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Security for Costs Refused Where Claimant Shows Very High Probability of Success and Defendant’s Estimate Demonstrably Excessive

The King’s Bench Division’s decision in Yuen v Li & Anor [2026] EWHC 532 (KB) illustrates how the cumulative effect of a claimant’s very high probability of success, a defendant’s demonstrably excessive costs estimate, and the existence of alternative security within the jurisdiction can decisively weigh against ordering security for costs under CPR 25.27.

Background

The claim concerned the alleged misappropriation of 2,323.28423347 Bitcoin, valued between £160-£180 million. The claimant alleged that his estranged wife, the first defendant, obtained his private key and transferred the Bitcoin without authorisation on 2 August 2023. The claimant’s case rested on audio recordings from 29 and 31 July 2023, which he contended captured the first defendant discussing the exfiltration of the Bitcoin, the difficulties of converting it to cash, and the need to avoid detection.

A without notice proprietary asset preservation injunction was granted by Sweeting J on 27 November 2025. The claimant undertook to issue the claim form within 24 hours but failed to do so. On 10 December 2025, the claimant applied for relief from sanctions, which was granted by Sweeting J on 16 December 2025, with time extended to 4 December 2025.

The first defendant filed an affidavit in compliance with the injunction order which amounted to a bare denial, confirming only that she was “unaware of any information required to be provided” in response to the matters alleged.

The claimant subsequently applied to amend the claim form and particulars of claim to add causes of action including unjust enrichment, breach of confidence, misuse of private information, causing loss by unlawful means, and proprietary restitution/constructive trust. The first defendant applied to strike out the claims in conversion and trespass to goods and sought security for costs. At the hearing on 2 March 2026, Cotter J allowed the amendment application and then considered the strike-out and security for costs applications.

The Security for Costs Application

The threshold condition under CPR 25.27(b)(i) was satisfied: the claimant was resident in Thailand. The court therefore had to determine whether, having regard to all the circumstances, it was just to make an order for security for costs.

The first defendant initially sought security in the sum of £678,715.80 for future costs through to trial, supported by a costs schedule. She argued that the claimant’s residence outside the jurisdiction created an enforcement risk, that the merits were not so clear as to weigh against an order, and that the costs sought were reasonable and proportionate given the value and seriousness of the claim.

The claimant resisted on multiple grounds. He submitted there was a very high probability of success based on compelling evidence. He argued the first defendant’s costs estimate was demonstrably excessive and failed basic scrutiny. He pointed to alternative security within the jurisdiction: valuable watches seized by Sussex Police from the first defendant’s home, with an estimated combined value exceeding £250,000. Finally, he provided evidence through his solicitor of substantial assets including mortgage-free properties in Dubai and a substantial investment portfolio, but declined to provide detailed financial disclosure given the history of alleged misappropriation.

The Court’s Analysis

Cotter J dismissed the application, finding that three cumulative circumstances weighed decisively against making an order.

- - Very High Probability of Success: Applying Porzelack v Porzelack [1987] 1 WLR 420, the judge held that where it can clearly be demonstrated that there is a very high probability of success or failure, this is a matter that can properly be weighed in the balance. The court found the claimant had demonstrated a very high probability of success. The evidence included the warning from the claimant’s daughter in early July 2023, the audio recordings capturing discussions about taking the Bitcoin and avoiding detection, the discovery of cold wallets and recovery seeds during the police search of the first defendant’s home, and the first defendant’s persistent failure to provide any explanation despite numerous opportunities. The judge observed that the Bitcoin had remained at the addresses to which it was moved, consistent with the difficulties of realisation identified in the recorded conversations. This circumstance weighed heavily against ordering security.
  - Demonstrably Excessive and Unreliable Costs Estimate: The court conducted what it described as a “broad brush” analysis of the first defendant’s costs schedule and found it contained clearly unsustainable estimates. The factual dispute was straightforward, the particulars of claim extended to only 12 pages and 45 paragraphs, witness evidence would likely be limited, and disclosure could not realistically be document-heavy. Yet the estimate included: 75 hours of solicitor time (over 10 working days) to prepare a defence following a bare denial; 245 hours for disclosure in a non-document-heavy case; 75 hours to prepare for a two-hour case management conference; and 95 hours for witness statement preparation despite the simplicity of the factual issues. The judge described the estimate for the CMC as “nonsense” and found no sensible basis for the figures advanced.

During the hearing, confronted with the court’s analysis, the first defendant dramatically reduced the scope of her application from costs to trial (£678,715.80) down to costs to the case management conference only. However, the judge found “the damage was already done.”

Significantly, the court held that the fact a demonstrably excessive figure had been sought and verified by statement of truth was relevant not only to quantum but to whether any order should be made at all. The judge stated: “The purpose of an order for security for cost is to protect a party against the risk of not being able to enforce any costs order the Court must ensure that it is not used as an instrument of oppression by seeking excessive security.” The first defendant’s conduct in advancing an unreliable and excessive estimate—which the court found could constitute an attempt to use security as an instrument of oppression—weighed against making any order.

- - Alternative Security Within the Jurisdiction: The court noted that valuable property was held by Sussex Police within the jurisdiction following the first defendant’s arrest. This included numerous high-value luxury watches with individual estimated values ranging from approximately £3,600 to £94,500, and cryptocurrency hardware wallets. The claimant’s solicitor stated in his witness statement that the combined estimated value was well in excess of £250,000. The first defendant’s own solicitors had proposed a division of these items in correspondence, suggesting the claimant be left with six Rolex watches and two Patek Philippe watches. The court found it highly likely that this property would provide ample security for any reasonable costs order up to the CMC stage (the revised scope of the application), thereby negating the enforcement risk for the period in question. The property could not be released without the first defendant’s agreement or a court order, and there was no current risk of dissipation.
  - Other Circumstances: The court briefly addressed other arguments. The claimant had disclosed his assets to his solicitor and provided a reason for not sharing full details with the first defendant, which was understandable in the circumstances, though a confidentiality ring could have been considered had other circumstances been different. The court found no evidence of substantial obstacles to enforcing a costs order in Thailand or Dubai. The first defendant had not identified any special difficulty, material additional cost, systemic delay, or public policy objection to enforcement in either jurisdiction. The claimant’s conviction for assault was not a relevant factor regarding his ability to pay costs; convictions for dishonesty might have been relevant, but none were suggested.

Conclusion

The combination of the very high probability of success, the unreliable and excessive costs estimate that could constitute an instrument of oppression, and the existence of alternative security within the jurisdiction led the court to conclude it would not be just to order security for costs. The application was dismissed in its entirety. The judge emphasised that the three circumstances, taken cumulatively, weighed so strongly against making an order that it was unnecessary to decide every other contested point, though he addressed them briefly given the extent of submissions.

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Interpreter Fees Through Related Companies Require No Breakdown Absent Abuse

New Costs Blog

The High Court’s decision in Motor Insurers’ Bureau v Santiago [2026] EWHC 513 (KB) addresses whether interpreter fees provided through a company related to the claimant’s solicitors must be broken down to identify recoverable disbursement elements in fixed costs cases.

Background

The respondent, Mr Raphael De Lima Santiago, sustained injuries in a motorcycle accident on 22 May 2018 involving an uninsured driver. Consequently, the Motor Insurers’ Bureau (MIB) was joined as second defendant to the claim. The substantive claim settled on the first day of trial for £20,000 plus costs, with the case falling under the fixed recoverable costs regime.

Mr Santiago required Portuguese interpretation services. His solicitors, Bond Turner, served a costs schedule dated 8 August 2022 claiming £924 for an interpreter’s fee at trial. The supporting invoice was issued by Professional and Legal Services Ltd (PALS), a company related to Bond Turner. On provisional assessment, the MIB contended that interpreter fees were not recoverable as a disbursement under the then applicable CPR 45.29I. A Deputy District Judge accepted this argument. The claimant successfully appealed this point directly to the Court of Appeal, which held that an interpreter’s fee was a recoverable disbursement. The matter was then remitted to His Honour Judge Dight, the Designated Civil Judge for London, to assess the quantum of that fee.

Before Judge Dight, the MIB argued that the PALS invoice likely contained an irrecoverable agency or profit element and sought a breakdown. The claimant resisted providing a breakdown, maintaining the fee was reasonable. Judge Dight, in a reserved judgment dated 21 February 2025, assessed the recoverable fee at £794.40 (being £662 plus VAT). The MIB appealed that assessment, and permission was granted by Sir Stephen Stewart on 4 August 2025.

