Entries by Toby Moreton

Can Unreasonable Refusal To Mediate Lead To Indemnity Costs On Appeal Even Where Permission Is Granted?

In Fernandez v Fernandez [2025] EWHC 2530 (Ch), HHJ Paul Matthews addressed consequential costs matters following dismissal of an appeal against removal of an executor. The court awarded costs on the indemnity basis, finding Julian Fernandez’s conduct was “out of the norm” within Hosking v Apax Partners Ltd [2019] 1 WLR 3347. Critical factors included unreasonable refusal to mediate—frustrating the process by delaying responses and declining all proposed dates—and pursuing unpleaded issues beyond the core removal question. The court rejected arguments that late service of a costs statement under CPR PD 44 warranted denying costs entirely, citing Macdonald v Taree Holdings Ltd. Applying CPR rule 44.2(8) and Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC 566 (Comm), a payment on account of 50% was ordered given substantial disputes over quantum. The court declared the appellant was not entitled to indemnity from the estate under section 31(1) of the Trustee Act 2000, as the appeal was conducted for personal benefit. The decision confirms that unreasonable mediation refusal on appeal may independently justify indemnity costs.

High Court Removes The “Murphy” Exceptionality Test For Inter Partes Costs In Criminal Judicial Reviews

In R (Bates) v Highbury Corner Magistrates’ Court, the Divisional Court determined costs applications following successful judicial review proceedings that quashed a summons and committal for trial obtained by a private prosecutor. The claimant sought costs for the judicial review under section 51(1) of the Senior Courts Act 1981 and for the underlying criminal proceedings under section 19 of the Prosecution of Offences Act 1985. The central legal issue was whether the Murphy v Media Protection Services principle—that costs in criminal matters should only be awarded under the civil regime in exceptional circumstances—remained good law. After comprehensive review of authorities including R v Chief Magistrates, ex parte Osman and the legislative history, the Court held Murphy was wrongly decided. The High Court’s discretion under section 51 was not ousted by the criminal costs regime and no exceptionality requirement existed. Applying normal CPR Part 44 principles, the Court ordered the interested party to pay the claimant’s judicial review costs on the standard basis. The Court found section 19 engaged for the criminal costs but remitted quantification to the magistrates’ court.

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Part 36 Consequentials | Enhanced Interest, Indemnity Costs And 100% Payment On Account

In Learning Curve (NE) Group Ltd v Lewis & Anor (Consequentials) [2025] EWHC 2491 (Comm), HHJ Russen KC determined costs following a £5.2m judgment that matched the claimant’s Part 36 offer. The defendants mounted comprehensive challenges to avoid CPR 36.17(4) consequences, arguing the offer was unclear about a prior £783,325 payment, that the claimant’s shifting quantum case made application unjust, that enhanced interest should be capped at 4% above base, that costs should be reduced by 50% for claim exaggeration, and that payment on account should be limited. All arguments were rejected. The court held that defendants who fail to seek clarification under CPR 36.9 cannot later claim ambiguity, that the availability of settlement at the correct sum reinforced rather than undermined Part 36 consequences, and that defendants “come nowhere close” to overcoming the “formidable obstacle” required to escape those consequences. Enhanced interest at 8% above base was awarded, indemnity costs ordered from the relevant period, and payment on account set at 100% of budgeted costs given the irrelevance of CPR 3.18 to indemnity basis assessment.

Monthly Costs Law Update – September 2025

September delivered critical decisions on costs budgeting, indemnity costs thresholds, and procedural jurisdiction. The NOx Emissions litigation saw budgets slashed by 62%, whilst courts clarified when “annoying” behaviour remains insufficient for indemnity basis awards. Pre-action applications now definitively constitute “proceedings” for costs purposes. Practitioners must note the firm line drawn against Part 36 offers demanding […]

Variation Of Costs Orders After Successful Appeal | When Previous Orders Should Stand

In Potanina v Potanin (No.2) (Costs), the Court of Appeal addressed four costs issues following a remitted appeal in protracted Part III proceedings involving a sanctioned Russian oligarch. The central question was whether a 2021 costs order in the wife’s favour should be varied after the husband’s subsequent success in the Supreme Court on different grounds. The court declined to vary the earlier order, holding that where a party’s fundamental basis for success remains undisturbed by a later appellate decision on previously unargued points, the original costs order should stand. Applying Baker v Rowe [2009] EWCA Civ 1162, the court treated the wife as the overall successful party despite the Family Division appeal exclusion under CPR 44.2(3)(a). The court ordered a payment on account of £350,000 (over 70% of costs claimed) under CPR 44.2(8), rejected set-off against a Supreme Court costs order it lacked jurisdiction to vary, and set a 60-day payment period balancing sanctions compliance requirements with prompt payment. The decision provides guidance on managing costs through complex, multi-stage appeals and payment timing in sanctions-affected litigation.

No Procedural Tension Between CPR 44.11 And s57 of the Criminal Justice and Courts Act 2015

In XX (a protected party by her husband and litigation friend YY) & Anor v Young & Anor [2025] EWHC 2443 (SCCO), the Second Defendant’s application for permission to appeal a detailed assessment judgment was dismissed. Following a road traffic accident settlement of £149,000 net of contributory negligence, the Second Claimant’s costs bill was reduced from £517,985 to £339,565.16 (34% reduction). The Defendant sought permission under CPR 52.6, arguing the costs judge erred by not applying further CPR 44.11 misconduct reductions based on the Claimant’s alleged failure to explain accepting a lower settlement after surveillance evidence disclosure. Costs Judge Nagalingam held that detailed assessment was not the forum for retrospectively determining notional recovery dates or making quasi-fundamental dishonesty findings where judgment had been entered. The judge rejected any tension between CPR 44.11 and section 57 of the Criminal Justice and Courts Act 2015, noting these serve distinct purposes. The decision reinforces that parties must protect their position through appropriate costs orders (issues-based, time-limited, percentage-based) rather than seeking retrospective relief on assessment.

