Baxendale-Walker Principle Does Not Extend To Appellate Costs Against Regulatory Bodies

The Court of Appeal confirmed that regulatory bodies defending appeals from the Solicitors Disciplinary Tribunal face the ordinary costs-shifting regime under CPR r.44.2, rejecting the argument that the costs approach applicable before the tribunal extends to appellate proceedings.

Court of Appeal ruling on costs protection principles in regulatory appeals under CPR r.44.2 following SDT proceedings

DENTONS UK AND MIDDLE EAST LLP V SOLICITORS REGULATION AUTHORITY LTD [2026] EWCA Civ 655

In Dentons UK and Middle East LLP v Solicitors Regulation Authority Ltd [2026] EWCA Civ 655, the Court of Appeal rejected the SRA’s contention that its status as a regulatory body shielded it from an adverse costs order following Dentons’ successful appeal against disciplinary findings. The SRA argued that the principle in Baxendale-Walker v Law Society [2007] EWCA Civ 233, which disapplies the ordinary costs follow the event rule in SDT proceedings to avoid a chilling effect on the regulator’s functions, extended equally to appellate proceedings, relying on obiter observations of Lord Phillips CJ in Baxendale-Walker v Law Society [2007] EWCA Civ 820. The court held itself bound by Wingate v Solicitors Regulation Authority [2018] 1 WLR 3969, in which the Court of Appeal expressly confirmed that parties appealing from the SDT enter the costs shifting regime under CPR r.44.2 on equal footing. The Wingate decision was not rendered per incuriam by the absence of citation to Baxendale-Walker 2, whose relevant passage was in any event obiter. The court reasoned that while the SRA’s regulatory responsibilities justify special costs treatment before the SDT, where the SRA has the benefit of a determination by the SDT and challenges it on appeal, its position is more akin to that of a normal litigant. The court ordered the SRA to pay 65% of Dentons’ costs of both appeals, subject to detailed assessment, and ordered a payment on account of £200,000 within 21 days.
Link to full judgment

[14] The Court of Appeal's decision in Wingate, which expressly considered whether the approach in Baxendale-Walker 1 should be applied on appeal, is binding on us… In our judgment, the Court of Appeal in Wingate was in any event correct in determining that the reasoning that underpinned the Court of Appeal's decision in Baxendale-Walker 1 decision does not extend to appeals from the SDT. The approach applied in the SDT is based on the fact that the SRA's regulatory responsibilities require it to bring properly justified complaints to the SDT's attention without fear of the "chilling effect" of an adverse costs order… The same does not apply, however, where, as here, the SRA has the benefit of a determination by the SDT and challenges it on appeal. In that context its position is in our judgment more akin to that of a normal litigant.

Citations

Baxendale-Walker v Law Society [2007] EWCA Civ 233 There was no presumption in cases before the SDT that an order for costs should be made in favour of a solicitor who was successful before the tribunal, as regulatory bodies should not fear adverse cost orders simply because proceedings were unsuccessful. Bryant and Another v Law Society [2007] EWHC 3043 (Admin) The Divisional Court concluded that the normal approach under the CPR should apply to the costs before the court on an appeal against a decision of the SDT. Bass and Ward v SRA [2012] EWHC 2457 (Admin) The decision in Baxendale-Walker 1 did not govern the costs of an appeal, indicating differing principles apply in appellate scenarios. Wingate v Solicitors Regulation Authority [2018] 1 W.L.R. 3969 The principle that applied before the SDT did not transfer to appeals, where a costs shifting regime would apply, treating the parties as equals. Dentons UK and Middle East LLP v Solicitors Regulation Authority Ltd [2026] EWCA Civ 655 The main judgment the subject of this blog post — costs judgment determining regulatory costs protection does not extend to appellate proceedings.
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Key Points

