The High Court’s decision in Mannings Organisation Ltd v Joseph Henry Manning [2026] EWHC 1491 (KB) concerned the assessment of an interim payment on account of costs following an unsuccessful discharge application where overlapping issues with the main injunction application made it impossible to produce a statement confined to discharge costs alone.
Background
This judgment, handed down on 17 June 2026 by Andrew Kinnier KC sitting as a Deputy Judge of the High Court, dealt with a single issue: the assessment of the sum to be paid on account of costs by the defendant, Joseph Henry Manning (“Joseph Senior”), following the determination of a discharge application in proceedings brought by Mannings Organisation Limited and Mannings Amusements Limited (together, “the Claimants”).
The judgment should be read alongside two earlier decisions in the same proceedings: the judgment dated 14 May 2026 on the injunction and discharge applications ([2026] EWHC 1160 (KB)), and the consequential judgment dated 3 June 2026 ([2026] EWHC 1344 (KB)), which addressed costs, case management directions, and related matters. The costs order was made on 3 June 2026, following an earlier order on 18 May 2026.
By way of brief background, the proceedings involved an injunction application and a related discharge application brought by Joseph Senior. The discharge application was vigorously pursued and included serious allegations against the Claimants’ solicitors and counsel who had attended the hearing before Foster J on 2 December 2025. The discharge application was ultimately unsuccessful, and Joseph Senior was ordered to pay the Claimants’ costs of that application.
The Claimants were represented by Richard Power KC, instructed by Greenwoods Legal Services Limited. Joseph Senior was represented by Thomas Grant KC and Hugh Jeffery, instructed by Boodle Hatfield.
At the consequential hearing, the Claimants had not served a statement of costs dealing exclusively with the discharge application. They were therefore directed to file and serve such a statement by 4 p.m. on 3 June 2026, with Joseph Senior permitted to serve brief written submissions in response by 4 p.m. on 5 June 2026. Mr Power KC then sought and was granted permission to respond to Joseph Senior’s submissions, lodging his note on 8 June 2026. The statement of costs was re-sent on 9 June 2026, as it had not initially reached the judge. The matter was then determined on the papers.
Costs Issues Before the Court
The court was required to determine two related but distinct questions. First, what costs had the Claimants actually incurred in relation to the discharge application, given that those costs could not be cleanly separated from the broader costs of the litigation. Second, what reasonable sum should be ordered to be paid on account of those costs, in accordance with CPR 44.2(8).
The difficulty in answering the first question arose from the nature of the proceedings. The injunction and discharge applications, while formally distinct, shared a number of overlapping issues, particularly the heavily contested questions of whether there was a serious triable issue and whether full and frank disclosure had been given to Foster J at the without notice hearing on 2 December 2025. Because of this overlap, the Claimants’ solicitors took the view that it was not possible to produce a statement of costs dealing exclusively with the discharge application. Instead, they submitted a statement setting out the Claimants’ total costs of the proceedings (£165,355.84) and sought to apportion a percentage of those costs to the discharge application.
The second question required the court to apply the principles governing interim payments on account of costs, as set out in CPR 44.2(8) and elaborated upon in Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC 566 (Comm). A further contextual factor was the imminence of the trial, which was listed in a window commencing 20 July 2026.
The Parties’ Positions
The Claimants’ position
The Claimants acknowledged that it was not possible to distinguish the costs of the discharge application from the other costs of the litigation. They submitted a statement of costs covering all costs incurred in the proceedings (£165,355.84) and put forward 40% of that total as a good faith estimate of the costs attributable to the discharge application, producing a figure of £66,142.34.
Mr Power KC provided a more granular breakdown in support of that estimate. He submitted that it was appropriate to allocate half of counsel’s brief fee (£16,250) and other fees for advice and documents (£8,000) to the discharge application, together with half of the solicitors’ attendance time (£6,000) and the full costs of preparing the witness statement of Mr Wallis (£11,160). That produced a sub-total of approximately £40,000, representing roughly one quarter of the total costs of the proceedings. When attendance costs and other items were factored in, the Claimants’ solicitors’ estimate of 40% was said to be fair.
On the question of the payment on account, the Claimants submitted that 75% of the incurred costs was a reasonable figure. It was said that the discharge application had been hard fought, that the Claimants’ solicitors had sought to delegate work where appropriate to non-Grade A fee earners, and that the costs of preparing Mr Wallis’ statement had been reasonably incurred given the need to respond to serious allegations. A discount of 25% was said to be more than sufficient to address any criticisms raised by Joseph Senior.
Joseph Senior’s position
On behalf of Joseph Senior, Mr Grant KC and Mr Jeffery submitted that the Claimants’ statement of costs was not confined to the discharge application and impermissibly covered all costs incurred between 3 December 2025 and 3 June 2026. The statement sought the application fee for continuation of the injunction application, which was said to be symptomatic of the Claimants’ deliberate decision not to assist the court by providing a statement confined to the discharge application but instead to claim all their costs of the proceedings.
Joseph Senior’s submissions identified the same two questions. On the applicable legal principles, reliance was placed on Christopher Clarke LJ’s review of the authorities in Excalibur, and in particular the proposition that where there is doubt, it should be resolved in the paying party’s favour. It was also submitted that the imminence of the trial reduced the prejudice to the Claimants of having to wait for a general reckoning on costs, and that this was therefore not a case where a generous interim payment was warranted.
On the costs incurred, Joseph Senior’s primary submission was that the Claimants had done little to distinguish between the costs of the discharge application and the broader litigation costs. While some items could safely be attributed to the discharge application, such as the costs of preparing Mr Wallis’ statement (£11,160), others could not. It was submitted that 20% of the costs of the return hearing (assessed at £70,000) could reasonably be apportioned to the discharge application, producing a sub-total of £14,000. Adding the costs of Mr Wallis’ statement gave a best estimate of £25,160.
On the payment on account, Joseph Senior submitted that the Claimants’ costs were likely to be substantially reduced on assessment, with a recovery of between 50% and 60% being realistic. Taking the lower end of that range, the appropriate payment on account was said to be 50% of £25,160, namely £12,580 including VAT.
The Court’s Decision
Preliminary observations
The court addressed two preliminary points before turning to the substance. First, the suggestion that the Claimants had deliberately failed to assist the court by not providing a statement confined to the discharge application was rejected. As the Claimants’ solicitors had explained, the costs of the discharge application could not be satisfactorily separated from the other costs of the litigation. The decision to provide a statement of total costs with an apportionment was described as a pragmatic and reasoned one.
Second, the court noted the vigour with which the discharge application had been pursued on Joseph Senior’s behalf and the seriousness of the allegations made against the Claimants’ solicitors and counsel. Preparation of the Claimants’ response would necessarily have required their solicitors and counsel to review the documents in detail, to consider the draft witness statement and to give advice. Although the injunction and discharge applications were distinct, some points were inevitably relevant to both. That was especially so in relation to the heavily contested and linked questions whether there was a serious triable issue and whether full and frank disclosure had been given to Foster J.
Joseph Senior’s submission that only 20% of the Claimants’ total costs were properly attributable to the discharge application did not, in the court’s judgment, fairly reflect the seriousness of the allegation which he made, the substance of the work that would be required to respond, the nature of the issues arising in the discharge application or their connection with the substance of the injunction application. In these circumstances, Joseph Senior’s proposal that the allowed percentage of costs should be assessed by reference to the proportion of his skeleton argument that dealt with the discharge application was an unreliable way to assess the costs incurred.
Costs incurred
Having regard to the vigour with which Joseph Senior pursued the discharge application and the seriousness of the allegations which were made on his behalf, the court considered it reasonable to proceed on the basis that half of counsel’s fees (both for the return hearing and the associated work advising in conference and on documents) should be allocated to the discharge application. Similarly, half of the solicitors’ attendance time could be fairly assigned to that application. The costs of preparing Mr Wallis’ statement were exclusively concerned with the discharge application. Therefore, the costs incurred in respect of work which could be safely attributed to the discharge application was approximately £40,000, that is to say, very roughly 25% of the Claimants’ total costs of the litigation.
The costs of attendances on counsel and client, correspondence with the other side, work on the hearing bundles and work on counsel’s skeleton argument on the discharge application could not now be allocated between the discharge application and other litigation costs. In those circumstances, some caution should be exercised in reaching a view about how much of the Claimants’ total costs should be allocated to the discharge application. Doing the best it could and having regard to the nature and substance of the issues arising, the court allowed 10% of the total cost in relation to those items of work.
Therefore, 35% of the Claimants’ total costs were attributable to the discharge application, namely £57,874.44.
Payment on account
The court is required to determine a reasonable sum under CPR 44.2(8). As Christopher Clarke LJ found in Excalibur, a reasonable sum on account of costs will be an estimate dependent on the circumstances, the chief of which is that there will, by definition, have been no detailed assessment and so there is an element of uncertainty, the extent of which will differ widely from case to case as to what will be allowed on detailed assessment.
At paragraphs 23 and 24 of the Excalibur judgment, Christopher Clarke LJ explained that a reasonable sum would often be one that was an estimate of the likely level of recovery subject to an appropriate margin to allow for error in the estimation. That can be done by taking the lowest figure in a likely range or making a deduction from a single estimated figure or perhaps from the lowest figure in the range if the range itself is not very broad. In determining the amount, account needs to be taken of all the relevant factors including the likelihood, if it can be assessed, of the claimants being awarded the costs that they seek or a lesser and, if so, what proportion of them; the difficulty, if any, in recovering costs; the likelihood of a successful appeal; the parties’ means; the imminence of any assessment; any relevant delay and whether the paying party will have any difficulty in recovery if there is an overpayment.
There were, in the court’s judgment, two principal factors in assessing a reasonable sum in this case: the difficulty distinguishing the costs of the discharge application from the broader costs of the litigation and the imminence of the trial (to be heard in a window starting on 20 July 2026). As to the former, a balance needed to be struck between the difficulty identifying the costs that were truly attributable to the discharge application and the cautious approach already taken to determining the costs incurred in dealing with it. As to the latter, the expedited trial meant that the parties would not have to wait long for detailed assessment and some weight should be attached to that consideration.
For the sake of completeness, the court noted that Mr Grant KC and Mr Jeffery did not rely upon the likelihood of a successful appeal, any argument based on the parties’ financial resources or any potential difficulty recovering any overpayment from the Claimants as factors which may be relevant to increasing the discount that should be applied in assessing a reasonable sum to be paid on account.
Having regard to all the relevant circumstances (including the absence of any costs budgets), it was likely that the Claimants would recover between 65% and 75% of their costs of the discharge application. Bearing in mind that some allowance for error of estimation should be made, the payment on account should be calculated by reference to the lowest end of that range, namely 65% of the Claimants’ incurred costs. For the sake of convenience, the sum due was rounded down to £37,600.
Conclusion
Joseph Senior was ordered to pay the sum of £37,600 on account of the Claimants’ costs of the discharge application by 4 p.m. on 6 July 2026.
https://tmclegal.co.uk/wp-content/uploads/2026/06/ChatGPT-Image-Jun-17-2026-03_09_00-PM.webp10861448Toby Moretonhttps://tmclegal.co.uk/wp-content/uploads/2026/05/grok-video-6a05f798-3bcb-4a2f-b2a6-b42dc25382a7-1-mp4-image-300x150.webpToby Moreton2026-06-17 15:50:342026-06-17 15:52:16Interim Payment on Account of Costs | A Court May Accept A Total Costs Statement With A Percentage Apportionment Where Overlapping Issues Make Clean Separation Impossible
The King’s Bench Division’s decision in Vertical Aerospace Group Limited v Thandiwe Ngoma [2026] EWHC 1449 (KB) addresses the appropriate costs order following a contested return date at which several interlinking applications were argued, including an application to set aside an imaging order and an application for an interrogation order.
Background
This judgment, handed down on 12 June 2026 by Tom Little KC sitting as a Deputy Judge of the High Court (King’s Bench Division), deals solely with the question of costs following an earlier substantive judgment in the same proceedings ([2026] EWHC 1096 (KB)).
The underlying claim was brought by Vertical Aerospace Group Limited against Thandiwe Ngoma. The substantive hearing took place on 29 April 2026, with judgment handed down on 8 May 2026. Following that hand down, the court heard initial argument on the terms of the order to be made, including some argument on costs. The court then directed the parties to serve sequential written submissions on the costs question, which were duly considered alongside the oral submissions already received.
The proceedings involved an imaging order obtained by the Claimant in relation to the Defendant’s electronic devices. The Defendant applied to set aside that imaging order on the grounds of an alleged failure of full and frank disclosure at the without notice stage. The Claimant, for its part, applied for what was described as an “interrogation order” in relation to those same devices. Both applications were contested, and the court was required to determine a number of interlinking issues arising from them.
Paul Nicholls KC appeared for the Claimant, instructed by Osborne Clarke LLP. Diya Sen Gupta KC and Nick Zweck appeared for the Defendant, instructed by Farrer and Co.
Costs Issues Before the Court
The court was required to determine the appropriate costs order following a contested return date hearing at which several distinct but closely related applications had been argued. The issues before the court on costs were, in broad terms, threefold.
First, whether the Claimant was entitled to its costs of obtaining and serving the imaging order, including the costs of the supervising solicitor and the IT expert engaged in connection with that order. The Claimant’s position was that those costs were directly attributable to the Defendant’s conduct and that the order had been upheld at the contested return date.
Second, whether the Claimant was entitled to its costs in relation to the electronic devices more broadly, on the basis that it had in substance achieved swift access to relevant material from those devices, even though its application for an interrogation order had been refused in the terms sought.
Third, whether the Defendant was entitled to her costs of resisting the interrogation order application, which had been refused by the court, and whether any remaining costs should be costs in the case or costs reserved pending a clearer picture of the value of the imaging order to the litigation as a whole.
The court approached the question by reference to CPR 44.2, which sets out the general rule that the unsuccessful party pays the costs of the successful party, whilst preserving the court’s discretion to make a different order having regard to all the circumstances, including the conduct of the parties and the extent to which each party succeeded on particular issues.
The Parties’ Positions
The Claimant submitted that, on a proper analysis, it had succeeded in its applications and in resisting the Defendant’s application, and that it should therefore recover its costs. More specifically, it argued that the costs of obtaining and serving the imaging order, including the costs of the supervising solicitor and the IT expert, fell to be paid by the Defendant. The basis for this was that the imaging order had been obtained as a direct consequence of the Defendant’s conduct and had been upheld at the contested return date. As to the electronic devices more broadly, the Claimant submitted that it had in substance achieved its evident purpose, namely swift access to relevant material well in advance of standard disclosure, even if the interrogation order had not been granted in the terms sought.
The Defendant submitted that the Claimant’s application for an interrogation order had been refused and that she should have her costs of that application. As to the remaining costs, the Defendant argued that they should either be costs in the case or costs reserved. The basis for the costs reserved argument was that it was said to be premature for the court to assess costs without knowing the ultimate value of the imaging order to the litigation as a whole.
The Court’s Decision
The court concluded that there was no clear overall winner and that both parties had succeeded on certain arguments whilst losing on others. The court considered making an issue-based costs order under CPR 44.2(6)(f) but declined to do so on the basis that the issues were too interwoven to be separated out in any meaningful or non-artificial way. The court also declined to make any order attributing a particular percentage of costs to either party, for the same reason. It was noted that seeking to separate out applications that went to the maintenance of and the terms of the imaging order would be wholly artificial on the facts of this case.
On the specific outcomes, the court noted the following. The Defendant’s application to set aside the imaging order on grounds of a failure of full and frank disclosure did not succeed. However, the terms of the affidavit to be filed and served by the Defendant were varied in terms appreciably narrower than had originally been sought and obtained by the Claimant. The Claimant’s application for an interrogation order in relation to the electronic devices was refused, but the court did not adopt the approach to disclosure invited by the Defendant either. The eventual outcome on that issue was described as very much a middle ground.
Having applied CPR 44.2 to those circumstances, the court determined that the appropriate order was costs in the case. The court expressly considered whether costs should instead be reserved, or whether some part of the costs should be reserved, but concluded that neither of those alternatives was the correct order on the facts. The court’s reasoning was that roughly 50% of the time at the hearing had been spent on arguments that led to a positive outcome in some way for each side, and that the interlinking nature of all the applications and arguments made individual costs orders on individual applications inappropriate.
The order drawn up accordingly provided for costs in the case.
https://tmclegal.co.uk/wp-content/uploads/2026/06/Vertical-Aerospace-1.webp10861448Toby Moretonhttps://tmclegal.co.uk/wp-content/uploads/2026/05/grok-video-6a05f798-3bcb-4a2f-b2a6-b42dc25382a7-1-mp4-image-300x150.webpToby Moreton2026-06-15 21:35:472026-06-16 19:15:09CPR 44.2(6)(f) | Costs In The Case Where Interwoven Issues And No Clear Winner Precludes Issue-Based Or Percentage Orders
The High Court’s decision in Mirza v Lewin [2026] EWHC 1423 (Ch) addresses the circumstances in which enforcement of a costs order will be stayed pending appeal, particularly where no appeal of the underlying substantive decision is on foot.
Background
The underlying dispute arose from proceedings in the Business and Property Courts concerning a Part 20 Claim brought by Mr Camran Mirza against three directors: Mr Mark Lewin, Mr Oliver Webster, and Ms Dawn Yates. The broader litigation also involved a Main Action brought by Mr Morjaria, in which Mr Mirza and others were defendants. By a substantive judgment handed down on 28 July 2025, Mr Justice Thompsell found against Mr Mirza in the Main Action, dismissed the counterclaim brought against Mr Morjaria, dismissed claims against Mr Mirza’s wife and son, and dismissed the Part 20 Claim against the Directors.
Following the substantive judgment, on 11 August 2025 the court made an order determining costs in favour of the Directors and including an interim costs order of £1.3 million. That sum remained unpaid at the time of the hearing.
