Consequences Of “Over-Egging” A Claim At The CCMC | Court Engages The CPR 44.3(2)(a) Proportionality “Safety Valve” As Good Reason To Depart Downwards From The Approved Budget Under CPR 3.18

, , , , , ,

The County Court at Central London’s decision in O’Sullivan v Trading 212 UK Limited [2026] EWCC 32 addresses the circumstances in which a court may depart from approved costs budgets under CPR 3.18 when conducting a summary assessment following trial.

Background

This matter concerned a claim brought by Mr Peter O’Sullivan against Trading 212 UK Limited, arising from the closure of his share trading account in August 2021. The substantive judgment, delivered orally by Recorder Benjamin Wood on 12 February 2026 at the County Court at Central London, dismissed the claim. The recorder found that the defendant had both the contractual right and the regulatory obligation to close the account, the latter arising under the applicable anti-money laundering regulations, though no suggestion was made that the claimant had been involved in anything other than entirely legitimate activity.

The claim had been valued at under £30,000 on the Claim Form, with the prayer to the Particulars of Claim pleading monetary relief of £37,106. No non-monetary relief was sought. As the recorder noted in the costs judgment, when properly analysed, the claim was only ever worth a few thousand pounds. It turned on the application of the relevant regulations and the parties’ written contract to a set of facts that were largely apparent from contemporaneous written communications, with the relevant documents running to no more than a few dozen pages.

The claim was initially issued and case managed in Hull. A costs and case management conference took place before a district judge at the County Court at Hull on 11 December 2024, at which the claim was allocated to the multi-track and a costs management order was made. The claimant’s budget was agreed at £59,575 (of which £8,625 had already been incurred), and the defendant’s budget was approved at £188,558.98 (of which just over £88,000 had already been incurred). All figures in the judgment were stated net of VAT.

The defendant applied to strike out the claim on the basis that the claimant’s conduct, which was said to involve attempts to interfere with witnesses and intimidate the defendant’s employees, jeopardised the fairness of the proceedings. That application was heard on 15 September 2025 and adjourned, with the claimant offering undertakings to the court. Costs were reserved. The claimant’s costs schedule for that hearing totalled £20,800 and the defendant’s totalled £59,513.67, both figures being additional to the budgeted costs.

At the pre-trial review on 16 October 2025, a circuit judge increased each party’s budget by £18,243.50. Three phases of the claimant’s budget were increased (witness statements, PTR and trial preparation) and two of the defendant’s phases (witness statements and trial preparation) were increased.

During the course of the trial itself, the defendant produced late disclosure of documents, including internal “Slack” messages, which ought to have been identified and disclosed considerably earlier. That late disclosure generated a significant volume of additional work, including a partially successful and partially unsuccessful application to amend the Particulars of Claim. Both parties filed Precedents T in respect of their increased costs: the claimant’s increase was £54,115 and the defendant’s was £63,330.91, though the defendant later indicated it would seek only £41,477.33 of that figure.

By the time judgment was handed down on the substantive claim, the parties had, between them, a little over £482,000 in costs on the table. The recorder noted that the parties’ actual costs incurred were somewhat higher: the claimant had spent just under £246,426.54 and the defendant had spent £452,456.26, giving a combined total of approaching £700,000 in actual costs incurred in a dispute worth, on the recorder’s analysis, around £5,000.

There being insufficient time to deal with consequential matters on 12 February 2026, the recorder gave directions for the resolution of costs issues. Written submissions were received from both parties. The claimant requested that costs be determined on paper; the defendant requested a hearing. Following consideration of the written submissions, the recorder directed an oral hearing, which took place on 21 May 2026. The costs bundle, which had originally been 54 pages, had grown to 205 pages by the time of the hearing, with both parties having produced further written submissions without invitation or permission to do so. The defendant also filed an N260 indicating costs of just under £30,000 for the hearing on 21 May alone. The claimant filed a costs schedule of £1,925 for that hearing.

Throughout the proceedings, the claimant had been represented by Anthony Metzer KC and George Symes of counsel, instructed by Andreas Laws. The defendant was represented by Anna Greenley of counsel, instructed by Winckworth Sherwood LLP. At the costs hearing itself, the claimant chose to appear in person, assisted by his wife, on the basis that he wished to save money. Following the conclusion of the hearing, the claimant sent two further detailed emails to the court containing additional submissions, the second of which prompted an order that neither party should file further submissions without applying formally and on notice.

The recorder noted that, so far as could be discerned from the absence of any witness statement explaining a refusal of an ADR proposal (as would have been required by the CCMC order), neither party had proposed mediation, early neutral evaluation or any other form of ADR at any stage.

Costs Issues Before the Court

The recorder was required to determine a number of distinct costs issues following the dismissal of the claim. The principal question was what costs order, if any, should be made, and in particular whether the general rule under CPR 44.2(2) should apply so as to require the unsuccessful claimant to pay the defendant’s costs, or whether the conduct of the parties, and in particular the defendant’s late disclosure and the circumstances surrounding the strike out application, justified a departure from that general rule or a modification of any order made.

Two specific conduct-related issues were identified as warranting separate treatment. The first concerned the defendant’s failure to comply with its standard disclosure obligations until the trial had almost concluded, specifically its failure to search for and disclose internal Slack messages. The second concerned the claimant’s conduct in the period leading up to the defendant’s strike out application, which had been heard on 15 September 2025 and adjourned on the basis of undertakings.

A further significant issue arose in relation to the costs management orders made at the CCMC and PTR, and specifically whether there was good reason, within the meaning of CPR 3.18, to depart from the approved and revised budgets when carrying out the summary assessment. The recorder considered the competing approaches in RNB v LB Newham [2017] EWHC B15 (Costs) and Nash v Ministry of Defence [2018] EWHC B4 (Costs), as well as the principles established in Merrix v Heart of England NHS Foundation Trust [2017] EWHC 346 (QB), [2017] 1 WLR 3399.

The court was also asked to carry out a summary assessment of the costs of both parties in respect of the various elements of the order. The claimant sought assessment of his costs arising from the defendant’s late disclosure, as set out in his Precedent T dated 6 February 2026, totalling £54,115. The defendant sought costs of the claim as a whole, including the costs of the strike out application (£59,513.67), budgeted and incurred costs, Precedent T costs and the costs of the hearing on 21 May 2026 (approximately £30,000), though the latter figure was not included in its formal quantification document.

Finally, the claimant raised the question of whether any order for payment of costs should be stayed pending the determination of his application for permission to appeal the substantive judgment.

The Parties’ Positions

The claimant’s position, as developed through his written submissions settled by counsel and his own oral and written submissions at the costs hearing, was that the defendant should pay his costs in relation to steps caused or prolonged by the defendant’s conduct, and that, save in relation to those issues, there should be no order as to costs. This represented a hardening of the position set out in his earlier written submissions of 26 February 2026, in which it had been submitted on his behalf that the fairest order was no order as to costs save for those costs directly consequential on the defendant’s late disclosure, with any costs order in favour of the defendant being drastically reduced in the alternative.

In relation to the defendant’s late disclosure, the claimant submitted that he should have his costs consequent upon this misconduct on the indemnity basis, on the basis that the conduct was analogous to that of the defaulting claimant in Finsbury Food Group plc v Axis Corporate Capital UK Ltd [2023] EWHC 1559 (Comm), whose conduct was described by the Deputy Judge as “profoundly unsatisfactory“.

The defendant’s position was that the correct and just order was that the claimant pay the defendant’s costs, save for a limited concession in respect of the costs of the reconvened trial and of considering the late disclosure. The defendant submitted that it should have its costs in relation to the strike out application on the basis that it was necessarily made, relying upon the matters set out in the witness statement of a partner at Winckworth Sherwood dated 10 June 2025.

The General Rule and Conduct

The recorder began by noting that costs are in the discretion of the court, but that the discretion must be exercised judicially. CPR 44.2(2) provides that if the court does decide to make an order about costs the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party, but the court may make a different order. The successful party was the defendant, because the claim had been dismissed.

Following CPR 44.2(4), the court must have regard to all the circumstances in deciding what order to make about costs, including the conduct of all the parties, whether a party has succeeded on part of its case (even if it has not been wholly successful) and any admissible offer to settle. In this case, there had been no admissible offers to settle other than an offer from the defendant to the claimant, made on 29 October 2025, which was to accept just over £160,000 in respect of its costs as they then stood.

Much of the parties’ focus in their costs submissions had been on conduct, and in particular on each other’s conduct. The recorder observed that the case had been extremely hard fought and every point that could be taken had been taken. One of the difficulties with conducting litigation in this way is that costs rise and, because people become polarised and irritated with each other, they take more and more points in their scramble for victory.

With two exceptions, the recorder did not consider it would be just, having regard to the conduct of both the parties, to start doing a fine analysis of the impact of particular elements of conduct that might be said to have had an impact on the costs. This included all of the conduct points made by the claimant in his written submissions after the hearing and in his own written submissions relied upon at the hearing, to the extent that there were admissible conduct points and not impermissible challenges to the substantive judgment. The recorder considered that it would be wholly disproportionate for the court to descend into the level of detail that appeared to be envisaged.

The recorder therefore did not propose to make an adjustment to the costs order for general conduct points. The two specific points that did warrant separate consideration were the defendant’s disclosure and the claimant’s conduct leading to the defendant’s strike out application.

The recorder also noted the claimant’s position as expressed in his email of 22 May 2026: “I know the difference between right and wrong, and that is all that matters to me. I will either get Justice or I will end up penniless trying. I have my principles your Honour, they are expensive but I will not depart from them.” The recorder further noted that the claimant had not accepted the Financial Ombudsman’s decision of 2 December 2022, which had concluded that the defendant had not done anything substantially unfair or unreasonable in restricting and then closing the claimant’s account.

Having considered the parties’ submissions, and subject to those two points, the recorder concluded that there was no reason to depart from the general rule that the unsuccessful party should pay the successful party’s costs.

The Defendant’s Disclosure

As the recorder had explained in his substantive judgment, the defendant had not complied with its standard disclosure obligations until the trial had almost concluded. In particular, it failed to carry out a search for internal “Slack” messages as part of its initial disclosure searches, in spite of the fact that these might have revealed the internal communications that led to the decision to close the claimant’s account. The absence of such messages in the defendant’s disclosure led its witness (who had left the defendant’s employment in 2022, years before the disclosure exercise was undertaken) to give evidence that was wrong, to the effect that there was no paper trail. It was evident that the witness said this because of the absence of any disclosed communications and not because the witness was trying to hide anything.

Even at the time of the costs judgment, it was not really clear why the defendant failed to disclose those Slack messages as part of its standard disclosure and, in fairness to its Company Secretary and Legal Counsel, who made an explanatory witness statement during the course of the trial, even she did not appear fully to understand what went wrong. But something did go wrong on the defendant’s side and it led to this case taking up a great deal more court time and the incurring of a great deal more expense on both sides.

In reaching that conclusion, the recorder also reflected his earlier conclusion that there were no adverse inferences that ought to be drawn from the non-disclosure or late disclosure and that, by the time he gave judgment on the substantive claim, the defendant was compliant with its disclosure obligations. It followed that the defendant’s late disclosure did not change the outcome of the litigation. The recorder also had no basis to conclude that the late disclosure might have altered either party’s approach to the litigation.

The defendant had partially conceded that it should not recover its own costs in relation to its late disclosure, nor of the reconvened trial. The claimant submitted that he should have his costs consequent upon this misconduct on the indemnity basis.

In the recorder’s judgment, the just costs order in relation to disclosure was that the defendant should not receive its costs of the disclosure phase and that it should pay all of the claimant’s costs consequent upon the late disclosure, on the standard basis, including the costs of the unsuccessful elements of his re-amendment application.

In making this order, the recorder sought to strike a balance between marking the court’s disapproval of a sophisticated financial institution’s failure to comply with its procedural obligations and the undesirability of encouraging an “innocent” party to act disproportionately in response. The recorder was not persuaded that the defendant’s conduct was “unreasonable to a high degree” and “out of the norm” such that nothing less than an indemnity costs order would be appropriate and was also not persuaded that the claimant should be deprived of any of his consequential costs so as to reflect the outcome of the work that was carried out. To the contrary, it seemed to the recorder that the additional costs were precipitated by the defendant’s conduct in circumstances where they would otherwise probably have been avoided altogether. It also seemed that the defendant should not have any of its costs of a phase that it failed to conduct properly, even though the recorder recognised that at least an element of this phase would reflect costs incurred in carrying out its own review of the other side’s disclosure.

The recorder was not trying to draw a sharp line around the costs that go in each direction but to work with a rather broader brush. The costs orders in relation to disclosure were made after having stood back and in order to reflect the overall justice of the case.

For the sake of completeness, the recorder also recorded his rejection of the defendant’s submission that he ought to take account of what it said was “significant disclosure outstanding from the Claimant despite repeated requests”. There was no application by the defendant for specific disclosure or specific searches, none of the claimant’s disclosure (or allegedly non-disclosed material) was relevant to the issues that the recorder was or is now required to decide and he was not a sophisticated financial institution with in-house lawyers.

The Defendant’s Strike Out Application

The defendant applied to strike out the claimant’s claim on the basis that his conduct, in seeking to interfere with witnesses and intimidate the defendant’s employees, jeopardised the fairness of the proceedings. That application was heard on 15 September 2025 and adjourned on the basis of undertakings being offered by the claimant to the court, with costs reserved.

The defendant submitted that it should have its costs in relation to that application, on the basis that it was necessarily made. It relied upon the matters set out in the witness statement of a partner at Winckworth Sherwood dated 10 June 2025, which set out what were said to be “a continuous pattern of threatening conduct by the Claimant to the Defendant from December 2021 to at least March 2025 (and possibly to May 2025 through anonymous communications). The effect of the Claimant’s threatening contact with the Defendant and its former employees has been to (i) prevent key witnesses giving evidence, and (ii) cause current members of the Defendant considerable anxiety about giving evidence and becoming known to the Claimant. This jeopardises a fair trial“.

The claimant submitted that he should have his costs of the application, primarily on the basis that the defendant failed to get the claim struck out and, in pursuing such an optimistic application, failed to consider witness summonses or special measures for the hearing, with the consequence that the application as framed was doomed to fail.

Furthermore, in his more recent submissions, the claimant drew attention to what he said were contradictory and unsatisfactory signals from the defendant and its legal team which, he submitted, undermined the assertion that there was any need for the application and instead indicated that the defendant was trying to present an “aggressive fear narrative“. The recorder noted that the claimant did not deny any of the conduct that was directly attributable to him.

The claimant was also very aggrieved by the order that was made at the pre-trial review, in relation to special measures, which resulted in his having to observe the trial by video (from his counsel’s chambers) and only to attend the courtroom when he was giving evidence. The defendant’s witness was in the same position. Although the claimant was able to communicate electronically with his legal team, he submitted that this was very difficult and meant that he could not correct mistakes and give other instructions as the trial proceeded.

The recorder paused to note that, according to the defendant, the hybrid hearing proposal was made on behalf of the claimant at the PTR; there was no challenge to the arrangements, either by way of appeal or by application to the recorder during the course of the trial; the person who became the defendant’s only live witness was reported to be fearful and the recorder later received evidence of the witness’s emotional state shortly after their evidence had concluded; and the court is required to consider special measures for vulnerable witnesses, as set out in Practice Direction 1A.

