Payment On Account May Reflect Excessive Hourly Rates While Leaving Rates Open For Detailed Assessment

The High Court’s decision in QuidPay Finance Limited v SettleGo Solutions Limited (t/a OpenPayd) [2026] EWHC 2199 (Ch) addresses the treatment of excessive hourly rates when fixing a payment on account of costs, and illustrates the distinction between reducing an interim payment to reflect rate concerns and determining the rates issue itself.

Background

QuidPay Finance Limited brought proceedings against SettleGo Solutions Limited, trading as OpenPayd, following a dispute arising from the suspension of QuidPay’s account and the retention of funds held in a reserve account. The Claim Form was issued on 29 April 2026, seeking declaratory relief, a mandatory injunction to lift the suspension of QuidPay’s account, release of funds held in e-money accounts, and damages. On the same date, QuidPay issued an injunction application seeking an expedited trial and an interim order requiring OpenPayd to remove the suspension and pay out the entirety of the funds held in the accounts direct to QuidPay’s customers.

The draft Particulars of Claim relied on at the time of the injunction application alleged, among other matters, a Braganza obligation on the part of OpenPayd as to the exercise of the rights to suspend QuidPay’s account and to require the maintenance of a float or reserve account, and that the fiat currency paid over to OpenPayd belonged beneficially to QuidPay’s customers such that OpenPayd was not entitled to require QuidPay to utilise such funds for a float or reserve account, nor unilaterally to seize such funds. The draft also alleged that on a proper construction of the General Terms, neither clause 15 nor clause 20 survived termination of the relevant agreement.

The injunction application came before Green J on 7 May 2026. QuidPay’s skeleton argument for that hearing still advanced the beneficial ownership arguments. On 13 May 2026, OpenPayd served five witness statements in response to the injunction application, the majority of which evidence was directed to the arguments as to beneficial ownership, as well as the allegations of deceit, dishonesty and breaches of regulatory obligations. On 15 May 2026, QuidPay’s solicitors wrote abandoning the arguments as to beneficial ownership, enclosing Particulars of Claim deleting that part of the claim from the draft which had previously been supplied.

The injunction application then came before Richard Spearman KC, sitting as a Deputy High Court Judge, on 20 May 2026. OpenPayd had prepared its submissions on the basis that all remaining arguments were being pursued. QuidPay limited its arguments to one, namely that clauses 15 and 20 did not survive termination which was going to be effective from 27 May 2026. Rather than ruling on the application, Mr Spearman KC suggested that a trial of preliminary issues might be the more sensible course. The parties agreed, and directions were made accordingly. Three preliminary issues were identified, though two fell away, leaving a single issue for determination: whether clauses 15 and 20 of the relevant agreement survived termination. Mr Spearman KC reserved the costs of the injunction application.

The preliminary issue was determined by Lance Ashworth KC, sitting as a Deputy High Court Judge, in a judgment handed down on 30 July 2026 under neutral citation [2026] EWHC 1991 (Ch). QuidPay succeeded on that issue. The handing down hearing was adjourned for consequential matters, with directions for written submissions on costs and related issues. OpenPayd decided not to seek permission to appeal, and no stay arose for consideration. The consequential judgment, [2026] EWHC 2199 (Ch), addressed four outstanding matters: the costs of the injunction application, the costs of the preliminary issue applications, the costs of the preliminary issue trial, and interest on the sums ordered to be paid to QuidPay.

The Parties’ Positions

Injunction application costs: OpenPayd contended that it should be entitled to 50% of its costs up to the point at which QuidPay’s case was recast, on the basis that substantial costs had been wasted by QuidPay’s initial approach. OpenPayd accepted that from 19 May 2026, when QuidPay filed its skeleton argument for the hearing on 20 May 2026, it should pay QuidPay’s costs. QuidPay’s position was that it should recover its costs of the injunction application in full, on the basis that the preliminary issue trial had effectively determined the relevant part of the dispute in its favour. QuidPay proposed a 20% reduction to reflect the matters raised by OpenPayd, and sought a payment on account of £139,546.80, calculated as 60% of 80% of its statement of costs totalling £290,722.50. QuidPay’s rates were up to 50% above the 2026 Guideline Hourly Rates, but OpenPayd took no point on those rates at the interim stage.

Preliminary issue applications costs: The parties agreed that OpenPayd was the winner and entitled to its costs. OpenPayd sought a payment on account of 60% of £15,503.10, namely £9,301.86. QuidPay resisted on three grounds: first, that had OpenPayd followed the guidance in C v S [1999] 1 WLR 1551, the applications might not have been necessary; second, that OpenPayd’s conduct in withholding information about the legal impediment had increased QuidPay’s costs; and third, that OpenPayd’s hourly rates were grossly excessive, being approximately 235% of the 2026 Guideline Hourly Rates. In support of the rates argument, QuidPay referred the court to paragraph 29 of the Guide to the Summary Assessment of Costs and to the decision of Trower J in JSC Commercial Bank Privatbank v Kolomoisky [2025] BCC 393 at paragraphs [33] to [36], a case involving worldwide freezing orders and BVI company restoration obligations in which costs were awarded on the indemnity basis. In that case, Trower J had found that rates exceeding the guidelines by between 139% and 182% were excessive even on the indemnity basis, and had made a reduction of approximately £5,000, or around 7%.

Interest: QuidPay sought interest at 5.75% from 27 May 2026, being what it characterised as the effective rate of interest on new loans, relying on the principles set out by Hamblen LJ in Carrasco v Johnson [2018] EWCA Civ 87 at paragraphs [16] to [17]. OpenPayd argued that no interest should run until judgment on 30 July 2026 and that the rate should in any event be limited to 1% above base rate, relying on Jones v Secretary of State for Energy and Climate Change [2014] EWCA Civ 363 for the proposition that pre-judgment interest is compensatory rather than punitive.

The Court’s Decision

Injunction application costs: The court accepted that the starting point was that QuidPay should recover its costs of the injunction application, on the basis that, had the application been determined, the outcome would have been similar in effect to the result of the preliminary issue trial, with QuidPay as the winner. However, the court concluded that a reduction was warranted. QuidPay’s initial claim based on beneficial ownership arguments was characterised as unsustainable and as having been used as the basis for assertions that OpenPayd’s conduct was unlawful and tantamount to deceit, combined with threats to report OpenPayd to the FCA and to publicise its conduct. Those steps were described as entirely illegitimate. The relatively late abandonment of the contractual arguments other than the clause 15 survival point was also taken into account. The court rejected OpenPayd’s submission that it should receive a percentage of its own costs up to 19 May 2026, holding that the correct approach was to reduce QuidPay’s recoverable costs. A reduction of 35% was applied, entitling QuidPay to 65% of its costs of the injunction application on the standard basis. A payment on account of 60% of 65% of £290,722.50 was ordered, producing a figure of £113,381.78. The court noted that QuidPay’s rates were up to 50% above the 2026 Guideline Hourly Rates but that no point had been taken on those rates by OpenPayd, and the payment on account was made without any adjustment on that basis, the court expressly noting that the costs judge on detailed assessment would not be bound by the interim order.

Preliminary issue applications costs: The court rejected QuidPay’s first two objections to the payment on account. The court held that there was no basis for criticising OpenPayd’s failure to follow the guidance in C v S, and that had that guidance been followed it may well have increased costs. The court also rejected the criticism of OpenPayd’s conduct in relation to the legal impediment. However, the court accepted the third objection. The hourly rates claimed by OpenPayd were some 235% of the Guideline Hourly Rates. The court referred to paragraph 29 of the Guide to the Summary Assessment of Costs and to the decision in Privatbank v Kolomoisky, in which Trower J had held that rates exceeding the guidelines by between 139% and 182% were excessive even on the indemnity basis in a case involving worldwide freezing orders and obligations to restore companies to the register in the BVI, and had made a reduction of approximately 7%. The court held that the decision did not support OpenPayd’s position that no deduction should be made to the hourly rates claimed, but rather suggested that even in those more complicated circumstances with a greater international element, hourly rates of around two thirds of the ones claimed in the present case were excessive. The court concluded that the hourly rates claimed were excessive as between opposing parties, and fixed the payment on account at £7,000, doing the best it could and leaving the matter open for further consideration on detailed assessment.

Preliminary issue trial costs: The parties were agreed that OpenPayd should pay QuidPay’s costs of the preliminary issue trial, subject to detailed assessment on the standard basis if not agreed, and that there should be a payment on account of 60% of those costs, namely £110,731.70. The court made an order in those terms.

Interest: The court held that QuidPay was entitled to interest from 27 May 2026, the date on which the sums should have been paid on termination of the agreements. The monies were paid over on 7 August 2026. The court rejected OpenPayd’s submission that interest should run only from judgment on 30 July 2026. The court also rejected OpenPayd’s submission that the fact that there was no provision for the payment of interest to its customers under OpenPayd’s general terms was relevant to the exercise of discretion. The court accepted that it was OpenPayd’s case, which the court had accepted, that once the money was moved to the reserve account it was not e-money, and that Regulation 45 EMR 2011 was therefore not relevant. The court held that the starting point was that QuidPay was entitled to be compensated for being kept out of money which it should have had and did not receive until after the main judgment, and saw no reason to deviate from that starting point. The court noted that had the monies been returned on 27 May 2026 as they should have been, it was likely that QuidPay would have paid them out to its own customers rather than generating bank interest, but that did not occur because OpenPayd did not return the monies. However, as to the rate, the court held that there was no evidence as to what level someone with QuidPay’s general attributes would have borrowed, and that the reliance on the Bank of England’s effective interest rates was not of any great assistance as it was very broad. The court held that QuidPay was a claimant which did not fall clearly into a category of those who would have borrowed or would have put money on deposit, and that the appropriate rate of interest to be awarded in all of the circumstances to compensate QuidPay for being kept out of the money was 1% above base rate, that is a total rate of 4.75%. Applying this interest rate for the relevant periods, the interest payable was £58,301.37 and €20,436.44, subject to the parties checking the calculations. The court followed the later decision of the Court of Appeal in Carrasco v Johnson rather than the earlier decision in Jones v Secretary of State for Energy and Climate Change, on the basis that Carrasco had considered more cases, though the court acknowledged that Sharp LJ in Jones had referred to many of the same cases that Hamblen LJ did in Carrasco and that in so far as there was any difference it was marginal.

Comment

The decision illustrates the court’s approach to fixing a payment on account where hourly rates are challenged as excessive. The court reduced the payment on account from the arithmetically correct figure of £9,301.86 (60% of £15,503.10) to £7,000, a reduction of approximately 25%, while expressly leaving the rates question open for detailed assessment. This approach differs from the treatment of QuidPay’s own rates in relation to the injunction application costs. QuidPay’s rates were up to 50% above guideline, but because OpenPayd took no point on them at the interim stage, the payment on account of £113,381.78 was calculated without any adjustment for rates. The court expressly noted that the costs judge on detailed assessment would not be bound by the interim order and that it would be open to OpenPayd to challenge QuidPay’s rates in the detailed assessment process. The decision demonstrates that a party who challenges rates at the interim stage may secure a reduction in the payment on account even where the rates issue is left open for detailed assessment, while a party who does not take the point at the interim stage will find that the payment on account reflects the rates claimed, though the rates remain open to challenge on detailed assessment.

Wasted Costs Applications | The Practical Necessity Of A Costs Schedule

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The Family Court’s decision in Pool v Pool [2026] EWFC 226 (B) arose from an adjourned First Appointment in financial remedies proceedings at which a wasted costs application against the respondent husband’s former solicitors was withdrawn after counsel for the applicant wife conceded that no Form N260 had been prepared or served.

Background

Pool v Pool [2026] EWFC 226 (B) arose from financial remedies proceedings in the Family Court, in which the applicant wife, Sabrina Pool, sought the transfer of a tenancy into her sole name following the breakdown of a marriage that had lasted from 1998 to 2018. Divorce proceedings were issued in 2024. By March 2025, the parties appeared to have reached an informal agreement on the tenancy transfer, and the respondent husband, Jean-Paul Pool, attended Ash Solicitors in West London to instruct them to prepare a consent order. The wife declined to agree to a dismissal of claims without financial disclosure, instructed MacKenzie & Co, and proceedings were issued in October 2025.

Ash Solicitors indicated in correspondence that the husband remained willing to transfer the tenancy, but by 17 November 2025 they reported that they were without instructions, the husband having communicated only that he was sick. He was not heard from again. He is rumoured now to be in the Seychelles, and he has filed no documents and taken no further part in the proceedings.

The First Appointment was listed for 4 February 2026. The husband filed no Form E and no other documentation. Shortly before that hearing, Ash Solicitors went on the record as acting for the husband and filed a document headed “Respondent Husband’s Position Statement for the FDA“. That document asserted, among other things, that it was “common knowledge” that the husband suffered from mental health difficulties, had been hospitalised, and was in no fit state to participate in the proceedings. Ash Solicitors did not attend the hearing, did not contact the court to explain their absence, and the husband was neither present nor represented.

The court, acting on the capacity assertions in the position statement, ordered that a medical report on the husband’s capacity be prepared and adjourned the First Appointment. It also directed that a member of Ash Solicitors file a statement explaining their conduct and their failure to take any steps to ascertain the husband’s capacity. The court indicated that the adjourned hearing would consider whether a wasted costs order should be made against the firm.

A statement was duly filed on 24 July 2026, signed by Santhya Sasitharan of Ash Solicitors. It disclosed that after the firm’s initial meeting with the husband in March 2025, a social worker at the Royal Free Hospital had made contact regarding the husband’s housing situation. The statement acknowledged that the firm had understood the treatment to be related to mental health but had been unable to contact the husband or his support worker to confirm this. It then stated that it had been “further clarified” that it was the husband’s father who suffered from mental health difficulties. Correspondence disclosed alongside the statement revealed that the social worker in question was attached to a team at the hospital with no connection to mental health services.

The adjourned hearing took place on 3 August 2026 before Deputy District Judge Hales, sitting remotely at the Royal Courts of Justice. The wife was present and represented by counsel, Natalya Evans. The husband did not appear. Representatives of Ash Solicitors attended for part of the hearing.

Costs Issues Before the Court

The primary costs question before the court was whether a wasted costs order should be made against Ash Solicitors pursuant to the court’s jurisdiction under section 51 of the Senior Courts Act 1981 and the procedural framework in CPR 46.8, as applied in family proceedings through FPR 28.2. The application had been foreshadowed at the February 2026 hearing and was confirmed at the outset of the August hearing by counsel for the wife.