On 20 August 2025, Mr Mirza applied to the Court of Appeal for permission to appeal the August Order and for a stay of execution pending appeal, arguing a breach of the indemnity principle and contending that his liability to pay the Directors’ costs was linked to the position of the parties in the Main Action. He did not, however, seek permission to appeal the dismissal of the Part 20 Claim itself. On 18 November 2025, Newey LJ refused permission to appeal the August Order.
On the same date, Newey LJ granted permission to appeal in the Main Action on ten grounds (in addition to two already granted by the trial judge), and granted the claimants in the Main Action permission on four grounds. Those appeals were listed to be heard together over five days at the end of October 2026. One of the grounds on which permission was granted concerned an allegation that the trial had been procedurally unfair, a point upon which Mr Mirza sought to place considerable reliance in the applications before Thompsell J.
On 21 January 2026, Master Brightwell made an order on the Directors’ ex parte application under Part 71, requiring Mr Mirza to attend court for questioning as to his financial means. By the time of the hearing before Thompsell J on 19 May 2026, four applications remained live: two stay applications brought by Mr Mirza seeking to halt enforcement of the Interim Costs Order; a set-aside application by Mr Mirza seeking to set aside or vary the Examination Order; and two charging order applications brought by the Directors over certain land and securities held by Mr Mirza.
Costs Issues Before the Court
The central costs-related issues before the court arose from the Directors’ attempts to enforce the unpaid Interim Costs Order of £1.3 million, made following the dismissal of the Part 20 Claim. The court was required to determine whether enforcement of that order should be stayed, and if so on what basis and for how long.
The first stay application concerned a writ of control and warrant issued by the Directors in respect of the Interim Costs Order. The second stay application, dated 11 May 2026, sought a more general stay of all enforcement steps taken pursuant to the August Order. Both applications were brought under s.49(2) of the Senior Courts Act 1981, CPR 3.1(2)(g), CPR 40.8A, and CPR 83.7, which permits the court to stay execution where there are special circumstances rendering enforcement inexpedient, or where the applicant is unable to pay.
A further enforcement-related issue arose from the Directors’ applications for interim charging orders over Mr Mirza’s interests in land and securities, made on 10 April 2026 under CPR 73.6(3) and s.1(1) of the Charging Orders Act 1979. Master Brightwell had directed that these applications be heard on notice, given the complexity of the proceedings. The applications before the court included the question of whether to proceed to make final charging orders.
The set-aside application, whilst not a costs enforcement matter in the strict sense, was closely connected: Mr Mirza sought to set aside or vary the Examination Order made under Part 71, which had been obtained by the Directors as a step towards understanding his financial position for enforcement purposes.
Underpinning all of these applications was the question of whether the pending Court of Appeal proceedings in the Main Action, and in particular the procedural unfairness ground, had any bearing on the enforceability of the Interim Costs Order made in the Part 20 Claim, in circumstances where no appeal of the Part 20 Claim was itself on foot.
The Judge’s Recusal Concern
At the commencement of the hearing, Thompsell J raised a concern about whether he should hear the stay applications at all. It appeared that a substantial part of Mr Mirza’s argument in favour of the stay applications was based on the prospect that he would succeed in the Court of Appeal in showing that the trial had been procedurally unfair, and that such a finding would impugn, and perhaps render void, the finding in the Substantive Judgment as it related to the Part 20 Claim also. The judge’s concern was that if, in determining the stay applications, he had to take into account the likelihood of this happening, he would be, as he put it, “marking my own homework”. He might be perceived to have been biased in relation to this point, given that he was having to determine the likelihood of his own conduct of a trial being ruled procedurally unfair.
The judge noted, however, that if he was considering a stay as being analogous to a stay requested under CPR 52.16, the matter would be determined on the basis of balance of injustice, and the likelihood of success on appeal would operate only as a tie-breaker and so would not necessarily be central to the argument. The matter was resolved when Mr Lloyd, representing the Directors, made the concession that, to the extent that the decision in the stay action was dependent on having to assess the prospects for success of the procedural unfairness issue, the judge could do so without having to determine that matter, but instead making an assumption that this argument had a good prospect of success before the Court of Appeal. Mr Lloyd made it clear that this assumption was relevant to this hearing only. On the basis of that concession, the judge considered that he could proceed with the hearing as he was relieved of any need to determine the narrow point where there might be a perception that he could not be impartial.
The Parties’ Positions
Mr Mirza’s position on the stay applications
Mr Mirza, represented by Hefin Rees KC, Jack Fletcher, and Michael Campbell of Noble Solicitors, advanced three principal arguments in support of the stay applications.
First, it was argued that the court had already stayed costs enforcement in the Main Action pending the outcome of the appeals, and that it would be unfair not to extend the same treatment to the Interim Costs Order in the Part 20 Claim. This argument was advanced on the basis that Mr Morjaria had funded a substantial portion of the Directors’ costs (at least £1,160,015 by his own evidence at trial, with an indication that he would pay all of their legal costs), and that he would therefore be the ultimate beneficiary of any payment under the Interim Costs Order. Mr Mirza characterised the Directors as “litigation conduits” for Mr Morjaria, pointing to a Deed of Co-Operation and Mr Morjaria’s payment of the Directors for their time in court. It was argued that the Directors’ costs should only be payable alongside Mr Morjaria’s costs and those of Mrs Mirza and Ameer Mirza.
Second, Mr Mirza argued that enforcement at this stage would cause him and his family substantial commercial disadvantage. His principal asset was an indirect interest in a development at Walpole Court, which was subject to a Murabaha facility with Al Rayan Bank. The Facility was structured so that, on early termination, the entire outstanding balance together with Al Rayan’s expected profit until 31 September 2029 would become payable. It was further argued that the development could not be sold with vacant possession because many of the flats were occupied under sub-licences, the longest of which did not expire until January 2027, and that the most advantageous sale would be as a single portfolio with vacant possession. It was also submitted that any sale using the proceeds to pay the Interim Costs Order would breach the Asset Preservation Undertakings Mr Mirza had given in lieu of a freezing order.
Third, Mr Mirza relied on the procedural unfairness ground of appeal in the Main Action. He referred to Serafin v Malkiewicz [2020] UKSC 23, in which Lord Wilson quoted Lord Reed PSC to the effect that “a judgment which results from an unfair trial is written in water”, and to Moss v Martin [2022] EWHC 3258 (Comm) for the proposition that a stay may be appropriate not only where there is a live appeal within the English courts, but also where something else “has the potential to undermine the foundation of” the order in question. Mr Mirza argued that if the Court of Appeal were to overturn the entirety of the substantive judgment on procedural unfairness grounds, this would necessarily undermine the August Order and the Interim Costs Order.
Mr Mirza’s position on the set-aside application
In relation to the Examination Order, Mr Mirza argued that the Directors had failed to discharge their continuing duty of full and frank disclosure on the ex parte application, specifically by failing to mention in a letter to the court dated 9 February 2026 the financial disclosure already made in his 14th witness statement, and by implying that the appeals had no impact on the Part 20 Claim. He further argued that requiring him to attend an examination would be otiose and oppressive given the volume of financial disclosure already provided, the Asset Preservation Undertakings he had given, and the pending appeal on procedural unfairness grounds.
The Directors’ position
The Directors, represented by Christopher Lloyd of PCB Byrne LLP, resisted the stay applications on multiple grounds. They argued that Mr Morjaria’s funding of their costs did not amount to “special circumstances” justifying a stay, noting that this point had already been raised and dismissed when Mr Mirza sought an adjournment of the hearing on the Interim Costs Order, and that the argument framed as a breach of the indemnity principle had been refused permission to appeal. They produced evidence that, contrary to Mr Morjaria’s general statements at trial, £1.6 million of the Directors’ legal costs had been paid by their employer, IQEQ, out of some £2.7 million of legal costs incurred.
On the financial hardship argument, the Directors contended that Mr Mirza’s valuation of Walpole Court appeared substantially less than the valuation on which the Facility was granted; that the Facility appeared to allow individual units and parking spaces to be sold at current market value; and that Mr Mirza could obtain loans from other members of his family or their companies, noting that his wife was already lending him £25,000 per month for living expenses and had allowed loans to fund his appeal.
In relation to the Examination Order, the Directors relied on Vale v BSG [2020] EWHC 2021 for the proposition that in an application under Part 71 a judgment creditor is not under an obligation to disclose what documents he already has in his possession relating to enforcement, and that the fact the debtor has provided some information already is not a material matter caught by the full and frank disclosure obligation. They also relied on Sucden Financial v Fluxo-Cane [2009] EWHC 3555 (QB) for the proposition that an examination order may be made even where the relevant order has been stayed, as an examination order is not part and parcel of the process of enforcement, but is there to enable a judgment creditor to enforce a judgment order.
The Court’s Analysis
The argument based on Mr Morjaria’s involvement
The court rejected the argument that the Directors’ costs should be stayed because Mr Morjaria had funded them. Thompsell J noted that this argument had even less merit than when he had considered and rejected it before, since it was now clear that the £1.3 million interim payment would not go back to Mr Morjaria. The evidence showed that £1.6 million of the Directors’ legal costs had been paid by their employer, IQEQ. The court concluded that Mr Mirza had brought unmeritorious claims against the Directors, and they (or their employer) should not have to wait to receive payment of that money back.
The argument based on Mr Mirza’s financial position
The court accepted that, in order to realise cash to meet the Interim Costs Order, it was likely that Mr Mirza (or another member of his family) would have to sell assets, and that this might be substantially commercially disadvantageous. However, the court found that Mr Mirza’s financial position was not likely to get materially better in the medium term.
Thompsell J identified two circumstances in which the courts have stayed enforcement proceedings on the grounds that meeting a payment order would cause substantial commercial disadvantage to the paying party: first, where there is a prospect of a successful appeal; and second, where the paying party is able to point to specific assets which it is selling (or re-financing) so as to raise the money to pay, and the circumstances warrant a stay until particular steps are taken to allow those assets to be sold at a proper value. However, as Foxton J (as he then was) said in Recovery Partners v Rukhadze [2023] WLUK 369, what is of obvious relevance to the court is whether there is sufficient realistic prospect of the position changing during the period of the stay, and how confident the court can be of the stay producing the promised beneficial outcome, rather than simply kicking the can down the road to no great purpose.
The court found that Mr Mirza’s circumstances were not likely to change substantially if he was given a stay until the Court of Appeal had published its decision. The argument regarding the terms of the Facility remained valid up to 31 December 2029, and any reduction in the liability for terminating that Facility would be offset by interest payable for late payment of the Interim Costs Order. The point regarding the length of the tenancies was highly suspect: under the Renters’ Rights Act 2026 most fixed term tenancies are converted into periodic tenancies that can only be terminated by the landlord in particular circumstances, and vacant possession can only be obtained with a court order, which may take many months to obtain. The court also noted that even if some of the flats were vacated earlier, they might need to be relet in order to find the income to keep paying down the Facility.
The court also noted that even if Mr Mirza succeeded in the Court of Appeal in relation to the Main Action, it was not clear that this would be transformative of his financial position, certainly in the medium term. It was unlikely that he would get an immediate costs order at the end of a five-day appeal hearing, and if the ground on which he succeeded related to procedural unfairness rather than the substantive merits, there was a strong possibility that the Court of Appeal would defer any costs order until there had been a retrial. Further, even if Mr Mirza obtained costs or other orders against Mr Morjaria, his financial position would not be improved unless and until those orders were enforced, and Mr Mirza had himself made the case that it was extremely difficult to get enforcement against Mr Morjaria in Dubai.
Applying a test of balance of inconvenience, and ignoring for the moment the possibility of the Court of Appeal declaring that the substantive judgment was void in relation to the Part 20 Claim, the court concluded that the prospect of Mr Mirza being in a better position to pay at the point that the Court of Appeal made its judgment was too uncertain to provide grounds for a stay, especially as it was balanced by the prospect that he might lose and so find it even more difficult to satisfy his creditors.
The argument based on the Court of Appeal finding procedural unfairness
The court noted that CPR 52.16 makes particular provision for stays where there is an appeal. The essential question is whether there is a risk of injustice to one or other or both parties if the court grants or refuses a stay: Hammond Suddard Solicitors v Agrichem International Holdings Ltd [2001] EWCA Civ 2065. The normal rule is for no stay to be granted, but where the justice of that approach is in doubt, the answer may depend on the perceived strength of the appeal: Otkritie International Investment Management Ltd v Urumov [2014] EWHC 755 (Comm).
Thompsell J considered that if Mr Mirza had obtained permission to appeal the substantive judgment in relation to the Part 20 Claim, and the court was considering a stay application under CPR 52.16, the disadvantages Mr Mirza potentially faced through having to sell assets to meet the Interim Costs Order did create a risk of injustice that would crystallise if he won his appeal, after selling assets on disadvantageous terms or in disadvantageous circumstances.
However, there was no appeal on foot in relation to the Part 20 Claim and no certainty that the Court of Appeal would grant permission for such an appeal given that this was being raised very late. Mr Mirza relied on Moss v Martin [2022] EWHC 3258 (Comm) for the proposition that the stay approach does not only apply where there is an appeal on foot within the English courts, but also in circumstances where something else “has the potential to undermine the foundation of” the order in question. He argued that there was a prospect that the Court of Appeal would overturn the entirety of the substantive judgment on the grounds of procedural unfairness, citing Serafin v Malkiewicz [2020] UKSC 23, where Lord Wilson quoted Lord Reed PSC as saying that “a judgment which results from an unfair trial is written in water”.
Whilst the court could see the logic in this argument, it concluded that the Court of Appeal would not overturn the decision in the Part 20 Claim without giving the Directors an opportunity to put forward their own arguments as to whether the trial had been procedurally unfair. If Mr Mirza wished to overturn the decision in the Part 20 Claim, he could only do so by joining the Directors into the appeal. He would face a difficulty in doing so since it was now extremely late to seek to bring an appeal. Nevertheless, the court could not discount the possibility that Mr Mirza would obtain late permission to appeal on the grounds of procedural fairness, particularly as (for the reasons explained at the beginning of the judgment) the court was operating on the assumption that such an appeal, if allowed, would have a good prospect of success.
The court concluded that if an appeal of the Part 20 Claim were on foot, it would grant a stay pending the determination of that appeal. If there was no prospect of appeal, it would not grant a stay. The issues concerning procedural fairness raised the possibility of an appeal, but that possibility did not crystallise until permission was given for an appeal on those grounds. In these circumstances, the only fair approach would be to give Mr Mirza a short opportunity to apply to the Court of Appeal for permission to appeal the Part 20 Claim on the grounds of procedural unfairness.
The Set-Aside Application
The court rejected Mr Mirza’s arguments that the Directors had failed to discharge their continuing duty of full and frank disclosure. Relying on Vale v BSG [2020] EWHC 2021, the court noted that in an application under Part 71 a judgment creditor is not under an obligation to disclose what documents he already has in his possession relating to enforcement, and the fact the debtor has provided some information already is not a material matter caught by the full and frank disclosure obligation. As to the failure to update the court about Mr Mirza having had permission to appeal the substantive judgment in relation to unfair proceedings, the court did not see this as a breach of requirements for full and frank disclosure, noting that there was no appeal on foot as regards the Part 20 Claim.
The court also rejected the argument that nothing would be achieved from the examination given the financial information Mr Mirza had already provided. The information that Mr Mirza had provided was by no means complete, and the cash flow and balance sheet disclosures made were incomplete and less than useful. Further, findings were made within the substantive judgment that Mr Mirza was not always honest in his presentation of information. The court concluded that this was clearly a case where a very full examination before a judge was necessary, and on that basis ordering it could not be oppressive.
In relation to the Asset Preservation Undertakings, the court expressly stated that these had no bearing on the need for the Directors to understand what assets were available that they might enforce against.
The court noted that the Directors relied on Sucden Financial v Fluxo-Cane [2009] EWHC 3555 (QB) for the proposition that an examination order may be made even where the relevant order has been stayed, as an examination order is not part and parcel of the process of enforcement, but is there to enable a judgment creditor to enforce a judgment order. Whilst the court saw no reason to strike out or vary the Examination Order, it considered it would be appropriate to stay its implementation as part of the more general stay that it was ordering, to ensure that the information received was the most up-to-date available.
The Charging Order Applications
The court noted that it has a discretion whether to make charging orders under CPR 73.6(3) (interim orders) and CPR 73.10A(3) (final orders) and s.1(1) of the Charging Orders Act 1979. In exercising its discretion the court must consider all the circumstances of the case, including the personal circumstances of the debtor and whether any other creditor would be likely to be unduly prejudiced by the making of the order.
The court noted that the fact that the debtor’s position is that the judgment debt renders him balance sheet insolvent is not a reason to refuse to make the charging orders final unless UK insolvency proceedings are already on foot or are imminent: Roberts Petroleum v Bernard Kenny [1982] 1 WLR 301. The fact that the judgment creditor has the benefit of a freezing order is not a weighty consideration in deciding whether to make a final charging order: State Bank of India v Mallya [2019] EWHC 995 (QB). Where there are competing judgment creditors, the court may adopt a “first past the post” approach if that is the just and equitable outcome between them. In British Arab Commercial Bank v Algosaibi [2011] 2 CLC 736, Flaux J (as he then was) treated “first past the post” as the “general rule” in non-statutory insolvency regime cases, giving rise to only a “limited discretion to decline to make the charging order final”.
Given the difficulties that the Directors had had in enforcing the Interim Costs Order, that there were no insolvency proceedings in the offing in relation to Mr Mirza, and that it was his evidence that he was not insolvent on a balance sheet basis, the court considered that the case for a charging order was a strong one. However, the court noted that Mr Mirza had had only four working days’ notice of the charging order applications, and that the time estimate for the hearing had been fixed without any allowance of time to consider them. As it turned out, there was no time within the hearing for any oral submissions on the charging order applications.
The court also noted that granting the applications would cause significant prejudice to Mr Mirza as it would constitute an Event of Default under the Facility, and would prejudice innocent third parties including the other shareholders in Prime Ealing and other creditors. The court observed that had the short notice been the only reason for a stay, it would have granted the charging orders but stayed their enforcement. However, it was the additional factors (the Event of Default risk and the prejudice to third parties) that warranted a fuller hearing.