Costs Issues Before the Court

The appeal concerned the correct approach to assessing a disbursement for interpreter services within a fixed costs case. The central issues were: first, whether the receiving party was required to provide a detailed breakdown of an invoice from a service provider company (particularly one related to the solicitors) to identify and potentially strip out any agency fee or outsourced profit cost; second, whether, in the absence of such a breakdown, the fee should be assessed at nil; third, whether the Judge’s methodology for assessing a reasonable and proportionate fee was erroneous in law.

The Parties’ Positions

The appellant, the MIB, represented by Mr Robert Marven KC, advanced three principal arguments. First, it submitted that the element of the fee retained by PALS was irrecoverable in principle, being characterised as a disguised solicitors’ profit cost or an impermissible agency fee outside the fixed costs regime. A breakdown was therefore essential to identify what could be recovered. Second, it argued that a breakdown was necessary as a matter of procedural fairness to enable a proper assessment. Third, it contended that the Judge’s assessed figure of £794.40 was too high, suggesting a lower figure should have been applied, potentially aligned with the evidence of an interpreter’s direct fee of £300.

The respondent, Mr Santiago, represented by Mr Benjamin Williams KC, opposed the appeal. He submitted there was no general rule requiring a breakdown of a disbursement invoice. He argued that the fee for interpretation services, provided via a company, was a proper disbursement, drawing an analogy with fees charged by expert consultancies. He maintained that the Judge had all necessary evidence to assess reasonableness and that his conclusion was within the range of his legitimate discretion.

The Court’s Decision

Mr Justice Moody dismissed the appeal. On the first issue, the court rejected the argument that a breakdown was required as a matter of principle to separate an agency component. It approved the distinction from Crane v Cannons Leisure Centre that a disbursement is characterised by work for which the solicitor does not bear personal responsibility to the client. Interpretation services fell into this category. The court held there was nothing wrong with such services being provided via a company, noting potential advantages such as providing cover for illness or a range of interpreters of differing levels of expertise and experience. The fact that PALS and Bond Turner were related did not of itself render the arrangement unlawful or necessitate a breakdown. The court noted that the Legal Services Act 2007 expressly permits procuring services from a related company. The analogy with an expert report from a consultancy firm was considered helpful; the full fee charged would be a disbursement without needing to dissect the expert’s internal remuneration.

The court acknowledged that there may be cases where a breakdown is needed to investigate abuse or establish reasonableness. The court noted that its attention had been drawn to County Court cases requiring breakdowns for medical agency invoices and to commentary in Cook on Costs that deprecated that practice. However, the court held there was no rule of law or practice that requires a breakdown in every case where a litigation service is provided through a company. On the facts, the evidence before the Judge provided sufficient information for the assessment. This included Mr Dean’s evidence that the specific interpreter, Mr Alvarenga, would charge £300 directly, and Mr Ryder’s evidence of alternative quotes for interpreter services. With this information, no breakdown was required and the fee was not to be assessed at nil.

On the second issue, the court found no error in the Judge’s assessment of a reasonable and proportionate fee. The Judge had correctly directed himself by reference to CPR 44.3 and the market-based approach endorsed in Callery v Gray. His decision to take the mean of the quoted figures provided by the claimant’s costs draftsman was an evaluative judgment reached by an experienced judge who would himself have conducted summary assessments after trials in London including claims for interpreters’ charges. The appeal court emphasised that this was a paradigm case for appellate restraint and would not interfere with the first-instance judge’s assessment.

Accordingly, the Judge’s assessment of £794.40 was upheld and the appeal dismissed.

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Late Acceptance of Part 36 Offer | Fixed Costs Apply at Relevant Period Expiry Despite Later Multi-Track Allocation

New Costs Blog

The Court of Appeal’s decision in Attersley v UK Insurance Limited [2026] EWCA Civ 217 resolves an important question about the interplay between Part 36 costs consequences and the fixed costs regime for claims that exit the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents.

Background

The claim arose from a road traffic accident on 9 March 2018. The claimant, Laura Attersley, initiated her claim under the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents (the RTA Protocol) on 19 March 2018, valuing it at up to £10,000. The claim exited the protocol on 9 April 2018 after the defendant, UK Insurance Limited, disputed liability pending enquiries. Liability was subsequently admitted on 29 April 2019.

Shortly before limitation expired, the claimant issued a Part 7 claim form on 13 February 2021, now valuing the claim at up to £150,000 with reference to ongoing physical and psychological issues. The defendant filed a defence admitting liability on 4 March 2021 and, on the same day, made a Part 36 offer of £45,000. The 21-day relevant period for acceptance expired on 25 March 2021.

The case was allocated to the multi-track at a case management conference on 5 January 2022. A costs management order was made. It was agreed by the parties at the CMC that the case was suitable for the multi-track given the quantum claimed, the expert evidence required, and the time estimate for trial. On 8 July 2022, the claimant accepted the defendant’s Part 36 offer, which had not been withdrawn. The acceptance was late, occurring well after the expiry of the relevant period. A dispute arose as to the correct basis for assessing the claimant’s costs up to the date of acceptance, leading to a costs hearing.

Costs Issues Before the Court

The central issue was determining the costs consequences of the claimant’s late acceptance of the defendant’s Part 36 offer. The dispute turned on which rule in CPR Part 36 governed the situation. The claimant argued that because the case had been allocated to the multi-track by the date of acceptance, the fixed costs regime in Section IIIA of Part 45 was disapplied, and therefore her costs fell to be assessed on the standard basis under CPR 36.13. The defendant contended that the claim, having started under the RTA Protocol, was governed by the specific costs consequences for such cases set out in CPR 36.20, which provided for fixed costs even on late acceptance. The court had to decide whether allocation to the multi-track retrospectively ousted the application of rule 36.20.

The Parties’ Positions

The defendant argued that its construction was dictated by the plain wording of the rules. Rule 36.20(1) applied where a claim no longer continued under the RTA Protocol, which was the case here. Rule 36.20(4) specifically addressed late acceptance, entitling the claimant only to fixed costs for the stage applicable when the relevant period expired. It was submitted that rule 36.20 was a specific provision dealing with ex-Protocol claims, which should prevail over the more general rule 36.13. The defendant argued that the claimant’s interpretation would create a perverse incentive to delay accepting offers to try and secure a more favourable costs regime upon later allocation, undermining the purpose of Part 36 to encourage early settlement.

The claimant’s primary argument relied on the Court of Appeal’s decision in Qader v Esure Services Ltd [2016] EWCA Civ 1109. She submitted that the effect of allocation to the multi-track was to disapply the fixed costs regime in Section IIIA of Part 45 entirely. Consequently, the claim no longer fell within the scope of rule 36.20, and the default position in rule 36.13 applied, with costs to be assessed on the standard basis. The claimant emphasised that her claim was always suitable for the multi-track and she was not seeking a windfall, but rather the costs appropriate to such a case. She also advanced an alternative argument that even if rule 36.20 was engaged, rule 36.13(3) (“except where the recoverable costs are fixed by these Rules”) meant standard costs applied because allocation had disapplied the fixed costs.

The Court’s Decision

The Court of Appeal allowed the defendant’s appeal, restoring the order that the claimant was entitled only to fixed costs. Lord Justice Miles, giving the leading judgment with the agreement of Lady Justice Falk and Lord Justice Lewison, held that rule 36.20 applied and that the claimant was restricted to the fixed costs applicable at the date the relevant period expired.

The court found that the natural and straightforward reading of the rules was that where, on the date the relevant period of a Part 36 offer expired, the claim was still within the Section IIIA fixed costs regime (i.e., not yet allocated to the multi-track), the consequences of acceptance were governed by rule 36.20. Rule 36.20(4) expressly fixed the claimant’s entitlement by reference to the costs stage applicable at the expiry date of the relevant period. In this case, that date (25 March 2021) was long before allocation to the multi-track (5 January 2022).

The court confined Qader to its context and rejected the claimant’s broad proposition that it had retrospective effect for all purposes, including Part 36. It held that Qader decided that the fixed costs regime should not apply to a case once it was allocated to the multi-track, but it did not establish that allocation operated to treat the case as if it had never been within the regime for all purposes, retrospectively. The words “for so long as the case is not allocated to the multi-track” in rule 45.29B had a temporal meaning; the regime ceased to apply prospectively from allocation, not retrospectively. The court noted that Qader did not have to consider the interplay with other rules or the question of potential retrospective effect of allocation for other purposes.

The court emphasised that this interpretation promoted certainty and coherence with the purpose of Part 36. Drawing on the reasoning in Qader itself, where Briggs LJ had explained that requiring parties to guess whether a case which settled prior to allocation was subject to fixed costs would introduce damaging uncertainty, the court held that the claimant’s interpretation would similarly bring undesirable uncertainties into the operation of Part 36. It ensured that a defendant’s liability for costs was anchored to the costs environment applicable during the period when the claimant was deciding whether to accept the offer. It would be surprising and potentially unjust if a claimant could improve their costs position by accepting late, based on a subsequent allocation outside the defendant’s control. This would undermine the regime’s aim of encouraging early settlement.

