CPR 46.27 Variation Refused Despite Financial Resources | Objective Unreasonableness Test Applied

The High Court’s decision in R (The Badger Trust and Wild Justice) v Natural England [2025] EWHC 2761 (Admin) provides detailed guidance on when courts may vary Aarhus Convention costs caps under CPR 46.27, establishing that objective unreasonableness operates as a freestanding protection even where increased costs are real-world affordable for claimants.

Background

The case involved a judicial review claim brought by two environmental non-governmental organisations, The Badger Trust and Wild Justice, against Natural England. The claim challenged a decision made on 3 May 2024 to issue or renew 26 supplementary badger cull licences, authorising the killing of badgers between 1 June 2024 and 30 November 2024 [§3]. The Interested Party was the Secretary of State for Environment, Food and Rural Affairs. Permission for judicial review was granted by Fordham J at an oral renewal hearing on 15 May 2025 [§3], with a two-day substantive hearing scheduled for December 2025 [§3].

The case was recognised as an Aarhus Convention claim, engaging the costs protection provisions of CPR Part 46 Section IX [§20]. The default costs caps under CPR 46.26 were therefore applicable, limiting the claimants’ potential costs liability to £10,000 each and the defendant’s liability to £35,000 [§22]. Natural England subsequently applied for a variation of these caps under CPR 46.27, seeking to increase the claimants’ caps to £20,000 for Wild Justice and £30,000 for Badger Trust [§58].

The hearing before Fordham J on 16 October 2025 dealt with two distinct applications: Natural England’s application for redaction of certain decision-making documents, and its application to vary the Aarhus costs caps [§1, §7]. Judgment was handed down on 28 October 2025 [title page].

Costs Issues Before the Court

The primary costs issue for determination was Natural England’s application under CPR 46.27 to vary the default Aarhus Convention costs caps [§17]. The application required the court to consider whether increasing the caps would make the costs of the proceedings prohibitively expensive for the claimants, applying the two-limb test set out in CPR 46.27(3) [§23]. The court had to analyse both whether likely costs exceeded the claimants’ financial resources (Limb (a)) [§§29-33] and whether the likely costs were objectively unreasonable (Limb (b)) [§§34-44], having regard to the specific mandatory factors listed in the rule. A secondary costs issue concerned the allocation of costs for the redactions application and the variation application itself [§§62-64].

The Parties’ Positions

Natural England, represented by Paul Luckhurst and Sean Butler, contended that the default £10,000 caps should be increased to £20,000 for Wild Justice and £30,000 for Badger Trust [§58]. They argued this represented a fairer balance, producing a total potential recovery of £50,000 if successful [§58]. Their submissions emphasised that the claimants had real-world affordability, pointing to Wild Justice’s cash reserves of £57,576 (as at 8 October 2025) [§47] and Badger Trust’s reserves of approximately £326,000 (as at 31 December 2024) [§48]. They noted the claimants’ successful crowdfunding campaign which raised £57,180 against a target of £52,486 [§55], suggesting further fundraising was possible. Natural England also highlighted the backward-looking nature of the claim and current government policy favouring curtailed culling, suggesting limited environmental importance [§58].

The Claimants, represented by David Wolfe KC and Barney McCay, opposed the variation. They characterised the default Rule 26 caps as a carefully considered balance struck by the rule-maker, not merely a starting point [§§25-26]. They submitted that even if real-world affordability could be demonstrated (Limb (a)), the increase sought was objectively unreasonable under Limb (b) [§45]. They emphasised the public interest imperative in facilitating access to environmental justice and the need for environmental NGOs to function as repeat players [§56]. Witness evidence indicated both claimants would reluctantly withdraw their claim if faced with a materially increased cap, demonstrating the chilling effect such a variation would have [§§47-48]. They contended that the claim had a reasonable prospect of success, involved important environmental issues, and was a paradigm environmental protection case undiluted by private economic interests [§§50, 52-53].

The Court’s Decision

Fordham J refused Natural England’s application to vary the costs caps [§62]. He held that even assuming the claimants could real-world afford the increased caps (Limb (a)), Natural England had failed to demonstrate that the increase would not be objectively unreasonable (Limb (b)) [§45].

The Legal Framework: Rule 26 Caps as More Than Placeholders

The court provided significant analysis of the legal framework, characterising the Rule 26 default caps (£5,000 for individuals, £10,000 for organisations) as more than mere placeholders [§26]. They were described as representing a “normal” and “general” position [§§25-26], chosen by the rule-maker on a principled basis to facilitate access to environmental justice while minimising satellite litigation [§26]. The caps were said to constitute a “soft presumption” [§26], providing clear signalling to avoid chilling effects [§27]. The court emphasised the onus on any party seeking variation to clearly demonstrate its appropriateness [§§25-26].

