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Payment on Account Percentage Where Budgets Are Massively Exceeded | Overspend By Paying Party As Evidence Costs Were Reasonably Incurred

budgeting, Budgeting & Management, Indemnity Costs, Interim Costs Order, New Costs Blog, Payment on Account

The King’s Bench Division’s decision in Winehouse v Parry & Gourlay [2026] EWHC 1970 (KB) addresses the calculation of interim payments on account where indemnity costs have been awarded and the receiving parties have departed substantially from their approved costs budgets without making variation applications under CPR r.3.15A.

Background

The claim was brought by Mr Mitchell Winehouse, suing as personal representative of the estate of his daughter Amy Jade Winehouse, the singer and songwriter who died on 23 July 2011. The defendants, Ms Naomi Parry and Ms Catriona Gourlay, had been close friends and associates of Amy Winehouse during her lifetime. Following her death, 141 items of property came into the defendants’ possession and were subsequently sold at Julien’s Auctions in Los Angeles in 2021 and 2023. The claimant alleged that the defendants were not entitled to possess or sell those items and were therefore liable to the estate for the proceeds of sale.

A six-day trial took place on 8 to 12 December 2025 and 27 January 2026 before Sarah Clarke KC sitting as a Deputy Judge of the High Court. The substantive judgment, handed down on 20 April 2026, found for both defendants on all issues and dismissed the claimant’s claims in their entirety. Every disputed issue of fact and law was resolved against the claimant, including findings that he and his witnesses had given unreliable evidence on material points.

Critically, the court found that the claimant and his witnesses knew prior to the 2021 auction that the defendants were selling a number of significant disputed items in that auction, and that contemporaneous emails and documents in the claimant’s possession proved this beyond doubt. This knowledge, and the evidence proving it, meant that the claim should never have been commenced and should have been withdrawn long before trial.

Following receipt of the embargoed draft judgment, the parties were unable to agree an order on costs and consequential matters. By an order dated 20 April 2026, the court adjourned the hearing generally and set a timetable for the exchange of costs schedules and the filing of written submissions and responsive submissions on the incidence, basis, quantum and interim payment of costs. The court indicated it would determine all issues on the papers unless an oral hearing was directed. Detailed submissions and responsive submissions were received from all parties, accompanied by approximately 500 pages of documentary evidence. A further costs issue was raised by the claimant’s solicitor by email shortly before the judgment on costs was finalised, to which the defendants’ solicitors responded. The court determined all costs issues on the papers.

Costs Issues Before the Court

Four distinct costs issues required determination. First, the incidence of costs: whether the general rule under CPR r.44.2 that costs follow the event should apply, or whether the court should depart from it and make no order as to costs. Second, the basis of assessment: whether costs should be assessed on the standard or indemnity basis. Third, the quantum of any interim payment on account under CPR r.44.2(8): specifically, what percentage of budgeted and unbudgeted costs should be ordered by way of interim payment, having regard to the approved costs budgets and the very substantial departures from those budgets by all parties. Fourth, whether any interim payment orders should be stayed pending a prospective application to the Court of Appeal for permission to appeal.

The costs budgeting position was central to the interim payment calculation. A costs management order had been made. The first defendant’s approved budget was £218,730 inclusive of VAT, against total costs as at 28 April 2026 of £715,361.98 inclusive of VAT, leaving unbudgeted costs of £496,631.98. The second defendant’s approved budget was £194,485.20 inclusive of VAT, against total costs of £487,132.15 inclusive of VAT, leaving unbudgeted costs of £292,646.95. Neither defendant had made a budget variation application under CPR r.3.15A. The claimant’s own total costs as at 28 April 2026 were £951,080.28 inclusive of VAT, against an approved budget of £160,850 inclusive of VAT, representing an overspend of approximately £790,000.

A further discrete issue arose very late in the costs proceedings when the claimant’s solicitor raised by email a challenge to the recoverability of the second defendant’s costs, relying on references to a conditional fee agreement and a social media statement by the second defendant suggesting she had secured third-party funding. The claimant submitted that the conflicting accounts raised a question as to whether some or all of the costs claimed by the second defendant were properly recoverable, and that any interim payment in respect of those costs would be particularly prejudicial given her alleged impecuniosity.

The Parties’ Positions

The claimant accepted that the defendants were the successful parties and that the usual starting point would be a costs order in their favour, but contended that this was an exceptional case in which the court should make no order as to costs. His primary submission was that the defendants had withheld explanations for their possession of the disputed items for several years, had failed to engage meaningfully with ADR until a very late stage, and had by their conduct driven the case to trial and caused costs to escalate beyond the approved budgets. He submitted that the defendants should not be permitted to recover costs caused by their own unreasonable conduct.

In the alternative, the claimant submitted that any costs orders should be made on the standard basis and reduced by 75% of each defendant’s total costs. On interim payments, the claimant proposed that any order should be limited to 90% of budgeted costs and 50% of unbudgeted costs, and that payment should be stayed pending determination of any application to the Court of Appeal for permission to appeal. The claimant argued that there was a real risk of injustice if interim payments were made and subsequently could not be recovered from the defendants given their alleged impecuniosity.

The defendants submitted that the claimant’s defeat was total and comprehensive and that there was no basis to depart from the general rule. They further submitted that the claimant’s conduct was unreasonable to a high degree and took the case out of the norm within the meaning of Excelsior Commercial and Industrial Holdings Ltd [2002] EWCA Civ 879, justifying an indemnity costs order in favour of both defendants. In support of that submission, the defendants relied on a range of conduct findings made in the substantive judgment, including the speculative and thin nature of the claim as issued, the late addition of serious allegations of deliberate concealment and breach of fiduciary duty, the aggressive pursuit of those allegations to the end of trial, the claimant’s courting of press publicity, and the finding that the claimant had told a newspaper journalist he had gone to the police when he knew he had not.

On interim payments, the defendants sought approximately 80% of each defendant’s total costs inclusive of VAT, submitting that there were good and unavoidable reasons why the defendants had been forced to depart from their budgets and that there was a high degree of confidence that a sum in excess of that figure would be recovered on detailed assessment. They submitted that payment should be made within 14 days and that no stay should be granted.

In response to the late CFA and third-party funding challenge, the second defendant’s solicitor confirmed that the second defendant was and remained personally liable for the total amount of her legal fees, that a CFA had at one point been agreed but had never been put into effect, and that the social media statement about third-party funding had been optimistic and premature as no funder had in fact materialised. Both defendants had provided signed costs schedules. The first defendant’s solicitor corroborated that account.

The Court’s Decision

The court ordered the claimant to pay the costs of both defendants on the indemnity basis, to be assessed if not agreed, with no reduction of 75% or any other amount. Interim payments were ordered in the sum of £569,330.99 to the first defendant and £394,521.89 to the second defendant, both payable within 14 days. No stay was granted. The court also refused the claimant’s application for permission to appeal.

Indemnity Costs

Applying the principles in Excelsior and as summarised by Coulson LJ in Thakkar v Mican [2024] EWCA Civ 552, and the concurring remarks of Lady Carr CJ in that case, the court was satisfied that the claimant’s conduct was unreasonable to a high degree and outside the ordinary and reasonable conduct of proceedings. The court found that the claimant had pursued a claim that was speculative, weak, opportunistic and thin, had issued proceedings without any positive factual case, had pleaded his claim in vague and sloppy terms, and had abandoned his claim to a number of items shortly before trial having failed to apply any critical thought to the list of items he was claiming. The court further found that the claimant had significantly expanded his claim at a very late stage by adding allegations of deliberate concealment and breach of fiduciary duty, both of which were dismissed, and that these late additions significantly expanded the seriousness of the allegations, the scope of the evidence, the issues in dispute and the length of the trial.

The court found that the claimant had made grave, unjustified and demonstrably false allegations of dishonesty and deceit against both defendants and pursued these aggressively to the end. The allegations included deliberate concealment (put on the basis that the defendants had deliberately deceived the claimant by lying to him about their possession of the disputed items and their intention to auction them), breach of fiduciary duty (based on the assertion that the first defendant had deliberately, knowingly and repeatedly deceived the claimant in order to derive significant, improper, financial gain), and theft (allegations made within days of the 2021 auction that the defendants had deliberately removed items from the estate’s lockup without the estate’s knowledge or consent). The court found these claims to be totally unfounded and was extremely critical of the claimant for making them.

The court further found that the claimant deliberately courted publicity in a way that was calculated to exert pressure on the defendants and cause significant damage to their reputations. He gave an exclusive statement to The Sun newspaper published on 3 November 2023 (the day after the claim was served) which plainly alleged that the defendants had sold items that they were not entitled to sell and which did not belong to them, for the purpose of achieving significant financial gain and thereby depriving the Amy Winehouse Foundation of funds. At a court hearing in July 2024, the claimant’s instructed counsel stated in open court in front of members of the press that there was “evidence of suspicious circumstances surrounding these auctions”. In an article in the Sunday Times Magazine published on 14 April 2024, the claimant stated that he had “gone to the police” about the case and repeated this on oath at trial. However in cross-examination he conceded that this was untrue and the court found that it could not see how “telling a newspaper journalist that he had gone to the police when he knew he had not, can be anything other than deliberate and when coupled with his accusation that the defendants had stolen the Items from the lockup, was plainly intended to damage the defendants’ reputations and probably also to put pressure on them to give him the proceeds of sale of their Items”.