The court rejected the claimant’s alternative argument based on rule 36.13(3). It gave two reasons: first, rule 36.13 is expressed to be “subject to” rule 36.20, so it was necessary to determine whether rule 36.20 applied before considering the specific wording of rule 36.13(3); and second, where a case continued to come within the fixed costs regime on the date when the relevant period ended, the recoverable costs were indeed “fixed” by the rules for the purposes of rule 36.13(3).

The court concluded there was no conflict between the rules, but if there were, the specific rule 36.20 would prevail over the more general rules in Part 45. The court also noted that the Rules Committee may wish to consider scenarios where a Part 36 offer is made after multi-track allocation or where the relevant period expires after such allocation, as the existing rules do not yield entirely straightforward answers in such cases. The court noted that at first instance, Stacey J had found that the claim was “always likely to be allocated to the multi-track” once the Part 7 form was issued, yet the court reached its decision favouring fixed costs even in such a case, underscoring the strength of the rule-based and policy reasoning.

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Court of Appeal Limits Pre-Transfer Costs To IPEC Scale Where No Good Reason to Depart From Transferring Judge’s Indication

New Costs Blog

The Court of Appeal’s decision in Salts Healthcare Limited v Pelican Healthcare Limited [2026] EWCA Civ 93 clarifies the costs consequences of transferring proceedings from the Intellectual Property Enterprise Court to the Patents Court, establishing that a trial judge who departs from the transferring judge’s indicated costs regime without good reason commits an error of principle.

Background

The underlying dispute was a patent infringement and validity claim concerning UK Patent No. 2569212 for an ostomy appliance. The Claimant, Salts Healthcare Limited, alleged that the Defendant, Pelican Healthcare Limited, had infringed the patent by marketing its ModaVi range of ostomy bags. Pelican denied infringement and counterclaimed for revocation. The claim was commenced in IPEC but was subsequently transferred to the Patents Court.

The procedural history relevant to costs began on 24 May 2023 when Pelican applied to transfer the claim. On 11 July 2023 HHJ Hacon acceded to the application and ordered the transfer for the reasons given in his judgment [2023] EWHC 2232 (IPEC). A recital in HHJ Hacon’s order stated that the court had indicated “that costs prior to transfer should be assessed in accordance with the usual IPEC scale cost caps pursuant to CPR r.46.21 and Practice Direction 46 albeit costs were reserved and this was an issue for the judge making the assessment”. Paragraph 2 of the order provided simply: “Costs reserved”.

The substantive trial took place in the Patents Court before Ian Karet OBE, sitting as a Deputy High Court Judge. In a judgment dated 5 March 2025, the judge dismissed Salts’ claim for infringement, declared claim 8 invalid as granted, and granted permission to amend. The judge addressed costs in a consequential judgment on 1 April 2025, in which he declined to order that Pelican’s pre-transfer costs be assessed in accordance with the IPEC scale cost caps.

Costs Issues Before the Court

The primary costs issue before the Court of Appeal was whether the costs incurred by Pelican during the period when the claim was proceeding in IPEC, prior to its transfer to the Patents Court, should be assessed subject to the IPEC scale costs caps. IPEC operates a distinctive costs regime under Section VII of Part 46 of the CPR. Rule 46.20(1) provides that “this Section applies to proceedings in the Intellectual Property Enterprise Court”. Rule 46.21(1) imposes a cap on total recoverable costs of £60,000 on the final determination of a claim in relation to liability. The only express exceptions are where a party has abused the process of the court or the claim concerns a patent, registered design, or trade mark the validity of which has been certified in earlier proceedings. In the Patents Court, by contrast, costs are assessed on the standard basis without pre-determined caps.

The dispute turned on the interaction between these provisions and the power to set terms on transfer under Practice Direction 30, paragraph 9.2(1).

The Parties’ Positions

Salts contended that the IPEC scale cost caps applied to all costs incurred while the proceedings were in IPEC, irrespective of the subsequent transfer. Its primary argument was that rule 46.20(1) governed costs for work done in that court, and that the only bases for exceeding the caps were those in rule 46.20(2), neither of which applied. Salts relied on the purpose of the IPEC scale as articulated in Westwood v Knight [2011] EWPCC 11: to provide certainty about costs exposure from the outset, enabling potential litigants and their advisers to predict their costs exposure before any action is commenced. In the alternative, if the judge had a discretion, Salts argued its exercise was flawed because he failed to give proper weight to HHJ Hacon’s indication and provided no good reason to depart from the IPEC scale.

Pelican argued that the IPEC scale cost regime applied only to proceedings that both started and concluded in IPEC. It relied by analogy on CPR 27.15(1), which expressly provides that where a claim is allocated to the small claims track and subsequently re-allocated, costs are assessed as if allocated to the new track from the outset. Pelican submitted that the absence of an equivalent provision for IPEC supported its interpretation. It also contended that the judge had correctly exercised his discretion, emphasising that the pre-transfer work formed an integral part of the overall litigation in the Patents Court.

The Court’s Decision

The Court of Appeal (Lord Justice Arnold, with whom Lord Justice Miles and Lord Justice Newey agreed) allowed Salts’ appeal on the costs issue. The court’s reasoning proceeded in three stages.

Interpretation and Discretion: The court held that rule 46.20(1) did not provide a clear answer to the question of what happens to pre-transfer costs after transfer. It rejected Salts’ primary argument that the IPEC caps applied as of right. However, it equally rejected Pelican’s interpretation that the caps only applied to cases that finished in IPEC. The court observed that Pelican’s reliance on CPR 27.15(1) was, if anything, a point against its own case, precisely because there was no equivalent provision for IPEC.

The key to the issue was found in paragraph 9.2(1) of Practice Direction 30, which provides that when ordering a transfer to or from IPEC, the court may “specify terms for such a transfer”. The court approved the earlier decision of HHJ Birss QC (as he then was) in Comic Enterprises Ltd v Twentieth Century Fox Film Corp [2012] EWPCC 13, which confirmed that this power includes the ability to order that pre-transfer costs be assessed on the IPEC scale in any event. The court agreed that it lies in the discretion of the judge making a transfer order whether to make such an order. It followed that, where no such order is made, the receiving court retains a discretion as to whether to apply the IPEC scale to pre-transfer costs.

The Purpose of the IPEC Scale: In reaching this conclusion, the court endorsed the statement of purpose given by HHJ Birss QC in Westwood v Knight, describing the scale costs regime as one of the key reforms implemented to improve access to justice for individuals and SMEs in intellectual property disputes. However, the court considered that the rationale for scale costs did not apply “at least with full force” to claims started in IPEC but then transferred to the Patents Court, since transfer inherently means the parties will no longer be protected by the scale costs provisions for future costs. The court expressly reserved for future consideration the question whether there is a residual discretion to depart from scale costs even in cases that remain in IPEC.

Flaw in the Exercise of Discretion: The Court of Appeal found that the trial judge’s exercise of discretion was flawed. The judge had concluded that it was “not an invariable rule” that pre-transfer costs were capped and that, because the IPEC work was integral to the Patents Court dispute, Pelican should recover its costs in the court in which the matter was determined. The appellate court held that this was the wrong approach. The recital in HHJ Hacon’s transfer order contained a clear indication that pre-transfer costs “should” be assessed under the IPEC caps. The discretion therefore fell to be exercised on the basis that HHJ Hacon’s indication should be departed from “if, but only if, there was a good reason to do so”. The trial judge had not identified any such reason. Rather, he had treated the pre-transfer costs as being at large, subject to the ordinary Patents Court costs regime.

Re-exercise of Discretion: Having found the exercise of discretion flawed, the Court of Appeal re-exercised it. The court noted that HHJ Hacon, as the IPEC judge who heard the transfer application, was well placed to assess the parties’ conduct during the IPEC phase. Pelican’s arguments about Salts’ pre-transfer conduct — the same arguments it had advanced before HHJ Hacon — did not persuade the court to take a different view. The court therefore varied the costs order to limit Pelican’s recoverable pre-transfer costs in accordance with the IPEC scale.

The court added, per curiam, that although its analysis referred to transfers from IPEC to the Patents Court, the same principles apply to transfers of copyright and trade mark claims from IPEC to the High Court.

Key Takeaway

This decision establishes that where IPEC indicates at the point of transfer that pre-transfer costs should be assessed on the IPEC scale, a receiving court may only depart from that indication for good reason. Practitioners acting in IPEC proceedings that may face transfer should ensure that the question of pre-transfer costs is expressly addressed in the transfer order — and, where appropriate, that a binding term under PD 30 paragraph 9.2(1) is sought rather than a mere indication in a recital.

