Defendant’s Mediation Refusals And Late Expert Change Of Position Insufficient To Displace The Usual Costs Order

The Technology and Construction Court’s decision in MJS Projects (March) Limited v RPS Consulting Services Limited [2026] EWHC 884 (TCC) addresses whether a successful defendant’s conduct in refusing mediation and its expert’s late change of evidence justified departing from the usual costs rule.

Background

This costs judgment arose from the dismissal of a professional negligence claim brought by MJS Projects (March) Limited against RPS Consulting Services Limited in the Technology and Construction Court in Leeds. The underlying dispute concerned the design and construction of a container park near Felixstowe Port, with the Claimant alleging that the Defendant’s design fell below the standard of a reasonably competent firm of civil and structural engineers. The court ultimately found in favour of the Defendant, concluding that the cause of the damage was workmanship rather than design.

The pre-action history was protracted. The Defendant’s letter of response, dated 22 May 2019, set out in considerable detail why it considered its design was not negligent and identified eleven workmanship defects, as well as the use of incorrect dowel sizes. The Claimant’s response, dated 5 November 2019, did not engage with those workmanship allegations and instead requested sight of the Defendant’s calculations. Those calculations were provided by letter dated 22 December 2020. No substantive reply was received for nineteen months. When the Claimant wrote again in July 2022, it confirmed that an expert structural engineer had been instructed and that the expert supported the Claimant’s position on design negligence. Proceedings were issued on 14 October 2022. Particulars of Claim were served on or around 10 February 2023, a Defence on or around 14 April 2023, and a Reply on 19 May 2023.

The expert evidence timetable was, as the court described it, “concertina-ed” into a short period before trial. The experts’ joint statement was produced approximately three months before trial, with individual expert reports following thereafter. Supplementary reports were filed in response to points raised in the primary reports, with some material served as late as one week before the trial commenced in February 2024. The claim was dismissed following trial, and the costs and consequential orders hearing took place on 14 May 2025, with judgment handed down on 15 April 2026.

Costs Issues Before the Court

Three distinct costs issues required determination. The first was whether the usual costs order, namely that the unsuccessful Claimant pay the Defendant’s costs, should be departed from on account of the Defendant’s conduct in relation to alternative dispute resolution. The Claimant argued that the Defendant had unreasonably refused to engage in mediation on multiple occasions, both before and after proceedings were issued, and that this conduct justified a departure from the default position under CPR 44.2. The Claimant’s position was that the appropriate order was no order as to costs.

The second issue was whether the Defendant’s expert having changed his position on the mass concrete taper and having produced additional calculations approximately one week before trial constituted conduct that should further influence the costs order in the Claimant’s favour.

The third issue was the Defendant’s cross-application for indemnity costs in respect of the expert evidence phase of the proceedings. The Defendant contended that the conduct of the Claimant and its legal team in relation to the instruction, oversight, and management of the Claimant’s expert was sufficiently outside the norm to justify an order for costs on the indemnity basis for that phase. In the alternative, both parties agreed that a payment on account of costs should be made, with the only dispute being the appropriate percentage reduction to apply to the approved costs budget.

The Parties’ Positions

The Claimant’s position on ADR

The Claimant traced a series of proposals for mediation made from as early as 14 July 2022, when a without prejudice meeting, mediation, or meeting of experts was suggested. That proposal was declined by the Defendant on 30 September 2022 on the basis that mediation was not appropriate until the Claimant had provided its expert report. Further proposals were made on 5 June 2023 and 21 September 2023, the latter suggesting two named mediators and a mediation in late October or November 2023. The Defendant declined that proposal by letter dated 28 September 2023, citing the technical nature of the issues and the fact that liability was denied in full, and suggesting that any mediation should follow the experts’ joint statements due in November 2023.

The Claimant characterised the Defendant’s successive objections as a shifting of the goalposts: first, no mediation until the expert report was provided; then, no mediation until after expert discussions; then, no mediation without the experts present at the mediation itself. The Claimant noted that its expert was based in Singapore, making expert attendance at a mediation impractical. It submitted that, applying the Halsey v Milton Keynes General NHS Trust [2004] 1 WLR 3002 factors, this was not a case unsuitable for mediation. Professional negligence disputes of this nature were routinely resolved at mediation, the parties’ budgets had each included approximately £25,000 for mediation costs, and the value of the claim at nearly £400,000 justified that expenditure. The Claimant also submitted that the merits were not entirely one-sided, given that the Defendant’s expert had changed his position on the mass concrete taper and that the outcome might have been different but for the late additional calculations.

The Claimant’s position on the expert’s late change of evidence

The Claimant submitted that the Defendant’s expert had stated in his written evidence that the mass concrete taper was part of the design and that the failure to install it was a workmanship defect causing the cracking. At trial, he accepted that the mass concrete taper was not part of the design at the relevant joints. The Claimant argued that it had been entitled to approach trial on the basis that the Defendant’s expert would give evidence consistent with his written report and the joint statement. The Claimant asserted that the expert changed his mind as a result of very late additional calculations produced one week before trial, and that this late change of position had a decisive impact on the outcome. On that basis, it was submitted that it would be unjust for the Defendant to recover all of its costs.

The Claimant’s position on indemnity costs

The Claimant resisted the indemnity costs application on the basis that the threshold was high and had not been met. It submitted that the correct Bolam question had in fact been put to the expert in his letter of instruction and was set out on the face of his report. The fact that the expert appeared under cross-examination not to have applied the test correctly did not amount to conduct unreasonable to a high degree. The Claimant also relied on the compressed expert evidence timetable, noting that reports were served late and that supplementary reports followed in quick succession. It was submitted that the expert’s decision to rerun the FE analysis immediately before trial, without informing anyone, could not be attributed to the Claimant or its lawyers, as everyone was astonished when the expert disclosed this during his evidence. The Claimant argued that the tactical decision to focus on design negligence rather than workmanship, whilst ultimately unsuccessful, was a legitimate forensic choice and did not take the conduct of the litigation outside the norm.

The Defendant’s position on ADR

The Defendant accepted the broad outline of the correspondence but submitted that the full chronology had to be considered. It emphasised that workmanship issues had been raised as the cause of the damage for four years before proceedings were issued, and that the Claimant had never substantively engaged with those allegations. The Defendant had provided detailed calculations when requested, had engaged fully in the pre-action protocol process, and had made Calderbank offers and Part 36 offers in the run-up to trial. It submitted that it was not refusing to engage in ADR but was reasonably requiring some understanding of the Claimant’s expert evidence before committing to a mediation process. It noted that the Claimant had refused to provide its expert report even on a without prejudice basis, and that the Claimant’s own stance immediately before trial, asserting that its Part 36 offer “was not made for negotiation purposes” and that it had “a strong case”, demonstrated that mediation would not have had realistic prospects of success. The Defendant also pointed to the Claimant’s imposition of onerous conditions on any mediation, including that the Defendant would have no say in the identity of the mediator appointed, and argued that the Claimant’s refusal to engage with workmanship allegations throughout the pre-action period made meaningful mediation impossible without expert evidence being available.

The Defendant’s position on the expert’s late change of evidence

The Defendant submitted that the mass concrete taper issue had limited materiality. The Particulars of Claim did not mention a mass concrete taper and did not assert that the failure to specify one was a negligent defect in the design. It was never part of the Claimant’s case that a mass concrete taper was required. The issue was only first mentioned in the experts’ joint statement dated 15 December 2023, and the detail of the Defendant expert’s evidence on this aspect came in his report served on 26 January 2024, just over one week before trial. By this time, the majority of costs were already incurred. The Defendant’s expert had explained that a further check was required after consideration of some of the points raised by the Claimant’s expert, and the court accepted that explanation. The additional calculations did not cause the Claimant to abandon its case and did not result in additional costs being incurred. The Defendant also submitted that it was wrong to assert that the expert simply changed his evidence on the number of dowels engaged by the design when the court accepted his explanation that a further check was required.

The Defendant’s position on indemnity costs

The Defendant asserted that the conduct of the Claimant and its legal team in relation to the instruction, oversight, and management of the Claimant’s expert was sufficiently outside the norm to justify an order for costs on the indemnity basis for the expert phase. The Defendant criticised the fact that the Claimant’s expert did not directly answer the question of whether the Defendant’s design was one that a reasonable body of engineers could have produced. Proceedings were issued, the experts’ joint statement produced, and expert reports exchanged without that question being answered. The Defendant asserted that the Claimant did not properly interrogate the application of the Bolam test, the Defendant’s causation arguments, the significance of the date by which the damage had become manifest, nor provide any evidence about what the correct design would be if the Defendant’s design was negligent. The Defendant also criticised the Claimant’s expert’s decision to use FE analysis to assess the Defendant’s design, his use of an out-of-date edition of a technical publication without disclosing that fact, his changes of position without explanation, and his decision to rerun the FE analysis over the weekend before trial without informing anyone. All of these factors, the Defendant submitted, showed the inadequacy of the Claimant’s expert’s compliance with CPR 35 and his expert duty, and justified a costs sanction.

The Court’s Decision

Costs to follow the event

Her Honour Judge Kelly ordered that the Claimant pay the Defendant’s costs, to be the subject of detailed assessment if not agreed. The judge accepted that the Defendant had declined multiple mediation proposals but held that this could not be assessed in isolation. The full chronology had to be considered, including the Claimant’s failure to engage with workmanship allegations raised in 2019, the 19-month delay in responding to the Defendant’s calculations, and the refusal to provide expert evidence even on a without prejudice basis.

Applying the Halsey factors, the judge found that it was not unreasonable for the Defendant to have refused mediation before having some understanding of the Claimant’s expert evidence. The Defendant had raised workmanship issues in response to the letter of claim, and the Claimant had asked for calculations to justify the Defendant’s design but did not deal with the alleged workmanship issues. The Defendant’s calculations were provided, but the Claimant then did not respond for 19 months. When the Claimant wrote again, it stated it had expert support for its case but once more did not engage with the workmanship issues. The Defendant asked for a copy of the expert report on a without prejudice basis and again raised the lack of response to the issues about workmanship and causation. The Claimant did not provide the expert report and did not engage with workmanship issues in any meaningful way.

The judge accepted that the Defendant did not agree to the continued suggestions of mediation without having some understanding of the expert evidence, but held that this could not be described as unreasonable. Other forms of ADR were proposed by the Defendant throughout, and offers were being made. The nature of the dispute would not prevent a successful mediation, but having actively engaged, provided calculations and justification as to why the Defendant asserted it was not negligent, it was not unreasonable to require a meaningful response to the points made before mediation. Mediation may have cost up to £50,000, which was not an insignificant sum, especially when the Claimant was not providing information which was reasonably requested.

Once the expert evidence was available, the Claimant’s offer to consider mediation was only weeks before the start of the trial and was offered only on potentially disadvantageous terms to the Defendant. The judge held that failure to agree to earlier mediation, nor to the last suggestion of mediation on the terms demanded, could not reasonably be held against the Defendant. The Defendant’s reasoned rejection of one form of ADR, namely mediation, was not unreasonable. The legal issues were clear and largely agreed between the parties. The case would always depend upon the court’s assessment of the expert evidence. The Claimant’s refusal to disclose its expert evidence (even on a without prejudice basis) and its apparent failure to instruct its expert to consider all of the workmanship issues raised by the Defence would inevitably have had a significant impact on the likely success of any mediation.

Even had mediation taken place, the judge did not accept that it would have had reasonable prospects of success. The Claimant had not engaged with the Defendant’s allegations of poor workmanship nor provided its expert evidence. The Defendant’s reasonable wish to understand the case it was meeting was not just going to disappear. Offers were being made both ways in the run up to trial, but the parties remained a vast distance apart.

The expert’s late change of evidence

The judge did not accept the Claimant’s assertions that a “late change” of evidence by the Defendant’s expert supported a decision that no order as to costs was the appropriate costs order. The judge found that the Defendant’s expert was in error in asserting that a mass concrete taper was part of the Defendant’s design. However, as the need for a mass concrete taper was never part of the Claimant’s case that the Defendant’s design was negligent, this did not have a material bearing on the outcome of the litigation. The Claimant’s expert did not assert that a mass concrete taper was needed to make the design work. The first mention of the need for a mass concrete taper was about two months before trial when the experts produced their joint statement. The need for a mass concrete taper was only if adequate compaction could not be achieved under the relevant joint. The detail of the Defendant’s expert opinion on the need for a mass concrete taper came in his report served about one month before trial.

In both the joint statement and the report, the Defendant’s expert made it clear that he knew that the mass concrete taper was shown on the design drawing for a different joint. However, he was of the opinion that the Claimant’s workmen should have inferred that a mass concrete taper was also required under the relevant joint, even though it was not shown on the design drawings, because of the compaction issue. The Claimant’s expert opined that the necessary compaction could be achieved and that was the finding the judge made. The Defendant’s expert also produced some additional calculations shortly before trial. However, as was stated in the judgment, that was done to enable him to consider the evidence of the Claimant’s expert and the criticisms of the design and the conclusions drawn from them. The judge held this was classically an example of the sort of final “sense check testing” the court would expect from an expert, particularly when the expert evidence has been finalised very late in the day before trial. The judge accepted the Defendant’s submission that this was “simply part of the usual cut and thrust of a professional negligence trial”. In those circumstances, it was difficult to see how any additional costs were caused by the late calculations in any event.

Indemnity costs refused

The Defendant’s application for indemnity costs in respect of the expert phase was refused. The judge reminded herself that the question was whether there was something in the conduct of the action or the circumstances of the case which took the case out of the norm in a way which justified an order for indemnity costs. The judge was just persuaded that the answer to that question was no, and costs should be assessed on the standard basis throughout.

The judge had made findings in the substantive judgment that the Claimant’s expert did not properly understand his duties to the court pursuant to CPR 35, that he did not appear to have considered adequately the applicable legal test, and he did not deal with the workmanship issues raised by the Defendant adequately. He used an outdated edition of a technical publication to justify some conclusions without providing any reference to the updated edition. He carried out additional tests and reran the FE analysis immediately before trial without telling anybody he had done this nor providing anyone with the results. The Claimant lost the case because the judge had no confidence in its expert.

The judge agreed with the Defendant’s submission that this was not simply a case of the court preferring one expert’s evidence over another. The reality was that the criticism of this expert went beyond that. However, the judge accepted that the Claimant’s solicitors had put the correct test in the expert’s instructions, and the expert had set out the correct test in his written report and answered questions in a way which would indicate that he was considering the correct test when giving his opinion. When cross-examined, it became apparent that he was not correctly applying the test and had not given consideration to various matters to which the judge found he should have given consideration. The judge accepted that a claimant is responsible for their expert for the purposes of costs. However, she did not accept that there was sufficient material before trial in the expert’s reports to indicate to the Claimant’s legal team that their expert was going to give evidence in the way that he did. Further questions could perhaps have been asked of the expert during the proceedings. That may have been an error or a tactical decision. However, the judge did not accept that the asserted failure to spot the various problems with their expert’s evidence was sufficient to pass the high hurdle before indemnity costs are justified.

The Claimant made various tactical decisions in how to pursue its case against the Defendant for negligent design. Some tactical decisions would always be needed when a company associated with the Claimant has carried out the construction work for the design and that work is criticised by the Defendant as being the cause of the damage. With hindsight, it may have been better expressly to instruct the Claimant’s expert to deal with the various workmanship defects asserted by the Defendant. However, as the Claimant took the view that it only needed to prove that the defective design was “a” cause of the damage, it did not need to deal with all of those workmanship issues. The tactic was unsuccessful, but the judge accepted that deciding on the tactic did not take the Claimant’s lawyers’ conduct “out of the norm”.

It may have been that the Claimant’s legal team restricted its frame of reference in respect of the expert evidence required because of the analysis undertaken by John Frith. However, the tactic of concentrating primarily on identifying a negligent design and then establishing the negligent design was a cause of the damage, whilst unsuccessful, could not be said to take the conduct of the case so far out of the norm. The further criticisms of the Claimant’s lawyers, such as refusing to answer Part 18 further information questions, the judge would not find to justify indemnity costs. If the Defendant felt that the refusal to answer the questions was unjustified, it could have made an appropriate application.

The Claimant’s counsel asked for clemency for the Claimant’s expert as his reputation had been tarnished by the judgment, and he would have to live with the consequences of that. The judge did not accept that clemency should form any part of the court’s consideration. The question was whether there was something in the conduct of the action or the circumstances of the case which took the case out of the norm in a way which justified an order for indemnity costs.

The judge did not accept that the combination of the Claimant’s tactics and the Claimant’s expert approaching the case in a more technical rather than practical manner, then effectively going off on a frolic of his own immediately before trial and not giving the evidence expected during his oral evidence, created circumstances to justify an order for indemnity costs. It was of relevance that the expert evidence timetable was “concertina-ed” into a short time frame before trial. The joint expert report became available about three months before trial and the individual expert reports then followed. Supplementary expert reports were filed because of additional factors raised in the various reports which required a reply. The judge did not find in the circumstances of this case that the conduct of the Claimant’s lawyers was such that the action was conducted, or the circumstances were such, that it was out of the norm in a way which justified an order for indemnity costs.

Payment on account

The parties were agreed that a payment on account of costs should be made. Applying the principles in MacInnes v Gross [2017] 4 WLR 49, the Defendant sought £312,700.75, being the approved budget in the sum of £344,082, less 10% bringing that sum down to £309,673.80 and then adding interest at 4% of £12,386.96, payable within 21 days. The Claimant sought a reduction of 20% to take into account the fact that there was not a mediation which had been part of the budgeted costs. The Defendant objected to further reduction as the budgeted figure was for all forms of ADR. There was no justification to consider individual phases to reduce further. Any adjustment could be dealt with at detailed assessment.

The judge held that the starting point for assessment of a reasonable sum was a 10% reduction. She did not accept that it was reasonable or proportionate to increase the percentage reduction further in this case. Mediation did not take place, but other forms of ADR did. Interest would run on the costs payable. The judge accepted that 4% interest on pre-judgment costs was a reasonable percentage. She awarded interim costs in the sum of £309,673.80 plus interest at 4%.

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Indemnity Costs Awarded After Contempt Proceedings Used As Commercial Pressure

The High Court’s decision in Bargain Busting Ltd v Shenzhen SKE Technology Company Ltd [2026] EWHC 1146 (Ch) addresses the basis and quantum of costs following dismissal of a contempt application that the court found had been used to weaponise the criminal jurisdiction to pursue the applicant’s private interests.

Background

These proceedings arose from a contempt application brought by Bargain Busting Limited (“BBL”) against Shenzhen SKE Technology Company Limited, Stobbs IP Limited, Wan-Yi Tsai, and Jixuan Si. The contempt application was started in August 2025 and concerned allegations that the respondents had interfered with the administration of justice by writing to the Intellectual Property Office (“IPO”) to request that it delay registration of a trade mark pending the outcome of an application for permission to appeal to the Court of Appeal. The respondents included both the first defendant company and the solicitors and fee earners who had acted on its behalf, namely Stobbs IP Limited and two of its lawyers.