The court rejected the claimant’s submission that the trial of this litigation was caused by the defendants’ refusal to accept his offers of settlement or mediation. A review of the pre-trial correspondence demonstrated the aggressive and unpleasant way in which the claimant’s solicitor pursued the defendants and made offers of settlement which only ever amounted to requiring the defendants to concede his claim and make payments of money to him, whilst leaving him free to continue to publicly make serious accusations of dishonest, deceitful behaviour against them. At no point did the claimant ever properly consider the explanations provided by the defendants, nor the inherent weakness of his own case. On the contrary his response was to disbelieve the defendants and make additional, even more serious allegations against them shortly before trial.

The court found that the defendants were fully entitled to defend their personal and professional reputations to the end, and that they had no other realistic option given the claimant’s serious and damaging allegations, his aggressive conduct throughout, his refusal to accept their explanations, his unrealistic settlement offers and the real risk that he would thereafter be free to continue making public allegations of deceit and dishonesty against them.

As Lady Carr CJ observed in Thakkar, an unnecessarily aggressive approach to litigation is unacceptable. The court found that the claimant’s high degree of unreasonable conduct extended into every facet of the proceedings: pre-trial, at trial, and in respect of his unreasonable and unrealistic approach to the issue of costs. The court noted that the claimant’s costs submissions themselves demonstrated that he had no insight into his own failings and continued to conduct the litigation in a similar vein, making baseless allegations against the defendants in an attempt to avoid the obvious costs consequences of the total failure of his claim.

No Costs Reduction

The court declined to reduce the amount of costs payable by the claimant by any amount. The claimant would be liable for the total costs incurred by both defendants subject to assessment if not agreed. The court found that the claimant’s high degree of unreasonable conduct, extending into every facet of the proceedings (pre-trial, at trial, and in respect of his unreasonable and unrealistic approach to the issue of costs), fully justified the making of indemnity costs orders in favour of both defendants with no reduction. The court noted that quantum would ultimately be a matter for a costs judge to determine on detailed assessment.

Interim Payments | The Court’s Reasoning

In assessing what was a reasonable amount for interim payment under CPR r.44.2(8), the court estimated the likely level of recovery on an indemnity costs basis by each defendant and allowed a margin for error. The court took into account that the claimant’s total costs as at 28 April 2026 amounted to £951,080.28 (inclusive of VAT) against budgeted costs of £160,850 (inclusive of VAT), an overspend of approximately £790,000. The court found it inevitable that the defendants were also forced to significantly exceed their budgeted costs to meet the unreasonable way in which the claimant deliberately litigated and pleaded his claim. It was notable however that the claimant’s total costs were significantly higher than the total costs incurred by either defendant.

The court applied the principle that where indemnity costs have been ordered, doubts as to whether the item of cost in question was reasonably incurred, or reasonable in amount, are resolved in favour of the receiving party (CPR r.44.3(3)). The court considered that the additional costs incurred by the defendants, over and above the costs budget, were reasonably incurred as a result of the claimant’s unreasonable conduct of this litigation and that the vast majority of these costs were therefore likely to be recovered. The court also took into account that the defendants’ costs would undoubtedly have increased from the figures quoted in their April 2026 costs schedules due to the way in which the claimant had chosen to unreasonably litigate the issue of costs.

The court further considered that there were good reasons why the first defendant’s total costs were significantly higher than the costs of the second defendant. The court estimated that the reason the trial overran by three days (taking six court days to complete rather than the three days listed) was largely due to the additional allegations of deliberate concealment and breach of fiduciary duty and the significant time taken up in evidence and submissions dealing with the facts and law caused by these matters. These matters would inevitably have significantly increased the time and costs expended by the defendants pre-trial. This applied to both defendants but was particularly relevant in respect of the total costs incurred by the first defendant, as she was alleged by the claimant to have been the person mainly responsible for the deliberate concealment, and was directly involved in all the evidence and matters relevant to this issue. In addition, she alone faced the allegation of breach of fiduciary duty.

Taking all these factors into account, the court considered that the likely level of recovery for each defendant would be the full amount of budgeted costs and at least 85% of unbudgeted costs. Allowing a margin for error, the court reduced the interim payment figure to 90% of budgeted costs and 75% of unbudgeted costs, both inclusive of VAT. This in the court’s view arrived at a reasonable amount for each defendant to receive by way of interim payment.

For the first defendant, this resulted in an interim payment order of £569,330.99, calculated as £196,857 (90% of budgeted costs inclusive of VAT) plus £372,473.99 (75% of unbudgeted costs inclusive of VAT). For the second defendant, this resulted in an interim payment order of £394,521.89, calculated as £175,036.68 (90% of budgeted costs inclusive of VAT) plus £219,485.21 (75% of unbudgeted costs inclusive of VAT).

The Late Challenge to Recoverability

The court dealt briefly with the claimant’s late challenge to whether the second defendant was in fact liable to pay the costs she claimed to have incurred. The claimant relied on an assertion that the second defendant had apparently made on social media in March 2024 that she had secured a third-party funder, a statement by her solicitors in December 2024 that the second defendant “has a CFA with this firm”, and a later statement in her costs submissions that “a CFA was agreed at one point but no costs were incurred under it. Ms Gourlay was obliged to pay them regardless of the outcome. She is heavily indebted to her solicitors.”

The court found that the claimant’s attempt to raise this further issue so late in the day was unimpressive and provided further evidence that he was continuing to drive up the costs of all parties by raising new, weak arguments to bolster his already weak costs submissions, and find a way to avoid paying the costs orders to which the defendants were fully entitled. The court accepted the explanations provided by the defendants and their solicitors. In particular the court noted that both defendants had provided signed costs schedules which carried obligations of truthfulness, not only on the defendants but also their solicitors. It would be a grave and serious matter to give misleading information in these schedules and in the defendants’ submissions to the court regarding the quantum of costs incurred, the basis for those costs and the second defendant’s liability to pay. The court made it clear that it fully accepted the figures given in the costs schedules of both defendants, and the explanations provided by them and their solicitors regarding the basis of their liability to pay these costs. This was consistent with the court’s findings at trial that the defendants were and are credible and truthful witnesses.

The court further noted that the defendants’ solicitors had conducted the difficult litigation properly and appropriately, despite coming under significant and unreasonable pressure from the claimant and his solicitors, including being bombarded with aggressive and unpleasant correspondence and serious allegations of impropriety against the first defendant and her solicitor, which the court found to be unfounded and improper.

Time for Payment and No Stay

The court ordered the claimant to pay both interim payment orders within 14 days of the date of the order, in accordance with CPR r.44.7. The claimant plainly had ready access to the funds to satisfy these orders and there was no reason why the defendants or their solicitors should wait longer than that to receive these funds, particularly given both defendants’ parlous financial situations which had been caused by the claimant’s unreasonable behaviour.

The court declined to stay the interim payment orders pending any application to the Court of Appeal for permission to appeal. The court adopted the defendants’ submissions that the risk that the claimant may succeed on appeal was limited, and in any event his grounds related only to the Category B disputed items, meaning that there was no appeal against the court’s dismissal of his claim in respect of the Category A and Category C items. In those circumstances, in the unlikely event that the claimant was granted permission to appeal and ultimately succeeded to this limited extent, he would still be liable for substantial adverse costs orders.

Conclusion

The decision illustrates the court’s approach to interim payments on account where indemnity costs have been awarded and both sides have massively exceeded their approved budgets without making variation applications. The court treated the paying party’s own overspend (approximately £790,000 against a budget of £160,850) as affirmative evidence that the receiving parties’ departures from budget were reasonably incurred, particularly where those departures were caused by the paying party’s unreasonable conduct. By applying the indemnity costs principle in CPR r.44.3(3) that doubts are resolved in favour of the receiving party, and estimating likely recovery at 100% of budgeted costs plus at least 85% of unbudgeted costs before applying a margin for error, the court arrived at interim payment orders representing 90% of budgeted and 75% of unbudgeted costs. This is a substantially higher recovery rate on unbudgeted costs than would ordinarily be expected, and reflects both the indemnity basis of assessment and the court’s finding that the excess costs were caused by the paying party’s unreasonable litigation conduct.

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High Court Cuts Claimants’ Expert-Phase Budgets, Holding Legal Fees Should Not Be ‘anywhere close to twice the amount of the expert fees’

budgeting, Budgeting & Management, Costs Budgeting & CMC, Disbursements, Expert fees, New Costs Blog, Proportionality

The King’s Bench Division’s decision in Various Claimants v Mercedes-Benz Group AG and Others [2026] EWHC 1335 (KB) addresses the appropriate ratio of legal fees to expert fees in costs budgeting for multi-party litigation.

Background

The NOx Emissions Group Litigation comprises 13 Group Litigation Orders covering claims by various claimants against vehicle manufacturers and dealers relating to alleged emissions irregularities in diesel vehicles. The lead GLO was made against Mercedes, with additional lead GLOs (“ALGLOs”) against Ford, Nissan, Renault and Peugeot-Citroen. The remaining GLOs are referred to as Non-ALGLOs.

