Costs on Discontinuance Archives

Indemnity Costs After Discontinuance And Apportionment Of Costs Liability Between Multiple Claimants

Costs on Discontinuance, Indemnity Costs, New Costs Blog, Payment on Account

The Business and Property Courts’ decision in Stuart Allen & Ors v East Lindsey District Council [2026] EWHC 1863 (Ch) addresses when costs following discontinuance should be assessed on the indemnity rather than standard basis under CPR r 38.6, and how costs liability should be allocated in multi-party litigation where claimants pursue individual claims based on similar allegations.

Background

The claim arose from a dispute between the owners or former owners of caravans stationed at the Kingfisher Caravan Park in Ingoldmells, Skegness, and East Lindsey District Council, the freehold owner of the park. The council, through companies to which it had delegated the relevant functions, granted licences to caravan owners to keep their caravans on the site. Until 2017, those licences had been granted annually. Following events in the period after that, new licence terms were entered into in 2020, comprising a licence agreement and an extension agreement. The claimants challenged whether the council was entitled to impose those new terms.

The issues raised included whether the council had, through representations made on its behalf, estopped itself from imposing new terms. The claimants sought declaratory relief on that basis, and also advanced claims that the council had failed to comply with its public law duties and/or had breached their ECHR property rights. All claims were defended.

Proceedings were issued on 9 November 2021. The defendant initially applied to strike out, which Mr Ingham, appearing for the claimants, characterised as essentially an attempt to regularise the way in which the allegations were pleaded. That application was resolved by a consent order made by Deputy Master Marsh on 17 February 2022. Following that order, 89 claimants were identified as pursuing claims, as set out in the schedule to the order.

A costs and case management conference took place on 14 May 2024 before Master Brightwell. At that hearing, a direction was given that ten test claimants would be identified, with five to be selected by each side. The remaining claims were stayed in the meantime. Difficulties then arose in ascertaining the identity of those ten claimants, leading to a further application by the defendant, heard on 14 March 2025. At that hearing, the court varied the provisions for identifying the test claimants, allowed claimants to indicate they did not wish to continue if so advised, and made an unless order providing that non-compliance would result in automatic strike-out.

Following the March 2025 order, a trial date was fixed and the defendant proceeded to prepare for trial, including preparing its own evidence for exchange in accordance with the court’s directions. The claimants did not exchange any evidence. Shortly before the trial, which had been listed for November 2025, the remaining claims were discontinued on or around 22 September 2025. Deputy Master Arkush made an order on 29 September 2025 giving directions to enable the defendant to make a costs application. Master Brightwell extended time for compliance with that order, and the matter came before him on 13 May 2026.

It is worth noting that, by the time of the hearing, only the defendant had filed evidence and a skeleton argument. The claimants had instructed counsel late in the day, and no skeleton argument or evidence had been filed on their behalf.

Costs Issues Before the Court

The defendant, East Lindsey District Council, applied for costs orders in two distinct respects. The starting point was CPR r 38.6, which provides that a discontinuing party is liable to pay the defendant’s costs up to the date of discontinuance on the standard basis, unless the court orders otherwise. The defendant sought a different order in two respects.

The first issue concerned the basis of assessment. The defendant sought an order that costs be assessed on the indemnity basis rather than the standard basis, relying on the conduct of the claimants throughout the proceedings and, in particular, during the period leading up to discontinuance.

The second issue concerned the allocation of costs liability as between the 89 individual claimants. Because this was multi-party litigation in which each claimant pursued their own individual claim rather than a single common claim, the court was required to determine how costs liability should be apportioned across the claimant group. The defendant’s draft order divided the costs of the claim into seven distinct periods. For periods 4 and 6, which covered the phases immediately following the first CCMC and the second order respectively, and during which the bulk of the work was carried out in relation to test claims (ten test claimants having been identified in each case), the defendant proposed that costs be payable jointly and severally by the test claimants for the relevant period. For all other periods, the proposal was that costs be payable jointly and severally by all claimants who had not already discontinued at an earlier date.

A further issue arose following the substantive costs determination: whether the court should order a payment on account of costs, and if so, in what amount and on what basis, having regard to the different periods and the different bases of assessment applicable to each.

The Parties’ Positions

On the allocation of costs liability between the claimants, Mr Ingham was largely neutral. He recognised the potential for conflict between different classes of claimant, namely those who were test claimants at any given point and those who were not. He did not advance a positive case for a different order to that proposed by the defendant in paragraphs 1 to 7 of the draft order.

Mr Lees KC, for the defendant, submitted that on analysis there were, in this case, no individual costs; all costs for each of the identified periods were effectively common costs. He supported that submission in particular by reference to the fact that the claimants had never served any witness evidence, meaning that the allegations made by individual claimants had never been fully articulated and could not therefore have been individually addressed by the defendant. He submitted that the proposed seven-period structure, with joint and several liability limited to the test claimants for periods 4 and 6, was the fairest available order, given that the non-test claimants’ claims had been stayed during those periods.

On the question of indemnity costs, Mr Lees advanced three broad points. First, he relied on what he characterised as a general failure by the claimants to prosecute their claims properly, most notably in the final period when no evidence was exchanged and the claims were then discontinued without prior warning, shortly before trial. He did not rely on the fact of discontinuance itself, but on the timing of it and the context of earlier defaults. He also referred to the claimants’ initial objection to the defendant having any role in selecting test claimants, and the subsequent reluctance to proceed once the defendant’s nominated claimants had been identified. Second, he noted, with a light touch, that earlier costs orders made in the proceedings remained unpaid. Third, he submitted that the claim had been pleaded in a scattergun fashion, with a lack of specificity, and that because witness evidence had never been produced, the defendant had remained uncertain as to the precise case it had to meet.

Mr Ingham submitted that none of the factors identified by the defendant, individually or cumulatively, crossed the threshold required for an indemnity costs order. He argued that the fact of discontinuance was, if anything, a point in the claimants’ favour, and that public policy considerations militated against penalising claimants who discontinue by imposing indemnity costs.

On the question of a payment on account, Mr Lees sought payments calculated at 90 per cent of budgeted costs for periods falling within the costs budget, and 50 per cent for costs incurred in earlier periods before the budget was set. Mr Ingham raised concerns about the overall level of costs, particularly in relation to the costs of the application itself, but did not advance a specific alternative figure.

The Court’s Decision

Allocation of Costs Between Claimants

On the allocation of costs liability between the claimants, Master Brightwell accepted the general principles applicable to multi-party litigation, drawing on the Court of Appeal’s decision in Stumm v Dixon (1889) 22 QBD 529, as summarised in the recent decision of Nicklin J and Senior Master Cook in Lawrence v Associated Newspapers Ltd [2025] EWHC 3207 (KB). The principle derived from Stumm v Dixon is that each defendant is liable for all costs properly incurred by the plaintiff in maintaining the action, except as to costs caused solely by a separate defence available only to that defendant. The same principle applies, mutatis mutandis, to claimants.

The court also had regard to the analysis of Nugee J in Rowe v Ingenious Media Holdings plc [2020] EWHC 235 (Ch), which distinguished between cases where claimants have a true joint claim and cases where a number of claimants join forces to bring what is in effect a single claim or group of claims, and cases where each claimant has their own individual claim. As Nicklin J and Senior Master Cook observed in Lawrence, circumstances may range from large scale GLO or quasi-GLO claims involving hundreds or thousands of claimants, where each claimant is not connected and has their own individual claim, to cases where the claimants have effectively combined together to present claims based upon common allegations against a single defendant.

Master Brightwell found that this was not a true single claim where various claimants were entitled to pursue the same cause of action. After the 2022 order, 89 different claimants had each pursued their own claim in relation to their own caravan, or former caravan, albeit based upon similar allegations. It seemed inevitable that each claimant would have had their own case as to what was said to them and as to the nature of the representations that were made.

In principle, this was a claim where the common costs should be paid jointly and severally by the claimants as a whole or perhaps between the test claimants at any given time, and where any individual costs should be borne by the claimant to whom those costs related. Mr Lees submitted that in the circumstances of this case there were, on analysis, no individual costs; all of the costs for each of the given periods were common costs. That point was supported particularly by the submission that the claimants never served any evidence, so the allegations made by individual claimants did not fall to be addressed or simply could not be addressed by the defendant, they never having been fully set out.

Master Brightwell considered from the submissions that Mr Lees was probably correct that a very large proportion of the costs were common costs. However, the court did not have all of the information that passed between the parties, nor all of the information contained in any disclosure documents that were considered, and had not been taken to all aspects of the witness statements that were prepared on behalf of the defendant. In relation to the two periods which seemed to be the most significant periods, identified as periods 4 and 6, when there were test claims, he did not consider it appropriate to close off the possibility of claimants arguing that identifiable costs were individual to other claimants and therefore that they should not be jointly and severally liable for the whole.

With that modification, the court made the order sought by the defendant in paragraphs 1 to 7 of the draft order. In relation to periods 4 and 6, the costs liability would be limited to the test claimants. That was the order sought by the defendant and the claimants did not contend for a different order. Mr Lees fairly submitted, and the court accepted, that that was likely to be the fairest order to the claimants, for the simple reason that the claims for the non-test claimants were stayed during the material period. Master Brightwell accepted there would be cases where it would not be appropriate to make that order and where all of the claimants should remain liable for common costs. However, in circumstances where the claimants had not responded to the application with evidence or made any argument for such an order, it did not seem appropriate to consider making one.

Indemnity Costs

The court then turned to the principal argument, which was whether the costs should be ordered on the standard or on the indemnity basis. The court has a broad discretion which is to be guided by principle as to what order to make on costs. The test as to when indemnity costs may be ordered has been stated in broad terms as whether the conduct of the paying party is outside the norm or unreasonable to a high degree. Master Brightwell noted that there is no requirement that the paying party’s conduct is deserving of moral opprobrium or even exceptional. The purpose of an indemnity costs order is to compensate the receiving party for costs they have incurred as a result of the conduct of the paying party and not to punish. It follows from this that there must be some connection between the costs that have been incurred by the receiving party and the conduct of which complaint is made.

Master Brightwell considered it appropriate to stand back and consider both the proceedings as a whole and the conduct of the claimants in the individual periods that had been identified in the draft order.

Mr Lees’ submissions were divided essentially into three points. First, he relied in general terms on what he characterised as a general failure on the part of the claimants to prosecute their claims in any proper way, most particularly in the final period when, without prior warning, there was no provision of evidence on behalf of the claimants and the claims were then discontinued. He made clear that he did not rely on the fact of discontinuance itself but on the time at which that was done, shortly before the trial, and in light of the other defaults which had occurred previously. He referred to the fact that initially the claimants had objected to the defendant having any role in the selection of test claimants and that when claimants were put forward by the defendant there was then a lack of willingness to proceed with the claim.

Master Brightwell observed that this, to some extent, exemplified the difficulties which solicitors may have when acting on behalf of a large number of claimants who each themselves have what may be a moderately small claim but, when all the claims are put together, the claim is far more substantial. It also showed the difficulties that may be experienced when claimants who are pooling costs, and perhaps a relatively small amount of costs each, become aware of the burdens which will be placed on them personally in relation to the proceedings. However, if the claimants wished to rely on such points in order to explain their conduct during key periods of this litigation, they ought to have filed evidence in response to the costs application.

Master Brightwell accepted, having dealt with the case management of this claim since the beginning of 2023, that there had been repeated missed deadlines on the part of the claimants and it had clearly proved difficult for the defendant to pin down which claimants were pursuing claims and what each claimant’s case on the facts was or was going to be.

The second point Mr Lees made, as he indicated with a light touch, was that costs orders which had been made earlier in the proceedings had not been met. They remained unpaid. That itself might not be outside the norm, but it was a point that could be viewed together with the points made in relation to conduct.

The third general point made on behalf of the defendant related in broad terms to the merits of the claim and the way in which the claim had been presented. Mr Lees described the allegations made as being of a scattergun nature. He commented that there was a lack of specificity in the way in which the claim had been pleaded and, because witness evidence had not been produced, the defendant had remained unaware of the precise allegations it had to meet.

In relation to the period in which the defendant was preparing for trial, Master Brightwell considered there was some force in this third point, although he noted that an order was made for simultaneous exchange of evidence rather than provision for service of evidence on behalf of the claimants first (i.e. the defendant was also going to have to prepare its own evidence without sight of the claimants’ evidence). Furthermore, as far as the earlier applications made in these proceedings were concerned, costs orders had already been made dealing with them. The first application was resolved by consent. Whilst Mr Lees indicated that the defendant quite properly took into account the fact that it was using public money in defending the proceedings and therefore decided not to pursue further interim applications, the conventional way in which issues about the way in which the claim is presented are resolved is by interim applications. As far as the complaint of lack of specificity in the particulars of claim was concerned, it is open to a defendant to make a request and/or seek an order under Part 18 for further information.

As far as the final point was concerned, i.e. the complaint about the way in which the claim was pleaded or the merits of the claim, Master Brightwell did not consider that it had been established that the claimants behaved unreasonably to a high degree. That left the first point, to be considered together with the fact that outstanding costs orders had not been met.