The recorder rejected any implication by the claimant that the special measures directed by the court at the PTR came about as a result of any cynical attempt by the defendant to gain a tactical advantage.

However, the recorder recognised that the defendant’s strike out application probably raised, rather than lowered, the temperature of the dispute and that it would have created even more polarisation between the parties. The defendant (or its legal team) did not appear to have sought alternative relief (such as special measures, an order preventing contact or similar) short of strike out.

Nevertheless, the recorder was satisfied on the basis of the material that had been shown to him and the submissions of both parties that an application of some sort was appropriate and it was appropriate to seek the court’s intervention so as to facilitate the giving of best evidence by witnesses and so as to enable both sides to have a fair trial.

The recorder therefore ordered the claimant to pay the defendant’s costs of such an application (and the resulting hearing), on the standard basis.

The Budgeted Costs and CPR 3.18

Some of the costs in respect of which the recorder had decided to make a party/party costs order had been the subject of costs management orders (made at the CCMC and at the PTR). Others (including the costs incurred prior to the CCMC, those of the strike out application and those consequent upon the defendant’s late disclosure) had not been managed by the court.

CPR 3.18 provides that in any case where a costs management order has been made, when assessing costs on the standard basis, the court will have regard to the receiving party’s last approved or agreed budgeted costs for each phase of the proceedings, not depart from such approved or agreed budgeted costs unless satisfied that there is good reason to do so, and take into account any comments made pursuant to rule 3.17(3) and recorded on the face of the order.

Carr J (as she then was) drew attention to the importance of this Rule in Merrix v Heart of England NHS Foundation Trust [2017] EWHC 346 (QB), [2017] 1 WLR 3399. Her Ladyship pointed out at paragraph 67 that the words are “clear” and “mandatory” and explained the purpose and effect of the Rule. Real emphasis needs to be placed on the importance of certainty on costs in the context of access to justice. Costs budgets serve the important function of giving certainty to clients, in the form of knowing what costs they are likely to face, in terms of payment or recovery: Harrison v University Hospitals NHS Trust [2017] EWCA Civ 792, [2017] 1 WLR 4456 per Davis LJ.

However, neither of these decisions contains any guidance as to what would constitute a “good reason” to depart from an agreed or approved budget. The editors of the White Book (at 3.18.3) invite judges to have in mind the Denton test. They go on to identify two decisions which are said to “support the view that a costs judge may depart from the last approved or agreed budget if satisfied that the total costs incurred are disproportionate”.

Although the question of whether to depart from the budgets loomed large, neither party referred the recorder to these decisions and so he had not heard argument about them. The recorder considered whether to invite submissions on their effect but decided that to do so would be disproportionate, adding yet further cost and delay to an already protracted and overly expensive dispute.

In RNB v LB Newham [2017] EWHC B15 (Costs), the Deputy Costs Judge concluded that, if a court on assessment reduces the hourly rates for incurred costs, then this is a good reason to depart from the approved budget (to reflect the hourly rate reduction within the budgeted costs). At paragraph 24 of the judgment, the Deputy Costs Judge drew support for that conclusion from paragraph 73 of Merrix, noting that the rates allowed for incurred costs would need to be applied to the budgeted costs.

In Nash v Ministry of Defence [2018] EWHC B4 (Costs), the Costs Judge took a different view, concluding that hourly rates should not be treated as holding a special status. However, at paragraph 88, he drew attention to the wording at the end of CPR 3.18 as “in recognition that the facts and circumstances in which a costs management order was made may have subsequently changed without revisions being made to the budget“. He went on to give an example where “a change in facts and circumstances led to simplification of matters” without budgets being revised to reflect this such that the addition of the assessed incurred costs to the budgeted costs led to a disproportionately high total. At paragraph 90, he described CPR 44.3(2)(a) as “an effective safety valve for paying parties to seek a further reduction” and concluded at paragraph 91 that “a paying party retains the ability to argue that the overall sum of assessed incurred costs plus budgeted costs is disproportionate such that the overall sum should be reduced“.

It was right at this point to identify the hourly rates of the defendant’s solicitors. Prior to 1 May 2025, the Grade A rate was £605 (rising since then to £650). The Grade B rate was formerly £460 (rising to £495). Grade C actually decreased, from £345 to £340, and Grade D went up from £175 to £205.

The 2025 Guideline Hourly Rates for London 1 for grades A to D were £566, £385, £299 and £205, respectively. “London 1” is defined as “very heavy commercial and corporate work by centrally based London firms“. The rates for London 2 (City and Central London, other work) were £413 (A), £319 (B), £269 (C) and £153 (D). The National 2 rates (which would apply to work carried out in Hull, where this claim began life) were £282 (A), £242 (B), £196 (C) and £139 (D).

The hourly rates of the defendant’s more senior solicitors were significantly higher than any of the guideline rates, and higher even than the guideline rates for very heavy commercial work conducted by centrally based London firms. The claimant had drawn attention in his submissions to the fact that his solicitor was a grade B, working for £300 per hour, but the recorder did not find this comparison to be of any assistance.

The recorder spent some time reflecting upon whether there was a “good reason” to depart from the approved budgets and came to the conclusion that there was, both working from first principles and by parity of reasoning with each of the costs judges’ decisions (hard to reconcile though they might be).

Starting from the position of hourly rates (and so following the reasoning in RNB), the recorder could not see any justification for the defendant being entitled to recover its solicitors’ time at the hourly rates claimed. This was a claim that started in Hull (and was case managed there) and was always of modest value. Even though the defendant was based in the City of London, and was a financial organisation, this case did not justify the involvement of “London 1” solicitors. The recorder was far from convinced that it required London-based solicitors at all, given how many firms operate outside London, including those with financial services specialisms (if that was required).

In the recorder’s view, when it came to an assessment of costs, it would be necessary to reduce the solicitors’ rates by something between around a third and a half, in the case of the more senior solicitors, and by something between around a quarter and a third, in the case of the more junior solicitors. If that was required for the incurred (and not budgeted) costs, then it would, applying RNB, be a good reason to depart from the approved budgets in order to apply the same reductions.

If, on the other hand, the recorder adopted the reasoning in Nash, then he would need to ask himself whether there had been a change in facts and circumstances so as to justify the use of the “safety valve” of seeking a further reduction. As the recorder understood the reasoning in Nash, a change of circumstances would need to be required if the court were considering reducing the overall level of costs below the total of the approved costs. The recorder took the view that, in spite of the parties’ best efforts, there had been a simplification of the issues, such that the total level of expenditure was disproportionately high.

Finally, the recorder reached the same outcome from first principles. As the trial judge, he had the opportunity to review the material and form conclusions about the issues to a far greater degree than the costs managing judge.

The recorder had been able to form views about the factors set out in CPR 44.3(5). He had formed a view about how much this case was really worth. This was and was only a money claim; the case turned on a relatively small number of documents, the application of the anti-money laundering regulations and the interpretation of the written contract between the parties; each side had generated additional work (which could not have been envisaged when the costs management order was made); there were no wider factors of reputation or public importance; the vulnerability of the defendant’s witnesses came to light (and became an issue) only after the costs management order was made.

Put shortly, the recorder took the view that the judge who made the costs management order did so on a basis that had turned out to be completely wrong. Had the judge known what the recorder knew at the time of the costs judgment, it was vanishingly unlikely that this case would have been allocated to the multi-track and it was “all but inconceivable” that the parties would have been allotted 3.5 days of court time for the trial. Even if it had been treated as a multi-track trial, the shorter time estimate ought to have led the court to approach the cost budgeting exercise in a very different way. The parties would have been expected to cut their cloth much better to reflect the pleaded value of the claim.

The recorder wished to emphasise that nothing in the previous paragraph was intended as any criticism whatsoever of the case managing judge (who would no doubt have dealt with this case as part of a busy list and on the basis of the limited information provided by the parties) nor to suggest that there was any impropriety on the part of any of the lawyers.

The recorder recognised that this was the claimant’s claim and that it might be thought unfair to visit his misjudgement upon the defendant as the receiving party.

However, there were three main reasons why this did not prevent the recorder from concluding that he ought to depart from the approved budgets.

  • First, it is the duty of all parties (and not just a claimant) to assist the court to manage a case proportionately. If a defendant falls into the same errors as a claimant (or different errors with the same consequences) in over-egging a claim at the case management stage, then that defendant shares responsibility for the consequences.
  • Second, the effect of this decision was not to ignore the approved budget altogether, but to permit departure from it. In that regard, the defendant was right to draw attention to the fact that the claimant had been well aware of the potential scale of his liability for a long time. And a receiving party’s last approved or agreed budget is one of the factors that the court will have regard to, applying CPR 44.4(3)(h).
  • Third, and in the particular circumstances of this case, it seemed rather more appropriate to evaluate the ways in which the paying party had generated additional work at the end of the claim, rather than at the case management stage.

The recorder therefore concluded that there was a good reason to depart from the defendant’s approved (and revised) cost budget.

Summary Assessment

Having reached conclusions about what costs orders to make and as to the effect of the costs management orders, the recorder turned to the summary assessments that both parties agreed should be carried out.

In undertaking a summary assessment, the recorder’s task was not to undertake a detailed, item by item analysis, but to arrive at a figure which reflected, on a broad-brush basis, costs which were reasonably incurred and reasonable in amount, having regard to the overriding objective and the principle of proportionality. The court must have regard to the factors identified in CPR 44.4(3).

Since the assessment was on the standard basis, the court would only allow costs which are proportionate to the matters in issue, even if they were reasonably or necessarily incurred, and if there was any doubt as to whether costs were reasonably and proportionately incurred or reasonable and proportionate in amount, then that doubt would be resolved in favour of the paying party: CPR 44.3(2).

The Claimant’s Costs

The claimant claimed £54,115 in respect of his costs caused by the defendant’s late disclosure. These were set out in his three-page Precedent T, dated 6 February 2026, with his solicitor’s comments and those of the defendant’s solicitors (together with their offer in respect of each line) on the pages that followed. The amount offered by the defendant in respect of the variation to the budget was £18,000.

Having read all of the comments and considering the work that was necessitated by the late disclosure, with a cross-check for proportionality, the recorder assessed these costs at £27,000 (plus VAT, giving a net figure of £32,400).

The Defendant’s Costs

The recorder turned next to the defendant’s costs, which he dealt with in two parts.

First, he considered the costs of the strike out application, which costs were not the subject of any costs management order and which totalled £59,513.67 (of which £45,772 were solicitors’ costs). 98 solicitors’ hours were spent on the application, including 30.8 hours at grade A and 35.9 hours at grade B.

In the recorder’s judgment, this application could and should have been conducted much more modestly. It was unsuccessful, inasmuch as it was framed as a strike out application, and it was grossly disproportionate to spend more than twice the amount stated on the Claim Form to try to achieve that end.

Using the information available to him, the recorder took the view that the amount that the defendant should recover in respect of this application was £15,000 and he assessed its costs in that amount.

The recorder turned next to the defendant’s costs of the claim as a whole, noting that some of those costs were budgeted and others were not. He also noted that the defendant sought a further £30,000-odd for the hearing that took place on 21 May (which were not included in its “Quantification of Costs” document).

With that additional £30,000, but removing the costs arising out of the late disclosure and of the strike out application, the total costs claimed by the defendant was around £225,000.

The recorder had already explained that the solicitors’ hourly rates required a significant reduction, regardless of the time that was deemed to be recoverable. These accounted for roughly £165,000, with counsel’s fees being the other £60,000.

Having been through the defendant’s analysis more than once, and having performed his own calculations on the figures with which he had been provided, the recorder reached the conclusion that this “rump” of the defendant’s costs should be assessed at £113,750.

He arrived at that figure having conducted a more detailed review, during which he analysed all of the information provided to him for each phase, albeit with a broad brush. In particular, he assessed the disclosure phase at £0 (reflecting his earlier conclusion); he applied very significant reductions to the first two phases (arriving at a figure of £30,000 between them); and he reduced the witness statement phase to £15,000, to reflect his view that one of the defendant’s witness statements should not have been prepared (because that witness had very little, if any, relevant evidence to give) but acknowledging that the task of preparing the statement of the person who became the defendant’s only live witness was not straightforward. He made more modest reductions to the other phases and he allowed only a further £8,000 in respect of the costs on the schedule for the hearing on 21 May.

In arriving at that figure of £113,750, the recorder considered proportionality and concluded that it was a reasonable and proportionate amount in respect of the costs and the work that were the subject of the assessment.

Stay of the Order for Payment

At the end of the parties’ submissions, the claimant asked what would happen if, as turned out to be the case, the recorder were to order him to pay a sum of money in respect of costs and his application for permission to appeal the substantive judgment had not been determined.

The recorder enquired of the claimant whether there was any temporary issue that might prevent him from paying or if there were grounds for believing that the defendant might be unable to repay him, in the event that an appeal were successful and the costs order reversed. The claimant did not identify anything specific that he wanted the recorder to take into account.

In those circumstances, and as the recorder indicated at the time, he said that he would not grant a stay, but that, unless the defendant objected, he would allow a period of 35 days for the claimant to pay the sum ordered, which was considerably longer than the default period of 14 days. He chose that period because it ought to allow sufficient time for the claimant to obtain advice on whether to apply for permission to appeal from the High Court and, if appropriate, to apply for and receive a decision on an application for a stay (from the High Court), whether in the context of his pending application for permission to appeal the substantive judgment or, if he decided that there were grounds for challenging it, in what might become his application for permission to appeal the costs judgment.

Given that the defendant did not object to the claimant’s having 35 days within which to pay any costs that might be ordered, the recorder allowed that timeframe rather than ordering any stay of execution or enforcement.

Conclusions

The recorder observed that the claim had exacted a high price, financially and emotionally, on those involved. It should never have reached this point. Neither side would regard himself or itself as the winner.

The defendant was ordered to pay the claimant’s costs arising from its late disclosure, which the recorder summarily assessed at £27,000 (plus VAT, giving a net figure of £32,400).

However, the claimant was ordered to pay the defendant’s costs of the claim (including its strike out application but excluding the disclosure phase), which the recorder summarily assessed at £128,750.

There was a setting-off of those two amounts, with the consequence that the claimant was required to pay the defendant £96,350. He was given five weeks, until 8 July 2026, within which to make payment.

▶ Watch the case summary

Costs budgeting trumps detailed assessment… to an extent

The court can only depart from agreed or approved budgets, up or down, if there is a “good reason” for doing so

CPR 3.18(b): Good Reason To Depart?

Summary Assessment | No Justification Found For Indemnity Costs, Leading Counsel, Multiple Fee Earner Attendance Or £750+ Hourly Rates

The Correct Approach To Summary Assessment | Guideline Hourly Rates Up By 35%?

CPR 3.15A | Costs Budget Revisions | Significant Developments And The Need To Act Promptly

 

Court Upholds Discounted CFAs Where Rounding Added Just £1,678 To A £2 Million Bill

,

The High Court’s decision in Seladore Legal Limited v PGMBM Law Limited [2026] EWHC 1305 (Ch) concerned the enforceability of two discounted conditional fee agreements between law firms, turning on whether the agreements complied with the requirement in section 58(4)(b) of the Courts and Legal Services Act 1990 to state the percentage by which fees would be increased on success.