The conduct said to ground the application was the filing of a position statement asserting, without any evidential basis, that the husband lacked capacity to engage in proceedings; going on the record without instructions from the husband; failing to attend the First Appointment without notifying the court; and, separately, forwarding the remote hearing link to a third party without the court’s permission.

A secondary issue arose from the wife’s own solicitors’ conduct. The judge noted that the failure to file and serve a Form N260 had caused the wasted costs application to be withdrawn, and observed that this failure was likely to result in a direct cost to Mrs Pool. The judge stated that he would hope that MacKenzie & Co would absorb that cost burden rather than pass it to their client.

A further procedural point arose in relation to the wife’s solicitors having exhibited the entirety of the pleadings from Family Law Act proceedings between the parties to a statement filed in the financial remedies proceedings, without having obtained permission from the Brentford Family Court for that disclosure and without any order having been made at the original First Appointment.

The Parties’ Positions

At the outset of the hearing, Ms Evans confirmed on behalf of the wife that a wasted costs order was sought against Ash Solicitors. The application rested on the conduct described above: the filing of a position statement containing assertions about the husband’s capacity for which the firm had no evidential foundation, going on the record without instructions, failing to attend the First Appointment, and forwarding the hearing link to a third party without permission.

However, on inquiry by the court, Ms Evans conceded that no Form N260 had been prepared or served on Ash Solicitors. Following a short adjournment, Ms Evans communicated by email that the wife no longer pursued the wasted costs application. The judgment records that this withdrawal was presumably a consequence of the absence of the N260, though no formal explanation was provided to the court.

Ash Solicitors, represented initially by Ms Sasitharan and subsequently by Ms Veronica Lartey, who was introduced as the person with supervisory responsibility for family work at the firm, did not advance any substantive defence to the wasted costs application before it was withdrawn. During the court’s subsequent inquiry, Ms Lartey accepted that the firm had no instructions to go on the record in February 2026, that there was no evidence to support the capacity assertions in the position statement, and that the assumption about the social worker’s connection to the mental health team had been an error for which she could offer no explanation. She also accepted, after a struggle, that permission to forward the remote hearing link to a third party was a matter for the court alone.

The Court’s Decision

The wasted costs application was withdrawn before any determination was made, and the court made no wasted costs order. The withdrawal followed the concession by the wife’s counsel that no Form N260 had been prepared or served.

Once the application was withdrawn, the court did not simply move on. The judge used the explanatory statement that had been directed at the February hearing, the correspondence with the hospital social worker that Ash Solicitors had disclosed, and the oral concessions made by Ms Lartey during the hearing to record a series of matters. The judge recorded that Ash Solicitors had no instructions from the husband when they went on the record in February 2026; that the capacity assertions in the position statement were made without any evidential basis and rested on an assumption that was demonstrably wrong; and that the firm had forwarded the remote hearing link to a third party without the court’s knowledge or permission.

The judge described this conduct as “utterly extraordinary” and stated that it had resulted in the firm misleading the Court, though he made clear he did not suggest this was deliberate or that the firm had anything to gain. He characterised the conduct as betraying “carelessness, ignorance of the rules and, it is not too strong to say, utter incompetence.” The judge also noted that if all these steps were conducted by Ms Sasitharan, a solicitor apprentice and not an admitted solicitor, it was a further poor reflection on the firm, betraying a failure to ensure proper and competent supervision of non-admitted staff.

In relation to the wife’s solicitors, the judge noted the failure to file and serve an N260, for which there was no explanation and which led to the withdrawal of the application. He stated that this failure was likely to lead to a direct cost to Mrs Pool, and that he would hope her solicitors would take the necessary steps to ensure the relevant cost burden was undertaken by them rather than by her. He also noted that the wife’s solicitors had exhibited what appeared to be the entire pleadings from Family Law Act proceedings between the parties without permission from the Brentford Family Court, and that no order had been made at the original First Appointment. The judge observed that none of the legal professionals in the case had covered themselves with glory.

The judgment concludes with the judge expressing the hope that it would lead to those involved reflecting upon their conduct, seeking further training or guidance, and ensuring that their clients receive a significantly improved level of service in the future. He stated that parties to family proceedings, many of whom are spending money they can ill afford, deserve no less from the legal professionals involved, and that the competent conduct of legal proceedings is not negotiable.

Analysis | The N260 Point

Neither CPR 46.8, PD 46 nor FPR 28.2 expressly requires a schedule of costs to be filed at the show cause stage of a wasted costs application. The procedural framework requires notice to the legal representative and an opportunity to respond, but does not prescribe the form that notice must take or the documents that must accompany it. Form N260 is not mentioned in the wasted costs rules themselves. That is not the whole picture. PD 44 para 9.5 applies to family proceedings through FPR 28.2 and imposes a positive duty on any party intending to claim costs to prepare a written statement following Form N260 as closely as possible, filed and served in accordance with para 9.5(4), in any case to which para 9.2 applies. Para 9.2 sets the general rule that the court should assess summarily at the conclusion of any hearing lasting not more than one day. Para 9.6 supplies the sanction for non-compliance. So a costs schedule is not a condition precedent to issuing the application, but it is required where summary assessment is in prospect.

In this case, the absence of an N260 led directly to the withdrawal of the application. The judgment does not record any ruling by the judge that an N260 was required as a matter of law, nor does it contain any analysis of whether the application could have proceeded without one. The withdrawal followed counsel’s concession, not a judicial determination. What the case demonstrates is that the absence of a costs schedule made the application practically unviable, even if not legally defective.

The practical lesson is clear. A wasted costs application seeks an order that a legal representative pay costs personally. The court cannot make such an order without knowing what costs are claimed and on what basis. Without a schedule, the court has no evidential foundation on which to assess quantum, even if liability were established. The application becomes an exercise in principle divorced from remedy.

Applicants should file a schedule in any event. The rules do not make one a condition of issuing the application, but PD 44 para 9.5 engages once the matter reaches a hearing at which costs will be claimed and summarily assessed, and para 9.6 gives the court a discretion to take any failure into account. The risk of withdrawal, as occurred here, is otherwise substantial. Whether the court would in every case treat the absence of a schedule as ending the application is not decided by this judgment, which records no ruling on the point.

Analysis What Survived the Withdrawal

The court’s inquiry did not end when the wasted costs application was withdrawn. The judge had already directed that Ash Solicitors file an explanatory statement, and that statement had been filed and served. The firm’s representatives attended the hearing. The judge used that material, together with the disclosed correspondence and the oral concessions made by Ms Lartey, to place on the record a series of observations about the firm’s conduct.

Those observations are now part of a published judgment. They record that the firm went on the record without instructions, asserted incapacity without evidence, failed to attend a hearing without explanation, and forwarded a hearing link to a third party without permission. The judge described the conduct as “utterly extraordinary” and as betraying “carelessness, ignorance of the rules and, it is not too strong to say, utter incompetence.”

These are not findings made pursuant to a wasted costs order, because no such order was made. But they are judicial observations made after inquiry, recorded in a judgment, and based on admissions made by the firm’s own representative. Their status is not equivalent to findings made in a contested wasted costs application, but they are not without weight. They may be deployed in a fresh, properly constituted wasted costs application if one is brought. They may be relevant to a referral to the Solicitors Regulation Authority. They may be relevant in any dispute between the wife and her own solicitors about the costs consequences of the failed application.

Practitioners should note that withdrawal of a wasted costs application does not necessarily insulate the respondent from scrutiny or from the consequences of what emerges during the court’s inquiry. If the court has already directed evidence and conducted a hearing, the material that comes to light may survive the withdrawal and may be used for other purposes.

Analysis | The Permission Points

Two separate permission issues arose in this case, both of which were treated as procedural failures by the judge. The first concerned the wife’s solicitors, who had exhibited the entirety of the pleadings from Family Law Act proceedings between the parties to a statement filed in the financial remedies proceedings. No permission had been sought from the Brentford Family Court, which had conducted the Family Law Act proceedings, and no order had been made at the original First Appointment in the financial remedies proceedings authorising the disclosure.

The second concerned Ash Solicitors, who had forwarded the remote hearing link for the First Appointment to a social worker at the Royal Free Hospital, inviting her to attend. This had been done without the court’s permission and without notifying either the court or the wife’s legal team.

Both are permission points, but they are different in kind. The first concerns the use of documents from one set of proceedings in another. The second concerns the disclosure of a confidential hearing link to a third party and the invitation to that third party to attend a private hearing. The first is a question of which court’s permission is needed and whether it can be implied from case management directions. The second is a question of whether permission was needed at all, a question to which the answer is plainly yes.

Ms Lartey accepted, after a struggle, that responsibility for granting permission to invite a third party to a hearing lay with the court alone. That concession was rightly made. The hearing was a private family proceedings hearing. Attendance is restricted. A party’s legal representative has no unilateral right to invite third parties, however well-intentioned the motive. The court controls its own process, and permission must be sought in advance.

The wife’s solicitors’ position is less clear-cut. Pleadings from related proceedings are often exhibited to statements in financial remedies cases, particularly where they are relevant to the issues in dispute. Whether express permission is required, and from which court, depends on the nature of the documents, the purpose for which they are being used, and whether any order restricting disclosure was made in the original proceedings. The judge’s observation that no permission had been sought and no order made suggests that he considered permission was required, but the judgment does not analyse the point in detail.

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Agreed Budget Variation Refused | Mutual Consent Intensifies, Not Reduces, Retrospective Scrutiny

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The High Court’s decision in ML Technology Limited and Naurex Limited v B.E.A.T. SAM Limited and others [2026] EWHC 2142 (Ch) holds that mutual agreement between parties to a costs budget variation may attract closer scrutiny than a contested application, because the court cannot rely on the adversarial process to test the justification.

Background

ML Technology Limited and Naurex Limited brought proceedings against B.E.A.T. SAM Limited (trading as Naurex B.E.A.T. SAM) and seven other defendants in the Intellectual Property List of the Business and Property Courts. The claim concerned the use of the trade mark NAUREX and related intellectual property rights following a share purchase agreement under which, in broad terms, the claimants contended that the defendants had continued to use the Naurex brand beyond any licence they were entitled to rely upon. The defendants, for their part, sought declarations of ownership and entitlement to use the rights in question, relying on complex agency arguments. Parallel proceedings were on foot in Switzerland concerning the share purchase agreement itself.

The main judgment was handed down on 18 June 2026. The central issue that emerged at trial was the length of the period of reasonable notice required to terminate the implied licences. The court found that the defendants had infringed the registered trade marks for a period after expiry of that notice period, but the claims in passing off and joint tortfeasorship failed entirely, and the website copyright claim also failed. The second consultancy contract copyright claim succeeded only to the extent of £4,000, a figure agreed on the basis that it was not worth disputing whether it should be lower.

A costs and case management conference had been held, at which costs budgets were approved. The claimants’ total approved and incurred budget at that stage stood at £716,239.24, with a budgeted disclosure phase of £97,768 and an ADR/settlement discussions budget of £5,000. The defendants’ equivalent total was £840,229.20, with a budgeted disclosure phase of £135,000 and an ADR/settlement discussions budget of £4,964. By the time of the pre-trial review in February 2025, both sides had applied for substantial increases to their costs budgets, principally in respect of the disclosure phase. The claimants sought an increase of £259,069.67 for disclosure alone, together with £29,500 each for the witness statements and trial preparation phases. The defendants sought an increase of £470,747.25 for disclosure. The parties had, by that stage, reached a position of mutual acceptance of each other’s proposed increases and submitted an agreed draft order to the court.

Deputy Master Dew directed on 19 February 2025 that the applications be considered at the pre-trial review unless time was insufficient or the judge considered it inappropriate. At the pre-trial review, the judge declined to approve the increases and instead deferred both applications to after trial, so that the value of the additional disclosure could be assessed retrospectively. Neither party objected to that course. The consequentials hearing took place on 21 July 2026 and addressed, among other things, the claimants’ renewed application for approval of the increase to their costs budget for the disclosure phase.

The Application for Budget Variation

Two distinct costs questions required determination at the consequentials hearing. The first was whether the court should retrospectively approve an increase to the claimants’ costs budget for the disclosure phase in the sum of £259,069.67, being an increase of more than three times the originally budgeted figure of £97,768. The claimants indicated that if this increase were approved, they would not press the remainder of their variation application. The defendants had withdrawn their own variation application entirely by the time of the hearing, which prompted the claimants to adopt a more focused position and press for approval of the disclosure increase alone.

The second question was the incidence of the costs of the proceedings as a whole, including whether either party could be identified as the overall winner for the purposes of CPR r.44.2, and whether any issue-based or proportionate costs order was appropriate.

On the budget variation, the claimants’ position was that the increase to the disclosure phase was justified by significant developments after the costs and case management conference, including the need to search additional data sources and to review a larger volume of the defendants’ disclosed documents than had been anticipated. The defendants had agreed in principle to the disclosure increase (though not to the witness statements and trial preparation increases), accepting that the disclosure exercise had been more substantial than originally envisaged. By the time of the consequentials hearing, the defendants had withdrawn their own variation application, and the claimants pressed for approval of the £259,069.67 disclosure increase on the basis that it was not opposed.

The Court’s Decision on Budget Variation

The court refused to approve the retrospective increase to the claimants’ disclosure budget, notwithstanding that the defendants did not oppose it. The reasons given are of direct relevance to costs practitioners and merit careful attention.

The court’s starting point was that costs budgeting is not simply a matter between the parties. Control of costs serves the interests of third parties and of the court itself, because disproportionate expenditure on disclosure imposes burdens beyond those borne by the immediate litigants, including the court’s own resources in dealing with larger volumes of material. The court stated in terms that the fact that the parties and their advisers had agreed not to challenge each other’s proposed increases was a reason for examining the basis for the variation with more, rather than less, intensity. That proposition is the critical one for practitioners: mutual consent to a Precedent T variation does not provide a safe harbour. It may, on this analysis, attract closer scrutiny than a contested application, because the court cannot rely on the adversarial process to test the justification.

The court identified six reasons for refusing the increase. First, the proposed variations were substantial in both absolute and relative terms, and the more substantial the variation, the greater the justification required. Second, the costs already incurred and budgeted at the pre-trial review stage appeared high given the nature of the dispute, and the proposed increases would make them significantly higher. Third, and most significantly for the purposes of this analysis, it was unclear what value the additional disclosure had contributed to resolving the key issues between the parties. The court observed, having heard the trial and reviewed a large volume of the disclosed documents, that much of the disclosure had been of limited utility. The court noted that if the parties had identified at an early stage that the central issue was likely to be the length of the period of reasonable notice, a great deal of the disclosure exercise would probably not have been required. Critically, no attempt had been made in evidence or argument to explain specifically why the additional disclosure was of value, or why a sum of more than £259,000 (described by the court as roughly the price of an average UK house) needed to be spent on it. The court stated that in the context of a case where the costs budgeted appeared disproportionate, a party seeking a retrospective increase bore a heavy burden, and that burden had not come close to being discharged.