Having regard to these points, the context that the Asset Preservation Undertakings provided some form of protection for the Directors, and that the court was already ordering a general stay until the Court of Appeal determined whether it would give late permission to appeal the decision in the Part 20 Claim, the court concluded that the balance of justice was best served by adjourning and staying the charging order applications as part of that general stay. This reflected, in particular, the point that the potential for an Event of Default deserved a better airing before the court than had been possible in the circumstances.
Conclusion
The court refused the two stay applications made by Mr Mirza, which sought a stay until the Court of Appeal had determined the appeal in the Main Proceedings. However, it ordered a much shorter general stay until the Court of Appeal determined an application for late permission to appeal the decision in the Part 20 Claim (assuming that such an application was made within a week from the date on which the judgment was handed down). The practical effect was that enforcement was stayed, albeit on a much shorter and more conditional basis than Mr Mirza sought.
The court refused Mr Mirza’s application to set aside or vary the Examination Order, but stayed its implementation as part of the more general stay. The court adjourned and stayed the charging order applications as part of that general stay.
The court did not deal with costs at the hearing. It proposed to deal with the costs relating to the matters dealt with in the judgment on paper, following written submissions and costs schedules from the parties.
https://tmclegal.co.uk/wp-content/uploads/2026/06/Mirza.webp6671000Toby Moretonhttps://tmclegal.co.uk/wp-content/uploads/2026/05/grok-video-6a05f798-3bcb-4a2f-b2a6-b42dc25382a7-1-mp4-image-300x150.webpToby Moreton2026-06-15 17:03:482026-06-15 17:03:48Enforcement Of Costs Orders Not Stayed Merely Because Related Proceedings Remain on Appeal
The Court of Appeal’s decision in Ward v Donnellan [2026] EWCA Civ 729 addresses the proper approach to costs orders where both the successful and unsuccessful parties have advanced dishonest cases at trial.
Background
This appeal arose from a costs order made following a 15-day trial in the Business and Property Courts. The trial judge was Ms Louise Hutton KC, sitting as a Deputy High Court Judge. The substantive judgment was handed down on 6 September 2024, running to 103 pages and 473 paragraphs. The costs judgment was delivered on an extempore basis on 14 October 2024.
The three actions concerned a property known as Creative House in Battersea. The first was the Partnership Claim, brought by Mr Donnellan against Mr Ward. Mr Donnellan, a mortgage broker, alleged that in 2012 he and Mr Ward, a property developer, had expressly agreed to enter into a partnership (or alternatively a joint venture) for the development of Creative House and future projects, with interests split 25% to Mr Donnellan and 75% to Mr Ward. The freehold of Creative House was held by Ebonair Investment SA, a Panamanian company which Mr Donnellan alleged was beneficially owned by Mr Ward. Mr Ward’s case was that the interests in Creative House were ultimately held by his wife, his former girlfriend, and Ebonair, which he said was owned by a group of overseas investors. A number of flats in the building were held by Mr Keane and Ms Howard as nominees. Mr Donnellan’s case was that they held those flats for the alleged partnership; the Ward parties’ case was that Ebonair was the ultimate beneficial owner. As part of the Partnership Claim, Ebonair brought a Part 20 Claim against Mr Keane and Ms Howard seeking declarations that they held their leases on trust for Ebonair. The second action was the Arbitration Claim brought by Mr Keane, which does not feature in the appeal. The third was the Possession Claim, also brought by Mr Keane, seeking possession of two flats in the building.
The Partnership Claim failed in its entirety. The judge found that no partnership had been formed and that there was no joint venture. As a consequence, the Part 20 Claim succeeded: Mr Keane and Ms Howard were found to hold their respective flats on trust for Ebonair. The Possession Claim also failed as a result of those findings.
Findings of Dishonesty
The judge was highly critical of the honesty of both Mr Donnellan and Mr Ward. In relation to Mr Donnellan, she found that he had given dishonest evidence about two key meetings said to have taken place in support of his partnership claim, that he had executed dishonest trust deeds, and that he had made assertions that were not true in order to bolster his case. In relation to Mr Ward, the judge found that he had created backdated documents, including a loan agreement and a trust deed, in order to conceal assets from his trustees in bankruptcy. She found that Mr Ward had at least a significant beneficial interest in Ebonair, rejecting his case that Ebonair was owned by overseas investors. That finding, referred to throughout as the Ebonair issue, meant that the Ward parties failed on that aspect of their defence, even though they ultimately succeeded on the Partnership Claim as a whole.
No finding of personal dishonesty was made against Mr Keane or Ms Howard, although the judge found that Mr Keane’s evidence could not be relied upon except where supported by reliable documents or the inherent probabilities, and that Ms Howard had thrown in her lot with Mr Donnellan and regarded her interests as inseparable from his. Both Mr Keane and Ms Howard had executed trust deeds which the judge found to be bogus.
Procedural Complication
A procedural complication arose when the appeal first came before the court on 5 February 2026. It emerged at the outset of that hearing that Mr Donnellan had been adjudicated bankrupt on 7 October 2025. His instructing solicitors had known of the bankruptcy, as they had been acting for the petitioning creditors. No trustee in bankruptcy had been appointed, so the bankrupt estate was vested in the Official Receiver, who had only been supplied with the appeal papers the afternoon before the hearing. The appeal was adjourned. The Official Receiver subsequently confirmed that she wished to play no part in the proceedings and remained entirely neutral. The Court of Appeal proceeded on the basis that, absent success in the appeal, there was no judgment debt capable of being proved in the bankruptcy, and the appeal was relisted. Due to the unavailability of the original constitution, only Lewison LJ remained from the first listing.
The Costs Order Under Appeal
The costs order under appeal was the judge’s decision to make no order for costs on either the Partnership Claim or the Part 20 Claim. The Ward parties, as the successful parties in both claims, appealed on the basis that the judge had erred in the exercise of her discretion.
The judge’s reasoning, as expressed in her extempore costs judgment and her subsequent reasons for refusing permission to appeal, was that Mr Ward’s dishonesty in advancing the Ebonair issue had taken up a very substantial part of the trial and the proceedings leading up to it, and that it would be inappropriate for the Ward parties to benefit from that dishonesty or to recover costs incurred in advancing a dishonest case. She took the view that the costs the Ward parties had incurred in advancing the dishonest Ebonair case, and the costs Mr Donnellan had incurred in meeting it, roughly cancelled each other out, producing a no order position. She applied the same reasoning to the Part 20 Claim on the basis that its issues followed and formed part of the matters in dispute on the main claim.
The Appellants’ Submissions
The appellants, represented by Timothy Polli KC and Tim Hammond, argued that the judge’s exercise of discretion was flawed on a number of grounds. They submitted that the judge had failed to take into account the extent of Mr Donnellan’s dishonesty, which had infected all three claims, and that she had only paid lip service to the principle that costs follow the event. They pointed out that the Partnership Claim had been brought entirely by Mr Donnellan, that it had failed in its entirety, and that it had been supported by dishonest evidence. They argued that the Ward parties were entitled to recover at least their costs of exposing Mr Donnellan’s dishonesty, as well as the costs reasonably incurred in resisting a failed and dishonest claim. They further submitted that no financial penalty of any kind had been imposed on Mr Donnellan, which was inconsistent with the approach endorsed in authorities such as Summers v Fairclough Homes Ltd [2012] UKSC 26 and Hutchinson v Neale [2012] EWCA Civ 345. Mr Polli also argued that the judge had overstated the legal relevance of the Ebonair issue to the Partnership Claim, since that issue went to the composition of partnership property rather than to the existence of the alleged partnership itself.
In relation to the Part 20 Claim, the appellants submitted that the judge’s reasoning was unsustainable. Ebonair had succeeded on that claim, and the defence advanced by Mr Keane and Ms Howard had been based on the dishonest trust deeds. The question of who ultimately owned Ebonair was entirely irrelevant to whether Mr Keane and Ms Howard held their leases on trust for that company. The Ward parties’ dishonesty on the Ebonair issue had no bearing on the Part 20 Claim. The appellants also pointed to the inconsistency between the no order position on the Part 20 Claim and the order that Mr Keane pay the costs of the Possession Claim, when the outcome of both claims stood or fell together.
The Court of Appeal’s Analysis
Lord Justice Lewison (with whom Lord Justice Arnold and Lady Justice Falk agreed) began by emphasising the heavy burden faced by any appellant seeking to overturn a costs decision. As Wilson J stated in SCT Finance v Bolton [2002] EWCA Civ 56, the court discourages such appeals by interpreting the discretion very widely. Davis LJ in F & C Alternative Investments (Holdings) Ltd v Barthelemy (No 3) [2012] EWCA Civ 843 articulated the test more fully: an appellate court may only interfere if the decision on costs is wrong in principle, or if it involves taking into account a matter which should not have been taken into account or failing to take into account a matter which should have been taken into account, or if it is plainly unsustainable.
Lewison LJ reviewed the authorities on dishonesty in pursuing a successful case. In Northstar Systems Ltd v Fielding [2006] EWCA Civ 1660 and Bank of Tokyo-Mitsubishi UFJ Ltd v Baskan Gida Sanayi Ve Pazarlama AS [2009] EWHC 1696 (Ch), it was established that even if the losing party is ordered to pay the winning party’s costs, the winning party will not be entitled to recover the costs of seeking to maintain a dishonest case, because such costs would not have been reasonably incurred. The court’s powers include disallowance of that party’s costs in advancing that case, an order that he pay the other party’s costs attributable to proving that dishonesty, and the imposition of an additional penalty which may in an appropriate case extend to a disallowance of the whole of the successful party’s costs.
In Hutchinson v Neale [2012] EWCA Civ 345, the Court of Appeal set aside a costs order which had the effect that the successful defendants received none of their costs of defending the claim, not even those which had been reasonably and necessarily incurred. Pitchford LJ emphasised that the starting point is that costs should follow the event, and that there is no general rule that a finding of dishonest conduct by the successful party will replace that starting point. What is required is an evaluation of the nature and degree of the misconduct, its relevance to and effect upon the issues arising in the trial, and its tendency to create an unwarranted increase in the costs of the action. The objective is not merely that the dishonest but successful party does not gain from his dishonesty but also that the honest but unsuccessful party does not lose.
Lewison LJ noted that Hutchinson was not a case where the unsuccessful party was also dishonest. He therefore turned to cases where dishonesty was found on both sides. In Intrigue Shipping Inc v Nikitin [2013] EWCA Civ 749, the trial judge had made no order for costs where the claimant had succeeded in part but had failed on its primary case (which accounted for most of the cost and effort) and had advanced that case on the basis of widespread dishonest evidence. The defendant had also given dishonest evidence. The Court of Appeal held that the judge had committed no error of principle, noting that courts do not look sympathetically on dishonest litigants.
In Ahuja Investments Ltd v Victory Game Ltd [2021] EWHC 2730 (Ch), HHJ Hodge QC addressed a case where the claimant had brought a fundamentally false claim in order to avoid repayment of a loan, and the defendants had met that claim with lies. The judge held that it would be wholly wrong to ignore the defendants’ success by making no order as to costs, as that would be to penalise unduly one of two dishonest parties and to ignore the fact that one of those two dishonest parties had succeeded on a claim that was fundamentally rooted in the prosecution of a dishonest claim by the unsuccessful party. The judge ordered the claimant to pay 75% of the defendants’ costs, ensuring that the defendants recovered no more costs than would have been incurred in advancing an entirely honest case, and adjusted to ensure that the claimant did not find itself bearing the costs of resisting those parts of the defence that were dishonest.
Lewison LJ also referred to the observations of Lord Clarke in Summers v Fairclough Homes Ltd [2012] UKSC 26, who said that in the ordinary way one would expect the judge to penalise the dishonest and fraudulent claimant in costs, and that it is entirely appropriate to order the claimant to pay the costs of any part of the process which have been caused by his fraud or dishonesty, on an indemnity basis if appropriate. Such cost orders may often be in substantial sums, leaving the claimant out of pocket, and the prospect of such orders is likely to be a real deterrent. Lewison LJ observed that in this case that claimant was Mr Donnellan.
Application to the Present Case
Lewison LJ held that the judge had erred in principle. The effect of her order was that the Ward parties, despite being the successful parties, were not entitled to recover any of their costs in successfully resisting the Partnership Claim or in advancing the Part 20 claim, not even those which were reasonably and properly incurred. Nor were they entitled to recover any of their costs in exposing the dishonesty of Mr Donnellan in advancing the Partnership Claim. That dishonesty also permeated the Part 20 Claim and the Possession Claim because in both of those claims the main plank on which the Donnellan parties relied was the dishonest trust deeds. No financial penalty of any kind was imposed on Mr Donnellan.
Lewison LJ agreed with HHJ Hodge QC that this was wrong in principle. Although the judge said that the starting point was that the unsuccessful party must pay the successful party’s costs, she departed far too readily from that starting point. The judge referred to the effect of Mr Ward’s dishonesty on the trial and “the proceedings leading up to it”, but it was entirely unclear to which proceedings she was referring. In fact, in her main judgment the judge held that there had been no significant breach by Mr Ward of his disclosure obligations. Moreover, there was no finding in the main judgment that Mr Ward’s dishonesty had in some way prompted Mr Donnellan to advance his own dishonest claim, or prompted Mr Donnellan to institute the Partnership Claim. As in Ahuja, the claim was fundamentally false, and the false claim spawned a partially false defence.
This was not a case like Intrigue in which the successful party had failed on its principal claim. On the contrary, the Ward parties were successful on all the claims. Nor was it a case like Hutchinson where the unsuccessful party was honest but the successful party was not. As in Hutchinson, the fact was that Mr Donnellan launched an action on grounds that failed, and which was supported by dishonest evidence.
In the critical part of her costs judgment the judge said that the Ward parties should not get the costs incurred in relation to advancing the dishonest Ebonair case and that they should pay the Donnellan parties’ costs of that case, and taking both those into account, she would say no order as to costs. Lewison LJ held that this left out of account the fact that the Donnellan parties ought to have been ordered to pay the Ward parties’ costs of exposing Mr Donnellan’s dishonesty, as well as the costs reasonably incurred by the Ward parties in resisting Mr Donnellan’s failed (and dishonest) claim. The judge’s approach was one-sided and failed to consider the conduct of both the Ward parties and Mr Donnellan. Nowhere in her judgment on costs did she refer to her findings about Mr Donnellan’s dishonesty. That omission was all the more surprising since Mr Donnellan’s dishonesty infected all three claims. This part of the judgment also left out of account the fact that none of the costs (including the costs of the evidence on the Ebonair issue) would have been incurred if Mr Donnellan had not chosen to litigate in the first place.
Moreover, the judge seemed to Lewison LJ to have overstated the legal relevance of the Ebonair issue to the Partnership Claim. Mr Donnellan’s claim was that a partnership existed and that it had been expressly agreed. The relevance of the Ebonair issue did not go to the existence (or not) of the partnership, but to what amounted to partnership property, if there were a partnership as Mr Donnellan claimed.
The Part 20 Claim
When she came to deal with the Part 20 Claim the judge said that she would make no order for costs because the issues raised in that claim “very much followed and formed part of the matters in dispute on the main claim”. Lewison LJ held that this observation was unsustainable. One of the main issues in the Partnership Claim was who was the beneficial owner of Ebonair. But the Part 20 Claim was brought by Ebonair itself against Mr Keane and Ms Howard for declarations that they held their leases on trust for Ebonair. Ebonair is a corporation with legal personality. Who is the ultimate owner of Ebonair is entirely irrelevant to the question whether Mr Keane or Ms Howard held their leases on trust for that corporation. The dishonesty of Mr Ward in relation to the Ebonair issue had no bearing on the issues raised in the Part 20 Claim. By contrast, the dishonesty of Mr Donnellan did, because the defence to the Part 20 Claim was based on the dishonest trust deeds.
The judge did not specifically deal with the Possession Claim. But success or failure on that claim also depended on whether the leases were held on trust for Ebonair or the alleged partnership. Once again, who was the beneficial owner of Ebonair had nothing to do with the Possession Claim. That position was reflected in the costs order that the judge in fact made in relation to the Possession Claim, namely that the unsuccessful claimant (Mr Keane) should pay the costs of the successful defendants (Ebonair and Luxap).
There was a further reason why the judge’s order in relation to the Part 20 Claim could not stand. The outcome of the Part 20 Claim and the Possession Claim stood or fell together. The judge recognised that. Yet the costs orders that she made in relation to the Part 20 Claim and the Possession Claim were inconsistent. She made no order for costs on the Part 20 Claim but ordered the unsuccessful claimant (Mr Keane) to pay the costs of the Possession Claim. There could be no rational explanation for that inconsistency.
The Substituted Order
Lewison LJ held that the court must exercise its discretion afresh. Although it is desirable for the court to make a global order dealing with the costs of all the actions tried together, he did not consider that to be possible in this case. Mr Ward’s dishonesty in relation to the beneficial ownership of Ebonair was not relevant to the issues raised in the Part 20 Claim. On the other hand, Mr Donnellan’s dishonesty was relevant to all the claims. Where several trials are conducted together, the judge must evaluate the relevance of the dishonesty to each of the trials.
In relation to the Part 20 Claim, Ebonair brought the claim against Mr Keane and Ms Howard for declarations that they held their leases on trust for it. They defended that claim unsuccessfully, on the basis of the trust deeds which the judge found to be bogus. But there was no finding that they themselves were dishonest. Since Ebonair was the successful party in the Part 20 Claim, the starting point was that the unsuccessful parties (Mr Keane and Ms Howard) should pay its costs. Although Mr Keane emphasised that he complied with all his procedural obligations and that he was drawn into the proceedings as a nominee, Lewison LJ did not regard these points as justification for departing from the starting point. Whether Mr Keane was drawn into the proceedings as a nominee (presumably for Mr Donnellan) was a matter between him and Mr Donnellan. Compliance with procedural obligations by an unsuccessful party is only to be expected and cannot justify a departure from the starting point. The court therefore ordered Mr Keane and Ms Howard to pay Ebonair’s costs of the Part 20 Claim to be assessed on the standard basis if not agreed.
