Richard Desmond’s Northern & Shell Hit with £40m Costs Bill in National Lottery Tribunal defeat

Richard Desmond’s Northern & Shell has been left nursing costs expected to reach £40m after a High Court judge intervened in the media giant’s two-year campaign against the Gambling Commission, setting the case for £1.3bn in “fictitious” damages.

In sentencing the 73-year-old businessman, Mrs Justice Joanna Smith ordered Northern & Shell and its subsidiary, the New Lottery Company, to pay costs in the form of compensation, a punitive measure reserved for those accused of misconduct in court. The judge also ordered that 75 percent of the debt be paid first, denying Desmond’s camp the breathing space of a full appeals process before writing the check.

The decision marks a modest end to what was billed in court as a legal collapse in “the most financially significant procurement process in UK history” – the award of the fourth National Lottery licence, worth £70 billion over ten years.

The anatomy of defeat

Northern & Shell’s two-track challenge attacked both the Gambling Commission’s assessment of its application as a “failure” and the legality of post-award changes to the contract awarded to Czech-owned Allwyn Entertainment, the eventual winner. Neither argument survived court contact.

Smith found that the commission was entirely correct in rejecting Desmond’s application, which failed more than half of the 23 mandatory requirements imposed by the regulator. The judge highlighted a “huge gap” of more than 30 points between Northern & Shell’s aggregate rating and Allwyn’s, describing the Czech operator, controlled by billionaire Karel Komárek, as a “world leader in lottery operation”.

Dismissing the claim for £1.3 billion in damages, the judge concluded that it was “presumptuous” that Desmond’s car would win any fair competition against Allwyn. The commission’s subsequent modification of the license was also deemed valid, a finding that closed the second route Northern & Shell tried to keep alive after abandoning part of its application on the eve of the trial.

A bill that keeps growing

The Gambling Commission’s legal costs are understood to have reached around £22 million, in line with the £28.8 million the regulator has already disclosed in its growing defense budget for the case. On top of that, Desmond’s company is responsible for paying Allwyn’s and his counsel’s legal fees, bringing the total to over £40 million.

For a private group whose flagship asset is now the Health Lottery, launched in 2011, that’s no small sum. Northern & Shell recently reported around £20.8 million in cash reserves, while the New Lottery Company itself is focused on pre-tax losses. An interim payment alone can force a rebalancing of the group’s finances.

An inventor who runs out of road

Desmond made his name in adult magazines before moving on to adult television and, in 2010, the acquisition of Channel 5. He has since exited those interests as well as Express Newspapers, leaving the Health Lottery and the failed National Lottery bid as the centerpiece of his media-to-sport empire.

The Supreme Court’s decision, published in full on the Courts and Tribunals website, is part of a wider pattern: an early April defeat on a substantive appeal left little room for a costs hearing to deliver anything other than more pain. Northern & Shell have signed an intention to appeal, but the order for compensation costs suggests the bench had a negative view of the way the trial was conducted.

What the administrator said

A spokesman for the Gambling Commission, who accepted the decision in a public statement, said that the award of costs “will reduce the potential impact of the case on good causes” – a clear reminder that every pound spent to secure the license is an income that does not reach the charities and community projects the lottery is designed to support.

Attorneys for the commission noted that the order was open to appeal, but called the interim payment a “milestone” that closes this chapter of the dispute. A written judgment from Smith, expected within weeks, will explain in detail why he deemed the compensation costs appropriate, and may read badly for Desmond’s camp.

Northern & Shell have been contacted for comment.