Fourth, the court said at the pre-trial review that it may need to consider whether applications to vary the costs budgets should have been made at an earlier stage, and in particular before the costs were incurred, so that the court could have exercised proper control over whether the proposed costs were likely to be justified by the anticipated benefit. The court emphasised that costs budgeting is intended to act as a constraint on future costs, in the interests of justice, not least because parties incurring increased costs at an earlier stage can hinder settlement and therefore result in still further costs in taking a case to trial. Costs budgeting has to take that into account and is not normally a vehicle for sanctioning costs already incurred.

Fifth, the court considered whether insufficient time, effort and cost had been devoted by the parties and their legal advisers to resolving the case at earlier stages, so avoiding further costs (whether on disclosure, witness statements or other work) such as by ADR or mediation. Limited provision had been made for this and, while the court did not know what without prejudice discussions there had been, no evidence had been provided that there were serious, third-party assisted attempts to resolve the case.

Sixth, the court noted that it has the power to depart from a costs budget in any event, albeit in limited circumstances, and stated that this would have been a case for doing so.

The court’s view was that, in the light of the applicable principles, the retrospective revision to the costs budgets should not be approved, even though it was not actively opposed by the defendants.

Comment

This decision provides important guidance on the court’s approach to retrospective costs budget variations, particularly where the parties have reached agreement. The proposition that mutual consent may attract more intense scrutiny, rather than less, is clearly stated by the deputy High Court judge, though as a first-instance decision it has not yet been tested at appellate level. The court’s reasoning makes clear that costs budgeting serves a wider public interest, not merely the interests of the parties, and that the court retains an active supervisory role even where the parties are agreed.

The decision is particularly valuable for identifying the evidence the court expected but did not receive: a specific explanation of what the extra disclosure actually contributed to resolving the issues, judged with hindsight after trial, plus evidence of serious third-party assisted settlement attempts. The court also noted that the parties’ limited provision for ADR in their own Precedent T schedules was a relevant factor in assessing whether insufficient effort had been devoted to early resolution.

The procedural mechanics are also instructive: the court deferred both parties’ variation applications from the pre-trial review to after trial, over an agreed draft order, so that it could assess value retrospectively. This approach enabled the court to evaluate whether the additional disclosure had in fact contributed materially to resolving the dispute, rather than accepting the parties’ prospective justifications at face value.

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Retainer Termination Without Good Reason | Unenforceability And The Indemnity Principle

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The Senior Courts Costs Office’s decision in HD and others v North Devon Healthcare Trust [2026] EWHC 2009 (SCCO) addresses the enforceability of retainers terminated without good reason, the application of the abuse of process test to detailed assessment proceedings, and the circumstances in which a solicitor may be ordered personally to pay costs on the indemnity basis under CPR 44.11.

Background

The six linked claims at the centre of this judgment arose from alleged failings in the consent process relating to the use of synthetic mesh in the treatment of female pelvic conditions, including urinary stress incontinence. The claimants were among a larger cohort of individuals represented by Mr Darren Hanison, a sole practitioner trading as Fortitude Law, who had been instructed to pursue damages claims against various NHS trusts in England. NHS Resolution was notified of 305 such claims, received letters of claim in approximately 100 of them, and compromised 58 on substantially similar terms, including provision for the payment of reasonable legal costs.

Damages in the six linked claims were duly paid. Mr Hanison commenced detailed assessment proceedings in each, serving signed and certified bills of costs on the relevant defendants. The defendants applied to link the six cases, noting the significant similarities between the bills and the common issues likely to arise in points of dispute. On 7 July 2022, Costs Judge James granted that application, and the linked cases were listed for a five-day hearing to determine seven preliminary issues common to all six bills.

The first hearing was listed for 28 November to 2 December 2022. The judge was unwell on 28 November and the matter stood down. Counsel then acting for the claimants served a skeleton argument late that evening. When the hearing resumed on 29 November, it became apparent that Mr Hanison had not lodged the documents required by paragraph 13.11 of the Practice Direction to CPR Part 47. An attempt had been made to provide a laptop computer to the court late on 28 November, but when the judge examined it on 29 November it was found to contain files relating to only three of the six linked claims. The hearing could not proceed. Costs Judge James adjourned it and ordered the claimants to pay the costs of 28 and 29 November, to be assessed if not agreed. The costs order was made against the claimants, not against Mr Hanison personally, and was on the standard basis by operation of CPR 44.3(4).

The preliminary issues hearing was relisted for 27 to 31 March 2023. Costs Judge James heard submissions on all issues, gave judgment on some, reserved others, and provided a reserved judgment on 13 April 2023. A third hearing took place on 17 April 2023 to deal with the remaining preliminary issues. That was the last substantive activity in the detailed assessment proceedings.

On 18 May 2023, the Solicitors Regulation Authority intervened into Mr Hanison’s practice on grounds including suspected dishonesty and failure to comply with regulatory rules. Fortitude Law ceased to trade. Lester Aldridge was appointed as the SRA’s intervening agent. DAC Beachcroft LLP, acting for the defendants, wrote to each of the claimants suggesting they obtain independent legal advice in relation to the costs process. Some appear to have done so, but none engaged actively or to any significant extent in the costs proceedings thereafter.

Disciplinary proceedings were commenced against Mr Hanison on 14 May 2025, leading to a hearing before the Solicitors Disciplinary Tribunal on 24 February 2026. Mr Hanison faced 17 allegations of professional misconduct. He admitted many, including allegations of dishonesty. The SDT found several other allegations of dishonesty proved on the balance of probabilities and, by a written judgment dated 12 March 2026, ordered that he be struck off the Roll of Solicitors.

Mr Hanison was not formally removed from the court record as solicitor for the claimants in the six linked claims until an order of Senior Costs Judge Rowley dated 10 June 2025. From the conclusion of the third hearing before Costs Judge James on 31 March 2023 until the application considered in this judgment, nothing of substance had occurred in the detailed assessment proceedings. No new solicitors came on the record for any of the claimants. None of the other claimants in the wider cohort had commenced detailed assessment proceedings at all.

On 12 December 2025, the defendants issued an application seeking, among other things, a declaration that the retainers and conditional fee agreements between the claimants and Mr Hanison were unenforceable, strike out of the bills of costs and detailed assessment proceedings, repayment by Mr Hanison of payments on account totalling £92,000, an unless order against the wider cohort of claimants who had not commenced detailed assessment proceedings, and orders that Mr Hanison pay the defendants’ costs of the abortive November 2022 hearing and of the detailed assessment proceedings as a whole, on the indemnity basis. The application was supported by witness statements from Mr Mark Ashley and Mr Myles Mundill of DAC Beachcroft. The hearing took place on 3 July 2026 before Costs Judge Joseph. Neither the claimants nor Mr Hanison appeared or were represented.

Service and Joinder of Mr Hanison

After the hearing on 3 July 2026, Costs Judge Joseph raised of his own motion the question of whether Mr Hanison had been properly served with the evidence in support of the application. The judge was also concerned that Mr Hanison, having been removed from the court record by Senior Costs Judge Rowley’s order of 10 June 2025, was not at that moment a party to the action nor representing a party in it. The judge raised these matters with counsel in correspondence following the hearing.

That correspondence generated a further application by the defendants to join Mr Hanison as a party to the action. A further witness statement signed by Mr Mundill was filed in which evidence was given that Mr Hanison had in fact been served, prior to the hearing on 3 July, with the evidence in support of the application. The judge was satisfied that Mr Hanison had been served with the evidence prior to the hearing but considered it appropriate for him to be joined formally into the action for the purposes of the defendants’ application.

On 13 July 2026, the judge made an order to that effect which included various directions requiring service on Mr Hanison of the latest application and the evidence in support of it. As that order was made without a hearing, it included the usual paragraph that any party affected by the order could apply to vary it, stay it or set it aside within seven days of receipt of it. The order also stated that if no application was made within that time, the court would proceed to determine the application dated 12 December 2025 without further submissions. No party applied to vary, set aside or stay that order within the time stipulated. The judge was satisfied that Mr Hanison had had every reasonable opportunity to respond to the application and to make any submissions he might have wished to make.

Enforceability of the Retainers

Costs Judge Joseph began by considering whether the retainers between the claimants and Mr Hanison had been terminated without good reason and were accordingly unenforceable. The claimant HD had waived privilege over her conditional fee agreement following advice from new solicitors. The CFA, exhibited to Mr Ashley’s witness statement, was in fairly standard terms and had been signed by Mr Hanison on 26 September 2018. It expressly covered negotiations about, or a court assessment of, the costs of the claim.

The judge accepted the defendants’ submission that the retainer was an entire contract. Relying on Re Underwood & Piper v Lewis [1894] 2 QB 306, the judge noted that a solicitor’s retainer in an action is ordinarily an entire contract to conduct the action to the end, and that a solicitor cannot sue for costs until the contract has been entirely fulfilled. The retainer with HD plainly encompassed not only negotiations with the defendant about recoverable costs but also, if required, preparation for and attendance at a detailed assessment hearing. Agreement or court assessment of recoverable costs was an express and necessary step required by the retainer.

The judge found that Mr Hanison’s contractual obligations included the obligation to obtain agreement, or a court assessment, of HD’s recoverable costs. Although that process had been started, it had by no means concluded. Following the intervention into Mr Hanison’s practice, there was now no prospect at all of him ever completing his obligations under the retainer. The passage of a very considerable period of time in which no activity at all had occurred supported the inference that he had evinced no intention of so doing. The judge concluded that the retainer between HD and Mr Hanison was unenforceable by Mr Hanison against HD.

The judge inferred that the terms of the retainers between the rest of the claimants in the six linked claims were on the same, or substantially similar terms. The retainer between Mr Hanison and HD was in relatively standard terms. There was no reason to believe that Mr Hanison would have concluded retainers with the other claimants on materially different terms. Had that been the case, it had been open to Mr Hanison to adduce appropriate evidence establishing it. He had not done so. The judge concluded that the retainers between each of the claimants in the six linked claims were unenforceable by Mr Hanison against any of those claimants.

Strike Out for Abuse of Process

The judge then considered whether the bills of costs and detailed assessment proceedings should be struck out, either as a consequence of the unenforceability of the retainers or on the separate ground of abuse of process under CPR 3.4(2)(b). If the retainers were unenforceable, the claimants had no liability to their solicitor for any costs incurred pursuant to those retainers. If they had no such liability, there could be no claim by those claimants against the defendants for any of those costs. Any other conclusion would amount to a breach of the indemnity principle. The further consequence must be that the detailed assessment proceedings had to be struck out, or alternatively that the bills of costs must be assessed at nil.

The judge nevertheless addressed the separate arguments for strike out based on abuse of process. The defendants relied on the two-stage framework in Asturion Fondation v Alibrahim [2020] EWCA Civ 32. At the first stage, the court considers whether the claimant has deliberately allowed the proceedings to become dormant, and if so why. That involves examining the claimant’s intention, to be inferred from the evidence as a whole. The court must assess objectively the strength of any explanation advanced, having regard to the length of the period of inactivity. Prolonged inactivity may itself support the inference that a claimant does not intend to advance the action. Where such stagnation is established, the burden shifts to the claimant to explain why the claim should be permitted to continue.

The judge had no evidence from Mr Hanison. He had been given the opportunity to give evidence and make submissions and had elected not to do so. The claimants in the six linked claims had also had a similar opportunity and had not taken it. No explanation had been given, let alone a credible one. The costs proceedings of the claimants in the six linked claims had been deliberately allowed to become dormant. The extensive and wholly unexplained delay offended against the integrity of the court’s process. The serious abuse of the court’s process had been perpetrated by Mr Hanison, the solicitor and officer of the court whom the claimants in the six linked claims trusted to pursue their claims for costs.

The judge also found that there was now no realistic prospect of any of the detailed assessments in any of the six linked claims being pursued. In addition, there was significant prejudice to the defendants. They had made payments on account of costs in relation to six sets of detailed assessment proceedings. If the detailed assessment proceedings were allowed to remain extant, the defendants presently had no way of knowing when they would be resolved, nor for how much they might be liable. The judge accepted that the failure by the claimants in the six linked claims to take any steps at all since the last hearing before Costs Judge James was, in all the circumstances, a serious abuse of the process of the court.

At the second stage of the enquiry, the court considers whether striking out the claim is a proportionate response to the abuse. The defendants had put forward a possible alternative to strike out, namely an unless order against the claimants in the six linked claims to the effect that if they did not request a substantive detailed assessment hearing within 14 days, their claims should be struck out. The judge concluded that if such a course were a realistic option the claimants would have appeared on the hearing of the defendants’ application to make submissions to that or similar effect. The fact that they had not done so indicated that they had no such intentions. In all the circumstances, the judge did not consider that any useful purpose would or could be served by delaying the strike out of the claims by the claimants in the six linked claims for any further period of time. Immediate strike out was not only the proportionate response to the current state of affairs, but was the only realistic option, in order to do justice between the parties. It would be seriously unfair to the defendants to prolong these matters any further.

Repayment of Payments on Account

The judge dealt with the application for repayment of payments on account relatively shortly in the light of the findings and decisions already made. Now that the detailed assessment proceedings in the six linked claims had been struck out and the retainers between Mr Hanison and the claimants declared to be unenforceable, the case for the return of monies paid to Mr Hanison on account of the costs of the claimants was unanswerable. The payments on account were made on the footing that there were enforceable retainers in existence between the receiving parties and their solicitor. It would, to all intents and purposes, constitute a breach of the indemnity principle for those payments to be retained. There were orders against Mr Hanison for the repayment of all of the payments on account of costs which the defendants had made to him in the six linked claims.

Unless Order Against the Wider Cohort

No action at all had been taken by any of the other claimants in the cohort of claims against the various defendants to progress their respective claims for costs. The defendants had applied for an unless order against those claimants under CPR 47.8. None of the claimants to which this part of the application was directed had been involved in the detailed assessment proceedings commenced by the claimants in the six linked claims. Given that, it was appropriate that those claimants should be given an opportunity, if they so wished, to commence detailed assessment proceedings. The orders for costs in favour of those claimants were made a considerable time ago. It was appropriate for the court to exercise its discretion under CPR 47.8. The power to make an unless order is discretionary. The judge considered it right that the claimants should now be placed under the unless sanction. There was an unless order against those claimants that they should commence detailed assessment proceedings in respect of their costs within 28 days, failing which all of the costs to which they would otherwise be entitled would be disallowed.