In relation to the Partnership Claim, the court identified the following important considerations. First, the costs of the Partnership Claim were incurred solely because Mr Donnellan chose to bring it. Second, the Partnership Claim failed in its entirety. The starting point that the unsuccessful party should pay the successful party’s costs must be given proper weight. Third, Mr Donnellan supported his case by dishonest evidence. The Ward parties ought in any event to recover their costs of proving that dishonesty. Fourth, the Ward parties should not be entitled to recover any part of their costs incurred in advancing a dishonest case. This can be achieved either by reducing the proportion of costs to which, as the successful parties they would otherwise be entitled to recover, or by a direction to the costs judge to disallow the costs of advancing the dishonest case. Fifth, Mr Donnellan ought to be able to recover his costs of proving that dishonesty. Sixth, any costs order must not unduly penalise one of two dishonest parties.
The judge had taken the view that the costs incurred by the Ward parties in advancing the dishonest case and the costs incurred by Mr Donnellan in exposing that dishonesty were roughly equal and so balanced each other. Although Mr Polli KC submitted that the judge’s evaluation in that respect was flawed, Lewison LJ held that the judge was in a far better position to make that evaluation than the Court of Appeal. He would not disturb the judge’s conclusion in that respect.
Nevertheless, what the judge overlooked in striking that balance was the costs incurred by the Ward parties in exposing Mr Donnellan’s dishonesty. Nor did she visit any financial penalty on Mr Donnellan for supporting his failed case by dishonest evidence. She also gave little if any weight to the principle that the unsuccessful party should pay the successful party’s costs. In addition, she did not take into account the fact that the only reason that any costs were incurred in relation to the Ebonair issue was that Mr Donnellan had chosen to litigate.
Weighing all those considerations together and necessarily applying a broad brush approach, Lewison LJ ordered Mr Donnellan to pay 50% of the Ward parties’ costs of the Partnership Claim to be assessed on the standard basis if not agreed. He also directed that, as in Hutchinson, there should be no further deduction by the costs judge solely or mainly on the ground of the Ward parties’ dishonesty in relation to the Ebonair issue.
https://tmclegal.co.uk/wp-content/uploads/2026/06/DONNELLAN-1-scaled.webp15361920Toby Moretonhttps://tmclegal.co.uk/wp-content/uploads/2026/05/grok-video-6a05f798-3bcb-4a2f-b2a6-b42dc25382a7-1-mp4-image-300x150.webpToby Moreton2026-06-12 16:46:182026-06-12 16:50:10Court of Appeal Substitutes A 50% Standard-Basis Costs Order Following A 15-Day Trial Marked By Dishonesty On Both Sides
The High Court’s decision in Szwed v Aviva Insurance Ltd [2026] EWHC 1425 (KB) confirms that the merits of an appeal may be a material factor at the third stage of the Denton framework when the court can see without much investigation that the grounds are very weak, and that costs budget decisions attract a high threshold for appellate intervention.
Background
This matter arose from a personal injury claim brought in the Central London County Court by Mr Pawel Szwed against Aviva Insurance Limited. The underlying claim related to a road traffic accident on 30 January 2018, in which the Appellant was knocked from his bicycle after the Respondent’s insured opened a van door into his path. Liability was admitted, and allegations of contributory negligence were subsequently abandoned. The Appellant valued his claim at up to £100,000 in his original claim form, though his final schedule of loss dated 16 August 2024 sought a total of £960,504.75 for past and future losses. The Respondent’s counter-schedule contended that the Appellant was entitled to no more than £919.22 for past losses, with nothing for future losses. The parties instructed psychiatric, orthopaedic surgery, and ENT experts, with directions given in the usual way for the preparation of joint statements.
The procedural history of the claim was protracted. In November 2022, the Respondent served surveillance evidence on the Appellant, following which his solicitors came off the record. He has represented himself, with the assistance of a court interpreter, ever since. The first trial window in April to May 2023 was vacated because the Appellant was unable to comply with the court’s directions.
By the time the matter came before Recorder Glancy KC on 28 July 2023, only the joint statement of the psychiatry experts had been prepared. The orthopaedic and ENT joint statements remained outstanding. The Respondent had applied on 24 May 2023 for the claim to be struck out, or in the alternative for an unless order to secure the outstanding joint statements. The Recorder declined to strike out the claim but made an unless order at paragraph 2(a) of his order, to the effect that the claim would be struck out unless by 4.00 pm on 20 September 2023 the Appellant provided evidence that his orthopaedic and ENT experts were willing and able to engage in joint discussions and prepare joint statements. Directions were given to a new trial window from 1 March to 30 June 2024.
The Costs Budget Decisions
The Recorder also permitted the Respondent to vary its costs budget by adding £27,000 to the previously approved figure, against a sought increase of £31,611.11. The reasons for the increase related to the Appellant’s travel from Poland to attend medico-legal examinations, the obtaining and disclosure of surveillance evidence, and the costs of instructing interpreters to attend hearings.
The ENT joint statement was provided on 14 September 2023. However, by the time the matter came before HHJ Hellman on 22 December 2023, the orthopaedic joint statement remained outstanding. The Judge granted the Appellant relief from sanctions in relation to paragraph 2(a) of the Recorder’s order and directed that the orthopaedic joint statement be provided by 22 June 2024.
The Judge also considered three applications made by the Appellant, dated 1 September, 1 October, and 9 December 2023, which were in substance a single application seeking to have the Respondent’s costs budget reduced, or “cut entirely”, on the basis that the Respondent had been behaving oppressively by causing the Appellant to spend money disproportionately on costs. The Judge dismissed those applications, accepting the evidence of the Respondent’s solicitor, Jacob Wright, that the delay in the joint expert process had been caused by the Appellant’s own conduct rather than that of the Respondent. The Judge also noted that it was far from clear that any power existed to make the order sought in any event. The orthopaedic joint statement was ultimately provided on 21 July 2024, and the trial was listed to commence on 29 June 2026, being the fifth attempt to list the matter for trial.
The Appeals and Strike Out
The Appellant filed his Appellant’s Notice in appeal KA-2023-000166 on 21 August 2023, challenging the Recorder’s unless order and the decision to permit the Respondent to extend its costs budget. He filed his Appellant’s Notice in appeal KA-2024-000012 on 17 January 2024, challenging the Judge’s dismissal of his applications to reduce the Respondent’s costs budget. Both appeals were subject to significant procedural difficulties, including the absence of CPR-compliant appeal bundles, the absence of transcripts of the relevant judgments, and a failure to provide properly formulated grounds of appeal.
On 19 February 2025, Martin Spencer J directed the Appellant to file a witness statement addressing the continuing relevance of the appeals in light of the progress of the underlying proceedings. The statement provided on 13 March 2025 was considered by Sir Stephen Stewart on 26 March 2025, who concluded that it did not meet the requirements of Martin Spencer J’s order. Sir Stephen made an unless order requiring the Appellant to file a further witness statement by 4.00 pm on 17 April 2025 explaining clearly the continuing relevance of the appeals. The Appellant did not comply, and both appeals were automatically struck out at 4.01 pm on 17 April 2025.
The Appellant applied on 24 April 2025 for a retrospective extension of time to comply with Sir Stephen Stewart’s order in appeal KA-2023-000166, but made no such application in KA-2024-000012. On 23 March 2026, Ritchie J refused the application and confirmed that KA-2023-000166 remained struck out. By a further application dated 23 March 2026, the Appellant sought to set aside Ritchie J’s order, and also sought to set aside the automatic strike out of KA-2024-000012. The Respondent agreed that it was consistent with the overriding objective to treat that application as relating to the strike out of both appeals. The application came before Mrs Justice Hill, who delivered judgment on 11 June 2026.
Before the hearing, the Appellant applied on 20 March 2026 to vacate the trial listing to allow for the proper disposal of his two appeals. On 8 May 2026, HHJ Holmes dismissed that application, observing that the determination of the appeals did not prevent a fair trial taking place as currently listed.
The Legal Framework
Mrs Justice Hill noted that in accordance with R (Hysaj) v SSHD [2014] EWCA Civ 1633 at [38] and Lakatamia v Su [2019] EWCA Civ 1626 at [3], the guidance given by the Court of Appeal in Denton v TH White Ltd [2014] EWCA Civ 906 applies to applications for extensions of time. The Denton guidance requires a judge to address an application for relief from sanctions in three stages: first, to identify and assess the seriousness and significance of the failure to comply; second, to consider why the default occurred; and third, to evaluate all the circumstances of the case, so as to enable the court to deal justly with the application, including the matters set out in CPR 3.9.
The court also noted that in Hysaj at [46], the Court of Appeal held that in most cases the merits of an appeal will have little to do with whether it is appropriate to grant an extension of time: it is only in those cases where the court can “see without much investigation that the grounds of appeal are either very strong or very weak” that the merits will have a significant part to play when it comes to balancing the various factors that have to be considered at stage (3) of the Denton process.
The Appellant sought to rely on fresh evidence on appeal, said to provide further proof that he was not responsible for the breakdown of the joint expert process. However, the Appellant did not identify which documents were new, nor did he explain why those documents could not have been obtained with reasonable diligence for use before the Recorder or the Judge. This would have been necessary to meet the first criterion for the admission of such evidence on appeal set out in Ladd v Marshall [1954] 1 WLR 1489.
Application of the Denton Framework
At stage one, Mrs Justice Hill held that the Appellant’s failure to comply was significant and serious. The appeals had a protracted history, relating to two orders made in 2023, in the context of County Court proceedings that remained live, and where permission had not yet been granted. By the time of Sir Stephen Stewart’s order, the Appellant had already been afforded significant latitude, both in terms of the extensions of time he had been granted and the fact that there was (and still is) no CPR-compliant appeal bundle before the court on either appeal. Martin Spencer J had ordered the Appellant to provide a witness statement addressing the “potentially academic” issue, but he had failed to do so. The order made by Sir Stephen Stewart was therefore giving the Appellant a further opportunity to do something which he had already been directed to do. Against this background, the Appellant’s failure to comply was significant and serious as it had led to yet further delay in the appeals being progressed and yet further court resources being deployed on the appeals.
At stage two, the court considered why the default occurred. Although the Appellant contended that his mobile telephone was stolen on 28 March 2025, he provided no corroborating evidence of this, such as a police report. Even if the Appellant was without access to his mobile phone, he could have tried to access his email via another device. The Appellant asserted that he regained access to his email account on 14 April 2025, but again no proof of this was provided. If the Appellant had immediately checked his email on that date, he would have seen the order and would have still had time to comply as the deadline was not until 4.00 pm on 17 April 2025. The Appellant contended that even when he regained access to his email on 14 April 2025, he did not see the 31 March 2025 email from the court enclosing the Sir Stephen Stewart order because he needed the assistance of a friend who reads English, and that friend had not been available since 14 March 2025. No evidence from the friend was provided to support this assertion. The number of documents the Appellant had filed in these appeals, and the volume of material provided by the Appellant ahead of the hearing, suggested that he was able to deploy assistance in enabling him to fully participate in the litigation process. For these reasons the court did not find the reason the default occurred very persuasive.
At stage three, the court evaluated all the circumstances of the case, so as to deal justly with the application, including having regard to the matters set out in CPR 3.9, namely the need for litigation to be conducted efficiently and at proportionate cost, and the need to enforce compliance with rules, practice directions and orders. This evaluation encompassed the academic nature of the appeals, the merits of the appeals, and the broader conduct of the litigation.
The Academic Nature of the Appeals
The court agreed with the Respondent that the appeal against the Recorder’s 28 July 2023 unless order relating to the orthopaedic and ENT experts was entirely academic. The unless order had been completely overtaken by events in that on 22 December 2023 HHJ Hellman granted the Appellant relief from sanctions for the remaining element of non-compliance with it. The unless order was therefore superseded within the County Court proceedings on that date. The lack of ongoing relevance of the unless order was underscored by the fact that the joint expert process had now been completed, and by the fact that the trial could now fairly proceed. Indeed, in his 14 May 2025 statement addressing the “potentially academic” issue, the Appellant himself did not refer to the joint expert issues but rather the “financial result of the costs of the parties”, which the court took to relate to the costs budget issues alone.
There was also an element to which both the appeals relating to the costs budget were academic. This was because at present the Appellant had the benefit of Qualified One Way Costs Shifting, meaning that no cost orders made against him in the Respondent’s favour could be enforced without the permission of the court, and to the extent that there was in the future an argument about the Respondent’s costs, the Appellant may well be able to take some of these points then.
The Appellant was correct to highlight that the Recorder’s order and the Judge’s judgment included findings about his conduct with which he disagreed. However, it was plain that his credibility was much more widely in issue in the County Court claim, not least given the surveillance evidence. Insofar as there was any attempt to cross-examine the Appellant at trial on these issues, it would be open to him to contend that these findings were not properly made, but the Respondent’s counsel conceded in open court during the hearing that he had no intention of questioning the Appellant at trial about whether he had paid his experts or about why the joint expert process broke down.
The Merits of the Appeals
Mrs Justice Hill was satisfied that the merits of both KA-2023-000166 and KA-2024-000012 were in fact “very weak”, for the following reasons.
First, the Recorder’s decision to impose an unless order was based on his interpretation of the material placed before him as to why the joint expert process had broken down. The parties had different accounts for this and the Recorder opted to accept the Respondent’s position. Accordingly, this was very far from a material mistake of fact of the kind considered in E v SSHD [2004] EWCA Civ 49 at [66], where such mistakes need to be “established” in that they are “uncontentious and objectively verifiable”.
Second, the Recorder’s decision to permit the Respondent to extend its cost budget was a case management decision. It is well recognised that an appeal court should be slow to intervene with such a decision. As the White Book 2026 explains at paragraph 52.3.11, a party applying for permission to appeal to overturn a case management decision made within the judge’s discretion must cross a high threshold (Royal & Sun Alliance Insurance Plc v T & N Ltd [2002] EWCA Civ 1964 at [38]; Walbrook Trustees (Jersey) Ltd v Fattal [2008] EWCA Civ 427 at [33]). In Abdulle v Commissioner of Police of the Metropolis (Practice Note) [2015] EWCA Civ 1260, the Court of Appeal re-affirmed that it would not lightly interfere with case management decisions of lower courts. The reasons the Recorder agreed to extend the budget related to the Appellant’s travel from Poland to attend medico-legal examinations, the obtaining and disclosure of surveillance evidence, and the costs of instructing interpreters to attend hearings. While it was plain that the Appellant disagreed with those reasons, they were plainly reasonable. They were also unrelated to the alleged mistake of fact relating to the joint expert process.
Third, the Judge’s dismissal of the Appellant’s applications to have the Respondent’s cost budget reduced, ideally to nil, on grounds of its “oppressive” conduct, was again a case management decision. It was a highly unusual application. As the Judge identified it was far from clear that there was a power to make such an order. In any event the Judge was entitled to accept Mr Wright’s evidence, not that relied on by the Appellant, which sought to explain the delays in the joint expert process, so as to refuse the application.
Fourth, PD52A, paragraph 4.6 makes special provision for applications for permission to appeal from case management decisions. When considering such an application, the court may take into account whether “(a) the issue is of sufficient significance to justify the costs of an appeal” and whether “it would be more convenient to determine the issue at or after trial”. For the reasons given above, both of those questions would be answered in the negative in respect of both these applications for permission to appeal, which would provide a further basis for refusing permission.
Fifth, the factors relied on by the Appellant in support of his argument that the CPR 52.6(b) test applies, were generic factors that apply in very many cases: there was nothing particularly “compelling” about them.
Conclusion
Mrs Justice Hill held that there had already been very substantial delay in the underlying County Court claim and in both appeals, which had not therefore been conducted efficiently and at proportionate cost. It was also material that the Sir Stephen Stewart order was not the only occasion in the County Court or in this court when the Appellant had not complied with rules, practice directions and orders and there was a need to enforce such compliance.
For all these reasons, having applied the Denton criteria, the court dismissed the Appellant’s application. Both appeals therefore remained struck out.
https://tmclegal.co.uk/wp-content/uploads/2026/06/SZWED-1.webp10861448Toby Moretonhttps://tmclegal.co.uk/wp-content/uploads/2026/05/grok-video-6a05f798-3bcb-4a2f-b2a6-b42dc25382a7-1-mp4-image-300x150.webpToby Moreton2026-06-12 14:39:352026-06-12 15:44:56Application To Reinstate Two Appeals Struck Out At 4.01 pm Fails In The High Court As Their “Very Weak” Merits Weigh Against Relief At Denton Stage Three
Beech Hill Capital Limited brought proceedings in the London Circuit Commercial Court against three defendants: Lucas Duplan (also known as Lucas Andrew Duplančić), Sea Marine Holding LLC (the Second Defendant), and Sea Marine Holding Ltd (the Third Defendant). The claim arose from financing agreements entered into between the Claimant and the Second Defendant, with the First Defendant alleged to be a personal guarantor. The Claimant also brought a claim for damages and/or specific performance against the Third Defendant, together with a conspiracy claim against all three Defendants. The First Defendant was, according to his own affidavit dated 29 January 2025, the director of both the Second and Third Defendants.
The proceedings had generated a series of court orders prior to the hearing before Sharif Shivji KC (sitting as a Deputy High Court Judge) on 5 March 2026. Three costs orders were of particular relevance. First, HHJ Pelling KC made an order dated 22 January 2025 for costs against the Defendants in the sum of £74,579. Second, David Quest KC (sitting as a Deputy High Court Judge) made an order dated 18 June 2025 requiring the Second Defendant to pay £2,200,000 plus interest, together with costs of £65,000. Third, Rosalind Phelps KC (sitting as a Judge of the High Court) made a costs order dated 17 November 2025 against the Defendants in the sum of £4,167. It was common ground that none of these orders had been paid, in whole or in part.