Mr Ingham submitted that none of the factors identified by the defendant crossed the threshold for the imposition of indemnity costs and that the same was true when one viewed the factors as a whole. He suggested that the fact the claims were discontinued was in fact a point in the claimants’ favour rather than a point against them, and that for public policy reasons claimants who discontinue should not be penalised by the making of indemnity costs orders.

Master Brightwell considered the position more nuanced than that. A claimant who discontinues their claim in good time when they become aware of impediments to their claim should not generally be penalised through the making of an indemnity costs order. However, Mr Lees made clear that was not really the basis upon which the defendant made this application. It was the fact of discontinuance viewed through the lens of everything else that had occurred. It seemed to the court that, at least for a significant part of the latter period during which this claim had been proceeding, the conduct of the claimants had indeed been unreasonable to a high degree and outside the norm. The impression the court had was that there was no serious attempt to prepare the claim for trial, even though the defendant was preparing for trial, and the claimants had not sought in evidence to rebut that impression.

Taking into account to the extent possible the fact that a multi-party claim of this kind would present challenges and difficulties for the claimants’ solicitors, there had for a significant period been a failure properly to communicate, most notably in the final period, after the March 2025 order was made. That, in Master Brightwell’s judgment, led directly to the defendant incurring costs which would have been avoided if the claimants had through their solicitors properly considered the viability of the claims at an earlier stage.

With all of these points in mind, and standing back, Master Brightwell did not consider the claimants’ conduct was outside of the norm in the early periods, and in any event the fact the court had already made costs orders in relation to matters in those periods militated quite strongly in favour of a standard costs order governing the claim generally then. He accepted there would have been a period after the first CCMC when the parties were considering their position and identifying principal claimants. In that period it did not seem to him there should be an indemnity costs order either. The period where he did consider there should be such an order was period 6. It was clear that was when the bulk of the work was carried out by the defendant. For the reasons he had given, he considered that the costs incurred by the defendant in that period could be related to the conduct of the claimants which was outside of the norm and was subject to criticism accordingly.

Period 7 Master Brightwell considered to be in a different category. The mere fact that a party does not file any evidence, whilst he accepted it was of a piece with earlier conduct, did not itself mean that costs were incurred by the defendant other than costs which it would have to have incurred in any event in making the application. So the costs would be on the standard basis for period 7.

Payment on Account

When ordering costs be subject to detailed assessment the court is required to consider whether to direct that a payment be made on account of those costs. Master Brightwell’s concern about that order was the possibility that individual claimants might wish to pursue arguments that part of the costs were individual and not common costs. That was an issue which arose in relation to periods 4 and 6. That consideration, therefore, did not arise in relation to the other periods. As an order had been made that the claimants were to be liable jointly and severally, subject to identifying each element of costs with the relevant period, there was no reason not to order a payment on account.

As far as the periods other than 4 and 6 were concerned, Master Brightwell was satisfied the figures sought, which had been calculated on the basis essentially of 90 per cent of budgeted costs, where they fell within the budgeted costs, and 50 per cent for costs incurred previously, were in line with authority and appropriate. Whilst Mr Ingham had referred to the level of costs generally, particularly in relation to the costs of the application itself, there was no reason to suppose that those deductions were inappropriate in a case which had been costs managed.

As far as periods 4 and 6 were concerned, which were all budgeted costs, and where the figures currently in the draft order reflected 90 per cent of the budgeted costs incurred, Master Brightwell considered that a greater reduction was required. Following discussion with counsel on this point, he considered the sum for those payments should be 60 per cent of the budgeted costs, so 60 per cent of the sums attributable to those periods would be payable on account. That might be slightly overgenerous to the claimants, but in circumstances where he did not have clear sight on precisely what work was done by the defendant, it seemed appropriate to resolve the doubt in favour of the claimants and to leave further argument for detailed assessment.

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Several Liability Security For Costs | Rowe v Ingenious [2020]

TMC Legal provides advice on indemnity costs and CPR Part 44 for solicitors across England and Wales.

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Costs on Discontinuance, New Costs Blog, Payment on Account

The King’s Bench Division’s decision in Lodhia v Twelve Trees Management Company (Bromley-by-Bow) Limited & Ors [2026] EWHC 1177 (KB) addresses the costs consequences of discontinuance where a claimant sought to displace the usual rule under CPR 38.6 on multiple grounds.

Background

Mr Amar Lodhia, a leaseholder at the Maltings residential estate in East London, brought defamation and malicious falsehood claims against five defendants: Twelve Trees Management Company (Bromley-by-Bow) Limited (“TTMC”), the corporate entity managing the estate; Urang Group Limited trading as Urang Property Management (“Urang”), the property management company; and three individual residents who were also TTMC directors, Mr Thomas Squires (the third defendant), Mr Andrew Cregan (the fourth defendant), and Mr Tasleem Malleck-Amode (the fifth defendant). Mr Lodhia described himself as a legal consultant, social entrepreneur, and public interest advocate. He worked as a supervised legal consultant at JSC Chambers and was undertaking a postgraduate degree at the University of Law.

The claim arose from a newsletter sent to leaseholders on 6 March 2025, authored by Mr Squires and distributed by Urang. The newsletter criticised Mr Lodhia’s litigation activities, accused him of lying and making baseless allegations, stated that he was bankrupt and had no formal legal training, and referred to a previous general civil restraint order made against him. It encouraged leaseholders to seek independent legal advice before acting on his recommendation to withhold service charge payments.

Proceedings were issued on 15 May 2025. The original Particulars of Claim sought damages for defamation and malicious falsehood against all five defendants in relation to eleven statements in the newsletter. Mr Lodhia had been made bankrupt on 10 June 2024 and was automatically discharged on 10 June 2025, meaning the claim was issued during his bankruptcy.

Rather than filing a defence, the TTMC defendants applied on 15 July 2025 for summary disposal, seeking: a declaration under section 10 of the Defamation Act 2013 that the court lacked jurisdiction to hear defamation claims against the fourth and fifth defendants; strike-out or summary judgment on remaining claims against those defendants; strike-out or summary judgment on the malicious falsehood claim against the first and third defendants; and strike-out of paragraphs concerning the defendants’ insurance position. By order dated 13 November 2025, Steyn J listed the summary disposal application and a trial of preliminary issues as to meaning for hearing on 21 and 22 January 2026.

On 11 January 2026, Mr Lodhia applied to amend his Particulars of Claim. The proposed amendments deleted the fourth and fifth defendants entirely, abandoned all malicious falsehood claims, reduced the statements complained of from eleven to six, and removed the paragraphs concerning insurance. This conceded the summary disposal application in its entirety, despite Mr Lodhia having previously described it as “misconceived”.

On 15 January 2026, Mr Lodhia applied to postpone the January hearing, which was granted on 19 January 2026 by Collins Rice J, who attached particular weight to a letter from Dr Myrto Tsakopoulou, a Complex Emotional Needs and Complex Trauma Lead Psychologist at East London NHS Foundation Trust, dated 15 January 2026. That letter stated that Mr Lodhia’s treatment had been extended and that he was required to attend hospital on Thursdays, one of which fell during the listed hearing dates. The defendants subsequently raised questions about the authenticity of that letter.

A relisting appointment took place on 12 February 2026, which Mr Lodhia failed to attend. By order dated 16 February 2026, the matter was relisted for 6 and 7 May 2026. On 19 February 2026, Mr Lodhia applied again to postpone the May hearing on the grounds that his preferred counsel, Mr Chiffers, was unavailable. On 4 April 2026, he applied for a stay of proceedings until 30 September 2026 to facilitate mediation. Both applications were refused by Steyn J on 17 April 2026.

On 29 April 2026, Mr Lodhia made a further application to postpone the May hearing, supported by his tenth witness statement, which explained that he had only recently become aware that he was required to sit oral assessments at the University of Law on 6 and 7 May. Steyn J refused the application as originally framed but, in light of a subsequent witness statement indicating that the 6 May assessment could be rescheduled, ordered that the hearing proceed on 6 May only. She also expressed concerns about the authenticity of documents exhibited by Mr Lodhia and the truthfulness of his witness statement, and made directions for further evidence to address those concerns.

On 30 April 2026, Mr Lodhia filed a notice of discontinuance of the entire claim. Steyn J directed that the 6 May hearing be shortened to half a day to deal with consequential matters and outstanding costs issues. The hearing before Linden J took place on 6 May 2026. Mr Lodhia appeared in person. Jonathan Price KC and Percy Preston appeared for the TTMC defendants, instructed by rradar Limited. Greg Lazarev of Lazarev Cleaves LLP appeared for Urang. Judgment was handed down on 18 May 2026.

Costs Issues Before the Court

The costs issues arising at the 6 May hearing were numerous and arose against the backdrop of Mr Lodhia’s notice of discontinuance filed on 30 April 2026. The court was required to determine the costs consequences of several distinct procedural events, as well as the applicable basis of assessment and the question of an interim payment on account.

Before turning to the substantive costs issues, two preliminary points were raised by Mr Lodhia. First, he argued that his trustees in bankruptcy, Begbies Traynor, and his father (who held a lasting power of attorney over his property and financial affairs) should have been served before any costs determination could be made. Second, he contended that he was not personally liable for any adverse costs order, on the basis that such liability would attach to the bankruptcy estate. The court dealt with both points as threshold matters before proceeding to the substantive costs questions.

The substantive costs issues were: first, the costs of the summary disposal application brought by the TTMC defendants on 15 July 2025, which was effectively conceded by Mr Lodhia’s amendment application of 11 January 2026; second, the costs of the three applications to postpone hearings and the application for a stay, all made by Mr Lodhia; third, the costs consequences of the notice of discontinuance filed on 30 April 2026, with the central question being whether the presumption under CPR Rule 38.6 should apply or whether the court should “order otherwise”; fourth, whether any costs awarded in the defendants’ favour should be assessed on the indemnity basis; and fifth, whether an interim payment on account of costs should be ordered pursuant to CPR Rule 44.2(8) and, if so, in what sum.

The indemnity basis issue was ultimately not pursued by Mr Price KC at the hearing, on the basis that liberty to apply would be preserved pending the outcome of the further evidence directed by the court. The remaining issues were determined on the evidence before the court on 6 May.

An additional procedural matter arose from the TTMC defendants’ invitation to the court to make directions for further evidence in light of concerns about the veracity of certain evidence given by Mr Lodhia and the authenticity of certain documents produced by him. These concerns went beyond those already addressed in Steyn J’s 29 April Order and formed a significant part of the hearing.

The Preliminary Issues

Bankruptcy

Mr Lodhia’s position throughout the proceedings was that he was not personally liable for any adverse costs order and that such liability would attach to the estate in bankruptcy. He relied on sections 283 and 306 of the Insolvency Act 1986 and submitted that the trustees should be given the opportunity to respond to what he called “the potential non-party costs order”.

Linden J rejected this argument. The judge held that any order against Mr Lodhia would not be a bankruptcy debt or liability for the purposes of section 382 of the Insolvency Act or Part 14 of the Insolvency Rules 2016, given that there was no relevant “obligation incurred before the commencement of the bankruptcy”. The newsletter was not written until after his bankruptcy, and any order would be made long after the bankruptcy and his discharge from it.

In any event, the trustees had been aware of the proceedings for some time and had not expressed any wish to participate or make representations. Their view, which the court shared, was that Mr Lodhia was liable in respect of any order for costs against him and they were not. The court noted that if Mr Lodhia thought the trustees should be before the court, it was open to him to take steps to bring this about.

Lasting Power of Attorney

Mr Lodhia argued that his father should have been served in accordance with CPR Rules 6.13 and 6.25 because he had entered into a lasting power of attorney with his father in respect of his property and financial affairs. He submitted that he was a “protected party” to whom CPR Rule 21 applies.

Linden J rejected this argument. There was no evidence that Mr Lodhia lacked capacity or had lacked capacity at any stage of the litigation. His Particulars of Claim and other documents boasted in detail of his alleged public profile, abilities and successes. He described himself as working as a legal consultant at JSC Chambers, being responsible for day-to-day handling of leaseholder disputes, having considerable success in pre-action litigation, and having brought at least two other claims in his own name.

While Mr Lodhia described himself as disabled and vulnerable, and submitted evidence from Dr Tsakopoulou stating that he had complex post-traumatic stress disorder and required reasonable adjustments, Dr Tsakopoulou did not suggest that Mr Lodhia lacked capacity to conduct the proceedings. The judge observed that the evidence fell far short of establishing lack of capacity, and that Mr Lodhia’s performance at the hearing cast real doubt on whether he continued to experience the impairments identified by Dr Tsakopoulou.

The Costs of the Summary Disposal Application

Mr Lodhia sought dismissal of the summary disposal application on the ground that it was “otiose” in light of his proposed amendments, and sought his costs of that application and the amendment application on the basis that the defendants had failed to comply with the Pre-Action Protocol for Media and Communications Claims (“the PAP”).