Background

Seladore Legal Limited (“Seladore”) and PGMBM Law Limited, trading as Pogust Goodhead (“PGMBM”), are both law firms. PGMBM is a claimant firm conducting major group litigation, most notably acting for over 600,000 claimants in proceedings arising from the collapse of the Fundão tailings dam in Brazil on 5 November 2015, as well as in NOx emissions litigation. In May 2023, the two firms entered into two retainers (“the Retainers”), both signed on 10 May 2023, under which Seladore provided legal services to PGMBM.

The Retainers were structured as discounted conditional fee agreements (“CFAs”). Under each Retainer, PGMBM agreed to pay Seladore at hourly rates below Seladore’s standard rates in any event, with the position on success being that PGMBM would pay Seladore’s full standard rates together with an uplift. The first Retainer related to a proposed claim by PGMBM based on an equitable lien, arising from attempts by defendants in the main litigation to settle claims directly with claimants in a manner that would have cut PGMBM out of any settlement and jeopardised its receipt of costs (“the Lien Retainer”). The second Retainer covered general litigation support in relation to the main claim (“the Litigation Support Retainer”).

Between 12 May 2023 and 2 October 2024, Seladore issued PGMBM with 20 interim invoices under the Retainers at the discounted fee rates, totalling £978,411.03 including VAT. PGMBM paid 15 of those 20 invoices in full, amounting to £886,048.23 including VAT. On 1 April 2025, Seladore issued Final Statute Bills in respect of both Retainers, totalling £3,095,874.63. The outstanding balance claimed by Seladore in these proceedings was £2,209,826.40.

PGMBM declined to pay the outstanding balance and raised a defence of unenforceability, contending that the Retainers failed to comply with section 58(4)(b) of the Courts and Legal Services Act 1990 (“the 1990 Act”) on the basis that they did not state the percentage by which fees were to be increased in the event of success. PGMBM also counterclaimed for the recovery of the £886,048.23 already paid. A further issue as to whether the contractual condition of “Success” had been satisfied was also raised, though that issue was accepted by both parties as being a matter for trial.

Seladore issued an application dated 6 August 2025, amended on 21 August 2025, for strike out and/or summary judgment in respect of certain paragraphs of PGMBM’s Amended Defence and Counterclaim, specifically targeting the enforceability issue. The application was heard by Master Pester on 29 January 2026, with judgment handed down on 1 June 2026.

Procedural Context

Although the application was expressed as being for “strike out and/or summary judgment”, Seladore’s counsel indicated that the matter was most conveniently considered under the rubric of summary judgment under CPR Part 24. The court therefore had to consider whether PGMBM had a real as opposed to fanciful prospect of defending the enforceability issue.

Master Pester applied the principles set out in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch), emphasising in particular that where an application gives rise to a short point of law or construction, and the court is satisfied that it has before it all the evidence necessary for proper determination and the parties have had adequate opportunity to address it in argument, the court should grasp the nettle and decide it. If the respondent’s case is bad in law, he will have no real prospect of success.

Master Pester declined to place weight on evidence relating to the negotiation of the Retainers or PGMBM’s level of expertise in CFA matters. It would rarely, if ever, be appropriate on a summary judgment application for the court to spend time trying to determine the factual matrix. In any event, it was not necessary to consider the factual matrix, as the terms of the Retainers were clear. The question of compliance with the 1990 Act was a question of statutory construction.

Costs Issues Before the Court

The central issue before the court was whether the Retainers, as drafted, complied with the requirements of section 58(4)(b) of the 1990 Act, and if not, whether any departure from those requirements was material so as to render the Retainers unenforceable. The practical stakes were considerable: if the Retainers were unenforceable, not only would Seladore’s claim for the outstanding balance of approximately £2.2 million fall away, but PGMBM’s counterclaim for the recovery of the approximately £886,000 already paid would also become live.

The key provisions of the Retainers were found at clauses 5 and 6. Clause 5.3 contained a table setting out, for each of ten fee-earner grades, the Standard Fee Rate, the Discounted Fee Rate, and the Uplifted Fee Rate. Clause 6.3 provided that, in the event of success, PGMBM would be liable to pay at the Uplifted Fee Rates, and stated expressly that “The Uplifted Fee Rates represent 170% of the standard fee rates set out above (subject to rounding) and reflect an agreed risk assessment given the possibility that there may be no Success.”

Section 58(4)(b) of the 1990 Act requires that a CFA providing for a success fee “must state the percentage by which the amount of the fees which would be payable if it were not a conditional fee agreement is to be increased.” PGMBM’s position was that the Retainers failed to satisfy this requirement for two reasons. First, it was said that the Retainers did not state the requisite percentage at all, because the Uplifted Fee Rates in the table were merely freestanding rates rather than rates derived from a stated percentage increase. Second, and in the alternative, it was argued that even if a percentage could be identified, the words “subject to rounding” meant that the effective uplift differed as between fee-earner grades when calculated to two decimal places, ranging from 70.06% to 70.21%, so that no single stated percentage governed the agreement.

A further question arose as to whether the materiality test established in Hollins v Russell [2003] 1 WLR 2487 applied to alleged breaches of section 58(4)(b) at all, or whether a failure to state the requisite percentage was inherently material and therefore automatically fatal to enforceability.

The Parties’ Positions

Seladore’s position

Seladore submitted that the Retainers complied with section 58(4)(b) of the 1990 Act. It argued that clause 6.3, read together with the table at clause 5.3, made the position entirely clear: the statement that the Uplifted Fee Rates “represent 170% of the standard fee rates” was functionally identical to stating that fees would be increased by 70% in the event of success. To hold otherwise, it was submitted, would be empty formalism.

Seladore further argued that the words “subject to rounding” did not undermine compliance. The rounding arose inevitably from the application of a 70% uplift to hourly rates ending in a figure of five pence, and would have arisen in any event at the billing stage even if those words had been omitted. The effect of rounding was minimal: on the figures in evidence, the total excess charged by reason of rounding amounted to approximately £1,678 on a total bill of approximately £2,076,044.

Seladore also relied on the materiality test in Hollins v Russell, submitting that even if there were a technical departure from the requirements of section 58(4)(b), it was not material. The Retainers spelt out the position with sufficient clarity that PGMBM would have had no doubt as to what it was required to pay in the event of success. There was no adverse effect on the protection afforded to PGMBM as a client, nor on the proper administration of justice.

Seladore additionally placed before the court evidence relating to the negotiation of the Retainers, including email exchanges, and sought to rely on PGMBM’s level of expertise in CFA matters and the fact that PGMBM had obtained a legal opinion from counsel (who was also counsel for PGMBM at the hearing) at an early stage in negotiations. However, the form of agreement on which that counsel was asked to advise was not a CFA at all, but a contentious business agreement, and he did not advise on the issue raised in the application. In any event, Seladore accepted that the factual matrix was not strictly necessary to the analysis, given that the terms of the Retainers were clear on their face.

PGMBM’s position

PGMBM submitted that the Retainers were unenforceable for failure to comply with section 58(4)(b). Its primary case was that the Retainers did not state the percentage increase at all, because the Uplifted Fee Rates in the table were freestanding rates with no governing percentage. Alternatively, PGMBM argued that the percentage was not capable of being ascertained as a single figure, because the amount by which fees were increased varied across fee-earner grades due to rounding.

PGMBM contended that the requirement to state the requisite percentage was a mandatory requirement contained in primary legislation, and therefore the test of materiality did not apply. In any event, and without prejudice to that contention, the breach was said to be material for the following reasons: PGMBM was entitled to be told the figure; the failure had the potential to have an adverse effect on the administration of justice as it may have led to unnecessary disputes; and it had the potential to obfuscate the amount by which Seladore’s fees were to be increased in the event of success and as such was adverse to the protection afforded to PGMBM. (Master Pester noted that PGMBM’s pleading referred to “protection afforded to [the Claimant]”, and observed in parentheses that “presumably what is meant is ‘protection afforded to the Defendant'”.)

PGMBM also relied on Jones v Caradon Catnic Limited [2005] EWCA Civ 1821, in which the Court of Appeal held that a breach of section 58(4) was material where a collective CFA provided for a success fee of 120% (in excess of the prescribed maximum of 100%), notwithstanding that elsewhere in the agreement there was a provision restricting the success fee to 100%. PGMBM submitted that the breach in the present case was similarly material.

The Statutory Framework and Legal Principles

Section 58 of the 1990 Act contains provisions regarding conditional fee agreements. By section 58(1), a CFA which satisfies all the conditions in section 58 “shall not be unenforceable by reason of it only being a conditional fee agreement”. Section 58(2)(a) defines a CFA as “an agreement with a person providing advocacy or litigation services which provides for his fees and expenses, or any part of them, to be payable only in specified circumstances.” Section 58(2)(b) provides that “a conditional fee agreement provides for a success fee if it provides for the amount of any fees to which it applies to be increased, in specified circumstances, above the amount which would be payable if it were not payable only in specified circumstances.”

Section 58(4) contains provisions which only apply to a CFA which provides for a success fee. By section 58(4)(b), the CFA “must state the percentage by which the amount of the fees which would be payable if it were not a conditional fee agreement is to be increased”.

Both parties relied on Hollins v Russell [2003] 1 WLR 2487, where the Court of Appeal heard six joined appeals concerning the enforceability of CFAs or whether the receiving party was obliged to disclose the CFA to the paying party. All of these cases raised (or may have raised) the issue of failure to comply with the applicable conditions in sections 58(3) and (4). After surveying the historical context of the legislation, its declared statutory objectives, the extensions to the CFA regime and the purposes of the regime in section 58 and the new regulations, the Court of Appeal indicated that Parliament could not have intended to render unenforceable a CFA which adequately meets the requirements which were designed to safeguard the administration of justice, protect the client, and acknowledge the legitimate interest of the other party to the litigation.

The Court of Appeal held that the question of “satisfying” something inevitably raises questions of degree. In deciding whether the statutory conditions have been sufficiently complied with, Costs Judges should ask themselves: “Has the particular departure from a regulation pursuant to s. 58(3)(c) of the 1990 Act or a requirement in section 58, either on its own or in conjunction with any other such departure in this case, had a materially adverse effect either upon the protection afforded to the client or upon the proper administration of justice?” If the answer to that question was “yes”, the conditions have not been satisfied. If the answer is “no”, then the departure is immaterial and (assuming that there is no other reason to conclude otherwise) the conditions have been satisfied. Sufficiency or materiality would depend on the facts of each case.

The Court of Appeal explicitly considered the application of the materiality test in the context of section 58(4)(b). One of the cases, Tichband v Hurdman, involved a CFA where the space in which the success fee was to be written in the CFA itself had been left blank. However, the accompanying risk assessment showed that the success fee was to be 45%, including 5% to compensate the solicitors for the postponement of payment to the end of the case. The paying party said that this was a breach of section 58(4)(b) of the 1990 Act. The Court of Appeal saw this as a breach, but held it to be “obviously” not a material one.

Master Pester also referred to Garrett v Halton Borough Council [2007] 1 WLR 554, another decision of the Court of Appeal. The Court of Appeal in Garrett v Halton stressed that the conditions stated in section 58(1) and (3) and the requirements prescribed in the 2000 Regulations were for the protection of solicitors’ clients. The only mitigation of this strict approach is that “the breach must be material in the sense described at para. 107” of Hollins v Russell. Therefore “literal but trivial and immaterial departures from the statutory requirements did not amount to a failure to satisfy the statutory conditions”. Moreover, the importance of Hollins v Russell is that it dealt a fatal blow to challenges that were being made by defendants’ insurers to the enforceability of CFAs on the ground of minor technical breaches of the statutory requirements. The court explained that Parliament did not intend that such breaches should render CFAs unenforceable. The breaches had to be material in the sense that they had a materially adverse effect on the protection afforded to the client or on the proper administration of justice.

In Jones v Caradon Catnic Limited [2005] EWCA Civ 1821, the Court of Appeal considered the position where a collective conditional fee agreement had provided for a success fee of 120% (in excess of the prescribed maximum of 100%). Elsewhere in the agreement, there was a provision that said that the success fee ought to be restricted to 100%. Brooke LJ said that there was a plain breach of the 1990 Act. Construing the CFA as a whole, the court held that there was no question that the client would ever have to pay a success fee of more than 100%. For that reason, “this was not a case in which our attention should be devoted to consumer protection or client protection”. Rather, it was a case in which the issue was “whether the breach was material or not, to the administration of justice”. The Court of Appeal held that the breach of section 58(4) of the 1990 Act was material and therefore the CFA was unenforceable. Brooke LJ said that the breach was material in that it was “on any showing, a more serious breach compared with the trivial breaches” in two of the cases in Hollins v Russell. Laws LJ said he could not characterise the breach as a “marginal” failure to respect the statute. To disregard the 100% limit was inimical to the administration of justice “even if in the result it could be shown that no one would be the loser”.

Master Pester held that he did not read anything in Jones v Caradon Catnic as establishing the proposition that any breach of section 58(4), regardless of seriousness, was inevitably material. That would be inconsistent with the reasoning in Hollins v Russell.

The Court’s Analysis

Master Pester began by noting that, viewed purely as a matter of contractual construction, the terms of the Retainers were clear. PGMBM’s witness did not say that he or his firm did not understand or were confused as to what they were being charged. The Retainers needed to be considered as a whole, without reading individual clauses in isolation.

Literal compliance with section 58(4)(b)

Master Pester held that the requirement in section 58(4)(b) was satisfied. When the Retainers stated that the Uplifted Fee Rates “represent 170% of the standard fee rates set out above”, this was functionally identical to stating that the fees would be increased by 70% of the normal fees. To hold otherwise would be empty formalism. There was a need to read the relevant provisions as a whole: clause 6.3 had to be read together with the figures in the table at clause 5.3. The provision that the Uplifted Fee Rates “represent 170% of the standard fee rates (subject to rounding)” made it clear to the client how the Uplifted Fee Rates had been calculated, and how much more than normal fees the client had to pay in the event of success.

As to the words “subject to rounding”, Master Pester held that these did not render the Retainers unenforceable. PGMBM’s own evidence showed that it was able to identify precisely the increase in terms of pounds and pence. The effect of a 70% increase would always be to round up, as opposed to rounding down, because a 70% uplift would inevitably generate a figure with fifty pence when applied to a figure ending in a “5” (which was the case for all the grades, apart from the Of Counsel rate). There was inevitably going to be a degree of rounding involved once one came to the billing phase. If the words “subject to rounding” had been omitted, a 70% increase on the Standard Fee Rates would still lead to an element of rounding when one came to assessment.

Master Pester rejected PGMBM’s submission that the uplift was not fixed by reference to a percentage but by figures in a table. That was not right as a matter of contractual construction because the figures in the table needed to be read as subject to what was said in clause 6.4. (It appears that this is a typographical error in the judgment: clause 6.3 is the operative provision on uplifted rates; clause 6.4 defines “Success”.) Master Pester saw no requirement under the 1990 Act for there to be a single identical rate for each grade of fee earner in any given retainer. His conclusion was that there had been literal compliance with the requirement of section 58(4)(b) of the 1990 Act.

Materiality

Master Pester went on to hold that, even if his conclusion on literal compliance was wrong, there was no material breach of the legislation. One needed to be clear exactly what the departure from the requirements of the 1990 Act was. The Retainers did state the percentage increase. On PGMBM’s case, the departure was the failure in the Retainers to state in relation to each individual fee earner precisely what the increase was taking into effect the rounding element. PGMBM complained that it was being charged “impermissible elements”, namely, 50p per hour for each and every hour. Using the totals at the end of Mr Bushell’s spreadsheet, with a total of £2,076,044 being charged, Seladore had charged £1,678 more than it would have charged had the percentage increase been exactly 70.00% in relation to every fee earner (without rounding). On the figures, the excess, even if not de minimis, was not material.