Two applications came before the court at the March 2026 hearing. The Defendants had issued an application on 30 October 2025 seeking, among other things, permission to amend the Defence, strike out and/or summary judgment, a declaration that the court lacked jurisdiction in respect of the Third Defendant, variation of HHJ Pelling KC’s order of 22 January 2025, and a stay of proceedings. The Claimant had issued its own application on 13 November 2025, seeking an order debarring the Defendants from advancing any applications before the court until they had rectified their breaches of the outstanding court orders.
There was an initial disagreement at the hearing as to whether the Claimant’s application had been properly listed. It had originally been listed for 23 January 2026 but was removed from the list shortly before that date due to judicial unavailability. The parties also disagreed as to the order in which the applications should be heard. The Defendants ultimately accepted that the Claimant’s application could be dealt with first, and that is the order in which the court proceeded.
An early point arose in relation to the costs orders themselves. Counsel for the Defendants, Mr Middleton, initially suggested that it was unclear whether the Defendants were in breach of the costs orders because no date for payment had been specified in the body of the orders. The court drew his attention to CPR r.44.7, which provides that it is not necessary for a costs order to specify a date for payment. Mr Middleton accepted the point and acknowledged that the Defendants were accordingly in breach of all three orders.
Costs Issues Before the Court
The central question before the court was whether, in circumstances where the Defendants had failed to comply with three costs orders totalling £143,746 (leaving aside the £2,200,000 judgment sum), the court should exercise its jurisdiction to debar the Defendants from pursuing or advancing any applications in the proceedings until those orders were discharged.
The Claimant’s application had been framed by reference to the jurisdiction established in Hadkinson v Hadkinson [1952] P. 285, under which a court may, in appropriate circumstances, refuse to hear a party who is in contempt of a court order where that contempt impedes the course of justice. However, the Claimant’s skeleton argument of 22 January 2026 also relied on a separate line of authority addressing the court’s case management powers where a party fails to pay a prior interim costs order. The cases cited in that regard included Crystal Decisions (UK) Ltd v Vedatech Corp [2006] EWHC 3500 (Ch), Michael Wilson and Partners Ltd v Sinclair and others [2017] EWHC 2424 (Comm), and Aramco Trading Fujairah FZE v Gulf Petrochem FZC [2021] EWHC 2650 (Comm).
A preliminary question therefore arose as to the appropriate jurisdictional basis for the order sought: whether it fell under the Hadkinson jurisdiction or under the court’s case management powers, and whether these represented two distinct lines of authority or manifestations of the same underlying jurisdiction. The court was also required to consider the appropriate form of any order made, including whether the debarring order should operate against each Defendant individually by reference to the orders made against that Defendant, or whether all Defendants should be prohibited from making applications until all outstanding orders had been discharged collectively.
A further practical question arose as to whether alternative enforcement mechanisms outside the proceedings were available to the Claimant. The First Defendant had provided a list of assets pursuant to the freezing order made by HHJ Pelling KC on 17 January 2025, and that list disclosed no assets within the jurisdiction for any of the Defendants.
The Parties’ Positions
The Claimant sought an order preventing the Defendants from pursuing any applications unless and until they had purged their contempt of the outstanding court orders. It relied on the Hadkinson jurisdiction and, in the alternative, on the court’s case management powers as articulated in the Michael Wilson v Sinclair line of cases. The Claimant’s position was that it was unjust to be required to incur further costs in responding to the Defendants’ applications while those orders remained unpaid. The Claimant also sought a formulation of the order that would prevent any applications by any of the Defendants until all Defendants had discharged all outstanding orders against them collectively.
The Defendants’ position, as set out in their written skeleton argument, was that the Hadkinson jurisdiction was engaged only where there was a deliberate and continuing contempt that materially impeded the administration of justice, where no other effective remedy was available, and where the making of the order sought was proportionate. They contended that the present case did not meet those criteria. They also argued that the Hadkinson jurisdiction should not operate so as to bar an application already properly before the court at the time the application was made. A further argument was advanced to the effect that, since the court’s previous freezing injunction contained an express liberty to apply to discharge or vary, it would be contrary to principle to bar a party subject to that order from exercising that right.
Notably, the Defendants did not advance any argument based on impecuniosity or stifling. No submission was made that paying the outstanding orders would prevent the Defendants from continuing to defend the proceedings, and no point was taken under Article 6 of the ECHR or by reference to access to civil justice. Mr Middleton accepted on behalf of the Defendants that the Second Defendant was in contempt of the court’s order and did not resist a debarring order against the Second Defendant in the terms sought. No evidence was filed by the Defendants in answer to the Claimant’s application.
The Court’s Decision
The court determined that the appropriate jurisdictional basis for the order was the court’s case management jurisdiction, as established in the Crystal Decisions and Michael Wilson v Sinclair line of authorities, rather than the Hadkinson jurisdiction. The judge noted that the Hadkinson jurisdiction, which is of considerable antiquity and derives originally from canon law, arises where there is an impediment to the course of justice and may result in the court entirely refusing to hear a party. The factual circumstances of the leading Hadkinson cases, which concerned a child removed from the jurisdiction in breach of a court order and the compelled disclosure of a journalistic source respectively, were of a different character to the present case. By contrast, the case management jurisdiction as developed in the Michael Wilson v Sinclair line of cases was much closer to the facts before the court.
The court set out a detailed summary of the applicable principles governing the exercise of the case management jurisdiction, drawing on Crystal Decisions (HC and CA), Michael Wilson v Sinclair, Musion Systems v Activ8-3D [2012] EWPCC 5, Siddiqi v Aidiniantz [2020] EWHC 699 (QB), and J Robbins Capital Partners Limited v Zamsort Limited [2024] EWHC 1990 (Comm).
The Applicable Principles
The judge identified the following principles applicable to the exercise of the court’s case management jurisdiction to impose conditions on a party for failing to pay prior costs orders:
First, the court can impose conditions on a party for failing to pay one or more prior costs orders in the same proceedings. This is a case management power which derives from the court’s inherent jurisdiction and its powers under CPR r.3.1(3)(b) and r.3.4(2)(c).
Second, this is the exercise of a judicial discretion and the court must consider all of the circumstances. In particular, the court will have regard to: (a) the policy behind the imposition of costs orders made payable within a specified period of time before the end of the litigation, namely that it applies discipline to the parties in terms of which issues they decide to contest before the court if they have to bear the cost consequences of unsuccessfully doing so, and it is on balance fairer that the reasonable and proportionate costs of an application should be met by whoever turns out to have been wrong; (b) the importance of ensuring that court orders are complied with and that it diminishes the court’s authority and standing if the court then overlooks non-compliance by a party in the same proceedings; (c) all of the available options including other enforcement mechanisms outside the proceedings and the full range of possible orders within the proceedings designed to secure compliance with the court’s previous order(s); (d) the procedural behaviour of the defaulting party (though it is not to be assumed that the mere existence of an adverse costs order accompanied by an obligation of immediate payment is itself indicative of any misconduct on the paying party); (e) the potential interference with a party’s right to a fair trial under Article 6 of the ECHR and the right to access civil justice, which will usually arise where a party contends that they lack the means to pay and that therefore the application of conditions would be a denial of justice and/or in breach of Article 6 (such a claim should be supported by detailed, cogent and proper evidence which gives full and frank disclosure of the party’s financial position including prospects of raising the necessary funds); and (f) the degree of connection between the unpaid costs in question and the claim or application in which the respondent wishes to participate.
Third, if the court decides to exercise its discretion, there are a range of options for orders within the proceedings. The court will be careful to ensure that its proposed order is proportionate. The options include striking out a claim or defence, debarring a defendant from defending, or staying a claim until costs are paid.
Fourth, there is no rigid rule that the court will necessarily impose conditions simply because there has been a non-payment of a costs order. This is because the court has a discretion which requires it to take into account all of the relevant circumstances. However, it can ordinarily be expected the balance will weigh in favour of imposing conditions where a party has failed to comply with a costs order and has no satisfactory reason for failing to do so (e.g. an inability to pay / stifling) such that the reasonable inference is that the failure to pay represents wilful disobedience of the court’s order.
Fifth, the court will usually make an order on an unless basis rather than simply ordering the immediate imposition of a sanction.
Application to the Facts
The judge considered all the relevant circumstances of the case. The Defendants were in breach of prior orders of the court which had been outstanding for some considerable time. The orders were all made at a time when the Defendants were legally represented, with solicitors on the record, and with submissions made by counsel or leading counsel on their behalf. No explanation had been offered for the Defendants’ failure to comply with those orders. The Defendants did not allege that they were impecunious and they did not allege that paying the orders would stifle their defence of the proceedings. They did not allege that the proposed order raised any concerns in relation to Article 6 or their access to civil justice.
The judge noted that the Defendants had not even sought to make a part payment of the sums due. Nothing had been paid at all. The Claimant had faced a series of applications from the Defendants which had not been pursued. As to the Defendants’ latest application of 30 October 2025, the judge noted that the Third Defendant’s application to challenge the court’s jurisdiction appeared unmeritorious, given that the Third Defendant had filed an acknowledgment of service dated 6 January 2025 but had made no application disputing the court’s jurisdiction within the period under CPR r.11, and under CPR r.11(5) was to be treated as having accepted that the court had jurisdiction to try the claim.
The Defendants had not identified any assets in the jurisdiction against which the Claimant could enforce. The judge considered whether there were alternative routes available to the Claimant in enforcing the outstanding orders outside of these proceedings but no viable options had been raised. It would be unfair to expect the Claimant to incur expenses dealing with the Defendants’ applications in circumstances where the Defendants had apparently deliberately chosen not to discharge costs orders payable to the Claimant.
There was a significant connection between the unpaid orders, which were made in relation to the worldwide freezing order, summary judgment and the application to adjourn the CMC, and the pending applications. The pending applications related to the same substantive subject matter and were part of the continuum of this litigation. The Defendants had been on notice since November 2025 that the Claimant was seeking an order in this form. They had had ample time to discharge the outstanding orders.
The judge considered that a limited form of debarring relief, preventing the progress of any applications, was reasonable and proportionate, considering the circumstances of the case, and was consistent with Article 6, ECHR. In support of that view, the judge took into account the Defendants’ conduct and noted that the proposed order did not prevent the Defendants participating in the litigation but merely prevented them from issuing or pursuing any applications. The Defendants would still be able to defend the claim substantively. Instead, the effect of the order would be that the Claimant would not face any applications issued by the Defendants unless the Defendants discharged the outstanding court orders.
The Form of the Order
An issue arose in the process of drawing up the order as to whether the court should prohibit each Defendant from making an application unless they paid the orders applicable to them or whether all the Defendants should be prohibited from making an application unless and until all Defendants have discharged all orders. This was not a point that was taken by the Defendants at the hearing (at least not in the way that it has since been articulated). It was one that the Defendants raised after the event. The Claimant contended that it sought a formulation of the order that prevents any applications by the Defendants until all Defendants have discharged all orders against them.
The judge was content to make an order of the former nature: that the prohibition operates against each Defendant individually unless and until that Defendant has discharged the orders made against it. The judge was prepared to hear argument from the parties on whether the order should be extended so as to apply in the way that the Claimant contended, and if so persuaded, could make a further order to that effect.
The judge had considered whether the order also ought to contain a liberty to apply in the event that there was a material change in circumstances. The parties agreed the following text: “The Defendants shall have liberty to apply in the event of a material change of circumstances, but (i) such circumstances must be directly relevant to the Defendants’ ability to comply with the outstanding orders, (ii) the Defendants must give no less than 14 days’ written notice to the Claimant before making such application, and (iii) the Defendants are not permitted to advance, under the guise of this liberty to apply, any application that is or was the subject of the debarring order made herein.”
https://tmclegal.co.uk/wp-content/uploads/2026/06/Beech-Hill.jpg6671000Toby Moretonhttps://tmclegal.co.uk/wp-content/uploads/2026/05/grok-video-6a05f798-3bcb-4a2f-b2a6-b42dc25382a7-1-mp4-image-300x150.webpToby Moreton2026-06-10 18:23:082026-06-10 18:23:08Debarring A Party For Unpaid Costs Rests On Case Management Powers Under CPR 3.1(3)(b), Not The Hadkinson Jurisdiction
The claimant challenged a series of statutory notices issued by HMRC on 17 May 2024 under section 28B(4)(a) of the Taxes Management Act 1970. The notices made consequential amendments to the claimant’s personal tax returns arising from amendments to partnership returns for six film partnership schemes. No statutory right of appeal arises from section 28B(4)(a) notices themselves, and judicial review is therefore the only available public law remedy in respect of such notices, as confirmed by the Court of Appeal in R (Amrolia) v HMRC [2020] EWCA Civ 488.
The section 28B(4)(a) notices made two categories of consequential amendment to the claimant’s personal tax returns. First, they removed loan interest tax relief under Part 8 Chapter 1 of the Income Tax Act 2007. Second, they added the claimant’s apportioned share of partnership income used to pay the loan (so-called dry tax), pursuant to section 609(1) of the Income Tax (Trading and Other Income) Act 2005.
The claimant commenced judicial review proceedings on 14 August 2024. Subsequently, and as had been foreshadowed in HMRC’s summary grounds of resistance filed on 27 September 2024, HMRC issued a series of section 28A(2)(b) notices against the claimant on 16 January 2025. Those notices repeated the removal of the loan interest tax relief but did not include any corresponding addition of the partnership income used to pay the loan, HMRC’s position being that it was statutorily precluded from doing so within the section 28A notices. The section 28A notices carried a statutory right of appeal to the First-tier Tribunal, and the claimant lodged a notice of appeal dated 29 July 2025.
The Permission Application
Six grounds for judicial review had been pleaded. Some related to the removal of loan interest tax relief; others related to the addition of the dry tax income. At the permission hearing, the claimant advanced two principal arguments in support of granting permission on the loan interest tax relief grounds, notwithstanding the existence of the FTT appeal as an adequate alternative remedy.
The first argument was that the section 28B(4)(a) notices remained extant and could be maintained by HMRC even if the claimant succeeded in the FTT appeal. Fordham J rejected this submission. HMRC had expressly confirmed that the FTT appeal would address the substantive issues raised in the judicial review proceedings, including the argument about purchasing a share in the partnership under section 398(2)(a) of the 2007 Act. The judge found it impossible to see a situation where HMRC would be able to maintain a position on the same legal point by reference to the parallel statutory notices if that point had been resolved against HMRC in the FTT proceedings.
The second argument advanced by the claimant was that permission for judicial review was necessary in order to enable recovery of costs incurred in the judicial review proceedings to date. There appeared to be a suggestion that the court should not only grant permission but should go on to resolve the substantive legal issues relating to loan interest tax relief, for the purpose of determining who should bear the costs already incurred.
Fordham J rejected this submission on two distinct grounds. First, the court confirmed that permission for judicial review is not a prerequisite for ventilating a question as to costs. Where a judicial review claim has been overtaken by events, costs can be sought by applying the principles in M v Croydon [2012] EWCA Civ 595. That line of authority, and the procedural mechanism it supports, is addressed at paragraph 25.5 of the Administrative Court Judicial Review Guide 2025. The court noted that the specific mechanism available to a claimant who considers there is a clear-cut basis for a costs order, set out at paragraph 25.5.3 of the Guide, had not been utilised by the claimant in this case.
Second, the court confirmed the well-established principle that the judicial review court will generally not grant permission where a claim has become academic, as explained at paragraph 6.3.4 of the Judicial Review Guide. The prospect of recovering costs already incurred does not provide a freestanding justification for granting permission on otherwise academic or alternative remedy grounds. The court was clear that it was not appropriate to proceed to determine substantive legal issues relating to loan interest tax relief solely for the purpose of resolving a costs dispute.
Fordham J expressly put all questions as to costs and the mechanism for claiming them to one side, confirming that the only issue being decided at the hearing was permission. The court noted that the hearing had been convened specifically to deal with the permission question and that its ambit had not been extended.
Permission Refused on Loan Interest Tax Relief Grounds
The court refused permission on all grounds relating to loan interest tax relief. The FTT appeal provided an adequate alternative remedy for the substantive issues, and the claim had in material respects become academic following the issue of the section 28A notices. The court declined to make any observations as to the viability of any point before the FTT on the claimant’s appeal. Fordham J noted the obvious risk that a claimant runs in seeking to interest the High Court in questions about the viability of legal arguments which will feature in an appeal: the High Court might say something about the viability of those arguments which may not promote the claimant’s position in that parallel forum.
Permission Granted on Section 612(2) Expenses Deduction
Permission was, however, granted on a narrow issue relating to the second component of the statutory section 28B(4)(a) notices: the inclusion of the dry tax and the taxable partnership income used to pay the loan. Insofar as the grounds challenged whether the dry tax income arises as taxable income at all under Part 5 Chapter 3 of the 2005 Act, that challenge was unarguable by reference to the Court of Appeal authority in Good v HMRC [2023] EWCA Civ 114 at paragraphs 80 to 81.
However, a specific and narrow point remained: whether an expenses deduction from the income arises under section 612(2) of the 2005 Act, by reason of the fees described in the Eclipse FTT judgment. In the context of the claimant’s £2.3 million contributions and the £11.6 million said to be at stake in his FTT appeal, the scale of the relevant expenses deduction, if applicable pursuant to section 612(2), would be worth £186,000. The claimant argued that the denial of an expenses deduction under section 612(2) was unlawful, unreasonable, or unfair.
HMRC submitted that beyond narrow parameters of demonstrable procedural unfairness, judicial review was unavailable to challenge the substance of the decision, including by reference to its reasonableness. HMRC’s position was that there is a fundamental distinction between the tax position of the partnership and the tax position of an individual partner. The partnership income used to pay the loan concerns the income of the partnership. Any section 612(2) expenses deduction is one which the partnership is entitled to make. Once the position of the partnership has been determined against the partnership, the consequences cascade down automatically to impact the individual partner. Once HMRC has issued the section 28B(2)(b) notice, the question is whether the partnership takes steps to challenge that notice by way of its statutory appeal. Where there is no appeal, or an appeal is withdrawn, HMRC’s decision becomes legally determinative for the substantive question as to the lawfulness or reasonableness of the application of section 612(2) to any expenses. In the present case, there had been a conclusive determination through the issuing of a statutory section 28B notice against all the relevant partnerships, and the decisions of those partnerships, through the nominated partner, was not to appeal on 27 March 2024.