The substantive hearing took place before HHJ Paul Matthews, sitting as a Judge of the High Court in the Business and Property Courts in Bristol. On 23 April 2026, judgment was handed down ([2026] EWHC 933 (Ch)) dismissing the contempt application, together with associated strike out applications and a joinder application. The court commented adversely in that judgment on the use of the contempt jurisdiction in the circumstances of the case.

Following the handing down of the main judgment, written submissions were invited on consequential matters, including the basis of the costs order, the mode of assessment, whether a payment on account should be ordered, and permission to appeal. A clip of correspondence and attendance notes was also placed before the court for the purposes of those consequential matters. The consequential judgment was handed down on 13 May 2026.

BBL was represented by Aidan Eardley KC, instructed by Brandsmiths. The respondents were represented by Fiona Horlick KC and Charlotte Elves, with Kingsley Napley LLP acting for the first respondent and Hickman and Rose acting for the remaining respondents.

Costs Issues Before the Court

BBL accepted that it had been unsuccessful in the strike out applications, the contempt application, and the joinder application, and did not resist an order that it pay the respondents’ costs. The live issues before the court on consequential matters were therefore: first, whether those costs should be assessed on the standard basis or the indemnity basis; second, whether the costs should be subject to summary assessment or detailed assessment; and third, whether a payment on account should be ordered and, if so, in what amount. A fourth issue, namely permission to appeal, was also addressed.

The claimant calculated the total costs claimed by the respondents across their costs schedules as some £293,460. The court corrected this to £296,099.61 plus applicable VAT on the costs of Hickman and Rose, producing a total of £322,628.77. The respondents sought indemnity costs, relying on the conduct of BBL and its solicitors during the course of the litigation. BBL resisted the indemnity basis and submitted that, in any event, the costs should be subject to detailed assessment rather than summary assessment, and that no payment on account was appropriate.

The Parties’ Positions

The respondents’ position on the basis of assessment

The respondents argued that costs should be assessed on the indemnity basis. They contended that BBL by these proceedings had sought to weaponise the contempt jurisdiction against the defendants, to drive a wedge between the defendants and their lawyers, to strike fear and loss of professional status amongst the defendants’ lawyers, and to boast to the IP legal market.

The respondents relied on a number of features of BBL’s conduct during the litigation. First, an open offer of settlement had been made in August 2025, on the basis that BBL would discontinue and pay the respondents’ costs on the indemnity basis. That offer was maintained at various points and was not withdrawn until January 2026. Second, at a directions hearing on 16 January 2026, Trower J had remarked that the weaponisation of the contempt jurisdiction was a problem and that the application appeared to fall squarely into that category. Third, a letter dated 23 January 2026 from BBL’s solicitors had, in the respondents’ submission, threatened to report the second to fourth respondents to the Solicitors Regulation Authority unless the defendants agreed to pay BBL’s costs incurred in connection with the trade mark applications. Fourth, a without prejudice save as to costs telephone call on 11 March 2026 had, in the respondents’ submission, revealed that the contempt proceedings had been issued as a form of pressure on the defendants to cease attempting to persuade the IPO to delay registration of the trade mark.

BBL’s position on the basis of assessment

BBL submitted that the court had made no findings in the main judgment that its applications were abusive, or any other findings capable of taking the case out of the norm. It argued that the August 2025 offer was not a genuine offer to settle, as it required BBL to discontinue and pay costs on the indemnity basis. It also submitted that the respondents had not referred in correspondence to the points which ultimately succeeded, and had not made strike out applications until January 2026. As to the January 2026 letter, BBL submitted that it did not contain a threat to report the respondents to the SRA; rather, it explained that the conduct alleged would, if well-founded, amount to breaches of the SRA Code, and provided reassurance that BBL would not raise those matters in another forum if the contempt application were settled. BBL further submitted that the telephone call of 11 March 2026 had been mischaracterised, and that it represented a genuine attempt to resolve the proceedings.

Mode of assessment

The respondents submitted that summary assessment was appropriate, relying on paragraph 9.2 of CPR PD44, which provides that the court should make a summary assessment at the conclusion of a hearing lasting not more than one day. The hearing had lasted less than one day. BBL submitted that detailed assessment was appropriate, primarily because of the size of the costs claimed.

Payment on account

BBL submitted that a lack of clarity about the respondents’ costs made a payment on account inappropriate. The respondents sought a payment on account. BBL also raised points about duplication of effort between Stobbs IP and Kingsley Napley, both of whom had acted for the first respondent, and about the rates claimed in the costs schedules.

The Court’s Decision

Indemnity costs

The court ordered costs on the indemnity basis. HHJ Matthews confirmed that it was not necessary for the main judgment to have made findings on all matters relevant to the costs decision. The general conduct of the parties in litigation is not ordinarily an issue for determination in the substantive judgment, and the court may make supplementary findings for the purpose of consequential matters after giving the parties an opportunity to be heard. The court noted that it had, in any event, commented adversely on the weaponisation of the contempt jurisdiction in paragraphs 33 to 34 of the earlier judgment.

The court applied the well-established principle that an award of indemnity costs is appropriate where the conduct of the paying party or the circumstances of the case take it out of the norm: Excelsior Commercial and Industrial Holdings Ltd v Salisbury Hammer Aspden and Johnson [2002] EWCA Civ 879; Hosking v Apax Partners Ltd [2019] 1 WLR 3347, [42]. The court also noted the range of factors that may be taken into account in such an assessment, as set out in Three Rivers DC v Bank of England [2006] EWHC 816 (Comm), [25].

The court observed that the proceedings themselves were of an unusual nature, making very serious allegations against officers of the court, and potentially having far-reaching professional consequences for those officers. In terms of seriousness, the court put the allegations in the contempt application on the same level as allegations of dishonesty. The court noted that there is no presumption that a failure to make good allegations of dishonesty should normally lead to an order for costs on the indemnity basis; instead, it is a factor to take into account, and may be a reason for making such an order: Thakkar v Mican [2024] EWCA Civ 552.

Three factors were identified as particularly significant. First, the nature of the alleged contempt: writing to the IPO to request a delay in registration pending an application for permission to appeal was described as the kind of thing solicitors do routinely, and was supported by the IPO’s own published practice and decisions. The court found it difficult to understand how BBL’s solicitors could have formed the view that such conduct amounted to a criminal offence. Second, the January 2026 letter: notwithstanding BBL’s submissions, the court found, to the civil standard, that the letter was intended to be read as a threat to report the respondents to the SRA unless they agreed to BBL’s terms. Even if that intention could not be established, the letter fell to be judged by its effect on the reasonable addressee, and any reasonable addressee would have understood it as such a threat. Third, the without prejudice save as to costs telephone call of 11 March 2026: the court found that the call made clear that the claimant justified the issue of criminal contempt proceedings in August 2025 as a form of pressure on the defendants to cease trying to persuade the IPO to delay registration of their client’s trade mark. Criminal proceedings should not be used for such a purpose.

The court held that, whether or not these various factors would each individually justify an award of costs on the indemnity basis, taken together they did so overwhelmingly. The claimant made very serious allegations against the defendants, and lost. It was wrong and out of the norm for the claimant’s solicitors opportunistically to seek to use criminal contempt proceedings, in which the touchstone is the public interest in the administration of justice, in order to pursue their client’s private interests. It was wrong and out of the norm for the claimant’s solicitors to threaten the defendants with being reported to the SRA in order to persuade them to agree to their client’s terms.

Mode of assessment

The court ordered that the costs should be subject to detailed assessment. This was not simply because the amount of money involved was significant. It was because these were complex and hard-fought multi-party proceedings which had lasted about eight months. On any view, a lot of work had been done by all those involved. The fact that the hearing which put an end to these proceedings lasted less than one day did not tell the full story. Justice to both sides required a detailed assessment.

Payment on account

The court ordered a payment on account of £215,000 under CPR rule 44.8, which provides that where the court orders a party to pay costs subject to detailed assessment, it will order that party to pay a reasonable sum on account of costs, unless there is good reason not to do so. The court applied the guidance in Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC 566 (Comm), in which Christopher Clarke LJ stated that what is a reasonable amount will depend on the circumstances, the chief of which is that there will, by definition, have been no detailed assessment and thus an element of uncertainty. Any sum will have to be an estimate. A reasonable sum would often be one that was an estimate of the likely level of recovery subject to an appropriate margin to allow for error in the estimation.

The court noted that this was complex, high-value work carried out by specialists on both sides, which would amply justify the London 1 guideline hourly rate. The claimant’s solicitors claimed rates in their costs schedules of £1,100 and £605 for grade A, £550 and £500 for grade B, £380 and £370 for grade C, and £240 for grade D, all of which considerably exceeded the London 1 rate. In contrast, those claimed by the defendants’ and Mr Rebling’s solicitors fell partly within and partly outside the London 1 rates, whilst those for Stobbs IP itself (when acting for the first defendant) were all within the London 1 rates. The claimant made a point about duplication of effort between Stobbs IP and Kingsley Napley, both of whom acted for the first defendant. The claimant also made a point about VAT on Kingsley Napley’s costs schedule, but this had been corrected.

The court referred to Thomas Pink Ltd v Victoria’s Secret UK Ltd [2014] EWHC 3258 (Ch), in which the judge made an order for a payment on account equal to 90% of the approved budget. Given that there was no approved costs budget for these proceedings, the court considered it should be more cautious. Overall, the court considered it should build in a margin of about one third, and ordered the claimant to pay £215,000 on account of costs, to be paid to the three solicitors’ firms pro rata to their schedules of costs.

Permission to appeal

The court refused permission to appeal. Under CPR rule 52.6, in a first appeal the court may not grant permission to appeal unless either there is a real prospect of a successful appeal or there is some other compelling reason why an appeal should be heard. The phrase ‘real prospect’ does not require a probability of success (that is, more likely than not), but merely means a prospect which is ‘not unreal’: Tanfern v Cameron-MacDonald [2001] 1 WLR 1311, [21]; Re R (A Child) [2019] EWCA Civ 895, [31]. If the application passes that threshold test, however, the court is not obliged to give permission to appeal; instead it has a discretion to exercise.

The claimant put forward five grounds of appeal, each containing multiple sub-points.

First ground: public interest. This ground contained three points. The first was that the court had wrongly directed itself that the presence of a private interest rules out the possibility of a party invoking the law of criminal contempt. The court rejected this, clarifying that what it had sought to express was that it was impermissible to use criminal contempt proceedings simply for the purpose of pursuing private interests. The second point was that the court had misunderstood the significance of BBL’s submission that there is no requirement for a person who brings a contempt application as of right to demonstrate some wider public interest. The court held that even if it had misunderstood the “significance” of the submission, the claimant did not say the court was wrong to say that a wider public interest must be shown. The third point was that the court was wrong to hold that BBL could not show any sufficient public interest in prosecuting these allegations of criminal contempt. The court held that this was an evaluative judgment, essentially part of fact finding, and that appellate courts will not interfere with evaluative judgments unless compelled to do so.

Second ground: the ‘Representations’. The claimant argued that the court was wrong to break down the ‘Representations’ into indicative and subjunctive/imperative statements and to disregard the latter. The court held that this missed the point: the complaint was that the solicitors had said things that they knew to be untrue, but you cannot tell lies in making a request or issuing a command. Moreover, the court had expressly gone on to deal with the position if it were wrong to break down the ‘Representations’ in this way.

Third ground: ‘interference’. This ground contained two points. The first was that the court’s finding that there could be no arguable ‘interference’ with the administration of justice was vitiated by mischaracterisation of the claimant’s case and failure to take into account the entirety of the statements complained of in the three emails. The court held that the allegation of “mischaracterisation” was not understood, and that it could not give permission for a ground which it did not understand. To the extent that this point depended upon the second ground, it must fail. The second point was that the court was wrong to hold that there could be no interference in circumstances where the IPO alone had the power to decide to register, it knew exactly what the legal position was, and acted in accordance with its own internal guidance at the time. The court held that this was an attempt to appeal against findings of fact, but that the appellant court will not interfere with that unless it is satisfied that the judge was plainly wrong, that is, that the decision was one that no reasonable judge could have reached.

Fourth ground: ‘impropriety’. This ground contained two main points. The first was that the court had mischaracterised the impugned communications as submissions about the meaning and effect of the order of the High Court. The court rejected this, clarifying that its view was that submissions that an order of the court should not yet be implemented for some reason or another were, in this context at least, not improper. There was nothing about “submissions about the meaning and effect” of an order. The second point was that the court’s rejection of the claimant’s case on impropriety was vitiated by its finding that there was simply no real prospect of showing at the hearing of the contempt application that the third and fourth defendants were doing otherwise than asking the IPO to implement its own guidance. The claimant argued that the court was wrong to make that finding because the emails made no reference to the guidance or to the practices of the IPO, and the third and fourth defendants did not give evidence. The court held that the third and fourth defendants could not be obliged to give evidence, and had chosen not to. Realistically, the court was never going to hear from them. Accordingly, the only material before the court on which it could make a finding was the emails, the manual, the decisions of Dr Porter and their own experience as IP lawyers. On that basis the court was entitled to make its finding. Once again, the claimant was simply challenging the court’s finding of fact, and the court saw no real prospect of an appellant court overturning it.

Fifth ground: mens rea. The claimant argued that the court’s conclusion that there was no real prospect of showing that the third and fourth defendants acted with the relevant mens rea was vitiated by its finding that there was simply no real prospect of showing that they were doing otherwise than asking the IPO to implement its own guidance. The claimant argued that that finding was not open to the court, for the reasons given under the fourth ground. The court held that since the fourth ground failed, so did the fifth. The court also noted that the mens rea point was strictly unnecessary anyway.

Since none of these five grounds had any real prospect of success, the court could not give permission to appeal on any of them. The claimant did not suggest that there was any other compelling reason for an appeal, and the application was therefore dismissed.

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And The Winner Is? Defendant Who Beat Both Strike Out and Summary Judgment Recovers 75% of Her Costs After 80% Costs Order Against Her Reversed on Appeal

The High Court’s decision in Cook v Skeggs [2026] EWHC 1132 (KB) addresses the proper approach to costs where a defendant successfully resists both strike out and summary judgment applications but makes a late amendment application at the hearing.

Background

The underlying proceedings concern a possession claim brought by the Respondent, Leonard Cook, following his 2022 purchase of a property from the Appellant, Charlotte Skeggs. The property had been sold to Mr Cook for £250,000, having been purchased by Ms Skeggs in 2017 for £560,000. Mr Cook maintained that the transaction was voluntarily entered into. Ms Skeggs, who described herself as a vulnerable woman, alleged fraud and conspiracy, which Mr Cook denied.

The costs appeal before Mr Justice Sweeting arose from an order made by HHJ Parker on 12 March 2025, requiring Ms Skeggs to pay 80% of Mr Cook’s assessed costs of his strike out and summary judgment application. That application had been issued on 1 May 2024 and was listed for hearing in May 2024, but was not determined until 2 January 2025. At the January hearing, the application was dismissed following amendments proposed on behalf of Ms Skeggs at or shortly before the hearing.

The procedural history leading to the costs determination was somewhat involved. Mr Cook had issued his application for strike out and summary judgment shortly before the first costs and case management conference, which had been listed for 9 April 2024. The application notice did not identify the basis upon which either form of relief was sought and was unsupported by any evidence in support of the summary judgment limb. By an order dated 9 May 2024, HHJ Brown recorded that the CCMC had to be adjourned because the application did not comply with CPR 24.5(1) and had been issued too late to afford Ms Skeggs the 14 days’ notice required by CPR 24.4(5). Mr Cook was directed to amend the application.

The amended application notice remained expressed in generic terms, again failing to articulate the grounds relied upon for strike out or to provide any evidential basis for summary judgment, asserting only that both applications should succeed “as a matter of fact and law”. There then followed a period of procedural uncertainty arising from issues concerning capacity, which were addressed by HHJ Parker at a hearing on 25 October 2024. At that hearing, the court accepted that Ms Skeggs had insufficient material to understand the case advanced in support of Mr Cook’s application, and Mr Cook was granted permission to serve further evidence.

On 8 November 2024, Mr Cook served a witness statement in support of the application. That statement was substantially directed to disputing the factual merits of Ms Skeggs’ case and was therefore concerned principally, although not exclusively, with the summary judgment limb. Ms Skeggs served a re-amended Defence and Part 20 Claim on 6 December 2024, though the accompanying application notice was filed late on 9 December 2024. Mr Cook’s solicitors wrote on 16 December 2024 by way of without prejudice save as to costs correspondence, proposing that if Ms Skeggs confirmed by 4pm on 18 December 2024 that she would serve a further re-amended defence limited to the conspiracy allegation and properly particularised by 4pm on 31 December 2024, Mr Cook would consider consenting to the re-amended pleading and propose that the 2 January 2025 hearing be used for costs and case management directions. That offer also required Ms Skeggs to pay Mr Cook’s costs. No agreement was reached.

On 20 December 2024, Mr Cook served two further witness statements dealing with the factual merits of the case. Skeleton arguments were exchanged on 31 December 2024, at which point it became apparent that Ms Skeggs was abandoning her December application and advancing new proposed amendments relating to the conspiracy allegation, presented in the form of an annex to counsel’s skeleton argument rather than as a formal draft.

At the 2 January 2025 hearing, HHJ Parker dismissed both the strike out and summary judgment applications. In relation to summary judgment, the Judge found that the application would have failed irrespective of the amendments, concluding that Mr Cook had not come close to showing that Ms Skeggs’ factual case was merely fanciful. In relation to the strike out, the Judge permitted re-amendment of the defence, with the exception of references to Mr and Mrs Thorpe at proposed paragraphs 21A and 21B, which were not supported by sufficient pleaded facts. The issue of costs was adjourned to a further hearing on 12 March 2025.

At the 12 March 2025 hearing, HHJ Parker considered five categories of costs. In relation to the strike out and summary judgment application, the Judge ordered Ms Skeggs to pay 80% of Mr Cook’s assessed costs. The Judge also awarded Mr Cook his costs of the 12 March 2025 hearing, summarily assessed at £5,980.44, on the basis that the hearing had been necessitated by the late amendment application made on 2 January 2025. Mr Cook’s costs schedule for the half-day application totalled approximately £123,000, a figure which the Judge described as “fairly stunning”. Given the size of that figure, the Judge declined to embark on summary assessment and directed detailed assessment instead.