Costs Orders Against Mr Hanison Under CPR 44.11

The defendants sought orders that Mr Hanison pay the costs of the abortive hearing on 28 and 29 November 2022 and the costs of the detailed assessment proceedings as a whole, on the indemnity basis. The order made by Costs Judge James on 29 November 2022 had been against the claimants in the six linked claims, not against Mr Hanison. The application now made was for something quite different, namely an order against Mr Hanison personally.

The defendants framed their case pursuant to CPR 44.11, which provides that the court may make an order where a party or that party’s legal representative, in connection with a summary or detailed assessment, fails to comply with a rule, practice direction or court order, or where it appears to the court that the conduct of a party or that party’s legal representative, before or during the proceedings, or in the assessment proceedings, was unreasonable or improper. Where those conditions apply, the court may disallow all or part of the costs which are being assessed, or order the party at fault or that party’s legal representative to pay costs which that party or legal representative has caused any other party to incur.

In relation to CPR 44.11(1)(a), the defendants relied upon various defaults perpetrated in the course of the detailed assessment proceedings by Mr Hanison. They pointed to the failure prior to the first hearing before Costs Judge James to lodge at court those documents which were required to have been lodged prior to the hearing pursuant to paragraph 13.11 of the Practice Direction to CPR Part 47. They also relied on the fact that the failure to lodge the requisite documents was compounded by the attempt to provide documents to the court by means of a laptop computer which, in fact, did not contain the requisite documents.

In relation to CPR 44.11(1)(b), the defendants submitted that the conduct of Mr Hanison throughout the detailed assessment proceedings had been unreasonable. Their main complaint was the substantial delay which had occurred following the last hearing before Costs Judge James. They also pointed to the various rulings which were made by Costs Judge James on the preliminary issues which they said demonstrated that very high and unsustainable claims for costs were made in respect of certain items in the bills of costs. By way of some examples, in respect of the letter of claim sent on behalf of HD, 63.3 hours were claimed, but only 15 hours were allowed. In respect of the letter of response, 66.1 hours were claimed but only 10 hours were allowed and, in respect of the Schedule of Loss, 31.3 hours were claimed but only 7.9 hours were allowed, of which one hour only was at grade A and the rest at grade D.

The judge noted that Costs Judge James had very considerable concerns about the claims for costs which had been made. He shared those concerns. The reductions in the claims on the preliminary issues were substantial, as well as being reductions which one would not normally expect to see in claims for costs of this nature. Of further concern was the fact that Mr Hanison had, to all intents and purposes, abandoned the detailed assessments.

The leading case on the operation of CPR 44.11 is Gempride Ltd v Bamrah [2018] EWCA Civ 1367. Mistakes or negligence, without more, are insufficient to engage the rule. Unreasonable conduct is essentially conduct permitting of no reasonable explanation. In order for the conduct of a legal representative to be unreasonable, that conduct must also breach the legal representative’s duty to the court. The burden of proof is on the applicant and even when the threshold criteria are satisfied, the court still has a discretion as to whether an order ought to be made. Any order made must be proportionate to the misconduct.

The hearings on 28 and 29 November 2022 were wholly ineffective due to the fact that the legal representative for the claimants in the six linked claims had failed to lodge at court prior to the hearing the necessary documents to enable the detailed assessment hearing to proceed effectively. There could be no doubt that a solicitor on the record has the responsibility for lodging those documents and for complying with the requisite practice direction. The judge was satisfied that Mr Hanison was seriously in breach of his duties to the court. That conduct was unreasonable and there was no reasonable explanation for it.

Mr Hanison was not removed from the court record until the order of 10 June 2025 of Senior Costs Judge Rowley. Until that point, he had sole responsibility for the conduct of the detailed assessments on behalf of the claimants in the six linked claims. It is a fundamental obligation on the part of a solicitor that unless and until he is removed from the record, he must act in the matter. This is apparent from CPR 42.2(5) which contains the presumption that a solicitor on the record is acting until the conclusion of the matter. That is the case even if the retainer has been terminated.

Since the last hearing before Costs Judge James, nothing of any substance had occurred. The judge had found that there had been a serious abuse of the process of the court in that respect. It followed from that finding that the conduct of the person who was responsible for that delay was itself unreasonable. There had been no explanation given for it.

The judge found that both CPR 44.11(a) and (b) were engaged. The costs to which the claimants in the six linked claims would otherwise have been entitled had already been disallowed. The defendants’ application invited the court to order Mr Hanison to pay the defendants’ costs of the hearing on 28 and 29 November 2022, and of the detailed assessments as a whole.

The judge had no hesitation in concluding that Mr Hanison should pay the costs of the hearing on 28 and 29 November 2022. His various defaults amounted to conduct which was unreasonable and which, on any analysis, caused the hearing to have to be abandoned. It could hardly be controversial or unsurprising that a solicitor on the record who conducts himself in such a way should end up being ordered to pay the costs of the abortive hearing.

In relation to the rest of the costs of the detailed assessments, the judge reached the same decision. The various significant and substantial reductions in those parts of the bill which were assessed by Costs Judge James on the preliminary issues indicated an attempt to claim very much more than could ever have been allowed on a standard basis assessment. As Mr Hanison had not responded to the defendants’ allegations in this respect, the judge had to proceed with there being no explanation at all as to why and on what basis such high amounts were claimed. The making of a claim for costs, and the signing of a bill of costs which makes very high and unsustainable claims for costs, is itself unreasonable. On that basis, Mr Hanison’s unreasonable behaviour started at the very outset of the detailed assessment proceedings by the signing of the bills. Detailed assessment proceedings are started by the service of a Notice of Commencement and a signed and certified bill (CPR 47.6).

Since the hearings before Costs Judge James, nothing had happened. Mr Hanison had abandoned them and his clients. The judge had found that such conduct amounted to a serious abuse of the court’s process. Nothing of any value had been achieved by them due to the failure of the solicitor on the record to fulfil his obligations and duties to the court.

Indemnity or Standard Basis?

The defendants contended that the costs for which Mr Hanison was liable should be paid on the indemnity basis. The indemnity basis differs from the standard basis in two respects. First, the onus of showing that costs have not been reasonably incurred or are not reasonable in amount is on the paying party. Secondly, there is no requirement of proportionality. See CPR 44.3 and Excelsior Commercial and Industrial Holdings Limited v Salisbury Hannah Aspden and Johnson [2002] EWCA Civ 879.

The criteria for the making of an indemnity costs order have been considered many times. In the very recent case of Breeze v Chief Constable of Norfolk Constabulary [2026] EWHC 1937 (KB), Cotter J set out in some detail the various important rules and decisions on the issue. One of the circumstances in which an indemnity order may be made is where there has been an abuse of the court’s procedure. In Three Rivers DC v Bank of England [2006] EWHC 816 (Comm), Tomlinson J identified the relevant principles. It was emphasised that the court should have regard to all the circumstances of the case and that the discretion to award indemnity costs is very wide.

The critical requirement, before an indemnity order can be made, is that there must be some conduct or some circumstance which takes the case out of the norm. That was emphasised by Christopher Clarke J in Balmoral Group Ltd v Borealis (UK) Ltd [2006] EWHC 2531 (Comm) who, having adopted Tomlinson J’s summary in Three Rivers, and noting that an order for indemnity costs was itself a departure from the norm, said that it is important not to lose sight of the essential requirement of unreasonable or inappropriate conduct overall and not to treat examples of such which may amount to such conduct as necessarily constituting it.

In relation to the hearing on 28 and 29 November 2022, Mr Hanison failed to lodge the necessary papers to enable the hearing to proceed. He provided a laptop computer at the end of the first day which did not contain the necessary documents, and which meant that Costs Judge James had no choice but to abandon the hearing. He thereby wasted significant court time and resources in addition to causing the defendants to expend significant resources which ultimately were wasted. The judge was satisfied that the conduct of Mr Hanison in relation to the hearing on 28 and 29 November 2022 was unreasonable to a high degree such that the case was taken out of the norm. An indemnity costs order in respect of those costs was the appropriate response.

In addition, Mr Hanison had abandoned the detailed assessment proceedings. The result of the findings and decisions which the judge had made was that those detailed assessment proceedings had themselves achieved nothing and that the defendants again had been required to expend considerable time, effort and resources in what had been for all concerned a fruitless and wasteful exercise. Mr Hanison had failed to fulfil his duties to the court in his capacity as the solicitor for the claimants in the six linked claims and as an officer of the court. His conduct was well outside the norm. Taking all the circumstances of this case into account, it was appropriate that Mr Hanison should pay the costs of the detailed assessment proceedings in the six linked claims on the indemnity basis.

Costs of the Application

The defendants’ application had been successful. The general rule under CPR 44.2 is that the unsuccessful party will be ordered to pay the costs of the successful party. Whilst the court has a discretion to make a different order, the judge could see no reason at all to depart from the usual rule in this case. Again, indemnity costs were sought and for the same reasons as were given above, it was appropriate that an indemnity order should be made.

Undertakings

At the hearing on 3 July 2026, the judge expressed a concern that, notwithstanding the application now being made by the defendants, the defendants might still have the right to pursue the claimants in the six linked claims personally in respect of the costs which the defendants had incurred in these detailed assessment proceedings. The judge enquired whether the defendants might be prepared to provide the court and those claimants with appropriate undertakings not to do so. In making that enquiry the judge made it clear that the court had no right to require any such undertakings to be given, and that whatever judgment might be reached on the defendants’ application would in no way be conditional upon such undertakings being given. Mr Ashley gave appropriate undertakings dated 31 July 2026 on behalf of his clients.

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A Costs Sanction Can Be Both Remedial And Punitive Where Proportionate | Carl v Limbani In The Court of Appeal

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The Court of Appeal’s decision in Carl v Limbani [2026] EWCA Civ 856 addresses the principles governing costs orders where a successful party has engaged in reprehensible conduct before and during litigation.

Background

Bernard Carl brought proceedings against Vikash Limbani and others arising from attempts to acquire historic sports cars through intermediaries. The central allegation was that money paid for that purpose had not been applied accordingly, and that cars purportedly acquired had never been delivered. The key defendant was Richard Edwards, a car dealer whose approach involved taking money from clients ostensibly to purchase cars, diverting those funds into transactions in his own name, and providing false reports to clients.

Two vehicles were of particular relevance to the claims against Mr Limbani: a Ferrari F40, which had never been purchased, and a Porsche 959, which had been purchased and was at the premises of a company called SCM but which Mr Edwards and others were attempting to sell to a third party.

On 9 October 2015, Mr Carl issued an application for delivery up of eight vehicles. Between that date and the hearing, Mr Edwards and others attended SCM’s premises and removed the cars present there, in what became known as “the raid.” An interim delivery up order was made on 13 October 2015 and made permanent on 20 October 2015.

In committal proceedings that followed, Mr Edwards claimed to have delivered the vehicles to an individual called “Vic,” identified as Mr Limbani, who worked for a Mr Trevor Smith. Mr Edwards’ statement included a telephone number attributed to “Vic,” which was Mr Limbani’s number. A Detective Constable Lucy Robson of North Yorkshire Police contacted the number and spoke to the individual who identified himself as “Vic.” Her subsequent email to Mr Carl, dated 19 December 2015, recorded that “Vic” had confirmed he was self-employed, organised vehicle transportation, and had been asked by Trevor Smith to remove five vehicles from a location in Wandsworth, including an F40 and a number of Porsches. A witness statement in DC Robson’s name followed in January 2016 in similar terms.

The significance of that account was not merely the admission of involvement in the raid, but the claim to have moved an F40 from SCM’s premises when no such vehicle had ever been purchased. The account given was therefore false and served Mr Edwards’ purposes.

The English proceedings were stayed in August 2016 while Mr Carl pursued proceedings in the United States, to which Mr Limbani was also named as a defendant. Those US proceedings were dismissed on jurisdictional grounds in February 2018. In May 2018, Mr Carl applied to lift the stay and to join additional defendants, including Mr Limbani.

Default judgment was entered against Mr Limbani in November 2018, but was subsequently set aside on terms that Mr Limbani pay the costs of the application. The defence served was described by the trial judge as a “stonewall” defence, asserting only that Mr Limbani had worked as Mr Smith’s chauffeur and had occasionally driven Mr Edwards as a passenger, always in Mr Smith’s presence, and that he had provided Mr Edwards with a contact number for a car dealer, Mr Aman Thukral. No mention was made of the raid, the conversation with DC Robson, or payments made from Mrs Edwards’ bank account to Mr Limbani’s wife’s account.

Mr Limbani’s witness statement, exchanged in March 2021, maintained essentially the same limited account of his interactions with Mr Edwards as had appeared in his defence.

The Trial and Judgment

The trial was heard in May 2024 before Simon Gleeson, sitting as a Deputy Judge of the High Court. Mr Carl conducted the trial in person. Mr Limbani gave evidence remotely on the basis of undisputed medical evidence that he was in poor health and unable to attend in person.

During cross-examination, it emerged that payments of £500 per month had been made from Mrs Edwards’ bank account to Mr Limbani’s wife’s account for several months after the raid, each bearing the reference “storage.” Mr Limbani’s explanation was that the payments related to secretarial services provided to Mr Trevor Smith. Mr Limbani also denied being the person who had spoken to DC Robson, suggesting that someone else must have answered his phone.

Judgment was handed down on 22 August 2024. The judge dismissed Mr Carl’s claim against Mr Limbani, finding that while Mr Limbani had given a dishonest account of his relationship with Mr Edwards and had facilitated the attempted disposal of Mr Carl’s cars, the evidence was insufficient to establish liability in conspiracy or conversion. The judge found that Mr Limbani was “an unsatisfactory witness, who clearly knew a great deal more than he was prepared to disclose,” that his explanation for the monthly payments was “entirely unconvincing,” and that his evidence as to his limited contact with Mr Edwards was rejected as dishonest. Nonetheless, the claim failed on the substantive legal issues.

The judge’s analysis reflected principles addressing the circumstances in which those acting solely in their capacity as employees for their principal’s purposes can be liable for conspiracy or whether they can be said to be in possession of goods held by them to the instructions of their employer for the purposes of the tort of conversion.