Two previous Costs Management Hearings had produced detailed judgments and Costs Management Orders. At the second hearing in July 2025, two phases were adjourned: the ADR/settlement phase of the Second General budget, and the expert evidence phase within Tranche 3. The third Costs Management Hearing took place on 16 April 2026. Following that hearing, the court granted permission for experts in five disciplines to give written and oral evidence at the quantum trial, though the scope of issues was reduced. The parties were given a further opportunity to revise their budgets in light of those decisions. The judgment was handed down on 4 June 2026 by Mr Justice Constable and Senior Costs Judge Rowley.

Both previous judgments had criticised the claimants’ estimated costs in strong terms. At the third hearing, reassurances were again given on behalf of the claimants that the court’s earlier criticisms had been taken on board, particularly regarding the layers of solicitor representation. However, that reassurance was undermined by the claimants’ own counsel accepting that the extent of counsel time, particularly in relation to the experts’ phase, could not be justified and would no doubt be reduced. The court observed that, given that concession, it was not apparent why realistically reduced figures had not been put forward before the hearing.

Issues Before the Court

The court was required to assess and approve budgeted costs for two phases left outstanding from the second hearing. The first was the experts’ phase within Tranche 3, covering five separate expert disciplines. The second was the ADR/settlement discussions phase of the Second General budget, covering the period from 1 April 2026 to the end of the quantum trial in December 2026.

Within the experts’ phase, the court had to grapple with a recurring structural issue: the ratio of legal fees to expert fees. The court had previously commented on the inappropriate level of lawyer time being spent in the curation of expert evidence, and the same concern arose again. The claimants’ budgets for several disciplines reflected what the court described as a “1:1:1” ratio between profit costs, counsel’s fees and experts’ fees, meaning that the total legal spend was approximately twice the amount being charged by the experts themselves. The court had to determine, for each discipline, what level of legal input was reasonable and proportionate relative to the expert work being undertaken.

A further structural issue concerned the claimants’ practice of suppressing profit costs figures to bring them into line with the other two elements. The court noted that this did not address the underlying concern about the overall ratio, and if anything reinforced the view that the legal team’s input into the expert evidence was excessive.

For the ADR/settlement phase, the court was required to assess the claimants’ revised budget of approximately £1.98 million. The defendants’ combined budget for this phase had been agreed by the claimants in its entirety. The court also had to address specific disputes in relation to individual GLOs.

The Parties’ Positions

Claimants

The claimants maintained that their revised budgets, produced following the hearing, reflected the court’s decisions on the scope of expert evidence and were reasonable and proportionate.

In relation to Loss Assessment, the claimants submitted that the list of issues approved by the court encompassed the majority of the issues in their original proposal, together with some further issues and complexities, and that the budgets had not otherwise been reduced beyond a moderate reduction in counsel’s fees.

In relation to Mechanical Engineering, the claimants pointed to the reductions made following the hearing, which they attributed to the removal of the initial joint expert meeting and joint statement, counterbalanced to some extent by the permission given to the defendants to serve additional factual witness statements. The claimants also highlighted the particular demands of the Mercedes GLO given the number of core sample vehicles involved, and the Nissan/Renault GLO which they said justified a higher budget given the involvement of two separate original equipment manufacturers. The claimants relied on the defendants’ own correspondence, in a different context, asserting significant differences in the technical issues facing the manufacturers.

On the 1:1:1 ratio point, Mr Barclay informed the court that the profit costs figures had been reduced to bring them into line with the other two elements, on the basis that this reflected what was reasonable and proportionate in accordance with the statement of truth on the budgets. He characterised this as the solicitors taking a reduction rather than as reverse engineering to produce aligned figures.

In relation to Consumer Behaviour, the claimants submitted that the reduction in scope did not materially affect the work required. For Software Engineering, the claimants said the budgets had been reduced to reflect the fact that no separate reports were required, but that the costs for joint meetings and joint statements would be greater than originally budgeted. For UK Vehicle Valuation, the claimants submitted that the single remaining issue had been significantly expanded and encompassed some of the issues originally set out elsewhere, resulting in only a moderate adjustment to the proposed budget.

Defendants

Numerous defendants’ counsel took aim at the amounts claimed for solicitors’ profit costs, counsel’s fees and experts’ charges. The similarity between them led to the description of them being incurred in a “1:1:1” ratio. After numerous attacks upon the unlikely nature of the similar figures being spent by all concerned, the claimants’ explanation that profit costs figures had been reduced to match the other two elements was described by the court as not reassuring and as not meeting the substance of the criticism, namely that a ratio of 1:1:1 was itself inappropriate.

Mr Carlo Taczalski, for the defendants generally on the Mechanical Engineering issue, disputed the extent of the asymmetry between the claimants and defendants. He accepted that the defendants have in-house expertise but denied that this was a substitute for the work needed to be carried out by the CPR Part 35 expert. Mr Taczalski also disputed that the need to deal with more core sample vehicles justified the claimants’ assumption that there would need to be a double allocation of costs to Mercedes.

Mr Bailey, for Renault, submitted that there was an unexplained discrepancy in circumstances where the claimants’ mechanical engineering expert fees were 1.5 times the defendants’ experts but the solicitors and counsel fees were double. He submitted that the result was more extreme than the 1:1:1 approach seen elsewhere. For Peugeot-Citroen, Mr Hogan described the sums claimed for both expert fees and counsel’s fees as “surprising” and the profit costs as “arbitrary”.

For Software Engineering, the defendants said the work required was limited to the filing of a joint statement following a meeting between the respective experts. Notwithstanding this, the claimants still sought nearly half of the original budgeted sums even though the cost of preparing an initial report and two responsive reports was no longer required. The extent of counsel’s fees was also criticised as not reflecting the expert led exercise allowed by the court.

For Consumer Behaviour, the defendants’ offer of little more than one third of the sums claimed by the claimants reflected the stark difference in the parties’ views of its utility. The defendants made a valid point regarding the reduction in issues to be dealt with by this expert, but their offer allowed for little more than the expert’s fees claimed.

For UK Vehicle Valuation, the defendants referred to the “considerably reduced scope” and quoted the managing judge as saying that the remaining issue was a “very limited question”. The defendants described the remaining issue as being slightly expanded, rather than the claimants’ description of it. Notwithstanding this description, the reduction in the claimants’ budgets of just over a fifth did not reflect the reduction in scope, in the defendants’ submission.

The Court’s Decision

The 1:1:1 Ratio

The court held that the explanation given by the claimants for the 1:1:1 ratio was not reassuring and did not meet the substance of the criticism. The fact that profit costs figures had been suppressed to match counsel’s fees and expert fees did not address the underlying concern about the overall ratio. If anything, it reinforced the view that there was too much input from the legal team into the expert evidence.

The court stated that it ought not to be the case that the legal fees are anywhere close to twice the amount of the expert fees required to produce the necessary evidence. Previous judicial comments had been made about an inappropriate amount of lawyer time being spent in the curation of expert evidence.

The court noted that the budgets produced by the Lead and ALGLO defendants suggested that the legal input of solicitors and counsel combined would be no more costly than the expert evidence and on some occasions rather less. Whilst the court did not rely too heavily upon such budgets, which were inevitably produced on a somewhat speculative basis where the defendants did not consider that evidence was required, it reinforced the view that the amount of legal input into the claimants’ production of expert evidence was some way beyond what was reasonable between the parties.

Loss Assessment

Prior to the hearing, the claimants’ budgeted costs for this discipline amounted to £1,855,808.74 in addition to incurred costs of £2,355,017.34. Following the undertaking to revise counsel fees given at the hearing, counsel’s fees were claimed in the sum of £558,277.87 (a reduction of £62,030.87) whilst the profit costs remained at £618,000 and experts’ fees at £617,500. The overall estimated costs claimed were therefore £1,793,777.87. The defendants’ offer was £1,267,500.

The court noted that the proposed reduction in the legal fees was exactly 10% in this field and that this reduced the proportion from being 2:1 to 1.9:1. The court was under the impression that something rather more significant was being contemplated by the claimants’ legal team.

Taking the experts’ fees figure of £617,500 and doubling it as a starting point to reflect an equal amount for legal fees, the court reached a figure which was below the defendants’ offer of £1,267,500. In such circumstances, it was difficult to consider the defendants’ offer to be anything other than a reasonable sum to allow and so the court allowed £1,267,500.

Mechanical Engineering

Prior to the hearing, the budgeted costs claimed were £3,234,598.19, together with £2,481,298.26 in respect of incurred costs. Following the hearing, the fees were reduced by, in round terms, £279,000 (profit costs), £364,000 (counsel’s fees) and £144,000 (experts’ fees) totalling a revised estimated figure of £2,445,959.49. The defendants’ offer for this element totalled £1,460,605.

The court noted that the incurred costs under this heading were more easily explained than for the loss assessment discipline, given the further testing regime in the context of quantum which had involved mechanical engineers. There was little challenge to the experts’ fees themselves as opposed to the fees expected to be required for legal oversight.

If the court again took, as a starting point, the doubling of the experts’ fees for the various Lead and ALGLOs it reached, in round terms, £680,000 for Mercedes; £340,000 each for Peugeot-Citroen and Ford; and £515,000 in respect of Nissan/Renault.

The court considered that this starting point in respect of Mercedes was sufficiently close to the (revised) sum actually sought by the claimants of £718,681.65 for the estimated sum to be allowed as claimed.