Ms Skeggs appealed the costs order with the permission of Sir Stephen Stewart. The appeal was heard by Mr Justice Sweeting on 31 March 2026. In advance of that hearing, Mr Anthony Ashley Wilson, the solicitor with conduct of the proceedings on behalf of Ms Skeggs, provided a witness statement dated 27 March 2026 in support of an application to amend the appeal notice and grounds of appeal. That application arose from a “Costs Breakdown” document attached to Mr Cook’s skeleton argument for the appeal, served after 4pm on 25 March 2026, which Mr Wilson stated he had not previously seen and which gave a total (after deducting draftsman’s fees and applying the 20% deduction in HHJ Parker’s order) of £29,254.56 for the costs of the application — substantially lower than the £123,464.60 figure that had been placed before HHJ Parker. Mr Justice Sweeting permitted Ms Skeggs to rely on Mr Wilson’s evidence and to amend her grounds of appeal accordingly.

Costs Issues Before the Court

The central costs issue on appeal was whether HHJ Parker’s order requiring Ms Skeggs to pay 80% of Mr Cook’s assessed costs of the strike out and summary judgment application was wrong within the meaning of CPR 52.21(3)(a). The appeal raised a number of discrete but related questions.

The first and most fundamental question was whether the Judge had properly identified the successful party on the application. Ms Skeggs had resisted both the strike out and the summary judgment application. The summary judgment application had been dismissed, and the Judge had found that it would have failed even absent the late amendments. The strike out application had also been dismissed, with the Judge permitting re-amendment of the defence in substantially the terms proposed by Ms Skeggs’ counsel. The question was therefore whether, in those circumstances, the Judge had been correct to order Ms Skeggs to pay a substantial proportion of Mr Cook’s costs rather than the other way around.

The second question was whether the Judge had properly distinguished between the two discrete elements of Mr Cook’s application — strike out and summary judgment — when determining the appropriate costs order. Ms Skeggs submitted that the summary judgment application had failed entirely and by a considerable margin, and that the Judge had not given proper effect to that finding. She argued that the Judge had treated the late amendment as having “completely changed the picture” in a way that was inconsistent with his own finding that summary judgment would have failed irrespective of the amendments.

The third question was whether the Judge should have made an issues-based costs order rather than applying a single percentage reduction. Ms Skeggs’ primary position was that she should recover her costs of the summary judgment issue and that Mr Cook should recover his costs of the strike out issue, or alternatively that there should be no order for costs. Mr Cook’s position was that the two applications were closely intertwined and that the Judge had properly exercised his discretion in applying a 20% reduction.

A further issue arose from the amendment application brought by Ms Skeggs in advance of the appeal hearing. That application raised questions about the accuracy of the costs information placed before HHJ Parker at the 12 March 2025 hearing, and whether the presentation of the £123,000 figure as the costs of the application had misled the Judge as to the scale of costs attributable to the strike out and summary judgment elements. Ms Skeggs sought to rely on CPR 44.11, which concerns unreasonable or improper conduct in relation to costs, submitting that Mr Cook’s failure to provide an accurate costs figure until shortly before the appeal hearing may fall within the circumstances covered by that provision.

The Legal Framework

The test on appeal is set out in CPR 52.21(3): the appeal court will allow an appeal where the decision of the lower court was wrong, or unjust because of a serious procedural or other irregularity in the proceedings in the lower court.

In Johnsey Estates v Secretary of State for the Environment, Transport and the Regions [2001] EWCA Civ 535, the Court of Appeal allowed an appeal against the original costs order. Chadwick LJ summarised the applicable principles: costs cannot be recovered except under an order of the court; the question whether to make any order as to costs is a matter entrusted to the discretion of the trial judge; the starting point for the exercise of discretion is that costs should follow the event; the judge may make different orders for costs in relation to discrete issues and should consider doing so where a party has been successful on one issue but unsuccessful on another; the judge may deprive a party of costs on an issue on which he has been successful if satisfied that the party has acted unreasonably in relation to that issue; and an appellate court should not interfere with the judge’s exercise of discretion merely because it takes the view that it would have exercised that discretion differently.

The last of those principles requires an appellate court to exercise a degree of self-restraint. It is not for an appellate court even to consider whether it would have exercised the discretion differently unless it has first reached the conclusion that the judge’s exercise of his discretion is flawed — that is to say, that he has erred in principle, taken into account matters which should have been left out of account, left out of account matters which should have been taken into account, or reached a conclusion which is so plainly wrong that it can be described as perverse.

Whilst the appeal in that case was heard just before the introduction of the Civil Procedure Rules, the general principles set out hold good and it remains the position that appeals against costs involve a high threshold. In particular, an appellate court must not dissect or reinterpret extempore judgments with undue textual scrutiny; the Judge is presumed to have known and applied the correct principles in exercising their discretion unless the contrary is demonstrated.

The Appeal Court’s Analysis

Mr Justice Sweeting concluded that HHJ Parker’s costs order was wrong within the meaning of CPR 52.21(3)(a). The Judge identified several fundamental flaws in the reasoning below.

First, the starting position was that Ms Skeggs was the successful party, having resisted both the strike out on pleading points and summary judgment on the merits of the defence. HHJ Parker had acknowledged that the summary judgment application was “distinctly different” from the strikeout application and would have failed even prior to amendment. The Judge had found that Mr Cook had not come close to showing that Ms Skeggs’ factual case was merely fanciful. Ms Skeggs had therefore demonstrated that she had a sufficient prospect of success, which alone militated against depriving her of her costs.

Second, Mr Justice Sweeting did not consider that it was possible in the circumstances of this case to regard the summary judgment application as merely ancillary to the strikeout or as representing just another way of articulating the same shortcomings in Ms Skeggs’ case. The summary judgment application was advanced on the basis of an assertion that there was no merit in the defence, supported by evidence dealing with the underlying factual matrix, and an invitation to the court to conclude that a conspiracy could not be made out, not simply that the particular species of conspiracy had not been properly identified or was insufficiently particularised. There was plainly a risk, if not a probability, that a substantial amount of work had been carried out in relation to summary judgment rather than the more narrowly defined pleading issue.

Third, HHJ Parker’s conclusion that “the picture had completely changed at the hearing” did not stand up to analysis and was difficult to reconcile with his findings in relation to summary judgment. The Judge had gone no further than saying that there “might” have been a different result on the strike out absent the amendments. It was always apparent that any deficiencies in the pleading could be cured by amendment. Mr Justice Sweeting found it difficult to see how the predictable legal result could have been that Mr Cook could embark upon the hearing on the basis that he would receive his costs irrespective of the outcome.

Fourth, there would have to be a significant reason, grounded in Ms Skeggs’ conduct, for reversing the usual order as to the incidence of costs on interlocutory applications. The relevant conduct in this case was the application for amendment made at the hearing which, while necessary, should have been made earlier in a proper form in accordance with the court’s directions. However, the appropriate way to reflect that conduct was to deprive Ms Skeggs of part of her costs, not to reverse the costs order entirely.

In Matrix Receivables v Must Holdings Limited [2024] EWHC 2167 (Ch), Freedman J observed that the usual order on a summary judgment or strike out application is that the unsuccessful party should pay the costs, in part because of the regime within CPR 44.2(2) and also because of a symmetry: if the applicant is successful, the action comes to an end and the applicant generally recovers the costs of the action; if the strategy does not pay off and the applicant loses, the applicant stands to bear the costs. It is a disincentive to interlocutory applications to know that this starting point exists and operates in practice.

Mr Justice Sweeting noted the practical difficulties in making a costs order on an issues basis, observing that in many cases the judge can and should reflect on the relative success of the parties on different issues by making a proportionate costs order (see Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2009] 1 Costs LR 155). Those difficulties are multiplied where the question is whether the winning party on the issue ought to be deprived of costs. The Judge could not see a proper basis on which to make different orders by reference to issues in the circumstances of this case.

Applying the principles in Johnsey Estates, Mr Justice Sweeting concluded that the correct approach was not to seek to recast HHJ Parker’s order but to exercise the discretion afresh. Ms Skeggs was entitled to her costs as the successful party. The appropriate reflection of her late amendment, which related only to the strike out limb, was a proportionate reduction rather than a reversal of the costs order.

The Costs Breakdown Issue

Mr Justice Sweeting also addressed the issue arising from the revised costs breakdown served with Mr Cook’s skeleton argument for the appeal. That document gave a total of £29,254.56 for the costs of the application (after deducting draftsman’s fees and applying the 20% deduction in HHJ Parker’s order), substantially lower than the £123,464.60 figure referred to at the hearing below. The status of the revised schedule was opaque, and it appeared to have been advanced for a tactical purpose shortly before the appeal hearing.

The Judge noted that there was only one verified costs schedule in relation to the summary judgment and strike out application, and that Mr Cook would have to explain a departure from that costs schedule if he asserted in future that the information given to HHJ Parker was inaccurate. However, Mr Justice Sweeting concluded that it was not appropriate or possible to make any findings in relation to conduct on the material before him, particularly in relation to the CPR 44.11 misconduct issue raised by Ms Skeggs.

The Judge expressed sympathy for HHJ Parker given the circumstances in which he had to decide issues of costs. He did not receive Ms Skeggs’ skeleton prior to the hearing and did not appear, initially, to have had the N260. The matter overran so that he had to see whether the court could sit beyond 4:30pm. He candidly accepted that he did not entirely recollect the basis of his earlier order and had to deal with costs at a hearing separate from the hearing to which they related. It appeared he may not have received the assistance that he should have done in relation to the nature of the costs which were being claimed.

Conclusion

Mr Justice Sweeting allowed the appeal and substituted an order under CPR 44.2(2) that Mr Cook pay Ms Skeggs’ costs of the contested strikeout and summary judgment application on the standard basis, subject to a reduction of 25%. The reduction reflected Ms Skeggs’ late amendment application, which related only to the strike out application and should have been made earlier in accordance with the court’s directions.

The Judge also ordered Mr Cook to pay Ms Skeggs’ costs of the appeal, to be summarily assessed. He gave the parties additional time to make written submissions in relation to those costs, noting that Ms Skeggs’ cost schedules appeared to show that all work was done at Grade A rates, which would require an explanation.

The decision reinforces the principle that the starting point for costs orders on interlocutory applications is that the unsuccessful party should pay the costs of the successful party. Where a defendant successfully resists both strike out and summary judgment applications, there must be a significant reason grounded in the defendant’s conduct to justify reversing that usual order. Late amendment may justify a proportionate reduction in the successful party’s costs recovery, but does not ordinarily warrant a complete reversal of costs liability, particularly where the first instance judge has found that one limb of the application would have failed irrespective of the amendment.

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High Court Strikes Out Non-Compliant Points Of Dispute Despite Late Annotated Schedule

The King’s Bench Division’s decision in Ward v Rai [2025] EWHC 1681 (KB) addresses the consequences of serving non-compliant Points of Dispute in detailed assessment proceedings and the limits of a costs judge’s discretion to permit late variations under PD 47, paragraph 13.10.

Background

The underlying claim arose from a road traffic accident on 18 September 2019 involving Paul Ward (the Appellant/Claimant) and Gagandeep Rai (the Respondent/Defendant). Liability was admitted by the Respondent, with causation and quantum remaining in dispute. The claim was settled on 11 January 2023 by way of a Part 36 offer in the sum of £546,984.

Detailed assessment proceedings were commenced by the Appellant on 3 August 2023. The Appellant’s Bill of Costs included Item 39, which claimed 134.1 hours for work done on documents. That work was itemised in Schedule 2 to the Bill, which ran to 24 pages and comprised 418 individual entries describing the date of the work, the nature of the work, the fee earner involved, and the time spent.

On 30 August 2023, the Respondent served Points of Dispute comprising 25 points. Point 23 addressed Item 39 and made a series of general criticisms of the document time claimed—including that extensive and unnecessary time had been claimed by a Grade A fee earner reviewing medical records before expert evidence had been obtained, that time had been claimed for noting receipt of documents, that multiple administrative entries had been included, and that various entries were duplicated. Point 23 stated that the Respondent would “rely on an annotated documents schedule of objections in support” and proposed that document preparation time be limited to 68 hours 12 minutes. Crucially, no specific items from the 418-entry schedule were identified.

On 4 January 2024, the Appellant served Replies to the Points of Dispute. In those Replies, the Appellant challenged Point 23 on the basis that no specific bill entries had been identified and that neither the nature nor the grounds of the dispute were adequately stated. The Appellant cited Ainsworth v Stewarts Law LLP [2020] EWCA Civ 178 and indicated that, in the absence of specific areas of reduction being identified, a meaningful response could not be provided. The Appellant nonetheless offered 130 hours for Item 39 in response to the general points raised.

On 26 March 2024, the Appellant filed a request for a two-day detailed assessment hearing. A notice of hearing was issued on 28 May 2024, listing the matter for 5–6 August 2024.

At around 4.15 pm on Wednesday 31 July 2024—technically on the morning of Thursday 1 August 2024—the Respondent filed and served the annotated document schedule that had been referenced in Point 23. This was the first occasion on which specific individual items within Item 39 were identified as being in dispute. The schedule categorised the Respondent’s objections to individual entries under eight headings: duplication; supervision; non-progressive; excessive time claimed; non-contemporaneous file notes; case management discussion; incoming correspondence and routine response out; and lower grade offered, not Grade A work. The schedule advanced a primary case of 58.5 hours and an alternative case of 58.8 hours—figures materially different from the 68 hours 12 minutes proposed in the original Point 23.

The detailed assessment hearing took place over 5–6 August 2024 before Deputy Costs Judge Friston. During the hearing, the Judge determined preliminary points and general points from the Points of Dispute. The contentious issue of Point 23 and the annotated schedule was addressed in the latter part of 6 August 2024. The Judge declined to strike out Point 23 and permitted the Respondent to rely on the annotated schedule, adjourning the assessment to a third day. He indicated that costs consequences would follow and would be addressed at the conclusion of the assessment.

The adjourned hearing took place on 8 November 2024. The Judge conducted a line-by-line assessment of approximately 10% of the constituent parts of Item 39. The remaining 90% was assessed using a broad-brush “coffee break option” suggested by the Judge, whereby the parties took a break and the Judge gave them a provisional view on which they made submissions, with the option of detailed item-by-item assessment still available if they wished. The Bill was assessed in a total sum of £89,032.62 with £8,234.91 in interest.

The Deputy Costs Judge’s Decision on Point 23 and the Schedule (6 August 2024)

Deputy Costs Judge Friston gave two reasons for declining to strike out Point 23. First, he considered that the original Points of Dispute would have allowed there to have been a fairly broad-brush assessment in any event and would have allowed the Appellant to have known the case being made against him and to have responded to it. Second, and “perhaps more importantly,” he found that both parties knew that there should have been a further document and that both parties were significantly at fault for having failed to comply with the overriding objective by not ensuring the schedule was available earlier.

The Judge acknowledged that the schedule was served “unacceptably late, almost to the point that one could say, in other circumstances, that it was an ambush.” However, he concluded that it was not an ambush on the facts because it had been mentioned in Point 23 from the beginning and both parties were significantly at fault for not having ensured it was available when preparing for the assessment.

The Judge considered that PD 47, paragraph 13.10 gave him “very wide powers” to either allow or disallow an amendment and to impose conditions, including conditions as to payment of costs. He concluded that there would inevitably have to be an adjournment because it would be unfair to require the Appellant’s counsel to proceed on the basis that he had to respond to the schedule, but equally unfair to require him to deal with the categories in Point 23 “almost in a vacuum” without the benefit of the schedule. He therefore permitted the Respondent to rely on the schedule but indicated that there would be cost sanctions to be imposed at the end of the assessment.

The Judge noted an issue with the Appellant’s bundles: Bundle 1 contained all the documentary items, while Bundle 2 grouped together attendance notes relevant to the general points of principle. However, the Appellant’s counsel had not been informed until very recently that Bundle 1 contained the entirety of the documents. The Judge stated that his criticism of the Appellant’s solicitor in this regard “paled into insignificance” compared to his frustration at the parties’ lack of communication about the schedule.

The Costs Judgment (8 November 2024)

The Judge then addressed the costs of the detailed assessment. The Respondent had made a Part 36 offer which the Appellant had not beaten. The parties agreed that the Respondent would pay the Appellant’s costs up to the date on which the offer expired (3 July 2024) and that the Appellant would pay the Respondent’s costs thereafter, subject to argument about whether the Respondent should bear the Appellant’s costs of the adjourned hearing in any event.

The Appellant argued that the Respondent’s conduct in serving the annotated schedule so late had led to the need for an adjournment, such that the Respondent should be ordered to pay the Appellant’s costs of the adjourned detailed assessment. The Appellant cited Barton v Wright Hassall LLP [2018] UKSC 12 and Woodward v Phoenix Healthcare Distribution Ltd [2019] EWCA Civ 985 in support of the proposition that while the Appellant was under a duty to assist the court for the purposes of the overriding objective, the Appellant was under no duty to remind the Respondent that they had failed to file the schedule.

The Judge found that while the Respondent was significantly at fault for having served the schedule very late, the Appellant was also at fault. He referred to two matters: first, that the Appellant had not chased the Respondent for the annotated schedule; and second, that it had become apparent during the course of the 6 August hearing that the Appellant’s counsel was unaware that documents he needed were contained in the bundles. The Judge stated—contrary to his earlier finding that the bundle issue “paled into insignificance”—that the bundle issue was “more important” and that had counsel been so informed and had the court dismissed the Ainsworth point (as it did), there would have been no need for an adjournment as the court would have been able to deal with the first items in the documentary schedule.

The Judge therefore declined to award the Appellant his costs of the adjourned hearing and ordered that the Appellant pay the Respondent’s costs from 3 July 2024, subject to a small reduction to reflect the time spent on 6 August 2024 dealing with the annotated schedule.

The Appeal

The Appellant appealed against the Judge’s orders of 6 August 2024, advancing five grounds of appeal. Permission to appeal was granted by Sir Stephen Stewart on 11 March 2025. The appeal was heard by Mrs Justice Hill DBE on 18 June 2025, sitting with Costs Judge Leonard as assessor, and judgment was handed down on 3 July 2025.

The Legal Framework

PD 47, paragraph 8.2 requires that Points of Dispute must be short and to the point, must follow Precedent G, and must identify any general points or matters of principle requiring decision before individual items are addressed. Critically, paragraph 8.2(b) requires Points of Dispute to “identify specific points, stating concisely the nature and grounds of dispute.”

In Ainsworth v Stewarts Law LLP [2020] EWCA Civ 178, Asplin LJ held that paragraph 8.2 makes clear that Points of Dispute should be “short and to the point and, therefore, focussed” and that specific points should be made “stating concisely the nature and grounds of dispute.” Common sense dictates that Points of Dispute must be drafted in a way which enables the parties and the court to determine precisely what is in dispute and why. That is necessary to enable the receiving party to reply to the complaints and to enable the court to deal with the issues raised in a manner which is fair, just and proportionate. Asplin LJ identified CPR 3.4(2)(b) and (c) as the applicable powers enabling a Costs Judge to strike out non-compliant Points of Dispute.

Although Ainsworth concerned solicitor-client assessment proceedings, recent decisions including Wazen v Khan [2024] EWHC 1083 (SCCO) and St Francis Group 1 Ltd v Kelly [2025] EWHC 125 (SCCO) have confirmed that the principles apply equally to detailed assessment proceedings between parties under CPR Part 47.