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New Costs Blog

The High Court’s decision in Rudan Business Holding SA v Tridan Trusted Advisors AG & Ors (Re Leo Services Holding Ltd) [2025] EWHC 3565 (Ch) provides a detailed application of the two-stage threshold test for costs budget variations under CPR 3.15A, confirming that the “promptness” requirement will be strictly enforced even where significant developments are plainly established.

Background

This matter concerned an unfair prejudice petition presented by Rudan Business Holding S.A (the Petitioner) under section 994 of the Companies Act 2006. The Petitioner and the First Respondent, Tridan Trusted Advisors AG, each held a 50% shareholding in Leo Services Holding Limited (the Company). The petition alleged that the affairs of the Company were being conducted in a manner unfairly prejudicial to the Petitioner’s interests, focusing on allegations that the Second Respondent, Daniel Tribaldos, had falsified a loan agreement and subsequently removed the Petitioner’s nominees from the board of a key subsidiary, Leo Trust Switzerland AG, before transferring the shares in that subsidiary and another to entities he controlled.

The first costs and case management conference (CCMC) was heard in March and April 2022 by Deputy ICC Judge Lambert, who approved the parties’ costs budgets for the liability phase of the proceedings. Shortly thereafter, in May 2022, the Respondents served an Amended Points of Defence and Counter-Petition which substantially expanded the factual and legal issues in dispute. The Petitioner served an Amended Reply in August 2022. The disclosure process became protracted and complex, involving applications for Letters of Request to the Swiss courts under the Hague Convention to obtain permission to disclose documents located in Switzerland. This led to the vacation of the original trial window in 2023 and the listing of a Further CCMC.

The Further CCMC eventually took place before Deputy ICC Judge Jones on 6 May 2025, where directions were given for a 16-day trial (including two days’ pre-reading) in a window beginning on 29 June 2026. At that hearing, the consideration of both parties’ applications to revise their costs budgets was adjourned to a separate hearing. Both the Petitioner and the Respondents had filed revised costs budgets in late April 2025, seeking very substantial increases to their previously approved figures. The hearing before Deputy ICC Judge Kyriakides on 18 December 2025 was to determine the principle of whether variations to those budgets should be allowed, with quantum to be addressed separately.

Costs Issues Before the Court

The court was required to determine the competing applications by the Petitioner and the Respondents to revise their respective costs budgets upwards. The Petitioner sought an additional £2,269,495, increasing its total budget from approximately £2.67 million to approximately £4.84 million. The Respondents sought an additional £1,644,045, increasing their total budget from approximately £1.75 million to approximately £3.40 million. The applications engaged the provisions of CPR 3.15A, which mandates revision of a budget where significant developments in the litigation warrant such revisions.

The key issues for the court were: first, identifying whether the events relied upon by each party constituted “significant developments” in the litigation; second, determining whether each party had submitted particulars of the proposed variation “promptly” as required by the rule; and third, if both threshold tests were met, exercising discretion as to whether to allow the revisions and in what amount.

The Parties’ Positions

The Petitioner argued that multiple significant developments warranted budget revisions. Its primary contention was that the Respondents’ Amended Defence in May 2022 fundamentally expanded the scope of the litigation by introducing numerous new allegations, expanding the defence from 21 to 51 pages. This, it argued, had a cascading effect, increasing the work required for subsequent phases including disclosure, witness statements, trial preparation, and the trial itself, which had increased from an eight-day to a sixteen-day estimate. The Petitioner also pointed to the specific costs of the effective Further CCMC in May 2025. On promptness, the Petitioner submitted that in the context of this case — where proceedings were effectively paused during the Swiss disclosure process — it was sensible and proportionate to serve a single revised budget ahead of the Further CCMC in April 2025. It argued no prejudice arose from this approach.

The Respondents similarly relied on the expansion of issues from the amended pleadings as a significant development, particularly impacting disclosure and witness evidence. They also emphasised the unexpected scale of the electronic disclosure exercise, which necessitated engaging FTI Consulting LLP as an e-disclosure provider. The Respondents contended that they had acted promptly by serving a revised budget on the Petitioner in January 2023, although this budget was never formally filed with the court. The Respondents also submitted that the court’s primary role was to manage future costs prospectively and that allowing revisions long after costs had been incurred undermined the costs budgeting regime.

The Court’s Decision

Deputy ICC Judge Kyriakides applied the two-stage test derived from Persimmon Homes Ltd v Osbourne Clark LLP [2021] EWHC 841 (Ch) and Sharp v Blanks [2017] EWHC 3390 (Ch). The court first had to be satisfied that there had been a significant development since the last approved budget and that particulars of the variation were submitted promptly. Only if both thresholds were met would the court exercise its discretion on quantum.

The court also drew on the policy purposes underlying the costs budgeting regime, as identified in both Persimmon and Sharp: predictability of costs exposure for the parties, greater accuracy in costs recovery, the likely reduction in detailed assessment costs where accurate budgets are in place, and the inherent desirability of significant developments being reflected in the budgets.

Significant Developments

The court made findings on a phase-by-phase basis. The non-consequential amendments in the Respondents’ Amended Defence, and the consequential Amended Reply, were held to be significant developments in the litigation. They expanded the case from a 21-page defence to a 51-page document, introducing new issues not reasonably anticipated at the time of the original budgeting. Many of the new allegations did not arise from the Petitioner’s own amendments and could not have been foreseen.

The effective Further CCMC listed for 6 and 7 May 2025 was a significant development, as it was an unanticipated hearing to re-set the entire procedural timetable and address additional matters including the trial length. However, the earlier adjournment of a CCMC in June 2024 was not a significant development. The court accepted the Respondents’ submission that the adjournment was a normal part of litigation. A February 2023 hearing on the Petitioner’s application to extend time for inspection of documents was similarly not significant.

The expansion of issues from the amended pleadings and, for the Respondents, the unexpected scale of data collection were significant developments in the disclosure phase. The Petitioner’s original budget had estimated a population review of 250–300 documents and production of around 2,000 documents from the Respondents. In fact, the Petitioner carried out a population review of 9,722 documents. The Respondents’ position was more stark: 3,340,540 documents were collected, of which 91,710 were migrated to a Review Workspace, necessitating the engagement of FTI Consulting LLP as an e-disclosure provider — an expense the original budget had expressly excluded.

The increased scope of issues and disclosure justified a finding of significant development for witness statement preparation. However, the court held that a party’s internal decision to change solicitors and redistribute work between solicitors and counsel — as the Respondents had done following their instruction of Gresham Legal — was not a significant development. It was an internal matter arising from the choice of the party, not a change in the litigation itself. The court added that if the overall total of the approved budgeted costs for a phase was not changed by such redistribution, the Respondents should not be penalised merely because of the reallocation; but any additional costs above the approved amount would fall to be dealt with at detailed assessment.

No significant development was found for the expert evidence phase. The Petitioner relied principally on the introduction of an issue under section 191 of the Companies Act 2006. The court found, however, that this issue was introduced by the Petitioner’s own Amended Petition, for which permission had been granted in the order of 21 March 2022, and that paragraph 12 of that order already made provision for expert reports on the relevant share valuations. The costs of that expert evidence should therefore have been included in the Petitioner’s budget as originally approved. The court also held that a substantial increase in the Petitioner’s solicitors’ hourly rates — Freshfields’ rates having risen by approximately 25% in June 2024 — was not a significant development in the litigation warranting a budget revision. It was a matter between the solicitors and their client. The Respondents’ claimed variations for this phase were also rejected: the increase in expert fees from £45,000 to £65,000 was unexplained, and the only change identified — a Panamanian expert no longer being required — would logically reduce fees, not increase them.

The increase in trial length from eight to sixteen days was a significant development warranting increases to both parties’ trial preparation and trial costs. However, the court rejected the Petitioner’s argument that the adjournment of the trial from 2023 to 2026, and the consequent increase in lawyers’ fee rates, constituted a separate significant development. An adjournment during which lawyers raise their fees does not fall within that category.

On contingent costs, the court found that the withdrawal of an anticipated injunction application was a significant development warranting a downward revision of the Respondents’ budget. However, most other contingent cost variations were refused. The Respondents’ overspend on the security for costs application was not a significant development: they should have anticipated a contested hearing and budgeted for it. An application by the Petitioner for security for costs, which was issued and then withdrawn within weeks, was not significant either. Nor was an application for an extension of time for disclosure, which the court treated as part and parcel of normal litigation.