In his fourth witness statement, dated 10 January 2026, Mr Lodhia said he had sent a letter to the solicitors for TTMC on 6 March 2025 which complied with the PAP, and a further letter of claim to TTMC and Urang on 7 March 2025 by first class post. He stated that no defendant responded at all to either letter of claim, and there was no acknowledgement, substantive response, or engagement of any kind with the Protocol. As he had no factual confirmation as to which individual defendants authorised, edited, approved or authored the newsletter, he was forced to plead on the basis of reasonable inference. He sought further information in July 2025 but did not receive it until he read the witness statements supporting the summary disposal application. The defendants should therefore pay his costs.

The defendants’ position was that there was no breach of the PAP, nor any failure to engage in pre-action correspondence. The amendment application conceded the summary disposal application and discontinued against the fourth and fifth defendants. Mr Lodhia should pay the costs of the summary disposal application and the costs thrown away by reason of the amendments regardless of the outcome of the application for costs on the subsequent discontinuance of the proceedings as a whole.

Linden J agreed that Mr Lodhia should pay the defendants’ costs of the summary disposal application, the discontinuance against the fourth and fifth defendants, and the amendment application in any event. The judge did not accept that there was any breach of the PAP by the defendants, nor any failure to engage reasonably with Mr Lodhia in correspondence. Even if this was wrong, the judge did not accept that this made any difference to Mr Lodhia’s approach to starting, pleading and pursuing his case. His approach in the correspondence to the arguments which subsequently formed the basis of the summary disposal application was also unreasonable and directly gave rise to the need to make that application.

The PAP does not specifically require a prospective claimant or defendant to identify who authorised, edited, approved or authored the publication, nor does CPR Practice Direction 53B specifically require these matters to be pleaded. The principal target of the claim in defamation is the publisher of the statements complained of. In this case the publisher was TTMC, as was apparent on the face of the newsletter and as Mr Lodhia was well aware.

There was an issue as to whether Mr Lodhia actually asked who authorised, edited, approved or authored the newsletter prior to commencing proceedings. In the 6 March 2025 pre-action letter, the furthest he went was to seek “a written explanation of how these defamatory statements were approved for publication and by whom”. There was also an issue as to whether the second pre-action letter of 7 March 2025 was really sent, given that it was sent by post only and not by email, and the defendants’ evidence was that it was not received.

Even assuming the 7 March letter was posted and received, the judge did not accept that there was a failure to engage or a breach of the PAP. Rradar responded to the 6 March letter on 20 March 2025, pointing out that Mr Lodhia’s letter did not comply with the PAP in that it did not identify the specific statements complained of or give details of the serious harm alleged. Instead of providing the information requested, Mr Lodhia set a deadline of 24 March for various demands to be met. The correspondence continued, and on 24 March he stated that proceedings had been issued on CE File, despite not being under any limitation pressure.

The original Particulars of Claim, dated 25 March 2025, correctly pleaded that Mr Squires was the principal author and editor of the newsletter. The case against the fourth and fifth defendants was not pleaded simply on the basis that they were authors; it included allegations about piercing the corporate veil and particulars of the case that they were not acting as agents of TTMC. This was not a case in which the pleader based his case on an allegation that they were authors in circumstances where the true position had not been revealed to him in correspondence, and then discontinued that case when the true position became apparent.

On 13 June 2025, rradar wrote to Mr Lodhia stating that he was right to plead that Mr Squires was the author but arguing that there was no viable case against the fourth and fifth defendants. The terms of section 10 of the Defamation Act 2013 were set out, as were the flaws in Mr Lodhia’s case. The difficulties with piercing the corporate veil were also pointed out. He was invited to discontinue against the fourth and fifth defendants and told that an application would be made if he did not do so.

He did not do so. Instead, Mr Lodhia continued robustly to dismiss rradar’s arguments, to assert that the fourth and fifth defendants were personally liable, and to contest other aspects of the defendants’ position. On 26 June 2025, rradar wrote again, repeating the arguments which subsequently formed the basis for the summary disposal application and stating that they would seek instructions to make that application if he persisted. There was a further attempt to persuade Mr Lodhia on 30 June 2025, but he continued to dismiss the defendants’ arguments up to and including 15 July 2025.

The judge rejected Mr Lodhia’s argument that there was unreasonable conduct by the defendants prior to issuing the summary disposal application. He was given every opportunity to make concessions which would avoid the need for an application to the court, but he did not do so. If anyone was unreasonable it was Mr Lodhia in filing his claim so soon and then failing to engage with the defendants’ arguments, which were clearly explained to him but ignored.

As to causation, Mr Lodhia accepted that the position was clear from the witness statements served in support of the summary disposal application. However, this did not cause him to reflect or alter his approach. On 15 July 2025 he immediately responded that the defendants’ arguments were “misconceived”. On 20 August 2025, he filed a formal response which again described the summary disposal application as “misconceived” and continued to assert his claims as pleaded. It was not until 11 January 2026 that he indicated he wished to concede the summary disposal application.

When asked why, if the information he said he sought was critical, he did not discontinue shortly after 15 July when he had this information, Mr Lodhia told the court that he understood he had been ordered or required to resist the summary disposal application by Master Armstrong’s Order of 16 December 2025. The judge regretted to say that he did not regard this answer as truthful, not just because Master Armstrong’s Order did not require him to do any such thing, but also because the Order postdated by a number of months his decision to take the position that the summary disposal application was “misconceived”.

The judge was satisfied that Mr Lodhia should pay the costs of the summary disposal application given that the defendants were wholly successful. He should also pay the fourth and fifth defendants’ costs of the proceedings given that he discontinued against them: there was no change of circumstances and no unreasonable conduct on their part. He should pay the costs thrown away by reason of his application to amend given that the need to amend arose through his approach to the proceedings.

The Costs of the Postponement and Stay Applications

Mr Lodhia made three applications to postpone hearings and one application for a stay. The first postponement application, made on 15 January 2026, was granted by Collins Rice J on 19 January 2026. She attached particular weight to medical evidence in the form of a letter from Dr Tsakopoulou dated 15 January 2026, stating that Mr Lodhia’s treatment had been extended and he was required to attend hospital on Thursdays, one of which fell during the listed hearing dates.

By the time of the 6 May hearing there was an issue as to the authenticity of Dr Tsakopoulou’s letter, given that until his application on 15 January 2026, the basis for saying a postponement was required was the non-availability of Mr Chiffers. Before this, Mr Lodhia did not mention the need to attend hospital although the defendants said he must have been aware of it in December.

Linden J was willing to assume for present purposes that the 15 January 2026 letter was entirely genuine. Even on this assumption, however, Mr Lodhia should pay the costs of the first application to postpone. His emails of 22 December 2025 first proposed the postponement on the grounds that he had instructed counsel who was not available for the hearing. Insofar as that was the true reason for his application, it was an unreasonable basis for a postponement and the defendants were fully entitled to refuse to agree. Even taking his evidence about the need to attend hospital at face value, his application succeeded on a ground introduced very late in the day. The defendants’ skeleton argument had been filed on 14 January and preparations were necessarily well advanced. The just course was to order that Mr Lodhia pay any costs thrown away by reason of the postponement.

On 19 February 2026, Mr Lodhia applied to postpone the May hearing on the grounds that Mr Chiffers was not available. On 4 April 2026 he issued an application to stay the proceedings until 30 September 2026 to facilitate mediation. On 17 April 2026, both applications were refused by Steyn J. She referred to the 15 January application and noted that Mr Lodhia had failed to attend the listing appointment on 12 February 2026. She found that he had no reasonable excuse for failing to do so, particularly given that the hearing was being relisted at his request. She noted that there had been delay in the proceedings and that Mr Lodhia had had plenty of time to instruct alternative counsel or represent himself. She noted that the defendants were willing in principle to engage in mediation but agreed with them that this did not mean the proceedings should be stayed given the delays.

Linden J was satisfied that the costs of the second postponement application and the application for a stay should be borne by Mr Lodhia given that both applications failed.

On 29 April 2026, Mr Lodhia filed a further application to postpone the May hearing, supported by his tenth witness statement dated 24 April 2026. The application notice appears to have been signed by Mr Chiffers as his representative although Mr Lodhia conducted the correspondence. This explained that on 21 April 2026 he had become aware that he was required to attend oral assessments at the University of Law on 6 and 7 May 2026. He had attempted to reschedule these assessments but had been told by the Programme Lead, Ms Salome Verrell, that they could not be rescheduled.

In response, the defendants filed evidence casting doubt on the veracity of what Mr Lodhia had said in his tenth witness statement and questioning the completeness of the documents he had exhibited. Mr Lodhia then submitted an eleventh witness statement dated 29 April 2026, explaining that on 29 April he had been told that the oral assessment on 6 May could be rescheduled and he was therefore able to attend on that day but not on 7 May. His position was now that the preliminary issues as to meaning could be determined but that the issues as to costs should be postponed.

On 29 April 2026, Steyn J refused Mr Lodhia’s application as framed but, in light of his eleventh witness statement, ordered that the hearing would take place on 6 May 2026 starting at 10am. She expressly refused Mr Lodhia’s request to postpone the hearing of the issues in relation to costs. She also expressed concerns about the authenticity of certain documents exhibited by Mr Lodhia and the truthfulness of his witness statement, and made directions for further evidence to allay those concerns.

Mr Lodhia argued that his application was successful because the defendants resisted it and argued that one day would not be sufficient. Linden J held that his application was not successful in that the hearing was not vacated, as he originally asked. He did then modify his application but unsuccessfully argued that it should not deal with the issue of costs. On balance the judge took the view that he should pay the costs of this application.

The Costs of Discontinuing the Claim

Following Steyn J’s 29 April Order, on 30 April 2026 at 7.55am Mr Lodhia sent a letter offering a drop hands settlement. At 6.14pm, he emailed the defendants’ solicitors a signed notice of discontinuance of the whole claim. The covering email said that any application for costs would be resisted and referred to Mr Squires’ comments at the AGM on 29 April as unreasonable conduct relevant to costs under CPR Rule 44.2. Mr Lodhia also said that if the defendants sought their costs he intended to issue a further claim based on Mr Squires’ actions. The email concluded that the relentless nature of the litigation, and in particular Mr Squires’ actions, had had a profound and serious effect on Mr Lodhia’s health. The email did not suggest that the actions of Mr Squires, or the alleged position in relation to Mr Lodhia’s health, had caused him to decide to discontinue. No explanation for this decision was provided.

Mr Lodhia argued that the usual consequences of discontinuing proceedings, as set out in CPR Rule 38.6, should not follow. He put forward a number of reasons why the presumption identified in this rule was rebutted and the defendants’ costs should be disallowed.

Linden J applied the principles set out by Moore-Bick LJ in Brookes v HSBC Bank plc [2011] EWCA Civ 354. These provide that when a claimant discontinues, there is a presumption that the defendant should recover costs; the burden is on the claimant to show a good reason for departing from that position; the fact that the claimant would or might well have succeeded at trial is not itself a sufficient reason; if it is plain the claim would have failed, that is an additional factor in favour of applying the presumption; the mere fact that the claimant’s decision to discontinue may have been motivated by practical, pragmatic or financial reasons will not suffice to displace the presumption; if the claimant is to succeed in displacing the presumption he will usually need to show a change of circumstances to which he has not himself contributed; however, no change in circumstances is likely to suffice unless it has been brought about by some form of unreasonable conduct on the part of the defendant which in all the circumstances provides a good reason for departing from the rule.

At paragraph 10 of Brookes, Moore-Bick LJ stated that “a claimant who seeks to persuade the court to depart from the normal position must provide cogent reasons for doing so and is unlikely to satisfy that requirement save in unusual circumstances.”

The judge also referred to Nelson’s Yard Management Co v Ezieful [2013] EWCA Civ 235, in which Beatson LJ stated that “the context for the Court’s mandatory consideration of all the circumstances under CPR 44.3 is the determination of whether there is a good reason to depart from the presumption imposed by CPR 38.6.”

The judge proceeded on the assumption, derived from Scheinberg v Van Doorn [2019] EWHC 3220, that it was open to him to disallow the defendants’ costs or make an order in Mr Lodhia’s favour even without a change of circumstances, if there was unreasonable conduct on the defendants’ side. This gave Mr Lodhia the most favourable possible analytical framework.

The judge considered Mr Lodhia’s arguments individually and cumulatively but held that they did not amount to a relevant change of circumstances brought about by unreasonable conduct on the part of the defendants which in all the circumstances provided a good reason for departing from the rule. Nor did they amount to unreasonable conduct on the part of the defendants which would cause the court to disallow their costs in whole or in part.

The judge briefly addressed Mr Lodhia’s key arguments.