  • The principle established in Baxendale-Walker v Law Society [2007] EWCA Civ 233, which disapplies the ordinary costs-follow-the-event rule in disciplinary proceedings before the SDT, does not extend to appellate proceedings. Once a regulatory body such as the SRA defends or pursues a determination on appeal, its position is more akin to that of a normal litigant, and the ordinary costs-shifting regime under CPR r.44.2 applies. [14]
  • A decision of the Court of Appeal is not rendered per incuriam merely because an earlier, non-binding decision expressed a contrary view that was not cited to the court. The absence of citation of Baxendale-Walker 2 from the Court of Appeal in Wingate did not undermine the binding authority of that decision. [14]
  • Where obiter observations in an earlier case conflict with a subsequent binding Court of Appeal decision that expressly considered the same point, the binding decision prevails. The obiter comments of Lord Phillips CJ in Baxendale-Walker 2 could not displace the Court of Appeal’s express ruling in Wingate. [6, 14]
  • Where a successful appellant does not achieve outright resolution in its favour but instead obtains a quashing and remittal of the decision below, a partial costs order reflecting that outcome is appropriate. A 65% costs award may properly balance substantial success against the absence of a final determination. [2]
  • When ordering a payment on account of costs, the court must identify a fair estimate of the likely level of recovery at detailed assessment, applying a margin to allow for error in estimation. Where a receiving party’s costs are disproportionately high relative to those of the paying party and to the scope of the hearings involved, a substantial discount from the recoverable percentage figure is appropriate in fixing the interim payment. [18, 19]

[19] "The matter was no doubt of considerable importance to Dentons, but the question on assessment of costs payable between litigants is not whether it was reasonable for Dentons to choose to instruct such expensive solicitors and counsel, but whether it is reasonable for the resulting cost to be imposed on the SRA. In our judgment, given the enormous amount of their costs for a matter that lasted a day in the High Court, and involved substantially a repeat of the same arguments at a hearing of less than two days in the Court of Appeal, a substantial discount is appropriate in arriving at a fair estimate of the likely level of recovery."

Key Findings In The Case

  • The court determined that Dentons was entitled to 65% of its costs from the two appeals, balancing the firm’s substantial success against the absence of a final determination, resulting in a partial costs order. [2]
  • The court rejected the SRA’s contention that no costs order should be made against them due to its role as a regulatory body, affirming that in appellate proceedings, the SRA’s position is akin to that of a normal litigant, which subjects it to the ordinary costs-shifting regime. [3, 14]
  • The determination that Baxendale-Walker principles, which disapply the costs-follow-the-event rule in disciplinary proceedings before the SDT, do not apply to appellate proceedings, was upheld, thus aligning the SRA’s role on appeal with that of a regular litigant. [14]
  • The court decided that Dentons should be awarded an interim payment of £200,000 on account of their total costs across both appeals, reflecting a substantial discount from the calculated recoverable amount due to the proportionality of costs incurred relative to the scope of hearings. [19]
  • The court highlighted that a decision of the Court of Appeal (in Wingate) remains binding, even when an earlier, non-binding decision (Baxendale-Walker 2) expressing a contrary view was not cited to the court, underscoring the supremacy of binding decisions over obiter observations. [14]

[2] "Subject to the point discussed below, we have concluded that the appropriate costs order is that the SRA pays 65% of the costs of Dentons incurred in this court and on the appeal to Lang J. This best balances two considerations: first, Dentons is – following the second appeal to this court – substantially the successful party in respect of the appeals from the decision of the SDT. Second, we have nevertheless quashed the decision of the SDT and remitted the case to it to be determined on the basis of the different test set out in our judgment."

The Court of Appeal’s decision in Dentons UK and Middle East LLP v Solicitors Regulation Authority Ltd [2026] EWCA Civ 655 addresses whether the costs protection afforded to regulatory bodies in first-instance disciplinary proceedings applies equally on appeal.

Background

Dentons UK and Middle East LLP (“Dentons”) is a solicitors’ firm that found itself subject to disciplinary proceedings brought by the Solicitors Regulation Authority Ltd (“the SRA”) before the Solicitors Disciplinary Tribunal (“the SDT”). The SDT reached a decision against Dentons, which Dentons then appealed to the High Court. That appeal was heard by Lang J, who dismissed it. Dentons pursued a further appeal to the Court of Appeal, which was heard over two days on 25 and 26 March 2026.