Promptness

The court emphasised that the core purpose of costs management is the prospective control of future costs. It rejected the Petitioner’s argument that waiting to submit a single comprehensive revision until before the effective Further CCMC was “prompt” in this context. The court stated that this approach was “approaching costs budgeting from the wrong direction,” echoing Master Kaye’s language in Persimmon. The purpose of costs budgeting is to provide prospective predictability and certainty, not to approve incurred costs retrospectively. Where a significant development occurs, the mandatory obligation under CPR 3.15A is to revise the budget promptly in relation to that development — even if this results in multiple revisions over time. A single belated application, filed after the relevant costs have been fully incurred, effectively transforms the court’s function from approving prospective budgets into conducting what amounts to a summary assessment.

The parties were found not to have acted promptly regarding revisions for statements of case, disclosure, and witness statements. The significant developments in the pleadings were known by mid-to-late 2022, and the disclosure exercise had been completed by January 2023, yet revised budgets were not submitted until April 2025 — well after the relevant costs had been incurred. The Petitioner’s delay of nearly three years from service of the Amended Defence, and over two years eight months from service of the Amended Reply, could not on any interpretation be considered prompt. The Respondents’ position was no better: even if the January 2023 budget were relied upon, it was served nearly eight months after the Amended Defence and was never submitted to the court.

The Respondents’ January 2023 budget itself was not capable of satisfying the submission requirements of CPR 3.15A. It was served on the Petitioner but never filed with the court. ICC Judge Greenwood did not have a copy of it at the directions hearing on 2 February 2023, and its only appearance in the court file was as an exhibit to a witness statement filed in support of the Respondents’ security for costs application on 6 April 2023. That did not constitute submission of a costs budget to the court. The court also noted that the figures in the January 2023 budget differed significantly from the April 2025 revision — for statements of case alone, the claimed increase rose from £114,299 to £185,784 without explanation — illustrating the difficulties courts face when asked to approve incurred costs rather than prospective estimates.

The court found the parties had acted promptly regarding the Further CCMC costs, trial preparation, and trial phases. The scale of additional work for trial could only be properly assessed as the May 2025 CCMC approached, when the trial length was determined.

Conclusion on Allowable Variations

The court held that both threshold tests were satisfied only for the phases concerning the Further CCMC (held on 6 May and 18 December 2025), trial preparation, and trial. In principle, revisions to the budgets for these three phases would be allowed, with the quantum of those increases to be agreed between the parties or determined subsequently. All other requested variations were disallowed at this stage, primarily for failure to meet the promptness requirement. For those phases, the parties’ recourse will be to argue at detailed assessment that there is good reason to depart from the last approved budget under CPR 3.18.

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New Costs Blog

The Patents Court’s decision in Parsons v Convatec Limited [2026] EWHC 300 (Pat) addresses costs budgeting in a claim valued at up to £366 million, providing important guidance on the inter partes treatment of premium-rate solicitors’ fees, the limits of budget comparisons between parties, and the court’s approach to assertions that artificial intelligence should reduce litigation costs.

Background

This matter concerned costs budgeting in a substantial claim brought by the claimant, Dr David Parsons, against the defendant, Convatec Limited, under section 40 of the Patents Act 1977. Dr Parsons sought a payment equal to 10–15% of the value of the defendant’s global sales of certain products, which on his own formulation could amount to some £366 million. The claim involved seven patent families and 73 individual patents, and a 27-day trial was listed for 2027. Despite the scale of the claim, both parties agreed that costs budgeting was appropriate.

A preliminary issue regarding the potential impact of section 106 of the Patents Act on the level at which the defendant’s budget should be approved was reserved for a separate judgment. This decision proceeded on the assumption that section 106 had no effect. The outcome of that reserved judgment may have further implications for the approved budget figures.

Costs Issues Before the Court

The court was required to review and approve the parties’ costs budgets in accordance with CPR Part 3 and Practice Direction 3E. The primary focus was on phases of the defendant’s budget which were not agreed, with the claimant challenging the estimated costs as unreasonable and disproportionate. The claimant also raised a general criticism of the defendant’s incurred costs and conduct. The only phase of the claimant’s own budget that was not agreed was for disclosure. The court’s task was to determine the reasonable and proportionate costs for each future phase, having regard to the factors in CPR 44.3(5) and 44.4(3), including the sums in issue, the complexity of the litigation, and any wider factors such as the new issue of law arising under section 40 of the Act.

The Parties’ Positions

The claimant argued that the defendant’s incurred costs to date were at least double his own and were based on hourly rates that were excessive at the most senior levels, with Grade A rates of £1,100, £915 and £675 respectively, compared with corresponding figures of £700 and £525 for the claimant’s solicitors. He invited the court to deprecate this conduct and to adopt a hard-line approach to the defendant’s forward budget, relying on CIP Properties (AIPT) Ltd v Galliford Try Infrastructure Ltd. For specific phases, the claimant contended that the defendant’s solicitors’ costs were top-heavy, that four counsel including IP specialists were unnecessary, and offered lower sums for the CMC, disclosure, witness statements, and trial preparation, often pointing to his own budget as a comparator. The claimant also suggested that efficiency savings could be achieved through the use of AI in the disclosure exercise.

The defendant defended its budget as reasonable and proportionate given the exceptional scale and complexity of the claim. It emphasised the very high sums in issue, the complexity involving seven patent families and 73 patents, and the new issue of law regarding the scope of the enlarged section 40. The defendant argued it had a significantly greater disclosure exercise, requiring the location and hosting of some one million documents spanning 32 years, and that its case involved an additional dimension concerning the source of any benefit derived from the patents, justifying the instruction of IP specialist counsel and more extensive evidence. It maintained that its chosen solicitors, while expensive, were justified by the nature of the dispute, and that its budget represented costs within a reasonable and proportionate range.

The Court’s Decision

The court applied the principles from Various Shared Appreciation Mortgage Borrowers v BOS [2022] EWHC 254 (Ch), approving budgets for each phase with revisions where necessary.

General Approach

The court confirmed that the assessment was from an inter partes perspective: there is nothing wrong with a party instructing a particularly expensive firm because the case is important and they want to win, but the question is what is reasonable and proportionate to be incurred on an inter partes basis. Critically, the court emphasised that the costs budgeting exercise cannot be resolved simply by determining “appropriate” hourly rates. High hourly rates do not of themselves render costs unreasonable or disproportionate. The judge illustrated this with a practical example: a senior partner at Freshfields might complete a task in one hour at £1,100 that a more junior fee earner would take three hours to accomplish. Provided £1,100 is not an unreasonable or disproportionate cost for that task, the high hourly rate is not, of itself, a problem. The court’s quest, applying Discovery Land Company v Axis Specialty Europe, was for a figure within a reasonable and proportionate range, not the absolute lowest amount a party could be expected to spend.

The court also confirmed that a comparison between budgets may be informative but can never be determinative. Asymmetry between the parties’ budgets could be explained by differences in the volume of work, differing strategic approaches to the case, or even one side having underestimated costs.

The court rejected the claimant’s invitation to adopt a hard-line approach of the kind set out in CIP Properties, noting that this submission had not been pressed in oral argument. While opinions could reasonably differ on whether the defendant’s incurred costs were reasonable and proportionate, the court did not consider them so obviously unreasonable as to call into question the reliability of the forward budget. The criticism was, in the court’s view, nothing more than the usual debate about proportionality and reasonableness of costs, albeit involving large figures. Assessment of the reasonableness of incurred costs was a matter for a costs judge performing a detailed assessment, not for the budgeting judge.

Defendant’s Budget — Phase-by-Phase

Case Management Conference: The defendant estimated £193,600 for a further one-day CMC. The court allowed £170,000, making a modest reduction to reflect the cost of the defendant’s solicitors, particularly the proportion attributable to Grade A fee earners (£77,600 out of £118,600 in solicitors’ costs), given that counsel were also instructed at an estimated cost of £75,000.

Disclosure: The defendant estimated £1,515,775, comprising £100,000 for counsel, £270,000 for document hosting disbursements, and £1,145,775 for solicitors’ fees. The court allowed £1,300,000. It accepted that the defendant had a difficult and extensive disclosure exercise, involving the location and hosting of approximately one million documents across 32 years of the claimant’s career, and found nothing unreasonable about the number of Relativity accounts or the hosting fees. The court also accepted that investing time in training machine-learning systems for the initial stage of disclosure was a proportionate and reasonable approach.

However, the court found an element of “luxury” in the estimate. Some of that came from the hourly rates applied to Grade A fee earners, with approximately £215,000 of costs attributable to very senior staff at very high rates. Further luxury, in the court’s judgment, came from the number of hours estimated by more junior fee earners who were also charged at rates above guideline levels on work that, while extensive, was reasonably commoditised.