- - First, the alleged late disclosure of information as to authorship, editorship and publisher details, breaches of the PAP and failure to engage with the issues in correspondence had already been dealt with in the context of the summary disposal application. Insofar as the service of the statements of the third to fifth defendants in support of the summary disposal application was a relevant change of circumstances (which it was not), it occurred more than nine months before discontinuance. There was no unreasonableness on the part of the defendants in this regard.
  - Second, Mr Lodhia alleged that the defendants’ position on meaning had shifted in relation to two of the six statements complained of, adding to the costs of the preliminary trial as to meaning. There was nothing in this point. The defendants’ position did not materially shift and in any event their approach had no significant impact on costs. It was Mr Lodhia’s approach to pleading the statements complained of (complaining of eleven statements and then reducing this to six several months later) which unnecessarily increased the costs.
  - Third, Mr Lodhia relied on Mr Squires’ alleged defamatory statements about him at the 29 April AGM. It appeared that Mr Squires referred to the litigation and made uncomplimentary remarks which Mr Lodhia argued were implicitly about him. Assuming for present purposes that Mr Lodhia’s account and interpretation were accurate, the judge accepted that this was a recent development but did not regard it as a relevant change of circumstances. Mr Squires’ remarks were a reason for Mr Lodhia to continue with the claim rather than discontinue. Whatever Mr Squires said or implied on 29 April did not cause Mr Lodhia to discontinue. Rather, having decided that he wanted out of the litigation he alighted on this as a lever to use in an attempt to secure a drop hands settlement by threatening further proceedings, and to avoid paying the costs of the proceedings. Even if Mr Squires’ conduct was unreasonable, this was not unreasonable conduct of the litigation and in any event it had no bearing on the costs of the proceedings.
  - Fourth, Mr Lodhia relied on the fact that the defendants were insured in relation to the litigation. He said there was inequality of arms or resources between the parties. This was true but it was not a change of circumstances and did not amount to unreasonable conduct. Mr Lodhia’s own position was that he was aware the defendants were insured in December 2025. The fact that they were represented by qualified and competent lawyers may be a point of difference but this had been the position throughout the proceedings. He also said that although the defendants may be liable for the costs of their lawyers, the fact that they were insured against these costs rendered it unfair that he should have to pay them. This argument was misconceived for obvious reasons.
  - Fifth, Mr Lodhia relied on the alleged insolvency of TTMC, of which he implied he had first become aware from a report dated 9 December 2025. This, he said, was a change of circumstances. It also meant that TTMC would not be able to satisfy any adverse costs order. In fact, Mr Lodhia had a report dated 2 August 2025 which said that TTMC was insolvent. He relied on this report in his 20 August 2025 submissions resisting the summary disposal application and seeking to continue the litigation on all fronts. The insolvency issue was not a relevant change of circumstances and had no bearing on Mr Lodhia’s decision to discontinue or on the costs of the litigation. TTMC was insured against any liabilities in damages or costs, and in any event Mr Lodhia could recover against the other defendants.
  - Sixth, Mr Lodhia relied on the fact that he was discharged from bankruptcy after proceedings were issued. The judge had dealt with the bankruptcy issue above. Mr Lodhia’s discharge was not a relevant change of circumstances and did not amount to unreasonable conduct on the part of the defendants.
  - Seventh, he relied on the defendants’ refusal to accept various offers of settlement which he made and their alleged refusal to engage constructively with his proposals for mediation or other negotiation. The short answer, having considered the without prejudice materials, was that Mr Lodhia had not done better in these proceedings than any offer to settle which he made. He had recovered nothing and was liable to pay substantial costs even leaving aside the effect of his 30 April notice of discontinuance. On the other hand, the defendants did make a without prejudice save as to costs offer of settlement on 13 June 2025 which Mr Lodhia had failed to beat. They had also been prepared to engage in alternative dispute resolution through mediation. They engaged with Mr Lodhia’s proposals but it did not prove possible to reach agreement as to the terms of the mediation, let alone the terms of any settlement. There was no relevant change of circumstances and no unreasonable conduct on the part of the defendants such as would lead to any of their costs being disallowed.
  - Eighth, Mr Lodhia relied on a complaint which he had made to the Solicitors Regulation Authority about a point made in the defendants’ solicitor’s fourth witness statement. Although this would ultimately be a matter for the SRA to determine, there appeared to be nothing in the point. In any event, Mr Lodhia’s complaint and the witness statement were not a relevant change of circumstance and did not amount to unreasonable conduct on the part of the defendants such as would lead the court to disallow their costs.

The judge noted that Mr Lodhia also advanced what he described as “hopeless” arguments, including that he should not be required to pay twice given that part of the service charges which he pays goes towards TTMC’s budget for legal expenses, and that the doctrine of estoppel or approbation applied to prevent TTMC from recovering its costs. The judge observed that TTMC was entitled both to levy service charges and to claim its costs of the proceedings: there was no inconsistency and no question of double recovery.

The judge therefore ordered that Mr Lodhia would pay the costs of the proceedings up to the date of service of the notice of discontinuance. Those costs would be assessed on the standard basis, if not agreed, pending the responses to Steyn J’s 29 April Order and the judge’s directions for further evidence, and there would be liberty to apply in the light of that evidence.

Interim Payment on Account of Costs

Mr Lodhia did not advance any reason to depart from the presumption under Rule 44.2(8) that a reasonable sum should be paid on account of costs. His arguments were that no order for costs should be made in favour of the defendants and that, in any event, their Statements of Costs claimed disproportionately and unreasonably large sums. The judge held there was no good reason why an interim payment on account of costs should not be ordered in the case of both sets of the defendants’ legal representatives.

As to quantum, the judge applied the guidance given by Christopher Clarke LJ in Excalibur Ventures LLC v Texas Keystone Inc & Others [2015] EWHC 566 (Comm). Any figure ordered to be paid on account need not be “the irreducible minimum” in terms of what was likely to be recovered on a detailed assessment. A reasonable sum would often be one that was an estimate of the likely level of recovery subject to an appropriate margin to allow for error in the estimation.

As the judge understood TTMC’s Statement of Costs dated 5 May 2026, the figure of £112,779 plus VAT included the costs of the 6 May hearing rather than being limited to the costs to the service of the notice of discontinuance. In fairness to Mr Lodhia, the question whether he should pay TTMC’s costs of the 6 May hearing had not been the subject of submissions. The judge therefore reserved this issue and gave Mr Lodhia an opportunity to put in written submissions, limited to 5 pages, as to why he should not pay those costs and Urang’s costs of the hearing. The judge would then determine this matter on paper.

In the meantime, the judge worked on the rough and ready basis that approximately £25,000 of the £112,779 was in respect of the 6 May hearing so that approximately £90,000 related to the costs to service of the notice of discontinuance, which the judge treated as 30 April 2026.

Doing the best he could, the judge considered that a reasonable sum at this stage in respect of the costs to 30 April was £55,000 plus VAT. Although this was not a legally complex case, it was made more complex and expensive by Mr Lodhia’s approach. There were multiple emails, letters and witness statements from him generating voluminous material which required to be considered and responded to as appropriate. There were also the applications which generated additional costs, and there was the late postponement of the hearing in January. These considerations meant that the TTMC Defendants might well recover significantly more than £55,000 on a detailed assessment.

As for Urang’s costs, Mr Lodhia’s submission was that Lazarev Cleaves LLP had not been sufficiently involved to justify the figure of £7,364 plus VAT which was claimed. Mr Lazarev explained that in fact Urang’s costs could have been significantly higher. They instructed Counsel to advise them and thereafter had a watching brief in the sense that they were content for rradar and the TTMC Defendants to “make the going” rather than duplicate their efforts. Urang’s costs related principally to consideration of Mr Lodhia’s correspondence and witness statements. The judge rejected Mr Lodhia’s argument that Urang should not recover any of its costs.

As the judge understood Urang’s Statement of Costs, their costs to 30 April 2026 were in the order of £6,000 plus VAT. A reasonable sum at this stage in respect of those costs assuming assessment on a standard basis was £3,600 plus VAT.

Directions for Further Evidence

The judge made extensive directions for further evidence to address concerns about the veracity of certain evidence given by Mr Lodhia and the authenticity of certain documents produced by him. The judge explained to Mr Lodhia that Steyn J’s 29 April Order and these directions were not just relevant to the question whether costs should be assessed on the indemnity basis. Depending on what the evidence in response said, consideration might in due course be given to the question of proceedings for contempt of court. The judge expressly warned at paragraph 115 of the judgment that this possibility existed.

The directions covered: compliance with Steyn J’s 29 April Order; the 6 and 7 March 2025 letters of claim and associated certificates of service; Mr Lodhia’s dealings with Begbies Traynor; Dr Tsakopoulou’s letters; the role of Joseph Chiffers; and Mr Lodhia’s father’s role under the lasting power of attorney. The judge directed that the Order be served by the Defendants rather than by Mr Lodhia, noting that the experience in relation to Steyn J’s 29 April Order demonstrated that it would be “cleaner” for him not to be involved in the various witnesses’ compliance with the Order. This would ensure transparency and confidence in relation to the reliability of the responses received.

The judge gave liberty to apply to Begbies Traynor, Dr Tsakopoulou and Mr Chiffers to vary, set aside or stay the Order so far as it affected them, given that the Order had been made without giving them an opportunity to make representations.

CPR 38.6: Discontinuance And Costs – The Legal Principles

CPR 38.6 | Default Rule Disapplied On Discontinuance

CPR 38.6 | Post-Discontinuance Conduct Can Be Considered

CPR 38.6 Presumption Partially Displaced By 20% Due To Collateral Use Of Witness Statements

MEX Group v Ford | Costs After Discontinuance and Contempt

Indemnity Basis Costs Following Discontinuance

Indemnity Costs Awarded for Libel Claim Used to Pressure Anonymous Artist

Costs on Discontinuance, Indemnity Costs, New Costs Blog, Non-Party Costs

The King’s Bench Division’s decision in Full Colour Black Limited v Banksy [2026] EWHC 795 (KB) addresses the costs consequences following discontinuance of libel proceedings which the court found had been pursued to exert improper pressure rather than to obtain vindication by adjudication.

Background

Full Colour Black Limited, trading as Brandalised (“FCB”), is a company established in 2007 whose business model centres on the commercialisation of contemporary street art, including works attributed to Banksy. Andrew Gallagher is FCB’s sole director and shareholder. He began photographing Banksy’s art in 2001 and subsequently, through FCB, began exploiting those works commercially by granting licences to reproduce photographs of the artworks on clothing, greeting cards and related merchandise.

Banksy is an internationally renowned pseudonymous street artist who has consistently sought to preserve his anonymity. The Second Defendant, Pest Control Office Limited, is a registered company that publicly describes itself as the parent and legal guardian for Banksy. It holds an exclusive worldwide licence of the copyright in Banksy’s artworks and acts as his sole approved authentication body. Consistent with Banksy’s publicly stated opposition to the commercial exploitation of his works, neither Banksy nor Pest Control licences his images to third parties for commercial purposes.

The relationship between FCB and the Defendants had been fractious for well over a decade before these proceedings were commenced. The Defendants had repeatedly objected to FCB’s activities on copyright grounds, and FCB had repeatedly resisted those objections whilst simultaneously seeking to persuade Banksy to enter into a commercial arrangement. Notably, in correspondence dating back to November 2011 and again in January 2014, Mr Gallagher had drawn attention to the risk that litigation would expose Banksy to public identification, given that he would be required to give evidence to establish authorship and ownership of copyright. Those communications were accompanied by proposals for confidential commercial discussions. Aaron Wood, a Chartered Trade Mark Attorney who acted for FCB, made a series of public statements to similar effect, including comments to the BBC, the Daily Telegraph, and Australian television, all of which acknowledged that Banksy faced a fundamental dilemma: pursuing copyright litigation would require him to reveal his identity.

FCB’s business model was, as the court noted, legally precarious. A photograph of an artwork may attract its own copyright, but that does not displace the copyright in the underlying artistic work. Reproducing photographs of Banksy’s works on merchandise without a licence from the copyright owner carried an inherent risk of infringement proceedings. FCB had no such licence.

The immediate trigger for the libel proceedings was a collaboration between FCB and the fashion retailer GUESS, which launched a clothing collection in October 2022 marketed as “GUESS X BRANDALISED WITH GRAFFITI BY BANKSY”. The collection featured images derived from Banksy’s works, including the well-known “Flower Thrower”. No permission had been sought from or granted by Banksy or Pest Control. On 18 November 2022, Banksy posted a photograph of the Regent Street GUESS store window on his Instagram account, accompanied by the following message: “Attention all shoplifters. Please go to GUESS on Regent Street. They’ve helped themselves to my artwork without asking, how can it be wrong for you to do the same to their clothes?” The post attracted widespread public and media attention and led to crowds gathering outside the store, its temporary closure, and the removal of the “GRAFFITI BY BANKSY” wording from the window display.

On 21 December 2022, FCB sent a formal letter of claim to the Defendants alleging that the Instagram post was defamatory. A Claim Form was issued on 6 September 2023 and served on 13 September 2023. The Particulars of Claim alleged that the post conveyed the meaning that FCB had stolen Banksy’s artwork by licensing images to GUESS without permission or other legal authority, and that publication had caused serious harm to FCB’s reputation and serious financial loss within the meaning of section 1 of the Defamation Act 2013. Significantly, the final sentence of paragraph 2 of the Particulars of Claim included a purported reservation of the right to seek an order requiring Banksy to identify himself for the purposes of the proceedings.