The same was not true for the remainder of the ALGLO budgets, where the total revised sums sought remained significantly in excess of double the expert fees. The court tended to the view that the same sum should be allowed in respect of Peugeot-Citroen and Ford given that these manufacturers would appear to be broadly similar (at least in terms of number of sample vehicles). The figure of £340,000 fell squarely between the offers made by the two defendants. The court considered that the Peugeot-Citroen offer was unrealistic assuming the experts’ fees were allowed as claimed. However, the Ford figure of £400,000 allowed for 1 to 1.5 times those experts’ fees for legal fees and the court viewed this as a reasonable sum to be allowed to the claimants rather than the sum being claimed of nearly £500,000.

In relation to Nissan/Renault, it appeared that both sides were working on the principle that something in the region of 1.5 times the other ALGLO budgets would be reasonable. The court agreed, and with that in mind, allowed £600,000 in respect of that budget.

Accordingly, the court allowed £400,000 for each of Peugeot-Citroen and Ford.

Software Engineering

Costs in respect of this expert discipline were claimed at the GLO specific level. Prior to the hearing the estimated costs claimed were £1,956,800.90. Following the hearing, the estimated costs had been reduced to £759,015.80 based on £234,000 (profit costs), £223,133.70 (counsel’s fees) and £301,882.10 (experts’ fees). This estimated sum was in fact now considerably lower than the £951,128.93 offered by the defendants prior to the hearing. In large part this was explained by the reduction in scope of the evidence allowed.

At the case management hearing, the managing judge ruled that (at least for the time being) there need not be a separate report in addition to a joint report. It was presently anticipated therefore that the software engineers produce a joint report which sufficiently articulates the reasons for any areas of disagreement in respect of any areas where the software engineers cannot agree. The areas of disagreement were anticipated to be limited.

The court accepted that input into discussions as to how helpful the evidence is, or could be, with further exploration, forms an integral part of the experts’ evidence whether in conference with counsel or otherwise. On the face of it, the reduction of a little over half from the previously contemplated figures seemed to the court to be a realistic reduction. Nevertheless, the court saw some force in the defendants’ argument that the proportion of legal time, and in particular counsel input, should be lessened by the reduction in formal documentation needing to be served. On this basis, the court considered that the budgeted sum should be £125,000 per ALGLO save for Nissan/Renault where it should be £250,000.

Consumer Behaviour

Costs in respect of consumer behaviour were claimed at the Pan NOx level. Prior to the hearing they were claimed in a total sum of £1,425,823.50. Following the hearing, the experts’ fees continued to be claimed at £473,900, the solicitors’ fees had been reduced by £7,000 to £465,850 and counsel’s fees by roughly £88,000 to £391,166.51. The revised sum of £1,330,916.51 claimed for estimated costs remained considerably more than the £525,000 offered by the defendants for this field.

In giving permission for consumer behaviour evidence to be produced at the quantum trial, the managing judge emphasised that the evidence obtained from the consumer behaviour expert was to be non-duplicative to work carried out by the loss assessment expert.

The defendants’ offer of little more than one third of the sums claimed by the claimants for this discipline reflected the stark difference in the parties’ views of its utility. However, the court had determined that evidence under this heading was reasonable. Arguments as to utility, when the court may have relied or not relied at all on such evidence may be made in due course in the usual way if or when any costs order is made, but that was not relevant for the budgeting exercise once permission had been granted. Whilst the defendants made a valid point regarding the reduction in issues to be dealt with by this expert, their offer allowed for little more than the expert’s fees claimed.

The court held that there certainly ought to be some reduction in the expert’s fees, given the focussing of the issues and the court’s exhortation to avoid duplicating evidence being provided by other experts. That was also bound to flow through into the associated legal work. Doing the best it could in what was suspected to be a niche area of expertise, the court allowed a total of £1 million at the Lead/ALGLO level.

UK Vehicle Valuation and/or Pricing

The costs in this expert discipline were also claimed at the Lead/ALGLO level. A total of £938,286.95 for estimated costs was claimed prior to the hearing. Unlike the other disciplines, this sum was made up of four essentially equal parts with “other disbursements” adding to the profit costs, counsel’s fees and experts’ fees. The estimated costs were reduced to £730,333.26 following the hearing. The “other disbursements figure” of £219,300 did not change, but the other three elements were reduced to £175,650 (profit costs), £145,583.26 (counsel’s fees) and £189,800 (experts’ fees). The defendants’ offer for this field was £400,000.

At the case management hearing, the managing judge allowed evidence from an expert in this discipline in a considerably reduced scope from that sought by the claimants. Many of the issues proposed by the claimants to be considered by this expert were rejected.

The court thought it was clear from the determination made by the managing judge that the court’s intention was to provide the claimants with no more than a facility to combat the inevitable expertise contained inhouse at the defendants regarding the marketing of their products. The description of a “limited question” based on only one of nine questions originally proposed and with almost no amendment did not fit with the claimants’ approach as described in their post hearing letter.

The defendants had maintained their offer of £400,000 (which was now more than 50% of the total claimed). It seemed to the court that that was an entirely reasonable sum in respect of this element of the budget and it was allowed as such.

Defendants’ Budgets for the Experts’ Phase

It was confirmed by counsel to the court during the hearing that, in respect of the Tranche 3 expert reports, all of the ALGLO and non-ALGLO defendants’ individual budgets had been agreed, save for Vauxhall. All of the other non-ALGLO defendants had agreed their budget at a maximum of £20,000 for the experts in loss assessment and mechanical engineering. Further sums up to £10,000 had been agreed by those same defendants for the three contingent experts’ disciplines.

This left Vauxhall alone in contending for £23,453.56 for the loss assessment and mechanical engineering experts and £11,726.78 in respect of each of the three contingent experts. Ms Collar made oral submissions in support of the non-contingent experts’ budget by making reference to it amounting to less than 30 minutes for considering the main reports and less than 20 minutes for the contingencies. In Ms Collar’s submission, that time could not be reasonably reduced.

The court held that there was certainly the opportunity for the court to vary sums for different defendants in respect of the same phase in an appropriate case. The difficulty with Vauxhall’s argument was that it inevitably led to a consideration of the hourly rates that were charged in combination with the time claimed. It was trite to say that hourly rates were not set when budgets were considered and therefore it was a slippery slope to consider submissions of this nature in any detail. The task of the court was to set the global figure for each phase and it was a matter for the party thereafter as to what level of lawyer dealt with what aspect of the work required.

All of the non-ALGLO defendants would have to carry out similar work in respect of considering the expert reports obtained in the Lead and ALGLO cases. There was no good reason, as far as the court could see, for Vauxhall to be required to spend more time and effort in this task than any of the other non-ALGLO defendants. The other defendants had either estimated amounts less than £10,000 or £20,000, or been prepared to agree offers, at those sums. The court therefore came to the conclusion that the reasonable sum to allow for Vauxhall’s budget in respect of the Tranche 3 expert reports was also the combined figure of £50,000 made up of £20,000 and three £10,000 budgets.

ADR/Settlement Discussions Phase | Defendants’ Budgets

The entirety of the defendants’ budgets for this phase had been agreed by the claimants. The current defendants’ budgets totalled £1,687,074.55, representing a reduction of a little over £100,000 from the budget put forward for the second hearing.

The claimants said that it was not always obvious why there was a variation in the budgets between defendants given the paucity of assumptions set out. However, the claimants were committed to ensuring that all parties were adequately resourced to engage meaningfully and constructively in ADR/Settlement Discussions and were open to any approach that may facilitate a productive resolution of the dispute, including giving the defendants the benefit of the doubt in their estimates for the ADR phase. Accordingly, the claimants were prepared to agree the totality of the defendants’ projected future costs in the ADR phase of the Second General Budgets.

The court held that it did not seem that the claimants’ approach of effectively agreeing to whatever the defendants said they required to enter into ADR was one which should be endorsed by the court. This was particularly so where the claimants’ own assumptions for this phase were now much more limited. They accepted the defendants’ view that it was unlikely there would be any substantial settlement discussions before the formal PDD judgment was handed down (probably in July). The claimants said that any settlement discussions taking place would be informal rather than via any formal ADR process such as a mediation. Any settlement work was likely to take place prior to the quantum trial beginning in October and that thereafter, the parties would be too busy with the trial to be able to engage in settlement discussions. In any event, no concluded settlement was expected to be reached by the end of the period (31 December 2026), or indeed nor was it expected that any discussions were likely to have reached an advanced stage by then.

Given these limitations, the court recalibrated its view of the sufficiency of the defendants’ estimated costs. Rather than being the lowest sum which could be put forward to avoid judicial criticism, the court took the view that they were quite generous. As such, they had relevance to the sums claimed by the claimants.

ADR/Settlement Discussions Phase | Claimants’ Budgets

The total sum claimed by the claimants had reduced markedly from the previous figure of £11 million to one of £1,984,770. Those costs were claimed against the individual GLOs with just over £1 million claimed against the Lead and ALGLOs and just under £900,000 being claimed against the Non-ALGLOs. The defendants’ offer of £1,211,162 broke down almost exactly two thirds/one third between the Lead and ALGLO defendants and the Non-ALGLOs.