PD 47, paragraph 13.10 addresses variations to Points of Dispute. While permission is not required to vary Points of Dispute, the court may disallow the variation or permit it only upon conditions, including conditions as to the payment of any costs caused or wasted by the variation. In Edinburgh v Fieldfisher LLP [2020] EWHC 862 (QB), Chamberlain J held that while the default position is that parties may vary Points of Dispute, this is subject to a general discretion to disallow the variation or to allow it upon conditions. This is an important discretion, without which it would be possible for parties to ambush their opponents by waiting until the last minute to file supplemental Points of Dispute raising points not previously heralded. The overriding objective must be borne in mind when exercising this discretion.

Hill J’s Decision

Hill J held that Point 23 was not compliant with PD 47, paragraph 8.2(b) or Ainsworth. Point 23 made general assertions without indicating which items they related to and failed to identify the specific items in the Bill of Costs which were challenged or make clear in each case the reasons why the individual items were in dispute. Point 23 was directly comparable to the contentious Points of Dispute in Ainsworth and Christodoulides v CP Christou LLP [2025] EWHC 214 (SCCO) and even less specific than those in O’Sullivan v Holmes and Hills LLP [2023] EWHC 508 (KB) and St Francis.

Hill J accepted that whether Points of Dispute are compliant is a binary question rather than a matter of discretion. However, she recognised that whether to strike out non-compliant Points of Dispute and whether to permit a variation under paragraph 13.10 were evaluative, discretionary questions that were inextricably linked.

Hill J rejected the Appellant’s argument that the Deputy Costs Judge had misdirected himself by finding that a “fairly broad-brush assessment” could have taken place based on Point 23 alone. She held that the Judge had recognised that it would be inappropriate to carry out the detailed assessment on a broad-brush basis and that his focus was on whether to adjourn the case to allow the Appellant more time to consider how to respond to the annotated schedule. What the Judge was saying was that the Appellant had been provided with sufficient information in the original Point 23 to understand, broadly, what the case against him was.

Hill J also rejected the Appellant’s argument based on Barton v Wright Hassall LLP [2018] UKSC 12 and Woodward v Phoenix Healthcare Distribution Ltd [2019] EWCA Civ 985 that the Judge had been wrong to criticise the Appellant for not chasing the Respondent for the schedule. She acknowledged at [88] that there was “an inherent logic in, and attractiveness to” the submission and that it raised “an interesting issue” about where the duty to assist the court conflicts with the absence of a duty to assist an opponent. However, she held that it would be wrong to criticise the Judge for failing to take into account a point not raised with him at the relevant time, as the evidence strongly suggested that these authorities were not cited to the Judge on 6 August 2024 but only at the costs stage on 8 November 2024.

Hill J accepted that the Deputy Costs Judge was not wrong to say that paragraph 13.10(2) afforded him “very wide powers,” as this chimed closely with Foster J’s reference in Celtic Bioenergy Ltd v Knowles Ltd [2022] EWHC 1223 (QB) to “a wide discretion.” However, she held that Ground 5 raised two distinct aspects: the first (whether “very wide powers” was a correct characterisation) failed; the second (whether the Judge nevertheless misapplied those powers) succeeded.

Hill J concluded that the Judge’s refusal to strike out Point 23 and his decision to allow the Respondent to rely on the schedule was wrong. She held that the Judge’s decision failed to give sufficient weight to the requirements of paragraph 8.2(b) and Ainsworth and failed to ensure that the paragraph 13.10(2) power was exercised in accordance with the overriding objective as required by Edinburgh and Celtic.

Hill J found that the adjournment was necessitated solely by the Respondent’s conduct regarding Point 23 and the schedule, not by issues with the Appellant’s bundle. The hearing on 5–6 August 2024 had addressed all the issues on the detailed assessment save for that relating to Point 23. If the Judge had decided to strike out Point 23 and disallow the schedule, the assessment would have concluded on 6 August 2024. The Judge had specifically held in his 6 August judgment that his criticism of the Appellant’s solicitor regarding the bundle “paled into insignificance” compared to his frustration at the parties’ lack of communication about the schedule, and the issues over the bundle did not prevent all the issues on the detailed assessment save for that relating to Point 23 being concluded on 6 August 2024. The Judge’s later recollection on 8 November that the bundle issue was “more important” was inconsistent with his original finding.

Hill J noted that the Respondent had been on notice that the Appellant’s position was that Point 23 was not compliant since 4 January 2024, some seven months before the detailed assessment hearing, yet had taken no steps to remedy the position until two working days before the hearing. The Respondent’s explanation for the delay—that the parties hoped to settle and avoid a hearing—was, Hill J observed, “entirely circular” because settlement was surely much more likely to be achieved if the Appellant understood the case against him in detail. This breach of paragraph 8.2(b) was even more egregious than that in Ainsworth, where there had been five months’ notice, and that in Celtic, where supplementary Points of Dispute had been provided around one month before the hearing.

The Judge’s decision meant that the detailed assessment process continued into a third day, leading to additional costs and delay. Hill J held that it was hard to see how that was consistent with the requirement in the overriding objective to deal with the case “justly and at proportionate cost,” bearing in mind that this requirement includes saving expense, dealing with cases expeditiously, and enforcing compliance with rules, practice directions and orders. The streamlined nature of detailed assessment proceedings was also relevant.

Hill J concluded that the Judge erred in principle and did not balance the various factors fairly in the scales, such that it was appropriate for the appellate court to intervene. The appeal was allowed.

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Institutional Arbitration Rules May Displace Statutory Costs Specificity Requirements

The Commercial Court’s decision in Genel Energy Miran Bina Bawi Limited v Kurdistan Regional Government of Iraq [2026] EWHC 1003 (Comm) addresses the circumstances in which a tribunal’s failure to specify items of recoverable costs may be challenged as an excess of power under section 68(2)(b) of the Arbitration Act 1996.

Background

The matter arose from a two-week arbitration conducted in February 2024 concerning the termination of two Production Sharing Contracts relating to oil and gas reserves in the Kurdistan Region of Iraq. The claimant was the Kurdistan Regional Government of Iraq (“KRG”) and the respondent was Genel Energy Miran Bina Bawi Limited (“GEMBBL”). On 2 December 2024, the tribunal issued a Partial Final Award holding that KRG had validly terminated the Contracts and dismissing GEMBBL’s counterclaim for damages for repudiation.

The arbitration was conducted under the LCIA Rules 2020, with London as the seat. The parties had agreed to exclude any appeal on a question of law.

In subsequent costs proceedings, KRG as the successful party advanced a costs claim totalling over US$35.5 million in respect of legal and expert fees incurred over approximately two and a half years. The information provided in support consisted only of: a total aggregate figure for each category of fee earner (not each individual fee earner) across the entirety of the proceedings, together with total hours and a range of hourly rates per category; the total aggregate figure charged in each month by all fee earners; and the total aggregate fees and expenses charged in each month by each expert. No allocation of costs to particular workstreams was provided, and no information was given as to how much time any individual fee earner spent on any particular item of work. This was supplemented to a limited degree in reply by high-level monthly summaries consisting of headline descriptions such as “Legal advice regarding issues in dispute” and “procedural issues”.

GEMBBL argued before the tribunal that this level of information was insufficient to enable a reasoned costs award complying with the requirements of section 63(3)(a) and (b) of the Arbitration Act 1996—the provisions requiring the tribunal to specify the basis on which it acted and the items of recoverable costs with the amount referable to each (the “Specificity Provisions”). GEMBBL submitted that the tribunal should therefore decline to determine costs itself and instead direct that the assessment be referred to the court under section 63(4).

The tribunal rejected that submission. It held that the Specificity Provisions had been displaced by the parties’ agreement to arbitrate under the LCIA Rules 2020, specifically by Article 28(3), which conferred on it the power to decide the amount of Legal Costs “on such reasonable basis as it thinks appropriate.” The tribunal acknowledged that the material before it did not permit an assessment of whether particular items of work were appropriately staffed or whether the volume of hours was reasonable. Nonetheless, it concluded that it had sufficient information to reach a reasoned decision and that it was in any event appropriate for it to conduct the assessment itself given its familiarity with the proceedings.

The tribunal determined that the costs claimed were not reasonable and applied a blanket reduction of 20% to the legal fees and 50% to the fees of one of the experts, resulting in a total costs award for those heads of something over US$26 million. Awards were also made in respect of KRG’s disbursements and Arbitration Costs as defined under the Rules, though no challenge was brought in relation to those elements.

GEMBBL subsequently brought a challenge under section 68(2)(b) of the Act, contending that the tribunal had exceeded its powers by issuing a costs award that failed to comply with the requirement in section 63(3) to specify the items of recoverable costs and the amount referable to each. KRG applied for summary dismissal of the challenge on the basis that it had no real prospect of success. That application came before Robin Knowles J on the papers. He dismissed KRG’s application for summary dismissal, holding that the matter was unsuitable for summary determination and required a full hearing. He noted that it was arguable that “itemisation” for the purposes of section 63(3) required more than was set out in the costs award, but that the question of how much more was required and the consequences in the context of a section 68 application should be the subject of oral argument.

The full hearing came before Mrs Justice Dias on 16 April 2026, with judgment handed down on 1 May 2026. Mr Charles Graham KC and Ms Jade Fowler appeared for GEMBBL, instructed by Quinn Emanuel Urquhart & Sullivan LLP. Mr Ricky Diwan KC appeared for KRG, instructed by Wilmer Cutler Pickering Hale and Dorr LLP.

The Issues

Four discrete issues were identified for determination.

 

      • First, whether the power exercised by the tribunal in determining legal and expert costs derived from section 63 of the Act, from Article 28 of the LCIA Rules 2020, or from a combination of both—and in particular whether the tribunal was bound to comply with the Specificity Provisions. This required an examination of the relationship between the statutory default rules and the parties’ contractual agreement to arbitrate under the LCIA Rules.
      • Second, whether, assuming the Specificity Provisions did apply, non-compliance with them would constitute an excess of power challengeable under section 68(2)(b), or merely an erroneous exercise of a power that the tribunal did have—which, given the parties’ exclusion of any right of appeal on a question of law, would not be susceptible to challenge at all.
      • Third, whether the tribunal’s award in fact complied with the Specificity Provisions, having regard to the level of detail set out in the award itself.
      • Fourth, whether, if there had been an excess of power, substantial injustice had been caused or would be caused to GEMBBL as a result.

KRG identified the second issue as potentially decisive. If non-compliance with the Specificity Provisions could not, as a matter of law, amount to an excess of power under section 68(2)(b), the challenge would fail regardless of the answers to the other questions. Mrs Justice Dias agreed with that framing and addressed all four issues in sequence, notwithstanding that the second issue was sufficient to dispose of the application.

Issue 1: Relationship Between Section 63 and Article 28

GEMBBL’s case, presented by Mr Graham KC, proceeded primarily as a matter of statutory interpretation. His argument was that section 63(1) of the Act permits parties to agree arrangements which differ from the default rules, and that such an agreement will only oust those rules to the extent that it makes it unnecessary to look further at section 63(3). On his analysis, the default rules would only be displaced by an agreement which either took the relevant matter outside the tribunal’s purview altogether, or which was incompatible or inconsistent with the default rules. A mere agreement to institutional rules conferring a general power on the tribunal to assess costs—particularly where that power was to all intents and purposes identical to the default rules—was not sufficient to oust the Specificity Provisions. He drew support from a footnote to paragraph 5-112 of Russell on Arbitration (24th ed.) and from the DAC Report accompanying the draft Bill, which indicated that the non-mandatory provisions of the Act would apply unless the parties made a change or substitution.

On the substance of Article 28.3, Mr Graham argued that the second sentence addressing the assessment of costs was to all intents and purposes identical to the default rules in sections 63(3) and (5). Section 63(3) has two limbs: a power to determine the recoverable costs of the arbitration on such basis as the tribunal thinks fit, and the Specificity Provisions in sections 63(3)(a) and (b). The Specificity Provisions are couched in mandatory language indicating a clear statutory intention that they should apply wherever a tribunal exercised its power to assess costs. As Mr Graham put it, the second limb containing the Specificity Provisions “had got its hooks … into the first sentence so firmly that the one cannot be looked at without the other.” Parliament must therefore be taken to have intended that a tribunal should not award costs without any reasoning or substantiation. In so far as Article 28.3 simply replicated the first limb of section 63(3), that necessarily attracted the application of the Specificity Provisions.

Mr Diwan KC’s approach for KRG was to treat the matter primarily as one of construing the parties’ agreement. He submitted that there is no basis for ignoring the agreement made by the parties. To do so would be inimical to the concept of party autonomy enshrined in the Act. Party autonomy means that—subject only to the application of any mandatory provision or considerations of public interest—the ability of the parties to reach their own bespoke agreement should not be constrained. The starting point is therefore always to construe the parties’ agreement in order to assess whether and to what extent it has the effect of ousting the default rules.

Mrs Justice Dias agreed that it is necessary to interpret section 63(1) in order to determine what needs to be covered by any party agreement in order to oust the default rules. However, she rejected the premise of Mr Graham’s argument that there is any conceptual limit on the nature or type of agreement which can be effective for that purpose. There is nothing in the statutory language to suggest any such limitation. She considered that it would be unduly prescriptive and contrary to the entire notion of party autonomy to provide on the one hand in sections 63(1) and (2) in apparently unqualified language that the parties are free to agree what costs of the arbitration should be recoverable and that such agreement will have the effect of ousting the default rules, but then on the other to impose an implicit qualification on the type of agreement which will have that effect. This was an unnecessarily complicated and strained approach which is not mandated by the language of the Act and which is contrary to the clear intention of the Act to provide a simple, straightforward framework for arbitration which is easy to apply and leaves maximum flexibility for the parties to agree their own procedures subject only to the mandatory provisions.

Nor did Dias J accept that an agreement made by the parties will be wholly ineffective to oust the default rules unless it is inconsistent with them. If the parties are free to agree that legal costs can be assessed by a tribunal on a basis which is inconsistent with or contradicts the default rules, there is no reason in logic or principle why they cannot reach an agreement that the tribunal should assess legal costs on a basis which partially or entirely replicates what is already in the default rules. The underlying ethos of the Act is to give primacy to such agreements.

The correct approach is therefore straightforward. First, it is necessary to determine what section 63(1) requires an agreement to cover in order for the default rules to be ousted. Then it is simply a question of construing the agreement to see whether it does cover those matters or, if not, to what extent it leaves a lacuna to be filled. Section 63(1) refers to an agreement as to “what costs of the arbitration are recoverable.” In the context of ouster, this can only mean an agreement as to those matters which would otherwise be covered by the default rules: the heads of cost defined as “costs of the arbitration” in section 59; the basis of assessment; and matters to be specified in the award.

There can be no real dispute that Article 28 contains an agreement that all the heads of cost identified in section 59 should be recoverable. Article 28 also covers the basis on which both Arbitration and Legal Costs should be assessed. Arbitration Costs fall to be determined by the LCIA Court in accordance with its published Schedule of Costs. The amount of Legal Costs is to be decided by the tribunal “on such reasonable basis as it thinks appropriate.”

The battleground was as to whether Article 28 made provision for what, if anything, needed to be specified in the award in relation to recoverable costs. Article 28.2 provides that the tribunal should specify in an order or award “the amount of Arbitration Costs determined by the LCIA Court.” In relation to Legal Costs, Article 28.3 simply provides that the tribunal “shall decide the amount of such Legal Costs…”

Mr Diwan submitted that on its proper construction, Article 28.3 only required the Tribunal to state the amount of the Legal Costs awarded in its order or award. “Legal Costs” were explicitly defined in the Rules and there was no need or requirement to break them down further. On that basis, Article 28.3 represented a complete package and implicitly excluded or was inconsistent with the Specificity Provisions. There was therefore no need to resort further to the default rules because there was no lacuna to be filled.

Mr Diwan emphasised that although Article 28.3 is similar in its effect to the provisions of section 63, it is not identical. Costs are categorised and defined differently under the Act and under the Rules. This was an indication that the parties intended to apply a completely different and free-standing regime for the assessment of costs to that applicable under the default rules. Under Article 28.3, the power conferred on the tribunal is to award costs “on such reasonable basis as it thinks appropriate”. Section 63(3), by contrast, provides that the tribunal shall determine costs “on such basis as it thinks fit”, but with the added proviso in section 63(5) that, unless it decides otherwise, it must award a reasonable amount in respect of costs reasonably incurred. The power to determine costs in section 63(3) is permissive, whereas once the tribunal has determined the incidence of costs under the first sentence of Article 28.3, it is mandatory to determine the amount of those costs. He further drew attention to the express provision in the final sentence of Article 28.3 which made clear that the tribunal is not constrained in assessing costs by any court practices or procedures.

In short, Mr Diwan submitted that Article 28.3 provides for an entirely free-standing regime which depends on a different categorisation of costs to that in the Act and which confers on a tribunal a discretion to assess costs on such reasonable basis as it thinks appropriate without any requirement to specify in its award the basis on which it has acted or to itemise the costs in any way beyond stating the amount awarded for Arbitration Costs (as determined by the LCIA Court) and the amount determined for Legal Costs. This regime is capable of standing on its own and there was therefore no lacuna which could only be filled by reference to the default rules. On the contrary, to apply those non-mandatory default rules by effectively bolting them on to Article 28.3 would actually be fundamentally inconsistent with the parties’ agreement that the Tribunal should have a discretion to assess costs on such reasonable basis as it thought appropriate because that would, by definition, constrain the exercise of such discretion.

Mrs Justice Dias expressed considerable sympathy for GEMBBL. Even taking into account the amounts at stake, the quantum of legal and expert costs claimed by KRG was staggering for arbitration proceedings which lasted no more than two and a half years in total and culminated in a mere two-week hearing. It is profoundly unsatisfactory that those costs were not vouched in a manner which would have allowed GEMBBL to make properly informed submissions as to their reasonableness. Best practice would undoubtedly have been to compile a schedule in a format akin to that provided by GEMBBL in relation to its bifurcation costs. That said, she bore in mind that by agreeing to arbitrate in England under the Act, the parties accepted that there could be no appeal on a question of fact (such as the reasonableness of the costs awarded) and by agreeing specifically to arbitration under LCIA Rules, they also accepted that there could be no appeal for error of law. In other words, the parties deliberately and consciously elected for a form of dispute resolution which precluded any complaint that the Tribunal reached the wrong decision.

In those circumstances, and even accepting that mere agreement to a set of institutional rules does not per se exclude all non-mandatory provisions of the Act, Dias J would have held (had it been necessary to do so) that Article 28.3 provided a mechanism for the assessment of Legal Costs which was a complete package sufficient to exclude the operation of the default rules under section 63 in their entirety.