Master Pester rejected PGMBM’s primary case that the test of materiality did not apply to alleged breaches of section 58(4)(b). Hollins v Russell called for such a result. The test of materiality could apply. It was always going to be a factual matter and as such a question of degree. For example, if the CFA itself failed to state the increase, but it was clear from the surrounding extraneous material (a letter, a risk assessment), then although there was a breach of the legislation it might not (depending of course on all the circumstances) be material. That seemed plainly consistent with the Court of Appeal’s approach in Tichband v Hurdman, one of the cases in Hollins v Russell.

Master Pester distinguished Jones v Caradon Catnic. He did not read anything in that case as establishing the proposition that any breach of section 58(4), regardless of seriousness, was inevitably material. That would be inconsistent with the reasoning in Hollins v Russell.

Master Pester rejected PGMBM’s submissions that the breach was material. PGMBM had said that the failure could have led to an easily avoidable dispute about the indemnity principle, which would have a materially adverse effect on the proper administration of justice, and that one could not tell what was the base rate and what was the uplift. This was not right. The table indicated what the position was. In any event, the mere ability to raise bad or weak points did not endanger the administration of justice. PGMBM also said that Seladore’s true fees had been “obscured”. Again, this was not a good point. One arrived at the Uplifted Fee Rates by multiplying the base fee by 70%, together with the express reference to rounding. The inclusion of the table provided additional clarity. PGMBM submitted that there was a potential dispute about whether the fees that were payable upon success were (i) the Standard Fee Rates plus 70% or (ii) the Uplifted Fee Rates. When the Retainers were read as a whole, and not taking clause 6.3 in isolation, there was no basis for such a dispute.

The Retainers spelt out the position with sufficient clarity so that PGMBM would have no doubt what it was required to pay. This was something which the Court of Appeal in Hollins v Russell considered of paramount importance. There were no breaches which had a materially adverse effect on the protection afforded to PGMBM or on the proper administration of justice.

Conclusion

Master Pester concluded that there was literal compliance with the 1990 Act, and therefore no breach. If he was wrong on that, then the breach was not material. The application therefore succeeded. PGMBM’s counsel indicated that it was accepted that if the application succeeded on the enforceability issue, then that aspect of the counterclaim “falls away”, but there were still arguments as to the fees reasonably charged by Seladore more generally.

Unenforceable CFA: Court of Appeal Rejects Severance And Quantum Meruit Arguments As Between Solicitor And Client

Conditional Fee Agreements | Enforceability of Combined Fixed Fee And Hourly Rate Provisions

CFA unenforceable following “assignment” between firms

CFAs Enforceable With 25% Damages Cap But Success Fees And Hourly Rates Reduced For Lack Of Informed Consent

CFA Is A Contentious Business Agreement, High Court Rules

Court Rejects DBA Argument and Clarifies CFA Information Requirements

Competing Part 36 Offers In Multi-Issue Litigation | Like-for-Like Comparison Required

, ,

The High Court’s decision in Rued v Dormer [2026] EWHC 1074 (Ch) addresses the application of Part 36 costs consequences where competing offers were made in multi-issue partnership litigation, and determines the proper costs treatment of a contested account following dissolution.

Background

This judgment arose from a long-running partnership dispute between Ulrich Rued (the claimant) and Lloyd Dormer (the first defendant), who are brothers-in-law. In the second half of 1997, the two men agreed to go into partnership for the purpose of developing land. The business commenced trading on 1 December 1997. Lloyd identified and purchased two parcels of land in Somerset, known as Wellington and Hill Farm. Ulrich, who has resided throughout in Switzerland, provided the cash funding by way of loans, which were to be repaid with interest, after which the profits would be divided equally between the parties. Lloyd retained day-to-day control of the partnership business, including control over the banking arrangements and the manner in which the development was undertaken.

By 2015, the relationship between the parties had irretrievably broken down. Lloyd declined to make repayments of capital and interest, and the dispute became entrenched. The claim was issued on 7 August 2018, and the partnership was formally dissolved when the claim form was served on Lloyd. Substantive work on the Hill Farm development had stopped in November 2016.

The proceedings involved a liability trial, an account phase, and a series of consequential hearings. Judgments were handed down following both the liability trial and the account phase, with a further consequentials hearing producing a judgment on 18 July 2025. Throughout the proceedings, the court was assisted by detailed expert reports from the single joint expert, Mr Jonathan Dodge FCA CF, a partner at FRP Advisory Trading Limited, who was not called to give oral evidence.

Following the liability trial and the first consequential hearing, an order was made on 9 September 2021 (the “9.9.21 Order”). That order provided that the defendants should pay the claimant’s costs of the liability phase on the standard basis, to be assessed if not agreed, with execution stayed until the account hearing. Permission was also given to the parties to apply to vary the costs order after the account: to the claimant, to vary the basis from standard to indemnity on the basis of any beaten without prejudice offers; and to the defendants, to refer the court to any applicable without prejudice offers. The 9.9.21 Order also declared that Plot 9 had been transferred in breach of trust by Lloyd to himself and his wife Gabriella, and that it was held on trust for Ulrich as to 50% and Lloyd and Gabriella as to 50%.

The final consequentials hearing, which is the subject of this judgment, required the court to determine three outstanding issues: interest, costs, and the mechanics of sale. The costs analysis is the focus of this post.

Costs Issues Before the Court

The costs issues arising at the final consequentials hearing fell into two distinct categories: first, whether the costs order made in respect of the liability phase under the 9.9.21 Order should be varied; and second, what costs order should be made in respect of the account phase.

On the liability phase, the variation question was driven by competing Part 36 offers. Ulrich sought to upgrade the existing standard basis costs order to an indemnity basis costs order, relying on a Part 36 offer he had made on 5 April 2019 in respect of the repayment of capital and interest. Lloyd, by contrast, sought to recover 90% of his own costs of the liability phase from 12 January 2019 (being 21 days after his own Part 36 offer dated 21 December 2018), with Ulrich receiving only 10% of his liability costs from that date. Lloyd’s position was therefore that his Part 36 offer had not been beaten by the outcome of the liability trial, and that the costs consequences under CPR 36.17(3) should apply in his favour.

On the account phase, both parties sought their costs. Ulrich argued that the account was an inevitable and necessary consequence of the liability judgment and that Lloyd’s poor record-keeping had made the process more burdensome than it needed to be. Lloyd argued that he had been substantially vindicated on the central issues within the account, including wages and expenses, and that the final accounting position was far closer to his case than to Ulrich’s, such that costs should follow the event in his favour.

The court was therefore required to analyse the validity and effect of two competing Part 36 offers, consider whether the automatic costs consequences of CPR 36.17 applied, assess whether it would be unjust to apply those consequences, consider whether an issue-based or percentage-based costs order was appropriate for the liability phase, and determine the correct starting point and any departure from it for the account phase.

The Parties’ Positions

Ulrich’s position on the liability phase: Mr Sinai, counsel for Ulrich, submitted that the Part 36 offer dated 5 April 2019, which offered to accept £1,439,043.16 in settlement of the loan issue, had been beaten. Following the liability trial, Lloyd was ordered to pay £1,537,158.60, and on that basis Ulrich contended that he had obtained a more advantageous judgment, triggering the costs consequences under CPR 36.17(4), including indemnity costs from the date of expiry of the relevant period. Ulrich also contended that the existing costs order in the 9.9.21 Order should not be varied in Lloyd’s favour, and that Lloyd’s Part 36 offer of 21 December 2018 had not been beaten.

Lloyd’s position on the liability phase: Mr Teasdale, counsel for Lloyd on costs, submitted that Ulrich’s Part 36 offer of 5 April 2019 had not in fact been beaten once the differing treatment of withholding tax was properly taken into account. He further submitted that Lloyd’s own Part 36 offer of 21 December 2018, made at £1,601,000 and excluding Hill Farm and Plot 9, had not been beaten by Ulrich, and that accordingly Lloyd was entitled to 90% of his costs of the liability phase from 12 January 2019, with Ulrich receiving only 10% of his liability costs from that date. Lloyd also raised the question of an issue-based costs approach, inviting the court to reflect the outcome on individual issues within the liability phase.

Ulrich’s position on the account phase: Mr Sinai submitted that the account was an inevitable and necessary consequence of the liability judgment, and that Ulrich should not be left to bear the costs of an accounting exercise which flowed directly from findings made in his favour. He further submitted that the account was rendered more costly and burdensome because Lloyd had not kept proper records over many years, requiring wages and expenses to be reconstructed and tested in detail. He also relied on what he described as successes on individual accounting adjustments, pointing out that a number of issues were resolved in Ulrich’s favour even if the final arithmetic outcome was not what he had anticipated.

Lloyd’s position on the account phase: Mr Teasdale accepted that the orthodox starting point for costs following a partnership account is no order as to costs, as established in Ma’har v O’Keefe [2014] EWCA Civ 1684. However, he submitted that departure from that starting point was justified because the account had been heavily contested and outcome-determinative. He argued that the account was driven by Ulrich’s case that Lloyd’s wage and expense claims were overstated or illegitimate, and that the court’s findings had vindicated the overwhelming majority of those claims. He further submitted that the account had left Ulrich worse off than before, and that on that basis costs should follow the event in Lloyd’s favour.

The Court’s Decision

Ulrich’s Part 36 offer of 5 April 2019: The court rejected Ulrich’s submission that his Part 36 offer had been beaten. The offer was expressly limited to the repayment of capital and interest (the loan issue) and did not purport to resolve the wider liability issues, including the partnership account, Plot 9, wages, commission, or the taking of the account itself. It was therefore an offer to settle only a discrete monetary component of a much broader claim.

The court held that the comparison required by CPR 36.17(1)(b) must be a true like-for-like comparison, requiring careful attention to what the offer in fact proposed, how taxation and withholding were treated, and what the court ultimately ordered. The withholding tax issue had arisen previously in relation to an earlier Part 36 offer made by Ulrich on 7 September 2016. Lloyd’s response to that offer was to accept it but to state that he was obliged to withhold part of the sum attributable to interest in order to comply with UK tax obligations under section 874 of the Income Tax Act 2007, which requires that part be paid direct to HMRC in satisfaction of the lender’s tax obligations. The parties became embroiled in a dispute as to whether sums could be paid directly to Ulrich or not, and no agreement was reached.

Ulrich’s Part 36 offer dated 5 April 2019 repeated the same position on tax as the 2016 offer: that the sum must be paid to him direct. This was not a new point raised by Lloyd at the consequentials hearing; it was a known and unresolved dispute that infected the 2019 offer from the outset. Ulrich’s offer was framed on the basis which assumed direct payment to him without accounting for the operation of withholding tax, whereas the liability judgment proceeded on a different and legally correct footing, under which sums properly payable to HMRC under section 874 were treated as discharging part of Lloyd’s liability.

Once the judgment sum was adjusted to remove interest accruing after expiry of the relevant period, and once the differing treatment of withholding tax was correctly taken into account, Ulrich did not obtain a result more advantageous than his offer.

Even if that conclusion were wrong, the court held it would in any event be unjust to apply the automatic consequences of CPR 36.17(4) in the circumstances of this case. The offer concerned only a narrow aspect of the liability dispute and ignored the reality that substantial issues would still have to proceed to trial and determination. Acceptance of Ulrich’s narrow offer would not have avoided the determination of Plot 9 issues or the taking of a full account. The automatic imposition of indemnity costs and enhanced interest would therefore bear no proper causal relationship with the way in which the costs were actually incurred.

Lloyd’s Part 36 offer of 21 December 2018: The court held that Lloyd’s offer was made at a very early stage of the proceedings, before disclosure or evidence, and arguably before Ulrich had access to the information required to understand how the settlement figure was constituted or how acceptance would operate in practice without an account.

The judgment records at paragraph 55 that Lloyd’s offer was framed as settling all claims save for Hill Farm and Plot 9. However, at the time it was made, the litigation had not reached a stage where the practical consequences of settling with those two matters excluded could be identified with any meaningful certainty. The liability phase was not a simple money claim concerned only with quantification. It required determination of issues of entitlement and alleged wrongdoing, including whether Lloyd was liable to repay the capital advanced by Ulrich, whether interest was payable, whether Lloyd was entitled to retain or appropriate Plot 9, whether the defences relied upon by Lloyd had substance, and whether Ulrich was entitled to declaratory relief establishing basic partnership accounting obligations.

The offer figure of £1,601,000 therefore rested upon assumptions about liabilities and credits which, at that time, could not be reliably tested by Ulrich. On 14 January 2019, Ulrich’s solicitors sought clarification of matters which were plainly material to an evaluation of the offer. In particular, Ulrich asked Lloyd to explain how the global figure of £1.601 million had been calculated, what element of that sum, if any, represented partnership profits as distinct from repayment of capital and interest, and how acceptance of the offer was said to operate in circumstances where no account had been taken and where Lloyd’s position on wages and partnership liabilities remained undefined.

By letter dated 18 January 2019, Lloyd’s solicitors declined to provide any such clarification. The court considered that refusal a significant feature of the CPR 36.17(5) analysis. Ulrich was being asked to accept a substantial compromise without being told what, in legal or factual terms, he was being asked to concede or how the proposed settlement figure related to the pleaded and disputed liability issues. In a case of this kind, where Ulrich had no visibility into the accounting basis for a proposed figure at a preliminary stage, a refusal to clarify materially undermined the contention that the offer was one capable of being meaningfully assessed and accepted.

The court was not persuaded that Lloyd’s Part 36 offer was a valid offer within the meaning of Part 36. If that conclusion were wrong, it was difficult to evaluate whether Ulrich failed to obtain a judgment more advantageous than Lloyd’s Part 36 offer. At paragraph 63, the court recorded Mr Sinai’s challenge to the characterisation of Lloyd’s offer as settling all issues bar Plot 9 and Hillside (as the judgment refers to it at that point). The court accepted that challenge as “a fair point”, noting that the offer plainly did not cover all other issues. The offer excluded Plot 9, which later proved to be a central issue at the liability trial, did not concede repayment liability on the footing ultimately established by the court, and did not withdraw, qualify or narrow the substantive defences which Lloyd continued to advance through to trial. The later account proceedings demonstrated that the quantification of key items such as wages, overtime, commission and deductions were the subject of substantial dispute requiring expert analysis and judicial determination. That in turn demonstrated the practical impossibility of a reliable comparison between the offer and the eventual outcome.

If Lloyd’s Part 36 offer was a valid offer to which the costs consequences of Part 36 applied, the court held it would be unjust to apply CPR Part 36.17(3) in respect of the liability phase. There needed to be a meaningful causal connection between the refusal of the offer and the incurring of the liability phase costs. Lloyd’s offer excluded Plot 9, but this was a substantial and central issue in the liability trial, including the question of whether it had been transferred in breach of trust and at an undervalue. Even if the “offered parts” were accepted, the liability trial would still have been required to determine the excluded Plot 9 issues, together with consequential matters that could not sensibly be severed without an account. Lloyd did not accept liability on the basis ultimately found by the court and he advanced positive defences, which had they been accepted, would have defeated or undermined Ulrich’s claims.