Following service of Acknowledgments of Service in September 2023, FCB’s solicitors objected to Banksy’s failure to state his full name in the Acknowledgment of Service, relying on CPR 10.5(1)(d). On 4 October 2023, an article was published in The Sun in which Mr Wood was quoted commenting that “the worst thing that could happen to Banksy is if he gets unmasked by appearing in court”. On 10 October 2023, the Defendants’ solicitors provided a substantive response, admitting responsibility for publication of the Instagram post, denying that it was defamatory, and advancing defences of truth and qualified privilege. That letter also addressed the anonymity issue and foreshadowed a formal application for anonymity.

On 22 November 2023, the Defendants issued an application seeking an order that Banksy’s real identity be withheld and that he be referred to only as “Banksy” in the proceedings (“the Identity Application”), together with an extension of time for service of a Defence. The matter was referred to Nicklin J, who on 8 December 2023 made an order, without a hearing, giving directions for the Identity Application and directing FCB to issue any application seeking an order that Banksy identify himself by 5 January 2024, failing which the relevant sentence in the Particulars of Claim would be struck out. The order also required FCB to explain what it sought to achieve against Banksy that it could not legitimately achieve against the Second Defendant alone.

FCB did not pursue the naming application. On 28 February 2024, by consent, the court stayed the claim against Banksy pending resolution of the claim against the Second Defendant and confirmed the striking out of the reservation of rights sentence. The Identity Application was resolved by consent order on 12 March 2024, granting Banksy anonymity pursuant to CPR 39.2(4).

The Second Defendant served its Defence on 26 January 2024. Notably, the Defence did not advance a defence of honest opinion, despite that having been foreshadowed in earlier correspondence. FCB served its Reply on 8 March 2024, in which it resiled from its earlier case on publication and declined to admit that Banksy was the creator of the relevant artworks, requiring the Second Defendant to prove those matters. The Defendants characterised this as a tactical shift intended to maintain the risk that Banksy might be required to give evidence.

FCB then took no steps in the litigation for over a year. On 4 February 2025, the Second Defendant issued an application for summary judgment and/or striking out of the claim. FCB instructed new solicitors in February 2025, who engaged in without prejudice save as to costs correspondence seeking to settle not only the libel proceedings but also wider matters between the parties, including trade mark disputes, and proposing a broader “co-existence” commercial arrangement. The Defendants rejected that approach. On 27 March 2025, before the summary judgment application was determined, FCB served a Notice of Discontinuance.

On 22 July 2025, the Defendants issued an application seeking: (1) an order that FCB pay their costs on the indemnity basis; (2) a non-party costs order against Mr Gallagher personally; and (3) a payment on account of costs. The application was heard by Nicklin J on 28 November 2025, with judgment handed down on 1 April 2026.

Legal Principles

Indemnity costs

When a claim is discontinued, CPR 38.6(1) provides that the claimant is liable for the defendant’s costs on the standard basis. The court may, however, make a different order.

In Thakkar v Mican [2024] 1 WLR 4196, the Court of Appeal summarised the key principles governing indemnity costs orders. To obtain indemnity costs, the receiving party must surmount a “high hurdle” by demonstrating “some conduct or some circumstance which takes the case out of the norm”. Where the application is based on the paying party’s conduct, it is necessary to show that such conduct was “unreasonable to a high degree”, though it is not necessary to demonstrate “a moral lack of probity or conduct deserving of moral condemnation”. The phrase “out of the norm” reflects something outside the ordinary and reasonable conduct of proceedings.

In Hosking v Apax Partners LLP [2019] 1 WLR 3347, the Court of Appeal considered indemnity costs following discontinuance. The court held that discontinuance does not of itself justify an assessment of the merits, nor does it ordinarily require the court to determine whether the claim was unwarranted. However, the court is entitled to examine the circumstances of the case at the point of discontinuance, including the documentary record and the manner in which the proceedings were pursued, to assess whether the claim lacked real vitality or was continued as a means of extracting a settlement.

A hallmark of cases falling “out of the norm” is that proceedings have been high-risk litigation pursued, and often deliberately publicised, to exert pressure in the hope of extracting a settlement, with frail evidential support and little regard to their prospects of success at trial or any genuine objective of securing vindication by adjudication. Although such conduct may not amount to an abuse of process in strict terms, the court may have been intentionally used as an instrument of leverage – an “anvil for settlement” – rather than as an adjudicator. Where such conduct is demonstrated, discontinuance should not deter, and may positively incline, the court towards an award of indemnity costs.

Non-party costs orders

The jurisdiction to make a non-party costs order derives from section 51 of the Senior Courts Act 1981. In Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] 1 WLR 2807, the House of Lords held that the ultimate question is whether, in all the circumstances, it is just to make the order. Where a non-party not only funds but also substantially controls proceedings, or stands to benefit from them, justice will ordinarily require that if the proceedings fail, the non-party should bear the successful party’s costs. In such cases, the non-party may properly be characterised as the “real party” to the litigation.

Where the proposed non-party is a director or shareholder of a corporate litigant, the authorities emphasise the fundamental importance of limited liability. In Goknur Gida Maddeleri Enerji Imalet Ithalat Ihracat Tiracet ve Sanayi AS v Aytacli [2021] 4 WLR 101, the Court of Appeal held that control of the litigation, even sole control, is not of itself sufficient to justify a non-party costs order against a director. The touchstone is whether the director can fairly be described as “the real party to the litigation”. To persuade a court to make such an order, the applicant will usually need to establish either that the director was seeking to benefit personally from the company’s pursuit of the litigation, or that he or she was guilty of serious impropriety or bad faith. Such impropriety or bad faith must be of a serious nature and will ordinarily need to be causatively linked to the applicant unnecessarily incurring costs.

The Indemnity Costs Application

The Defendants limited their application to costs incurred from 10 October 2023, the date on which they provided their substantive response to the claim and formally raised the issue of protection of Banksy’s anonymity. They contended that the litigation was deployed as a means of exerting improper pressure by exploiting Banksy’s well-known and long-standing desire to preserve his anonymity. They relied on the history of threats made by FCB, the repeated acknowledgement that Banksy faced a risk of being unmasked if he became embroiled in legal proceedings, FCB’s early procedural steps and pleadings which raised the prospect of identifying Banksy, and the repeated linkage drawn between that issue and FCB’s commercial demands.

The Defendants further relied on the timing of FCB’s discontinuance, which occurred only when FCB was confronted with a substantive challenge to the viability of its case and the imminent incurring of further costs. That sequence, they submitted, supported the inference that the proceedings were abandoned once they ceased to be an effective means of applying pressure.

FCB resisted any award of indemnity costs. It submitted that the claim was properly brought to vindicate its reputation and was always arguable. It emphasised that discontinuance does not, without more, justify indemnity costs and that parties must be free to discontinue when litigation is no longer proportionate or commercially sensible. FCB denied that the proceedings were pursued for any improper or ulterior purpose and submitted that there was no strategy to threaten or procure the unmasking of Banksy. It relied on the fact that it did not pursue a naming application and ultimately accepted a stay of the claim against Banksy as being inconsistent with any alleged impropriety.

The Court’s Analysis on Indemnity Costs

Nicklin J held that the case fell outside the norm and that FCB must pay the Defendants’ costs on the indemnity basis from 10 October 2023. His conclusion did not rest on discontinuance alone, nor did it depend upon a finding that FCB was not entitled to discontinue when it did. It was founded on the manner and purpose for which the proceedings were pursued, viewed objectively and in the round.

The court found that, on the material before it, the defamation claim was, viewed objectively, without any real prospect of success. In particular, once the relevant context was taken into account, an honest opinion defence would, in all likelihood, have disposed of the claim. The court noted that honest opinion was “far and away the strongest defence” and that its omission from the Defence was otherwise difficult to understand. The most likely explanation was that reliance on that defence was recognised to carry an increased risk that Banksy would be required to give evidence, with the attendant risk of identification.

The critical feature which explained why such a claim was nonetheless pursued, and what took the case outside the norm, was that the proceedings were deployed to exert pressure relying upon Banksy’s well-known concern to preserve his anonymity as central to his artistic expression. The court referred to the history of communications in which Mr Gallagher drew attention to the risk to Banksy’s anonymity inherent in litigation and sought to use that risk as leverage in disputes concerning the commercial exploitation of Banksy’s works.

That dynamic was also reflected in the conduct of the litigation. The inclusion in the Particulars of Claim of a purported reservation of a right to seek an order requiring Banksy to identify himself, the subsequent correspondence pressing for Banksy’s “full name”, and the pleading decisions which had the effect of maintaining the possibility that Banksy might ultimately be required to give evidence, were not incidental to the procedural course adopted. Taken cumulatively, they served to maintain and to some extent to amplify the very risk which the court later took steps to contain by case management and anonymity orders.

A further consideration reinforced that conclusion. At an early stage of the proceedings, the Second Defendant admitted responsibility for publication of the Instagram post. In circumstances where the Second Defendant had done so, and having regard to the remedies sought by FCB, there was little objective justification for naming Banksy as a personal defendant. The decision nevertheless to include Banksy as a defendant from the outset, and to maintain his presence in the proceedings until compelled by case management to do otherwise, was consistent with the conclusion that FCB deliberately exposed Banksy to the risk inherent in the proceedings that his anonymity might be jeopardised, and that this was intended to exert pressure rather than to secure remedies which could not adequately be obtained against the Second Defendant alone.

The court rejected Mr Gallagher’s evidence that the proceedings were brought for vindication of legal rights in defamation. It reached that conclusion because it was inconsistent with the objective documentary record and with the inherent logic of the position which FCB adopted. A claim which, viewed objectively, had no real prospect of succeeding by adjudication was difficult to reconcile with a purely vindicatory purpose; whereas it was readily explicable if the proceedings were regarded as creating leverage by reason of the continuing sensitivity around Banksy’s anonymity.

The court made a further distinct finding regarding the honest opinion defence. Viewed in the context of the proceedings as a whole, the continuation of the proceedings could be understood as proceeding on the basis that Banksy would be reluctant to take procedural or evidential steps which might increase the risk of identification, even if those steps were otherwise available. The absence of an honest opinion defence was consistent with that analysis.

The correspondence in March 2025, marked without prejudice save as to costs, provided further support. FCB’s settlement overtures were not confined to compromise of the defamation proceedings. They were framed to link settlement to wider matters and to the prospect of a broader “co-existence” or commercial arrangement under which FCB would be permitted to continue exploiting Banksy’s works. Whilst not sufficient on its own, it provided support to the conclusion that the proceedings were being used, at least in part, to seek a broader commercial accommodation rather than to obtain vindication by adjudication.

Finally, the timing of the discontinuance – in the face of a substantive challenge and the prospect of further significant costs – was consistent with the inference that the proceedings were abandoned once they ceased to serve the function for which they were being deployed. No other explanation had been offered by FCB as to the sudden decision to discontinue.

Taking these matters together, the court was satisfied that the proceedings were pursued in a manner and for purposes which were unreasonable to a high degree and which took the case outside the norm. The Defendants’ limitation of their application to costs incurred from 10 October 2023 was appropriate and proportionate. Although FCB’s plan to exploit the Defendants’ concerns over Banksy’s anonymity was implemented when the Claim Form was issued and Particulars of Claim drafted, 10 October 2023 was the date on which the Defendants provided their substantive response to the claim and formally raised the issue of protection of Banksy’s anonymity in the proceedings.

The Non-Party Costs Application

The Defendants submitted that Mr Gallagher was the driving force behind the litigation, exercised complete control over it, and stood to benefit personally from its outcome. In those circumstances, they argued, he should properly be regarded as the real party to the proceedings. Alternatively, they submitted that Mr Gallagher’s conduct met the threshold of serious impropriety required to justify a non-party costs order, relying on the same features of the litigation conduct said to justify indemnity costs.

Mr Gallagher submitted that the principles governing non-party costs orders against directors and shareholders are stringent and deliberately so, reflecting the fundamental importance of limited liability. He accepted that he controlled the litigation, but submitted that control, even when combined with sole ownership, is not sufficient to justify a non-party costs order. He denied that he was the real party to the litigation in the relevant sense, submitting that the claim was brought to vindicate the company’s asserted commercial and reputational interests, and that any benefit to him was no more than the indirect consequence of his shareholding. He further denied any serious impropriety or bad faith on his part.

The Court’s Analysis on the Non-Party Costs Application

Nicklin J refused the application for a non-party costs order against Mr Gallagher. The court held that the application raised a distinct and more exacting question than the indemnity costs application. The issue was not whether the litigation was conducted in a manner which justifies an indemnity costs order against a company, but whether it is just to impose personal liability for costs on a person who was not a party to the proceedings, thereby displacing the principle of limited liability.

The court was satisfied that the two jurisdictions are distinct and that the thresholds are not co-extensive. While the same facts may be relevant to both applications, a finding sufficient to justify indemnity costs does not automatically or necessarily justify a non-party costs order. A separate and more exacting analysis is required before displacing the principle of limited liability.

An indemnity costs order is concerned with marking, in costs, litigation conduct which is unreasonable to a high degree or otherwise outside ordinary and reasonable forensic behaviour. It does not require a finding of dishonesty or moral turpitude. By contrast, where the proposed non-party is a director/shareholder of a corporate litigant, control of the litigation – even sole control – and even the pursuit of litigation which is ill-advised or tactically motivated will not ordinarily suffice. Something more is required: either that the director be properly characterised as the “real party” to the litigation in the relevant sense, or that the director’s personal conduct involves serious impropriety or bad faith of a qualitatively different order from ordinary litigation misjudgment or tactical opportunism.