She regarded this conclusion as being entirely consistent with section 4(3) of the Act and rejected Mr Graham’s suggestion that it would be uncommercial. On the contrary, she suspected that many parties would be surprised to learn that what they supposed to be a watertight package of institutional rules turned out to be no more than a leaky sieve which required ad hoc patching by bringing in odd bits and pieces from the Act. Indeed, requiring a particular level of specificity in institutional rules before they can be regarded as capable of ousting the default rules in the Act, would require a minute parsing of the rules in question. This would entail an unnecessarily cumbersome and complex exercise. There is also force in Mr Diwan’s submission that the LCIA Rules are international rules and that the logical consequence of Mr Graham’s argument is that their effect (and, indeed, that of any other institutional rules) might be different depending on the seat of the arbitration. Dias J regarded this as being the antithesis of what commercial parties anticipate or expect when they agree to a London seated arbitration under institutional rules. By signing up to a London seat, they also accept the principle of party autonomy. There are sufficient safeguards in the Act in the form of the mandatory provisions and to accede to Mr Graham’s arguments would be to confer on section 63 a quasi-mandatory status that Parliament did not see fit to accord it directly. Moreover, it is always open to parties to incorporate the default rules from section 63 into their agreement expressly if they feel that the institutional rules do not adequately cover the position. Alternatively, they could expressly exclude Article 28.3 in which case the default rules would apply in any event. If they do not adopt either course, then there is nothing to warrant construing Article 28.3 as anything other than a complete free-standing agreement for the determination of Legal Costs which is effective to exclude the default rules in section 63.

Issue 2: Excess or Erroneous Exercise of Power

It followed from the judge’s conclusions that the Specificity Provisions did not apply in this case. If she was wrong about that and they were applicable (whether because the default rules applied in their entirety or because the Specificity Provisions applied alongside and in addition to Article 28.3), it was necessary to consider whether non-compliance amounted to an excess of power challengeable in principle under section 68(2)(b), or merely an erroneous exercise of power challengeable, if at all, only for error of law, which under the Rules is excluded. Mr Graham accepted that his challenge under section 68 could only succeed if he could demonstrate that non-compliance with the Specificity Provisions amounted to an excess of power.

The parties agreed that the starting point was the decision of the House of Lords in Lesotho Highlands Development Authority v Impregilo SpA [2005] UKHL 43; [2006] 1 AC 221. That case concerned a challenge to a decision of an arbitration tribunal to make an award of damages in a foreign currency converted from the contractual currency of account at the rate specified in the contract notwithstanding a subsequent dramatic collapse in the value of that currency. Lord Steyn held that the issue was whether the tribunal purported to exercise a power which it did not have or whether it erroneously exercised a power that it did have. If it is merely a case of erroneous exercise of power vesting in the tribunal no excess of power under section 68(2)(b) is involved. A major purpose of the Act was to reduce drastically the extent of intervention of courts in the arbitral process. Section 68 was designed as a long stop, only available in extreme cases where the tribunal has gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected. Nowhere in section 68 is there any hint that a failure by the tribunal to arrive at the “correct decision” could afford a ground for challenge under section 68. By its very terms, section 68(2)(b) assumes that the tribunal acted within its substantive jurisdiction. It is aimed at the tribunal exceeding its powers under the arbitration agreement, terms of reference or the 1996 Act. Section 68(2)(b) does not permit a challenge on the ground that the tribunal arrived at a wrong conclusion as a matter of law or fact. It is not apt to cover a mere error of law.

Mr Diwan relied on the repeated emphasis in Lesotho that challenges for excess of power are not designed to provide a remedy if the complaint is simply that the tribunal reached the wrong answer. To the contrary, the Act was intended to limit the scope of possible challenges such that section 68 is a long-stop for exceptional cases where there has been a failure to comply with due process in the conduct of the arbitration. It is not concerned with errors of law or fact and therefore cannot be used as a vehicle for challenging errors in statutory construction, still less an assessment of reasonableness. Furthermore, the logic of Lord Steyn’s reasoning in Lesotho is that an excess of power only occurs if a tribunal purports to exercise a power which it does not have. Accordingly, section 68(2)(b) does not cover errors or mistakes made by a tribunal in the exercise of a power which it indisputably does have.

Mr Diwan submitted that, having regard to the high hurdle posed by section 68(2)(b), the relevant question to ask is whether the tribunal had no power at all to do what it did, or whether it simply went wrong in the exercise of its power. He referred to Essar Oilfields Services Ltd v Norscot Rig Management PVT Ltd [2016] EWHC 2361 (Comm); [2017] Bus LR 227 as a good example of a case where Judge Waksman QC (as he then was) deprecated attempts to dress up an appeal on a question of law as an excess of power by arguing that the relevant power could only be exercised in a particular way. In that case, the tribunal had an undoubted power to award costs either under section 59(1)(c) of the Act or under the ICC Rules which also applied. The tribunal made an award in respect of the costs of third party funding and the paying party argued that it was not within its power to do so under either the Act or the ICC Rules. Judge Waksman held that the relevant power was the undoubted power to award costs. If the arbitrator fell into error, it was an error as to the scope of such costs by reason of his allegedly erroneous interpretation of section 59(1)(c) and the relevant ICC provision. To characterise the arbitrator’s error as an excess of power would be wholly unrealistic and artificial, and it goes against the grain of the strict and narrow confines in which section 68 is to operate.

Basing himself on these propositions, Mr Diwan argued that in the present case, the Tribunal undoubtedly had the power to determine and award legal and expert costs under either section 63 or Article 28.3. However, the question of what evidence was required for that purpose and what needed to be specified about it in the award was nothing to do with the existence of the power itself but simply related to the manner of its exercise. Moreover, once it is accepted that the parties have autonomy to make alternative arrangements which may be inconsistent with the Specificity Provisions, it is difficult, if not impossible, to regard failure to comply with those (non-mandatory) provisions as so fundamental that non-compliance goes to the very existence of the power.

He also made the powerful point that if GEMBBL’s arguments were accepted, it would open up the prospect of post-award costs challenges under section 68(2)(b) in virtually every case since it would almost always be possible to argue that the tribunal had not sufficiently itemised the costs awards and had therefore exceeded its powers. He submitted that such an unpalatable outcome could only be avoided if the court laid down a prescriptive rule as to what the Specificity Provisions required by way of itemisation, which was capable of application in every case. This, he suggested, was a chimera given the infinite variability in arbitration procedures and the nature of the costs which might be incurred.

In response, Mr Graham reiterated that it was impossible to sever the Specificity Provisions from the power contained in the first limb of section 63(3). They were an inseparable part of that power which could not therefore be exercised save in compliance with them. Accordingly, they were properly to be regarded as delimiting the power itself. By contrast, the power in issue in Lesotho and Essar was entirely general and did not have any such adjuncts.

He accepted that the nature of the itemisation required would necessarily vary from case to case depending on the nature and complexity of the proceedings, the amount at stake, and the manner in which it was presented and that it was impossible to be prescriptive about it. He pointed to GEMBBL’s own bifurcation costs schedule as a paradigm of what a proper costs schedule should look like, and suggested that in 99 cases out of 100 there would not be a problem because the parties would either provide something similar or the tribunal would demand it.

Mr Graham further submitted that holding the Tribunal’s power to be circumscribed in this way would do no damage to party autonomy or to the reputation of London as a global centre for arbitration. He suggested that Mr Diwan’s submissions to the contrary were mere scaremongering which were not supported by any evidence. On the contrary, he argued, arbitrating parties have a legitimate interest in ensuring that they are only required to pay reasonable and proportionate costs and that they are provided with sufficient information to allow them to make meaningful submissions in that regard. If anything, therefore, they were more likely to be deterred from arbitrating in London if faced with a regime where a tribunal could make a wholly unspecific award of costs unsupported by any material which allowed transparent interrogation. It can be assumed that Parliament was of a similar view otherwise it would not have included the Specificity Provisions in section 63 to start with. An incidental beneficial effect of circumscribing a tribunal’s power in this way would be to discourage excessive and profligate expenditure on legal costs.

Mrs Justice Dias had little hesitation in preferring the submissions of Mr Diwan on this point. The fact remains that the Specificity Provisions are essentially adjectival and she could not really see an answer to Mr Diwan’s submission that if the parties were free to confer on a tribunal the power to act on a basis inconsistent with the Specificity Provisions, the latter could hardly be said to be fundamental to the existence of that power—a point only underlined by the fact that Parliament could have designated them as mandatory provisions but chose not to.

The concern that a contrary conclusion would open the floodgates to a deluge of costs challenges is neither illusory, nor a prospect that the court can view with equanimity given the clear objective of the Act to provide for one-stop adjudication and to limit the scope for challenges to arbitral decisions. For all these reasons, Dias J was satisfied that even if the Tribunal was wrong in making an award in the manner and form in which it did, there was no excess of power but at most an erroneous exercise of that power. In an appropriate case, such an error might have been challengeable by way of an appeal under section 69 but it was GEMBBL’s misfortune in this case to have agreed to institutional rules which exclude any such possibility.

On this ground alone, therefore, the section 68 challenge failed.

Issue 3: Compliance with the Specificity Provisions

The Tribunal clearly set out in paragraph 49 of its award the basis on which it acted in assessing legal and expert costs (even though, on KRG’s case, it was not obliged to do so). This explained that the Tribunal must assess the Claimant’s costs on the ordinary basis in international arbitration—that is, whether the Claimant’s costs are reasonable and proportionate. The Tribunal accepted the general principle put forward by the Respondent that the Claimant must establish that its costs are reasonable, in the sense that it was necessary for the costs to be incurred, and that the expenditure referable to the work in question was reasonable in amount. This involved showing that the expenditure on that item was not disproportionate, given the work involved and its relative importance to the outcome of the dispute.

GEMBBL’s complaint was limited to its submission that in relation to the legal and expert costs the Tribunal did not sufficiently “specify the items of recoverable costs and the amount referable to each.” Mr Graham submitted that an award which simply awarded amounts for “Legal costs” and “Experts’ costs” was not good enough to comply with the Specificity Provisions. An “item of recoverable costs” for this purpose denoted (i) an item of work carried out by the lawyers or experts as appropriate; (ii) in respect of which costs had been incurred; (iii) which costs were both incurred reasonably and reasonable in amount. For such a determination to be carried out, the items in question needed to be sufficiently particularised so that a tribunal could make an assessment of each of these matters. As he accepted, it was impossible to be prescriptive about what would constitute an “item of work” in any particular case since this would vary depending on the circumstances. However, as a bare minimum each item specified should identify the particular fee earners involved, their seniority and the hours and rates charged by each of them for that particular item. Having carried out the necessary assessment, the tribunal should then specify in its award each item of work in respect of which it was awarding costs and set out the figure awarded. In most cases, it would be sufficient to refer to the receiving party’s costs schedule but where there was insufficient information to make a proper assessment, the tribunal should either request further particularisation or direct the parties to refer the matter to court under section 63(4).

Mr Diwan’s response was to point out that an “item of work done” is nowhere referred to in the Act and moreover is not the same as an “item of recoverable costs.” The latter is the only concept referred to in the Specificity Provisions and this must refer back to the first limb of section 63(3), which in turn refers back to section 63(1), which in turn leads back to section 59 where “costs of the arbitration” are defined. Thus, he submitted that an “item of recoverable costs” meant no more or less than the headline categories set out in section 59. This was clear, simple and easy to apply in practice. By contrast, Mr Graham’s approach was impractical in the absence of any clear guidance as to what was required by way of itemisation, something which both parties agreed was impossible to provide a priori.

Mrs Justice Dias acknowledged that she had considerable sympathy for GEMBBL. The scant information furnished by KRG’s solicitors was completely inadequate to permit any proper examination of the reasonableness of the costs and so denied GEMBBL any opportunity to make informed submissions on the question. The Tribunal was also clearly uneasy about the lack of particularisation but nonetheless felt that in view of its familiarity with the case it was in a position to do substantial justice. The only question for the court was whether in proceeding on that basis, the Tribunal complied with its obligation (on the hypothesis that the Specificity Provisions applied) to set out the items of recoverable costs.

With some hesitation, Dias J concluded that Mr Diwan was right and that “items of recoverable costs” in section 63(3)(b) refers back to the headline categories in section 59. She was fortified in this conclusion by the sheer impracticality of any other solution given that an “item of work done” is an impossibly elastic concept which will differ in every case. Moreover, there is scope for almost infinite disagreement as to appropriate “items of work” and a tribunal cannot know in advance what it needs to do in order to stay within its powers unless it takes pre-emptive precautions in agreeing with the parties what is required at an early stage, if only to ensure that appropriate records are compiled. Nothing of that nature appears to be contemplated by either the Act or the Rules.

The decisive point was that the judge was considering this on the basis that (contrary to her conclusions above), compliance with the Specificity Provisions was an essential pre-requisite to the proper exercise of the Tribunal’s power to determine costs. Given that premise, she considered it unsatisfactory that the exercise of a general power to determine costs should be circumscribed depending on the vagaries of the way in which the parties choose to present their respective cases and incur costs. This would mean, in effect, that a different power fell to be exercised in every single arbitration, the precise ambit of which could not be known until costs fell to be assessed—unless it had been presciently agreed in advance. She could not accept that this was the intention of either Parliament or the parties. Rather, that intention was to confer on a tribunal a general power to assess costs which should be the same in every case to which the default rules applied.

On that basis, there was no failure by the Tribunal to comply with the Specificity Provisions and the challenge failed for this reason as well.

Issue 4: Substantial Injustice

A challenge under section 68 requires the serious irregularity in question to be one which the court considers has caused or will cause substantial injustice to the applicant. As appears from RAV Bahamas v Therapy Beach Club [2021] UKPC 8; [2021] AC 907, the test for substantial injustice is whether “had the irregularity not occurred, the outcome of the arbitration might well have been different… It is not necessary to show that the outcome would necessarily or even probably be different… In general, there will, however, be no substantial injustice if it can be shown that the outcome of the arbitration would have been the same regardless of the irregularity…”

Applying this test, if Dias J had found that the Tribunal exceeded its powers by failing sufficiently to itemise the recoverable costs, she would have had no difficulty in concluding that the outcome of the costs award might well have been different and that a substantial injustice had been established. Mr Diwan argued that there was nothing to suggest that the Tribunal would have reached any different conclusion even if full particularisation had been provided. However, the judge regarded that as pure speculation and considered that the Tribunal might, at the very least, have reached a different conclusion more favourable to GEMBBL. If KRG wished to rebut that suggestion, then it should have provided the court with the necessary material to substantiate its case. Indeed, it might be said that the very fact that we have no way of knowing what the Tribunal might have decided had it been provided with proper particularisation is a substantial injustice in itself. The judge also agreed with Mr Graham that Essar provides support for the submission that there is substantial injustice in the very fact that the Tribunal awarded costs in a manner which it had no power to adopt.

Appropriate Relief

The only other matter debated briefly before the court related to the nature of the order that should be made had the challenge been allowed. GEMBBL’s claimed relief asked for the question of costs to be referred to the court on the basis that the Tribunal could not realistically be expected to reach any different conclusion in the absence of further material. However, Dias J indicated during the course of argument that the obviously sensible course would be to remit the matter to the Tribunal with directions as to the further information that should be provided by KRG to substantiate its costs. It seemed to her that, in view of the Tribunal’s familiarity with the case and the nature of the arguments, it would make no sense at all to send the matter to the court which would have to approach it from scratch. Neither party dissented from this approach although, in the event, it did not arise.

Conclusion

For all these reasons, GEMBBL’s application under section 68(2)(b) was dismissed.

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Success Fee Reduced From 100% (£2,500) To 11% (£330) And ATE Premium Disallowed In Child Personal Injury Claim

The County Court sitting at Oxford’s decision in Spicer v Greene King Brewing and Retailing Limited [2026] EWCC 18 concerned the deduction of CFA success fees and ATE insurance premiums from a child claimant’s damages in a “straightforward” personal injury claim where liability was never in dispute.

Background

This judgment by District Judge Lumb in the County Court sitting at Oxford carries the neutral citation [2026] EWCC 18, though the internal hand-down notice records the date as 17 April 2024. The judgment arose from a personal injury claim brought on behalf of Bradley Spicer, a child, by his mother and litigation friend, Jessica Lewington, against Greene King Brewing and Retailing Limited.

On 4 August 2022, Bradley, then aged four, was visiting The Rowing Machine public house in Witney, Oxfordshire — a pub owned by the defendant — with his family. While playing in the pub garden with his elder sister, he tripped on uneven paving slabs and suffered a laceration to his forehead. He was taken to Witney Community Hospital, where the wound was closed with steristrips and he was discharged. The wound healed fully within two months, leaving a faint scar below the hairline visible only on close inspection.

Liability was never in dispute. The pub manager admitted liability at the scene and offered Ms Lewington vouchers as compensation. Ms Lewington considered the vouchers insufficient and contacted Greene King directly, whose claims handling agents, Gallagher Bassett, advised her that as Bradley was a child, any damages would require court approval, and asked her to instruct solicitors to obtain a medical report. Following a recommendation from a local solicitor, Ms Lewington instructed Express Solicitors, based in Manchester, in June 2023.

Express Solicitors advised Ms Lewington to enter into a Conditional Fee Agreement and to take out an After the Event insurance policy. A medical report was obtained through On Time Reports Limited — described in the judgment as a wholly owned subsidiary medical reporting agency of Express Solicitors — with Mr Asif Malik FRCEM, Consultant in Emergency Medicine, producing a report dated 11 March 2024. The Stage 2 settlement pack was provided to the defendant on 19 March 2024 with an offer to settle of £10,031.66. The defendant responded with an all-inclusive counter-offer of £10,000, which was formally accepted approximately two weeks later. Part 8 proceedings were issued and the matter was listed for an infant approval hearing.

At the infant approval hearing on 15 August 2024, District Judge Lumb had no difficulty approving the proposed settlement of £10,000. The between-the-parties fixed costs, including disbursements, had been agreed prior to the hearing. The remaining issue was the proposed deduction from Bradley’s damages of a success fee under the CFA and an ATE insurance premium.

A schedule of solicitor and own client costs was produced claiming £13,316 in profit costs, based on 73.1 hours of recorded time across 18 different fee earners. The CFA and risk assessment assessed the success fee percentage at the maximum 100%. As 100% of £13,316 would exceed 25% of the damages (25% of £10,000 being £2,500), a success fee of £2,500 was sought, together with an ATE premium including Insurance Premium Tax of £1,120, producing total proposed deductions of £3,620 — equivalent to 36.2% of the recovered damages.

District Judge Lumb was sceptical that £13,316 in profit costs could have been reasonably incurred or reasonable in amount on even an indemnity basis, and considered the 100% success fee percentage to be obviously too high. In exercise of the court’s duty to safeguard the interests of the child, the solicitors were directed to file the complete file of papers for inspection and assessment. Following receipt of the file, a paper hearing was conducted to consider the solicitor and own client costs and the ATE premium.