In the closing paragraphs of the judgment, the judge offered preliminary views on costs, indicating that there should be no order as to costs as between Mr Carl and Mr Limbani, on the basis that Mr Limbani had “escaped examination of his conduct through a policy of evasion and non-disclosure.” The judge made clear that these were preliminary views, subject to further submissions at a consequentials hearing.

The Consequentials Hearing and Procedural Error

The consequentials hearing took place on 23 January 2025, some five months after the judgment was handed down. Mr Limbani’s legal team did not serve a skeleton argument or otherwise identify in advance the points they intended to raise. A bundle of documents was served on Mr Carl approximately 90 minutes before the hearing.

At the hearing, Mr Williams, appearing for Mr Limbani, opened his submissions by addressing the costs consequences of settlement offers, Mr Carl’s alleged failure to comply with the pre-action protocol, and prior costs orders, without initially identifying any challenge to the judge’s preliminary view on the general costs order. When Mr Carl submitted that the judge’s indication in the judgment was a final ruling, the judge agreed and declined to hear further submissions from Mr Williams on the point, stating that the matter was one for the Court of Appeal. Mr Williams sought to clarify whether the door was closed on submissions as to why Mr Limbani should have his costs of the main action, and the judge confirmed that it was.

The Consequentials Judgment was handed down on 7 May 2025. The judge rejected Mr Limbani’s argument that a costs order should be made in his favour to reflect Mr Carl’s failure to comply with the pre-action protocol, finding that it was reasonable and proportionate not to have sent a pre-action letter in the circumstances. Mr Limbani appealed against the costs order with the permission of Newey LJ.

The Appeal | Procedural Irregularity

The appeal raised two grounds. The first was that the judge had been wrong to disallow Mr Limbani his costs, having taken into account matters said to be immaterial, not in issue before him, and unsupported by evidence or submissions. The second ground was that the judge had refused to hear or permit any submissions on costs at the consequentials hearing, notwithstanding his earlier indication that the costs paragraphs in the judgment were provisional and that a further hearing would take place for that purpose. It was submitted that this refusal was in breach of natural justice and constituted a serious procedural irregularity.

The Court of Appeal identified Ground 2 as the logically prior question. Lord Justice Foxton held that the judge had misdirected himself and occasioned a serious procedural irregularity in refusing to hear further submissions, having set out what was expressly stated to be a provisional view in the judgment on the basis that there would be an opportunity for the parties to make submissions on that issue. The judge appears to have taken that position because, by the date of the consequentials hearing some five months after the judgment, it was his understanding that he had already finally determined that issue.

The Court of Appeal held that the error could not be characterised as anything other than serious, as it involved reaching a decision to depart from the established starting point for the exercise of the costs discretion in a significant respect without permitting Mr Limbani to make any submissions on that question. The judge’s costs order was set aside under CPR 52.21(3)(b), and the court proceeded to exercise the discretion afresh.

The Applicable Principles

CPR 44.2 gives the court a discretion as to whether costs are payable by one party to another, in what amount and when. The general rule is that the unsuccessful party will be ordered to pay the costs of the successful party, but the court may make a different order. In deciding what order to make, the court will have regard to all the circumstances, including the conduct of all the parties.

The Court of Appeal reviewed the authorities considering the circumstances in which it would be appropriate for the court not to make a costs order in favour of a successful party by reason of that party’s reprehensible conduct before or during the litigation.

In Widlake v BAA Ltd [2009] EWCA Civ 1256, the court stated that in addition to looking at costs consequences, the court is entitled in an appropriate case to say that the misconduct is so egregious that a penalty should be imposed upon the offending party. One can therefore deprive a party of costs by way of punitive sanction. The court sounded a word of caution: lies are told in litigation every day and quite rightly do not lead to a penalty being imposed in respect of them. There is a considerable difference between a concocted claim and an exaggerated claim and judges must be astute to measure how reprehensible the conduct is.

In Abbott v Long [2011] EWCA Civ 874, the Court of Appeal approved the statement in Walsh v Singh [2011] EWCA Civ 80 that the court could reflect the poor conduct of a successful party both when the conduct in question had had costs consequences, and, even when it had not been causative of any or any significant waste of costs, provided it was a proportionate response to the behaviour in question. Ward LJ summarised the position: if the court is going to deprive a party of costs on the grounds of misconduct which has not been causative of a waste of costs, it should be satisfied that that sanction is a proportionate sanction.

The court was also referred to Ward v Donnellan [2026] EWCA Civ 729, in which Lewison LJ quoted from Pitchford LJ’s judgment in Hutchinson v Neale [2012] EWCA Civ 345. The starting point for the consideration of any order for costs is that costs should follow the event. It is from this point that the court will, in an appropriate case, consider the conduct of the parties. There is no general rule that a finding of dishonest conduct by the successful party will replace the usual starting point. What is required is an evaluation of the nature and degree of the misconduct, its relevance to and effect upon the issues arising in the trial, and its tendency to create an unwarranted increase in the costs of the action to either or both of the parties.

The court emphasised that whenever the court is asked to make some out-of-the-ordinary costs order in consequence of the alleged misconduct of the party against whom the application is made, the court must bear constantly in mind the conduct of the party making the application.

As these decisions make clear, a costs order will generally seek to address the costs consequences of dishonesty or similarly reprehensible conduct on the part of the successful party. In Bank of Tokyo-Mitsubishi UFJ Ltd v Baskan Gida Sanayi Ve Pazarlama SA [2009] EWHC 1696 (Ch), Briggs J noted that an otherwise successful party should not normally obtain costs incurred in advancing a false case, and that the otherwise unsuccessful party should normally obtain an order for payment of its costs in revealing the falsity of that case. Briggs J referred to “the purely remedial consequences of orders of this type.”

In addition, the courts have regard to the effect of reprehensible conduct before and during litigation where it has fuelled the claimant’s suspicion that the defendant has committed an actionable wrong, and thus can be said to have been a motivating factor in the claimant’s commencement or pursuit of proceedings. In such cases, it can be said that the successful defendant has, at least to some degree, brought the action on themselves.

However, it is clear from the authorities that there can be conduct which is of sufficient seriousness that, regardless of its consequences on the costs of the litigation generally, the court is entitled to impose a costs penalty on the successful party. Such an order will only be appropriate where and to the extent that it is a proportionate response to the conduct in issue, having regard to all of the circumstances of the case including the conduct of the party seeking a costs order of this type. In an appropriate case, a proportionate response could extend to disallowing the whole of the successful party’s costs, or even an order that they pay all or part of the unsuccessful party’s costs.

A court can make a single costs order intended both to achieve the remedial consequences which Briggs J referred to in Bank of Tokyo, and as a proportionate sanction for conduct which is sufficiently serious to merit a penalty of this kind irrespective of its consequences on costs. In Sulaman v Axa Insurance plc [2009] EWCA Civ 1331, Longmore LJ rejected a challenge to the costs order on the basis that the first instance judge had made a single costs order to address both of these factors, observing that there is no need for the judge to apportion different parts of his order between lies which prolong the trial process and lies of which he merely disapproves.

Challenges to the Judge’s Findings

Mr Limbani advanced challenges to the judge’s findings as to his conduct. The Court of Appeal rejected the argument that it was not open to Mr Limbani to pursue his challenges to those findings on appeal.

The challenges made on Mr Limbani’s behalf can be summarised as follows: the findings did not form part of any questioning, submissions or oral evidence; Mr Limbani could have had no conceivable idea that the matters relating to disclosure were going to be dealt with in the judgment and the judge’s finding that Mr Limbani had failed to comply with his disclosure obligations had no or no sufficient evidential basis; in his comments on the honesty of Mr Limbani’s trial evidence, the judge failed to pay adequate regard to the evidence of his ill-health; there was no or no sufficient evidential basis for the judge’s finding that Mr Limbani had failed to engage sufficiently with the proceedings; and DC Robson’s statement was inadmissible hearsay evidence.

The Court of Appeal distinguished between findings as to Mr Limbani’s pre-action conduct and the honesty of his evidence about that conduct at trial, and other findings relating to his conduct of the litigation.

As to the former, Mr Limbani’s relationship with Mr Edwards, his involvement in the raid and his actions relating to the Porsche 959 were all pleaded issues in the litigation about which Mr Limbani was questioned. The judge was clearly entitled to make findings on those matters, and as to the truthfulness of Mr Limbani’s evidence in relation to them. The findings that Mr Limbani had given untruthful evidence were not made on the basis of his demeanour, but the inherent improbability of his explanations and their inconsistency with other evidence. The medical evidence relating to Mr Limbani could not conceivably provide an answer to those difficulties.

The challenge to the use made of DC Robson’s evidence of her conversation when she called Mr Limbani’s phone by reference to its hearsay status was rejected as hopeless. There does not appear to have been any challenge before the judge that the email and statement from DC Robson were genuine documents. The judge did not rely on the statements made to DC Robson as evidence of the truth of their contents: on the contrary he found that they were false. He relied on the statement only to establish what were in any event the essentially undisputed facts that DC Robson had phoned Mr Limbani’s number and had a conversation with whoever answered the phone to the effect recorded, the judge relying on the inherent probabilities and the undisputed fact that the number called was Mr Limbani’s to find that Mr Limbani was the person DC Robson had spoken to. Hearsay evidence is admissible in civil proceedings, subject only to matters of weight.

Turning to Mr Limbani’s conduct in the case, Mr Williams particularly criticised the judge’s finding that Mr Limbani had failed to comply with his CPR 31 disclosure obligations and court orders, and also that he had failed to engage in the proceedings. The Court of Appeal held that it was not practical in the appeal to determine whether Mr Limbani breached his CPR 31 disclosure obligations or failed to engage in the proceedings, or whether he breached any other court orders. The judge does not expand on these findings, and the court was not taken to the events in the lengthy procedural history of the case said to justify them. Accordingly, the Court of Appeal placed no reliance on these matters.

However, the judge’s finding of non-disclosure in a more fundamental sense could not be gainsaid: the failure to give an accurate account of his involvement in the matters in dispute, and instead to offer a minimalist account which suggested that he had had far less involvement than was in fact the case. On the basis of the findings as to his conduct which the judge was entitled to make, Mr Limbani’s defence and witness statement were misleading, and failed to address significant aspects of his involvement of obvious relevance to the issues in the case.

The Appropriate Costs Order

The Court of Appeal accepted that it was appropriate for the costs order as between Mr Carl and Mr Limbani both to reflect the consequences of Mr Limbani’s conduct on the proceedings, and to constitute a proportionate sanction for that conduct.

It was obvious that Mr Limbani’s statement to DC Robson that he had been involved in moving a number of cars from SCM’s premises, including the untruthful evidence relating to the F40, was an important factor in Mr Carl’s decision to pursue proceedings against him. The judge found that this account, including the false statement relating to the F40, was given to the police at Mr Edwards’ instigation and for the purposes of offering Mr Edwards an excuse for not delivering up certain vehicles as the court had ordered. Mr Limbani’s statement was relied upon by Mr Carl in the application to join him to the proceedings, and in the Particulars of Claim. On the basis of these facts, Mr Limbani could be said to have brought the proceedings on himself.

In addition, Mr Limbani’s dishonest account of his relationship with Mr Edwards, his statement and the false statement relating to the F40, and his involvement in introducing Mr Thukral to Mr Edwards who offered the Porsche 959 for sale and, in the judge’s finding, facilitating the attempted disposal of Mr Carl’s cars were all likely to fuel Mr Carl’s belief that Mr Limbani was a party to a conspiracy with Mr Edwards to deceive Mr Carl and to convert his property.

Finally, Mr Carl’s claim against Mr Limbani failed to a significant extent not because Mr Limbani had not done any of the things which Mr Carl alleged he had done, but because of a combination of the lack of evidence and the judge’s findings as to the capacity in which and the purpose for which he acted.

In addition, Mr Limbani’s conduct in the litigation plainly required a costs sanction irrespective of its costs consequences. In his defence, supported by a statement of truth, his witness statement and his oral evidence, he gave a dishonest account of his relationship with Mr Edwards, and his evidence was found to be untruthful as to his conversation with DC Robson and as to the purpose of the payments made through Mrs Edwards to his wife. He did not address either of those topics in his written evidence.

The Court of Appeal held that the combination of those two factors justified a decision that there should be no order as to costs as between Mr Carl and Mr Limbani. The only matter said to point the other way was the suggestion that Mr Carl too behaved inappropriately, on the basis that it is apparent from the Part 36 letters sent by Mr Carl that he only brought proceedings against Mr Limbani in the hope that the claim could be settled on terms that Mr Limbani would give evidence against Mr Edwards and others. However, Mr Carl had a plainly arguable claim against Mr Limbani, which in its factual aspects succeeded to a significant extent. The court was not persuaded that Mr Carl was to be criticised for pursuing a viable claim in the hope that it could be settled on terms providing for assistance against other, more centrally involved, defendants.

As to Mr Carl’s conduct generally, the judge’s finding was clear: Mr Carl gave his evidence clearly and well, and was an impressive witness. He cross-examined the witnesses who did appear with tact and sensitivity, and at times exhibited a great deal of self-restraint. The judge found that Mr Carl’s conduct had been blameless throughout. There was nothing about Mr Carl’s conduct which would render an order of “no order as to costs” inappropriate.

For these reasons, looking at the matter afresh, the Court of Appeal arrived at the same costs order as the judge. The appeal was dismissed.

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Non-Compliant Points Of Dispute Risk Strike Out Or Costs Sanctions | Court Of Appeal Warning In Ward v Rai

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The Court of Appeal (Civil Division)’s decision in Ward v Rai [2026] EWCA Civ 816 restores a Costs Judge’s refusal to strike out non-compliant Points of Dispute and warns paying parties that paragraph 8.2 of PD 47 requires an Ainsworth compliant approach.

Background

Ward v Rai arose from a road traffic accident on 18 September 2019. Mr Paul Ward brought proceedings against Mr Gagandeep Rai, who admitted liability subject to issues of causation and quantum. The underlying claim settled in January 2023 by acceptance of a Part 36 offer in the sum of £546,984.

Detailed assessment proceedings were commenced by the claimant on 3 August 2023. Item 39 of the bill of costs claimed 134.1 hours for work done on documents, supported by a 24-page schedule, at a cost of £38,819.50 plus VAT. Of that time, 126.7 hours were attributed to a Grade A fee earner, with the balance at Grade D. Work on documents represented approximately half of the total profit costs claimed. The total bill, including counsel’s fees and disbursements, came to £129,196.50 including VAT.