Fordham J acknowledged these were powerful submissions which may well prevail, but held that they did not meet the modest threshold of arguability in judicial review for refusing permission. HMRC expressly accepted that judicial review is not necessarily excluded in its entirety when a statutory section 28B(4)(a) notice includes a component of this kind. The court was shown no authority which decisively established the legal correctness of HMRC’s position about the restricted availability of judicial review. It was arguable that it is open to a person in the claimant’s position to challenge the public law lawfulness of section 28B(4)(a) notices of this kind by judicial review, including the substance of the decision and its reasonableness, and that this recourse to law has not been excluded by the statutory scheme.
The court noted that the parallel FTT appeal route would not be dealing with this specific issue about the application of section 612(2) of the 2005 Act, and that it had been shown no decided case within all of the lines of authority about these film partnerships which addresses this point. While the court was sceptical as to whether any enhanced fact-based scrutiny of the kind referred to in BlackRock HoldCo 5 LLC v HMRC [2024] EWCA Civ 330 could be appropriate on judicial review, it had not been persuaded by HMRC that there was no properly arguable basis for the claimant saying that the reasoned conclusion communicated by HMRC to him on the section 612(2) expenses point in a letter dated 6 August 2025 was in its substance unlawful or unreasonable. Although the court was also sceptical about whether public law procedural unfairness could be made out by the claimant in the facts and circumstances of the present case, procedural unfairness was also an argument which crossed the modest threshold of judicial review arguability.
Outcome
Permission for judicial review was granted, limited to two narrow and focused questions. First, whether it is open to the judicial review court to consider the lawfulness, reasonableness and/or fairness of the non-application of a section 612(2) expenses deduction for the fees. Second, if so, whether the application of section 612(2) described in the HMRC letter dated 6 August 2025 was unlawful, unreasonable and/or unfair. In all other respects, permission for judicial review was refused.
The claimant was required to amend the judicial review grounds to remove all challenges that relate to loan interest tax relief and those that relate to income used to pay the loan, leaving only those challenges as relate to a deduction under section 612(2) for expenses.
https://tmclegal.co.uk/wp-content/uploads/2026/06/LEVY.webp7501000Toby Moretonhttps://tmclegal.co.uk/wp-content/uploads/2026/05/grok-video-6a05f798-3bcb-4a2f-b2a6-b42dc25382a7-1-mp4-image-300x150.webpToby Moreton2026-06-10 16:35:472026-06-10 16:46:10Permission Is Not Needed To Pursue Costs Where A Judicial Review Has Been Overtaken By Events
Latter Rain Outpouring Project Limited (formerly The Latter-Rain Outpouring Revival Ministries) is a company limited by guarantee, registered under company number 06011619. The Company owns a property at 234-242A Hoxton Street in London, which is used for church purposes and is also let as a flat and four commercial units, with a value said to exceed £3 million. The Company’s stated object in its articles is the provision of property for accommodation and business activities in the community, and it conducts the commercial activities of a church.
The underlying dispute concerns control of the Company, its property, and the church to which it relates. There has been, as one counsel described it, a “schism” within the church, broadly with the Hoxton congregation led by Leroy Vassell, Lorna Vassell and Nathaniel Turner opposing the First Respondent’s conduct, and the Peckham congregation supporting him. The three Respondents, Creswell Lindsay Green, Grace Anderson and Darren Patten, are listed as directors of the Company at Companies House, with the Second and Third Respondents recorded as having been appointed in November 2024. The First Respondent, Mr Green, is a bishop of the Afro-Caribbean Churches Pentecostal ministry and holds his directorship ex officio under the Company’s articles.
A draft Part 7 Claim dated 18 September 2025 was prepared but never issued, sealed or served. It asserted that the Respondents were removed as directors by an extraordinary general meeting held on 11 July 2025, and that they had wrongfully diverted Company funds and granted charges over the Property in favour of a lender, Charles Street Commercial Investments Limited. The relief sought included declarations, rectification of the Companies House register, injunctions restraining the Respondents from acting on the Company’s behalf, and a declaration that the Charles Street charges were invalid. Despite the application having been issued in September 2025, the underlying claim remained in draft form at the time of the hearing in May 2026, some eight months later.
The application was first heard on 30 September 2025 before Mann J (the judgment at paragraph 9 states this date, though paragraphs 64 and 72 appear to contain a typographical error referring to “30 January 2025”), who granted a limited interim injunction until 24 October 2025 upon various undertakings being given by the Respondents. That interim position was extended by a consent order of Trower J on 24 October 2025, and further extended by consent order of Richards J on 30 October 2025, upon the parties agreeing to mediate. The matter came before Mark Anderson KC sitting as a High Court judge on 6 February 2026, who gave directions for mediation and for a further hearing, including provision for additional evidence. The case did not settle, and the matter came before Adam Kramer KC sitting as a High Court judge on 19 May 2026.
At the May 2026 hearing, the court was also asked to consider an enforcement application dated 20 February 2026, which sought unless orders requiring Mr Green to provide documents relating to the Charles Street loan advance, cheque stubs, bank statements, and documents relating to payments to a Mr Livingston. A wasted costs application had also been issued on 30 January 2026 by the Applicant against the Respondents and, it appeared, against the Respondents’ former solicitors Naylor LLP, seeking the wasted costs of a failed mediation. The court was informed at the hearing that this application was not being pursued, and the Applicant was directed to notify Naylor LLP accordingly, as correspondence indicated they were unaware of that position.
Until February 2026, the Applicant had been represented by Brown and Co solicitors, and thereafter appeared through Mr Horaine Henry of counsel by direct access. The Respondents had been represented by Naylor solicitors until January 2026, and thereafter appeared through Mr Duncan Kynoch of counsel by direct access.
Costs Issues Before the Court
The costs issues arising from this hearing were relatively contained, though they arose in a procedurally layered context. The hearing on 19 May 2026 was a further hearing of the interim injunction application, combined with the enforcement application of 20 February 2026. The Applicant failed on the injunction application, save that the undertakings previously provided by the Respondents were continued. The Applicant achieved partial success on the enforcement application, securing orders for the provision of certain categories of documents and a witness statement from Mr Green.
The costs of the hearing before Mann J on 30 September 2025 had been reserved to “the judge hearing the application on the return date”. At the hearing before Mark Anderson KC on 6 February 2026, no order as to costs of that hearing was made. The question therefore arose as to what costs order should be made in respect of the May 2026 hearing, and what should happen to the reserved costs from the Mann J hearing.
The court was required to consider the appropriate costs order in circumstances where the outcome of the hearing was mixed: the Applicant had failed on the primary relief sought but had succeeded in part on the enforcement application, and the hearing itself had been necessary given the deadlock in the Company and the urgency surrounding the Property and its potential development.
The Applicant had failed on the injunction application in its entirety, save for the continuation of the Respondents’ existing undertakings. It had achieved partial success on the enforcement application, securing orders for the provision of bank statements, cheque stubs, documentation relating to the disbursement of the Charles Street loan proceeds, and a witness statement from Mr Green explaining the payments. The Respondents had resisted the unless orders sought and had succeeded in that resistance, though they did not dispute that certain categories of documents remained outstanding and should be provided.
The court noted that the hearing had been plainly necessary, given the deadlock in the Company and the significance of the Property and the potential development. This was a relevant consideration in the exercise of the costs discretion, pointing away from a straightforward costs order against the Applicant notwithstanding its failure on the primary application.
The Court’s Decision
The court indicated that it was minded to reserve all outstanding costs, including those reserved by Mann J, to the preliminary issue trial judge or to any other judge hearing the matter in the future. The court did not make a final costs order at this stage.
The court’s provisional approach reflected the mixed outcome of the hearing and the ongoing nature of the proceedings. The Applicant had failed on the injunction application but had succeeded in part on the enforcement application. The court observed that a hearing had been plainly necessary in the circumstances, given the deadlock in the Company and the urgency of the issues surrounding the Property. These factors militated against making an immediate costs order against the Applicant simply by reason of its failure on the primary relief.
The court also noted, in the context of its wider observations on the proceedings, that if the Applicant chose not to pursue the matter following the judgment, it would not automatically follow that the Applicant would be required to pay all costs expended to date. The court expressed the view that the questions as to who controls the Company did and do need to be resolved, whatever the answer turns out to be, which was a further factor informing the reserved costs approach.
The court also raised, without deciding, the possibility that if it ultimately transpired that the application and claim were not properly authorised by the Company, a costs order against the individuals who had brought the application in the Company’s name, or potentially against the solicitors who had confirmed proper instructions, might be appropriate. This observation was made expressly as a possibility only, with no view expressed on the point, and was directed at ensuring that those behind the application were aware of the potential costs consequences of proceeding without proper authority.
The wasted costs application against the Respondents and Naylor LLP was noted as not being pursued. The court directed the Applicant to notify Naylor LLP that the application was not being pursued, given that correspondence from that firm indicated they had not been informed of that position.
This matter arose from proceedings brought in the Technology and Construction Court by The New Lottery Company Limited and Northern & Shell Plc (together, the claimants) against the Gambling Commission (the defendant), with Allwyn Entertainment Ltd, Allwyn International AG, and Camelot UK Lotteries Limited joined as interested parties. The proceedings concerned two distinct but intertwined claims: the Process Claim and the Modifications Claim, both arising from the fourth National Lottery competition, which the claimants described as “the most financially significant procurement process in UK history”.
The Process Claim challenged the conduct of the competition itself, including the evaluation and award process. The Modifications Claim concerned modifications made to the enabling agreement following the award decision. The claimants sought damages in excess of £1 billion and a declaration of ineffectiveness, which, if granted, would potentially have brought the National Lottery to a standstill. The proceedings were substantial, with the list of issues originally running to 64 issues in relation to the Process Claim and 17 issues in relation to the Modifications Claim.
Throughout the proceedings, the claimants advanced numerous serious allegations against the defendant and the interested parties, including allegations of bias, conflicts of interest, pre-determination of the competition outcome, retrospective amendment of reasoning to “retrofit” feedback to scores already awarded, and preferential treatment of Allwyn in the provision of Phase One Feedback. Many of these allegations were abandoned shortly before or during trial, often without notice and without explanation. Issues were dropped at the outset of trial, at the outset of closing submissions, and even during closing submissions, frequently only after the court or the other parties drew attention to the fact that they had not been addressed or could no longer be maintained.
The judgment, handed down by Mrs Justice Joanna Smith DBE, found against the claimants on all material issues. The consequentials hearing took place on 22 May 2026, at which the costs issues described below fell to be determined. By that stage, the claimants were represented by Mr Roger Mallalieu KC, without the assistance of any of their trial counsel. The defendant was represented by Ms Sarah Hannaford KC, Ms Rachael O’Hagan, and Mr Barney McCay, and the interested parties by Mr Mark Howard KC, Mr Malcolm Birdling KC, and Mr Jamie Carpenter KC.
Costs Issues Before the Court
Two principal costs issues required determination at the consequentials hearing.
The first was whether the defendant and the interested parties were entitled to recover their costs on an indemnity basis rather than the standard basis. It was common ground that the claimants were liable to pay the costs of both the defendant and the interested parties on a standard basis. The dispute was as to whether the basis of assessment should be elevated to an indemnity basis. The defendant and the interested parties sought indemnity costs in respect of the entirety of the proceedings, covering both the Process Claim and the Modifications Claim. The claimants conceded realistically that there were grounds for an indemnity costs order in respect of the costs of the trial of the Process Claim, or perhaps the costs of the Process Claim from the date of the pre-trial review, but contended that standard costs should apply to everything else, including the Modifications Claim in its entirety and the Process Claim up to the pre-trial review or the start of trial.
The second issue was whether the court should depart from the general rule that the winning party recovers all of its costs, by making a reduction to the defendant’s recoverable costs to reflect what the claimants characterised as an unreasonable approach to disclosure. The claimants sought a reduction to the defendant’s costs on the basis that the defendant’s conduct of the disclosure exercise had substantially increased the costs of all parties. The figure sought shifted between the witness evidence and the skeleton argument: the thirteenth statement of Mr Bryant suggested a 7.3% reduction, while the skeleton argument for the hearing proposed a 20% reduction for the first time, which would have had the effect of reducing the defendant’s costs bill by approximately £4 million. The application was made on 18 May 2026, four days before the hearing.
A third, more discrete point also arose concerning the extent of the interested parties’ involvement in the proceedings for the purposes of costs assessment, specifically whether the claimants could go behind the agreed list of issues, which had been annotated with references to the pleadings and had delineated the interested parties’ involvement throughout the trial.
The Parties’ Positions
On indemnity costs: The defendant and the interested parties submitted that the conduct of the claimants throughout the entirety of the proceedings was such as to take the case out of the norm and to warrant an order for indemnity costs across the board. They relied upon the cumulative effect of a number of factors: the inadequate and unparticularised pleadings from the outset; the broad and scattergun nature of the allegations, which included serious allegations of impropriety and dishonesty; the repeated and unexplained abandonment of issues and allegations, often at the last moment and without proper notice; the prejudice and disruption caused to the defendant and the interested parties by those abandonments; the unpleaded and fluctuating nature of the allegations advanced at trial; and the weak and speculative character of the claims from the beginning. Ms Hannaford KC submitted that the conduct warranting indemnity costs was not confined to the trial itself, because the conduct at trial was itself a consequence of the highly unreasonable manner in which the proceedings had been advanced from the outset. Mr Howard KC submitted that there was a need for the court to mark its disapproval of the claimants’ conduct by making an order for indemnity costs.
The claimants, through Mr Mallalieu KC, conceded realistically that there were grounds for an indemnity costs order in respect of the costs of the trial of the Process Claim, or at least from the date of the pre-trial review. However, they argued that standard costs should apply to the Modifications Claim in its entirety and to the Process Claim up to the pre-trial review or the start of trial. Mr Mallalieu also submitted that the defendant’s and interested parties’ costs were extremely high and raised proportionality as a relevant consideration in the exercise of the court’s discretion, arguing that the disproportionate level of those costs was a factor that should weigh against an indemnity costs order. He further cautioned the court against the exercise of hindsight in assessing the reasonableness of the claimants’ conduct.
On departure from the general rule: The claimants submitted that the defendant’s approach to disclosure had substantially increased the costs of all parties and that it would be unreasonable or unjust to require them to bear those increased costs. The application was advanced through the thirteenth statement of Mr Bryant, initially proposing a 7.3% reduction, with the skeleton argument for the hearing escalating that figure to 20% without adequate explanation. The claimants relied on the principles set out in TMO Renewables v Timothy Yeo [2021] EWHC 2773 (Ch), [2021] Costs LR 947.
The defendant, through Ms Hannaford KC, characterised Mr Bryant’s witness statement on the subject as “extremely thin” and submitted that the application was little more than a last-ditch attempt to obtain a reduction in the defendant’s costs. The defendant noted that it had had no proper opportunity to put in evidence in response to the application, given the very late service of the witness statement. The defendant also confirmed that it had excluded from its overall costs application both existing costs orders made during the proceedings and costs incurred in relation to the inadvertent disclosure of privileged documents, and that these would not be added back at a later stage.
The Court’s Decision
Indemnity costs: Mrs Justice Joanna Smith DBE ordered that both the defendant and the interested parties were entitled to recover their costs on an indemnity basis in respect of the entirety of the proceedings, covering both the Process Claim and the Modifications Claim.
The applicable principles were not in dispute. The court referred to Three Rivers DC v Bank of England [2006] EWHC 816 (Comm) at [25] per Tomlinson J, which cited Excelsior Commercial and Industrial Holdings Ltd v Salisbury Hammer Aspden & Johnson [2002] EWCA Civ 879, and to the summary of the law in Hislop v Perde Kaur [2018] EWCA Civ 1726 per Coulson LJ at [35] to [36]. Essentially, there must be conduct which takes the case out of the norm. That is a highly fact-sensitive question and the court’s discretion is extremely wide. The touchstone is unreasonableness, but that unreasonableness must be “to a high degree”. Unreasonable in this context does not mean merely wrong or misguided in hindsight. The court may have regard to an aggregation of factors and there are infinite situations that may give rise to highly unreasonable conduct.
The court found that this was a huge and important claim, billed by the claimants as “the most financially significant procurement process in UK history”. The claimants sought damages of over £1 billion together with a declaration of ineffectiveness which, if granted, would potentially have brought the National Lottery to a standstill. One would expect such a significant and substantial claim to be advanced in a serious, responsible, and proper manner. That was not what happened.
The court noted its observation in the main judgment that, notwithstanding the size of the claim and the legal resources available, the Process Claim had been advanced by the claimants in an apparently unfocused manner, leading to various of the numerous original issues being dropped at the outset of trial, at the outset of closing submissions and even during closing submissions. In many cases, the issues were not dropped until it was specifically drawn to the claimants’ attention by the court or by the other parties that they had not been addressed in the claimants’ written closing submissions or that there no longer seemed to be any viable basis on which they could be maintained. The extent of this moveable feast was regrettable and, given the legal resources available to the claimants, inexcusable. It led to significant time being wasted by the other parties in dealing with issues which were subsequently abandoned. It also risked leaving the court with an imperfect understanding of how the case was being advanced. The court described this as surprising, given the nature and alleged value of the claim, which would be an understatement.