For Peugeot-Citroen, the claimants claimed £192,136 and were offered £168,330 for this phase. The reason for the difference was the sum claimed for the non-lead firms of £52,836. The defendants’ offer allowed for £29,030 for that work on the assumption that the lead solicitors’ time and disbursements were allowed in full.

The lead solicitors’ time in respect of each of the Lead and ALGLOs’ budgets was claimed at the same figure and so too were the disbursements. The only variable between those budgets was where there was a steering committee involved, such as in the Mercedes GLO, and the number of non-lead solicitors involved. In respect of the latter, 17 hours per non-lead solicitor had been allowed for in the claimants’ budgets, save for the Johnson Law Group who had been allowed 25.5 hours and who were intending to provide a co-ordinating role amongst non-lead solicitors in the GLOs in which they were involved.

Mercedes and Ford had agreed figures with the claimants in respect of their budgets. Assuming that the lead solicitors’ time and disbursements had been allowed in full in each, these agreed budgets suggested that Ford had allowed the equivalent non-lead solicitors’ time in full and Mercedes had reduced the non-lead solicitors’ time by roughly one third. The Ford and Mercedes agreements with the claimants suggested that the Peugeot-Citroen offer of 55% or thereabouts was a little low and the court allowed £175,000 for this phase.

For Nissan/Renault, the claimants’ figures were double the other ALGLOs in respect of lead solicitors’ time and disbursements and totalled the sum of £406,816. Nissan offered £235,000 and Renault offered £221,846. At first blush, the defendants had offered at least as much as was being claimed by the claimants and it might be expected that the claimed figure would therefore be agreed. However, the claimants understood from past experience that the Nissan/Renault defendants made separate and different offers which were not capable of being accepted without the agreement of the other. In practice, this meant that the lower of the two offers was the only one which the claimants could actually accept.

In submissions, Mr Teasdale did not shy away from the doubling of the figures under this phase and pointed to the defendants’ budget discussion reports which indicated that, at least as far as Renault were concerned, there would not be any coordination between the defendants in respect of settlement. If the defendants were to go in different directions, then there was no justification for suggesting that the claimants’ costs in this ALGLO should be similar to those in the other ALGLOs. Whilst he contended for the doubling figures in their entirety, Mr Teasdale indicated that in any event, the figures would be higher than those agreed in the Mercedes GLO.

The budgeted figures for these defendants were £200,840.00 (Nissan); £7,675.00 (Nissan authorised dealerships) and £144,966.30 (Renault), making a total of £353,481.30. Based on these figures agreed between the parties, it would appear that the defendants expected to spend approximately 1.5 times more than they considered was reasonable for the claimants to spend in respect of any settlement negotiations.

The court held that there were numerous possibilities as to the methodology of any settlement reached between the claimants and some or all of the defendants. The estimated figures were therefore particularly broad brush in this phase. The court did not think there was any great purpose in considering whether doubling the claimants’ figures in order to cope with two separate OEMs was precisely the correct approach. But it seemed unlikely that the claimants would spend less than the defendants in such negotiations. Consequently, the court considered that £350,000, representing essentially the same sum as claimed by the defendants overall, was the reasonable and proportionate sum for this phase.

For the non-ALGLO defendants, all offered the sum of £50,000 to the claimants in the budget discussion reports in respect of each GLO specific budget. By the time of the hearing, Toyota had agreed a sum of £69,450, but the remaining seven budgets were not agreed. The sums claimed by the claimants in those budgets ranged from £75,400 to £149,363. The lowest three budgets (including Toyota) had been reduced following a decision by the claimants to reflect the fact that in those budgets, only one of the lead solicitor firms was instructed by the claimants. As such, less work was likely to be done. Overall, the claimants did not accept that simply halving the time claimed was appropriate.

The other five budgets were much closer in range (between £121,486 and £149,363) and, as with the ALGLO budgets, they were based on a standard figure for the lead solicitors and for counsel’s fees. Those figures were reduced. As with the ALGLO budgets, these non-ALGLO budgets varied depending upon the amount of non-lead solicitors’ time involved. They contained the same amounts of time as for the ALGLO budgets in respect of each individual non-lead solicitor.

The non-ALGLO defendants’ own budgets generally ranged between £40,000 and £70,000 with Volvo (£82,827.50) and Vauxhall (£103,836.91) being the outliers.

The defendants’ offer of £50,000 on the claimants’ budget per non-ALGLO defendant was said to be based upon the allowances made in the first hearing judgment regarding this phase. However, as Mr Teasdale pointed out, the figures in fact varied quite considerably, with, for example, the budget in the Vauxhall GLO being allowed at £100,000 whereas in the Toyota GLO it was £20,000, which perhaps reflected the suggestion that it ought to be at the lower end of the sums involved given the comparative simplicity of any settlement mechanism. The court considered it was difficult to say any standard figure ought properly to apply in this phase. Even a regimented methodology for settlement of individual claims would require more time where there were considerably more claimants than in others. The court therefore rejected the defendants’ approach of simply allowing a standard figure.

Nevertheless, the court considered the defendants’ two thirds/one third approach between ALGLO and non-ALGLO defendants to be a more appropriate division than allowed for in the 55/45 figures proposed by the claimants and moved the sums allowed towards the defendants’ split. As Mr Kapoor submitted on behalf of the defendants on this subject, any settlement of these claims was likely to be based on a framework which cascaded from the lead and ALGLO defendants to the non-ALGLO defendants, at least in its general shape.

The court also agreed with the general thrust of the defendants that any negotiation would have to be dealt with in a compressed period. Until the PDD judgment was available for consideration, little or no negotiating was likely. Once the quantum trial had commenced, the scope for industry in respect of settlement was also constrained. The court acknowledged Mr Teasdale’s comments that if there was traction in the manner of any negotiations, then significant time may be spent in seeking to resolve the claims. Equally, there may be little or no traction and the court’s task was not to budget on a worst case approach.

Balancing these various factors, and having allowed £975,986 in respect of the ALGLO budgets for this phase, the court allowed the sum of £649,450 in respect of the non-ALGLO defendants. The court allowed a maximum of £75,000 in respect of the single lead firm defendants and allocated the remainder so as to achieve a figure which was approximately 60%/40% overall.

Conclusion

The court’s approach to the experts’ phase established a clear methodology: doubling the approved expert fees as a starting point for reasonable legal costs. This produced total allowed costs of £5,411,181.65 for the claimants and £12,858,057.16 for the defendants.

For the ADR/settlement discussions phase, the court allowed £1,625,436.00 for the claimants and £1,687,074.55 for the defendants. The court rejected both the claimants’ initial £11 million estimate and the defendants’ attempt to impose a uniform £50,000 cap across all non-ALGLO defendants, instead adopting a nuanced approach that reflected the varying complexity of individual GLOs while maintaining an overall two thirds/one third split between ALGLO and non-ALGLO work.

The judgment reinforces the principle that legal fees for curating expert evidence must bear a reasonable relationship to the cost of the expert work itself, and that a ratio approaching 2:1 in favour of legal fees will ordinarily be regarded as disproportionate in multi-party litigation.

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Consequences Of “Over-Egging” A Claim At The CCMC | Court Engages The CPR 44.3(2)(a) Proportionality “Safety Valve” As Good Reason To Depart Downwards From The Approved Budget Under CPR 3.18

budgeting, Budgeting & Management, Costs Budgeting & CMC, Hourly Rates, New Costs Blog, Proportionality, Summary Assessment

The County Court at Central London’s decision in O’Sullivan v Trading 212 UK Limited [2026] EWCC 32 addresses the circumstances in which a court may depart from approved costs budgets under CPR 3.18 when conducting a summary assessment following trial.

Background

This matter concerned a claim brought by Mr Peter O’Sullivan against Trading 212 UK Limited, arising from the closure of his share trading account in August 2021. The substantive judgment, delivered orally by Recorder Benjamin Wood on 12 February 2026 at the County Court at Central London, dismissed the claim. The recorder found that the defendant had both the contractual right and the regulatory obligation to close the account, the latter arising under the applicable anti-money laundering regulations, though no suggestion was made that the claimant had been involved in anything other than entirely legitimate activity.

The claim had been valued at under £30,000 on the Claim Form, with the prayer to the Particulars of Claim pleading monetary relief of £37,106. No non-monetary relief was sought. As the recorder noted in the costs judgment, when properly analysed, the claim was only ever worth a few thousand pounds. It turned on the application of the relevant regulations and the parties’ written contract to a set of facts that were largely apparent from contemporaneous written communications, with the relevant documents running to no more than a few dozen pages.

The claim was initially issued and case managed in Hull. A costs and case management conference took place before a district judge at the County Court at Hull on 11 December 2024, at which the claim was allocated to the multi-track and a costs management order was made. The claimant’s budget was agreed at £59,575 (of which £8,625 had already been incurred), and the defendant’s budget was approved at £188,558.98 (of which just over £88,000 had already been incurred). All figures in the judgment were stated net of VAT.

The defendant applied to strike out the claim on the basis that the claimant’s conduct, which was said to involve attempts to interfere with witnesses and intimidate the defendant’s employees, jeopardised the fairness of the proceedings. That application was heard on 15 September 2025 and adjourned, with the claimant offering undertakings to the court. Costs were reserved. The claimant’s costs schedule for that hearing totalled £20,800 and the defendant’s totalled £59,513.67, both figures being additional to the budgeted costs.