The defendant served points of dispute on 30 August 2023. Point 23 of those points of dispute challenged item 39, raising a series of general criticisms about the document time claimed and indicating that the defendant would rely on an annotated documents schedule to support those challenges. No such schedule was served at that stage. The claimant replied on 4 January 2024, taking issue with the adequacy of Point 23 and relying on Ainsworth v Stewarts Law LLP [2020] EWCA Civ 178 in support of an argument that the point lacked the specificity required by paragraph 8.2(b) of Practice Direction 47. The claimant nonetheless responded to the general points raised and indicated a willingness to accept a total of 130 hours.

A two-day detailed assessment hearing was requested on 26 March 2024 and listed for 5 and 6 August 2024. At around 4.45pm on 31 July 2024, after hours in service terms, the defendant filed and served the annotated documents schedule that had been referenced in Point 23. This was the first time individual items in dispute were identified. The schedule offered 58.5 hours as a primary case and 58.8 hours as a fallback, divided into eight categories that did not correspond to the eight points listed in Point 23.

At the hearing, Point 23 was not reached until the latter part of the second day. The claimant applied to Deputy Costs Judge Friston to strike out Point 23 as non-compliant with Ainsworth and to refuse permission to rely on the annotated schedule. In an ex tempore judgment, the Costs Judge declined to do either and adjourned the detailed assessment to a third day.

The adjourned hearing took place on 8 November 2024. The Costs Judge conducted a line-by-line assessment of approximately 10% of the entries in the documents schedule, with the remainder assessed on a broadbrush basis agreed by the parties. The bill was assessed in the sum of £89,032.62 plus interest. On costs of the assessment itself, the outcome was affected by a Part 36 offer made by the defendant. The claimant had offered to settle costs at £105,000 and the defendant had offered £100,000. The assessed figure fell below the defendant’s offer, with the result that the defendant was ordered to pay the claimant’s costs of the detailed assessment up to 3 July 2024, and the claimant was ordered to pay the defendant’s costs thereafter. However, the defendant’s costs were to exclude time spent on 6 August 2024 dealing with the annotated documents schedule, on the basis that part of that afternoon had been wasted. The narrow gap between the offers may provide some explanation for what might otherwise seem an uneconomic appeal.

The claimant appealed to the High Court on five grounds. Mrs Justice Hill, sitting with Costs Judge Leonard, rejected each of the individual grounds but allowed the appeal on the basis of what she described as a residual, overarching argument: that the Costs Judge’s approach was wrong and failed to give proper effect to paragraphs 8.2(b) and 13.10(2) of PD 47. The Judge set aside the order made at the adjourned hearing, struck out Point 23, and refused permission to rely on the annotated documents schedule. The matter was remitted to the Costs Judge to determine consequential issues, including proportionality.

The defendant appealed to the Court of Appeal. Permission was granted by Lewison LJ, who noted the unusual nature of the case and observed that it was well arguable that the Judge had simply disagreed with the Costs Judge, notwithstanding her acknowledgment of the limited bases on which a case management decision can be disturbed on appeal. The Court of Appeal heard the appeal on 17 June 2026 and handed down judgment on 2 July 2026. A Respondent’s Notice contended that, in deciding whether to admit variations to points of dispute, the court should first categorise whether the variation was curative of non-compliance or augmentative.

The Costs Judge’s Decision

The Costs Judge recorded that the parties had been in negotiations around the time the notice of hearing had been sent in May 2024, such that there was a real likelihood of settlement. He noted confusion about bundles and observed that the annotated schedule went beyond the general points raised in the points of dispute, or at least provided significantly greater detail.

The Costs Judge summarised the test approved in Ainsworth as being whether there was sufficient particularity in the points of dispute for the proceedings to proceed fairly. He gave two reasons not to strike out Point 23. First, the original points of dispute would have allowed a fairly broad-brush assessment in any event and would have allowed the claimant to have known the case being made against him and to have responded to it. Secondly, and perhaps more importantly, both parties knew that there should have been a further document. The defendant had taken no steps to provide it until very close to the hearing, but the claimant had also done nothing to chase it. Thus both parties were significantly at fault for having failed to comply with the overriding objective and to assist the court by getting their act together earlier.

The Costs Judge then turned to whether to permit reliance on the annotated schedule, a question he said he had not found easy. While unacceptably late, it was not an ambush: it had been mentioned at the start and both parties were at fault for not ensuring that it was available on a timely basis. There was merit in the argument that the types of points raised would be fairly obvious to a costs practitioner, and indeed many of the points had been anticipated by the claimant. However, the assessment had also been unusual in considering items on a line-by-line basis, which gave rise to concern as to the impact of the delay.

The Costs Judge considered that paragraph 13.10 of PD 47 gave him very wide powers. He took the view that an adjournment was inevitable. It would be unfair to require the claimant to proceed on the basis that he had to respond to the annotated schedule, and even without it the claimant would still be in difficulty, without at least a breakdown from the defendant of which items were referred to in the categories in the points of dispute. Given the inevitability of an adjournment, the Costs Judge concluded that, on balance, the court would be assisted by having the annotated schedule available. Thus, and very reluctantly, the defendant would be permitted to rely on it, and an adjournment would be ordered subject to costs sanctions which would be imposed at the end of the process.

The High Court’s Decision

The Judge sat with Costs Judge Leonard. There were five grounds of appeal, namely that the Costs Judge: (1) did not give proper effect to paragraph 8.2(b) of PD 47 and wrongly applied Ainsworth; (2) wrongly concluded that a broad brush assessment was possible without the annotated schedule; (3) failed to give proper effect to CPR 1.3 (the duty of parties to help the court to further the overriding objective), misapplying Barton v Wright Hassall LLP [2018] UKSC 12; (4) wrongly allowed reliance on the annotated schedule; and (5) failed to give proper effect to paragraph 13.10 of PD 47. The first three grounds related to the refusal to strike out Point 23 and the last two related to permission to rely on the annotated schedule.

The Judge reminded herself of the basis on which an exercise of discretion may be disturbed on appeal. On ground 1, she concluded that Point 23 did not comply with paragraph 8.2(b) of PD 47 or Ainsworth. It made general assertions and failed to identify specific items in dispute or why they were disputed. However, that was insufficient because the Costs Judge had not found that Point 23 was compliant, and the question whether to strike out was a discretionary one linked to the question of whether reliance on the annotated schedule should be allowed.

Ground 2 related to the Costs Judge’s comment that a fairly broad-brush assessment would have been possible without the annotated schedule. The Judge rejected the challenge to that point, noting that the Costs Judge had recognised that it was the parties’ right to descend into further detail. Rather, the Costs Judge was saying that there was enough in Point 23 to gain a broad understanding of the challenge. This was clear from the content of the reply, the preparation of Bundle 2 and the broadbrush approach ultimately taken at the final hearing on 8 November 2024. Ground 2 was therefore dismissed.

The Judge also dismissed ground 3, which challenged the Costs Judge’s criticism of the claimant for not chasing the annotated schedule, on the basis that the challenge related to an argument that had not been raised with the Costs Judge at the relevant time. Ground 4 was dismissed for the same reason.

As to ground 5, the authorities did not support the criticism made of the Costs Judge’s comment that his powers under paragraph 13.10 were very wide, such that this aspect of ground 5 failed.

The Judge then went on to consider what she described as the residual, overarching argument from grounds 1 and 5, to the effect that the Costs Judge’s approach was wrong and failed to give effect to paragraphs 8.2(b) and 13.10(2) of PD 47. She accepted the argument by the claimant that the adjournment was necessitated by the defendant’s conduct with regard to Point 23 and the late annotated schedule. If Point 23 had been struck out then the assessment would have concluded on 6 August 2024, without the need for an adjournment. Any issues with the bundles also related to Point 23. The defendant had been on notice since January 2024 that Point 23 was not compliant and had taken no steps to remedy that until two working days before the hearing. The reason given for not serving the schedule, namely a hope to achieve settlement, was circular because a detailed understanding would facilitate settlement. The costs and delay caused by a third day were not consistent with the overriding objective, and the unfairness to the defendant resulting from striking out was of his own making. The Judge stated that she was very conscious of the limited role of an appellant court considering an appeal against a discretionary case management decision, but nonetheless concluded that the decision not to strike out Point 23 and to allow reliance on the annotated schedule was wrong. The Costs Judge had erred in principle by failing to give sufficient weight to the requirements of paragraph 8.2(b) and Ainsworth, and failing to ensure that the power in paragraph 13.10(2) was exercised in accordance with the overriding objective.

The Court of Appeal’s Decision

Lady Justice Falk, with whom Lord Justice Jeremy Baker and Lord Justice Foxton agreed, allowed the appeal and restored the Costs Judge’s decision.

The Court of Appeal emphasised that this was a second appeal against a case management decision. It is well-established that appellate courts should not interfere with such decisions simply because they disagree with them or otherwise consider that they would have taken a different course. Rather, as Lewison LJ reiterated in Broughton v Kop Football (Cayman) Ltd [2012] EWCA Civ 1743, case management decisions are discretionary decisions that often involve an attempt to find the least worst solution where parties have diametrically opposed interests. The discretion involved is entrusted to the first instance judge. An appellate court does not exercise the discretion for itself. It can interfere with the exercise of the discretion by a first instance judge where he has misdirected himself in law, has failed to take relevant factors into account, has taken into account irrelevant factors or has come to a decision that is plainly wrong in the sense of being outside the generous ambit where reasonable decision makers may disagree. The essential question is whether the decision could properly have been made.

The Judge had carefully directed herself as to these principles and reminded herself of them again later in her judgment. However, the Court of Appeal concluded that her decision nonetheless strayed beyond the limits set by them. Despite the efforts of counsel for the claimant to persuade the court otherwise, the Costs Judge’s decision disclosed no error of principle or failure to take relevant matters into account, and did not otherwise fall outside the ambit of his discretion. It should therefore not have been set aside.

Preliminary Observations

The Court of Appeal made a number of preliminary observations. First, one of the reasons why appellate courts must exercise caution when reviewing case management decisions is that it is impossible to recreate the situation before the judge. On an appeal against a case management decision an appellate court is simply not in the same position as the judge. It will not have the same perspective of the circumstances as they appeared to the judge on the ground at the time, it risks being influenced by hindsight, and it also risks being influenced by arguments that were simply not made or at least were not developed before the judge, and which have benefited from a lengthy period of gestation.

Secondly, case management decisions are frequently made under significant pressure. This case provided an excellent example. The Costs Judge had little option but to make an immediate decision at the end of the second day, with an unreserved judgment, because he had to decide whether to complete the assessment on that day or to adjourn.

Thirdly, an ex tempore judgment is just that, unreserved and lacking in the preparation that would go into a reserved judgment. It should be read as a whole, with those points and the circumstances in which it was delivered in mind, rather than picked apart in minute detail.

Fourthly, the points that had arisen in this case included an alleged lack of reasoning on the part of the Costs Judge, as well as some confusion caused by what appeared to have been a mis-recollection on his part at the adjourned hearing as to precisely what his reasoning had been at the earlier hearing. The Court of Appeal reminded the parties of what Munby LJ said in In re A (Children) [2011] EWCA Civ 1205: it is the responsibility of the advocate, whether or not invited to do so by the judge, to raise with the judge and draw to his attention any material omission in the judgment, any genuine query or ambiguity which arises on the judgment, and any perceived lack of reasons or other perceived deficiency in the judge’s reasoning process. In this case the claimant’s failure to do so was all the more marked by the fact that, by the date of the adjourned hearing on 8 November, his legal team had obtained a transcript of the judgment under appeal, but had neither shared it with the defendant nor provided a final version to the Costs Judge. Further, no permission to appeal against the decision on 6 August was sought at any stage from the Costs Judge, which might also have provided an opportunity for clarification, and (relying on CPR 47.14(7)) no appeal was filed in the High Court until after the November hearing.

Finally, the Court of Appeal observed that it does no credit to the justice system for there to be appeals on case management issues which do not, on analysis, raise material points of principle and the cost implications of which must risk outweighing the sums at stake. This reinforces the importance of parties seeking clarification, and where appropriate, reconsideration by the first instance judge. An appeal should be a last resort. This is quite apart from the fact that the very narrow gap between the final Part 36 offers should have given serious pause for thought before embarking on the hearing in the first place.

The Arguments on Appeal

Turning to the arguments on appeal, the focus had to be on the judgment of the Costs Judge, because the question was whether he was entitled to make the decision that he did.

Counsel for the claimant submitted that the Costs Judge had erred in principle by treating the decision-making process as a singular exercise of discretion. What he should have done was, first, decide whether the original points of dispute were Ainsworth compliant, such that they met the requirements of paragraph 8.2 of PD 47. That was a binary question, as demonstrated by O’Sullivan v Holmes and Hills LLP [2023] EWHC 508 (KB). The correct answer to that was that they were not compliant, such that the annotated schedule, which was served very late, was curative rather than augmentative. Secondly, if they were not compliant, the Costs Judge had to decide what to do, both in relation to the points of dispute and the annotated schedule. That second stage was a discretionary decision but, importantly, the fact that the points of dispute had been found to be non-compliant informed how the discretion should be exercised, as did the reasons for the breach, the length of time that had elapsed before an attempt was made to cure it and the proximity of that attempt to the hearing.

The Court of Appeal did not accept that the Costs Judge erred in principle. Although counsel for the claimant sought to argue that he did not conclude that Point 23 was non-compliant, it was sufficiently clear that he proceeded on that basis, as indeed the Judge had also concluded. Most obviously, no question of strike-out would have arisen if Point 23 was compliant. Point 23 was obviously incomplete because it referred to a non-existent annotated schedule. The Costs Judge agreed that Ainsworth applied despite it being a solicitor and client case, and while he observed that the original points of dispute would have allowed for a fairly broad-brush assessment, he made it clear elsewhere in his judgment that it was up to the parties whether they wished to proceed on a more detailed basis (as, the Court of Appeal added, the cross-reference to a schedule indicated that the defendant wished to do). The Costs Judge proceeded to give reasons why he should not strike out Point 23, clearly implying that he considered that he had power to do so.

Further, it was unrealistic to suggest that the Costs Judge did not have the non-compliance in mind, together with the other factors relied on by counsel for the claimant, in making his decisions in respect of Point 23 and the annotated schedule. He referred to the schedule being served at an extremely late stage, leading to not a happy state of affairs, the claimant having already prepared and put together bundles on a different basis. During the course of argument, the Costs Judge asked for an explanation for the delay, and was provided with one by counsel for the defendant, namely that the parties were in discussion and it was hoped that a hearing could be avoided.