The court was not satisfied that Lloyd could show that his offer was a genuine mechanism which, if accepted, would have avoided the incurring of the costs of the liability trial for which he now sought to shift responsibility. Taking all the circumstances together under CPR 36.17(5), there was no causal connection between the refusal of the offer and the liability-phase costs incurred. The costs of the liability phase were incurred because Lloyd contested liability on serious grounds and failed on them at trial. To apply CPR Part 36.17(3) would be to permit Lloyd, who unsuccessfully resisted liability and who declined to clarify his offer, to achieve an unjust result because of an early, opaque and partial offer.

Issue-based costs approach: Mr Teasdale had also raised the question of an issue-based costs approach. However, the court held that the liability phase did not consist of discrete, neatly severable issues capable of being cleanly costed in isolation. The evidence, witnesses and legal submissions overlapped substantially across the repayment claim, the Plot 9 dispute, the regulatory defences and the declaratory relief sought. The trial was conducted as an integrated whole.

In such circumstances, the court is not required, nor is it generally appropriate, to engage in forensic dissection of costs issue by issue. The authorities recognise that this risks introducing artificiality, uncertainty and disproportionate satellite litigation at the assessment stage. The proper approach is instead a broad-brush, evaluative assessment, reflected if appropriate in a percentage order. That approach was articulated clearly by the Court of Appeal in Pigot v Environment Agency [2020] Costs LR 825, where it was explained that an issues-based costs order is often best expressed as a percentage of the whole in order to avoid an unreal and overly technical partitioning of costs.

Any attempt to isolate costs attributable to Plot 9 at detailed assessment would be artificial and speculative. More fundamentally, however, the adoption of an issues-based or percentage-based approach did not assist Ulrich on the question of Part 36. The question under CPR 36.17(5) is not merely how any costs order might be structured, but whether it would be just to apply the automatic consequences at all. For the reasons already given, the liability-phase costs were incurred because Lloyd contested liability on serious and wide-ranging grounds and failed on the central issues. An issues-based order which nonetheless transferred a substantial proportion of those costs to Ulrich would be inconsistent with the substantive outcome of the liability trial.

Accordingly, even applying the principles in Pigot, the only percentage-based order consistent with justice and with the court’s findings would be one which continues to reflect Ulrich’s success on the core liability issues. That is precisely what the existing costs order following the liability judgment achieved. At paragraph 77, the court observed that had it been evaluating the liability of costs by reference to CPR Part 44.2, the same points as set out above could be made. The court therefore did not consider that the costs liability determined in the 9.9.21 order should be varied. When making the 9.9.21 order, the court had rejected Lloyd’s submission that the liability trial had resulted in a “score draw”.

Account phase: The court held that the account in this case followed directly from the findings made at the liability trial. Ulrich succeeded on the core liability issues, including repayment, interest, and the characterisation of partnership assets. Those findings plainly entitled him, as a matter of principle, to require Lloyd to account for partnership dealings following dissolution. Ulrich could not fairly be criticised for seeking an account in circumstances where, without one, the financial consequences of the liability findings could not be worked out at all.

In the case of an account ordered following the dissolution of a partnership, the orthodox starting point is that there should be no order as to costs: Ma’har v O’Keefe [2014] EWCA Civ 1684. That reflects the character of an account as a process designed to ascertain the parties’ respective financial positions rather than to determine liability as between adversaries. That exercise may be complex, time-consuming and contested. That of itself is not a reason to displace the starting point of no order as to costs. However, where the account proceedings can fairly be characterised as having been unnecessarily generated by one party, or where one party has plainly failed on the issues which justified the taking of the account at all, or where there are admissible offers, the court may make a different order.

Both parties contended that they were each entitled to their costs of the account phase. Ulrich submitted that the account was an inevitable and necessary consequence of the liability judgment and that, having succeeded at that stage, he should not be left to bear the costs of the accounting exercise which flowed from it. Lloyd, by contrast, submitted that the account was a heavily contested and outcome-driven process in which he was vindicated on the central issues, such that Ulrich should bear its costs.

The court held that Ulrich’s reliance on liability-phase success explained why he should not be penalised in costs for having sought an account. It did not, however, justify an order requiring Lloyd to fund a process in which Ulrich’s own accounting case did not succeed overall. Lloyd was entitled to say that he was substantially successful on many of the issues within the account. The majority of Lloyd’s wage and expense claims were allowed, and the final accounting position was far closer to Lloyd’s case than that of Ulrich. However, this was not a freestanding adversarial claim, but rather a process that Lloyd was obliged to undergo because of adverse findings at the liability stage.

The account was not an option for Lloyd; it was required to give effect to declarations made against him. His success within that process explained why he should not be criticised for the manner in which it was defended. It did not follow that he was entitled to recover the costs of a necessary accounting exercise imposed by prior liability findings. To accept Mr Teasdale’s characterisation risked converting the account process into ordinary outcome-based litigation for costs purposes, undermining the long-standing approach that accounts are, in substance, neutral mechanisms of ascertainment.

The court held that both parties sought to characterise the account phase by reference to success: liability success in Ulrich’s case, accounting success in Lloyd’s case. That approach obscured the true nature of the account. The account was neither an extension of the liability trial nor a failed damages claim. It was a necessary implementing exercise, albeit one which required judicial resolution of contested issues. Its function was to ascertain the true financial position following dissolution. The fact that the answer was unfavourable to Ulrich on balance did not render the exercise unreasonable. The fact that it favoured Lloyd did not convert it into litigation for which costs should follow the event.

The court was not satisfied that either party had pointed to conduct during the account phase which justified a costs sanction. Ulrich’s challenges to wages and expenses were not hopeless or abusive in the context of incomplete records. Lloyd’s defence of those claims was robust but not unreasonable. The complexity and expense of the account were inherent in the partnership’s historic operation and affected both parties. The account was itself an interwoven complex process which required extensive input from Mr Dodge, the expert, and judicial evaluation. At paragraph 94, the court made a specific factual observation relevant to why it rejected Lloyd’s costs argument: “This is a case where Lloyd controlled the development, had access to all the financial records and elected to transfer a partnership asset without Ulrich’s knowledge to himself and his wife at an undervalue. It is hardly surprising that when Lloyd had to recreate records there was a level of distrust.”

The court also considered whether an issues-based or percentage-based order might be appropriate for the account phase, but concluded that this would be artificial and would no doubt invite further satellite disputes.

In summary, this was a case where the account was inevitable following the liability trial, it was a process legitimately sought by Ulrich following the breakdown of the business relationship, and the account trial was properly defended by Lloyd. Both parties advanced perfectly arguable cases and the process achieved its intended purpose. Neither party’s submissions demonstrated that justice required the costs burden of the account to be shifted to the other side. The court therefore concluded that the appropriate order was that there be no order as to the costs of the account.

Mechanics of Sale

The partnership had been dissolved. The remaining partnership assets comprised cash, the undeveloped land at Hill Farm, and Plot 9. The governing principles are well established. Subject to exceptional circumstances, partnership assets capable of being realised should be sold on the open market, so as to secure a fair value for both partners.

Following the liability and account judgments, the court was required to determine the appropriate mechanism for realisation of the partnership assets, and in particular the treatment of Plot 9, which was presently occupied by Lloyd and his wife as their home. The court had already found that Plot 9 was transferred into Lloyd’s and Gabriella’s names without Ulrich’s knowledge or consent, and at an undervalue, and that Lloyd’s case that there was a concluded agreement permitting Lloyd to acquire Plot 9 for £180,000 was rejected.

The question at this stage was therefore not whether Lloyd was entitled to retain Plot 9 by reference to any historic agreement, but whether, as a matter of mechanics, the court should permit Lloyd to purchase Plot 9 now, and if so on what terms. Ulrich’s position was that the partnership assets should be realised by sale on the open market, with the proceeds applied in satisfaction of the parties’ entitlements. Lloyd submitted that the court should permit him to purchase Plot 9, relying on the fact that it was now his home and that a forced open-market sale would be disruptive and unnecessary if value could be realised without exposure to the market.

The court approached the issue on the basis that the partnership assets must be realised at proper value, and that Ulrich was entitled to receive the economic equivalent of an open-market sale. The fact that Plot 9 was Lloyd’s home did not, of itself, justify departure from that principle. However, nor did it preclude a structure which permitted Lloyd to acquire Plot 9 provided that the mechanism delivered full market value and did not expose Ulrich to any further disadvantage.

The court held that Plot 9 should be valued by an independent chartered surveyor, jointly instructed by the parties if possible, or otherwise appointed by the court. The valuation should be on the basis of open-market value with vacant possession, ignoring the fact that Lloyd was currently in occupation. Neither Lloyd nor any member of his family should be in attendance when the valuer carried out an inspection of Plot 9. The valuation should be carried out on the same basis as would be adopted for an open-market sale, including proper allowance for the standard and completion state of the property, but excluding any discount for a private or “friendly” sale.

Upon receipt of the valuation, Lloyd should be given the option, exercisable within a defined period, to purchase Plot 9 at the full valuation figure. If Lloyd exercised that option, he should be required to complete the purchase within a short and defined timeframe, and to pay the full purchase price into the partnership account (or as otherwise directed) without set-off, save insofar as set-off had already been determined by the account judgment. The purpose of these requirements was to ensure that Ulrich received the same financial outcome as he would on an arm’s-length sale, without being exposed to delay, uncertainty, or further leverage.

If Lloyd did not exercise the option within the specified period, Plot 9 should be marketed and sold on the open market in the usual way, with vacant possession if required. This mechanism struck a fair balance between the parties’ competing positions. It protected Ulrich by ensuring that Plot 9 was realised at full market value and that he was not compelled to accept a private sale at an undervalue or on uncertain terms. At the same time, it accommodated Lloyd’s understandable wish to remain in occupation of his home, but only on terms which fully respected Ulrich’s rights and reflected the findings already made.

Importantly, this approach did not give Lloyd any advantage flowing from the prior unauthorised transfer of Plot 9 or from any alleged historic understanding which the court had rejected. His ability to purchase arose solely from the court’s pragmatic management of the realisation process.

▶ Watch the case summary

Issues-Based Costs Orders And The Powers Of A Trial Judge Under CPR Part 36

Partial Success, Conduct, Offers And Alleged Exaggeration

CPR 36.17 And The Just Rewards Of A Good Part 36 Offer

Validity Of Pre Issue Part 36 Offer And Service By Email

Issues Based And Proportional Costs Orders: When Should They Be Made?

A costs-inclusive “Part 36 Offer” is NOT a Part 36 Offer

No Double Recovery | Represented Party Cannot Claim Both Solicitor Fees And Director’s Time

, ,

The Senior Courts Costs Office’s decision in R (TM Eye) v Dean Hall and R (TM Eye) v Radu and Teodorescu [2026] EWHC 1193 (SCCO) concerned the costs of two conjoined appeals by a private prosecutor against hourly rates assessed by the Legal Aid Agency under section 17 of the Prosecution of Offences Act 1985.

Background

TM Eye Ltd is a private prosecution company that undertakes surveillance, investigative and test purchase operations in connection with the sale of counterfeit goods. As a private prosecutor, it is entitled to recover its costs from central funds under section 17 of the Prosecution of Offences Act 1985, with those costs assessed by the Legal Aid Agency (“LAA”). Two separate prosecutions had been brought by TM Eye Ltd, one against Dean Hall and one against Florentina Radu and Carmen Teodorescu. In both cases, costs orders under section 17 were made in TM Eye Ltd’s favour.

On assessment, the LAA’s Determining Officer awarded hourly rates of £89 per hour for surveillance, preparatory and investigative work and test purchases of counterfeit goods, and £32 per hour for travel. TM Eye Ltd appealed those rates to the Senior Courts Costs Office. In January 2026, Costs Judge Leonard gave judgment on the two appeals together, increasing the rates awarded. The Judge awarded £107 per hour for all work, save for supervision carried out by Mr McKelvey, the Appellant’s sole director, which was awarded at £142 per hour. The Judge found that the LAA had been paying the same hourly rates for years, based on historic Costs Judge decisions, and that those rates were not reasonably sufficient to compensate the Appellant in accordance with the relevant statutory provisions. In the absence of more helpful evidence from either party, the Judge applied a straightforward inflation-based adjustment using public records.

Following the substantive judgment, the question of the costs of the appeal fell to be determined. The Appellant produced a costs schedule in form N260 totalling approximately £45,052. It was also noted that some 28 further claims had been put on hold by agreement pending the outcome of the appeal, and that the benefit of the judgment to the Appellant across those claims was estimated at in excess of £200,000. The Judge noted however that he had no substantive evidence of that figure. The costs of the appeal were determined by Costs Judge Leonard on 18 May 2026.

Costs Issues Before the Court

The jurisdiction to award costs of the appeal arose under regulation 10(14) of the Costs in Criminal Cases (General) Regulations 1986, which permits the court to award to a successful appellant “a sum in respect of part or all of any reasonable costs (including any fee payable in respect of an appeal) incurred by him in connection with the appeal“. The Judge noted at the outset that this discretion is materially different from the costs regime under CPR 44. There is, for example, no general rule that a successful appellant will be awarded its costs; it is a matter for the court.

The Respondent, represented by Richard Clarke for the Lord Chancellor, did not contest the principle that some costs should be awarded to the Appellant. The dispute centred on the amount. The Respondent argued that the Appellant had failed on so many of its arguments, and had achieved an outcome so far short of what it had sought, that recovery should be limited to 33% of its costs. Alternatively, the Respondent proposed an issue-based approach under which several categories of costs should be disallowed entirely. The amount of time claimed was also challenged.

The specific items in dispute within the costs schedule included: the hourly rate claimed for Mr McKelvey’s time (claimed at £330 per hour, being the rate sought on the substantive appeal rather than the rate actually awarded); the time claimed for Mr McKelvey’s witness statement and exhibits; the time claimed for bundle preparation; and the time claimed for client attendances. A professional fee of £3,000 claimed for Mr Conway, the Appellant’s accountant and unofficial financial director, was also in issue.

A more fundamental objection also arose in relation to Mr McKelvey’s time. The Appellant had been represented throughout the appeal by Mr Strickland of Thomas Legal Costs Ltd, a fully qualified Costs Lawyer with the right to conduct litigation and to undertake advocacy on costs issues. Thomas Legal Costs Ltd was on the court record for the Appellant. The costs schedule had been drawn up so as to include both Mr Strickland’s time and Mr McKelvey’s time, as if both were legal representatives. The question arose whether it was permissible for the Appellant to claim both the costs of its legal representative and the time spent by its own employee on the litigation.

The Parties’ Positions

The Appellant contended that it had achieved significant success, both in the two cases under appeal and more broadly, given the knock-on effect on the 28 further claims that had been stayed pending the outcome. It submitted that the benefit of the appeal to the Appellant was estimated at in excess of £200,000 across those claims alone, and that it had had no realistic alternative but to pursue the appeals in order to establish its entitlement to be compensated at appropriate hourly rates. On that basis, the Appellant argued for recovery of its costs in full or close to full, relying in part on CPR 44 criteria and associated legal authority.