Costs Issues Before the Court

The judgment addressed two discrete costs issues arising in the context of the court’s approval of a settlement on behalf of a child claimant under CPR Part 21: first, the appropriate level of the success fee deductible from the child’s damages under the CFA; and second, whether the ATE insurance premium was a reasonably incurred expense that could properly be deducted from those damages.

The broader context, as District Judge Lumb noted at the outset, was a pattern of apparent error — both by practitioners and the judiciary — in the application of the correct tests when assessing additional liabilities in children’s personal injury claims. The judgment set out the correct analytical framework in some detail. In relation to ATE premiums, the question is whether taking out the policy was a reasonably incurred expense; absent actuarial or underwriting evidence as to the appropriate level of premium, the premium should either be allowed in full or disallowed. In relation to success fees, the correct approach requires the court first to assess the reasonable base profit costs (the multiplicand), then to apply the appropriate success fee percentage assessed by reference to the risk of losing the case (not as a percentage of damages), and finally to compare the resulting figure against 25% of the general damages for pain, suffering and loss of amenity and any past special damages — capping the deduction at that figure if the calculated success fee exceeds it.

District Judge Lumb, who has maintained a keen interest in this area since his own judgments in A & M v Royal Mail [2015] EW Misc B24 and B30, also identified two recurring errors in practice: first, an assumption by some practitioners that the success fee will always amount to 25% of the damages — an approach that risks constituting an unlawful contingency fee arrangement; and second, a failure to produce solicitor and own client base costs, which prevents the court from performing the first stage of the calculation at all.

In the present case, the specific issues were: (i) whether the claimed profit costs of £13,316 across 73.1 hours and 18 fee earners were reasonably incurred and reasonable in amount; (ii) what the appropriate success fee percentage was, given the nature and risk profile of the claim; and (iii) whether the ATE premium of 10% of recovered damages plus IPT (totalling £1,120) was a reasonably incurred expense in the circumstances of the claim.

An additional issue arose in relation to informed consent. District Judge Lumb found that Ms Lewington, as litigation friend, did not really understand what was in the witness statement or its meaning and effect, and had been conditioned to expect a deduction of 25% of damages as the norm. This finding engaged the principles in Herbert v HH Law Ltd [2019] EWCA Civ 527 and informed the court’s approach to the assessment.

The Claimant Solicitors’ Position

Express Solicitors, acting for the claimant, sought deductions from Bradley’s damages totalling £3,620, comprising a success fee of £2,500 (representing 25% of the £10,000 settlement) and an ATE premium including IPT of £1,120.

In support of the proposed deductions, the solicitors relied upon a witness statement from Eleanor Brickell, the trainee solicitor with conduct of the claim, which District Judge Lumb characterised not as a genuine witness statement but as a note of the relevant provisions of the CPR — particularly CPR 21.12 and 46.9 — and the authorities of Callery v Gray [2001] EWCA Civ 1117, West v Stockport NHS Foundation Trust [2019] EWCA Civ 1220, Herbert v HH Law Ltd [2019] EWCA Civ 527, and the persuasive judgment of HHJ Lethem in Wheeler v H&M Hennes & Ors. Written submissions were also provided by Poppy Lawrie, described as a solicitor’s clerk, which largely repeated the earlier note and additionally referred to the decision of HHJ Monty KC in Duffield v WM Morrison Supermarkets Ltd [2025] EWCC 35 (the judgment cites this as “EXCC 35”, which appears to be an error).

The solicitors’ position on the success fee rested on the claimed profit costs of £13,316 and a risk assessment that assessed the appropriate success fee percentage at the maximum 100%. The effect of this approach — combining high claimed base costs with the maximum success fee percentage — was that the 25% cap on deductions from damages would inevitably be reached regardless of what percentage the court might assess as reasonable. District Judge Lumb noted that this practice drew suspicion that it was deliberately designed to ensure the cap was always reached, with clients conditioned to expect a 25% deduction and therefore unaware that the solicitors may have been acting in their own interests contrary to those of the client, in potential breach of the Principles of the Solicitors Code of Conduct.

The Court’s Assessment

Having found that the litigation friend did not really understand the witness statement or its meaning and effect and had been conditioned to expect a 25% deduction, District Judge Lumb applied Herbert and carried out a summary assessment on the indemnity basis of the reasonably incurred and reasonable in amount solicitor and own client costs.

The contractual hourly rates under the CFA were significantly higher than the guideline hourly rates issued by the SCCO. Although Express Solicitors mentioned in the retainer documentation that their hourly charges were higher than other firms may charge, seeking to justify this by their expertise, the repeated reference to the limitation of the client’s liability for costs to 25% of the damages was clearly designed to downplay any importance of the hourly rates from the client’s perspective, as the result would always be the same: an expected deduction of 25% of the damages and deduction of the ATE premium.

On the facts of this straightforward case where liability was admitted at the start and at the time of instruction the solicitors knew that all that had to be done was to obtain and serve a medical report and negotiate settlement, none of the factors in CPR Part 44.4(3) justified an hourly rate beyond the guideline rate for the fee earner with conduct with minimal supervision. The case could and should have been run by a grade D fee earner with supervision from a grade B fee earner — the grades of fee earner who were in fact engaged to conduct the case. The reasonably incurred time would have been 15 hours at grade D and 2 hours at grade B, being relatively generous bearing in mind that the assessment was on the indemnity basis where the benefit of any doubt is in favour of the receiving party. The CFA stated hourly rates of £345 per hour for grade B and £235 for grade D. The 2023 guideline hourly rates were £218 for grade B and £126 for grade D. The judge held that the base costs should have been no more than £3,000, which in itself was more than the guideline rates total of £2,326.

A success fee of 100% could not be justified given the minimal risks involved in the case being unsuccessful. Applying the traditional ready reckoner table for success fees, a 100% success fee is applicable where the chances of winning are assessed at 50%. In this case, on the facts, the prospects of success were about as close to 100% as there could be. Allowing for the minimal risks involved and taking into account the deferment of not being able to charge until the conclusion of the case, a more realistic assessment of the prospects of success would be 90%, which applying the ready reckoner equates to a success fee of 11%. The appropriate success fee in this case was therefore £3,000 x 11% = £330 plus VAT.

As to the ATE premium, this was a question of whether taking out an ATE policy was a reasonable expense for the litigation friend to incur on the child’s behalf. The judge held that it was not. What risk was there to insure against where the solicitors’ own client profit costs were covered by the CFA? The risk of not being able to recover the court issue fee? The defendant’s claims handling agents had told the litigation friend that a court hearing was necessary so there was no risk whatsoever of failing to recover that. The costs of the medical report? Again, the claims handling agents had explained that a medical report was required and that the litigation friend should instruct solicitors to obtain one, which she did. All the disbursements were paid by the defendant without question as part of the proposed settlement and there was no real risk that they would not do so. The only possible risk of an adverse costs order was in the event of failing to beat a Part 36 offer, but given that approval by the court was always going to be required, that risk in this case was practically non-existent and certainly did not justify the expense of a premium calculated as 10% of the recovered damages plus IPT (the judgment contains an internal inconsistency here, stating £1,100 in paragraph 29 but £1,120 in paragraph 15). The deduction of the ATE premium was therefore disallowed. If HHJ Monty KC in Duffield meant that wherever there was any risk it was always reasonable to take out an ATE policy (and the judge doubted that is what he meant, rather that each case had to be considered on its own facts), then District Judge Lumb respectfully disagreed.

Conclusion and Postscript

The appropriate deduction of additional liabilities from the claimant’s damages was limited to the success fee of £330 plus VAT.

District Judge Lumb concluded by raising continuing concerns about how some firms are operating in their approach to charging through CFAs. The judge expressed the hope that the Warning Notice issued by the SRA on 26 January 2026 regarding “no-win, no-fee” and other fee arrangements would provide a timely reminder of the importance to solicitors of complying with the SRA Principles and Solicitors Code of Conduct, particularly Principle 1 (upholding the rule of law and proper administration of justice), Principle 2 (upholding public trust and confidence), Principle 5 (acting with integrity), and Principle 7 (acting in the best interests of the client), as well as specific provisions of the Code including paragraph 3.4 (consider and take account of your client’s attributes, needs and circumstances), paragraph 8.6 (give clients information in ways they can understand, and ensure they are in a position to make informed decisions), and paragraph 8.7 (ensure that clients receive the best possible information about how their matter will be priced).

As the authors of Cook on Costs remarked in their latest edition at paragraph 36.8 (quoted with approval by the judge): “Courts will, however, remain alive to the possibility that unreasonably incurred base costs may give rise to the ‘Jackson Cap’ on success fees being reached where an assessment of those base costs is otherwise unnecessary because only a success fee is being sought.” That was the position in SJ (a minor suing by his mother and Litigation Friend AJ) v DGJ Tanner t/a Sopley Farm [2025] EWCC 17, in which the judge held that there was a considerable amount of duplication and “padding” in the bill of costs which substantially exceeded the fixed costs recoverable from the defendant, and which “raises a suspicion that the costs purported to have been incurred were artificially inflated to ensure that the 25% cap was always reached.”

Solicitors who are acting in this way through their business models have been warned that the courts will remain vigilant and the next step may well be investigation by the SRA given the Warning Notice of January 2026.

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Conditional Value Reservation Does Not Prevent Rendering Of Interim Statute Bills Where No Uplift Agreed

The High Court’s decision in Mehta v Howard Kennedy LLP [2026] EWHC 968 (KB) confirms that a reservation in standard terms of business permitting a value or importance element to be charged in a concluding bill does not prevent earlier invoices from constituting interim statute bills where the retainer contains no success-related, conditional, or contingent fee arrangement.

Background

Vishal Mehta was subject to a worldwide freezing order and instructed Howard Kennedy LLP to act for him in that litigation. In related civil proceedings, a fraud of US$1 billion was alleged. Over the period from 22 June 2022 to 5 May 2023, Howard Kennedy delivered 24 invoices to Mr Mehta with a total value of £3,124,674.04, many of which had been paid.

Mr Mehta subsequently issued Part 8 proceedings under the Solicitors Act 1974, seeking an assessment of the costs billed by Howard Kennedy. The central question was whether the 24 invoices constituted interim statute bills — each final and complete in respect of the period they covered — or whether they formed a series of interim invoices comprising a so-called “Chamberlain” bill, which would only become final upon delivery of the last invoice in May 2023. The distinction was critical: if the invoices were interim statute bills, the time limits under s. 70 of the 1974 Act would apply, and Mr Mehta would be debarred from seeking assessment of those bills in respect of which the relevant time limits had expired.

On 25 April 2025, Costs Judge Whalan handed down judgment on three preliminary issues: Mehta v Howard Kennedy LLP [2025] EWHC 1008 (SCCO). He found against Mr Mehta on all three issues, holding that the invoices were interim statute bills, that the retainer was not a Contentious Business Agreement (“CBA”) within the meaning of ss. 59 to 63 of the 1974 Act, and that there were no special circumstances justifying assessment under s. 70(3).

Mr Mehta appealed to the High Court. The appeal was heard by Mr Justice Kimblin, sitting with Costs Judge Nagalingam as an assessor, on 17 April 2026, with judgment handed down on 24 April 2026. Robin Dunne of counsel appeared for Mr Mehta, instructed by JG Solicitors. Dan Stacey and Chris Cooke appeared for Howard Kennedy, instructed by the firm itself.

Costs Issues Before the Court

Three preliminary issues fell to be determined, each arising from the application of the 1974 Act to the retainer between Mr Mehta and Howard Kennedy.

The first issue was whether the 24 invoices delivered by Howard Kennedy were interim statute bills — each final and complete in respect of the period covered — or whether they were interim invoices forming part of a composite “Chamberlain” bill, which would only crystallise as a statute bill upon delivery of the final invoice. This distinction is of considerable practical importance. Under s. 70 of the 1974 Act, a client has an absolute right to seek assessment within one month of delivery of a statute bill. Between one and twelve months after delivery, assessment remains available but is at the court’s discretion. After twelve months from delivery, assessment requires the demonstration of special circumstances and, critically, is entirely barred twelve months after payment. If the invoices were statute bills, Mr Mehta’s right to seek assessment of the earlier invoices was either time-barred or subject to the special circumstances threshold.

The second issue was whether the retainer constituted a CBA within the meaning of ss. 59 to 63 of the 1974 Act. A CBA is not subject to the time limits in s. 70, and a finding that the retainer was a CBA would therefore have opened the door to assessment regardless of when the invoices were delivered or paid. The court stayed determination of this issue pending the Court of Appeal’s forthcoming judgment in Barnes v BDB Pitmans (CA-2025-000773), listed for hearing on 13 May 2026, which was said to raise strongly overlapping issues.

The third issue comprised two distinct sub-questions. The first was whether certain invoices had been “paid” within the meaning of s. 70(4) of the 1974 Act, given that some had been discharged not by Mr Mehta personally but by third party companies and by Hogan Lovells in respect of an adverse costs order. The second was whether, even if the invoices were statute bills and had been paid, special circumstances existed under s. 70(3) sufficient to justify an order for assessment notwithstanding the time limits.

The Parties’ Positions

Issue 1 — Statute Bills

For Mr Mehta, it was submitted that the invoices were not interim statute bills because the retainer reserved to Howard Kennedy the right to revisit charges in a concluding bill by reference to the “value” or “importance” of the matter. Reliance was placed on paragraph 5(2) of the Terms of Business, which provided that if the value or importance element was achieved only as a result of the completion or final settlement of the case, and had not been taken into account in earlier bills, Howard Kennedy reserved the right to take it into account in the concluding bill. It was argued that this reservation qualified the finality and completeness of the earlier bills, such that they could not be interim statute bills, applying the principles in Ivanishvili v Signature Litigation LLP [2024] EWCA Civ 901. The argument proceeded on the basis that this reservation applied to all retainers entered into on Howard Kennedy’s standard Terms of Business.

For Howard Kennedy, it was submitted that the Terms of Business were clear: paragraph 5(2) stated in terms that “each bill issued to you is a final bill covering the total charge for the work carried out within the stated period” and that “each bill has the status of a statute bill”. The value and importance reservation was conditional in nature and had no application to this retainer, which was not concerned with any particular outcome amounting to success and contained no conditional or contingent fee arrangement. There was no agreed uplift and no conditional fee, distinguishing the position from Ivanishvili. The invoices themselves contained the necessary features of a statute bill, being detailed and setting out the client’s rights under the 1974 Act.

Issue 3(a) — Payment

For Mr Mehta, it was submitted that payments made by third party companies and by Hogan Lovells did not constitute payment by Mr Mehta for the purposes of s. 70(4). It was argued that only Mr Mehta, as the signatory to the retainer and the party chargeable, could make a payment capable of triggering the absolute bar under s. 70(4). Reference was also made to Bill 445657, in respect of which a payment of £80,000 was said to have been made on the same day as the bill was raised, which it was submitted could not satisfy the requirements identified by the Supreme Court in Oakwood Solicitors Ltd v Menzies [2024] UKSC 34.

For Howard Kennedy, it was submitted that the payments made by third parties were made with Mr Mehta’s knowledge and consent, as established by witness statement evidence. Reliance was placed on Re Jackson [1915] 1 KB 371, cited in Menzies, for the proposition that payment by a third party at the direction of or with the knowledge of the client constitutes payment for the purposes of s. 70. The Costs Judge had found nothing irregular or ineffective in such payments, and those findings of fact were said to be unimpeachable.

Issue 3(b) — Special Circumstances

For Mr Mehta, three special circumstances were advanced: first, that Howard Kennedy had failed to provide adequate estimates of future costs; second, that the size of the bills was itself a special circumstance; and third, that the fact of rendering interim statute bills was itself capable of constituting a special circumstance. It was submitted that the Costs Judge had failed to address the second and third of these matters adequately.

For Howard Kennedy, it was submitted that Mr Mehta had received regular, itemised invoices with detailed accounts of the work done, had paid approximately 80% of the invoices, and had received appropriate estimates of future costs throughout the retainer. The Costs Judge’s evaluative judgment that no special circumstances existed was said to be correct and not susceptible to challenge on appeal.

The Court’s Decision

Issue 1: Statute Bills

Kimblin J dismissed the appeal on the first issue. Applying the principles of contractual interpretation in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, he held that the meaning of the retainer documents was that which a reasonable reader would understand, having all of the background knowledge of the parties at the time the retainer was entered into on 1 June 2022.

The judge agreed with the Costs Judge’s analysis. The Terms of Business stated clearly that “each bill issued to you is a final bill covering the total charge for the work carried out within the stated period” and that “each bill has the status of a statute bill”, unless otherwise stated. The Terms of Business also referred to the solicitor’s right to sue.

The reservation at paragraph 5(2) concerning value or importance was conditional in nature and had no application to this retainer. The retainer was not concerned with a particular outcome which would amount to ‘success’, nor were there any conditional or contingent fees or payments. The value and importance term within paragraph 5(2) was conditional on two matters. First, it was conditional on ‘value’ or ‘importance’ being achieved only as a result of the completion or final settlement of the case. This was a term of the contract which may or may not apply, depending on the type of work being undertaken and the way in which the fee structure was agreed. Second, it was conditional on the ‘value’ or ‘importance’ not being taken into account in earlier bills. Per paragraph 1 of the Terms of Business, the level of fees was explained as reflecting a number of factors, including value and importance. An hourly rate may be set having regard to these factors and so be included in monthly bills.

The judge added that Section 8 of the retainer letter concerned “Payments on account”, requesting £40,000 and making clear that further payments would be requested. It warned Mr Mehta that “We are bound to apply funds received from you on account to settle any bills we may render to you.” It was therefore clear that funds on account would be used to pay bills which would be delivered, usually monthly.

The judge also noted that Part 30 of the Terms of Business stated that the retainer letter prevails in the event of conflict. While there was no conflict, this served to emphasise the point that the retainer letter did not suggest any conditionality in the fee agreement.

The General Notes, though not forming part of the contract, were relevant to its interpretation because they comprised material on which Mr Mehta elected to sign the retainer and enter the contract. The Notes confirmed that the additional fee reservation was only applicable if it was discussed in advance or referred to in the engagement letter. Insofar as no such discussions took place with the solicitor, it did not apply.

The judge rejected the submission that the retainer was ambiguous by reason of the statement that each bill was a statutory bill but was not necessarily a final bill in the matter. This term was simply a consequence of billing every month. It explained that the bill was final for the month but not for the case. Another way of putting it would be that it was not necessarily the last bill in the matter.

The invoices themselves contained the necessary features of a statute bill, being both detailed and stating the rights available under the 1974 Act. Taken together, the terms and the facts of the case established that the invoices were statute bills.

Kimblin J acknowledged the policy concerns identified by the Court of Appeal in Ivanishvili and other cases regarding the scheme of s. 70, which is problematic from the point of view of a client who must either challenge the very solicitor representing him in hard fought litigation or change solicitor with the disruption to his case which that entails. However, those policy issues were not for the Costs Judge to resolve, nor did they form part of the court’s role on appeal.