Mr Gallagher plainly exercised control over the litigation as FCB’s sole director and shareholder. The court also accepted that he was, in a practical sense, the directing mind of the company and that the conduct which it had found to take the case outside the norm for the purposes of indemnity costs reflected decisions taken under his direction. However, the law draws a deliberate distinction between responsibility for litigation conduct which warrants an indemnity costs order against a corporate party, and the exceptional step of imposing personal liability for costs under section 51 of the Senior Courts Act 1981.

In the present case, whilst Mr Gallagher plainly controlled the litigation, the court was not satisfied that he was the “real party” to it in the requisite sense. The claim was brought in the company’s name and sought relief for the company, namely vindication of asserted corporate reputational and commercial interests and recovery of alleged corporate loss. Any personal advantage to Mr Gallagher from a successful outcome would have been indirect and incidental to his shareholding. That is not unusual in the case of a small company whose shares are held by, and whose affairs are controlled by, a single director, and does not, without more, justify treating the director as the true litigant and transferring to him the company’s costs liability.

The court also took into account that FCB was advised by solicitors and Counsel. The litigation strategy adopted was formulated and implemented with the benefit of legal advice, albeit directed towards objectives which the court had found to be improper for the purposes of the indemnity costs analysis. That feature did not excuse the company’s conduct, but it was relevant to whether it is just to impose personal liability on the director in the absence of clearer evidence that he acted in bad faith of the kind contemplated by the authorities. The court was not satisfied that any aspect of Mr Gallagher’s personal conduct provided a sufficient causative basis for transferring to him personal responsibility for costs arising from the company’s prosecution of the claim.

The Defendants also relied on the allegedly precarious financial position of FCB as supporting the inference that Mr Gallagher was using the company’s corporate personality to shield himself personally from the costs consequences of litigation. The court was unable to draw that inference on the evidence before it. While there was material suggesting that FCB’s financial position deteriorated significantly after publication of the Instagram post, the court did not have sufficient evidence as to the company’s financial health at the time when the litigation strategy was adopted and pursued, or as to whether FCB was then insolvent, undercapitalised, or being rendered unable to meet an adverse costs order by design.

Nor was the court persuaded that the evidence established serious impropriety or bad faith by Mr Gallagher personally of the qualitatively different order required to justify a non-party costs order. The court had found that the proceedings were deployed to exert pressure. However, the evidence did not establish, to the requisite standard, that Mr Gallagher engaged in dishonesty towards the court, deliberate manipulation of the corporate form to render the company unable to meet an adverse costs order, or other conduct of a markedly different order from aggressive or opportunistic litigation strategy. In short, the conduct warranted the sanction of an indemnity costs order against the corporate claimant, but it did not cross the higher threshold required to make it just to impose personal costs liability on Mr Gallagher.

The court also took into account the delay in bringing the non-party costs application which, while not determinative, reinforced the conclusion that it would not be just to make such an order.

Conclusion

FCB was ordered to pay the Defendants’ costs from 10 October 2023 on the indemnity basis. The application for a non-party costs order against Mr Andrew Gallagher was refused. FCB must make a payment on account of costs in a sum to be determined.

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The High Court’s decision in KXO and OYW v Devon County Council [2026] EWHC 203 (Admin) confirms that discontinuance of a judicial review claim triggers full costs liability under CPR 38.6, not merely costs limited to the Mount Cook stage.

Background

The claim was a judicial review brought on behalf of two children, KXO and OYW, by their mother, SZO, acting as their litigation friend. The Claimants challenged decisions made by Devon County Council on 25 May 2023 to propose amendments to their Education, Health and Care Plans (EHCPs) under regulation 28 of the Special Educational Needs and Disability Regulations 2014. The Claimants contended the Council acted unlawfully by amending the plans outside a formal review process. The Council maintained the decisions were lawful, provisional, and that an adequate alternative remedy existed via a statutory appeal to the Special Educational Needs and Disability Tribunal.

The procedural history was protracted and marked by considerable difficulties. The claim was issued on 30 May 2023 without a pre-action letter, in breach of the Pre-Action Protocol for Judicial Review. An application for interim relief was refused following a hearing on 8 June 2023 before DHCJ Mathew Gullick KC. The litigation friend, a disabled litigant in person diagnosed with Autism, ADHD, Agoraphobia and partial deafness, subsequently engaged in a pattern of conduct that included filing then withdrawing applications to discontinue the claim, making repeated complaints about an alleged failure to provide reasonable adjustments, failing to respond to court enquiries, and making applications that were certified as totally without merit. The court had, on multiple occasions, directed special measures to facilitate her participation, including remote attendance, permission for a supporter, and regular breaks.

On 5 January 2026, the litigation friend filed and served a Notice of Discontinuance. The court listed a hearing to determine, amongst other things, whether court permission or approval was needed for the discontinuance under CPR 38 or CPR 21.10 and to deal with costs. At the hearing on 3 February 2026, the litigation friend did not attend, although the hearing was available by CVP with the special measures previously directed. The court found that the Notice of Discontinuance was valid and had effectively ended the claim on 5 January 2026. Court approval was not required under CPR 21.10 because the discontinuance was unilateral and did not constitute the settlement or compromise of the claim. The only remaining issue was the liability for costs.

Costs Issues Before the Court

The primary costs issue was the financial consequence of the Claimants’ discontinuance. The general rule under CPR 38.6(1) is that a claimant who discontinues is liable for the defendant’s costs incurred up to the date of discontinuance, unless the court orders otherwise. The court needed to determine whether this default rule should apply. A related question was whether any costs award should be limited to the acknowledgment of service and summary grounds stage on a Mount Cook basis, or whether the full costs of the proceedings were recoverable. A secondary issue was the personal liability of the litigation friend for any costs order made against the child Claimants, governed by CPR 21.12.

The Parties’ Positions

The Defendant’s Position: The Council observed that by filing the Notice of Discontinuance, the Claimant had triggered liability for the Defendant’s costs under CPR 38.6(1). The Defendant made no positive application for costs but noted that the Claimant had made no application to reverse the general rule. The Defendant accepted that, given the litigation friend’s personal circumstances, any costs order should not be enforceable without the court’s permission.

The Claimants’ Position: The litigation friend did not attend the hearing and made no formal submissions on costs. In her witness statement dated 5 January 2026, she acknowledged that the Defendant’s costs were “highly likely to be passed on to me by way of a costs order.” No application was made to demonstrate a good reason for departing from the CPR 38.6 default rule.

The Court’s Decision

The court ordered that the Claimants, and therefore the litigation friend, pay all the Defendant’s costs of the proceedings — not simply the cost of preparing the acknowledgment of service and summary grounds on a Mount Cook basis — to be assessed if not agreed. The order was not to be enforced without the court’s leave.

In reaching this decision, the court applied the clear terms of CPR 38.6(1). As the Claimants had discontinued and had made no application to displace the general rule, it applied. The court had regard to the fact that the litigation friend was unrepresented and disabled, and the need to make reasonable adjustments to ensure fairness. However, it found that being a litigant in person does not exempt a party from compliance with the Civil Procedure Rules and Practice Directions, citing the Administrative Court Guide 2025 at paragraph 4.2.1. The court was satisfied that the litigation friend must be taken to be aware of the costs consequences of discontinuing under CPR 38.6, noting the Administrative Court Guide is designed to be accessible to litigants in person.

On the issue of personal liability, the court referred to CPR 21.12 and the certificate of suitability of litigation friend signed on 30 May 2023. This certificate contained an undertaking in the following terms: “I undertake to pay any costs which the above named claimant may be ordered to pay in these proceedings subject to any right I may have to be repaid from the assets of the claimant.” The court held that the litigation friend must be taken to be aware of her personal liability, a point she herself had acknowledged in her 5 January 2026 statement.

The court expressly declined to limit recovery to the Mount Cook basis, ordering all of the Defendant’s costs pursuant to CPR 38.6(1) and noting that no application had been made to displace the default rule. The judgment separately records a protracted procedural history involving multiple interlocutory applications, directions hearings, and the Defendant’s attendance at the final hearing by counsel — context which underscores why the costs exposure following discontinuance extended well beyond the acknowledgment of service stage.

Finally, the court recorded — though it was not in a position to act upon it — that had it retained jurisdiction, it would have refused permission to apply for judicial review and dismissed the claim as totally without merit. The court found the Claimants had an adequate alternative remedy by way of statutory appeal to the SENDisT. The court further indicated it would have been strongly inclined to refer the matter for consideration of a general civil restraint order, but was precluded from doing so by the valid discontinuance. By virtue of CPR 38.7, the Claimants will not be permitted to bring another claim arising from the same or similar facts without the court’s permission.

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The Court of Appeal’s decision in R (Public and Commercial Services Union) v Secretary of State for the Home Department [2025] EWCA Civ 1644 upholds a ‘no order as to costs’ determination where a judicial review became academic following a change of government that was already publicly committed to repealing the challenged legislation.

Background

The Public and Commercial Services Union (PCSU) challenged the lawfulness of the Strikes (Minimum Service Levels: Border Security) Regulations 2023. These regulations empowered the Secretary of State for the Home Department to serve “work notices” on trade unions, requiring them to take “reasonable steps” to ensure specified border staff did not participate in strikes [§3]. Failure to comply meant the union would lose immunity from tort liability, while non-complying members would lose statutory protections from detriment and dismissal [§4].

PCSU issued a pre-action protocol letter on 17 January 2024, arguing the regulations unlawfully interfered with Article 11 ECHR rights and inviting their withdrawal [§5]. The then-Conservative government defended the lawfulness of the regulations in its response dated 15 February 2024 [§7]. PCSU issued judicial review proceedings on 5 March 2024 [§8], with permission granted by Holgate J on 8 May 2024 in respect of two grounds, both based on Article 11 ECHR [§10]. The defendant filed detailed grounds maintaining its defence on 26 June 2024 [§12].

The context changed following the general election on 4 July 2024, which resulted in a Labour government [§13]. The Labour Party had, while in opposition, opposed the underlying 2023 Act and the regulations, pledging to repeal them [§6, §11]. On 6 August 2024, the Minister for Migration and Citizenship wrote to PCSU confirming the new administration’s belief that the 2023 Act “unduly restricts the right to strike” and pledged to repeal it via the forthcoming Employment Rights Bill [§15]. The letter confirmed that, although the legal power remained until repeal, the Home Secretary would not exercise the power to issue work notices in the interim [§15].

The following day, the Government Legal Department wrote stating the claim had become academic and inviting discontinuance. It also stated that the Home Secretary would not agree to pay PCSU’s costs, since PCSU had “not demonstrated that the claim has become academic by virtue of the legal merits of the case” [§16]. The parties agreed to discontinue the claim, with the ordinary costs consequences of discontinuance disapplied by consent, leaving the issue of costs for the court’s determination based on written submissions [§17].

Costs Issues Before the Court

The sole issue for HHJ Jarman KC at first instance, and subsequently the Court of Appeal, was the appropriate costs order following the discontinuance of the judicial review claim after it became academic due to a change of government policy. PCSU sought its costs on the basis it had been “wholly successful” in obtaining what it sought, namely the repeal of the MSL Regulations [§18]. The Secretary of State resisted any costs order, contending the claim had “become academic for political reasons, rather than for reasons connected with the merits of the claim” [§19]. The Respondent did not file any witness evidence in support of this assertion [§19]. The court had to determine whether, in these specific circumstances, PCSU was the “successful party” entitled to its costs, or whether the lack of a causal link between the claim and the outcome warranted a different order.

The Parties’ Positions

The Appellant’s (PCSU’s) Position: PCSU argued it had been “wholly successful” in obtaining what it sought via the litigation [§18]. It contended that the minister’s letter, which described the regulations as “unduly restrictive,” amounted to an acknowledgment that the claim was soundly based in law. It submitted that the authorities did not place an evidential burden on a claimant to prove the defendant’s concession was caused by the litigation [§40]. Relying on the line of authority beginning with R (Bahta) v SSHD, PCSU argued that a defendant could no longer avoid costs by asserting “pragmatic” settlement reasons without clear evidence [§40]. It emphasised the constitutional continuity of government, submitting that the new administration could not be “absolved of [legal] responsibility for the acts of the previous administration” [§39].

The Respondent’s (Secretary of State’s) Position: The respondent accepted that where it is “tolerably clear” a claimant would have won at trial, they would usually be entitled to costs, but pointed out (correctly) that it had not been suggested that the judge should have made an order for costs on that basis in this case [§41]. The respondent’s central contention was that the claim became academic for extrinsic political reasons following a change of government, not because of the claim’s legal merits. It argued that a causal link between the claim and the relief obtained was required, citing Speciality Produce Ltd, ZN (Afghanistan), and Parveen [§41]. It submitted that the clear pre-election pledge to repeal the Act meant the outcome would have happened anyway, irrespective of the litigation.

