Richard Desmond’s Northern & Shell has been left nursing a costs bill expected to top £40 million after a High Court judge tore into the media tycoon’s two-year campaign against the Gambling Commission, branding its case for £1.3 billion in damages “fanciful”.

In a punishing blow to the 73-year-old entrepreneur, Mrs Justice Joanna Smith ordered Northern & Shell and its subsidiary, the New Lottery Company, to pay costs on the indemnity basis, a punitive measure typically reserved for litigants whose conduct the court considers unreasonable. The judge further directed that 75 per cent of the bill be paid up front, denying Desmond’s camp the breathing space of a full appeal process before writing the cheque.

The ruling marks a humbling end to what was billed in court as the legal fallout from “the most financially significant procurement process in UK history” — the award of the fourth National Lottery licence, valued at £70 billion over a decade.

The anatomy of a defeat

Northern & Shell’s twin-track challenge attacked both the Gambling Commission’s scoring of its bid as a “fail” and the lawfulness of post-award modifications to the contract handed to Czech-owned Allwyn Entertainment, the eventual winner. Neither argument survived contact with the courtroom.

Smith found that the commission had been entirely right to disqualify Desmond’s bid, which had failed more than half of the 23 mandatory requirements the regulator had set. The judge highlighted an “enormous gap” of more than 30 points between Northern & Shell’s aggregate score and Allwyn’s, describing the Czech operator, controlled by billionaire Karel Komárek, as the “world leader in conducting lotteries”.

In dismissing the £1.3 billion damages claim outright, the judge concluded it was “fanciful to suppose” Desmond’s vehicle would have won any fair competition against Allwyn. The commission’s subsequent modifications to the licence were also held to be lawful, a finding that closes off the secondary route Northern & Shell had attempted to keep alive after dropping part of its claim on the eve of trial.

A bill that keeps growing

The Gambling Commission’s own legal costs are understood to have reached around £22 million, broadly in line with the £28.8 million the regulator had already disclosed in its mounting defence budget for the case. On top of that, Desmond’s company is liable for Allwyn’s legal fees and its own counsel, pushing the all-in figure comfortably past £40 million.

For a privately held group whose flagship asset is now the Health Lottery, launched in 2011, that is no trivial sum. Northern & Shell most recently reported around £20.8 million in cash reserves, while the New Lottery Company itself sat on a pre-tax loss. The interim payment alone could force a recalibration of group finances.

A founder running out of road

Desmond made his name in adult magazines before moving into adult television and, in 2010, the acquisition of Channel 5. He has since exited those interests along with Express Newspapers, leaving the Health Lottery and the failed bid for the National Lottery as the centre of gravity for his media-to-gaming empire.

The High Court ruling, published in full on the Courts and Tribunals Judiciary website, forms part of a wider pattern: the original April defeat on the substantive claim left little room for the costs hearing to deliver anything other than further pain. Northern & Shell has signalled an appetite to appeal, but the indemnity costs order suggests the bench took a dim view of how the proceedings were run.

What the regulator says

A spokeswoman for the Gambling Commission, which welcomed the ruling in a public statement, said the costs award would “lessen the potential impact of the litigation on good causes” — a pointed reminder that every pound spent defending the licence is a pound not reaching the charities and community projects the lottery is designed to fund.

Lawyers for the commission noted the order remained open to appeal, but called the interim payment a “significant milestone” that effectively closes this chapter of the dispute. A written judgment from Smith, expected within weeks, will set out in detail why she considered indemnity costs appropriate, and is likely to make uncomfortable reading for the Desmond camp.

Northern & Shell has been contacted for comment.

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Desmond’s Northern & Shell faces £40m bill after ‘fanciful’ lottery claim collapses