Can Defendants Be Ordered To Pay Costs When Fundamental Dishonesty Allegations Fail?

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The High Court’s decision in Hakmi v East & North Hertfordshire NHS Trust [2025] EWHC 2597 (KB) establishes that defendants may be ordered to pay a percentage of a claimant’s costs arising from unsuccessful fundamental dishonesty allegations, even where the claimant has lost the underlying claim.

Background

The claim arose from clinical negligence allegations concerning the treatment of Mr Mohamed Atef Hakmi, a consultant orthopaedic surgeon, following a stroke on 16 November 2016. It was alleged that the second defendant’s stroke consultant at Norwich & Norfolk Hospital failed to offer thrombolysis, resulting in serious disability. Quantum was agreed at £1,033,824, subject to liability. [§1]

The trial, held in June 2025, focused on breach of duty and causation. The court dismissed the claim, finding that thrombolysis would probably not have altered the outcome even if offered. [§97] While the court identified certain process failures (including failure to check telemedicine equipment before the shift and failure to conduct hourly neurological checks post-admission [§65, §75]), the claim ultimately failed on causation: Mr Hakmi had made a very good, if imperfect, recovery, achieving a Modified Rankin Scale score of 2, which falls within the range of a good outcome whether or not thrombolysis had been administered. [§95-97]

During the proceedings, the defendants raised an allegation of fundamental dishonesty against Mr Hakmi under section 57 of the Criminal Justice and Courts Act 2015, contending that he had deliberately underperformed in neuropsychological and other assessments conducted by their experts (Dr Bach, Dr Hassan, and Dr Santullo) to advance his claim. [§98] This allegation was raised formally in the defendants’ counter-schedule dated 18 March 2025 and was maintained throughout the trial. [§134-135] The allegation was ultimately rejected by the court, which found that Mr Hakmi’s poor performance in testing could be explained by his psychological condition, fatigue from serious familial issues, and the organic effects of his stroke rather than deliberate malingering. [§126-129]

Costs Issues Before the Court

Following the dismissal of the claim, the court was required to determine the appropriate costs order. [§131] The primary issue was whether the defendants should bear a portion of the claimant’s costs due to their unsuccessful pursuit of the fundamental dishonesty allegation. The defendants had raised this issue in their counter-schedule dated 18 March 2025, and it was maintained throughout the trial despite the evidence becoming “increasingly wanting.” [§133]

The court also had to consider the general principle that costs follow the event, given the claim’s dismissal, and whether any order for costs payable by the claimant should be subject to enforcement restrictions.

The Parties’ Positions

The claimant submitted that the defendants should pay a percentage of his costs from the date the fundamental dishonesty allegation was formally raised (18 March 2025), arguing that the issue had been pursued without sufficient basis and had caused significant distress and reputational damage. [§134] The claimant’s solicitors had previously put the defendants on notice that costs would be sought if the allegation failed. [§132] The claimant proposed that 25% of his costs from 18 March 2025 would be appropriate, reflecting the resources devoted to defending the allegation. [§134]

The defendants contended that costs should follow the event, with the claimant paying their costs of the action. [§131] They argued that the fundamental dishonesty issue was properly investigated and pursued, and that some costs associated with it would have been incurred in any event as part of the defence. The defendants highlighted that they had made two “drop hands” offers shortly before trial, which were not accepted. [§132] They maintained that the allegation was raised and pursued in good faith, with counsel assuring the court that “careful consideration had been given to making and maintaining the allegation right through to submissions.” [§133]

The Court’s Decision

The court held that, while the claimant was liable for the defendants’ costs as the unsuccessful party, the defendants’ failure to establish fundamental dishonesty warranted a partial costs order in the claimant’s favour. [§133, §135]

The court found that the allegation had been pursued to the end of the trial despite the evidence being “properly explored at the trial and found increasingly wanting.” [§133] Critically, the court rejected the defendants’ argument that making such an order would “undermine the costs regime” or give defendants a “free tilt at raising the issue of fundamental dishonesty.” The court stated: “If anything it is the converse, not to make such an order would give a defendant a free tilt at raising the issue of fundamental dishonesty.” [§133]

The court noted several factors supporting a costs order in the claimant’s favour:

      • Reputational impact | There was “unfavourable national press coverage on the first day of trial” [§134]
      • Serious consequences if proved | The allegation, if established, “would have been disastrous for his reputation and career” [§134]
      • Opportunity to abandon | “It would have been open to Mr de Bono to have abandoned the issue after the close of evidence, or indeed earlier, but he did not do so” [§133]

The court rejected the claimant’s submission for 25% of costs, considering it too high, and instead ordered the defendants to pay 15% of the claimant’s costs from 18 March 2025, subject to detailed assessment on the standard basis if not agreed. [§134-135] This percentage reflected that some costs would have been incurred regardless, but acknowledged the additional burden imposed by the fundamental dishonesty allegation. The court also accepted Mr de Bono’s submission “that some of the costs would have been incurred in any event.” [§134]

The court also ordered that the claimant pay the defendants’ costs of the action, not to be enforced without the leave of the court. [§135]

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Costs Cross-Appeal Fails Where Challenge Arose From Applicant’s Own Default

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Background

The claim was brought by Colin Robertson against Google LLC concerning the termination of a contract under which Mr Robertson provided YouTube videos. The termination occurred on 22 February 2021, and Mr Robertson alleged that Google’s actions, including “demonetising” and “shadow banning” his channel, amounted to unlawful discrimination under section 29 of the Equality Act 2010 or, alternatively, breach of contract. A claim form was issued on 7 October 2021, with a requirement for service on Google in the USA within six months, by 7 April 2022. On 5 April 2022, the claim form was delivered to Google’s headquarters, but the mandatory Form N510, required under CPR rule 6.34 for service out of the jurisdiction, was not filed with the court or served with the claim form. Google pointed out this omission on 19 April 2022, confirming that valid service had not been effected. In response, Mr Robertson filed Form N510 with the court on 22 April 2022 and applied for relief from sanctions, seeking to validate the service or extend time for service.

The application for relief was heard by Deputy District Judge Grout on 17 May 2023. The judge determined that valid service had not occurred by 5 April 2022 due to the absence of Form N510. The primary dispute centred on whether CPR rule 7.6(3) (governing extensions of time for service) or rule 3.9 (relief from sanctions) applied to rectify the defect. The judge, influenced by authorities cited, applied the rule 3.9 test and granted relief from sanctions, deeming service to have taken place on 5 April 2022. A separate jurisdictional challenge by Google, arguing that the Equality Act claims required permission to serve out of the jurisdiction, was rejected by the judge. Following the judgment, the judge issued a costs order dated 14 August 2023, requiring Mr Robertson to pay the costs of the application for relief from sanctions. Mr Robertson appealed this costs order, leading to a cross-appeal in the Court of Appeal.

The Costs Cross-Appeal

The costs issue before the Court of Appeal arose from the judge’s order that Mr Robertson pay the costs of his application for relief from sanctions. Mr Robertson contended that the costs order should not encompass costs incurred by Google in pursuing its unsuccessful jurisdictional challenge regarding the Equality Act claims. The key question was whether there was a causative link between the application for relief and the jurisdictional challenge, and if so, whether the judge had properly exercised discretion in awarding costs. The issue required consideration of whether costs related to distinct, unsuccessful arguments should be excluded from the general principle that an applicant for relief from sanctions typically bears the costs of the application.

The Parties’ Positions

Mr Robertson, through his counsel Mr Boch, argued that the costs order should be varied to exclude costs associated with Google’s jurisdictional challenge. It was submitted that this challenge was separate from the service issue and had been lost by Google, meaning there was no causal connection to the relief application. Mr Boch relied on the principle that costs should follow the event only for issues directly related to the application, citing that the general rule in cases like Swivel UK Ltd v Tecnolumen GmbH (where an applicant for relief pays costs) should not apply to unrelated, unsuccessful arguments. He emphasised that Google’s jurisdictional challenge concerned whether permission was needed to serve the Equality Act claims out of the jurisdiction, which was distinct from the defect in service due to the missing Form N510.