The Court’s Decision

The Court of Appeal (Bean LJ, with whom Peter Jackson and Elisabeth Laing LJJ agreed) dismissed the appeal, upholding HHJ Jarman KC’s order of no order as to costs [§48–50]. The court’s analysis focused on the principles governing costs in settled judicial review claims and the critical issue of causation.

The court reiterated the high threshold for appellate intervention in costs matters, as set out in Roache v News Group Newspapers Ltd: before the court can interfere, it must be shown that the judge erred in principle, left out of account or took into account some feature that should or should not have been considered, or that the decision was wholly wrong [§22]. It then applied the principles from the seminal case of R (M) v Croydon LBC, noting that where a claimant obtains substantially all relief sought (a “type (i)” case), it is hard to see why they should not recover all costs absent a good reason [§26]. However, the court emphasised that subsequent authorities, including Speciality Produce, R (RL) v Croydon, ZN (Afghanistan), and Parveen, establish that causation is a “relevant and sometimes decisive factor” [§36]. A claimant must show that the litigation caused or contributed to the result; it is not enough that the desired result occurred if it “would have happened anyway” [§47].

The court accepted PCSU’s constitutional continuity argument in principle, agreeing that an incoming government “cannot be absolved of [legal] responsibility for the acts of the previous administration” [§43]. However, it found that was not what the Government was asserting in this case [§43].

The court also accepted that R (Bahta) and M v Croydon represented an important change in attitude, meaning defendants can no longer escape costs by citing “purely pragmatic reasons” for settlement [§44]. In the typical case where a public body agrees to reconsider a challenged decision following issue of proceedings, and there is no dispute about causal link, the claimant will generally be entitled to costs [§44].

However, the court rejected PCSU’s characterisation of the minister’s letter as a legal admission [§46]. It found the phrase “unduly restrictive” simply reflected the new administration’s long-held political view, not a concession that the regulations were unlawful or that the claim would have succeeded at trial. The court held that the letter “cannot be read as if it said” something akin to an admission that the High Court would have found a breach of Article 11 rights or that the interference exceeded the margin of appreciation [§46].

It had, realistically, not been suggested on behalf of PCSU that this was a case which the Union would clearly have won at trial. The court observed that “Article 11 cases have not usually resulted in easy victories for claimants, either in our domestic courts or at Strasbourg” [§45]. The question therefore turned on whether the bringing of the claim made a difference to the outcome, either by changing the decision which would otherwise have been taken or at least achieving the desired result more quickly than would otherwise have occurred [§45].

The court agreed with the respondent that the commitment of the Labour Party to repeal the restrictions was so clear that there was good reason to believe it would have come about in any event, even if PCSU had not issued its claim [§47]. Using the terminology of Singh LJ in ZN (Afghanistan), the outcome was achieved for an “extrinsic reason”; or in the words of Males LJ in Parveen, it “would have happened anyway” [§47]. As in R (RL) v Croydon, the claimant got what it wanted, but had not shown it got what it wanted, or even got it more quickly, because of issuing the claim [§47].

The court characterised this case as “quite close to the borderline” but was not satisfied that HHJ Jarman KC made any error of principle or error of law which would justify overturning his exercise of discretion [§48]. His concise reasoning—that the claim became academic for political reasons after a change of government, not because of the claim—was sufficient and disclosed no error of principle [§42]. The appeal was therefore dismissed.

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The Court of Appeal’s decision in R (Nisar and Others) v SSHD; R (Mammedov) v SSHD [2025] EWCA Civ 1646 confirms that the precise language of Home Office deadline commitments determines whether a legal obligation is created, with direct consequences for costs recovery in settled immigration judicial reviews.

Background

The appeals concerned two separate judicial review claims against the Secretary of State for the Home Department (SSHD), which were heard together. In both, the appellants were foreign nationals living outside the UK whose applications for entry clearance as visitors had been refused. Following pre-action correspondence, the SSHD in each case agreed to withdraw the challenged decision and make a new one, indicating a timeframe for doing so. The fresh decisions were made shortly after the indicated dates and were again refusals. In the interim period between the deadline passing and receiving the decision, each appellant commenced a claim for judicial review challenging the delay. These claims were discontinued by consent once the decisions were received. The sole remaining dispute was over costs [§1–5].

In the case of Nisar, the appellants (a mother and her four children, all Pakistani nationals) had a protracted history of refusals and reconsiderations [§6–8]. In a letter dated 25 July 2023, the SSHD stated that “a decision regarding your client’s UK visitor visa will be made by the 21/08/2023, absent special circumstances” [§11]. The decision to refuse was made on 22 August but not served until 23/24 August 2023 [§12–13]. The judicial review claim had been lodged on 22 August 2023, the same day the decision was made but before it was communicated [§12, §16]. The parties agreed to discontinue the claim, leaving costs to be determined. Upper Tribunal Judge Sheridan made no order as to costs, finding both parties’ conduct contributed to the unnecessary proceedings [§16].

In the case of Mammedov, the appellant was a national of Turkmenistan who had been living in Turkey as a student since 2016 [§19]. The SSHD’s letter of 20 December 2024 stated that “Barring complexities, the SSHD aims to issue a reconsidered decision on your client’s visit visa application within 3 months of the date of this response to your letter before claim (by 20 March 2025, absent special circumstances)” [§20]. A reminder email was sent on Sunday 16 March 2025, warning that proceedings would be issued if no decision was made by the deadline [§22]. No decision was made by 20 March, and proceedings were issued on 21 March 2025 [§23]. A refusal decision was made on 28 March 2025 [§24]. The claim was discontinued by consent. Upper Tribunal Judge Hirst also made no order as to costs, citing the appellant’s failure to comply with the Pre-Action Protocol regarding the new issue of delay [§27].

Costs Issues Before the Court

The central costs issue in both appeals was whether the Upper Tribunal judges had erred in their discretion by making no order as to costs, rather than awarding costs to the appellants as the successful parties. The legal context was the settlement of judicial review proceedings before a substantive hearing, where the defendant public authority provides the substantive remedy (a decision) after proceedings are issued. The court was required to apply the principles from R (M) v Croydon LBC [2012] EWCA Civ 595 and related authorities to determine if the appellants could be considered “successful” and whether there was a sufficient causal link between the issued claim and the obtaining of the decision to justify a costs order in their favour [§30–36].

The Parties’ Positions

The appellants argued they were the successful parties as they obtained the remedy sought—a decision on their application—as a result of issuing proceedings. In Nisar, it was submitted that the SSHD’s unequivocal commitment to decide by a specific date created a legal obligation, the breach of which reasonably triggered litigation [§17]. The judge’s conclusion that the appellants should have chased for a decision was irrational. In Mammedov, the appellant argued the reminder email of 16 March was sufficient compliance with the Pre-Action Protocol, and a further formal letter was not required given the SSHD’s prior commitment and failure to act [§28].

The respondent SSHD opposed the appeals. It argued that in neither case were the appellants “successful” in a relevant sense, as the eventual decisions were refusals. It contended there was no, or insufficient, causal link between the issued claims and the decisions being made. In Mammedov, the SSHD supported the judge’s finding that a fresh Pre-Action Protocol letter was required to complain about the delay, a new issue not raised in the earlier correspondence.

The Court’s Decision

The Court of Appeal allowed the appeal in Nisar but dismissed the appeal in Mammedov. Applying the principles from R (M) v Croydon, the court held that the exercise of discretion on costs could be interfered with only if the judge erred in principle, considered irrelevant matters, or the decision was wholly wrong [§30].

In Nisar, the court found the claim fell squarely within category (i) of M v Croydon (where a claimant is wholly successful) [§48]. The SSHD’s letter of 25 July 2023 was sufficiently clear to amount to a legal obligation to decide by 21 August 2023, even if it was not an “enforceable undertaking” in the sense of being subject to specific performance or committal [§46]. The breach of that obligation, without citing special circumstances, made the issuance of proceedings reasonable. The court rejected the Upper Tribunal’s view that the appellants should have contacted the SSHD first, noting the unequivocal nature of the commitment [§46]. The claim was causative of the relief because, without the threat of litigation backed by the deadline, the delay would have been greater [§47]. The SSHD was therefore ordered to pay the appellants’ costs of the brief period up to the compromise [§48].

In Mammedov, the court found no error in the judge’s exercise of discretion [§49–50]. The SSHD’s letter used the language “aims to issue,” which did not create a legal obligation akin to the promise in Nisar [§49]. The issue of delay had not been raised in prior pre-action correspondence, and the delay had not reached the stage where it was so excessive as to be manifestly unreasonable [§49]. The Upper Tribunal was entitled to conclude that raising this new issue via a proper Pre-Action Protocol letter before issuing proceedings was reasonable and in accordance with the overriding objective. The failure to do so constituted a good reason to depart from the general costs rule [§49].

The court emphasised that Patten LJ’s statement in Speciality Produce Ltd v Secretary of State for the Environment [2014] EWCA Civ 225—that the claim “must be causative of the relief obtained”—was not to be treated as a statute nor as imposing a strict causation test in every case [§47]. The different outcomes in the two appeals turned on their distinct factual matrices, particularly the nature of the SSHD’s commitment and the reasonableness of commencing proceedings without further pre-action steps.

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The High Court’s decision in MEX Group Worldwide Limited v Ford & Ors [2025] EWHC 2689 (KB) addresses how courts allocate costs where discontinuance, proven contempt, and wrongfully obtained injunctions intersect.

Background

MGWL obtained a worldwide freezing order on 20 October 2023 requiring defendants including Mr Smith and CSM to disclose assets. Mr Smith and CSM failed to comply with the disclosure obligations. Other defendants successfully applied to discharge the WFO on 15 December 2023 due to material non-disclosure by MGWL. MGWL’s appeal was dismissed on 8 August 2024. Meanwhile, MGWL issued contempt proceedings against Mr Smith and CSM on 22 March 2024.

After two adjournments in June and July 2024, for which Mr Smith and CSM were ordered to pay costs on account totalling £50,000, contempt was proven on 13 December 2024. On 7 March 2025, MGWL discontinued the underlying Scottish proceedings, causing the WFO to be discharged. The court was required to determine the costs consequences. The Scottish court had already awarded costs against MGWL on an indemnity basis with a 75% uplift.

Costs Issues Before the Court

The court faced multiple competing costs principles. Under CPR 38.6, a discontinuing claimant is presumed liable for the defendant’s costs. However, the established principle is that a defendant found in contempt ordinarily pays the claimant’s contempt costs, often on an indemnity basis. At the same time, the WFO had been obtained by material non-disclosure and should never have been granted. The court also had to consider whether existing interim costs orders made against the defendants should stand despite the discontinuance, and whether an inquiry as to damages should be ordered under the cross-undertaking despite the proven contempt.

The Parties’ Positions

MGWL submitted that costs should be determined on an issue-by-issue basis. It sought to recover the costs of the contempt application, arguing that it had succeeded in proving the contempts. MGWL also sought costs of resisting various applications including those for cross-examination of witnesses and for a stay. It emphasised the defendants’ conduct in failing to comply with the WFO and in seeking unjustified adjournments. MGWL contended that contempt proceedings typically attract indemnity costs in the applicant’s favour.

Mr Smith and CSM argued that they were the overall winners due to the discontinuance. They relied on the presumption in CPR 38.6 that MGWL should pay their costs of the entire proceedings. They sought an order reversing the interim costs orders made in MGWL’s favour. They highlighted the serious non-disclosure by MGWL in obtaining the WFO and the findings of the Court of Appeal, which demonstrated that the WFO should never have been granted. They pointed to the Scottish court’s indemnity costs order as showing the appropriate approach to MGWL’s conduct.

The Court’s Decision

The court held that the starting point was that MGWL had effectively lost the action due to the discontinuance. Applying CPR 38.6(1) and the principles established in Brookes v HSBC Bank plc, the presumption was that MGWL must pay the defendants’ costs. MGWL had failed to displace this presumption. Its practical and financial reasons for discontinuance were insufficient, and there was no unreasonable defendant conduct that would justify a departure from the usual rule. The court rejected MGWL’s issue-by-issue approach, stating that it would be “cautious about eroding that starting point by chiselling away issue by issue in the circumstances where there is a grave question as to whether the action should have ever been brought, whether the WFO should ever have been granted.”

The court then addressed how this general approach should be modified to account for the specific circumstances. First, the court held that the costs orders made at the adjournment hearings in June and July 2024 should stand despite the discontinuance. Following the reasoning in Dar El Arkan v Al Refai rather than the obiter dictum in Safeway Stores Ltd v Twigger, the court held that interim orders do not automatically fall away on discontinuance. These orders stood because they reflected specific unreasonable behaviour by Mr Smith and CSM in seeking unjustified adjournments, separate from the overall merits of the case.

The treatment of the contempt costs required more nuanced consideration. Ordinarily, a defendant who refuses to provide disclosure information under a WFO and is found in contempt would be liable for the contempt costs, typically on an indemnity basis. However, the court identified significant mitigating factors. The WFO should never have been granted due to material non-disclosure. The WFO would likely have been discharged on jurisdictional grounds had the defendants applied, as had occurred with the other defendants. The discontinuance of the Scottish proceedings raised serious questions about whether there was ever a proper basis for the underlying claim. Moreover, MGWL had continued the contempt proceedings even after losing its appeal in the Court of Appeal on 8 August 2024, which raised serious concerns about its motivation.