At the pre-trial review on 16 October 2025, a circuit judge increased each party’s budget by £18,243.50. Three phases of the claimant’s budget were increased (witness statements, PTR and trial preparation) and two of the defendant’s phases (witness statements and trial preparation) were increased.

During the course of the trial itself, the defendant produced late disclosure of documents, including internal “Slack” messages, which ought to have been identified and disclosed considerably earlier. That late disclosure generated a significant volume of additional work, including a partially successful and partially unsuccessful application to amend the Particulars of Claim. Both parties filed Precedents T in respect of their increased costs: the claimant’s increase was £54,115 and the defendant’s was £63,330.91, though the defendant later indicated it would seek only £41,477.33 of that figure.

By the time judgment was handed down on the substantive claim, the parties had, between them, a little over £482,000 in costs on the table. The recorder noted that the parties’ actual costs incurred were somewhat higher: the claimant had spent just under £246,426.54 and the defendant had spent £452,456.26, giving a combined total of approaching £700,000 in actual costs incurred in a dispute worth, on the recorder’s analysis, around £5,000.

There being insufficient time to deal with consequential matters on 12 February 2026, the recorder gave directions for the resolution of costs issues. Written submissions were received from both parties. The claimant requested that costs be determined on paper; the defendant requested a hearing. Following consideration of the written submissions, the recorder directed an oral hearing, which took place on 21 May 2026. The costs bundle, which had originally been 54 pages, had grown to 205 pages by the time of the hearing, with both parties having produced further written submissions without invitation or permission to do so. The defendant also filed an N260 indicating costs of just under £30,000 for the hearing on 21 May alone. The claimant filed a costs schedule of £1,925 for that hearing.

Throughout the proceedings, the claimant had been represented by Anthony Metzer KC and George Symes of counsel, instructed by Andreas Laws. The defendant was represented by Anna Greenley of counsel, instructed by Winckworth Sherwood LLP. At the costs hearing itself, the claimant chose to appear in person, assisted by his wife, on the basis that he wished to save money. Following the conclusion of the hearing, the claimant sent two further detailed emails to the court containing additional submissions, the second of which prompted an order that neither party should file further submissions without applying formally and on notice.

The recorder noted that, so far as could be discerned from the absence of any witness statement explaining a refusal of an ADR proposal (as would have been required by the CCMC order), neither party had proposed mediation, early neutral evaluation or any other form of ADR at any stage.

Costs Issues Before the Court

The recorder was required to determine a number of distinct costs issues following the dismissal of the claim. The principal question was what costs order, if any, should be made, and in particular whether the general rule under CPR 44.2(2) should apply so as to require the unsuccessful claimant to pay the defendant’s costs, or whether the conduct of the parties, and in particular the defendant’s late disclosure and the circumstances surrounding the strike out application, justified a departure from that general rule or a modification of any order made.

Two specific conduct-related issues were identified as warranting separate treatment. The first concerned the defendant’s failure to comply with its standard disclosure obligations until the trial had almost concluded, specifically its failure to search for and disclose internal Slack messages. The second concerned the claimant’s conduct in the period leading up to the defendant’s strike out application, which had been heard on 15 September 2025 and adjourned on the basis of undertakings.

A further significant issue arose in relation to the costs management orders made at the CCMC and PTR, and specifically whether there was good reason, within the meaning of CPR 3.18, to depart from the approved and revised budgets when carrying out the summary assessment. The recorder considered the competing approaches in RNB v LB Newham [2017] EWHC B15 (Costs) and Nash v Ministry of Defence [2018] EWHC B4 (Costs), as well as the principles established in Merrix v Heart of England NHS Foundation Trust [2017] EWHC 346 (QB), [2017] 1 WLR 3399.

The court was also asked to carry out a summary assessment of the costs of both parties in respect of the various elements of the order. The claimant sought assessment of his costs arising from the defendant’s late disclosure, as set out in his Precedent T dated 6 February 2026, totalling £54,115. The defendant sought costs of the claim as a whole, including the costs of the strike out application (£59,513.67), budgeted and incurred costs, Precedent T costs and the costs of the hearing on 21 May 2026 (approximately £30,000), though the latter figure was not included in its formal quantification document.

Finally, the claimant raised the question of whether any order for payment of costs should be stayed pending the determination of his application for permission to appeal the substantive judgment.

The Parties’ Positions

The claimant’s position, as developed through his written submissions settled by counsel and his own oral and written submissions at the costs hearing, was that the defendant should pay his costs in relation to steps caused or prolonged by the defendant’s conduct, and that, save in relation to those issues, there should be no order as to costs. This represented a hardening of the position set out in his earlier written submissions of 26 February 2026, in which it had been submitted on his behalf that the fairest order was no order as to costs save for those costs directly consequential on the defendant’s late disclosure, with any costs order in favour of the defendant being drastically reduced in the alternative.

In relation to the defendant’s late disclosure, the claimant submitted that he should have his costs consequent upon this misconduct on the indemnity basis, on the basis that the conduct was analogous to that of the defaulting claimant in Finsbury Food Group plc v Axis Corporate Capital UK Ltd [2023] EWHC 1559 (Comm), whose conduct was described by the Deputy Judge as “profoundly unsatisfactory“.

The defendant’s position was that the correct and just order was that the claimant pay the defendant’s costs, save for a limited concession in respect of the costs of the reconvened trial and of considering the late disclosure. The defendant submitted that it should have its costs in relation to the strike out application on the basis that it was necessarily made, relying upon the matters set out in the witness statement of a partner at Winckworth Sherwood dated 10 June 2025.

The General Rule and Conduct

The recorder began by noting that costs are in the discretion of the court, but that the discretion must be exercised judicially. CPR 44.2(2) provides that if the court does decide to make an order about costs the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party, but the court may make a different order. The successful party was the defendant, because the claim had been dismissed.

Following CPR 44.2(4), the court must have regard to all the circumstances in deciding what order to make about costs, including the conduct of all the parties, whether a party has succeeded on part of its case (even if it has not been wholly successful) and any admissible offer to settle. In this case, there had been no admissible offers to settle other than an offer from the defendant to the claimant, made on 29 October 2025, which was to accept just over £160,000 in respect of its costs as they then stood.

Much of the parties’ focus in their costs submissions had been on conduct, and in particular on each other’s conduct. The recorder observed that the case had been extremely hard fought and every point that could be taken had been taken. One of the difficulties with conducting litigation in this way is that costs rise and, because people become polarised and irritated with each other, they take more and more points in their scramble for victory.

With two exceptions, the recorder did not consider it would be just, having regard to the conduct of both the parties, to start doing a fine analysis of the impact of particular elements of conduct that might be said to have had an impact on the costs. This included all of the conduct points made by the claimant in his written submissions after the hearing and in his own written submissions relied upon at the hearing, to the extent that there were admissible conduct points and not impermissible challenges to the substantive judgment. The recorder considered that it would be wholly disproportionate for the court to descend into the level of detail that appeared to be envisaged.

The recorder therefore did not propose to make an adjustment to the costs order for general conduct points. The two specific points that did warrant separate consideration were the defendant’s disclosure and the claimant’s conduct leading to the defendant’s strike out application.

The recorder also noted the claimant’s position as expressed in his email of 22 May 2026: “I know the difference between right and wrong, and that is all that matters to me. I will either get Justice or I will end up penniless trying. I have my principles your Honour, they are expensive but I will not depart from them.” The recorder further noted that the claimant had not accepted the Financial Ombudsman’s decision of 2 December 2022, which had concluded that the defendant had not done anything substantially unfair or unreasonable in restricting and then closing the claimant’s account.

Having considered the parties’ submissions, and subject to those two points, the recorder concluded that there was no reason to depart from the general rule that the unsuccessful party should pay the successful party’s costs.

The Defendant’s Disclosure

As the recorder had explained in his substantive judgment, the defendant had not complied with its standard disclosure obligations until the trial had almost concluded. In particular, it failed to carry out a search for internal “Slack” messages as part of its initial disclosure searches, in spite of the fact that these might have revealed the internal communications that led to the decision to close the claimant’s account. The absence of such messages in the defendant’s disclosure led its witness (who had left the defendant’s employment in 2022, years before the disclosure exercise was undertaken) to give evidence that was wrong, to the effect that there was no paper trail. It was evident that the witness said this because of the absence of any disclosed communications and not because the witness was trying to hide anything.

Even at the time of the costs judgment, it was not really clear why the defendant failed to disclose those Slack messages as part of its standard disclosure and, in fairness to its Company Secretary and Legal Counsel, who made an explanatory witness statement during the course of the trial, even she did not appear fully to understand what went wrong. But something did go wrong on the defendant’s side and it led to this case taking up a great deal more court time and the incurring of a great deal more expense on both sides.

In reaching that conclusion, the recorder also reflected his earlier conclusion that there were no adverse inferences that ought to be drawn from the non-disclosure or late disclosure and that, by the time he gave judgment on the substantive claim, the defendant was compliant with its disclosure obligations. It followed that the defendant’s late disclosure did not change the outcome of the litigation. The recorder also had no basis to conclude that the late disclosure might have altered either party’s approach to the litigation.