Google, represented by Ms Evans KC and Mr Roberts, maintained that the costs order was appropriate. They argued that all costs incurred were part of the same application process and arose directly from Mr Robertson’s failure to effect valid service. It was submitted that the jurisdictional challenge was a legitimate aspect of their response to the application, as it went to the merits of whether relief should be granted. Google contended that the judge had broad discretion under CPR rule 44.3 and that the costs order was a proper exercise of that discretion, reflecting the overall context where Mr Robertson’s default necessitated the application.

The Court’s Decision on Costs Cross-Appeal

The Court of Appeal dismissed Mr Robertson’s costs cross-appeal. Lord Justice Coulson, delivering the leading judgment, held that the judge’s costs order was within his discretion and not open to challenge. The court noted that appeals against costs orders face a high threshold, as established in SCT Finance v Bolton, where it was emphasised that appellate intervention is rare unless the decision is unprincipled or outside the wide discretion afforded to first-instance judges.

The court found that the judge had been aware of Mr Robertson’s arguments regarding the jurisdictional challenge but had reasonably concluded that the costs were incurred as a result of the application for relief. It was determined that Google’s jurisdictional challenge was not separate but formed part of the overall dispute stemming from Mr Robertson’s failure to serve the claim form correctly. The court observed that if the relief application had not been made, the jurisdictional issue would not have arisen, establishing a causative link. Although Lord Justice Coulson indicated that, if deciding afresh, he might have reduced the costs by 20% to account for Google’s lack of success on the jurisdictional point, he stressed that this did not render the judge’s decision erroneous. The judge had already made significant reductions to Google’s claimed costs, demonstrating a balanced exercise of discretion. Consequently, the court upheld the costs order, requiring Mr Robertson to pay the costs of the application.

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Sanderson Orders Appropriate Where Claimant Aligns With Successful Defendant On Key Issue

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The Commercial Court’s decision in Russian Aircraft Lessor Policy Claims (Consequentials) [2025] EWHC 2529 (Comm) addresses costs apportionment, interest rate determinations, and Sanderson orders following the billion-dollar Russian aircraft insurance judgment handed down in June 2025.

Background

The proceedings concerned six consolidated claims by aircraft lessors against insurers following the loss of aircraft in Russia after the invasion of Ukraine. The substantive judgment on 11 June 2025 ([2025] EWHC 1430 (Comm)) determined coverage issues, with the court finding that losses fell under ‘war risks’ rather than ‘all risks’ cover.

Following that judgment, several parties settled: DAE and Falcon with all insurers, and Merx with its war risks insurers. A consequentials hearing on 15-16 September 2025 resolved outstanding issues concerning interest, costs, and permission to appeal in the remaining AerCap, Merx, and Genesis claims.

The costs issues were particularly complex because claimants had pursued alternative claims against both ‘all risks’ and ‘war risks’ insurers. AerCap’s primary case throughout trial was that losses were caused by all risks perils, meaning all risks insurers were liable. When this failed and war risks insurers were found liable instead, difficult questions arose about who should bear the costs of the successful all risks defendants.

Costs Issues Before the Court

The court faced three main categories of costs issues across the remaining claims:

      • First, the incidence of costs: which parties should pay costs to whom, and in what proportions? This required determining how to apportion costs where claimants had brought alternative claims against different insurer groups, and how to reflect partial success on various issues.
      • Second, Sanderson and Bullock orders: where claimants succeeded against war risks insurers but failed against all risks insurers, should the war risks insurers be required to pay the all risks insurers’ costs (either directly via a Sanderson order, or indirectly via a Bullock order requiring claimants to pay then recover from war risks insurers)?
      • Third, interest: what was the appropriate start date for pre-judgment interest, what rate should apply to US dollar awards, and should interest be simple or compound?

Key Principles and Application

1. Cost Consequences When Primary Case Fails

AerCap recovered approximately $1 billion from war risks insurers. It sought to recover 81% of its total costs, arguing that only 19% related to the ‘peril issue’ on which its primary case failed. War Risks Insurers argued AerCap should recover only 30% of costs, reflecting the significance of the peril issue at trial.