Significantly, the court addressed the claimant’s argument that AI should reduce the defendant’s disclosure costs. The judge observed that it is easy to assert that AI should reduce costs, but the claimant had not identified specific steps involving AI that the defendant should be taking but was not. The defendant was already adopting an orthodox approach to disclosure, including investing in machine-learning systems. The court declined to reduce the budget on the basis of a general assertion about AI efficiencies without evidence of particular savings that were being foregone.

Witness Statements: The defendant estimated £978,600 based on six factual witnesses, compared with the claimant’s estimate of £493,000 for three witnesses. The court allowed £700,000. It accepted that the defendant had a legitimate additional dimension to its evidence — disputing the extent to which any benefit derived from the patents rather than from marketing, production, distribution, or regulatory matters — and found the claimant’s offer of £382,000 much too low. However, the court considered the mix of hours unreasonable on an inter partes basis, with Grade A fee earners estimated to spend 580 hours and more junior fee earners 900 hours on six witness statements, taking into account the requirements of Practice Direction 57AC. It also noted that the three additional witnesses would not be addressing matters as complex as the inventorship and patent issues covered by the first three.

Pre-Trial Review: The defendant estimated £257,900 for a two-day PTR. The court allowed £200,000. While acknowledging one would not necessarily expect a packed agenda at the PTR given the quality of representation on both sides, the PTR was listed for two days and that could not be ignored. The court found the claimant’s own estimate for counsel (£25,000 for a two-day hearing) to be on the low side, and concluded the truth lay somewhere in the middle.
Trial Preparation: The defendant estimated £2,051,250 on the basis of a single expert. The court reduced this by £350,000 in total (to £1,701,250), comprising a £200,000 reduction for counsel brief fees and a £150,000 reduction for solicitors’ costs. The court accepted that it was reasonable and proportionate for the defendant to instruct a four-person counsel team including IP specialists, given the nature of the inventorship dispute and the expansive way in which the claimant put his case on section 40. However, it was not satisfied that it was reasonable for the defendant’s counsel team to receive brief fees almost twice those of the claimant’s team. On solicitors’ costs, the court identified a top-heavy team at expensive hourly rates, a risk of overlap with counsel, and an element of what it described as a “Rolls-Royce service” that was unreasonable on an inter partes basis.

Trial: The defendant estimated £1,850,300 based on a single expert and 30 trial sitting days (although the trial itself was listed for 27 days). The court reduced this by £330,000 (to £1,520,300). The reduction equated to the cost of having a Grade A partner, at a charge-out rate of £1,100 per hour, sitting in court for 10 hours per day for the duration of the trial, in addition to the same level of involvement from three other team members. The court considered it unreasonable and disproportionate on an inter partes basis for a full four-person solicitor team to be in court listening to counsel’s submissions throughout the trial. Consistent with its broad-brush evaluative approach, the judge acknowledged that removing the Grade A partner’s time made no allowance for residual work that partner might do outside court, but equally left untouched the other team members’ court attendance costs. Refreshers for counsel and the defendant’s expert attendance costs of £60,000 were approved, with the court finding the claimant’s own estimate of £16,500 for expert attendance too low to be a reliable guide.

Claimant’s Budget

Disclosure: The claimant estimated £859,500. The court allowed £650,000, finding that the defendant’s disclosure exercise was approximately twice as large as the claimant’s. Having allowed the defendant £1,300,000 for disclosure, the court considered £650,000 a reasonable and proportionate figure for the claimant’s less exacting exercise. An unexplained increase of £330,000 from the previous iteration of the claimant’s budget raised a flag but was not in itself a reason for reduction.

The budgets for other phases, including expert reports (budgeted on an agreed assumption of a single expert), were approved as presented or agreed. If the assumption of a single expert proved inaccurate following the May 2026 CMC, the expert evidence budgets would need to be revisited.

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New Costs Blog

The Senior Courts Costs Office’s decision in Tucker & Anor v Howe [2026] EWHC 208 (SCCO) addresses two consequential issues arising from a nine-day detailed assessment of the costs of an estate administrator appointed under probate proceedings.

Background

The matter concerned the detailed assessment of costs under section 71(3) of the Solicitors Act 1974. The costs were those of Mr Mark Keeley, a solicitor and partner at Freeths LLP, who had been appointed as administrator pending suit of the estate of the late Mr Steven Howe. The appointment was made by order of HHJ Pearce on 16 October 2020 within probate proceedings brought by the executrices (the Claimants) to propound Mr Howe’s will against his daughter, the Defendant. Mr Keeley’s appointment authorised him to charge reasonable professional fees and terminated upon the final order in the probate claim.

The probate claim was compromised by a consent order in December 2021. Disputed matters of administration were later resolved by a further consent order made by District Judge Woodward on 21 February 2023. That order provided for the determination of the Administrator’s costs by way of a third-party detailed assessment pursuant to section 71(3) of the 1974 Act, setting out a timetable for the service of a bill, points of dispute, and the commencement of assessment proceedings in the Senior Courts Costs Office if agreement was not reached. The bill for assessment, served pursuant to that order, was drawn in the total sum of £147,436.33 across twelve parts, covering both contentious and non-contentious work under two separate contracts of retainer, together with Mr Keeley’s own professional time costs and counsel’s fees.

The assessment hearing took nine days of court time over three separate periods between April 2024 and February 2025. That duration was largely the result of 67 pages of Points of Dispute which employed the word “staggering” or “staggeringly” 54 times and the word “astonishing” 17 times. The court found none of that hyperbole justified. The bill was assessed at £129,686.76, just below 88% of the amount claimed. The court found the Claimants’ conduct to have been unreasonable to a high degree and ordered them to pay the costs of the assessment on the indemnity basis, summarily assessed at £132,400 exclusive of VAT.

The parties were unable to agree the terms of a final order, leading to a further hearing on two unresolved issues: whether the Claimants or the estate should bear the costs of the assessment, and the recoverability of VAT on those assessment costs. The question of costs liability had taken on particular significance because the estate of Mr Howe was insolvent, an Insolvency Administration Order having been made on 23 July 2025.

Costs Issues Before the Court

Two discrete costs issues required determination. The first was the identity of the party liable to pay the costs of the detailed assessment proceedings. The Claimants argued the burden should fall on the insolvent estate, while Mr Keeley contended the Claimants were personally liable in their capacity as beneficiaries who had applied for the assessment. The second issue was whether Value Added Tax was properly recoverable on the costs of the assessment, with the Claimants arguing that the work constituted a non-taxable self-supply by Freeths.

The Parties’ Positions

On the burden of costs, Professor Watson-Gandy submitted for the Claimants that the central consideration in a section 71(3) assessment was the protection of the estate’s interests, relying on Kenig v Thomson Snell & Passmore LLP [2024] EWCA Civ 15. He argued that the Claimants had participated in their capacity as executrices fulfilling a fiduciary duty to the beneficiaries. He submitted that DJ Woodward’s consent order made no provision for personal liability and that CPR 46.2, which governs costs orders against non-parties, would have been required if such liability was intended.

Mr Latham argued for Mr Keeley that the Claimants had clearly applied for and pursued the assessment in their capacity as beneficiaries, a point reinforced by their own pre-action correspondence and by the legal arguments they had advanced to broaden the scope of the assessment. The Claimants’ representative, Mr Valls, had consistently corresponded on behalf of all the beneficiaries and demanded a detailed assessment in that capacity. The court retained an absolute discretion under section 51 of the Senior Courts Act 1981 and section 71(3)(b) of the 1974 Act. Given the court’s findings on the Claimants’ unreasonable conduct — conduct not attributable to the estate or the beneficiaries as a whole — it was appropriate to order the Claimants to pay the costs personally.

On VAT, Professor Watson-Gandy argued that where solicitors act for themselves in contentious business matters, the supply is not a taxable supply, citing the VAT tribunal decisions in Ralph Arthur Archer v The Commissioners and D A Walker v The Commissioners. It was submitted that Freeths’ bills were addressed to Mr Keeley at Freeths, and that estate accounts bore Freeths’ business address, indicating a self-supply. Mr Latham submitted that the point had not been raised in the Points of Dispute against the main bill and should not be permitted to be raised after the assessment had concluded. On the merits, he argued that Mr Keeley and Freeths were separate legal entities capable of entering into a retainer and that VAT was properly chargeable on Freeths’ supply of services to him.