The defendant had partially conceded that it should not recover its own costs in relation to its late disclosure, nor of the reconvened trial. The claimant submitted that he should have his costs consequent upon this misconduct on the indemnity basis.

In the recorder’s judgment, the just costs order in relation to disclosure was that the defendant should not receive its costs of the disclosure phase and that it should pay all of the claimant’s costs consequent upon the late disclosure, on the standard basis, including the costs of the unsuccessful elements of his re-amendment application.

In making this order, the recorder sought to strike a balance between marking the court’s disapproval of a sophisticated financial institution’s failure to comply with its procedural obligations and the undesirability of encouraging an “innocent” party to act disproportionately in response. The recorder was not persuaded that the defendant’s conduct was “unreasonable to a high degree” and “out of the norm” such that nothing less than an indemnity costs order would be appropriate and was also not persuaded that the claimant should be deprived of any of his consequential costs so as to reflect the outcome of the work that was carried out. To the contrary, it seemed to the recorder that the additional costs were precipitated by the defendant’s conduct in circumstances where they would otherwise probably have been avoided altogether. It also seemed that the defendant should not have any of its costs of a phase that it failed to conduct properly, even though the recorder recognised that at least an element of this phase would reflect costs incurred in carrying out its own review of the other side’s disclosure.

The recorder was not trying to draw a sharp line around the costs that go in each direction but to work with a rather broader brush. The costs orders in relation to disclosure were made after having stood back and in order to reflect the overall justice of the case.

For the sake of completeness, the recorder also recorded his rejection of the defendant’s submission that he ought to take account of what it said was “significant disclosure outstanding from the Claimant despite repeated requests”. There was no application by the defendant for specific disclosure or specific searches, none of the claimant’s disclosure (or allegedly non-disclosed material) was relevant to the issues that the recorder was or is now required to decide and he was not a sophisticated financial institution with in-house lawyers.

The Defendant’s Strike Out Application

The defendant applied to strike out the claimant’s claim on the basis that his conduct, in seeking to interfere with witnesses and intimidate the defendant’s employees, jeopardised the fairness of the proceedings. That application was heard on 15 September 2025 and adjourned on the basis of undertakings being offered by the claimant to the court, with costs reserved.

The defendant submitted that it should have its costs in relation to that application, on the basis that it was necessarily made. It relied upon the matters set out in the witness statement of a partner at Winckworth Sherwood dated 10 June 2025, which set out what were said to be “a continuous pattern of threatening conduct by the Claimant to the Defendant from December 2021 to at least March 2025 (and possibly to May 2025 through anonymous communications). The effect of the Claimant’s threatening contact with the Defendant and its former employees has been to (i) prevent key witnesses giving evidence, and (ii) cause current members of the Defendant considerable anxiety about giving evidence and becoming known to the Claimant. This jeopardises a fair trial“.

The claimant submitted that he should have his costs of the application, primarily on the basis that the defendant failed to get the claim struck out and, in pursuing such an optimistic application, failed to consider witness summonses or special measures for the hearing, with the consequence that the application as framed was doomed to fail.

Furthermore, in his more recent submissions, the claimant drew attention to what he said were contradictory and unsatisfactory signals from the defendant and its legal team which, he submitted, undermined the assertion that there was any need for the application and instead indicated that the defendant was trying to present an “aggressive fear narrative“. The recorder noted that the claimant did not deny any of the conduct that was directly attributable to him.

The claimant was also very aggrieved by the order that was made at the pre-trial review, in relation to special measures, which resulted in his having to observe the trial by video (from his counsel’s chambers) and only to attend the courtroom when he was giving evidence. The defendant’s witness was in the same position. Although the claimant was able to communicate electronically with his legal team, he submitted that this was very difficult and meant that he could not correct mistakes and give other instructions as the trial proceeded.

The recorder paused to note that, according to the defendant, the hybrid hearing proposal was made on behalf of the claimant at the PTR; there was no challenge to the arrangements, either by way of appeal or by application to the recorder during the course of the trial; the person who became the defendant’s only live witness was reported to be fearful and the recorder later received evidence of the witness’s emotional state shortly after their evidence had concluded; and the court is required to consider special measures for vulnerable witnesses, as set out in Practice Direction 1A.

The recorder rejected any implication by the claimant that the special measures directed by the court at the PTR came about as a result of any cynical attempt by the defendant to gain a tactical advantage.

However, the recorder recognised that the defendant’s strike out application probably raised, rather than lowered, the temperature of the dispute and that it would have created even more polarisation between the parties. The defendant (or its legal team) did not appear to have sought alternative relief (such as special measures, an order preventing contact or similar) short of strike out.

Nevertheless, the recorder was satisfied on the basis of the material that had been shown to him and the submissions of both parties that an application of some sort was appropriate and it was appropriate to seek the court’s intervention so as to facilitate the giving of best evidence by witnesses and so as to enable both sides to have a fair trial.

The recorder therefore ordered the claimant to pay the defendant’s costs of such an application (and the resulting hearing), on the standard basis.

The Budgeted Costs and CPR 3.18

Some of the costs in respect of which the recorder had decided to make a party/party costs order had been the subject of costs management orders (made at the CCMC and at the PTR). Others (including the costs incurred prior to the CCMC, those of the strike out application and those consequent upon the defendant’s late disclosure) had not been managed by the court.

CPR 3.18 provides that in any case where a costs management order has been made, when assessing costs on the standard basis, the court will have regard to the receiving party’s last approved or agreed budgeted costs for each phase of the proceedings, not depart from such approved or agreed budgeted costs unless satisfied that there is good reason to do so, and take into account any comments made pursuant to rule 3.17(3) and recorded on the face of the order.

Carr J (as she then was) drew attention to the importance of this Rule in Merrix v Heart of England NHS Foundation Trust [2017] EWHC 346 (QB), [2017] 1 WLR 3399. Her Ladyship pointed out at paragraph 67 that the words are “clear” and “mandatory” and explained the purpose and effect of the Rule. Real emphasis needs to be placed on the importance of certainty on costs in the context of access to justice. Costs budgets serve the important function of giving certainty to clients, in the form of knowing what costs they are likely to face, in terms of payment or recovery: Harrison v University Hospitals NHS Trust [2017] EWCA Civ 792, [2017] 1 WLR 4456 per Davis LJ.

However, neither of these decisions contains any guidance as to what would constitute a “good reason” to depart from an agreed or approved budget. The editors of the White Book (at 3.18.3) invite judges to have in mind the Denton test. They go on to identify two decisions which are said to “support the view that a costs judge may depart from the last approved or agreed budget if satisfied that the total costs incurred are disproportionate”.

Although the question of whether to depart from the budgets loomed large, neither party referred the recorder to these decisions and so he had not heard argument about them. The recorder considered whether to invite submissions on their effect but decided that to do so would be disproportionate, adding yet further cost and delay to an already protracted and overly expensive dispute.

In RNB v LB Newham [2017] EWHC B15 (Costs), the Deputy Costs Judge concluded that, if a court on assessment reduces the hourly rates for incurred costs, then this is a good reason to depart from the approved budget (to reflect the hourly rate reduction within the budgeted costs). At paragraph 24 of the judgment, the Deputy Costs Judge drew support for that conclusion from paragraph 73 of Merrix, noting that the rates allowed for incurred costs would need to be applied to the budgeted costs.

In Nash v Ministry of Defence [2018] EWHC B4 (Costs), the Costs Judge took a different view, concluding that hourly rates should not be treated as holding a special status. However, at paragraph 88, he drew attention to the wording at the end of CPR 3.18 as “in recognition that the facts and circumstances in which a costs management order was made may have subsequently changed without revisions being made to the budget“. He went on to give an example where “a change in facts and circumstances led to simplification of matters” without budgets being revised to reflect this such that the addition of the assessed incurred costs to the budgeted costs led to a disproportionately high total. At paragraph 90, he described CPR 44.3(2)(a) as “an effective safety valve for paying parties to seek a further reduction” and concluded at paragraph 91 that “a paying party retains the ability to argue that the overall sum of assessed incurred costs plus budgeted costs is disproportionate such that the overall sum should be reduced“.

It was right at this point to identify the hourly rates of the defendant’s solicitors. Prior to 1 May 2025, the Grade A rate was £605 (rising since then to £650). The Grade B rate was formerly £460 (rising to £495). Grade C actually decreased, from £345 to £340, and Grade D went up from £175 to £205.

The 2025 Guideline Hourly Rates for London 1 for grades A to D were £566, £385, £299 and £205, respectively. “London 1” is defined as “very heavy commercial and corporate work by centrally based London firms“. The rates for London 2 (City and Central London, other work) were £413 (A), £319 (B), £269 (C) and £153 (D). The National 2 rates (which would apply to work carried out in Hull, where this claim began life) were £282 (A), £242 (B), £196 (C) and £139 (D).

The hourly rates of the defendant’s more senior solicitors were significantly higher than any of the guideline rates, and higher even than the guideline rates for very heavy commercial work conducted by centrally based London firms. The claimant had drawn attention in his submissions to the fact that his solicitor was a grade B, working for £300 per hour, but the recorder did not find this comparison to be of any assistance.

The recorder spent some time reflecting upon whether there was a “good reason” to depart from the approved budgets and came to the conclusion that there was, both working from first principles and by parity of reasoning with each of the costs judges’ decisions (hard to reconcile though they might be).