The court found AerCap should recover 65% of its costs. The reduction reflected that the peril issue—whether losses were caused by all risks or war risks perils—occupied the bulk of trial time, and AerCap’s primary case throughout was that all risks insurers were liable. Although AerCap argued it was merely putting war risks insurers to proof, the court found AerCap was “not neutral on the point” and actively advanced the all risks case, including through witness evidence. [§45(i)]

The court rejected AerCap’s narrow quantification of peril-related costs, stating that while only c.20% of costs might be referable solely to peril issues, this “does not reflect the importance of the issue of peril in the case and at the hearing” and failed to account for costs that, though theoretically relating to other issues, “in reality related principally to peril.” [§45(i)]

Practical significance: Claimants pursuing alternative claims against different defendant groups risk substantial costs reductions even when ultimately successful, if their primary case on a major issue fails. The court will look to the substance and importance of issues, not just narrow cost allocation exercises.

2. Sanderson Orders: When Alternative Claims Create Costs Shifting

The Sanderson/Bullock Distinction

Both orders shift costs of successful defendants to unsuccessful defendants, but through different mechanisms. A Sanderson order requires the unsuccessful defendant to pay the successful defendant directly. A Bullock order requires the claimant to pay the successful defendant, then recover those costs from the unsuccessful defendant. The court generally prefers Sanderson orders unless there are concerns about the unsuccessful defendant’s ability to pay. [§54]

AerCap: 65/35 Split

For AerCap, the court ordered a 65/35 split: war risks insurers would pay 65% of all risks insurers’ costs via Sanderson order, with AerCap bearing 35%. The court reasoned that while the peril issue would likely have been contested between the two insurer groups even if AerCap had been neutral, AerCap had actively pursued all risks insurers as its primary case and called evidence supporting that case. The split reflected that war risks insurers were primarily responsible for the peril debate, but AerCap bore some responsibility for pursuing its primary case. [§53]

Merx: 100% Sanderson Order

By contrast, for Merx the court ordered war risks insurers to pay 100% of all risks insurers’ costs directly via Sanderson order. The distinguishing feature was that Merx, unlike AerCap, had actively supported all risks insurers’ case on peril at trial, describing it as “irresistible” in opening submissions and relying on all risks insurers’ factual and expert witnesses. [§65] War Risks Insurers were therefore solely responsible for incurring those costs.

Genesis: Split Sanderson Order

For Genesis, the court made a Sanderson order requiring unsuccessful war risks insurers (D2-D6) to pay their shares of all risks insurers’ costs directly, but required Genesis to pay the share referable to the successful lead war risks insurer (TMK 510). [§77(v)]

Key Principles Established

The court’s approach establishes that Sanderson orders in multi-party insurance litigation depend on:

      • Whether claims were genuinely alternative or whether claimant actively supported one case over another
      • The extent to which different defendant groups were responsible for contested issues
      • Whether unsuccessful defendants can fairly be said to have caused successful defendants’ costs to be incurred

As the Court of Appeal stated in Irvine v Commissioner of Police [2005] EWCA Civ 139 (cited at [§50]), these are “strong orders” requiring careful assessment of whether it would work injustice to make unsuccessful defendants liable for successful defendants’ costs.

3. US Prime as Default Interest Rate and Pleading Requirements

The court’s treatment of interest rate arguments reinforces the default position established in Lonestar Communications Corp LLC v Kaye [2023] EWHC 732 (Comm).

The Default Rule

The court confirmed that US Prime is the default pre-judgment interest rate for US dollar awards in the Commercial Court. As explained in Lonestar, US Prime represents the rate offered by US banks to their most creditworthy customers. [§19-20]

Challenging the Default

War Risks Insurers argued AerCap’s actual borrowing costs were lower than Prime, relying on a spreadsheet showing average costs of borrowing for AerCap entities of approximately 6% (Prime minus 2.5%). The court rejected this argument because: [§21]

      • Defendants must plead that the claimant’s actual borrowing costs are lower than Prime
      • War Risks Insurers had merely denied Prime was appropriate, without pleading a positive case
      • The spreadsheet was inadequate: it showed mainly internal group funding, left questions about when facilities were entered into and whether rates were fixed or floating, and these issues had not been explored at trial
      • Without proper pleading, there was “no proper exploration of whether there is a category of corporate borrowers who pay lower rates than US banks’ most creditworthy customers”
Compound Interest

The court rejected AerCap’s claim for compound interest, finding there was “no adequate plea or proof by AerCap that its losses should be calculated by reference to the cost of borrowing on the basis of compound interest.” [§27] Following Sagicor Bank Jamaica Ltd v Seaton [2022] UKPC 48, compound interest as damages requires proper pleading and proof, not merely assertion that commercial borrowing is on compound terms.