The Costs Judge must be taken to have had that explanation in mind when he made his decision very shortly afterwards. Its absence from the judgment was a point that should most appropriately have been raised with the judge at the time. Further, although counsel for the claimant criticised that explanation by arguing that the negotiations referred to were negotiations at a later stage, once the hearing date was fixed, that was far from obvious from what was available to the court. Rather, the available chronology was consistent with a more continual process of discussion, as one would expect. And an attempt to rely on an indication in the first appeal hearing that the schedule may also have been overlooked by the defendant’s solicitor suffered from the defect that there was no indication that that point was made to the Costs Judge. In any event, that would not exonerate the claimant from blame for failure to chase it.

The Judge had suggested that the explanation given to the Costs Judge was circular, because settlement would have been much more likely if the annotated schedule was available, such that the claimant understood the case against him in detail. The Court of Appeal was not convinced by that. If it was likely to make a real difference to the discussions, it would surely have been chased for or supplied much earlier. The Costs Judge’s observations about both parties being at fault and the nature of the points raised were relevant in this context.

The Court of Appeal clarified that what it had said about the explanation for the delay should not be read as endorsing it as an acceptable excuse for non-compliance. It was not a good excuse, but it was a relevant part of the circumstances that the explanation was not of an egregious nature. There was no indication of, for example, a tactical move designed to wrongfoot the claimant, which would be a strong factor against allowing relief.

Counsel for the claimant further submitted that the Costs Judge had failed to have regard to the overriding objective, including the changes made to it in 2013 when proportionality of expense and the importance of compliance with rules were prioritised. She relied on two cases relating to late amendments to statements of case under Part 17, Quah Su-Ling v Goldman Sachs International [2015] EWHC 759 (Comm) and CIP Properties (AIPT) Ltd v Galliford Try [2015] EWHC 1345 (TCC). These paragraphs recognise the significance of the new, much stricter, approach, such that it is now more readily recognised that costs sanctions for late amendments may not be adequate, and indulgence of failures to comply with procedural obligations can no longer be expected.

Counsel for the claimant submitted that the same principles should be applied to Part 47. Compliance with paragraph 8.2 of PD 47 was of manifest importance. The points of dispute inform the receiving party of the challenges being made and allow a reply to them. This enables the parties and the court to understand the full scope of the dispute, affecting both listing and preparation for the hearing, as well as the parties’ ability properly to make and assess offers.

The Court of Appeal agreed with all of this, but it did not mean that the decision of the Costs Judge was one that he was not entitled to make. The Costs Judge must be taken both to have been aware and to have taken into account the now well-embedded change of culture that followed the 2013 reforms. It is both unrealistic and inappropriate to expect judges to spell out aspects of the overriding objective, in the form that has now been in place for some 13 years, when they make case management decisions, not least because that would lead to a wholly disproportionate exercise in box-ticking.

The gravamen of the claimant’s complaint was that the Costs Judge failed to identify that it was the defendant’s default that had the effect of the hearing going to a third day, which among other things undermined what was intended to be a streamlined process of detailed assessment. As the Judge had observed, that would have been unnecessary if Point 23 had been struck out. But that started from the wrong place. It was uncontroversial that Point 23 would have been compliant if it had been accompanied by the annotated schedule when the points of dispute were first served. It was also apparent that, in that case, a three day hearing would have been required: there was simply insufficient time to deal with all the other matters and a detailed dispute about work on documents in two days. Indeed, the transcript of the hearing on 8 November clearly showed that this was undisputed by counsel for the claimant. So the real question was not whether a third day was required because of the default (because it would have been needed without a default), but what other costs or difficulties arose from the default. Those would have included the fact that the claimant did not have the benefit of the annotated schedule when replying to the points of dispute or when preparing for the hearing (subject of course to the point that it did not chase for the schedule, as it could have done), as well as the inconvenience and some inevitable increase in costs in having a hearing split by an adjournment, rather than being completed over consecutive days.

Potentially, the claimant was also put to a disadvantage in making or assessing offers under Part 36. However, there was more than one answer to that. Most obviously, it would have been a very good reason to chase for the annotated schedule. Alternatively, the claimant could have sought to protect its position in other ways, including through the terms of any Part 36 offer that it made thereafter.

The claimant was not assisted in relation to paragraph 13.10 by the decision in Celtic Bioenergy Ltd v Knowles Ltd [2022] EWHC 1223 (QB). In that case the lower court had refused an application made around a month before the hearing to rely on a supplemental point of dispute in relation to whether the claimant’s conditional fee agreement complied with the indemnity principle. In the course of her judgment dismissing the defendant’s appeal against the decision of Master Campbell, Foster J rejected the proposition that there was any presumption that documents will be accepted however late they are and however many new points they raise, observing that the rules confer a wide discretion to make a decision in accordance with the overriding objective and it cannot be gainsaid that there will come a time when a document will be just too late. The Court of Appeal agreed, but nothing here indicated a restriction on the scope of the discretion, rather the reverse. The point being made was that the Master was entitled to decide as he had, not that he was obliged to do so.

While it would clearly have been open to the Costs Judge to strike out Point 23 and not permit reliance on the annotated schedule, and another judge might have taken that course, he was not obliged to do so. It was open to him to impose a costs sanction instead, as he made clear that he would. As it turned out, the costs sanction actually imposed at the 8 November hearing was very limited, but there was no appeal against that decision.

The Judge’s criticisms of the Costs Judge’s decision proceeded on the basis that the adjournment was necessitated by the late schedule. The Court of Appeal had already addressed that. Beyond that, the primary objections were that insufficient weight was attributed to the importance of compliance with paragraph 8.2(b) and Ainsworth, and that the Costs Judge failed to exercise the power in paragraph 13.10(2) in accordance with the overriding objective. However, questions of weight are pre-eminently ones for the first instance judge, and for the reasons already given the Court of Appeal was not persuaded that the Costs Judge failed to have proper regard to the overriding objective.

Concluding Remarks

The Court of Appeal allowed the appeal and restored the decision of the Costs Judge. It emphasised, however, that this was on the basis that this was a decision that the Costs Judge was entitled to make within the generous ambit of his discretion. It was neither the only decision he could make, nor was it one with which other judges would necessarily agree.

Paying parties should be under no illusion that paragraph 8.2 of PD 47 requires an Ainsworth compliant approach. They should not assume that a lenient approach will be taken if they take a similar approach to the defendant in this case. Those who do not comply on a timely basis risk non-compliant elements of their points of dispute being struck out or, as a minimum, cost sanctions. Similarly, late variations by either party under paragraph 13.10 of PD 47 risk being disallowed or permitted only on conditions, including as to costs.

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Duty To Investigate BTE Insurance | Adequacy Of Enquiries And Recoverability Of Success Fees As Between Solicitor And Client

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The Senior Courts Costs Office’s decision in Evans v Fletchers Solicitors Limited [2026] EWHC 1523 (SCCO) concerned a solicitor and own client assessment under section 70 of the Solicitors Act 1974, in which the central issue was whether the defendant’s approach to investigating the availability of before the event legal expenses insurance had been adequate, and what consequences flowed from any failure in that regard for the recoverability of a success fee of £30,365.13.

Background

The claimant, Mr Peter Evans, had instructed the defendant, Fletchers Solicitors Limited, in connection with a personal injury claim arising from a road traffic accident in 2017. The claim was successfully resolved, with a compromise of £250,000 recorded in an order dated 14 July 2021. The costs as between the claimant’s solicitors and the opposing party were agreed separately, and the defendant then rendered a bill to the claimant in the sum of £61,615.13. That figure included a success fee of £30,365.13, which had been capped at 25% of the relevant damages in accordance with the Jackson Cap.

Mr Evans subsequently sought advice from JG Solicitors regarding the fees he had been charged. Those enquiries led to the issue of proceedings in the Senior Courts Costs Office, with Mr Evans seeking an assessment of the defendant’s bill. The proceedings raised challenges both to individual items in the bill and to the agreement of costs between the parties. However, the central issue before Senior Costs Judge Rowley was whether the case ought to have been funded by legal expenses insurance rather than a conditional fee agreement. The claimant’s position was that, had proper enquiries been made, he would have been able to use before the event legal expenses insurance held under his home insurance policy with Zurich Insurance Company, and that he would therefore not have been charged a success fee or an after the event insurance premium.

The claimant had signed a CFA on 24 April 2017. As part of that process, a form regarding possible funding options was completed by the claimant’s wife, which confirmed that the claimant had the benefit of family legal expenses insurance as an add-on to his home insurance with Zurich. The legal expenses element of that cover was managed by DAS Legal Expenses Insurance Company Limited.

The defendant’s file contained no record of any enquiries having been made of either Zurich or DAS in 2017. The judge found, on the basis of the absence of any evidence from the defendant’s witnesses on this point, that no such enquiries were made in 2017.

The fee earner who took over the file in May 2019, Ms Charlotte Mackulin, made enquiries at that stage in anticipation of court proceedings. Ms Mackulin asked her assistant to write to several entities identified on the LEI checklist completed in 2017. The response received from Zurich in June 2019 directed the defendant to a policy booklet, which was not in fact received, and provided a telephone number in bold print for further assistance. Ms Mackulin’s assistant sent a follow-up letter on 23 July 2019, the same day Zurich’s response was received, but no telephone contact was made despite the telephone number being prominently displayed in Zurich’s letter. Crucially, no direct contact was ever made with DAS, the actual legal expenses insurer. Ms Mackulin concluded that BTE cover had not been established after reasonable enquiry and wrote to the claimant accordingly. ATE insurance was then incepted.

Following settlement, JG Solicitors made enquiries of both Zurich and DAS. They obtained a copy of a renewal pack confirming that the claimant had held family legal expenses cover managed by DAS at the time of the accident. DAS confirmed by email in February 2022 that it had no record of having been contacted by the defendant at any point, either in 2017 or 2019. The defendant’s Head of Costs, Mr Gary Ratcliffe, then made his own enquiries, including consulting the DAS website via the Wayback Machine. He identified an FAQ entry stating that family legal expenses insurance would not cover motor-related matters. However, DAS declined to provide a definitive answer as to whether cover would have been available, maintaining that a full claim assessment would be required and that such claims needed to be made much closer to the date of the incident.

The defendant declined to refund the success fee and ATE premium on the basis that neither Zurich nor DAS had confirmed that coverage would have been available. The matter proceeded to a hearing on 1 July 2025, with judgment handed down on 19 June 2026.

The Post-2013 Funding Landscape

Challenges by unsuccessful defendant paying parties as to the claimant’s methods of funding had begun in earnest almost as soon as CFAs became prevalent following the introduction of the Access to Justice Act 1999 and the CFA Regulations 2000. These provisions made success fees and ATE premiums recoverable from an opponent and the use of them was therefore a more expensive option from the paying party’s point of view. The requirements of the CFA Regulations overlapped with regulatory requirements for solicitors to consider with their clients the options for funding their case. A failure to comply with the regulations resulted in the CFA being unenforceable by the solicitor against their client and consequently no indemnity against such costs needed to be provided by the opponent. Much of the difficulty with compliance was removed by the revocation of the CFA Regulations in 2005, but the need to advise the client of possible funding options remained as a matter of professional conduct. Arguments by paying parties in between the parties assessments are generally available to clients of solicitors in Solicitors Act assessments.

The proceedings arose in the context of the funding landscape following the reforms introduced by the Legal Aid, Sentencing and Punishment of Offenders Act 2012, which removed the recoverability of success fees and ATE premiums from opposing parties in most personal injury cases with effect from April 2013. Since that change, the use of BTE insurance has generally been regarded as preferable for claimants, as it is not expected to require a success fee or ATE premium. The success fee charged in this case, at £30,365.13, represented a very substantial proportion of the total bill, making the funding question of considerable financial significance to the claimant.

The Five-Step Framework

Senior Costs Judge Rowley structured the analysis around five sequential questions. First, whether the defendant’s approach to enquiries into alternative funding had been unreasonable. Second, whether, if reasonable enquiries had been made, there would in fact have been LEI available for the claimant to use. Third, whether using the LEI would have meant that no deduction from the claimant’s damages would have been required. Fourth, whether the claimant would actually have used the BTE insurance had it been available. Fifth, what the consequences of the court’s findings on those questions should be for the costs payable by the claimant to the defendant.

The Parties’ Positions

The claimant’s position was that the defendant had failed to make any enquiries of the actual LEI provider, DAS, either in 2017 or in 2019. The enquiries that were made in 2019 were directed to Zurich, the home insurer, rather than to DAS, which was the entity responsible for managing legal expenses claims. The claimant argued that, on the balance of probabilities, BTE cover had been available and that, had he been properly advised, he would have used it. In support of that contention, Mr Evans gave evidence that, had he been made aware that using the LEI would have resulted in no deduction from his damages, he would unquestionably have taken that course.

On the question of consequences, the claimant argued that all of the defendant’s base costs, as well as the success fee and ATE premium, should be disallowed. Two strands of argument were advanced in support of that position. The first relied on the approach in McDaniel & Co (a firm) v Clarke [2014] EWHC 3826 (QB), in which all base costs had been assessed at nil following a failure to advise on union funding. The second was that the claimant should receive the benefit of the £50,000 limit of indemnity under the LEI policy, to be set against the bill he now faced.

The defendant’s position was that the enquiries made in 2019 had been reasonable in the circumstances and that, in any event, the BTE policy would not have covered the claimant’s personal injury claim arising from a road traffic accident. Mr Ratcliffe’s evidence pointed to his experience that family legal expenses insurance attached to home policies did not generally cover motor-related claims, and to the DAS FAQ entry to similar effect. The defendant also argued that, even if cover had been available in principle, the £50,000 limit of indemnity would have been insufficient for a claim of this value and complexity, and that the solicitors would not have recommended the policy given its terms.

On the question of causation, Mr Meehan relied on the Supreme Court’s decision in Perry v Raleys Solicitors [2019] UKSC 5, arguing that the claimant was required to prove that, had he received reasonable advice, he would have acted upon it so as to achieve a more beneficial outcome. Mr Meehan submitted that the various uncertainties as to coverage meant that the claimant could not discharge that burden, and that at most the court should apply a loss of chance approach to reduce any award accordingly.

Were the Enquiries Unreasonable?