The Court’s Decision

Burden of the Costs of Assessment

Costs Judge Leonard held that the Claimants were personally liable for the assessment costs in their capacity as beneficiaries. The court rejected the argument that they had acted as executrices, for several reasons. The Claimants had made it clear from the outset that they were acting as beneficiaries. They had relied extensively upon their position as beneficiaries to broaden the scope of their challenges to Mr Keeley’s costs. And the statutory jurisdiction under section 71(3) does not empower the court to order an assessment on the application of a trustee, executor or administrator; it empowers the court to do so on the application of any person interested in the relevant property — in this case, the beneficiaries of Mr Howe’s will.

The description of the Claimants as executrices in the heading of the proceedings and other procedural documents reflected the proper title of the probate proceedings in which the consent order was made. It had no bearing on the substance of the order or the capacity in which the assessment was pursued. The court held that CPR 46.2 had no application because the Claimants were already parties to the assessment proceedings, not non-parties. DJ Woodward’s order made no provision for the costs of the assessment because orders for assessment do not make such provision; the award and quantification of those costs was a matter for the assessing judge.

Even if the court was wrong on any of those points, it accepted Mr Latham’s submissions on the appropriate exercise of discretion. The Claimants had, without ever themselves making any attempt at negotiation, rejected three attempts by Mr Keeley to settle the costs dispute upon receipt of a smaller sum than he was ultimately found to be due on assessment. Had they engaged with those settlement attempts, it would have been possible to avoid the necessity for the court to spend nine days reducing the bill by less than £18,000 inclusive of VAT. It would be unfair for the estate, and potentially for Mr Ross Tucker and Mr Jamie Tucker (who did not participate in the assessment), to bear any part of the burden of the unnecessary costs incurred through the Claimants’ actions.

Recoverability of VAT

The court first held that the Claimants were barred from raising a VAT challenge to the main bill itself, having failed to raise the point in their Points of Dispute. CPR 47.14(6) provides that only items specified in the points of dispute may be raised at the hearing unless the court gives permission, and no such permission had been sought or granted.

On the substantive question of VAT on the costs of the assessment, the court found no basis for the self-supply argument. Mr Keeley and Freeths LLP are separate entities capable of entering into a contract of retainer. Freeths had provided services to Mr Keeley under two contracts of retainer, and VAT was payable on their charges in the usual way. The termination of Mr Keeley’s appointment as administrator did not affect this analysis. On Mr Keeley’s own time costs (Part 10 of the bill), the court held there was no question of self-supply because his services as administrator were supplied to the estate, not to himself. As for the costs of the assessment, Mr Keeley had been represented by counsel instructed by Freeths; he was not representing himself. He had a liability to Freeths for the attendant costs, and they had an obligation to add VAT to their fees and disbursements. The inclusion of Freeths’ address on bills or estate accounts was not to the point.

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New Costs Blog

The Chancery Division’s decision in United Kingdom Hydrographic Office v Samyung ENC Co Limited [2026] EWHC 206 (Ch) addresses the court’s approach to summary assessment of costs, payment on account, and indemnity costs where a defendant has deliberately disengaged from proceedings.

Background

The Claimant, the United Kingdom Hydrographic Office (UKHO), an executive agency of the Ministry of Defence, brought a claim against the Defendant, Samyung ENC Co Ltd (Samyung), a South Korean company. The dispute concerned Samyung’s breach of licence agreements relating to UKHO’s Admiralty Vector Chart Service (AVCS) data. Samyung had copied, decrypted, and converted this data into its own ‘S+Map’ format, which it then installed on navigation devices sold globally and made available for download.

On 8 November 2022, Sir Paul Morgan granted summary judgment to UKHO on liability for breach of contract and ordered an inquiry as to damages (the Inquiry). Samyung was also ordered to provide Island v Tring disclosure regarding sales. Following a Costs and Case Management Conference on 29 January 2025, Master Pester gave directions for trial, including an order for Extended Disclosure by 7 May 2025. A separate order (paragraph 10 of the CCMC Order) required Samyung to provide certain information about its disclosure process (the Paragraph 10 Information) by 19 February 2025.

Samyung failed to provide the Paragraph 10 Information. On 3 March 2025, Deputy Master Arkush ordered compliance by 14 March 2025 and gave UKHO permission to apply for an unless order. Samyung again failed to comply. On 28 April 2025, Master Pester made a First Unless Order providing that if Samyung did not supply the Paragraph 10 Information by 8 May 2025, the scope of its Extended Disclosure search would be automatically defined by parameters identified in that order, drawn from UKHO’s proposals. Samyung would be required to provide Extended Disclosure on that basis together with a confirmatory statement. Samyung did not comply.

During this period, Samyung’s solicitors, Hill Dickinson, applied to come off the record in February 2025, citing financial difficulties and an intention to file for “default”. Samyung did not subsequently provide a UK address for service as required. In March 2025, Samyung applied for rehabilitation proceedings in South Korea, and an Administrator was appointed in May. The court later inferred that Samyung’s non-compliance with its disclosure obligations was not the result of oversight or forces beyond its control, but that it had chosen not to comply as part of a strategy to delay or derail the proceedings.

On 11 June 2025, UKHO issued the UO/SJ Application, seeking an unless order that, unless Samyung complied with disclosure, its Defence be struck out and judgment entered for approximately £61.7 million plus interest and costs, or alternatively summary judgment. On 15 July 2025, UKHO made a separate application (the AS Application) for prospective orders permitting alternative service of documents, given the difficulties in serving Samyung.

The hearing of the UO/SJ Application in July 2025 was vacated following a temporary stay granted by the Insolvency and Companies Court after Samyung applied for recognition of the Korean rehabilitation proceedings. That stay was lifted by ICC Judge Barber on 11 December 2025, who found the English Inquiry was the better and quicker forum to resolve quantum. Despite representations from Hill Dickinson that disclosure work was underway, Samyung took no steps to comply. In December 2025 the Korean rehabilitation proceedings were cancelled, but Samyung immediately applied for new ones. Hill Dickinson informed the court they were without instructions. Samyung did not attend the hearing on 23 January 2026.

Costs Issues Before the Court

Three costs issues arose. First, the costs of the UO/SJ Application, including the appropriate basis and summary assessment. Second, whether UKHO was entitled to its costs of the entire Inquiry if the unless order was triggered, and the amount of any payment on account. Third, the costs of the AS Application. The court was required to determine all three issues without the benefit of any submissions from Samyung.

The Parties’ Positions

UKHO sought costs of the UO/SJ Application on the indemnity basis, summarily assessed at 90% of a total Statement of Costs of £113,637.73, equating to £102,273.96. Where items on the Statement of Costs related to both the UO/SJ Application and the AS Application (such as hearing attendance), they had been apportioned 90% to the former and 10% to the latter. Indemnity costs were said to be justified because Samyung had deliberately chosen not to comply with court orders, conduct that was unreasonable to a high degree and took the case out of the norm. UKHO submitted that the hourly rates claimed were below guideline rates and the overall sum modest given the complexity of the application and an abortive hearing in July 2025.

On the Inquiry costs, UKHO sought an order that if judgment were entered following non-compliance, Samyung should pay its costs on the standard basis, together with a payment on account of £235,241.58, representing 70% of the total incurred costs of £336,059.40. That total comprised the updated Precedent H figure of £325,501.59 and £10,557.81 for the First Unless Order application, the costs of which had been reserved at the time that order was made.

For the AS Application, UKHO sought summary assessment on the standard basis in the full amount of its Statement of Costs, £13,248.09.

Samyung did not attend and filed no evidence or submissions in response to any of the costs claims.

The Court’s Decision

Costs of the UO/SJ Application

The court awarded UKHO its costs on the indemnity basis. The same findings that justified the unless order — principally the inference that Samyung had deliberately chosen not to provide disclosure as part of a strategy to delay or derail the proceedings — were held equally to justify a finding that its conduct was unreasonable to a degree sufficient to take the case out of the norm.

However, the court did not accept UKHO’s proposed figures. Recognising that only the unless order aspect of the application had been resolved at this stage (the summary judgment aspect having been adjourned to a future expedited hearing), the court applied a 20% reduction to the total Statement of Costs, rather than the 10% UKHO had proposed. The judge considered that the witness statements and skeleton argument relating to the summary judgment aspect engaged more complex legal issues than the unless order, and that a 10% reduction understated the costs properly referable to that unresolved element. Applying an 80% allowance to the total of £113,637.73 produced £90,910.18.

The court then declined to summarily assess the costs at 90% of that reduced figure, as UKHO had proposed. Even in the absence of any submissions from Samyung on the Statement of Costs, the judge considered that 80% better reflected the level of costs which were recoverable. Applying 80% to £90,910.18 produced £72,728.14, which the court rounded up to £73,000.