In its substantive judgment handed down on 27 April 2026 ([2026] EWCA Civ 508), the Court of Appeal allowed Dentons’ appeal. The SDT’s decision was quashed and the matter was remitted to the SDT to be determined on the basis of a different test set out in the Court of Appeal’s judgment. Dentons was therefore substantially the successful party in the appellate proceedings, though the case was not concluded outright in its favour given the remittal.

Following the substantive judgment, the parties were unable to agree costs, and the Court of Appeal was required to determine the appropriate costs orders in respect of both the appeal to Lang J and the further appeal to the Court of Appeal. It was common ground between the parties that the costs of the proceedings before the SDT itself were to be reserved to the SDT. The costs judgment was handed down on 21 May 2026 ([2026] EWCA Civ 655), with the constitution comprising Lord Justice Bean (Vice President of the Court of Appeal, Civil Division), Lord Justice Jeremy Baker, and Lord Justice Zacaroli.

Costs Issues Before the Court

Two distinct costs issues required determination. The first, and more substantive, was whether the SRA’s status as a regulatory body meant that no costs order should be made against it in respect of the appellate proceedings, notwithstanding that Dentons had been substantially successful. The SRA argued that the principle established in Baxendale-Walker v Law Society [2007] EWCA Civ 233 (“Baxendale-Walker 1”), which disapplied the ordinary costs-follow-the-event rule in disciplinary proceedings before the SDT, should be extended to cover appeals from the SDT as well.

The second issue, which arose only if the court rejected the SRA’s primary position and made a costs order in Dentons’ favour, concerned the appropriate amount to be ordered on account of costs pending detailed assessment. Dentons had filed costs schedules showing total costs of £793,679.60 exclusive of VAT across both appeals: £355,778.98 in the High Court and £437,900.62 in the Court of Appeal. The SRA’s own costs across the same proceedings were considerably lower, at £90,358.54 in the High Court and £89,479.13 in the Court of Appeal, making Dentons’ costs nearly 4.5 times greater than those of the SRA.

The Parties’ Positions

The SRA’s position

The SRA contended that no costs order should be made against it, relying on the principle in Baxendale-Walker 1. In that case, the Court of Appeal held that there was no presumption that costs should be awarded in favour of a solicitor who had successfully defeated disciplinary proceedings before the SDT. The reasoning was that the Law Society (and by extension the SRA) occupied a wholly different position to that of an ordinary civil litigant, given its independent obligation to bring properly justified complaints of professional misconduct to the SDT’s attention in the public interest. Exposing the regulator to adverse costs orders simply because properly brought proceedings had been unsuccessful risked a chilling effect on the exercise of its regulatory obligations.

The SRA further relied on a subsequent decision in the same proceedings, Baxendale-Walker v Law Society [2007] EWCA Civ 820 (“Baxendale-Walker 2”), in which Lord Phillips CJ expressed the view that the same principle applied equally to appellate proceedings under s.13 of the Solicitors Act 1974. The SRA argued that there was a tension between that approach and the line of authority suggesting that the ordinary CPR costs regime applied on appeal, and that Lord Phillips CJ’s approach was to be preferred.

Dentons’ position

Dentons argued that the Baxendale-Walker 1 principle was confined to proceedings before the SDT and did not extend to appeals. It relied on a consistent line of authority to that effect. In Bryant and another v Law Society [2007] EWHC 3043 (Admin), the Divisional Court applied the normal CPR approach to costs on an appeal from the SDT, though the court gave no consideration to either of the two Baxendale-Walker decisions. In Bass and Ward v SRA [2012] EWHC 2457 (Admin), Bean J reached the same conclusion having been referred to Baxendale-Walker 1, though Baxendale-Walker 2 was not cited. Most significantly, in Wingate v Solicitors Regulation Authority [2018] 1 WLR 3969, the Court of Appeal expressly confirmed that the Baxendale-Walker 1 principle did not apply on appeal, with Rupert Jackson LJ stating that parties arriving in the Administrative Court on appeal from the SDT entered a costs-shifting regime and stood on an equal footing, with the losing party ordinarily paying the winning party’s costs under CPR r.44.2.