The Respondent’s position was that the Appellant’s success was substantially qualified. The Appellant’s primary case, that it should be paid for all work and all travel time at fixed rates far in excess of those actually awarded, had always been unsustainable in principle and had failed. The evidence produced in support of the claimed figures had been found to be inadequate. The Appellant’s case that recoveries under section 17 orders had caused its business to move from profit to loss had also failed, with the key evidence from Mr Conway found to be contradicted by evidence given by Mr McKelvey and Mr Hobbs in an earlier case, R (TM Eye Ltd) v Abdullah. The Respondent submitted that a 33% recovery was appropriate, or alternatively that an issue-based approach should be adopted with several categories disallowed entirely. The Respondent also challenged the inclusion of Mr McKelvey’s time in the schedule and the rate at which it had been claimed.

The Court’s Decision

Costs Judge Leonard began by addressing the legal framework. The award was made under regulation 10(14) of the Costs in Criminal Cases (General) Regulations 1986, not under CPR 44. The Judge noted that the Appellant’s submissions had referred to CPR 44 criteria and related authority, but made clear that the discretion under regulation 10(14) operates differently. There is no general rule that a successful appellant recovers its costs.

The Judge rejected the Respondent’s submission that the Appellant had wrongly based its case on a right to profit from private prosecutions and had lost that argument. The Judge accepted that the relevant statutory provisions confer a right to compensation for expenses incurred, not a right to profit. However, applying Re Eastwood [1975] Ch 112, “profit” in this context meant no more than the Appellant’s capacity to remunerate Mr McKelvey appropriately as its sole director. The Respondent’s point was therefore more hypothetical than real, and in practical terms the Appellant had the better of that argument.

The Judge acknowledged that the Appellant’s stated grounds had largely failed. The primary case, that all work and travel time should be paid at fixed rates far in excess of those awarded, was described as always having been unsustainable in principle. The evidence in support was inadequate. The case based on the business moving from profit to loss also failed, with Mr Conway’s evidence found to be contradicted by earlier evidence from Mr McKelvey and Mr Hobbs in R (TM Eye Ltd) v Abdullah, the discrepancies being sufficiently stark to cast doubt on the credibility of the Appellant’s evidence generally. The comparable market rate evidence offered by both parties was found to be one-sided and entirely unhelpful. The Judge observed that relevant market evidence did exist and might ideally have been addressed in an independent expert’s report, but no such report had been produced. The result was that the Judge had fallen back on a simple inflation-based adjustment using public records.

Turning to the costs schedule itself, the Judge addressed the inclusion of Mr McKelvey’s time. The Appellant had been represented by Mr Strickland of Thomas Legal Costs Ltd, a fully qualified Costs Lawyer with the right to conduct litigation and advocacy on costs issues. The Appellant was therefore not a litigant in person, and the principles applicable to litigants in person did not apply. Applying the principle in Richards v Wellington (Plant Hire) Ltd v Monk and Co (1984) Costs LR Core Vol 79, Bingham J at page 83 (citation as given in the judgment), the Appellant could recover only legal costs, not the cost of being a litigant. It was not open to the Appellant to claim both the costs of its legal representative and the cost of the time spent on the litigation by its own employees. Mr McKelvey did not fall within any of the limited exceptions to that rule as he was not legally qualified, nor was he an expert witness.

The Judge found that the Appellant’s costs schedule was incorrectly drawn up in that it incorporated both Mr Strickland’s time and Mr McKelvey’s time as if they were both legal representatives. For example, under “attendances on client” it was not permissible to claim both 7.4 hours of Mr Strickland’s time as the legal representative and 7.4 hours of Mr McKelvey’s time as, in effect, the client upon whom Mr Strickland was attending. Only Mr Strickland’s time was recoverable. Mr McKelvey’s time was disallowed in its entirety.

The Judge also declined to allow the fee of £3,000 claimed for the professional fees of Mr Conway, given the concerns about his evidence. The time claimed for the preparation of bundles was also found to be excessive. The bundle itself was relatively straightforward. The Judge was unable to understand why, in addition to some 9 hours claimed by Mr Strickland for working on it, an additional 17 hours was claimed for a paralegal. Given the amount of time spent by Mr Strickland on the bundle, the paralegal’s role must have been purely administrative. It was disallowed in its entirety.

The Judge marked as disallowed or reduced time which was considered to be irrecoverable, excessive or, in one instance, incorrectly calculated. This brought the total down from £45,052 to just over £22,000, reflecting Mr Strickland’s reasonable time and a small amount of recoverable disbursements. The Judge bore in mind however that some of that time, albeit reasonable in amount, would have been spent upon evidence which had been found to be unreliable or unhelpful, and so would have been unreasonably incurred. The amount payable by the Respondent for the Appellant’s costs of the appeal was accordingly reduced further, and was assessed at a total of £15,000 inclusive of disbursements.

▶ Watch the case summary

 

Costs In Private Prosecutions, London Solicitors And The “Singh” Discount

Criminal Legal Aid And The Indemnity Principle | No Escape From Legal Aid Rates In Contempt Proceedings

Litigants in Person: Costs recoverable by litigants in person

How Relevant Is The SCCO Guide To Hourly Rates?

The Correct Approach To Summary Assessment | Guideline Hourly Rates Up By 35%?

N260 Statement Of Costs | Form Matters

Foreign Litigation Costs Recoverable As Damages For Breach Of An Exclusive Jurisdiction Clause, Assessed on the Indemnity Basis

, , , ,

The Commercial Court’s decision in Diageo DV Limited v NIO S.R.L. (in liquidation) [2026] EWHC 1198 (Comm) addresses the recovery of foreign litigation costs as damages for breach of an exclusive jurisdiction agreement and the assessment of such costs on the indemnity basis.

Background

This matter concerned an application by Diageo DV Limited (“Diageo”), an English company engaged in the production and distribution of alcoholic beverages, for summary judgment and a final anti-suit injunction against NIO S.R.L. (in liquidation) (“Nio”), an Italian company in voluntary liquidation. The application was heard on 17 April 2026 before Anna Dilnot KC, sitting as a Deputy High Court Judge in the Commercial Court, with judgment handed down on 19 May 2026.

The underlying dispute arose from a Share Purchase Agreement dated 23 November 2023 (the “SPA”), by which Diageo agreed to purchase Nio’s category “A” share in Niococktails s.r.l. (“Niococktails”) for consideration comprising a completion payment of €2.75 million, a deferred payment of €1.25 million, and a contingent exit payment of at least €1 million. The dispute centred on Diageo’s decision to withhold €780,008 from the deferred payment, representing its estimated liability in respect of a settlement reached between Niococktails and entities associated with Conor McGregor and Proximo Spirits Inc (together, the “Proximo/McGregor Entities”).

Prior to the SPA, in around August 2023, Niococktails had entered into a letter of intent and a promotional services agreement with the Proximo/McGregor Entities. Following completion of the share purchase, those arrangements were terminated, prompting the Proximo/McGregor Entities to threaten claims of up to USD 12 million against Niococktails. A settlement agreement was ultimately executed on 2 August 2024, with Niococktails paying USD 1 million in full and final settlement. Diageo subsequently notified Nio of its intention to withhold part of the deferred payment as an estimated liability under clause 6.2 of the SPA.

By letter dated 18 November 2024, Diageo gave notice that it intended to withhold €800,000 from the deferred payment, incorrectly stating the settlement sum as €1 million. Diageo corrected that error in a letter dated 28 November 2024, explaining that the estimated liability was €750,000, being USD 1 million less the €200,000 excess stipulated by clause 7.5(a) of the SPA, converted to euros at an exchange rate of USD 1:EUR 0.95. On 14 January 2025, Diageo paid Nio €469,992, being the deferred payment of €1.25 million less €780,008, the latter figure representing the settlement sum less the excess, converted to euros using the Bank of America spot rate at the date of payment.

Nio objected to the withholding, raising grounds including alleged failures by Diageo to provide sufficient information, non-compliance with clause 5.4 of the SPA (which required reasonable endeavours to settle by way of a product purchase from Proximo), and the contention that Diageo had no unilateral right to withhold any sum without prior agreement or a determination under the Counsel Determination Mechanism provided for in clause 6.2. The parties exchanged correspondence between November 2024 and January 2025 without reaching agreement, and neither party invoked the Counsel Determination Mechanism.

On 26 March 2025, Nio commenced proceedings before the Civil Court of Milan, seeking recovery of the withheld sum. Nio relied upon an exclusive jurisdiction clause in favour of the Italian courts contained in Article 8 of a Deed of Transfer dated 1 December 2023, which had been executed to satisfy the formal requirements of section 2470 of the Italian Civil Code for the transfer of shares in an Italian company. Nio also filed an application before the Italian Supreme Court seeking a declaration that the Milan court had jurisdiction, which resulted in the Milan proceedings being stayed.

Diageo’s position was that the SPA contained, at clause 24.2, an exclusive jurisdiction agreement in favour of the English courts, and that the Italian proceedings had been commenced and pursued in breach of that agreement. Diageo obtained an interim anti-suit injunction from David Bailey KC on 18 July 2025 (reported at [2025] EWHC 2109 (Comm)), restraining Nio from taking further steps in the Italian proceedings. That injunction was continued until further order by HHJ Pelling KC by order dated 8 September 2025, which also addressed service of the claim form and other documents on Nio out of the jurisdiction in Italy. HHJ Pelling KC also made a costs award in Diageo’s favour at that stage in the amount of £85,159 (from a claimed sum of £95,411), covering the costs of the hearing before David Bailey KC and the application to continue the interim injunction, assessed on the indemnity basis.

Diageo’s application for summary judgment and a final anti-suit injunction was issued on 6 January 2026 and served on Nio by certified email on 23 January 2026. Nio did not file any acknowledgement of service or defence, and did not appear or seek representation at the hearing on 17 April 2026. The court was satisfied that Nio had been properly served and was aware of the application, and proceeded to determine it in Nio’s absence.

Costs Issues Before the Court

Three distinct costs matters fell to be determined. The first was whether Diageo was entitled to recover, by way of damages, the legal costs it had incurred in the Italian proceedings as a result of Nio’s breach of the exclusive jurisdiction clause in the SPA. The second was whether an interim payment on account of those damages should be made at this stage, given that the Italian proceedings remained ongoing and the full extent of Diageo’s loss could not yet be quantified. The third was the summary assessment of the costs of the application before the court on the indemnity basis.

On the question of damages, the legal basis for recovering foreign litigation costs as damages for breach of an exclusive jurisdiction clause was well established. The court noted that the proposition had gone unchallenged before the Supreme Court in both Starlight Shipping Co v Allianz Marine and Aviation Versicherungs AG [2013] UKSC 70 and AMT Futures Ltd v Marzillier [2018] AC 439. The measure of recovery is to put the non-defaulting party in the position it would have been in had the foreign proceedings not been brought at all, and can include costs incurred in those foreign proceedings: Compania Sud Americana de Vapores SA v Hin-Pro International Logistics Ltd [2015] 1 Lloyd’s Rep 301 at [37] to [38]. Importantly, such costs are recoverable even where the foreign court lacks the power to award costs: Union Discount Co Ltd v Zoller [2002] 1 WLR 1517 at [31]. The assessment of those costs is conducted on the indemnity basis, with the burden of establishing any failure to mitigate resting on the party in breach: National Westminster Bank plc v Rabobank Nederland (No. 3) [2008] 6 Costs LR 839 at [25].

On the question of the costs of the English proceedings and application, the court noted that a successful claimant for an anti-suit injunction is ordinarily entitled to its costs on the indemnity basis where it can establish that the breach of the exclusive jurisdiction clause caused it reasonably to incur legal costs: A v B [2007] 2 CLC 203 at [9] to [15]. Diageo sought summary assessment of the costs of the application on the indemnity basis, having provided a costs schedule in that regard. The court also had to consider how to treat any costs of the proceedings falling outside the scope of the two earlier applications and the present application, given the prior costs order made by HHJ Pelling KC.

The Parties’ Positions

Diageo’s position on damages was that, by commencing and pursuing the Italian proceedings in breach of clause 24.2 of the SPA, Nio had caused Diageo to incur costs in Italy in challenging the jurisdiction of the Italian courts. Those costs were recoverable as damages. Diageo was not yet in a position to quantify its total loss, given that the Italian proceedings remained ongoing, with the Milan court proceedings stayed pending the Italian Supreme Court’s determination on jurisdiction. Diageo therefore sought an interim payment of damages pursuant to CPR 25.20 and CPR 25.23(b) in the amount of £44,045, representing approximately 90% of the costs totalling €52,238.29 incurred to date in the Italian proceedings. Those costs were evidenced by invoices from Diageo’s Italian lawyers, PedersoliGattai. Diageo also sought an order that the remainder of its damages be assessed following the conclusion of the Italian proceedings.

On the costs of the application, Diageo sought summary assessment on the indemnity basis in the sum of £42,056.90. Diageo submitted that it was entitled to costs on the indemnity basis as a successful claimant for an anti-suit injunction, the breach of the exclusive jurisdiction clause having caused it reasonably to incur legal costs in obtaining the relief granted.

Nio did not appear and was not represented at the hearing. It had not filed any acknowledgement of service or defence, and had not responded to the application other than to dispute service in correspondence.

The Court’s Determination

The court granted summary judgment in Diageo’s favour, finding that Nio had no real prospect of successfully defending the claim. The court found that clause 24.2 of the SPA constituted an exclusive jurisdiction agreement in favour of the English courts. The court rejected Nio’s reliance on the jurisdiction clause in the Deed of Transfer, finding that the Deed was narrow in scope and concerned only with the formalities for effecting the transfer of the share in Niococktails. The construction of the exclusive jurisdiction clause started from the assumption, established in Fiona Trust & Holding Corp v Privalov [2007] UKHL 40, that the parties, as rational business people, are likely to have intended any dispute arising out of the relationship into which they have entered to be decided by the same tribunal unless the language of the clause makes it clear that certain questions are to be excluded from that tribunal’s jurisdiction. The Deed was not concerned with the wider rights and obligations of the parties related to the sale and purchase, including the terms upon which any part of the deferred payment could be withheld. All of the claims brought by Nio before the Court of Milan were disputes or claims which fell within the material scope of clause 24.2 of the SPA. While labelled by Nio as claims for breaches of the Deed of Transfer or of provisions of Italian law, they were in substance claims for breaches by Diageo of the terms of the SPA or the non-fulfilment of the conditions required to be fulfilled before Diageo was entitled to withhold any part of the deferred payment.

The court granted a final anti-suit injunction restraining Nio from continuing with the Italian proceedings, both before the Court of Milan and the Italian Supreme Court. The court also granted declaratory relief confirming that the claims brought by Nio in the Italian proceedings were within the scope of the exclusive English jurisdiction agreement and were brought in breach of that agreement.

On the substantive dispute, the court found that Diageo had complied with its obligations under clause 5.4 of the SPA (including the obligation to use reasonable endeavours to ensure Niococktails gave due regard to settling by way of a product purchase from Proximo, and to consult with Nio prior to entering into the settlement agreement). The court also found that Diageo had complied with clause 6.2 of the SPA and was entitled to withhold the sum of €780,008 from the deferred payment as a genuine and bona fide estimate of Nio’s liability under the indemnity provision. The court rejected Nio’s argument that Diageo was not entitled unilaterally to withhold any amount without agreement or a prior determination via the Counsel Determination Mechanism, finding that clause 6.2 entitled Diageo to withhold the amount of the estimated liability as long as it had notified Nio of the same in writing before the deferred payment became due.