There were numerous serious and wide-ranging allegations, including of impropriety and dishonesty, made by the claimants running through the litigation from the outset. These included allegations of: bias against the defendant as a whole and against specific individuals working for the defendant; conflicts of interest of varying types; pre-determination by the defendant’s Evaluators of the outcome of the Competition leading to only a perfunctory review at moderation; amendments to the defendant’s reasoning after the award decision was made but before it was communicated to the applicants so as to “retrofit” the feedback and comments to the scores awarded; and preferential treatment of Allwyn by the defendant in the provision of Phase One Feedback. These allegations were all advanced over an extended period of time. Many of them were only dropped shortly before or at the trial in wholly unsatisfactory and unreasonable circumstances.
By the end of trial, the list of issues, which originally ran to 64 issues in relation to the Process Claim and 17 issues in relation to the Modifications Claim, had been very substantially reduced, often without any proper notice being given to the other parties. This was, in the court’s judgment, highly unreasonable and wholly out of the norm. The court observed that no explanation had ever been provided by the claimants for their abandonment of any of the issues, nor had any reason been given by them for what the court considered to be a cavalier and highly unusual and unreasonable way of proceeding.
One of the most serious of the allegations made in the Modifications Claim was that the need for the Challenged Modifications was brought about “wholly or substantially by Allwyn’s failures to meet its obligations under the Enabling Agreement”, an allegation which was taken seriously by Allwyn, but mysteriously abandoned by the claimants without explanation during the course of the trial.
In addition to these numerous, serious, and wide-ranging allegations, the scale of the abandonments caused very significant disruption to the court and to the other parties, which the court considered to be out of the norm. It caused significant prejudice to the other parties in terms of their defence of the proceedings, in particular their understanding as to the case that was being advanced against them and the costs they had spent in trying to address that case. It also made it difficult for the court to understand the way in which the case was being advanced. At times, it was advanced in a fluid and apparently fully flexible and opportunistic manner.
Indeed, the claimants advanced a number of wholly unpleaded and unparticularised allegations at the trial and frequently sought to amend and reformulate existing allegations in a manner which the court considered also fell well outside the norm. The court commented on this approach in numerous places in the judgment. At [746] the court observed that the claimants had been forced in light of their abandonments “to reformulate (and often to reinvent their case) at every opportunity” throughout the trial. The court observed that this appeared to be a strong indicator that there was “really no basis whatever for [the] claim of manifest error or, indeed, therefore, for the intervention of the court”.
The court considered that the claimants advanced weak and speculative allegations in respect of both the Process Claim and the Modifications Claim from the outset. They pursued these all the way to trial notwithstanding that they had been notified by the defendant that those claims were doomed to fail from early in 2023. In the Process Claim the claimants had to overcome an almost insuperable hurdle: they had to establish that The New Lottery Company Limited would have passed every one of the 12 Pass/Fail Areas in respect of which it was failed during the Competition and that Camelot and Allwyn should both have been disqualified. The issue of standing, which the court found against the claimants in the Process Claim, meant that, absent proper evidence as to the counterfactual, the Modifications Claim could not succeed. Yet, the claimants fought the Modifications Claim (which it is now accepted was intertwined with the Process Claim) without such evidence. The court also agreed with Ms Hannaford KC that the Modifications Claim was always very weak in its own right owing to The New Lottery Company Limited’s woeful performance in the fourth National Lottery competition, the gap between its score and the scores of Allwyn and Camelot being 30%.
Mr Mallalieu correctly cautioned the court against the exercise of hindsight, and the court considered whether any of these matters might be affected by hindsight, but agreed with Ms Hannaford that hindsight did not affect the analysis in this case given the way in which the trial and case had proceeded from the outset.
Individually or cumulatively, the matters identified by the court were, in its judgment, highly unreasonable and took the case out of the norm. The court relied upon the many detailed points made in the judgment as to the claimants’ poor and unparticularised pleadings, their abandonment of claims, the prejudice and disruption caused by these abandonments, the extent of the unpleaded and fluctuating allegations and the weak and speculative nature of the claims.
The court did not accept the claimants’ evidence in the thirteenth statement of Mr Bryant that they were not to blame for the approach they took to the litigation or that their conduct was the consequence of circumstances imposed upon them. The court also did not consider it to be appropriate to “salami slice” the orders for costs by reference to individual issues or periods of time, as Mr Mallalieu suggested. The court accepted Ms Hannaford’s submissions that the conduct of the claimants which warranted an order for indemnity costs was not just their conduct at trial, because that conduct was itself a consequence of the highly unreasonable way in which these proceedings had been advanced and pursued from the beginning. The pleadings were inadequate and unparticularised from the outset, the claims were weak and none of these issues was remedied prior to trial. The pleadings gave no proper indication to the defendant and the interested parties as to the case that they must meet. The allegations made by the claimants, as Mr Howard KC said, were broad and scattergun because there did not appear to be a realistic pleaded case. They were not supported by adequate evidence from the claimants. Yet the defendant and the interested parties had to expend very considerable amounts of money in preparing to meet those allegations as best they could, only to find them being peremptorily abandoned or changed at trial.
Accordingly, the conduct that the court found to be highly unreasonable was conduct running through the whole of the case. It plainly warranted an order for indemnity costs in relation to the entirety of the proceedings. Further, the court agreed with Mr Howard that there was a need to mark disapproval on the part of the court of such extraordinary conduct by the making of such an order.
During the course of his submissions, Mr Mallalieu suggested that the defendant’s and interested parties’ costs were extremely high, that there were issues arising in relation to their proportionality, and that this was a relevant consideration to take into account in the exercise of the court’s discretion. Specifically he prayed in aid the disproportionate nature of those costs in seeking to persuade the court not to award costs on an indemnity basis. However, the court rejected that submission. The court stated that there is nothing in the authorities to suggest that proportionality is a relevant factor in considering whether to make an order for indemnity costs and that it was inclined to think that it is not. If a party has conducted itself in a highly unreasonable fashion which is out of the norm so as to justify the award of indemnity costs, that party has forfeited the right to any assessment based on arguments of proportionality. In any event, even if the court was wrong about that, it did not consider that Mr Mallalieu’s arguments on proportionality would have shifted the dial given the serious and highly unreasonable nature of the conduct in this case. The conduct here was such that there was no injustice in the claimants being unable to challenge the quantum of the other parties’ costs on the grounds of proportionality.
Departure from the general rule: The court turned to deal with the claimants’ application for the court to depart from the general rule that the winning party should recover all of its costs. The claimants sought an order for a reduction to the defendant’s costs to reflect various issues that they had identified with the disclosure exercise, as explained in the thirteenth statement of Mr Bryant. In short, the claimants submitted that the defendant’s approach to disclosure had substantially increased the costs of all parties involved and that it would be unreasonable or unjust to expect them to pay those increased costs.
The court was referred by Mr Mallalieu to the relevant principles in relation to the approach to costs, which are set out in the case of TMO Renewables v Timothy Yeo [2021] EWHC 2773 (Ch), [2021] Costs LR 947 at [7] to [14]. The court bore those in mind, but did not need to recite them. In the evidence of Mr Bryant, it was suggested that there should be a 7.3% reduction of the defendant’s costs to reflect the unreasonable costs incurred during disclosure. However, in the claimants’ skeleton argument for the hearing it was suggested for the first time that there should be a 20% reduction. No adequate explanation was given as to why that should be the case.
Having considered the arguments, the court was not prepared to make any reduction to the defendant’s costs. Having regard to all the circumstances of this case, the court considered justice to require that the defendant, as the winning party, should be entitled to recover all of its costs.
This application was made only on 18 May (the hearing being on 22 May) in the witness statement of Mr Bryant. Ms Hannaford described Mr Bryant’s witness statement on the subject as “extremely thin”, and the court agreed. No adequate explanation for the proposed reduction had been given. The defendant had had no proper opportunity to put in evidence in response to the application, which the court considered to be unfair, and the court bore in mind that the judgment in this matter had been handed down over a month ago and that this consequentials hearing was taking place, therefore, some considerable time after receipt of the judgment. If an application for a 20% reduction (or any reduction) from the defendant’s costs was to be made, it should have been made with proper notice being given to the defendant.
The court agreed with the defendant that this was little short of a last-ditch attempt on the part of the claimants to obtain a reduction of the defendant’s costs. A reduction of 20% would have the effect of slicing around £4 million from the defendant’s cost bill. The court did not consider there to be any basis for such an order, nor did it consider it to be fair, just or in accordance with the overriding objective to make that order.
The defendant had excluded both existing costs orders made during the course of the proceedings and costs incurred in relation to its inadvertent disclosure of privileged documents from its overall application for indemnity costs. It had confirmed that these would not be added back later. If the defendant spent an unreasonable amount of time on disclosure, that could be addressed on the assessment of costs. The court accepted that there were difficulties in this case with disclosure, but bore in mind that the issues raised in these proceedings necessitated a substantial and complex disclosure exercise. Disclosure in tranches was the subject of court orders, including as to costs. That was not unusual in a case of this magnitude and the court did not consider the disclosure issues identified by the claimants to go beyond what one would expect to see in the ordinary cut and thrust of litigation of this type.
Accordingly, in the exercise of its discretion and having regard to the relevant principles and the overriding objective, this was not a case in which the court should depart from the general rule that the losing party must pay all of the winning party’s costs.
The extent of the interested parties’ interests in the proceedings: Finally, the court observed that the extent of the interested parties’ interest in these proceedings was agreed by the parties in the list of issues which was annotated with relevant references to the pleadings. The trial proceeded on the basis that the list of issues accurately identified and delineated the interested parties’ involvement. The court did not consider there now to be any scope for the claimants to go behind that identification and delineation when it comes to the assessment of costs.
https://tmclegal.co.uk/wp-content/uploads/2026/06/New-Lottery.webp6671000Toby Moretonhttps://tmclegal.co.uk/wp-content/uploads/2026/05/grok-video-6a05f798-3bcb-4a2f-b2a6-b42dc25382a7-1-mp4-image-300x150.webpToby Moreton2026-06-08 18:01:022026-06-08 19:47:06Highly Unreasonable Conduct Forfeits Any Right to Challenge The Winner’s Costs On Proportionality Grounds
The NOx Emissions Group Litigation comprises 13 Group Litigation Orders covering claims by various claimants against vehicle manufacturers and dealers relating to alleged emissions irregularities in diesel vehicles. The lead GLO was made against Mercedes, with additional lead GLOs (“ALGLOs”) against Ford, Nissan, Renault and Peugeot-Citroen. The remaining GLOs are referred to as Non-ALGLOs.
Two previous Costs Management Hearings had produced detailed judgments and Costs Management Orders. At the second hearing in July 2025, two phases were adjourned: the ADR/settlement phase of the Second General budget, and the expert evidence phase within Tranche 3. The third Costs Management Hearing took place on 16 April 2026. Following that hearing, the court granted permission for experts in five disciplines to give written and oral evidence at the quantum trial, though the scope of issues was reduced. The parties were given a further opportunity to revise their budgets in light of those decisions. The judgment was handed down on 4 June 2026 by Mr Justice Constable and Senior Costs Judge Rowley.
Both previous judgments had criticised the claimants’ estimated costs in strong terms. At the third hearing, reassurances were again given on behalf of the claimants that the court’s earlier criticisms had been taken on board, particularly regarding the layers of solicitor representation. However, that reassurance was undermined by the claimants’ own counsel accepting that the extent of counsel time, particularly in relation to the experts’ phase, could not be justified and would no doubt be reduced. The court observed that, given that concession, it was not apparent why realistically reduced figures had not been put forward before the hearing.
Issues Before the Court
The court was required to assess and approve budgeted costs for two phases left outstanding from the second hearing. The first was the experts’ phase within Tranche 3, covering five separate expert disciplines. The second was the ADR/settlement discussions phase of the Second General budget, covering the period from 1 April 2026 to the end of the quantum trial in December 2026.
Within the experts’ phase, the court had to grapple with a recurring structural issue: the ratio of legal fees to expert fees. The court had previously commented on the inappropriate level of lawyer time being spent in the curation of expert evidence, and the same concern arose again. The claimants’ budgets for several disciplines reflected what the court described as a “1:1:1” ratio between profit costs, counsel’s fees and experts’ fees, meaning that the total legal spend was approximately twice the amount being charged by the experts themselves. The court had to determine, for each discipline, what level of legal input was reasonable and proportionate relative to the expert work being undertaken.
A further structural issue concerned the claimants’ practice of suppressing profit costs figures to bring them into line with the other two elements. The court noted that this did not address the underlying concern about the overall ratio, and if anything reinforced the view that the legal team’s input into the expert evidence was excessive.
For the ADR/settlement phase, the court was required to assess the claimants’ revised budget of approximately £1.98 million. The defendants’ combined budget for this phase had been agreed by the claimants in its entirety. The court also had to address specific disputes in relation to individual GLOs.
The Parties’ Positions
Claimants
The claimants maintained that their revised budgets, produced following the hearing, reflected the court’s decisions on the scope of expert evidence and were reasonable and proportionate.
In relation to Loss Assessment, the claimants submitted that the list of issues approved by the court encompassed the majority of the issues in their original proposal, together with some further issues and complexities, and that the budgets had not otherwise been reduced beyond a moderate reduction in counsel’s fees.
In relation to Mechanical Engineering, the claimants pointed to the reductions made following the hearing, which they attributed to the removal of the initial joint expert meeting and joint statement, counterbalanced to some extent by the permission given to the defendants to serve additional factual witness statements. The claimants also highlighted the particular demands of the Mercedes GLO given the number of core sample vehicles involved, and the Nissan/Renault GLO which they said justified a higher budget given the involvement of two separate original equipment manufacturers. The claimants relied on the defendants’ own correspondence, in a different context, asserting significant differences in the technical issues facing the manufacturers.
On the 1:1:1 ratio point, Mr Barclay informed the court that the profit costs figures had been reduced to bring them into line with the other two elements, on the basis that this reflected what was reasonable and proportionate in accordance with the statement of truth on the budgets. He characterised this as the solicitors taking a reduction rather than as reverse engineering to produce aligned figures.
In relation to Consumer Behaviour, the claimants submitted that the reduction in scope did not materially affect the work required. For Software Engineering, the claimants said the budgets had been reduced to reflect the fact that no separate reports were required, but that the costs for joint meetings and joint statements would be greater than originally budgeted. For UK Vehicle Valuation, the claimants submitted that the single remaining issue had been significantly expanded and encompassed some of the issues originally set out elsewhere, resulting in only a moderate adjustment to the proposed budget.
Defendants
Numerous defendants’ counsel took aim at the amounts claimed for solicitors’ profit costs, counsel’s fees and experts’ charges. The similarity between them led to the description of them being incurred in a “1:1:1” ratio. After numerous attacks upon the unlikely nature of the similar figures being spent by all concerned, the claimants’ explanation that profit costs figures had been reduced to match the other two elements was described by the court as not reassuring and as not meeting the substance of the criticism, namely that a ratio of 1:1:1 was itself inappropriate.
Mr Carlo Taczalski, for the defendants generally on the Mechanical Engineering issue, disputed the extent of the asymmetry between the claimants and defendants. He accepted that the defendants have in-house expertise but denied that this was a substitute for the work needed to be carried out by the CPR Part 35 expert. Mr Taczalski also disputed that the need to deal with more core sample vehicles justified the claimants’ assumption that there would need to be a double allocation of costs to Mercedes.
Mr Bailey, for Renault, submitted that there was an unexplained discrepancy in circumstances where the claimants’ mechanical engineering expert fees were 1.5 times the defendants’ experts but the solicitors and counsel fees were double. He submitted that the result was more extreme than the 1:1:1 approach seen elsewhere. For Peugeot-Citroen, Mr Hogan described the sums claimed for both expert fees and counsel’s fees as “surprising” and the profit costs as “arbitrary”.
For Software Engineering, the defendants said the work required was limited to the filing of a joint statement following a meeting between the respective experts. Notwithstanding this, the claimants still sought nearly half of the original budgeted sums even though the cost of preparing an initial report and two responsive reports was no longer required. The extent of counsel’s fees was also criticised as not reflecting the expert led exercise allowed by the court.
For Consumer Behaviour, the defendants’ offer of little more than one third of the sums claimed by the claimants reflected the stark difference in the parties’ views of its utility. The defendants made a valid point regarding the reduction in issues to be dealt with by this expert, but their offer allowed for little more than the expert’s fees claimed.
For UK Vehicle Valuation, the defendants referred to the “considerably reduced scope” and quoted the managing judge as saying that the remaining issue was a “very limited question”. The defendants described the remaining issue as being slightly expanded, rather than the claimants’ description of it. Notwithstanding this description, the reduction in the claimants’ budgets of just over a fifth did not reflect the reduction in scope, in the defendants’ submission.
The Court’s Decision
The 1:1:1 Ratio
The court held that the explanation given by the claimants for the 1:1:1 ratio was not reassuring and did not meet the substance of the criticism. The fact that profit costs figures had been suppressed to match counsel’s fees and expert fees did not address the underlying concern about the overall ratio. If anything, it reinforced the view that there was too much input from the legal team into the expert evidence.
The court stated that it ought not to be the case that the legal fees are anywhere close to twice the amount of the expert fees required to produce the necessary evidence. Previous judicial comments had been made about an inappropriate amount of lawyer time being spent in the curation of expert evidence.
The court noted that the budgets produced by the Lead and ALGLO defendants suggested that the legal input of solicitors and counsel combined would be no more costly than the expert evidence and on some occasions rather less. Whilst the court did not rely too heavily upon such budgets, which were inevitably produced on a somewhat speculative basis where the defendants did not consider that evidence was required, it reinforced the view that the amount of legal input into the claimants’ production of expert evidence was some way beyond what was reasonable between the parties.
Loss Assessment
Prior to the hearing, the claimants’ budgeted costs for this discipline amounted to £1,855,808.74 in addition to incurred costs of £2,355,017.34. Following the undertaking to revise counsel fees given at the hearing, counsel’s fees were claimed in the sum of £558,277.87 (a reduction of £62,030.87) whilst the profit costs remained at £618,000 and experts’ fees at £617,500. The overall estimated costs claimed were therefore £1,793,777.87. The defendants’ offer was £1,267,500.