Practical significance: Parties seeking to depart from US Prime (whether higher or lower) must plead their case and adduce proper evidence. Disclosure documents prepared for other purposes will not suffice. The court will not investigate borrowing costs absent proper pleading creating a live issue for trial.

4. Payments on Account and Proportionality

The court ordered unusually low payments on account in several instances, reflecting concerns about proportionality:

      • AerCap: 45% of recoverable costs (rather than typical 50%), given “unusually serious issues as to the reasonableness and proportionality” of its £81 million claimed costs [§59]
      • TMK 510: 45% of recoverable costs, given “surprising scale” of over £2.2 million attributed to the Genesis action alone and questions about allocation between claims [§78(iii)]
      • Swiss Re: No interim payment for either Merx or Genesis claims, despite entitlement to costs, due to “surprising magnitude” of costs claimed [§74, §79]

Permission to Appeal Refused

The court refused permission to appeal on all 23 grounds advanced by War Risks Insurers and 5 grounds by Chubb. Applying the principles from LZLabs GmbH v IBM UK Ltd [2025] EWCA Civ 842, the court found none had a realistic prospect of success. Many grounds were challenges to factual findings or evaluations of expert evidence, where the threshold for appeal is particularly high. The court criticised the “kitchen sink” approach, noting that settling parties (DAE, Falcon, Merx) had removed some potentially more promising grounds, leaving mainly attempts to relitigate what was determined at trial. [§85-88]

Practical Implications

This judgment provides important guidance for practitioners in complex multi-party insurance litigation:

For Claimants: Carefully consider costs risks when pursuing alternative claims against different defendant groups. Success against your secondary target may result in costs recovery substantially below 100% if your primary case on major issues fails. Early Part 36 offers reflecting the alternative case may protect position.

For Defendants: When seeking to challenge default interest rates, plead the case properly and adduce evidence rather than relying on disclosure documents. Spreadsheets prepared for other purposes will not establish actual borrowing costs.

For All Parties: Sanderson orders shifting costs between defendants depend heavily on who drove contested issues and whether claimant actively supported one defendant’s case over another. Clear evidence of case positioning throughout trial is crucial.

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Background

This costs judgment arose from proceedings in the Technology and Construction Court concerning a freezing injunction made on 15 August 2022. The applicants, Click Above Corben Mews Limited (acting by its fixed charge receivers) and Victoria Capital Trust, had sought clarification that the freezing injunction did not prohibit their dealing with and disposal of certain properties. The respondents comprised eleven parties, including a right to manage company, various individuals, and corporate entities.

The substantive judgment was handed down on 23 January 2025, following which the parties agreed terms for an order varying the injunction. The variation made clear that the injunction did not prohibit the dealing with and disposal of the Properties by the Receivers. The order provided that any issues as to costs would be determined following written submissions.

The background to the application involved a complex group structure where Click St Andrews was subject to the freezing injunction, whilst the Properties were owned by Click Above Corben Mews Limited. The applicants held a charge over the Properties and sought to enforce their security. The respondents had concerns about whether Click St Andrews might have a beneficial interest in the Properties, which uncertainty arose largely from Click St Andrews’ failure to comply with disclosure obligations under the freezing injunction.

Pre-action correspondence between February and August 2024 revealed the parties’ divergent positions. The applicants maintained that the Properties did not fall within the scope of the injunction and that their Charge took priority over any interest Click St Andrews might have. The respondents flagged risks that disposing of the Properties might breach the injunction and proposed ring-fencing £52,680 from the proceeds of sale as a practical solution.

Costs Issues Before the Court

The court was required to determine several discrete costs issues following the substantive application. First, the incidence of costs needed to be decided – whether costs should follow the event given the applicants’ success, or whether the court should make no order as to costs in light of the parties’ conduct and the circumstances leading to the application.