The Court’s Decision

The regulatory body costs issue

The Court of Appeal rejected the SRA’s argument that the Baxendale-Walker 1 principle should apply to the appellate proceedings. The court held that it was bound by its own decision in Wingate, which had expressly considered and answered the question in the negative. The fact that Lord Phillips CJ’s comments in Baxendale-Walker 2 had not been cited to the Court of Appeal in Wingate did not render that decision per incuriam. The observations in Baxendale-Walker 2 were in any event obiter, since Lord Phillips CJ had determined the costs question in that case largely on the basis of the petitioner’s dishonesty rather than on the regulatory principle.

The court also expressed agreement with the reasoning in Wingate as a matter of principle. The rationale underpinning Baxendale-Walker 1 was that the SRA’s regulatory responsibilities required it to bring properly justified complaints to the SDT without fear of the chilling effect of an adverse costs order, placing it in a wholly different position to that of an ordinary civil litigant. That rationale did not, however, extend to the appellate context. Where the SRA had the benefit of a determination from the SDT and was challenging that determination on appeal, its position was more akin to that of a normal litigant. The court therefore confirmed that the ordinary costs-follow-the-event approach under CPR r.44.2 applied.

Having determined that the SRA was not protected from an adverse costs order by reason of its regulatory status, the court considered the appropriate order. Dentons was substantially the successful party following the second appeal, but the SDT’s decision had been quashed and remitted rather than resolved outright in Dentons’ favour. Balancing those two considerations, the court ordered that the SRA pay 65% of Dentons’ costs of both the appeal to Lang J and the further appeal to the Court of Appeal, with those costs to be subject to detailed assessment if not agreed.

Payment on account

On the question of the appropriate payment on account, the court applied the approach set out in Excalibur Ventures LLC v Texas Keystone [2015] EWHC 566, identifying a fair estimate of the likely level of recovery subject to a margin to allow for error in estimation. The court was not assessing the costs, but determining what amount should be paid pending detailed assessment.

65% of the total costs incurred by Dentons was £515,891.74. The court noted that while the matter was no doubt of considerable importance to Dentons, the question on assessment of costs payable between litigants was not whether it was reasonable for Dentons to choose to instruct such expensive solicitors and counsel, but whether it was reasonable for the resulting cost to be imposed on the SRA. Given the enormous amount of Dentons’ costs for a matter that lasted a day in the High Court and involved substantially a repeat of the same arguments at a hearing of less than two days in the Court of Appeal, the court concluded that a substantial discount was appropriate in arriving at a fair estimate of the likely level of recovery. The court ordered the SRA to pay £200,000 within 21 days on account of the total costs incurred by Dentons across both appeals.

▶ Watch the case summary

 

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DENTONS UK AND MIDDLE EAST LLP V SOLICITORS REGULATION AUTHORITY LTD [2026] EWCA CIV 655 | LORD JUSTICE BEAN | LORD JUSTICE JEREMY BAKER | LORD JUSTICE ZACAROLI | LANG J | BAXENDALE-WALKER V LAW SOCIETY [2007] EWCA CIV 233 | BAXENDALE-WALKER V LAW SOCIETY [2007] EWCA CIV 820 | BRYANT AND ANOTHER V LAW SOCIETY [2007] EWHC 3043 | BASS AND WARD V SRA [2012] EWHC 2457 | WINGATE V SOLICITORS REGULATION AUTHORITY [2018] 1 WLR 3969 | SOLICITORS DISCIPLINARY TRIBUNAL | COSTS ORDER | PROPORTIONATE COSTS | REGULATORY BODY | REGULATORY FUNCTION | DETAILED ASSESSMENT | PAYMENT ON ACCOUNT | INDEMNITY BASIS | REASONABLE COST BASIS | NORMAL LITIGANT STANDARD | PUBLIC INTEREST | VICTORIOUS PARTY | COSTS SHIFTING REGIME | DISCHARGE OF RESPONSIBILITIES | EXCALIBUR VENTURES LLC V TEXAS KEYSTONE [2015] EWHC 566 | COSTS SCHEDULE | COSTS INCURRED | COSTS FOLLOW THE EVENT | COSTS ON APPEAL | QUASHED DECISION | REMITTAL TO TRIBUNAL | SUCCESSFUL PARTY | HIGH PROFESSIONAL STANDARDS