The court noted that the proposed reduction in the legal fees was exactly 10% in this field and that this reduced the proportion from being 2:1 to 1.9:1. The court was under the impression that something rather more significant was being contemplated by the claimants’ legal team.
Taking the experts’ fees figure of £617,500 and doubling it as a starting point to reflect an equal amount for legal fees, the court reached a figure which was below the defendants’ offer of £1,267,500. In such circumstances, it was difficult to consider the defendants’ offer to be anything other than a reasonable sum to allow and so the court allowed £1,267,500.
Mechanical Engineering
Prior to the hearing, the budgeted costs claimed were £3,234,598.19, together with £2,481,298.26 in respect of incurred costs. Following the hearing, the fees were reduced by, in round terms, £279,000 (profit costs), £364,000 (counsel’s fees) and £144,000 (experts’ fees) totalling a revised estimated figure of £2,445,959.49. The defendants’ offer for this element totalled £1,460,605.
The court noted that the incurred costs under this heading were more easily explained than for the loss assessment discipline, given the further testing regime in the context of quantum which had involved mechanical engineers. There was little challenge to the experts’ fees themselves as opposed to the fees expected to be required for legal oversight.
If the court again took, as a starting point, the doubling of the experts’ fees for the various Lead and ALGLOs it reached, in round terms, £680,000 for Mercedes; £340,000 each for Peugeot-Citroen and Ford; and £515,000 in respect of Nissan/Renault.
The court considered that this starting point in respect of Mercedes was sufficiently close to the (revised) sum actually sought by the claimants of £718,681.65 for the estimated sum to be allowed as claimed.
The same was not true for the remainder of the ALGLO budgets, where the total revised sums sought remained significantly in excess of double the expert fees. The court tended to the view that the same sum should be allowed in respect of Peugeot-Citroen and Ford given that these manufacturers would appear to be broadly similar (at least in terms of number of sample vehicles). The figure of £340,000 fell squarely between the offers made by the two defendants. The court considered that the Peugeot-Citroen offer was unrealistic assuming the experts’ fees were allowed as claimed. However, the Ford figure of £400,000 allowed for 1 to 1.5 times those experts’ fees for legal fees and the court viewed this as a reasonable sum to be allowed to the claimants rather than the sum being claimed of nearly £500,000.
In relation to Nissan/Renault, it appeared that both sides were working on the principle that something in the region of 1.5 times the other ALGLO budgets would be reasonable. The court agreed, and with that in mind, allowed £600,000 in respect of that budget.
Accordingly, the court allowed £400,000 for each of Peugeot-Citroen and Ford.
Software Engineering
Costs in respect of this expert discipline were claimed at the GLO specific level. Prior to the hearing the estimated costs claimed were £1,956,800.90. Following the hearing, the estimated costs had been reduced to £759,015.80 based on £234,000 (profit costs), £223,133.70 (counsel’s fees) and £301,882.10 (experts’ fees). This estimated sum was in fact now considerably lower than the £951,128.93 offered by the defendants prior to the hearing. In large part this was explained by the reduction in scope of the evidence allowed.
At the case management hearing, the managing judge ruled that (at least for the time being) there need not be a separate report in addition to a joint report. It was presently anticipated therefore that the software engineers produce a joint report which sufficiently articulates the reasons for any areas of disagreement in respect of any areas where the software engineers cannot agree. The areas of disagreement were anticipated to be limited.
The court accepted that input into discussions as to how helpful the evidence is, or could be, with further exploration, forms an integral part of the experts’ evidence whether in conference with counsel or otherwise. On the face of it, the reduction of a little over half from the previously contemplated figures seemed to the court to be a realistic reduction. Nevertheless, the court saw some force in the defendants’ argument that the proportion of legal time, and in particular counsel input, should be lessened by the reduction in formal documentation needing to be served. On this basis, the court considered that the budgeted sum should be £125,000 per ALGLO save for Nissan/Renault where it should be £250,000.
Consumer Behaviour
Costs in respect of consumer behaviour were claimed at the Pan NOx level. Prior to the hearing they were claimed in a total sum of £1,425,823.50. Following the hearing, the experts’ fees continued to be claimed at £473,900, the solicitors’ fees had been reduced by £7,000 to £465,850 and counsel’s fees by roughly £88,000 to £391,166.51. The revised sum of £1,330,916.51 claimed for estimated costs remained considerably more than the £525,000 offered by the defendants for this field.
In giving permission for consumer behaviour evidence to be produced at the quantum trial, the managing judge emphasised that the evidence obtained from the consumer behaviour expert was to be non-duplicative to work carried out by the loss assessment expert.
The defendants’ offer of little more than one third of the sums claimed by the claimants for this discipline reflected the stark difference in the parties’ views of its utility. However, the court had determined that evidence under this heading was reasonable. Arguments as to utility, when the court may have relied or not relied at all on such evidence may be made in due course in the usual way if or when any costs order is made, but that was not relevant for the budgeting exercise once permission had been granted. Whilst the defendants made a valid point regarding the reduction in issues to be dealt with by this expert, their offer allowed for little more than the expert’s fees claimed.
The court held that there certainly ought to be some reduction in the expert’s fees, given the focussing of the issues and the court’s exhortation to avoid duplicating evidence being provided by other experts. That was also bound to flow through into the associated legal work. Doing the best it could in what was suspected to be a niche area of expertise, the court allowed a total of £1 million at the Lead/ALGLO level.
UK Vehicle Valuation and/or Pricing
The costs in this expert discipline were also claimed at the Lead/ALGLO level. A total of £938,286.95 for estimated costs was claimed prior to the hearing. Unlike the other disciplines, this sum was made up of four essentially equal parts with “other disbursements” adding to the profit costs, counsel’s fees and experts’ fees. The estimated costs were reduced to £730,333.26 following the hearing. The “other disbursements figure” of £219,300 did not change, but the other three elements were reduced to £175,650 (profit costs), £145,583.26 (counsel’s fees) and £189,800 (experts’ fees). The defendants’ offer for this field was £400,000.
At the case management hearing, the managing judge allowed evidence from an expert in this discipline in a considerably reduced scope from that sought by the claimants. Many of the issues proposed by the claimants to be considered by this expert were rejected.
The court thought it was clear from the determination made by the managing judge that the court’s intention was to provide the claimants with no more than a facility to combat the inevitable expertise contained inhouse at the defendants regarding the marketing of their products. The description of a “limited question” based on only one of nine questions originally proposed and with almost no amendment did not fit with the claimants’ approach as described in their post hearing letter.
The defendants had maintained their offer of £400,000 (which was now more than 50% of the total claimed). It seemed to the court that that was an entirely reasonable sum in respect of this element of the budget and it was allowed as such.
Defendants’ Budgets for the Experts’ Phase
It was confirmed by counsel to the court during the hearing that, in respect of the Tranche 3 expert reports, all of the ALGLO and non-ALGLO defendants’ individual budgets had been agreed, save for Vauxhall. All of the other non-ALGLO defendants had agreed their budget at a maximum of £20,000 for the experts in loss assessment and mechanical engineering. Further sums up to £10,000 had been agreed by those same defendants for the three contingent experts’ disciplines.
This left Vauxhall alone in contending for £23,453.56 for the loss assessment and mechanical engineering experts and £11,726.78 in respect of each of the three contingent experts. Ms Collar made oral submissions in support of the non-contingent experts’ budget by making reference to it amounting to less than 30 minutes for considering the main reports and less than 20 minutes for the contingencies. In Ms Collar’s submission, that time could not be reasonably reduced.
The court held that there was certainly the opportunity for the court to vary sums for different defendants in respect of the same phase in an appropriate case. The difficulty with Vauxhall’s argument was that it inevitably led to a consideration of the hourly rates that were charged in combination with the time claimed. It was trite to say that hourly rates were not set when budgets were considered and therefore it was a slippery slope to consider submissions of this nature in any detail. The task of the court was to set the global figure for each phase and it was a matter for the party thereafter as to what level of lawyer dealt with what aspect of the work required.
All of the non-ALGLO defendants would have to carry out similar work in respect of considering the expert reports obtained in the Lead and ALGLO cases. There was no good reason, as far as the court could see, for Vauxhall to be required to spend more time and effort in this task than any of the other non-ALGLO defendants. The other defendants had either estimated amounts less than £10,000 or £20,000, or been prepared to agree offers, at those sums. The court therefore came to the conclusion that the reasonable sum to allow for Vauxhall’s budget in respect of the Tranche 3 expert reports was also the combined figure of £50,000 made up of £20,000 and three £10,000 budgets.
The entirety of the defendants’ budgets for this phase had been agreed by the claimants. The current defendants’ budgets totalled £1,687,074.55, representing a reduction of a little over £100,000 from the budget put forward for the second hearing.
The claimants said that it was not always obvious why there was a variation in the budgets between defendants given the paucity of assumptions set out. However, the claimants were committed to ensuring that all parties were adequately resourced to engage meaningfully and constructively in ADR/Settlement Discussions and were open to any approach that may facilitate a productive resolution of the dispute, including giving the defendants the benefit of the doubt in their estimates for the ADR phase. Accordingly, the claimants were prepared to agree the totality of the defendants’ projected future costs in the ADR phase of the Second General Budgets.
The court held that it did not seem that the claimants’ approach of effectively agreeing to whatever the defendants said they required to enter into ADR was one which should be endorsed by the court. This was particularly so where the claimants’ own assumptions for this phase were now much more limited. They accepted the defendants’ view that it was unlikely there would be any substantial settlement discussions before the formal PDD judgment was handed down (probably in July). The claimants said that any settlement discussions taking place would be informal rather than via any formal ADR process such as a mediation. Any settlement work was likely to take place prior to the quantum trial beginning in October and that thereafter, the parties would be too busy with the trial to be able to engage in settlement discussions. In any event, no concluded settlement was expected to be reached by the end of the period (31 December 2026), or indeed nor was it expected that any discussions were likely to have reached an advanced stage by then.
Given these limitations, the court recalibrated its view of the sufficiency of the defendants’ estimated costs. Rather than being the lowest sum which could be put forward to avoid judicial criticism, the court took the view that they were quite generous. As such, they had relevance to the sums claimed by the claimants.
The total sum claimed by the claimants had reduced markedly from the previous figure of £11 million to one of £1,984,770. Those costs were claimed against the individual GLOs with just over £1 million claimed against the Lead and ALGLOs and just under £900,000 being claimed against the Non-ALGLOs. The defendants’ offer of £1,211,162 broke down almost exactly two thirds/one third between the Lead and ALGLO defendants and the Non-ALGLOs.
For Peugeot-Citroen, the claimants claimed £192,136 and were offered £168,330 for this phase. The reason for the difference was the sum claimed for the non-lead firms of £52,836. The defendants’ offer allowed for £29,030 for that work on the assumption that the lead solicitors’ time and disbursements were allowed in full.
The lead solicitors’ time in respect of each of the Lead and ALGLOs’ budgets was claimed at the same figure and so too were the disbursements. The only variable between those budgets was where there was a steering committee involved, such as in the Mercedes GLO, and the number of non-lead solicitors involved. In respect of the latter, 17 hours per non-lead solicitor had been allowed for in the claimants’ budgets, save for the Johnson Law Group who had been allowed 25.5 hours and who were intending to provide a co-ordinating role amongst non-lead solicitors in the GLOs in which they were involved.
Mercedes and Ford had agreed figures with the claimants in respect of their budgets. Assuming that the lead solicitors’ time and disbursements had been allowed in full in each, these agreed budgets suggested that Ford had allowed the equivalent non-lead solicitors’ time in full and Mercedes had reduced the non-lead solicitors’ time by roughly one third. The Ford and Mercedes agreements with the claimants suggested that the Peugeot-Citroen offer of 55% or thereabouts was a little low and the court allowed £175,000 for this phase.
For Nissan/Renault, the claimants’ figures were double the other ALGLOs in respect of lead solicitors’ time and disbursements and totalled the sum of £406,816. Nissan offered £235,000 and Renault offered £221,846. At first blush, the defendants had offered at least as much as was being claimed by the claimants and it might be expected that the claimed figure would therefore be agreed. However, the claimants understood from past experience that the Nissan/Renault defendants made separate and different offers which were not capable of being accepted without the agreement of the other. In practice, this meant that the lower of the two offers was the only one which the claimants could actually accept.
In submissions, Mr Teasdale did not shy away from the doubling of the figures under this phase and pointed to the defendants’ budget discussion reports which indicated that, at least as far as Renault were concerned, there would not be any coordination between the defendants in respect of settlement. If the defendants were to go in different directions, then there was no justification for suggesting that the claimants’ costs in this ALGLO should be similar to those in the other ALGLOs. Whilst he contended for the doubling figures in their entirety, Mr Teasdale indicated that in any event, the figures would be higher than those agreed in the Mercedes GLO.
The budgeted figures for these defendants were £200,840.00 (Nissan); £7,675.00 (Nissan authorised dealerships) and £144,966.30 (Renault), making a total of £353,481.30. Based on these figures agreed between the parties, it would appear that the defendants expected to spend approximately 1.5 times more than they considered was reasonable for the claimants to spend in respect of any settlement negotiations.
The court held that there were numerous possibilities as to the methodology of any settlement reached between the claimants and some or all of the defendants. The estimated figures were therefore particularly broad brush in this phase. The court did not think there was any great purpose in considering whether doubling the claimants’ figures in order to cope with two separate OEMs was precisely the correct approach. But it seemed unlikely that the claimants would spend less than the defendants in such negotiations. Consequently, the court considered that £350,000, representing essentially the same sum as claimed by the defendants overall, was the reasonable and proportionate sum for this phase.
For the non-ALGLO defendants, all offered the sum of £50,000 to the claimants in the budget discussion reports in respect of each GLO specific budget. By the time of the hearing, Toyota had agreed a sum of £69,450, but the remaining seven budgets were not agreed. The sums claimed by the claimants in those budgets ranged from £75,400 to £149,363. The lowest three budgets (including Toyota) had been reduced following a decision by the claimants to reflect the fact that in those budgets, only one of the lead solicitor firms was instructed by the claimants. As such, less work was likely to be done. Overall, the claimants did not accept that simply halving the time claimed was appropriate.
The other five budgets were much closer in range (between £121,486 and £149,363) and, as with the ALGLO budgets, they were based on a standard figure for the lead solicitors and for counsel’s fees. Those figures were reduced. As with the ALGLO budgets, these non-ALGLO budgets varied depending upon the amount of non-lead solicitors’ time involved. They contained the same amounts of time as for the ALGLO budgets in respect of each individual non-lead solicitor.
The non-ALGLO defendants’ own budgets generally ranged between £40,000 and £70,000 with Volvo (£82,827.50) and Vauxhall (£103,836.91) being the outliers.
The defendants’ offer of £50,000 on the claimants’ budget per non-ALGLO defendant was said to be based upon the allowances made in the first hearing judgment regarding this phase. However, as Mr Teasdale pointed out, the figures in fact varied quite considerably, with, for example, the budget in the Vauxhall GLO being allowed at £100,000 whereas in the Toyota GLO it was £20,000, which perhaps reflected the suggestion that it ought to be at the lower end of the sums involved given the comparative simplicity of any settlement mechanism. The court considered it was difficult to say any standard figure ought properly to apply in this phase. Even a regimented methodology for settlement of individual claims would require more time where there were considerably more claimants than in others. The court therefore rejected the defendants’ approach of simply allowing a standard figure.
Nevertheless, the court considered the defendants’ two thirds/one third approach between ALGLO and non-ALGLO defendants to be a more appropriate division than allowed for in the 55/45 figures proposed by the claimants and moved the sums allowed towards the defendants’ split. As Mr Kapoor submitted on behalf of the defendants on this subject, any settlement of these claims was likely to be based on a framework which cascaded from the lead and ALGLO defendants to the non-ALGLO defendants, at least in its general shape.
The court also agreed with the general thrust of the defendants that any negotiation would have to be dealt with in a compressed period. Until the PDD judgment was available for consideration, little or no negotiating was likely. Once the quantum trial had commenced, the scope for industry in respect of settlement was also constrained. The court acknowledged Mr Teasdale’s comments that if there was traction in the manner of any negotiations, then significant time may be spent in seeking to resolve the claims. Equally, there may be little or no traction and the court’s task was not to budget on a worst case approach.
Balancing these various factors, and having allowed £975,986 in respect of the ALGLO budgets for this phase, the court allowed the sum of £649,450 in respect of the non-ALGLO defendants. The court allowed a maximum of £75,000 in respect of the single lead firm defendants and allocated the remainder so as to achieve a figure which was approximately 60%/40% overall.
Conclusion
The court’s approach to the experts’ phase established a clear methodology: doubling the approved expert fees as a starting point for reasonable legal costs. This produced total allowed costs of £5,411,181.65 for the claimants and £12,858,057.16 for the defendants.
For the ADR/settlement discussions phase, the court allowed £1,625,436.00 for the claimants and £1,687,074.55 for the defendants. The court rejected both the claimants’ initial £11 million estimate and the defendants’ attempt to impose a uniform £50,000 cap across all non-ALGLO defendants, instead adopting a nuanced approach that reflected the varying complexity of individual GLOs while maintaining an overall two thirds/one third split between ALGLO and non-ALGLO work.
The judgment reinforces the principle that legal fees for curating expert evidence must bear a reasonable relationship to the cost of the expert work itself, and that a ratio approaching 2:1 in favour of legal fees will ordinarily be regarded as disproportionate in multi-party litigation.
https://tmclegal.co.uk/wp-content/uploads/2026/06/Various-Claimants.webp10241536Toby Moretonhttps://tmclegal.co.uk/wp-content/uploads/2026/05/grok-video-6a05f798-3bcb-4a2f-b2a6-b42dc25382a7-1-mp4-image-300x150.webpToby Moreton2026-06-04 17:00:172026-06-04 17:02:58High Court Cuts Claimants’ Expert-Phase Budgets, Holding Legal Fees Should Not Be ‘anywhere close to twice the amount of the expert fees’