Second, the court needed to consider the basis of assessment. The applicants sought costs on the indemnity basis, arguing that the respondents’ conduct was out of the norm and had forced them to make an unnecessary application. The respondents resisted this, maintaining their conduct had been reasonable throughout.

Third, the court was asked to undertake a summary assessment of costs. Two versions of the applicants’ statement of costs were before the court: one filed in July 2024 totalling £24,058 plus VAT, and another filed in January 2025 totalling £42,338 plus VAT. The respondents objected to reliance on the January version and sought to cap costs at the July figure.

Finally, the court needed to consider an alternative submission by the respondents that a third party costs order should be made under CPR Part 46.2(1) against Click Group Holdings Ltd, Click St Andrews, or Aaron Emmett, on grounds that their breach of disclosure obligations had necessitated the application.

The Parties’ Positions

The applicants adopted a straightforward position: they were the successful party and costs should follow the event. They argued that the judgment vindicated their position that the freezing injunction did not prohibit their dealing with the Properties, and that the variation order simply clarified this position. They submitted that the respondents should pay their costs, assessed on the indemnity basis due to the respondents’ unreasonable conduct.

The applicants relied on early settlement offers made on 5 February 2024 and 22 February 2024, proposing no order as to costs if the respondents agreed to allow disposal of the Properties. They characterised the respondents’ conduct as “unresponsive, unreasonable, lacked any application of commercial common sense and in certain instances was nonsensical”, particularly regarding the priority issue.

The respondents advanced several arguments against a costs order. They contended the application was entirely avoidable, citing Taylor v Van Dutch Marine Holdings Ltd [2017] EWHC 636 (Ch) as authority that a creditor with security over an asset subject to a freezing order can enforce security without seeking variation of the order. They acknowledged this case was not cited to the court but argued the applicants should have been aware of the legal position.

The respondents maintained they had never positively asserted that the injunction prohibited the applicants from dealing with the Properties. Rather, they were unable to confirm the position due to uncertainty about Click St Andrews’ potential beneficial interest, arising from that company’s non-compliance with disclosure orders. They argued their proposal to ring-fence proceeds showed a reasonable desire to resolve matters without litigation.

On the indemnity basis issue, the respondents cited Arcadia Group Brands Ltd v Visa Inc [2015] EWCA Civ 883, arguing that weakness of a legal argument alone does not justify indemnity costs without evidence of hopeless proceedings or ulterior motives.

Regarding summary assessment, the respondents objected to the January 2025 statement of costs, noting the 75% increase from the July version. They argued that national guideline rates should apply given the applicants’ solicitors were based in Guildford, resulting in rates approximately 25% lower than those claimed.

The Court’s Decision

Mrs Justice Jefford determined that the applicants, as the successful party, were entitled to some portion of their costs. However, she declined to order full costs, instead ordering the respondents to pay 50% of the applicants’ costs. This reflected the court’s assessment of the overall circumstances, including what she termed “the conundrum” faced by the parties, their respective conduct, and the measure of success on various issues.

The court found that whilst the applicants were successful on the main issue, they had failed on several alternative arguments. These included unsuccessful applications for declarations, arguments that the injunction should be discharged entirely, and requests for retrospective undertakings as to damages. The judge noted these “far ranging” issues had consumed substantial time and cost.

On the basis of assessment, the court rejected the application for indemnity costs. Mrs Justice Jefford held there was “nothing so unreasonable in the respondents’ conduct that it was taken out of the norm of assessment on the standard basis.” She found the proceedings were not plainly hopeless nor pursued with ulterior motives, distinguishing the case from circumstances warranting indemnity costs.

Regarding summary assessment, the court expressed concern about the discrepancies between the two statements of costs. The judge found it “wholly unsatisfactory” that costs were allegedly omitted from the July version and questioned how over £5,000 of counsel’s fees could have been mistakenly excluded. She particularly scrutinised the increase in counsel’s fees from £2,750 to £8,000 and the additional £5,000 claimed for costs submissions.

The court summarily assessed costs at £34,100 before applying the 50% reduction, resulting in £17,050. A further 15% reduction was applied to account for the higher hourly rates claimed compared to national guideline rates, producing a final figure of £14,500 (excluding VAT). The parties were given 56 days to pay, recognising that the respondents were effectively individuals.

