Indemnity Costs Awarded for Libel Claim Used to Pressure Anonymous Artist

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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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When A Judicial Review Claim Is Discontinued | Can The Defendant Recover Costs Beyond The Acknowledgment Of Service Stage?

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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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Costs In Settled Immigration Judicial Reviews | Nisar v SSHD

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Costs In Settled Immigration Judicial Reviews | “Will Be Made” Creates A Legal Obligation; “Aims To Issue” Does Not

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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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Costs In Withdrawn Judicial Review Claims

CPR 44.2 And The Courts’ Discretion As To Costs

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When Interlocutory Costs Orders Survive Discontinuance But Underlying Conduct Is Penalised

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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.

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CPR 38.6 | Post-Discontinuance Conduct Can Be Considered

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In Charles Elphicke v Times Media Limited [2024] EWHC 2595 (KB), the court addressed costs issues following the discontinuance of a defamation claim by a former MP against The Times. The key issues were whether to depart from the usual costs order on discontinuance and how to address alleged misconduct, including the Times’ failure to preserve evidence before discontinuance and, after discontinuance, the misuse of witness statements in publications and social media, misrepresenting their content and breaching Rule 32.12. The court held that conduct after discontinuance could be considered under CPR 38.6, finding that these failures were sufficiently serious to justify departing from the usual order. The claimant was ordered to pay 80% of the defendant’s costs.

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