In light of these factors, the court ordered that MGWL should recover only 50% of its contempt costs from inception to 13 December 2024, to be assessed on the standard basis rather than the indemnity basis typically awarded in contempt cases. This reflected the court’s serious misgivings about MGWL’s conduct in pursuing the WFO despite the non-disclosure issues and the Court of Appeal’s decision. As the court observed, whilst an issue-by-issue approach is sometimes the fairest, it was not appropriate in this case to the extent that it would lead to a departure from the overall starting point, which was that Mr Smith and CSM were the successful parties.

From 13 December 2024, when the court ordered that the contempt penalty hearing and the set-aside application be heard together, the costs of both applications became inextricably linked. From that point, no further costs were awarded to MGWL for the contempt application. Instead, the costs of the action were awarded to Mr Smith and CSM.

The court made no order as to costs for several specific applications, including applications for permission to appeal the contempt findings, applications to cross-examine witnesses, and an application for a stay pending other proceedings. This reflected the court’s view that while these applications were unsuccessful, they were not entirely unmeritorious in the context of the overall concerns about the action.

On the question of the basis of assessment, the court declined to award indemnity costs to Mr Smith and CSM despite the Scottish court having done so. The court noted that the costs orders were multi-faceted and involved orders going in different directions, with the defendants having been unsuccessful on various applications. The decision to make a standard order as to costs reflected the overall justice of the case, where costs were awarded in different directions and proportions.

The final costs order was that MGWL should pay Mr Smith and CSM’s costs of the action on the standard basis, subject to MGWL recovering 50% of the contempt costs from inception to 13 December 2024 on the standard basis, the existing orders in MGWL’s favour totalling £50,000 standing, and no order as to costs for the specified applications.

In relation to the cross-undertaking as to damages, the court ordered an inquiry into the losses claimed by Mr Smith and CSM, finding that there was credible evidence that the WFO had caused loss. MGWL had argued that the defendants’ contempt should bar the inquiry, but the court rejected this. The existing costs orders already addressed the contempt conduct, and the more significant factor was that the WFO should not have been obtained or maintained. The defendants had been denied the opportunity to prove the WFO was wrongly obtained due to the discontinuance.

Key Takeaway

This decision demonstrates that discontinuance costs principles will generally prevail even where contempt has been proven, particularly where the underlying injunction was wrongly obtained. Proven contempt may reduce the defendants’ costs recovery for specific periods or applications where their conduct was unreasonable, but it will not reverse the overall costs liability where the claimant discontinues. Material non-disclosure in obtaining a freezing order will contaminate all subsequent costs applications, even where the applicant succeeds on discrete issues such as contempt. Interim costs orders reflecting specific unreasonable conduct will generally survive discontinuance and need not be reversed.

CPR 38.6: Discontinuance And Costs – The Legal Principles

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Indemnity Basis Costs Following Discontinuance

CPR 38.6 | Post-Discontinuance Conduct Can Be Considered

Who Should Pay The Costs Of A Withdrawn And Undetermined Application?

CPR 38 | Discontinuance | Default Rule Disapplied

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Costs on Discontinuance, Indemnity Costs, New Costs Blog

CPR 38.6 Presumption Partially Displaced By 20% Due To Collateral Use Of Witness Statements

Costs on Discontinuance, New Costs Blog, Payment on Account

Background

The Appellant, Charles Elphicke, a former Member of Parliament, commenced proceedings against Times Media Limited on 17 April 2019 regarding three articles published in The Sunday Times. The claims were brought in misuse of private information for all three articles and in defamation for two of them. The defamatory meaning alleged was that there were reasonable grounds to suspect the Appellant was guilty of rape.

Following the exchange of witness statements and approximately six weeks before the scheduled trial, the Appellant discontinued the claim on 22 March 2022. This discontinuance triggered the presumption under CPR 38.6 that the discontinuing party would pay the other party’s costs.

On 30 June 2022, the Respondent applied for an interim payment on account of costs in the sum of £260,000, relying on the CPR 38.6 presumption. The Appellant subsequently cross-applied on 6 January 2023 for an order disapplying this presumption, seeking to extinguish or reduce his costs liability to the Respondent.

Master McCloud heard the applications over three hearings spanning from 14 February 2023 to 14 March 2024. On 14 October 2024, she handed down a comprehensive judgment ordering that the Appellant pay 80% of the Respondent’s costs on the standard basis, to be assessed if not agreed, and that he make an interim payment. Following written submissions on the quantum of the interim payment, on 19 November 2024 the Master ordered payment of £229,848.41 within 28 days, including an element for the Respondent’s costs of the applications.

The Appellant’s application for permission to appeal was refused on the papers by Sir Stephen Stewart on 21 March 2025, leading to this renewed application before Mrs Justice Hill on 10 June 2025.

Costs Issues Before the Court

The primary costs issue was whether the presumption in CPR 38.6(1) should be displaced. This rule provides that unless the court orders otherwise, a claimant who discontinues is liable for the costs which a defendant incurred on or before the date of discontinuance. The Master was required to apply the guidance in Brookes v HSBC Bank [2011] EWCA Civ 354, which established that the discontinuing party bears the burden of showing good reason for departing from this presumption.

The Master had to determine whether the Respondent’s conduct constituted sufficient grounds to displace the CPR 38.6 presumption. The conduct issues included admitted breaches of CPR 32.12(1) through wrongful collateral use of witness statements in publications after discontinuance, and alleged failures to preserve evidence when on notice of proceedings. Additional allegations included lying in pre-action correspondence and failing to engage in alternative dispute resolution.

If the presumption was displaced, the Master needed to determine what costs order would be appropriate in the circumstances. This required consideration of the seriousness of any misconduct found and the principle of proportionality set out in Abbott v Long [2011] EWCA Civ 874.

The Master also had to determine whether to order an interim payment on account of costs under CPR 44.2(8), which creates a presumption in favour of such payments unless there is good reason not to do so. The quantum of any interim payment required assessment of budgeted and unbudgeted costs.

Finally, the Master needed to determine the costs of the applications themselves, applying the general rule under CPR 44.2(2)(a) that the unsuccessful party pays the successful party’s costs.

The Parties’ Positions

The Appellant argued that the Respondent’s misconduct was sufficiently serious to justify complete displacement of the CPR 38.6 presumption. He relied particularly on the admitted breach of CPR 32.12(1) through publication of witness statement material in newspapers and social media after discontinuance. He characterised this as causing significant damage to the administration of justice, particularly given the sensitive nature of rape allegations referenced in the case.

The Appellant also alleged that the Respondent had breached its duty under CPR 31 and PD31B to preserve evidence, specifically citing the loss or destruction of a journalist’s electronic telephone information. He further contended that the Respondent had lied in pre-action correspondence about police interviews and had failed to engage properly in alternative dispute resolution.

On the interim payment issue, the Appellant submitted that the Respondent’s serious misconduct, which he characterised as amounting to contempt and abuse of process, constituted good reason not to order any payment on account. He invoked equitable principles regarding clean hands and policy considerations about protecting the administration of justice.

The Respondent defended its entitlement to costs under the CPR 38.6 presumption. Whilst acknowledging the breach of CPR 32.12(1), the Respondent had taken internal steps to improve working methods. It denied the allegations of lying in pre-action correspondence and failures regarding alternative dispute resolution, maintaining these were contested issues that would have required determination at trial.

The Respondent argued for an interim payment at the conventional level of 90% of budgeted costs, submitting that any misconduct issues had already been addressed through the primary costs order and should not result in double penalisation by refusing an interim payment.

The Court’s Decision Below

Master McCloud had concluded that the Respondent’s admitted breaches were sufficient to open the CPR 38.6 gateway but only to a limited extent. She found that the wrongful collateral use of witness statements and failure to preserve evidence were “unusual” failures that “went to the heart of the fairness of the proceedings”. The misuse of witness statements was deemed marginally more significant due to its potential implications for the wider administration of justice.

However, the Master declined to make findings on the contested allegations of lying in pre-action correspondence and failures regarding alternative dispute resolution. She held that determining these heavily disputed issues would effectively re-litigate matters abandoned on discontinuance. These issues were deemed more appropriate for consideration by the Costs Judge during detailed assessment under CPR 44.11.

In exercising her discretion on the appropriate costs order, the Master balanced the seriousness of the proven misconduct against mitigating factors, including the Respondent’s internal remedial steps. Applying the proportionality principle from Abbott v Long, she concluded that a 20% reduction from the Respondent’s costs was appropriate, ordering the Appellant to pay 80% of the Respondent’s costs on the standard basis.

On the interim payment issue, the Master rejected the Appellant’s arguments that the misconduct constituted good reason to refuse any payment on account. She held that using the misconduct as grounds for refusing an interim payment would constitute double penalisation, having already factored it into the primary costs order. She ordered an interim payment calculated at 80% of budgeted costs (after applying the 20% sanction) and 50% of unbudgeted costs, totalling £229,848.41.

Regarding the costs of the applications, the Master found that the Respondent had succeeded in defending its entitlement to costs save for the 20% reduction. She therefore ordered the Appellant to pay 80% of the Respondent’s costs of the applications, reflecting the Respondent’s degree of success.

Mrs Justice Hill, hearing the renewed permission application, found no arguable error of principle or excess of discretion in the Master’s approach. She emphasised that decisions under CPR 38.6 are fact-specific and that the Master’s detailed consideration fell well within the generous ambit of judicial discretion. Permission to appeal was refused on all grounds.

Costs Orders | No QOCS Protection for Claimants Without Personal Injury Claims

Case Law, Costs on Discontinuance, New Costs Blog, Payment on Account, QOCS

BB & Ors v Khayyat & Ors [2025] EWHC 443 (KB) was a case involving multiple claimants and defendants, culminating in significant determinations on costs. Initially, the claimants, including BB, CC, DD, EE, FF, GG, HH, and II, brought claims against Mr Moutaz Al Khayyat, Mr Ramez Al Khayyat, and Doha Bank Limited. The claims entailed various allegations, including claims for personal injuries and damages resulting from purported actions by members of the al-Nusra Front, which caused loss of property and livelihoods in Syria.

Several key developments led to the costs determination.

The first key procedural event was the application to disapply the presumptive costs rule under CPR 38.6 by the Discontinuing Claimants (EE, FF, GG, HH). This application was dismissed on 19 February 2025, with the court ordering that the Discontinuing Claimants bear the Bank’s costs for the application, subject to detailed assessment.

Subsequently, a hearing was held on costs consequential to the dismissal of the Discontinuance Application and the earlier striking out of the claims by the Continuing Claimants (BB, CC, DD, II) on 1 July 2024. During this hearing, the Bank pursued interim payments on account of costs, an issue fiercely contested by the Discontinuing Claimants.

The complexity of the costs determination was augmented by intricate issues such as the Qualified One-Way Costs Shifting (QOCS) protection and an existing Undertaking provided by the claimants’ solicitors, McCue Jury. The discretionary application of QOCS under CPR 44.16(2)(b) was central to the arguments against interim payments. Additionally, concerns arose over the continued validity of the Undertaking, which had been intended as security for the Bank’s costs of a Jurisdiction Application.

Issues Before the Court

The primary costs issue in dispute stemmed from the dismissal of the Discontinuance Costs Application and the striking out of the Continuing Claimants’ claims. Specifically, whether the Discontinuing Claimants should be subject to interim costs order under CPR 44.2(8) and the implications of the QOCS protection.

The Parties’ Positions

The Discontinuing Claimants argued against interim payments on two primary grounds. First, they proposed that the court should exercise discretion to grant QOCS protection per CPR 44.16(2)(b), arguing that such consideration should occur only after detailed assessment. They contended that the mixed nature of the claims, involving both personal injuries and property damages, allowed for a broad application of QOCS protection across all claims within the proceedings.

Conversely, the defendant, Doha Bank Limited, sought interim payments (totalling £1.3m) for costs incurred in the Discontinuance Application, the Jurisdiction Application, and the overall proceedings. They argued that the provisions under CPR 44.16(2)(b) only applied to individual claimants with personal injury claims, and thus, the Discontinuing Claimants did not merit QOCS protection. Additionally, they maintained the enforceability of the Undertaking and called for separate orders to streamline the costs process.

The Court’s Decision

Mr Justice Soole ruled in favour of awarding the Bank interim payments on account of costs, rejecting the Discontinuing Claimants’ submissions on both the QOCS and Undertaking issues.

Regarding the QOCS issue, the court reaffirmed that QOCS protection applied only to individual claimants within the proceedings whose claims included damages for personal injuries. This interpretation aligned with precedents such as Wagenaar v. Weekend Travel Ltd and Brown v Commissioner of Police of the Metropolis. As the Discontinuing Claimants’ pleadings did not substantiate any personal injury claims, they were not entitled to QOCS protection. Consequently, interim costs orders under CPR 44.2(8) were justified.