The court declined to make a third party costs order under CPR Part 46.2(1). Mrs Justice Jefford held that the applicants’ success turned on the priority of the Charge rather than whether Click St Andrews had any interest in the Properties. She found that disclosure failures, whilst explaining the respondents’ position, were not determinative of the application’s merits and did not justify a costs order against third parties.

Finally, the court considered a without prejudice save as to costs offer made by the applicants on 17 January 2025, proposing that the respondents pay costs on the standard basis rather than the indemnity basis sought. As the applicants did not achieve this minimum outcome (receiving only 50% of costs), no adjustment was made for this offer.

Successful Claimant Awarded Only 50% Of Costs Due To “Imprecise, Vague And Wide-Ranging Case”

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Background

The matter concerned an action brought by Illiquidx Limited against Altana Wealth Limited, Lee Robinson, Steffen Kastner and Brevent Advisory Limited for breach of confidence, infringement of trade secrets, breach of contract and copyright infringement. Following a liability trial, Mr Justice Rajah handed down judgment on 13 February 2025, finding that Altana and Brevent had breached a non-disclosure agreement and misused Illiquidx’s confidential information and trade secrets in establishing and operating the Altana Credit Opportunities Fund. The copyright infringement claim failed, as did the claim seeking to establish Mr Kastner’s liability for the acts of Altana or Brevent.

The procedural history revealed significant difficulties with Illiquidx’s pleadings throughout the litigation. In December 2020, Illiquidx attempted to reformulate its case on confidential information, seeking to adopt terminology from CF Partners v Barclays Bank by pleading a “Big Idea” with component elements called “the Detail”. Deputy Master McQuail rejected this formulation as incoherent and unintelligible, a decision upheld by Mr Justice Miles on appeal. Following further attempts at clarification in early 2022, Illiquidx reframed its confidential information as “the Business Opportunity” with component parts identified in writing as “the Detail”.

At the Pre-Trial Review, the court refused Illiquidx’s application to expand its case on confidential information from the written Detail to include oral conversations and narrative elsewhere in the pleading. Despite these rulings, Illiquidx’s trial skeleton continued an expansive approach, making extensive reference to matters both within and outside the Detail. During closing submissions, Illiquidx’s counsel substantially dropped reliance on the Detail and argued instead that the Business Opportunity was simply the high-level idea of a sanctions-compliant fund, evidenced by only a few documents in the Detail.

The costs hearing took place on 6 June 2025, with judgment reserved. Illiquidx’s costs were stated to be approximately £6.6 million, whilst the defendants’ costs totalled approximately £5.5 million. Mr Robinson had accepted liability for Altana’s liabilities pursuant to paragraph 128 of the liability judgment.

Costs Issues Before the Court

The court was required to determine several discrete costs issues arising from the liability judgment. First, whether costs should be reserved pending determination of quantum or dealt with immediately. The defendants argued that Illiquidx had greatly overstated the value of its claim at £10 million when the true value of damages would likely be £100,000 or less at any quantum trial, and that this potential exaggeration could only be properly assessed after quantum had been determined.

Second, the court needed to determine the appropriate percentage deduction from Illiquidx’s costs to reflect its failure on the copyright and joint liability claims. Illiquidx conceded that some deduction was appropriate, proposing 10%, whilst the defendants argued for 14.7% attributable to these failed claims.

Third, and most significantly, the court was asked to consider whether further deductions should be made to reflect Illiquidx’s conduct of the litigation, particularly its failure to plead its case with clarity and precision. The defendants sought a total deduction of 61.5% of Illiquidx’s assessed costs, incorporating both the failed claims and conduct issues.

Finally, the court needed to determine the appropriate rate of interest on costs (Illiquidx seeking 2% above base rate, the defendants proposing 1% above base rate) and the appropriate interim payment on account of costs, with Illiquidx seeking 60% of 90% of its costs and the defendants proposing 50% of any costs ordered, reduced to account for unpaid interim costs orders in their favour.