The judge began by reviewing the authorities on the proper practice for a solicitor enquiring about BTE cover. In Sarwar v Alam [2001] EWCA Civ 1401, the Court of Appeal had considered the position in the context of a very modest injury claim and held that a solicitor was not obliged to embark on a treasure hunt to seek the insurance policies of every member of the client’s family. Nevertheless, even in that modest situation, proper modern practice dictated that a solicitor should normally invite a client to bring to the first interview any relevant motor insurance policy, household insurance policy, or any stand-alone BTE insurance policy belonging to the client and any spouse or partner living in the same household. That practice would enable the solicitor to read through the policy and consider the suitability of the insurance.

Subsequently, in Garrett v Halton Borough Council [2006] EWCA Civ 1017, the Court of Appeal gave guidance that solicitors should generally make enquiries of potential BTE insurers, even where the client was unclear as to whether any such cover was available. This led to the point where a failure to ask suitable questions, even in circumstances where it was later established that there was no LEI available, was found to be inadequate in seeking to establish the availability of any alternative funding.

Against that background, the judge found that the enquiries in this case were lacking in numerous respects. The most obvious deficiency was to fail to make any enquiries at all for more than two years after the accident. Thereafter, the letter from Zurich in response to the enquiry was, in the judge’s view, completely miscategorised as one which simply refused to indicate whether cover was available and which justified a repeat letter being sent. A telephone number in bold print in Zurich’s letter was put forward if any further assistance was required and yet there was no evidence to suggest that any phone call was made to Zurich about the apparent absence of the booklet or to discuss the likely coverage of the LEI in question.

Specialist personal injury solicitors, such as the defendant, are aware, or ought to be, that the company dealing with the LEI is not the same as the company dealing with the home contents insurance, since this was made perfectly plain in Sarwar. The Insurance Companies (Legal Expenses Insurance) Regulations 1990 require the management of claims under legal expense insurer contracts to be carried out by an undertaking having a separate legal personality from the insurer providing the main insurance policy.

Consequently, making desultory enquiries of Zurich, and without getting to the LEI company at all, could not be said to be making any form of reasonable enquiry. The fact that the enquiry was being made two years after the accident could hardly be said to have helped matters. If anything, a more concerted effort to establish the position was required given the delay in doing so. In fact, the correspondence was, in the judge’s view, drafted in a way which sought to encourage a lacklustre response from any potential LEI insurer so that the existing CFA arrangement was not disturbed by any putative BTE cover. The letters sent by Ms Mackulin’s assistant contained numerous bullet points requesting confirmation on various technical points and attached a schedule of charges, together with a statement that if no response was received within 14 days, ATE insurance would be advised. This structure, combined with the failure to telephone despite a prominent number being provided in Zurich’s response, supported the judge’s finding as to the character of the enquiry.

It was noteworthy that when JG Solicitors made enquiries some years later, they appeared to have had little difficulty in establishing the LEI insurer as distinct from Zurich itself.

Was There LEI Available?

The judge acknowledged that there could be no absolute answer to this question, but concluded that, on the balance of probabilities, there was such insurance available. The plain words of the Zurich home solutions policy provided that personal injury claims were covered by the LEI option.

Mr Ratcliffe’s evidence sought to undermine those plain words by giving evidence of his experience of coverage. It may be the case that not all home policies allow for accidents arising out of road traffic accidents to be covered, but the judge considered that Mr Ratcliffe’s evidence of what would have been the case was inevitably, at this distance from the material events, of only modest weight. If the correspondence to Zurich was anything to go by, the seemingly stock letter enquiring about the possibility of BTE cover was designed to produce a negative response. Whether that was actually by design or not, its impact would be to limit the number of occasions on which the defendant would have ever been instructed by a BTE insurer. Consequently, Mr Ratcliffe’s experience of his firm using such cover would inevitably have been more limited than might otherwise be the case.

It was no criticism of Mr Ratcliffe’s evidence that he was unable to obtain confirmation that the FAQ answer applied at the time of the claimant’s accident. But it left some room for doubt and that doubt was fortified by Mr Hazel’s comments. It would have been simple for him to say that family LEI cover could not be used in motor accidents if there was a blanket exclusion in this respect. But he did not make that statement despite being pressed by solicitors on both sides and maintained the more nuanced position that it would depend upon the policy wording in the individual case. That could only mean, as far as the judge was concerned, that some family legal expenses insurance did cover motor accidents, or at least that Mr Hazel suspected that it might have done.

In order to seek some more disinterested evidence, the judge consulted the preliminary report of Lord Justice Jackson regarding his Review of Civil Litigation Costs in May 2009. At paragraph 2.2 of Volume 1, Lord Justice Jackson described BTE as an optional extra on house and contents insurance policies, typically costing in the region of £15 to £20. He stated that the insured may be insured in respect of legal expenses for certain claims which he brings as claimant, including property disputes with the neighbour, claims regarding goods or services received, employment claims or even, depending upon the terms of the policy, personal injury and clinical negligence claims. In many of these cases the BTE insurers pay the claimant’s solicitors on a conventional hourly rate basis, recovering costs from the other side if they win and paying out adverse costs if they lose.

The terms of the Zurich home solutions policy covered personal injury cases in the manner described by Lord Justice Jackson. In any event, the judge preferred the plain words of the policy to Mr Ratcliffe’s evidence in this respect. Jackson LJ’s description of the market simply reinforced that preference.

A separate point made by Mr Meehan was that, even if LEI was available, the solicitors would not have recommended it, given the policy wording. The judge rejected that argument. The points made by Mr Meehan regarding the alleged constraints imposed by the LEI policy held little weight since they were, in the judge’s experience, no more than the sort of wording generally used in such policies. Furthermore, Mr Meehan’s submissions lacked any evidence on which to base the criticisms given that no evidence was given by either Ms Mackulin or Mr Ratcliffe that any such objection to the terms of the policy would have been raised in the event that enquiries had been made sufficiently to establish that it was available.

Would There Have Been No Deduction?

The judge observed that it had been something of an article of faith in the costs world that if a party was able to use BTE insurance, then they would not suffer any reduction in their damages by way of paying for irrecoverable success fees or ATE insurance premiums. Mr Meehan’s skeleton queried whether that was actually the case.

His first argument was that the claimant had failed to establish that the case would have been taken on without any deduction. The judge considered that there was no evidence on this point that helped either side. The fact that the defendant was claiming a success fee and ATE policy in the bill before the court was merely a reflection of the facts that actually occurred. If BTE insurance had been available which covered the claimant’s solicitors’ costs as well as the opponent’s, then there was no obvious need for either a success fee or an ATE policy.

It was not clear why the claimant was said to have the burden of proving a negative. The claimant’s case was simply that the defendant’s activities, or lack of them, had meant that the claimant could not avail himself of insurance he had purchased before the accident. On the face of it, using such insurance would mean a private paying agreement with the solicitor would be backed by an indemnity from the LEI insurer. That arrangement would not require either a success fee or an ATE premium. It seemed to the judge that the defendant ought to be demonstrating that, in such circumstances, they would use a CFA with a success fee and possibly some ATE insurance which the claimant would be required to meet. But there was no such evidence from the defendant any more than there was evidence from the claimant about the supposed inevitability of deductions.

The judge returned to the passage from paragraph 2.2 of the preliminary report of Lord Justice Jackson, which stated that in many of these cases the BTE insurers pay the claimant’s solicitors on a conventional hourly rate basis. A footnote to that passage, numbered 15 and attached to the phrase “on a conventional hourly rate basis”, expressly stated “Without a CFA”. This express description of retainers which do not involve a CFA and therefore do not contain a success fee demonstrated that there was no certainty of any deduction being claimed by a solicitor.

A subsidiary argument of Mr Meehan’s, which potentially had more weight, was that the level of indemnity of £50,000 for the LEI was insufficient and that therefore it could not have been utilised in the first place. Since the LEI is meant to cover both sides’ costs, its limit of indemnity is conceptually burned through at twice the rate, more or less, of an ATE policy which is only responsible for protecting against the opponent’s costs as well as the insured’s disbursements.

The claimant’s claim settled for £250,000 and was obviously a significant personal injury claim. To that extent, the defendant’s argument was well made in that the BTE cover would not have been sufficient to reach trial and that would have been apparent at the outset. There were, however, two difficulties with the defendant’s argument which meant that ultimately it did not prevail.

The first was that the ATE insurance actually taken out, and whose limit of indemnity was £100,000, was also insufficient to take the case to trial. A simple addition of the disbursements in the claimant’s approved budget of £20,280.40 (incurred) and £57,645 (estimated) together with the defendant’s claimed budgeted costs of £73,464, or even just the claimant’s offer in respect of that figure of £66,714, proved that the £100,000 limit of indemnity would have been insufficient to go to trial. That conclusion could have been drawn at the outset of the case if the appropriate approach would be simply to consider the amount of cover required to reach a trial.

Consequently, it was not an answer simply to look at the limit of indemnity of the LEI to decide whether it was an appropriate funding method. Most cases, in fact, settle much earlier, and therefore within the limit of indemnity.

The second difficulty was the existence of so-called top up ATE insurance which had been available for many years, whether or not the original insurance was BTE or ATE. On the basis that top up cover would have been required, whichever policy was originally used should the case have reached a trial, the lower level of indemnity was not a factor which militated against the use of BTE cover if its availability had been established.

Would the Claimant Have Used It?

The defendant argued that, even if there was BTE insurance which the claimant potentially could have used, this was not sufficient for the claimant to obtain a reduction in the defendant’s bill. As Mr Meehan’s skeleton argument put it, the claimant was required to prove that if he had received reasonable advice as to funding, he would have acted upon this, so as to achieve a more beneficial outcome. In other words, it was a basic requirement that the claimant prove loss.

Mr Meehan relied upon dicta approved by the Supreme Court in Perry v Raleys Solicitors [2019] UKSC 5 in support of this proposition. That case dealt with a claim in negligence against the defendant solicitors by the claimant and Mr Meehan particularly relied upon paragraphs 19 and 20 of that decision which fell under the heading “the law about causation in professional negligence cases.”

These paragraphs of the judgment discussed a regular problem of the claimant in establishing what he or she would have done but for the negligent act of their solicitor. It is a counterfactual situation in that the claimant has already had to prove successfully that their solicitor was negligent in order to consider what might have been. It is therefore likely that the situation will be uncertain in terms of proof. Consequently, rather than the court deciding a binary yes or no conclusion on the balance of probabilities, it is often the case that the claimant will receive some but not all of the damages that might flow from the negligence on the basis of a loss of chance.

The thrust of Mr Meehan’s various arguments about whether the policy actually covered the claimant’s personal injury claim, whether it would have been recommended given its terms, and whether, in fact, it would have avoided the claimant having any deduction from his damages were all aimed, to some extent, at reducing the extent of the loss of chance element.

By contrast, Mr Carlisle submitted that all the claimant needed to show was that, on the balance of probabilities, if the claimant had been properly advised he would have taken a different option, that is, he would have used the BTE insurance. In support of this, Mr Carlisle relied upon several paragraphs in the claimant’s witness statement, for example, paragraph 61, in which he said that if he had been made aware that instructing a solicitor associated with his legal expenses policy through Zurich would have resulted in no money, or less money, being deducted from his damages than instructing Fletchers, there was no doubt in his mind that he would have taken that course of action.

The judge acknowledged that it was inevitably the case that any such statement was likely to appear to be self-serving. After all, there was now no prospect of the claimant actually using the BTE policy and so he could safely say that he would have used it in any event. Nevertheless, the judge had no reason to doubt Mr Evans’ evidence and there was no evidence which could be put forward by the defendant to contradict his evidence.

This was not a professional negligence case and it seemed to the judge that the so-called Kitchen discount, from the case of Kitchen v RAF [1958] 1 WLR 563, regarding the use of a loss of chance to reflect the vagaries of a counterfactual situation in professional negligence cases simply did not apply. The attraction of using BTE policies had waxed and waned over the last 25 years depending upon other funding options. But since 2013, and the general elimination of the recoverability of success fees, the use of BTE as a method which would not be expected to require a success fee and ATE insurance to be taken out was something which weighed heavily in the balance. It did not seem to the judge that it took much to persuade the court that if that option were available, then the claimant was likely to avail himself of it. After all, he had paid a fee for that insurance and could be expected to use it unless he was unable to do so.

Consequently, the judge was satisfied on the balance of probabilities that the claimant would have used the BTE insurance policy, whether that was by requiring Fletchers to do so or by instructing another firm who would have been willing to do so.

What Are the Consequences?

Having decided on the balance of probabilities that there was BTE insurance available which the claimant would have used, the judge turned to the question of what effect that had on the costs payable by the claimant to the defendant.

The claimant contended that all of the defendant’s base costs as well as the success fee and the ATE premium should be disallowed. There were two strands to the claimant’s argument regarding the reduction in the base costs. The first was that the judge should follow the approach of Hickinbottom J, when upholding Senior Costs Judge Gordon-Saker’s disallowance of all base costs in the case of McDaniel & Co (a firm) v Clarke [2014] EWHC 3826 (QB). The second strand was that the claimant ought to receive some benefit from the £50,000 limit of indemnity in the LEI by having that sum deducted from the bill which he now faced.

In McDaniel, the solicitors accepted that they had not advised the claimant properly as to alternative methods of funding. In particular, Ms Clarke was a member of a trade union and there was evidence to confirm that the trade union would have backed her claim. On that basis, the judge decided that none of the costs claimed against Ms Clarke were reasonably incurred and so assessed the bill at nil.

The judge did not accept that there was any direct comparison between this case and McDaniel. If the claimant had been able to use the BTE insurance, then he would still have been liable for the solicitors’ base costs: the LEI simply providing an indemnity. That was a very different situation from where a trade union backs its member and the member has, in effect, no direct responsibility. The judge saw no scope for the argument that the base costs were not recoverable in principle by the solicitor based on McDaniel.

Nor did the judge think there was any weight to the second argument regarding the use of the LEI’s limit of indemnity. The claimant had been successful in his case and therefore would expect to recover costs from his opponent. All of the costs reasonably incurred would be recoverable. Only those costs which were unreasonable either in the manner in which they were incurred or in their amount would not be recoverable from the opponent. Such unreasonable costs would also not be recoverable under the LEI policy. There might arguably be a reasonably incurred disbursement which was not recoverable, but there was certainly nothing to suggest that the entire limit of indemnity ought to be set against the costs incurred by the claimant in the manner contended for by Mr Carlisle.

Nevertheless, based on the reasoning throughout the judgment, it was clearly the judge’s view that the success fee would not have been incurred if the BTE policy had been utilised. On that basis, the judge disallowed the success fee in its entirety. The same reasoning would apply to the ATE policy, though the judge noted that this item did not strictly fall for assessment within these proceedings and accordingly made no formal ruling on it.

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