Costs of the Inquiry

The court confirmed that UKHO would be entitled to its costs of the Inquiry on the standard basis in the event the unless order was triggered and Samyung’s defence struck out. The judge noted that UKHO’s own draft order had omitted the qualification that costs were payable on the standard basis, a drafting point requiring correction.

On the payment on account, the court accepted that the total incurred costs of £336,059.40 were reasonably incurred, reasonable in amount, and proportionate given the scale of the claim and Samyung’s conduct throughout. The hourly rates were below guideline rates. The court was satisfied UKHO would recover at least £235,000 on a detailed assessment and ordered that sum on account, conditional on the unless order being triggered. The judge observed that in the scenario where judgment was entered following non-compliance, a detailed assessment was unlikely ever to occur, which reinforced the importance of a realistic payment on account figure.

Costs of the AS Application

The court awarded UKHO its costs of the AS Application on the standard basis. Whilst the claimed sum of £13,248.09 was modest in the overall scheme of the litigation, the judge declined to summarily assess costs at 100% of the amount claimed. Even in the absence of opposing submissions, the court applied its own judgment and assessed the costs at £11,000.

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New Costs Blog

The Senior Courts Costs Office’s decision in MH v CH (By Her Litigation Friend the Official Solicitor) [2026] EWHC 238 (SCCO) confirms that CPR 3.1(7) remains available to challenge a Provisional Assessment Order where the receiving party failed to file the paying party’s complete Points of Dispute.

Background

This matter arose from detailed assessment proceedings following a costs order made in the Court of Protection. By an order dated 15 December 2023, HHJ Hilder ordered MH to pay 50% of CH’s costs. CH’s solicitors, Irwin Mitchell LLP, prepared a Bill of Costs totalling £19,233.93, which was served on MH on 1 November 2024.

On 22 November 2024, MH served his Points of Dispute by email. These comprised four documents: Precedent G; a Note in Relation to Points of Dispute; an annotated Bill of Costs; and a skeleton argument from a prior Court of Appeal application. Replies were served by CH on 13 December 2024.

On 15 April 2025, CH lodged the N258 bundle with the court to initiate a provisional assessment. It was later accepted by CH’s solicitor, Mr Cruise, in a witness statement dated 21 May 2025, that the bundle omitted two of the four documents comprising MH’s Points of Dispute — the annotated Bill of Costs and the Note — and also omitted MH’s open offer. Mr Cruise conceded the omission was a mistake and that all documents should have been filed.

Unaware of the omission, Deputy Costs Judge Bedford conducted the provisional assessment on 29 April 2025. The resulting Written Reasons repeatedly noted an inability to understand many of the objections. The judge later attributed this difficulty entirely to the absence of the complete documentation. The Provisional Assessment Order (PA Order) was issued the same day.

On 6 May 2025 — within seven days of the PA Order — MH issued an application to set aside the PA Order pursuant to CPR 3.1(7). MH declined to request an oral hearing under CPR 47.15(7). The application was heard on 24 June 2025. During that hearing a discrete question arose as to whether a provisional assessment order is final or interim prior to expiry of the 21-day period in CPR 47.15(7); the judge adjourned to receive written submissions on that point. Written submissions were filed by CH on 23 July 2025 and by MH on 28 July 2025, culminating in this judgment.

Costs Issues Before the Court

The central issue was whether a paying party may apply to set aside a Provisional Assessment Order under CPR 3.1(7) within seven days of its issue, as an alternative to requesting an oral hearing under CPR 47.15(7). Counsel informed the judge that there was no binding authority — indeed no authority at all — on this point, and the judge determined that a written judgment would therefore be of utility. Subsidiary questions included: whether the court’s general case management powers remain available where a specific procedural rule exists; whether the failure to file a complete set of Points of Dispute meant the decision was not a provisional assessment in the sense contemplated by CPR 47.15(7); and, if CPR 3.1(7) was engaged, whether the threshold test was met. The application also raised, but adjourned for later determination, issues of alleged misconduct under CPR 44.11 and whether a prior payment constituted a concluded agreement on costs.

The Parties’ Positions

MH, acting in person, argued the PA Order was null and void because CH had failed to comply with the mandatory requirements of PD 47 para 14.3 by not filing his full Points of Dispute and open offer with the N258 bundle. He submitted CPR 3.1(7) was available and drew analogies with other CPR set-aside mechanisms — including the power to set aside a default costs certificate under CPR 47.12(1) — to support the proposition that the rules provide redress where an order is obtained irregularly. MH contended that CPR 47.15(7) was not engaged because the provisional assessment process had never been properly initiated.

CH, represented by Mr Moss of Counsel, argued that the specific and self-contained code for challenging a provisional assessment was CPR 47.15(7), which required a request for an oral hearing within 21 days. MH’s failure to do so meant the PA Order had become binding. CH submitted that the general power in CPR 3.1(7) could not circumvent this specific rule, relying on the principle of lex specialis and the authorities of Terry v BCS Corporate Acceptances Ltd [2018] EWCA Civ 2422 and Deutsche Bank AG v Unitech Ltd [2016] EWCA Civ 119. In the alternative, CH argued that even if CPR 3.1(7) was available, the PA Order was a final order, the threshold was not met, and the circumstances fell woefully short of exceptional.

The Court’s Decision

Deputy Costs Judge Bedford granted the application and set aside the PA Order.

Availability of CPR 3.1(7)

The judge rejected the submission that CPR 47.15(7) ousted the general case management powers. She held that the two rules could operate cohesively, addressing different types of challenge. CPR 47.15(7) provides a mechanism to review items within a provisional assessment — decisions on hourly rates, individual bill items and the like. These items are defined by the four corners of the Points of Dispute, as illuminated by Ainsworth v Stewarts Law LLP [2020] EWCA Civ and PD 47 para 8.2. A jurisdictional challenge to whether the assessment was correctly constituted at all falls outside the scope of CPR 47.15(7) and may be addressed under CPR 3.1(7). She noted that CPR 3.1(1) expressly provides that the court’s case management powers are available in addition to those granted by specific rules, and that PD 47 para 14.2(2) — which lists the CPR provisions excluded from the provisional assessment regime — does not exclude CPR 3.1.

The authorities of Terry and Deutsche Bank were distinguished on the same ground: each confirmed that a general rule gives way to a specific rule, but that principle has no application where the two rules address distinct questions and operate in tandem.

Failure to File Complete Documents

The judge found that CH’s failure to file the complete Points of Dispute was a material breach of the mandatory obligation in PD 47 para 14.3(e). Critically, the provisional assessment is initiated unilaterally by the receiving party and the paying party has no involvement or control over what is filed. She drew an analogy to the duty of candour in without-notice applications: the duty on the receiving party to file all documents comprising the paying party’s Points of Dispute is stringent. She observed that Points of Dispute spread across multiple documents — including annotated bills and supplementary notes — are the norm rather than the exception in costs practice.

Because PD 47 para 14.3(e) had not been complied with, the resulting decision was not a provisional assessment in the sense contemplated by CPR 47.15(7). The consecutive steps in the workflow from CPR 47.15(4) onwards — including the 21-day period for requesting an oral hearing — were not properly engaged. The time for requesting a compliant oral hearing under CPR 47.15(7) and (8) had not properly begun to run.

Application of the CPR 3.1(7) Test

Applying the principles in Tibbles v SIG PLC [2012] EWCA Civ 518, and having regard to Lewison LJ’s observations in Vodafone Group PLC v IPCom GmbH and Co [2023] EWCA Civ 113, the judge found the threshold for exercising CPR 3.1(7) was met. The facts on which the PA Order was made had been misstated through omission — an incontrovertible fact accepted by CH’s own solicitor. The absence of the documents had axiomatically undermined the basis of the judgment, and the application was made promptly within seven days.

The judge declined to determine whether the PA Order was final or interim, finding it unnecessary to do so. The facts comfortably met the higher test of exceptional circumstances applicable to final orders in any event: the receiving party had failed to comply with a mandatory filing requirement in a without-notice context, the court had proceeded on an incorrect basis and wasted time on a flawed process, and a defaulting party ought not to benefit from its own default where the court has been inadvertently misled and a prompt in-time application has been made. For completeness, the judge further held that even if CPR 47.15(7) had been engaged, the same facts constituted exceptional circumstances within the meaning of that rule.

Case Management Directions

She exercised the power under CPR 47.15(6) to remove the matter from the provisional assessment regime, directing that it proceed to a one-day detailed assessment hearing. She concluded that an oral hearing was likely to be required in any event and it was more proportionate to proceed directly. All outstanding issues — including the CPR 44.11 misconduct application and the question of any concluded costs agreement — were adjourned to that hearing.

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

Background

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

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

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

Costs Issues Before the Court

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

The Parties’ Positions

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

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

The Court’s Decision

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

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

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

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

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

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