Issue 2: Contentious Business Agreement

The Costs Judge had held that the retainer was not a Contentious Business Agreement under s. 59 of the 1974 Act, to which the time limits under s. 70 do not apply. Kimblin J stayed consideration of this issue pending the Court of Appeal’s decision in Barnes v BDB Pitmans (CA-2025-000773), listed for hearing on 13 May 2026, which was said to raise issues which at least strongly overlap with the issues in this appeal. The judge did not see any impediment to informing the parties of his decision on the first and third issues and should not delay communication of those decisions without good reason. Ground 2 therefore remains undetermined.

Issue 3(a): Payment

Kimblin J dismissed the appeal on the payment issue. The Supreme Court in Oakwood Solicitors Ltd v Menzies [2024] UKSC 34 held at [71] that payment by deduction or retention requires a settlement of account, which in turn requires an agreement to the sum taken or to be taken by way of payment of the bill of costs. Such an agreement may in an appropriate case be inferred from the parties’ conduct and in particular from the client’s acceptance of the balance claimed in the delivered bill. A payment by a third party at the direction of or with the knowledge of the client can be payment for the purpose of s. 70: Re Jackson [1915] 1 KB 371, cited in Menzies.

The Costs Judge had held that all payments were made in accordance with the court’s provision and scrutiny in the worldwide freezing order. He found nothing irregular or ineffective in payments from a third or non-chargeable party, so long as these payments were made with the knowledge and consent of the client. The witness statement adduced in support of Howard Kennedy’s position established these payments were made with Mr Mehta’s knowledge and consent.

A further issue arose in relation to Bill 445657, which was said to be paid in full yet payment of £80,000 was said to have been made on the same day as the bill being raised. The judge noted that this could not satisfy the Menzies criteria, and that it was not explained how or why the bill was part paid from client account and part paid from office and which entity paid which elements. This issue was not considered at all by the Costs Judge.

Kimblin J nonetheless had no good reason to interfere with the Costs Judge’s findings of fact, nor his application of the law. Moreover, they were correct. Mr Dunne’s argument was artificial and unsupported by any factual context which suggested anything other than Mr Mehta causing his liabilities to be discharged from the variety of sources at his disposal. It would produce counter-intuitive results, contrary to the scheme of s. 70. If the argument were correct, it would create an easy mechanism to avoid the terms of the agreement which the client had entered into, namely to ensure that payments were made by some legal entity other than the person signing the retainer. That would have a large impact on the scheme of s. 70.

Issue 3(b): Special Circumstances

Kimblin J dismissed the appeal on the special circumstances issue. Whether special circumstances exist is essentially a value judgement, comparing the particular case with the run of the mill case in order to decide whether a detailed assessment in the particular case is justified, despite the restrictions contained in s. 70(2): Falmouth House Freehold Co. Ltd v Morgan Walker LLP [2010] EWHC 3092. Special circumstances do not have to be exceptional circumstances but can be established by something out of the ordinary course, sufficient to justify departure from the general position under s. 70 of the 1974 Act.

The Costs Judge did not find that special circumstances existed because Mr Mehta received regular, itemised invoices with detailed accounts of the work done and so understood his ongoing liability. He paid almost 80% of the invoices.

Kimblin J was not persuaded that the Costs Judge failed to consider whether the fact of rendering interim statute bills was itself a special circumstance. The Costs Judge stated that Mr Mehta was neither unaware nor disadvantaged by the size of the payments demanded by Howard Kennedy, as invoices were delivered on a regular, monthly basis. Those were sufficient reasons to address the point raised.

Further, Mr Mehta did receive appropriate estimates of future costs. On 30 June 2022 the partner with care and conduct sent an email to estimate costs and to highlight how high they were: £11,000 plus VAT per day plus counsel’s fees. On 26 January 2023, in response to a request for a projection of costs, a summary estimate was provided in a total sum of £486,983 excluding VAT. There were other similar types of estimate such as that of 24 March 2023. In the light of these materials, the submission that there was a special circumstance which derived from the lack of estimates was not sustainable.

Whether or not there are special circumstances is an evaluative judgement. It was for the appellant to show that the Costs Judge was wrong, and that had not been shown.

Conclusion

Grounds 1, 3, and 4 of the appeal were dismissed. The court invited the parties to seek to agree draft directions or an order within 14 days of judgment in Barnes v BDB Pitmans in respect of the outstanding CBA issue.

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SCCO Lacks Jurisdiction to Order Security for Costs of Detailed Assessment Proceedings

The Senior Courts Costs Office’s decision in Magomedov v Rabinovich [2026] EWHC 962 (SCCO) addresses whether the court conducting a detailed assessment has jurisdiction to order security for the costs of that assessment under CPR 25, or whether its powers are confined to the interim costs certificate procedure under CPR 47.16.

Background

The underlying litigation arose from two alleged unlawful means conspiracies. The Respondents (Claimants in the original proceedings) brought claims against the Applicants — the Eleventh, Twelfth, and Fourteenth Defendants, described as the Rabinovich Defendants — together with nineteen other defendants. The first alleged conspiracy concerned the sale of an indirect interest in a company to a Russian state-owned oil pipeline company at an undervalue, in respect of which the Respondents claimed approximately US$5 billion. The second alleged conspiracy concerned the wresting of control and practical ownership of the Respondents’ stake in one of the largest transport and logistics companies in Russia, with a claimed value of approximately US$8.8 billion, including an entitlement to acquire a further interest under option agreements.

The substantive proceedings were determined by Mr Justice Bright, whose judgment is reported at [2025] EWHC 59 (Comm). At a hearing on 3 May 2024, Bright J awarded security for costs in favour of the Applicants in the sum of £1,162,000. He rejected the Applicants’ alternative application for summary judgment or strike out in respect of certain parts of the Respondents’ claim but held that there was no jurisdiction to hear any of the Respondents’ claims. By order dated 17 January 2025, the Eleventh and Twelfth Defendants were awarded 75% of their costs on the standard basis, and the Fourteenth Defendant was awarded its costs on the indemnity basis. By order of 17 February 2025, substantial interim payments on account of costs were awarded: £1,162,000 in favour of the Eleventh and Twelfth Defendants and £211,286 in favour of the Fourteenth Defendant.

The Respondents’ funding arrangements were described as opaque. Following Bright J’s judgment, a further application was heard by Bryan J for disclosure in respect of those arrangements. That application was granted, with costs awarded in the Applicants’ favour. An interim payment on account of costs of approximately £73,116 was awarded in connection with the disclosure application, and a further interim payment of £32,312 was made in respect of a freezing injunction. The total interim payments awarded across all relevant orders amounted to approximately £1.8 million, a figure supported by an agreed schedule produced to the court. Permission to appeal Bright J’s decision was refused, though a renewal application was due to be heard shortly at the time of the costs hearing.

The Applicants served a Notice of Commencement of Detailed Assessment and a Bill of Costs in the sum of £4.2 million in respect of four costs orders made in their favour, with two further orders relating to an injunction application. At the time of the hearing before Costs Judge Brown on 11 March 2026, Points of Dispute had not yet been served — they were due on 27 March 2026 — and no Request for a Detailed Assessment Hearing had been filed. It was in this procedural context that the Applicants made an application to the Senior Courts Costs Office for security for the costs of the detailed assessment proceedings in the sum of £336,000, representing 70% of an estimated total of approximately £480,000.

The Application and Opposing Arguments

The Applicants sought security in the sum of £336,000, said to represent 70% of the estimated future costs of the detailed assessment. Those estimated costs comprised £220,000 for preparation of the Bill of Costs and approximately £259,000 for preparing Replies, conducting settlement negotiations, and representation at the detailed assessment hearing — giving a total estimate of approximately £480,000. The Applicants contended that there had been material changes of circumstances since the original security for costs order made by Bright J, which justified the court revisiting the position and granting further security specifically referable to the costs of the assessment proceedings. They identified four material changes: the award of costs on the indemnity basis in favour of the Fourteenth Defendant; the applications before Bryan J and his costs orders; the CPR 52.30 proceedings; and an increased risk of non-payment, given that the First Claimant was said to be incarcerated in Russia and had been made bankrupt, and that the Respondents would have no incentive to pay costs if permission to appeal were refused.

The Applicants, represented by Mr Thomas Mason of Fieldfisher LLP, contended that CPR 25.1 and CPR 25.2 conferred jurisdiction on the SCCO to make an order for security for the costs of the detailed assessment proceedings. They submitted that CPR 25.2(1) expressly permits an interim remedy to be made “at any time, including before proceedings are started or after judgment has been given”, and that this language was broad enough to encompass an application made in the context of detailed assessment proceedings following the determination of the substantive claim. They further submitted that, for the purposes of CPR 25.26, they should be regarded as defendants — having been compelled to participate in the original litigation — and that the costs proceedings were sufficiently ancillary to the substantive claim to bring them within the scope of the security for costs jurisdiction.

The Respondents, represented by Mr Imran Benson of Seladore Legal Limited, objected on two principal grounds. First, they submitted that the SCCO lacked jurisdiction to entertain the application at all, on the basis that the court’s powers in detailed assessment proceedings are limited to those set out in CPR 47, and that the only relevant interim measure available is the power to issue an interim costs certificate under CPR 47.16. Second, they argued that even if jurisdiction existed, the application should be dismissed on conventional principles applicable to security for costs applications, including the principle that security cannot be ordered against a party who is, in substance, the defendant to the claim in question. The Respondents contended that, in substance, the receiving party in a detailed assessment is more akin to a claimant pursuing a monetary claim, and that the paying party is in the position of a defendant compelled to participate in those proceedings.

The Respondents accepted that the relevant “gateways” for a security for costs application were satisfied and did not contend that an award would stifle the assessment proceedings.

The Jurisdictional Question

Costs Judge Brown described the application as unusual, if not unprecedented, in the context of inter partes detailed assessment proceedings in the SCCO. Neither advocate was able to find any cases on it, nor was the judge aware of any such application ever having been made in that court.

The judge began by reviewing the fundamental principles governing security for costs. As Lord Millett explained in CT Bowring v Corsi & Partners [1994] BCC 713, the purpose of the jurisdiction is to prevent “the injustice which would result if a plaintiff who was in effect immune from orders for costs were free to litigate at the defendant’s expense even if unsuccessful”. An order for security can be made only against a plaintiff; it cannot be made against a defendant, because a plaintiff institutes proceedings voluntarily whereas the defendant has no choice in the matter and must be allowed to defend himself without being subjected to the embarrassment of having to provide security for the plaintiff’s costs. The court must have regard to the substantial and not the nominal position of the parties.

The judge noted that it appears clear from a number of decisions that when dealing with the substantive claim a court can order security for the costs of the detailed assessment proceedings as costs of proceedings. Thus, while the costs sought under a costs order may be seen as a ‘claim’ by a winning defendant against a losing claimant, the costs of detailed assessment proceedings may form part of the security that the court provides to a defendant in a claim. The decisions appear to assume “proceedings” in CPR 25.26(2) must be understood as including the detailed assessment proceedings for the purpose of determining the amount of security, presumably on the basis that such proceedings are ancillary to the main proceedings, or as it may be put, the assessment of costs are part of the ‘working out’ of the substantive claim.

However, the judge held that it does not follow that merely because the court dealing with the substantive claim could include such costs as part of the security, the court in the detailed assessment proceedings can be assumed to have the same powers under CPR 25.2, rather than the more limited power under CPR 47, once the claim has been determined.

The judge observed that the meaning of the term ‘proceedings’ depends on its statutory context and on the underlying purpose of the provision in which it appears. In Serbian Orthodox Church – Serbian Patriarchy v Kesar & Co [2021] EWHC 1205 (QB), Foxton J held that detailed assessment proceedings were a distinct phase of the proceedings, not an originating process. However, the court was not addressing the issue as to whether for other purposes costs proceedings may be regarded as separate from the substantive proceedings, in particular for the purpose of deciding whether the terms of CPR 25 apply.

Costs Judge Brown reasoned that detailed assessment proceedings have their own particular procedure. They do not set out expressly any power to grant security for the costs of detailed assessment, nor is there any express importation of CPR 25. The only interim measure provided for is the power to order an interim certificate, which is itself a method of providing security for a claim. Whilst CPR 25.2 permits the court dealing with the substantive claim to make an interim order “after judgment has been given”, the use of the word ‘interim’ in CPR 25 at least points to the jurisdiction to make such orders being linked to determination of the claim which the court is then dealing with. It is perhaps difficult to read “after judgment” as extending the power so that it can be used at any time after judgment and even in later cost proceedings, rather than as part of the process of giving judgment.

The judge distinguished the power to order security from ordinary case management powers such as disclosure or requests for further information. Whilst the court does have power to order disclosure under its case management powers or CPR 31, and generally to order a Part 18 request for further information even though the power might not be expressly set out, the power to order security is qualitatively different from ordinary case management powers. The former are rather more obviously case management powers which are integral and necessary to the determination of disputes which arise in detailed assessment, whereas orders for security on claims which have already been determined are not.

The judge held that had it been intended that there should be a power to make orders for security in detailed assessment proceedings, the rules would have said so expressly and made clear the circumstances in which it could be applied for, and indeed who is to be regarded as the defendant and who the claimant for these purposes. The previous status of the parties as claimant and defendant for the purposes of the CPR rules is changed in detailed assessment, so that the parties are referred to as receiving party and paying party. Whilst the fact that the parties are renamed may not be decisive, it is indicative. If the Applicants were right that they should still be regarded as the defendants and CPR 25 did apply independently in costs assessment, then both parties might be able to apply for security, as the receiving party might say they were the defendant to the claim for costs. This would seem to be a highly improbable interpretation.

The judge further held that if CPR 25 had been intended to apply, the rules would have dealt with the difficult issue as to the point at which a claim for costs ceases to be merely ancillary to the original substantive claim and as to whether the court is imposing security for a claimant on a claim — which it is clear the court should not, at least in general, do.

In contrast to the position when the court is dealing with the substantive claim, there is no obvious sanction to enforce an order for security. Mr Mason did not show the judge any basis in law for striking out Points of Dispute, which are not regarded as statements of case, not being documents which require a statement of truth. In any event, in many instances such an order might be a disproportionate sanction.

The judge observed that there is no obvious need for any power to order security in detailed assessment proceedings given the wide powers of the court dealing with the substantive claim. It is far from the ordinary role of the costs court to deal with issues such as the ‘gateways’ and broader considerations which might apply in the event that there were risks of stifling — issues which are outside the SCCO’s normal remit. It is difficult to see how the Costs Court can readily determine whether there has been a material and sufficient change of circumstances when it is not the court dealing with the substantive claim. These can be expensive and time-consuming applications.

The judge noted that an order for interim payment is a form of security, and the court thus has the express power to provide security by way of an interim costs certificate. In the circumstances, and for the reasons set out, the judge was not persuaded that he could read into the provisions of CPR 47, which are at least intended to be part of a self-contained code for detailed assessment, powers that go beyond that.

Following the approach in GFN SA v Bancredit Cayman Limited [2010] Bus LR 587, the court can look to the settled practice of the court and, as the judge indicated, it does not seem that there is any practice of the court making such orders in inter partes claims. If the judge were to accept that the Applicants were right, it would be effectively to import or instigate the risk of a substantial amount of satellite litigation. Had there been such a jurisdiction it would surely have been enthusiastically employed to ward off any challenge to the claim for costs. There is good reason to believe such a jurisdiction would be used oppressively and would give rise to disproportionate costs. Such concerns strongly weighed against what seemed to the judge a novel interpretation of the rules.

The application itself appeared to have generated some £150,000 in costs. Costs proceedings are intended to be costs efficient and afford access to justice in circumstances where parties are often depleted in resources. The judge accepted that there are circumstances where a defendant to a claim may not be fully protected in respect of the costs of detailed assessment, but there are ample means of achieving security before the court dealing with the substantive claim. That must in itself be good reason for rejecting an application for security.

Costs Judge Brown concluded that he was not persuaded that the court dealing with the assessment of costs does have power to order security. But even if there were technically a jurisdiction to do so, the position is akin to a lack of jurisdiction and he should in limine refuse the application.

Material Change of Circumstances and Discretion

The judge went on to consider, in case he was wrong about jurisdiction, whether there had been a material change of circumstances justifying a revisiting of the security previously ordered, and whether in any event the application should be refused as a matter of discretion.

A defendant may obtain an order seeking an increase in security previously allowed if they can justify the further increase by reference to a material change of circumstances; and if the defendant proves such a material change of circumstances the court has a discretion to recalculate afresh the totality of the security. The judge was not satisfied that there had been any adequate or substantial change of any substance justifying the revisiting of the security for the costs of detailed assessment. Whilst the Applicant may be able to identify some changes, these were at best slight. As a matter of discretion, the judge was firmly of the view, in the particular circumstances, that he should not revisit it.

As to the indemnity costs order, the judge accepted that when a court is dealing with the substantive claim, the award of costs on an indemnity basis may amount to a material change of circumstances. However, not only was it not at all clear on what basis the security was granted in this case, the judge was not confident what, if any, difference it would make to the amount of the required security. Proportionality is unlikely to be a factor. Whether on the indemnity basis or standard, the court is required to determine the reasonableness of the costs, and the court is required to apply an objective standard of reasonableness when deciding whether costs have been reasonably incurred. In many cases the court may have little doubt about the reasonableness of the costs it is to award so that there is no need to exercise any doubt in favour of the receiving party. The basis of assessment may thus make no difference. Beyond referring to the award of costs on an indemnity basis, Mr Mason did not provide any clear basis for thinking that the basis of assessment would necessarily affect the extent of the security required. In any event the place for this point was before Bright J, not at this stage of the costs proceedings.

As to the order of Bryan J, if this changed anything it was marginal, as a substantial interim payment had been made against the costs of the disclosure application and a freezing injunction application. The judge may well have taken the view that the award of such an interim payment provided adequate security generally. The further difficulty was the failure to explain why the matter was not raised before the judge who would have been in a far better position to deal with it. In any event additional costs associated with the detailed assessment of perhaps relatively short applications would be modest. This could not justify a general revisiting of the amount of security.

As to the Part 52.30 application, plainly it was not for this court to give security in respect of other applications. It had not been heard at the time of the hearing and presumably the costs of it were not in the Bill.

As to greater risk, the judge accepted that if permission to appeal is refused the Respondents may no longer have an incentive to comply because judgment has already been given. But security is not set as a function of risk. Once the gateways are established and there is a risk of non-payment, then full security is provided. Mr Mason did demur from the judge’s suggestion that security in this case had been set on such a basis. Accordingly, the judge did not accept that the matters relied on were sufficient to justify revisiting the security.

Discretionary Refusal

The judge held that in any event he would reject the application in his discretion.

First, it seemed to the judge that the Applicants could have raised these matters before Bright J, or indeed before Bryan J, in any event when the Court was concerned with the extent of the interim payment. No adequate explanation as to the failure to raise this at an earlier stage had been provided.