The Parties’ Positions

Illiquidx submitted that as the overall winner on liability, the starting point under CPR 44.2(2)(a) was that its costs should be paid by Altana and Brevent. It accepted that a 10% deduction was appropriate to reflect the failed copyright and joint liability claims, which it acknowledged were discrete claims for additional relief rather than alternative routes to the same outcome. Illiquidx argued that costs should be determined immediately rather than reserved, relying on the general principle established in Langer v McKeown that costs should follow the outcome of discrete issues to encourage professional conduct of litigation.

On the conduct issue, Illiquidx resisted any further deduction beyond the 10% for failed claims. Counsel argued that its case, whilst perhaps obscurely pleaded, had ultimately succeeded and was available on the pleadings. It submitted that matters of excessive disclosure costs should be left to detailed assessment rather than dealt with by way of percentage reduction at this stage.

The defendants’ primary position was that costs should be reserved pending the quantum trial, arguing that only then could the court properly assess whether Illiquidx had exaggerated its claim as permitted under CPR 44.2(4)(a) and 44.2(5)(c) and (d). They highlighted that no Part 36 offers had been made but indicated that “without prejudice save as to costs” offers existed which included quantum, though they were unwilling to waive privilege to put these before the court.

On the substantive costs issues, the defendants argued for a 14.7% deduction for the failed copyright and joint liability claims, based on Mr Seadon’s detailed analysis. More significantly, they sought a total deduction of 61.5% to reflect the unnecessary costs incurred due to Illiquidx’s conduct. Mr Seadon’s witness statement attempted to calculate the extent to which costs had been inflated by the “expansive, imprecise and vague” way the claim had been pleaded, including excessive disclosure costs of over £1.1 million resulting in 13,526 documents being disclosed, of which only 452 were referred to at trial.

The defendants emphasised the basic injustice of facing vague and expansive pleadings which failed to properly identify the case they had to meet, arguing this had discouraged settlement and placed them on an unequal footing. They submitted that the lack of clarity and precision justified a substantial departure from the general rule on costs.

The Court’s Decision

Mr Justice Rajah first addressed whether costs should be reserved, holding that they should be determined immediately. He applied the principles from Langer v McKeown, emphasising that requiring losing parties to pay costs as they lose encourages professional conduct of litigation and selectivity in points taken. The court noted that apart from policy considerations, it was desirable to deal with costs whilst the trial and judgment remained fresh in the judge’s mind.

On the reservation point, the court held that if the defendants wished exaggeration of the claim to be considered at the liability stage, they could have made a global Part 36 offer giving the claim its fair value, or some other costs-protective offer. The existence of “without prejudice save as to costs” correspondence was insufficient, particularly where the defendants were unwilling to waive privilege. The court applied the principle from Langer that parties cannot “have it both ways by withholding admission of the evidence of the offer but still asking the court to take account of it”.

Turning to the substantive costs determination, the court found that costs had been significantly increased by Illiquidx’s failure to identify its case clearly. The judgment detailed how costs had been increased “at every turn” – in pleadings, disclosure, evidence, trial preparation, cross-examination and inter-solicitor correspondence. The court particularly criticised the disclosure exercise, which resulted in millions of documents being harvested at a cost exceeding £1.1 million, describing Illiquidx’s approach as “casting about to find a case”.

However, the court declined to displace the general rule entirely. Three factors influenced this decision: first, Illiquidx had won on a case that was pleaded, however obscurely; second, the defendants’ defence remained unaffected but unsuccessful; and third, the defendants had advanced a false case that Mr Robinson was already aware of most of the information and had independently conceived the fund idea.

The court ordered the defendants to pay 50% of Illiquidx’s assessed costs on the standard basis, representing both a reduction for the failed claims and the court’s disapproval of how the claim had been prosecuted. Interest was awarded at 2% above base rate from the date of payment to Illiquidx’s solicitors until judgment. The interim payment was set at 50% of the reduced figure (i.e., 25% of total costs), taking a cautious approach given the high hourly rates exceeding guideline rates and outstanding interim costs orders of approximately £77,000 in the defendants’ favour.

The court expressly rejected the suggestion that excessive disclosure costs should be left to detailed assessment, holding that where disclosure had been ordered or agreed by reference to pleaded issues, the Costs Judge would not revisit whether a different disclosure exercise should have been undertaken. The 50% reduction therefore reflected both the court’s disapproval of Illiquidx’s conduct and the likely additional costs caused by that approach.