for Sky to review every time entry since January 2010 (which, as I understand it, is when Sky began to incur costs in the matter) and allocate each resulting item of cost to the defendant or defendants to which the entry relates. Instead, he stated, Sky adopted what he described as “a more high-level approach” by reference to the various time periods. This involved identifying those costs incurred in each period which are attributable to one or more specific defendants (I call them “defendant-specific” costs), allocating those costs to the defendants or defendants in question and then dividing the balance of the costs for that period (described as “general action costs”) equally among the defendants who were parties to the proceedings in that period. The other parties were either not concerned with this topic or were content to leave it to be debated by Mr Moody-Stuart and Ms Pennifer.

74.

Sky’s approach, provided it has a sufficient degree of fairness about it, has the merit of fulfilling the requirement of CPR 44.3(7) that, if practicable, a percentage or time-based approach is to be followed if the court were otherwise minded to adopt an issues based approach. No other approach was suggested.

75.

In my judgment Sky’s approach seems to me to be a sensible way of going about what, if the issues based approach were to be adopted, might otherwise be an exceedingly lengthy and expensive assessment exercise. As a result of discussion in court Sky produced revised figures which made clearer what the costs were that were defendant-specific, and therefore attributed to that defendant alone. Such costs included matters such as applications for freezing injunctions, applications and return hearings for Norwich Pharmacal relief. The revised figures also adjusted the division of the general action costs by including Digital and Nationwide in each of the time period computations so that, instead of assuming eight defendants in the period starting on 20 November (and lasting to the end of the trial), all ten defendants were assumed. It was accepted that the methodology was, and could only be, approximate in that, to take a simple example, copies of evidence generated on a defendant-specific application would be supplied to defendants not concerned with that application without (as I understood it) attributing to those other defendants the costs so incurred. Taken in the round I suspect that such discrepancies probably make little if any difference to the overall outcome. In explaining the revised figures Mr Joel Smith also stated that the figures for counsels’ fees and for disbursements (other than those which related to matters which were already the subject of existing costs orders or which related to the Reynolds’ applications) had not been reviewed to establish whether they could be specifically attributed to particular defendants. Instead, and in order to avoid the time-consuming task of carrying out such a review, the percentage applicable to each defendant in respect of the aggregate of that defendant’s specific and general action costs for the period in question was applied to the overall figure for counsels’ fees and disbursements. I can see the reasons why this practical approach was adopted.

76.

Ms Pennifer, on being furnished with the revised figures, pointed out (correctly) that the defendant-specific costs were headline figures only (and lacked any breakdown) and that it was therefore impossible to comment upon their accuracy or reasonableness. She pointed out that any relatively minor mistakes in the allocation could have a significant impact on the amount payable by any defendant. She also submitted that it was unreal to treat Mr Sibbald as a defendant incurring the same level of general action costs as, for example, her own client, since he had done no more than file his initial (one-line) defence and a very brief witness statement before changing his name and becoming untraceable. She provided further revised figures re-allocating the Sibbald general action costs (but not his defendant-specific costs) between the other defendants for each time period. She did so both on the basis that Digital and Nationwide were to be included as defendants for each time period and on the basis (as Sky’s original calculations had done) that they were not so included.

77.

I agree with Ms Pennifer that it is unreal to treat Mr Sibbald in the same manner as the other defendants. The same might be said of Digital and Nationwide after each went into provisional liquidation in November 2010 when the statutory stay came into effect so that the action could no longer proceed against them. On the other hand this litigation is as much about what those two companies did as it is about the conduct of the other defendants. And it may well be that, if Digital’s appeal to the Supreme Court succeeds, Sky might find that it needs to return to court to obtain relief against that company. In that event it might be said that the general action costs were incurred as much in pursuing Digital as in pursuing the other defendants. Even if the appeal fails and Digital remains in liquidation the liquidators, as I understood Mr Bayfield, will want to review the material gathered in the course of the action when deciding whether to concede Sky’s claims without the need for the matter to be further litigated. I accept therefore that it is appropriate to include Digital and Nationwide in each time period for the purpose of calculating the division of the general action costs.

78.

On that approach Sky’s costs, as apportioned to each defendant, are, subject to one point, those set out under Basis B on the spreadsheet attached to Ms Pennifer’s written submissions of 9 November. They result in Sky’s costs of suing Mr Steele and Mr Sibbald (both defendant-specific and general action and also counsels’ fees and disbursements) coming to an overall figure of a little over £108,000. Although I remind myself that I am not being asked to assess the sums to be paid, merely the method of apportionment once the underlying cost items have been assessed by the court (in the absence of agreement) I find from the estimate of Mr Steele’s costs supplied by his solicitors that there is rough equivalence: his own costs are estimated in the sum, inclusive of VAT, of £119,500 odd. The one point that I have about Basis B (it applies equally to Basis A) is that Mr Marrow was not a defendant until he was joined on or about 21 May 2010. That being so he should not be included in the defendants between whom the general action costs for the initial time period are to be shared.

79.

Where a defendant’s liability for costs is shared with another that liability will be shared equally with that other but will be joint as regards the payee.

Payment on account

80.

It is appropriate that I order payments to be made on account before the actual amounts are either agreed or assessed. I will hear counsel further on this. My present view is that I should give to Sky 50% of the amounts it seeks. This will be on the basis of the apportionment exercise I have discussed, as revised by Ms Pennifer and as further revised (if appropriate) to take account of the point concerning Mr Marrow’s date of joinder.

81.

I am surprised at the amount of Mr Reynolds’ costs (as estimated by his solicitors). At £314,500 odd (inclusive of VAT) they vastly exceed the apportioned amount of Sky’s costs of suing him whether as calculated on the footing of Basis A or on the footing of Basis B. They also greatly exceed (by more than 100%) Mr Steele’s costs. I will need some persuading that I should order even 50% on account, let alone the 60% which Mr Reynolds seeks. I will direct that Mr Reynolds is not to be required to make any payment to Sky in respect of Sky’s costs of the specific disclosure application (estimated by Sky in the sum of £4,936) until he has received payment from Mr Freeman and Mr Sullivan (or one of them) of a sufficient amount to discharge what Sky should be paid for that application. To cope with any difficulties over this there may have to be a liberty to apply.

A footnote

82.

Mr Waters' estate has not had the chance to make representations to me on costs. No grant has yet been taken out and I gather that there is some doubt whether any ever will be. I will discuss with counsel how, theoretical as it may well turn out to be, the estate's prima facie right not to be made liable without an opportunity of being heard may be safeguarded.

British Sky Broadcasting Group Plc & Ors v Digital Satellite Warranty Cover Ltd & Ors

[2012] EWHC 3679 (Ch)

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