Executor’s Litigation Costs Indemnity Denied And Personal Costs Ordered In Hostile Trust Dispute

In Fernandez v Fernandez [2025] EWHC 2373 (Ch), the court dismissed an appeal against costs orders made following the successful removal of an executor and trustee. The appellant, Julian Fernandez, was removed by District Judge Wales as executor of his parents’ estates and as trustee of a 2008 family discretionary trust, with an independent professional appointed in his place. The respondents, his siblings, were awarded their costs. The judge ordered the appellant to pay the costs of the counterclaim on the standard basis, but the costs of the summary removal application, issued on 28 March 2024, were awarded on the indemnity basis. Crucially, the judge also ruled that the appellant could not indemnify himself from the assets of the estates or the trust for his own litigation costs or his liability for the respondents’ costs, though his right to an indemnity for proper administration expenses was preserved. On appeal, HHJ Paul Matthews held that the judge was entitled to characterise the litigation as hostile, engaging inter partes costs principles. The decision to award indemnity costs for the application period was justified as the appellant’s continued resistance, despite clear conflicts of interest, was conduct ‘out of the norm’. The deprivation of the litigation costs indemnity was correct under CPR PD 46 para 1.1, as the appellant had acted for a benefit other than that of the estate. The appeal court found no error in the exercise of discretion, emphasising that the judge’s thorough reasoning adequately addressed the principles from cases such as Armitage v Nurse and Excelsior Commercial & Industrial Holdings Ltd. The appeal was dismissed, affirming all costs orders.

Court Of Appeal Confirms That Pre-Action Applications Constitute ‘Proceedings’ for Costs Purposes”

In Gotti v Perrett, the Court of Appeal addressed whether courts retain jurisdiction to make costs and damages orders when discharging interim injunctions obtained without subsequent claim forms. The appellant secured an interim injunction using Form N16A without providing required undertakings or issuing a Part 8 claim form. When the respondent sought discharge with costs and damages seven months later, the appellant conceded his application was “deeply misconceived” but argued no “proceedings” existed to ground costs jurisdiction. The Court held that pre-action injunction applications constitute “proceedings” under section 51 Senior Courts Act 1981 and section 38 County Courts Act 1984, regardless of procedural defects. The appellant’s concession that the court had jurisdiction to both grant and discharge the injunction was fatal to his argument that no proceedings existed. The Court confirmed that interim injunctions have immediate effect requiring costs protection for respondents, and that CPR r.3.10 could remedy using the wrong form. The appeal was dismissed, upholding the lower courts’ jurisdiction to award costs and damages.

High Court Slashes Claimants’ Costs Budgets by 62% In NOx Emissions Litigation

In Various Claimants v Mercedes-Benz Group AG & Ors, the High Court conducted its second costs management hearing for the NOx emissions group litigation, addressing budgets for Tranche 3 (Quantum Trial) and Second General costs. The central costs issue was whether claimants had learned from previous judicial criticism of “over-lawyering” – they had not. Despite claiming to have absorbed lessons, claimants sought £55.7m for Tranche 3 and £19.8m for Second General costs, including 32 fee earners attending case management conferences. The court applied Tranche 2 budgets as comparators, ruling that shorter, less complex proceedings should attract lower costs, not higher ones. It established a 20% tolerance principle for defendants performing similar tasks and severely restricted non-lead solicitors’ recoverable common costs. The court deferred Expert Reports and ADR phases due to irreconcilable differences between parties’ assumptions. Final approved budgets represented dramatic reductions: £21m for claimants and £48m for defendants in Tranche 3. The decision reinforces that unprecedented litigation scale does not justify unlimited budgets and demonstrates robust judicial control over group litigation costs through comparative analysis and proportionality principles.

Being ‘Annoying and Difficult’ Not Sufficiently ‘Out Of The Norm’ For Indemnity Costs In Failed Liquidator Challenge

In Akwagbe v Ulrick & Anor, the court addressed whether indemnity costs should be awarded against a creditor who unsuccessfully applied to remove a liquidator, with particular focus on how personal circumstances affect the “out of the norm” threshold. The First Respondent liquidator sought indemnity costs, relying on Beattie v Smailes where a small creditor’s “extravagant” removal application justified such an order. The court declined indemnity costs, distinguishing Beattie on three grounds: the applicant’s instrumental role in initiating the liquidation, his significant personal losses through the company, and crucially, his head injury affecting executive functioning. While finding the application had little merit, the court held this didn’t meet the “out of the norm” conduct required for indemnity costs. On summary assessment, costs were reduced from £24,584 to £19,800, with specific reductions for the liquidator’s procedural error regarding witness evidence (£4,518.20 reduced to £1,800) and exclusion of items relating to the non-attending liquidation committee. This decision establishes that personal vulnerabilities and historical involvement in a liquidation can prevent conduct being deemed sufficiently unreasonable for indemnity costs, even where applications lack merit.