Damages for Italian Litigation Costs

The court held that by commencing and pursuing the Italian proceedings, Nio had breached the exclusive jurisdiction clause in the SPA. As a result of that breach, Diageo had taken steps in Italy to challenge the jurisdiction of the Italian courts and had incurred costs, principally legal costs. The court considered that Diageo was entitled to recover such expenditure which was reasonably incurred as damages in the proceedings.

The court applied the principles established in Union Discount Co Ltd v Zoller and National Westminster Bank plc v Rabobank Nederland (No. 3). A party forced to defend proceedings brought in breach of an exclusive jurisdiction clause can recover reasonable costs incurred as a result of the foreign proceedings even if the foreign court lacks the power to award costs. The assessment of those costs is conducted on the indemnity basis such that the non-defaulting party can recover all costs reasonably incurred and reasonable in amount, with the burden of proof of any failure to mitigate on the party in breach. The court described the indemnity basis as “a useful proxy for an exercise in assessing reasonable costs where the burden is on Nio to establish a lack of reasonableness or failure to mitigate,” drawing an explicit analogy with the burden of proof under CPR 44.3(3).

Diageo was not in a position finally to determine the amount of its loss because the Italian proceedings were ongoing, with the proceedings before the Milan court stayed pending a decision on jurisdiction from the Italian Supreme Court. The court therefore considered it appropriate to grant an interim payment of damages.

The sum of £44,045 sought by Diageo represented approximately 90% of the costs (which totalled €52,238.29) that Diageo had incurred to date in respect of the Italian proceedings. Those costs had been established by way of the invoices submitted by Diageo’s Italian lawyers, PedersoliGattai. The court acknowledged that even assessing the costs on the indemnity basis, 90% would be a high proportion of costs to recover. However, the amount of £44,045 was reasonably modest and the court had no specific reason to reduce the amount of the interim payment sought. Further, it was likely that Diageo would continue to incur legal costs in Italy and it followed that its final costs burden for which it would be entitled to be compensated would likely exceed £44,045.

The court therefore granted Diageo an interim payment in the amount of £44,045, with the remainder of its loss to be assessed in due course following the conclusion of the Italian proceedings. The court considered it appropriate for Diageo to receive some contribution from Nio towards its costs at this point rather than awaiting the conclusion of the Italian proceedings.

Summary Assessment of Application Costs

The court turned to the costs of the application before it. Diageo had been provided with a costs schedule in respect of the application (but not the proceedings), with a request that costs be assessed summarily and on the indemnity basis. The total amount claimed as the costs of the application was £42,056.90.

The court noted that HHJ Pelling KC had already made a costs award in Diageo’s favour in the amount of £85,159 (out of the £95,411 claimed) which sum covered Diageo’s costs of the hearing before David Bailey KC on 18 July 2025 and the costs of the application to continue the interim anti-suit injunction, assessed on the indemnity basis. The court observed that it was unclear whether there existed costs of the proceedings (other than the £10,000 court fee for issuing the proceedings) which fell outside of the scope of those two applications, this application and the Italian proceedings.

The court therefore limited its summary assessment to the costs of this application (plus the £10,000 court issue fee), with any other amounts incurred by Diageo in the proceedings not already subject to costs orders to be assessed at the same time as damages were finally to be assessed. The court assessed the costs of the application on the indemnity basis in the amount of £33,645, being 80% of £42,056 (the judgment uses the rounded figure of £42,056 at paragraph 87, though the claimed sum stated at paragraph 86 is £42,056.90). The court did not provide reasons for the 20% reduction in its judgment.

YouTube player

 

Claiming costs in one action as damages in another

When Should Costs Be Awarded In A Foreign Currency? Supreme Court Rejects ‘Loss Reflection’ Test

Indemnity Basis Costs Following Discontinuance

Costs Thrown Away, Indemnity Costs And Payments On Account

Section 51 Costs Jurisdiction Injunction Without Claim Form | Gotti

Payments On Account In Budgeted Cases And Pre Judgment Interest On Costs

 

No Presumption Against Summary Assessment Exists for Multi-Day Hearings | Court Retains Full Discretion In Every Case Under PD 44.9.1

, , ,

The King’s Bench Division’s decision in Mew v General Dental Council [2026] EWHC 1116 (Admin) concerned an appeal against erasure from the Dentists’ Register following a Professional Conduct Committee determination that the appellant’s fitness to practise was impaired by reason of misconduct.

Background

Dr Michael Mew, a registered Specialist Orthodontist and the owner and principal practitioner at a private clinic offering treatment under the umbrella term “Orthotropics,” appealed to the Administrative Court against a determination of the Professional Conduct Committee (“PCC”) of the General Dental Council (“GDC”) dated 6 November 2024. By that determination, the PCC found Dr Mew’s fitness to practise impaired by reason of misconduct and ordered the erasure of his name from the Dentists’ Register. The appeal was brought under section 29 of the Dentists Act 1984.

The charges before the PCC related to advice and treatment provided to two young patients, referred to as Patient A and Patient B, between September 2013 and May 2019, as well as claims made in a YouTube video posted in September 2017. In broad terms, the GDC alleged that the Orthotropic treatment provided to both patients was not clinically indicated, that misleading claims had been made to the patients’ parents about the aims and benefits of the treatment, and that certain statements made publicly on YouTube were inappropriate and without adequate objective evidential foundation. Thirty charges were brought in total, with admissions made to seventeen of them either in advance or at the hearing.

Orthotropics is not recognised by the GDC as a speciality, nor is it available within the NHS. Its central premise, as advanced by Dr Mew, was that environmental factors rather than genetics were the predominant cause of malocclusion, and that early environmental intervention could prevent or improve malocclusion in growing children. Dr Mew described himself as “probably the world’s expert” in Orthotropics and acknowledged that it remained a controversial approach with a limited evidence base.

The PCC proceedings were substantial. There were no fewer than 46 hearing days spread across a two-year period from November 2022 to November 2024, with the matter having originally been listed in December 2021 but removed at Dr Mew’s request. The determination itself ran to 197 paragraphs across 75 pages. Expert evidence was heard from four experts: Mr Stephen Powell and Mr Keith Smith for the GDC, and Professor Daniele Garcovich and Professor Stephen Sheldon for Dr Mew. Joint expert reports were also prepared. The PCC preferred the evidence of the GDC’s experts, found the charges proved, and concluded that misconduct and impairment were established. Erasure was imposed as the appropriate sanction, together with an immediate order for suspension.

The appeal was heard over three days on 20, 21 and 22 January 2026 before Charles Bagot KC, sitting as a Deputy High Court Judge. Further written submissions were received through to 26 February 2026, with email communications continuing to 30 April 2026. A draft judgment was circulated on 8 May 2026, with the parties’ corrections and submissions on costs received on 13, 14 and 15 May 2026. The appeal was dismissed in its entirety. The documents before the court ran to over 8,500 pages, with an authorities bundle of 925 pages.

On the substantive grounds, the Deputy Judge found that the PCC’s determination was correct in all material respects and unassailable. The primary challenge, directed at the PCC’s approach to the competing expert evidence, was rejected. The remaining grounds, including challenges to specific charge findings, the approach to “The Jaw Epidemic” paper, the alleged failure to define “adequate objective evidence,” and the exclusion of open-source internet material from cross-examination, were each dismissed. The fresh evidence application, which sought to adduce the full Harvey Thesis and a cephalometric interpretation guide, was also refused on a notional basis, having been considered at the parties’ joint request to assist with the resolution of costs.

The Legal Framework

CPR 44.2 deals with the court’s discretion about whether to make a costs order and the factors it will take into account. CPR 44.3 guides the court as to the basis of assessment. Where standard basis costs are concerned, the court is to determine any doubt about whether costs were reasonably and proportionately incurred, or were reasonable and proportionate in amount, in favour of the paying party. The considerations which point towards costs being proportionate include whether they bear a reasonable relationship to the factors in CPR 44.3(5), including the value of the non-monetary relief in issue, the complexity, additional work generated by conduct, and wider factors such as reputational issues or public importance.

As for the procedure to adopt for the assessment, CPR 44.6(1) and PD 44.9.1 provide the court’s jurisdiction to conduct either a summary assessment or refer costs for a detailed assessment by a costs officer or judge. PD 44.9.1 provides that the general rule is that the court should make a summary assessment of costs at the conclusion of any hearing which has lasted not more than one day.

The Deputy Judge rejected the Appellant’s submission that it should be implied from that passage that summary assessments should not be made in cases where the hearing has lasted more than one day. The court retains a discretion summarily to assess costs following hearings lasting longer than one day and there is no presumption, let alone rule, against doing so. The Deputy Judge was fortified in that view by the White Book Editors’ guidance at paragraph 44.6.3, which states: “There is no rebuttable presumption against summary assessment in relation to costs where hearings last longer than one day. The exercise of the power to make a summary assessment should be considered in every case.”

The Deputy Judge also noted the guidance at PD 44.9.2 that there may be good reason not to conduct a summary assessment where, for example, the paying party shows substantial grounds for disputing the sum claimed for costs that cannot be dealt with summarily.

Costs Issues Before the Court

Following circulation of the draft judgment, the parties agreed that costs should follow the event in accordance with CPR 44.2(2)(a), with the Appellant to pay the Respondent’s costs of the appeal. That much was not in dispute. The costs issues requiring determination by the court were twofold: first, whether the quantum of the Respondent’s appeal costs should be resolved by way of summary assessment or referred to detailed assessment in default of agreement; and second, if summary assessment was the appropriate course, what the correct quantum of those costs should be.

The Respondent’s costs schedule had originally been served in October 2025, when the appeal was first listed but subsequently adjourned. That schedule claimed costs totalling £85,853.20. An updated schedule dated 12 May 2026 increased the sum claimed to £96,248.48. Prior to the costs determination, the Respondent made an open concession of £10,000 against the experts’ fees element of the claim, reducing the sum in issue to £86,248.48. The Appellant raised objections across a range of items within the schedule and opposed the court proceeding to a summary assessment at all.

A procedural issue arose on the morning of handing down, when a dispute emerged between the parties as to whether there had been agreement for the court to be shown recent correspondence containing offers on costs. The Appellant contended that no such agreement had been reached and submitted that the court could not fairly conduct a summary assessment having been exposed to the parties’ respective offers. The Respondent maintained that agreement had been given. The Deputy Judge found it unnecessary to resolve that factual dispute in order to determine the costs issues, holding that judges are routinely required to put matters out of mind (such as documents seen de bene esse or offers disclosed in costs management hearings) and that he was able fairly to conduct a summary assessment notwithstanding his awareness of the offers.

An additional procedural point arose from the Appellant’s submission that, because the draft judgment had been embargoed, its content had not been communicated to Dr Mew by his legal representatives, and it had therefore not been possible to take instructions from him on costs. The Deputy Judge rejected the premise of that submission, noting that the embargo expressly permitted disclosure of the draft and its substance to the parties themselves and their legal representatives, and that there was accordingly no bar on sharing the draft with Dr Mew or taking his instructions.

The Parties’ Positions

Summary assessment versus detailed assessment

The Appellant opposed summary assessment on a number of grounds. It was submitted that, as the appeal hearing had lasted more than one day, the general rule in PD 44.9.1 pointed away from summary assessment. The Appellant also contended that there were multiple areas of the costs schedule requiring further interrogation and the provision of additional detail, and that the objections raised could not fairly be dealt with summarily. A further submission was advanced to the effect that, because the draft judgment had been embargoed and instructions had not been taken from Dr Mew, a summary assessment was procedurally inappropriate. Finally, the Appellant argued that the court’s exposure to the parties’ offers on costs meant that a fair summary assessment could not be conducted.

The Respondent’s position was that the court retained a discretion to conduct a summary assessment regardless of the duration of the hearing, and that the overriding objective supported resolving the costs of the appeal within the judgment rather than deferring them to detailed assessment. The Respondent pointed to the fact that the updated schedule of 12 May 2026 represented only a modest increase on the October 2025 schedule, of which the Appellant had had considerable notice, and that the schedule itself provided the expected level of detail and breakdown. The Respondent had also made an open concession of £10,000 on the experts’ fees, which was characterised as a realistic and sensible approach rather than an acknowledgement that the remaining costs were disproportionate.

Quantum

The Appellant challenged a range of items within the Respondent’s schedule, including the level of experts’ fees, the time costs associated with the experts and their reports, the time spent on producing the costs schedule, and the overall number of items detailed in the schedule of work done on documents (95 separate items being said to be indicative of excess). The Appellant declined to file or serve a schedule of his own costs and declined an invitation from the Respondent to do so for the purpose of contextualising the objections raised.

The Respondent maintained that the costs claimed were reasonable and proportionate having regard to the relevant factors under CPR 44.3(5), including the value of the non-monetary relief in issue, the complexity of the underlying proceedings, the additional work generated by the conduct of the litigation, and the wider reputational and public interest considerations. Particular emphasis was placed on the reasonableness of Counsel’s fees, given the nature and duration of the underlying PCC proceedings, the complexity of the appeal, and the need for complete mastery of 46 days of hearings and over 8,500 pages of documents.

The Decision

The Deputy Judge determined that the appropriate exercise of his discretion was to proceed summarily to assess the costs of the appeal, rather than deferring them to detailed assessment in default of agreement. Whilst he recognised that a referral to detailed assessment would be the normal order following a hearing of more than one day, it was not an invariable rule or presumption. Applying the rules and the overriding objective, several factors pointed in favour of summary assessment.

First, the Deputy Judge was well placed, having heard and determined the appeal via a detailed judgment, to conduct a summary assessment. He had considerable experience of costs and summary assessment, both as a Deputy High Court Judge and when sitting as a Deputy King’s Bench Master. The scale of the costs pointed towards summary assessment, given the amount claimed by the Respondent for the appeal was in five figures, not a substantial six-figure sum or more.

Second, whilst the Appellant complained that he had only about one day to review the Respondent’s updated costs schedule dated 12 May 2026, this had to be seen in the context that this was an update to a schedule served in October 2025, when the appeal was previously listed but adjourned. That earlier schedule already particularised almost 90 per cent of the costs claimed. The October 2025 schedule claimed costs totalling £85,853.20 whereas the May 2026 schedule increased that sum to £96,248.48 (before the £10,000 concession). The Appellant had therefore had an appropriate time period to consider the costs and could reasonably have anticipated that the adjourned hearing would produce a modest increase to the sum claimed.

Third, the Deputy Judge did not accept the Appellant’s assertion that there were multiple areas of the Respondent’s costs schedule which required interrogation and the provision of additional detail. The whole ethos of summary assessment is to avoid that sort of process and the attendant costs and delay, when this can fairly be done. Having scrutinised the Respondent’s schedule, it provided the expected detail and breakdown and, subject to certain adjustments, there was nothing in it which the Deputy Judge considered on the face of it to be disproportionate or unreasonable.

Fourth, and most fundamentally, the Deputy Judge bore in mind that these proceedings related to conduct between 2013 and 2019, now between 7 and 13 years ago. It was in accordance with the overriding objective to resolve all consequential matters within the judgment, rather than deferring the resolution of the appeal costs to further negotiation or, more likely, detailed assessment. The parties’ positions on costs were far apart. The Deputy Judge was pessimistic that simply allowing further time would result in an agreement on the amount of costs. It was probable that further costs would be incurred in proceeding at least part way towards a detailed assessment, which would swiftly become disproportionate to the sums involved, generate additional costs, and entrench the parties’ polarised positions further.