Starting from the position of hourly rates (and so following the reasoning in RNB), the recorder could not see any justification for the defendant being entitled to recover its solicitors’ time at the hourly rates claimed. This was a claim that started in Hull (and was case managed there) and was always of modest value. Even though the defendant was based in the City of London, and was a financial organisation, this case did not justify the involvement of “London 1” solicitors. The recorder was far from convinced that it required London-based solicitors at all, given how many firms operate outside London, including those with financial services specialisms (if that was required).

In the recorder’s view, when it came to an assessment of costs, it would be necessary to reduce the solicitors’ rates by something between around a third and a half, in the case of the more senior solicitors, and by something between around a quarter and a third, in the case of the more junior solicitors. If that was required for the incurred (and not budgeted) costs, then it would, applying RNB, be a good reason to depart from the approved budgets in order to apply the same reductions.

If, on the other hand, the recorder adopted the reasoning in Nash, then he would need to ask himself whether there had been a change in facts and circumstances so as to justify the use of the “safety valve” of seeking a further reduction. As the recorder understood the reasoning in Nash, a change of circumstances would need to be required if the court were considering reducing the overall level of costs below the total of the approved costs. The recorder took the view that, in spite of the parties’ best efforts, there had been a simplification of the issues, such that the total level of expenditure was disproportionately high.

Finally, the recorder reached the same outcome from first principles. As the trial judge, he had the opportunity to review the material and form conclusions about the issues to a far greater degree than the costs managing judge.

The recorder had been able to form views about the factors set out in CPR 44.3(5). He had formed a view about how much this case was really worth. This was and was only a money claim; the case turned on a relatively small number of documents, the application of the anti-money laundering regulations and the interpretation of the written contract between the parties; each side had generated additional work (which could not have been envisaged when the costs management order was made); there were no wider factors of reputation or public importance; the vulnerability of the defendant’s witnesses came to light (and became an issue) only after the costs management order was made.

Put shortly, the recorder took the view that the judge who made the costs management order did so on a basis that had turned out to be completely wrong. Had the judge known what the recorder knew at the time of the costs judgment, it was vanishingly unlikely that this case would have been allocated to the multi-track and it was “all but inconceivable” that the parties would have been allotted 3.5 days of court time for the trial. Even if it had been treated as a multi-track trial, the shorter time estimate ought to have led the court to approach the cost budgeting exercise in a very different way. The parties would have been expected to cut their cloth much better to reflect the pleaded value of the claim.

The recorder wished to emphasise that nothing in the previous paragraph was intended as any criticism whatsoever of the case managing judge (who would no doubt have dealt with this case as part of a busy list and on the basis of the limited information provided by the parties) nor to suggest that there was any impropriety on the part of any of the lawyers.

The recorder recognised that this was the claimant’s claim and that it might be thought unfair to visit his misjudgement upon the defendant as the receiving party.

However, there were three main reasons why this did not prevent the recorder from concluding that he ought to depart from the approved budgets.

First, it is the duty of all parties (and not just a claimant) to assist the court to manage a case proportionately. If a defendant falls into the same errors as a claimant (or different errors with the same consequences) in over-egging a claim at the case management stage, then that defendant shares responsibility for the consequences.
Second, the effect of this decision was not to ignore the approved budget altogether, but to permit departure from it. In that regard, the defendant was right to draw attention to the fact that the claimant had been well aware of the potential scale of his liability for a long time. And a receiving party’s last approved or agreed budget is one of the factors that the court will have regard to, applying CPR 44.4(3)(h).
Third, and in the particular circumstances of this case, it seemed rather more appropriate to evaluate the ways in which the paying party had generated additional work at the end of the claim, rather than at the case management stage.

The recorder therefore concluded that there was a good reason to depart from the defendant’s approved (and revised) cost budget.

Summary Assessment

Having reached conclusions about what costs orders to make and as to the effect of the costs management orders, the recorder turned to the summary assessments that both parties agreed should be carried out.

In undertaking a summary assessment, the recorder’s task was not to undertake a detailed, item by item analysis, but to arrive at a figure which reflected, on a broad-brush basis, costs which were reasonably incurred and reasonable in amount, having regard to the overriding objective and the principle of proportionality. The court must have regard to the factors identified in CPR 44.4(3).

Since the assessment was on the standard basis, the court would only allow costs which are proportionate to the matters in issue, even if they were reasonably or necessarily incurred, and if there was any doubt as to whether costs were reasonably and proportionately incurred or reasonable and proportionate in amount, then that doubt would be resolved in favour of the paying party: CPR 44.3(2).

The Claimant’s Costs

The claimant claimed £54,115 in respect of his costs caused by the defendant’s late disclosure. These were set out in his three-page Precedent T, dated 6 February 2026, with his solicitor’s comments and those of the defendant’s solicitors (together with their offer in respect of each line) on the pages that followed. The amount offered by the defendant in respect of the variation to the budget was £18,000.

Having read all of the comments and considering the work that was necessitated by the late disclosure, with a cross-check for proportionality, the recorder assessed these costs at £27,000 (plus VAT, giving a net figure of £32,400).

The Defendant’s Costs

The recorder turned next to the defendant’s costs, which he dealt with in two parts.

First, he considered the costs of the strike out application, which costs were not the subject of any costs management order and which totalled £59,513.67 (of which £45,772 were solicitors’ costs). 98 solicitors’ hours were spent on the application, including 30.8 hours at grade A and 35.9 hours at grade B.

In the recorder’s judgment, this application could and should have been conducted much more modestly. It was unsuccessful, inasmuch as it was framed as a strike out application, and it was grossly disproportionate to spend more than twice the amount stated on the Claim Form to try to achieve that end.

Using the information available to him, the recorder took the view that the amount that the defendant should recover in respect of this application was £15,000 and he assessed its costs in that amount.

The recorder turned next to the defendant’s costs of the claim as a whole, noting that some of those costs were budgeted and others were not. He also noted that the defendant sought a further £30,000-odd for the hearing that took place on 21 May (which were not included in its “Quantification of Costs” document).

With that additional £30,000, but removing the costs arising out of the late disclosure and of the strike out application, the total costs claimed by the defendant was around £225,000.

The recorder had already explained that the solicitors’ hourly rates required a significant reduction, regardless of the time that was deemed to be recoverable. These accounted for roughly £165,000, with counsel’s fees being the other £60,000.

Having been through the defendant’s analysis more than once, and having performed his own calculations on the figures with which he had been provided, the recorder reached the conclusion that this “rump” of the defendant’s costs should be assessed at £113,750.

He arrived at that figure having conducted a more detailed review, during which he analysed all of the information provided to him for each phase, albeit with a broad brush. In particular, he assessed the disclosure phase at £0 (reflecting his earlier conclusion); he applied very significant reductions to the first two phases (arriving at a figure of £30,000 between them); and he reduced the witness statement phase to £15,000, to reflect his view that one of the defendant’s witness statements should not have been prepared (because that witness had very little, if any, relevant evidence to give) but acknowledging that the task of preparing the statement of the person who became the defendant’s only live witness was not straightforward. He made more modest reductions to the other phases and he allowed only a further £8,000 in respect of the costs on the schedule for the hearing on 21 May.

In arriving at that figure of £113,750, the recorder considered proportionality and concluded that it was a reasonable and proportionate amount in respect of the costs and the work that were the subject of the assessment.

Stay of the Order for Payment

At the end of the parties’ submissions, the claimant asked what would happen if, as turned out to be the case, the recorder were to order him to pay a sum of money in respect of costs and his application for permission to appeal the substantive judgment had not been determined.

The recorder enquired of the claimant whether there was any temporary issue that might prevent him from paying or if there were grounds for believing that the defendant might be unable to repay him, in the event that an appeal were successful and the costs order reversed. The claimant did not identify anything specific that he wanted the recorder to take into account.

In those circumstances, and as the recorder indicated at the time, he said that he would not grant a stay, but that, unless the defendant objected, he would allow a period of 35 days for the claimant to pay the sum ordered, which was considerably longer than the default period of 14 days. He chose that period because it ought to allow sufficient time for the claimant to obtain advice on whether to apply for permission to appeal from the High Court and, if appropriate, to apply for and receive a decision on an application for a stay (from the High Court), whether in the context of his pending application for permission to appeal the substantive judgment or, if he decided that there were grounds for challenging it, in what might become his application for permission to appeal the costs judgment.

Given that the defendant did not object to the claimant’s having 35 days within which to pay any costs that might be ordered, the recorder allowed that timeframe rather than ordering any stay of execution or enforcement.

Conclusions

The recorder observed that the claim had exacted a high price, financially and emotionally, on those involved. It should never have reached this point. Neither side would regard himself or itself as the winner.

The defendant was ordered to pay the claimant’s costs arising from its late disclosure, which the recorder summarily assessed at £27,000 (plus VAT, giving a net figure of £32,400).

However, the claimant was ordered to pay the defendant’s costs of the claim (including its strike out application but excluding the disclosure phase), which the recorder summarily assessed at £128,750.

There was a setting-off of those two amounts, with the consequence that the claimant was required to pay the defendant £96,350. He was given five weeks, until 8 July 2026, within which to make payment.

▶ Watch the case summary

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