Second, the fact that the Applicants recovered only 75% of their costs before Bright J seemed to weigh in favour of reducing the amount of security and may be a reason why the Applicants were content with security as it was. In any event, this confirmed the judge’s view that he would not have increased the security.

Third, there was no obvious nor appropriate sanction if the Respondents did not comply with an order of payment into court. Mr Benson was not saying that the Respondents would not pay any security ordered, but if the Respondents did not pay there would need to be consideration of the sanction. Such a consideration led the court to refuse security in Dar International FEF Co v Aon Ltd [2003] EWCA Civ 1883. The order sought did not include any unless provision, and the judge remained unclear as to what effective sanction might be provided by way of an unless order. It was difficult to see what effective and proportionate measures would follow if no payment were made. The striking out of the Points of Dispute, even if the judge had jurisdiction to do this, was liable to be disproportionate. The benefits of a Days Healthcare order (depriving the paying party of representation at any detailed assessment hearing or the right to attend) were highly questionable. In circumstances where the costs of further hearings on this issue were likely to be substantial and disproportionate, such concerns must weigh against the order in the first instance.

Fourth, although in general it is not appropriate to consider the merits of a claim when dealing with a claim for security, in a costs claim the court may be in a good position to form a relatively clear, albeit necessarily provisional, view as to the amount reasonably recoverable. Bryan J appeared to take the view that at least some of the Applicants had a real prospect of recovering more than the amount allowed by way of interim payment. Neither party suggested the judge was bound by these views and that he could not exercise his own judgment. But in any event things had moved on since then. The Applicants had produced a Bill of Costs. The judge had not been shown it and could have been shown it. The decision not to produce it in the hearing bundle seemed significant. It was later offered by the Applicants at the hearing. It would no doubt take time to consider this Bill but it should provide details of the claim and the judge could then perhaps have taken a reasonable view as to the likely reasonableness of the costs claims and possibly a more informed view than the court ordering the original interim payment.

The judge made clear his concern about the amount of costs claimed. The hearing before Bright J proved to be lengthy and the issues arising appeared intricate, but these applications were interlocutory, not trials. Fees for counsel were said to be some £800,000. They may of course be justified but this was a large sum when seen particularly in the context of the fact that much of the work was or would have been shared with other Defendants. There was quite possibly a remarkable increase in the solicitor’s costs from the costs intimated by an open letter dated February 2025 and the Bill of Costs. If the statement of costs on the application the judge was dealing with, and the number of the attendance of fee earners at the hearing, was anything to go by, it would suggest that the costs claimed in the substantive matter may be very substantially reduced. In any event there is no reliable standing or predictable measure of a disallowance on an assessment of costs whether on a standard basis or on an indemnity basis — each claim depends on its facts. Reductions for unreasonable multiple fee-earner attendance, duplication, administrative work on bundles not properly chargeable can give rise to a large reduction of costs.

The judge noted that costs of preparing the Bill were put at £220,000; at £135-140 per hour for a Grade D costs draftsman that would equate to over 40 weeks’ work at 24/25 hours per week. The hourly rate may be open for debate and there might be some involvement of higher grades of fee earner. Nevertheless these figures appeared to be very concerning in a case where substantial time had already been spent dealing with costs, preparing for the security of costs application, the statements of costs for the interim costs application, and in circumstances where the solicitors might reasonably be expected to have kept reasonable ledgers which will have been provided in detailed bills to their clients.

The judge accepted that the sums involved in the underlying claim were huge and that it would be said that the claim was of considerable importance to the parties. Without the Bill of Costs and without Points of Dispute, it was difficult to form a view with any confidence that the further security sought was reasonably necessary for the “working out” of the claim or whether it was security to pursue a significantly overstated claim for costs. The judge’s concern was that it may be the latter but, in any event, unless he was confident that it was the former, it seemed plain from first principles that he should not in his discretion grant it.

Quantum

The judge went on to consider what amount of security might have been appropriate, had jurisdiction been established and the discretion exercised in the Applicants’ favour.

The judge held that it was impossible to say with any confidence how long a detailed assessment in this case would take, certainly without Points of Dispute. However neither party was suggesting that there were any particularly difficult features to the assessment.

The judge could see that junior costs counsel might be instructed to deal with hourly rates, if in dispute, and counsel’s fees. Such counsel might reasonably be expected, on hourly rates of circa £250-325 per hour, possibly for one day, so that the fee might be put at about £7,000-9,000. One might reasonably expect a costs draftsman and/or a costs lawyer to be primarily concerned with the Replies, if any were required. Such an individual, having been involved with preparing the Bill of Costs and having already considered the underlying files, would be familiar with the documentation, and could ordinarily be expected to deal with the rest of the assessment.

There would be work preparing the files for submission to the court and ordinarily a short inter partes bundle. However, files could be expected to be in good order. Those files should not be filleted — the full files should be provided to the court. It should not take a costs draftsman familiar with the files long bookmarking the relevant documentation so that they can be shown to the assessing judge. The most demanding element of this part of the assessment is retrieving the relevant documents and if they cannot be found, explaining their absence. But in any event the assessment generally just involves going through the documents, most of which speak for themselves, and by process of sampling and extrapolating reasonable sums, a well-ordered file should not take a long time to assess.

The judge indicated that detailed assessment in this case, assuming the typical points are taken, might be nearer 5 days, if the file is well ordered and the representation effective. That may be optimistic. It could take longer. If a long time is spent explaining why documents have not been produced to the court pursuant to the normal order for production, it could take substantially longer, but that will be a matter which might lie at the door of the receiving party. But in any event dealing with the ‘nuts and bolts’ of the assessment is rarely for counsel and normally appropriate for a costs draftsman or a costs lawyer, with limited involvement of the more senior fee earners.

In short, the judge would reckon the future costs of the detailed assessment for the purposes of security to be nearer to the relatively low £10,000s. This was a fraction of the costs said to have been incurred, albeit by both parties, in the application.

It followed that even if the judge had been persuaded to give further security, he would not have done so on the basis of the estimate of costs provided by the Applicants. It was very difficult to estimate the costs of a detailed assessment in circumstances where the judge did not have the Points of Dispute. He could not see why he should not assume that the assessment would be undertaken in an efficient manner and the underlying files were well kept and in order. But whatever the reasonable figure, it struck the judge that it was a sum that was as likely to fall within a margin of error on the initial award of security for costs or the awards of interim payment costs — a matter which might confirm his concerns about proportionality and the decisions he had set out above.

The application was dismissed.

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Default Costs Certificate Upheld Despite Variation For Irrecoverable VAT

The Senior Courts Costs Office’s decision in MT Construction Limited v Frieze [2026] EWHC 813 (SCCO) addresses the requirements for setting aside a default costs certificate under CPR 47.12, both on the mandatory ground that the receiving party was not entitled to obtain it and on the discretionary ground that there is good reason for the detailed assessment to continue.

Background

MT Construction Limited brought an application for an injunction against Dennis Frieze and Anne Saunders. By an order dated 17 July 2025, the Defendants were ordered to pay the Claimant’s costs of that application on the indemnity basis, to be assessed if not agreed. The order also provided for a payment on account of £20,000, which was duly made.

The Claimant’s costs agents, TLS, prepared a Bill of Costs and Notice of Commencement and began attempts to serve the Service Pack on the Defendants’ solicitors, Hunters Solicitors, from September 2025 onwards. Those attempts were met with some difficulty: Hunters would not confirm whether the Bill had been received when first served by post, nor would they confirm whether they would accept service by email. On 17 October 2025, TLS served the Service Pack by first class post, and Royal Mail tracking confirmed delivery on 20 October 2025. The Notice of Commencement stipulated a deadline of 11 November 2025 for Points of Dispute.

Also on 17 October 2025, a telephone call took place between Mr Collins of TLS and Mr McGuinness of Hunters Solicitors. The parties’ accounts of that call diverged in a material respect. Mr McGuinness’s evidence was that Mr Collins had agreed in principle to grant a 21-day extension for Points of Dispute if service by email were accepted. Mr Collins’s evidence, supported by a file note made on the same day, was that the call recorded only that Hunters did not have instructions for accepting service by email, with no agreement as to any extension.

On Saturday 8 November 2025, Hunters sent an email purporting to record that an agreement had been reached: that if service by email were accepted, 21 days for Points of Dispute would be agreed, and confirming that this was agreeable to Hunters. By that point, Hunters had been in possession of the correctly served Service Pack for 19 days. On Tuesday 11 November 2025, TLS replied by email confirming that Points of Dispute remained due by close of play that day and warning that a request for a Default Costs Certificate (“DCC”) would be filed if Points of Dispute were not received by 4 pm. No Points of Dispute were served, and no application was made to the court for an extension of time. On 12 November 2025, TLS filed a request for a DCC, which was sealed by the court on 14 November 2025, communicated to Hunters by email the same day, and delivered by post on 17 November 2025.

On 28 November 2025, the Defendants issued an application to set aside the DCC, supported by a witness statement from Mr McGuinness. Hunters Solicitors were subsequently intervened into by the Solicitors Regulation Authority on 4 March 2026, and Mr McGuinness moved to Alpha Alexis Law Firm, where he continued to act under the supervision of Mr Mahesh Kakkar.

In open correspondence in December 2025, the Claimant offered to consent to the DCC being varied to remove the VAT element, which would have reduced the certified sum from £47,005 to £39,271. The Defendants did not accept that offer and instead pursued the application to set aside the DCC in its entirety. Points of Dispute were not served with the set-aside application and were not served until shortly before the hearing on 25 March 2026. The matter came before Deputy Costs Judge Erwin-Jones, with judgment handed down on 8 April 2026.

Costs Issues Before the Court

The central issue before the court was whether the Default Costs Certificate dated 14 November 2025 should be set aside under CPR 47.12. Two distinct grounds were in play.

The first was the mandatory ground under CPR 47.12(1), which requires the court to set aside a DCC if it is shown that the receiving party was not entitled to obtain it in the first place. The Defendants contended that a binding agreement had been reached to extend the deadline for Points of Dispute to 1 December 2025, such that the DCC had been obtained prematurely and the receiving party had not been entitled to it.

The second was the discretionary ground under CPR 47.12(2), which permits the court to set aside or vary a DCC where there is some other good reason for the detailed assessment proceedings to continue. Practice Direction 47, paragraph 11.2 sets out the procedural requirements for such an application: it must be supported by evidence, the court must consider promptness, and as a general rule the applicant must file a draft of the Points of Dispute it proposes to serve if the certificate is set aside.

Where the mandatory ground is not established and the court exercises its discretion under CPR 47.12(2), the three-stage framework from Denton v White [2014] EWCA Civ 906 applies. The court is required to assess the seriousness and significance of the breach, the reasons for it, and all the circumstances of the case, including the need to conduct litigation efficiently, proportionately, and in a manner that enforces compliance with the Rules, Practice Directions, and audits. It is clear that good reason for the failure must be established before the court proceeds to consider the wider circumstances.

A further, narrower issue arose in relation to the VAT element of the DCC. The Claimant had offered in open correspondence to consent to the DCC being varied to remove the VAT element, on the basis that the VAT certificate within the Bill confirmed that the Claimant was able to recover VAT as input tax from HMRC. The certified sum of £47,005 would, on that basis, be reduced to £39,271. The Defendants did not accept that offer and pursued the full set-aside application instead.

The costs of the set-aside application itself were also in issue, with the Claimant seeking a summary assessment of its costs of and occasioned by the application.

The Parties’ Positions

The Defendants argued, in the first instance, that the mandatory ground under CPR 47.12(1) was made out. Their case was that a binding agreement had been reached on 17 October 2025 during the telephone call between Mr Collins and Mr McGuinness, to the effect that a 21-day extension would be granted for Points of Dispute in exchange for acceptance of email service. The email of 8 November 2025 was said to record and give effect to that agreement, extending the deadline to 1 December 2025. On that basis, the DCC had been obtained before the extended deadline had expired and the receiving party had not been entitled to it.

In the alternative, the Defendants relied on the discretionary ground under CPR 47.12(2). They submitted that the failure to serve Points of Dispute in time was inadvertent, that Mr McGuinness had genuinely believed an extension was in place until 1 December 2025, and that the period around 11 November 2025 had been one of heavy professional commitments involving High Court work in Birmingham, Manchester, and London. The Defendants further argued that the draft Points of Dispute served before the hearing demonstrated genuine issues to be resolved on assessment, and that setting aside the DCC would cause no prejudice to the Claimant, given that £20,000 had already been paid on account and the remaining sum in dispute was relatively modest.

The Claimant resisted the application in its entirety. On the mandatory ground, the Claimant’s position was that no binding extension agreement had been reached. Mr Collins’s evidence, supported by his contemporaneous file note, was that the 17 October call had recorded only that Hunters did not have instructions to accept email service, with no agreement as to any extension. The Claimant submitted that the email of 8 November 2025, sent unilaterally by Hunters on a Saturday with one working day remaining before the deadline, could not constitute a written agreement of both parties for the purposes of CPR 2.11, and that TLS’s silence in response to that email did not amount to agreement, particularly given that TLS’s email of 11 November 2025 had expressly and unambiguously asserted the original deadline.

On the discretionary ground, the Claimant submitted that the breach was serious and significant, that no good reason had been established for it, and that the reasons advanced—a mistaken belief in an extension and pressure of other commitments—were insufficient. The Claimant further contended that the draft Points of Dispute were in general terms and did not identify with particularity what items were to be challenged or on what basis, and that it would be disproportionate for the assessment to continue given that the proposed costs of the hearing alone totalled over £17,000 in a claim where the net sum in dispute was approximately £39,000 and £20,000 had already been paid on account.

The Court’s Decision

Deputy Costs Judge Erwin-Jones refused the application to set aside the DCC, but varied it to remove the irrecoverable VAT element, reducing the certified sum to £39,271. The varied DCC was ordered to stand as a costs order in the proceedings in respect of the Claimant’s costs of the injunction application.

The Mandatory Ground: CPR 47.12(1)

The judge was satisfied that the Service Pack was validly served and delivered on 20 October 2025 as confirmed by Royal Mail tracking. The period of 21 days prescribed by CPR 47.19 therefore expired on 11 November 2025. On the factual dispute concerning the telephone call of 17 October 2025, the judge preferred Mr Collins’s version of events on the balance of probabilities. The judge found that the email of 8 November 2025 did not satisfy the requirements of CPR 2.11 for a binding written agreement to vary time. An email sent unilaterally by one party after having received documents by postal service, purporting to record the terms of an earlier oral conversation 20 days earlier which the other party denied having had in those terms, could not of itself constitute a written agreement of both parties. TLS’s immediate silence in response to that email did not constitute agreement, particularly since their email of 11 November 2025 expressly and unambiguously asserted the original deadline.

The judge was conscious that 8 November was a Saturday, leaving one whole working day before the deadline at a time when the deadline must have been apparent to Hunters. Having considered all of the evidence, the judge was not persuaded that a binding extension agreement had been reached. The mandatory ground under CPR 47.12(1) was therefore not established.

The Discretionary Ground: CPR 47.12(2)

Turning to the court’s discretion under CPR 47.12(2) and applying the Denton framework, the judge found that the breach was serious and significant. The Defendants’ solicitors had been in possession of the Bill by service since at least 20 October 2025 and almost certainly for several weeks if not over a month beforehand. The 21-day period prescribed by CPR 47.19 is sufficient in all but the most complex cases, and no Points of Dispute were served by the deadline or indeed before the week of the hearing.

Mr McGuinness’s reasons for the breach were that the failure was inadvertent, that he believed there was an extension in place until 1 December, and that the period around 11 November 2025 he was engaged in heavy High Court commitments in Birmingham, Manchester and London. The judge noted that there was no evidence about the systems in place at his firm for supervision, for receiving and distributing email and postal correspondence, no evidence about diary management systems, no explanation as to why email service was initially refused, and nothing to explain what the systems were to cover the work of a busy fee earner working all over the country.

Even accepting that Mr McGuinness believed there was an extension in place, that belief was not objectively reasonable in the absence of any written agreement from TLS and in view of the fact that the Bill of Costs and Notice of Commencement had been served on 20 October and sent by email previously. The unanswered email of 8 November 2025 did not constitute any agreement, but it was relevant that even if one assumed the deadline was 1 December 2025, Points of Dispute were still not served by that date.

The reason for the breach was at best a combination of a mistaken belief in an extension and the pressure of other commitments. These were not sufficiently good reasons within the meaning of the authorities. The court took into account the need to conduct litigation efficiently and at proportionate cost. The Defendants argued that the Points of Dispute now served demonstrated genuine issues to be resolved on assessment and that setting aside the DCC would cause no prejudice to the Claimant because the Claimant had already received £20,000 on account.

The judge found that the draft Points of Dispute served before the hearing were in general terms and did not identify with any specific particularity what items were to be challenged and on what basis. In any event, the mere existence of draft Points of Dispute in a claim of around £39,000 net where £20,000 had already been paid on account did not of itself demonstrate there was good reason for the assessment to continue. It would be disproportionate for it to do so in any event. The proposed costs schedules for the hearing alone together totalled over £17,000.

On promptness, there was a delay of between 14 and 11 days before the application to set aside was issued. Mr McGuinness explained this by reference to the SRA intervention and transition. The judge took that into account but noted that the SRA intervention did not occur until 4 March 2026, well after the application was issued. The delay in November was not explained by that.

The judge was not satisfied that a good reason had been shown for the detailed assessment to continue. The mandatory grounds failed and the discretionary grounds also failed. The application was therefore refused.

Variation for VAT

The Claimant had offered in open correspondence to consent to the DCC being varied to remove the VAT element. In any event, the VAT certificate within the Bill confirmed that the Claimant was able to recover VAT as input tax from HMRC. The DCC was varied under CPR 47.12(2) to reduce the certified sum to £39,271. The payment of £20,000 made on account on 14 August 2025 was to be credited against the varied DCC sum in the ordinary way upon enforcement.

Costs of the Application

The Claimant had succeeded in resisting the application to set aside the DCC. The Defendants brought the application and failed on a substantive ground. The set-aside was refused. The variation of the DCC to remove VAT was, on the Claimant’s open offer, always going to happen. The Defendants chose not to accept the offer to vary and instead pursued a full set-aside. Accordingly, the Defendants were ordered to pay the Claimant’s costs of and occasioned by the application. The judge summarily assessed those costs at £4,250, noting that no VAT was claimed.

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Indemnity Costs Awarded for Libel Claim Used to Pressure Anonymous Artist

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

Background

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

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

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

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

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

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

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

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

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

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

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

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

Legal Principles

Indemnity costs

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

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

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

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

Non-party costs orders

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

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

The Indemnity Costs Application

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

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

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

The Court’s Analysis on Indemnity Costs

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

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

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

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

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

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

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

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

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

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

The Non-Party Costs Application

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

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

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

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

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

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

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

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

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

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

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

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

Conclusion

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

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