The Deputy Judge also noted that, notwithstanding the importance of the matter to the parties and the public interest in professional regulation, the underlying disciplinary proceedings had already taken up more than their fair share of the tribunal and court system’s limited resources. The PCC proceedings had occupied 46 hearing days spread across a two-year period. The Deputy Judge observed that this duration was manifestly disproportionate and that, with hindsight, the PCC should have exercised considerably more active case management, evidential control, and trial timetabling. Whilst the Appellant opposed the court proceeding to a summary assessment, it was in the Appellant’s interests, as much as the Respondent’s, to draw this protracted matter to a close. It would be doing the Appellant no kindness to permit him to spend further time, energy and money in disputing the appeal costs which he was to pay.

Quantum

As for the quantum of costs, with the Respondent’s open concession against the experts’ fees claimed of £10,000, the sum claimed totalled £86,248.48. The Deputy Judge bore in mind the Appellant’s various objections across a range of the amounts claimed. The Appellant had chosen not to file or serve a schedule of his costs and had declined an invitation by the Respondent to do so in order to contextualise the objections made. The Deputy Judge inferred that the Appellant’s costs of the appeal were greater than those claimed by the Respondent (the Appellant’s experts having, as the Deputy Judge understood it, worked pro bono), which would not be surprising assuming he was privately paying and as he was advancing the appeal, rather than responding to it.

The Deputy Judge noted that the Respondent’s solicitors’ blended hourly rate claimed of £138 for all fee earners involved was below the guideline rate, even for a Grade D fee earner of £146 (London Band 3), let alone that for Grade A of £319. This no doubt reflected negotiations around lower agreed panel rates in return for a regular flow of GDC work. This relatively modest hourly rate mitigated areas where, had the rates been significantly higher, the numbers of hours claimed would have pushed the overall costs claimed in differing categories up to amounts which would potentially have been disproportionate and unreasonable.

After making what he considered to be an appropriate further overall adjustment downwards for experts’ fees consequential on the Appellant’s application to admit fresh evidence, as well as reducing somewhat the solicitors’ time costs relating to the experts and producing the costs schedule, the Deputy Judge reached an overall figure of £75,000 (inclusive of VAT), before examining the other categories of costs further.

Nearly half of that amount related to Counsel’s fees for the appeal inclusive of VAT. The Deputy Judge disagreed with the Appellant’s contention that Counsel’s fees of £30,450 before VAT for appearing at this three-day appeal as well as preparing for it and drafting the written documents, even before factoring in the adjournment of the original listing in October 2025, were disproportionate and unreasonable. Those fees consisted of a brief fee of £28,000, plus two refreshers at £1,000 each, with a modest uplift of £450 which, whilst not explicitly broken down, may have reflected the adjournment of the original listing and a modest amount of time reading back in.

The Deputy Judge considered that no realistic objection could be taken to such fees in the circumstances. Counsel for the Respondent was a leading junior of considerable experience specialising in regulatory work. The underlying proceedings were complex, very lengthy, hard fought and document heavy. All of those factors applied to the appeal, save that at three days, it was not particularly lengthy. That said, the parties had suggested that four days of pre-reading time for the court were necessary (although in the event the necessities of listing meant that it only had one day). Extensive and diligent preparation had plainly been carried out by both parties’ Counsel. That had to be seen in the context that it was necessary for Counsel to have a complete mastery of all the issues, the extensive documents and of 46 days of hearings before the PCC. It was also necessary to distil those lengthy proceedings, the wide-ranging grounds of appeal and the Appellant’s painstakingly detailed submissions into a detailed and convincing written and oral response on behalf of the Respondent. Much was at stake for both parties and there were the wider interests of reputation and the public importance in the proper pursuit of regulatory proceedings. Counsel’s fees claimed were eminently reasonable and proportionate.

As for the Respondent’s solicitors’ time costs, a number of the same considerations also applied in justifying detailed and time-intensive preparation. Other than in relation to expert evidence and time on producing the costs schedule, the Deputy Judge did not consider that the sums incurred were disproportionate or unreasonable, whether standing back and looking at the global amount or considering the breakdown.

The Appellant had complained about the 95 separate items detailed in the schedule of work done on documents, as indicative of excess. In the Deputy Judge’s view, one needed to delve beyond the mere number of items to see that this reflected an admirable attempt at transparency in breaking down tasks into individual components, many of which were less than an hour in duration and reflecting appropriate delegation most (but not all) of the time. The overall total number of hours spent on documents by all fee earners combined was 179.5. Given the relevant factors in relation to the appeal, subject to the points around time on expert evidence being somewhat too high, there was nothing notable or objectionable about the time spent. This reflected work over a period of more than a year from the Appellant’s Notice being served to the substantive hearing, with additional work on consequential matters when the draft judgment was received.

The Deputy Judge made a further downward adjustment, beyond the concession of £10,000 made by the Respondent, to the experts’ fees and solicitors’ time costs on dealing with the experts and their reports, as well as a reduction to the time costs in relation to preparation of the costs schedule which, whilst a complex exercise, appeared on the high side.

For all those reasons, the reasonable and proportionate costs of the appeal were summarily assessed at £75,000. This sum included VAT of £6,090 on the Counsel fee element only (VAT was not claimed on any other aspect), with the Counsel fee before VAT being £30,450. The Appellant was ordered to pay to the Respondent the total sum of £75,000 for the appeal costs.

Whilst CPR 44.7(1) provides that the standard period for the payment of a costs order is 14 days from the date of the order, the Deputy Judge allowed an additional 14 days (28 days in total) for the Appellant to pay the sum ordered, to ensure fairness to the Appellant in making arrangements to pay. The sum was ordered to be paid by 4pm on 12 June 2026.

YouTube player

 

The Correct Approach To Summary Assessment | Guideline Hourly Rates Up By 35%?

Costs On Indemnity Basis For Wasted Hearing Due To Unreasonable Adjournment Application

The Duty Of Cooperation Under CPR 1.3 | Opportunism And Aggression Result In Fractional Costs Recovery

N260 Statement Of Costs | Form Matters

CPR 44.2 And The Courts’ Discretion As To Costs

Successful Defendant’s Costs In Judicial Review Claim Reduced by 15% for Partial Failure On Discreet Issue

 

The Court Retains Jurisdiction To Hear Part 23 Applications In Provisional Assessment Proceedings, But Will Ordinarily Decline To Exercise It

, , ,

The County Court at Derby’s decision in Maidens v Building Supplies Distribution Limited [2026] EWCC 25 addresses whether the court should entertain interim applications before provisional assessment is conducted.

Background

The underlying claim in Maidens v Building Supplies Distribution Limited [2026] EWCC 25 was a personal injury matter which settled for £43,000 on a Part 36 basis. Following settlement, the Claimant’s costs lawyers served a bill of costs in the sum of £56,460, together with notice of commencement, on 19 February 2025. The Defendant served Points of Dispute on 5 June 2025, and the Claimant served Replies on 26 July 2025. The matter fell within the provisional assessment regime under CPR Part 47, and was transferred to District Judge Davies sitting as Regional Costs Judge at the County Court at Derby from the County Court at Lincoln.

The Defendant’s Points of Dispute were accompanied by an itemised Excel spreadsheet, appended with the intention of rendering the Points of Dispute compliant with the requirements identified in Ainsworth. The Claimant’s Replies took issue with the use of that spreadsheet, contending that it could not properly be relied upon at provisional assessment. The Replies also raised more routine objections concerning the adequacy of Ainsworth particularisation in relation to specific points, including Points 7, 15 and 20.

The Defendant subsequently brought an interim application under Part 23, seeking a declaration that the Points of Dispute were compliant with CPR PD 47 paragraph 8.2, and also seeking to strike out those parts of the Replies which asserted non-compliance with Ainsworth. That application was adjourned and came before District Judge Davies on 15 April 2026, with Mr A Hood (solicitor) of Carter Burnett appearing for the Claimant and Mr P Hughes (counsel) instructed by Kennedys Law appearing for the Defendant, both attending remotely by Cloud Video Platform.

By the time of the hearing, the factual and procedural landscape had narrowed. The Claimant conceded the admissibility of the Excel spreadsheet for the purposes identified in Ainsworth, with the result that the majority of the Replies on the spreadsheet issue fell away, save for the Replies to Points 7, 15 and 20. The Claimant indicated that Amended Points of Reply would be filed and served to reflect that concession.

Costs Issues Before the Court

The application raised two distinct issues for determination. The first was a jurisdictional question: whether the Court had any power to entertain a Part 23 interim application within the provisional assessment regime at all. The Claimant’s position was that no such jurisdiction existed, relying on PD 47 paragraph 14.2(2), which excludes paragraph 13.7 of PD 47 from the provisional assessment process. Paragraph 13.7 would otherwise permit applications under Part 23 in the context of detailed assessment proceedings. The Claimant argued that, absent an express provision permitting such applications, the provisional assessment regime was a self-contained process which did not accommodate preliminary or interim applications of this kind.

The second issue, which arose only if the Court found that jurisdiction existed, was whether it should exercise its discretion to determine the remaining Ainsworth compliance disputes in relation to Points 7, 15 and 20 in advance of the provisional assessment on the papers. The Defendant invited the Court to resolve those issues there and then. The Claimant resisted that course, arguing that Ainsworth compliance is a qualitative matter for the judge conducting the provisional assessment, and that determining such issues in advance would fetter the discretion of the assessing judge and interfere with the streamlined nature of the regime.

A further, subsidiary point arose as to whether the application, or its continued pursuit following the concession on the Excel spreadsheet, amounted to an abuse of process.

The Parties’ Positions

The Claimant’s position was, in the first instance, that the Court simply had no jurisdiction to hear the application. Reliance was placed on PD 47 paragraph 14.2(2), which disapplies paragraph 13.7 within the provisional assessment regime. It was submitted that this exclusion reflected a deliberate policy choice: the provisional assessment process is streamlined and self-contained, and the mechanism for challenging the outcome is an oral review following assessment on the papers. There is, on this analysis, no room for Part 23 applications within that process save where expressly provided for. If the Defendant wished to litigate preliminary issues of this kind, the appropriate course was to apply to remove the matter from the provisional assessment regime and seek a full detailed assessment under CPR 47.15(6).

On that basis, the Claimant submitted that the application was an abuse of process and should be dismissed on that ground alone. In the alternative, if the Court found that jurisdiction existed, it was submitted that the remaining Ainsworth disputes in relation to Points 7, 15 and 20 were matters of evaluation and degree, properly to be addressed by the judge conducting the provisional assessment when considering the individual entries in the bill. It was further submitted that, in any event, alternative submissions and concessions were already contained within the Replies, such that the provisional assessment could proceed on the papers without any preliminary determination. Mr Hood also submitted that the Defendant was, in substance, seeking to censor the Claimant’s criticisms of the Points of Dispute, and that entertaining the application would set an undesirable precedent by encouraging parties to litigate costs disputes by instalments.

The Defendant’s position was that the Court did have jurisdiction to hear the application, notwithstanding the exclusion of paragraph 13.7. Mr Hughes submitted that the exclusion of that paragraph did not operate as a blanket prohibition on all applications; rather, the Court retained its general case management powers under CPR 3.1(2)(k) and (m), which remained available regardless of the assessment regime in play. The provisional assessment regime governed the method of assessment but did not strip the Court of its inherent case management jurisdiction to deal with discrete procedural issues. On the substantive question, the Defendant sought a declaration of compliance with PD 47 paragraph 8.2 and a strike-out of the non-compliant parts of the Replies. Mr Hughes invited the Court to resolve the remaining Ainsworth issues on the basis that the parties were before the Court.

The Court’s Decision

District Judge Davies accepted the Defendant’s submissions on jurisdiction. The exclusion of PD 47 paragraph 13.7 within the provisional assessment regime did not, in the judge’s view, operate as a prohibition on applications as such. The Court’s general case management powers under CPR 3.1(2)(k) and (m) remained available, and the provisional assessment regime governed the method of assessment rather than removing the Court’s broader procedural jurisdiction.

However, the judge declined to exercise that jurisdiction. The application was dismissed on the basis that it was not appropriate, as a matter of discretion, to determine the remaining issues in advance of the provisional assessment. The judge’s reasoning was rooted in the purpose and design of the provisional assessment regime, which was introduced following the recommendations of Sir Rupert Jackson to provide a proportionate and self-contained mechanism for resolving lower-value costs disputes, and to avoid the proliferation of interim hearings and associated expense that had previously characterised detailed assessment proceedings.

The regime proceeds on the basis that disputes as to quantum, reasonableness and proportionality are to be addressed through Points of Dispute and Replies, with the assessing judge well placed to deal with issues concerning the presentation and substance of those documents. The judge held that the Court should approach applications to intervene prior to formal provisional assessment with caution, since permitting such applications risks undermining the very purpose of the regime. The existence of jurisdiction did not mean that it should be exercised.

The Claimant’s concession on the admissibility of the Excel spreadsheet was significant. What remained were specific Ainsworth disputes in relation to Points 7, 15 and 20. Those issues, insofar as they concerned the level of detail or the merits of individual items, were matters for the judge conducting the provisional assessment. The Defendant sought, in substance, to pre-empt that evaluative exercise, which was precisely what the provisional assessment regime was designed to avoid. In light of the spreadsheet concession, there was a structured mechanism available (namely, the provisional assessment process itself) to resolve the remaining issues, and there was no demonstrated necessity for the Court to intervene at that stage.

The judge declined Mr Hughes’s invitation to determine the remaining Ainsworth issues, stating that he declined to do so as a matter of principle. Costs had already been incurred on the application, and they were not insignificant. It was not inevitable that there would be an oral review. The Court was required to have regard to the need to deal with cases at proportionate cost, which applied with particular force in costs litigation.

To entertain the application in circumstances where the dispute was suitable for provisional assessment, particularly in light of the concession made, would set an unwelcome precedent. It would encourage parties to bring interim challenges routinely, seeking to litigate issues by instalments which the rules intend to be resolved in a single, streamlined process. That would undermine the provisional assessment regime, increase costs disproportionately, and place additional burdens on court resources. That would not be consistent with the overriding objective.

The judge added for completeness that he was not persuaded that the application when mooted crossed the line into an abuse of process in the strict sense, given that he had accepted Mr Hughes’s submissions on jurisdiction. The issue over admissibility of the Excel spreadsheet schedule was not plainly unarguable when foreshadowed in correspondence, but its continued pursuit following the concession (before the application was issued, as Mr Hood pointed out) as to admissibility of the Excel spreadsheet schedule rendered it disproportionate.

The Claimant’s costs lawyers were directed to file Amended Points of Reply to reflect the Excel spreadsheet concession by 4.00 p.m. on 6 May 2026, and to re-file the N258 in the County Court at Derby by 4.00 p.m. on 27 May 2026. The Defendant’s application was dismissed. The Defendant was ordered to pay the Claimant’s costs of the application, summarily assessed at £11,220.00, to be paid by 4.00 p.m. on 6 May 2026.

YouTube player

 

Points Of Dispute In Solicitor And Client Assessments | The Court Of Appeal Speaks

CPR 47 PD 8.2 | Points Of Dispute, Be Specific

Ainsworth Applied | Preliminary Points Struck Out for Lack of Particularity

Ainsworth Applies To Inter Partes Detailed Assessment, Samsung Does Not

The Scope Of An Appeal From Provisional Assessment

Costs Of Assessment Where Bill Reduced To Under £75,000