The Two-Limb Test for Prohibitive Expensiveness

Fordham J provided detailed guidance on the meaning of “prohibitively expensive” under CPR 46.27(3), explaining that it comprises two independent bases [§§29-44]:

Limb (a): Real-World Affordability (§§29-33)

The court found this limb involves a means test focusing on the claimant’s actual financial resources and practical ability to pay [§§30-31], having regard to any third-party financial support under CPR 46.27(4) [§29]. This is about whether likely costs exceed the claimant’s financial resources in CPR 46.27(3)(a). The judge explained this is “really a kind of means test” [§30], concerned with “real-world unaffordability of the actual case for the actual claimant, in light of the money which the claimant has or can access” [§30]. Money in the bank does not automatically equal practical ability to pay if needed for essential purposes [§31].

Limb (b): Objective Unreasonableness (§§34-44)

The court clarified this operates as a freestanding protection even where costs are real-world affordable [§35]. Limb (b) is “a second way to protect a claimant for whom the proceedings are real-world affordable” [§35]. It establishes an objective standard of reasonableness to promote access to environmental justice [§34], assessed by reference to the six mandatory factors in CPR 46.27(3)(b): (i) the situation of the parties; (ii) reasonable prospect of success; (iii) importance for the claimant; (iv) importance for the environment; (v) complexity; and (vi) whether frivolous [§34].

Fordham J emphasised that “real-world affordability cannot drive a conclusion of objective reasonableness” as “that would subvert the rule and undermine the public interest aims” [§43]. The question is not affordability but reasonableness [§38], informed by the facilitative purpose in paradigm environmental protection cases [§§37-38].

Application to the Facts

Applying these principles, Fordham J found the variation objectively unreasonable because [§§46-57]:

      • The court held that the claim had a reasonable prospect of success, having crossed the permission threshold despite Natural England’s resistance [§50]
      • The court found the issues were important both for the claimants and “for the environment” under CPR 46.27(3)(b)(iv), involving an environmental protection case with backward-looking legal audit value [§52]
      • The court characterised the case as representing undiluted environmental protection without “individual economic interests” or mixed purposes [§53], distinguishing it from the CPRE case where local property owners funded the challenge [§53]
      • The claimants’ crowdfunding and legal arrangements (discounted rates, specialist lawyers) were eminently reasonable and could not be criticised [§55]
      • Increased caps would undermine their capacity to function as repeat players in future environmental litigation, and “space to be a repeat player” is essential for proper access to environmental justice [§56]
      • The existing caps already represented a doubling of protection due to two claimants being involved under CPR 46.26(4) [§51]
      • Natural England as a public authority with a £350m annual budget and £2.32m legal budget must accept practical implications of legal audits and irrecoverable costs [§54]

A Warning About Financial Scrutiny

Fordham J added pointed observations about the nature of Natural England’s application [§§60-61]. He noted that the claimants’ accounts, reserves policies, and fundraising arrangements had been subjected to “close scrutiny” during a “considerable portion of a 3-hour hearing“. While acknowledging this was permitted by the CPR 46.27 mechanism, the judge expressed concern that “the court room during this hearing would, I think, have been a chilling place for responsible environmental NGOs, contemplating viable environmental protection judicial review claims” [§61]. He concluded: “it was particularly appropriate that the Court should respond as robustly, straightforwardly and clearly as it legitimately could” [§61].

Orders Made

The court ordered [§§62-64]:

      • The variation application was dismissed [§64]
      • Natural England must pay the claimants’ costs of the variation application on the standard basis, to be assessed if not agreed [§64]
      • The costs of the redactions application were ordered to be the Claimants’ costs in the case [§64]
      • Confidential versions of certain decision-making documents were to be filed, with tailored restrictions requiring any press or public application for access to trigger notice to Natural England and a right to be heard [§§12-15]

Key Takeaway

This decision establishes that Aarhus Convention costs cap variations under CPR 46.27 must satisfy a rigorous two-limb test, with objective unreasonableness operating as an independent protection even where claimants can afford increased costs. Courts will scrutinise applications closely in paradigm environmental protection cases, recognising the need for environmental NGOs to function as repeat players and the chilling effect that detailed financial scrutiny can have on access to environmental justice.

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Can A Vulnerable Party’s Change Of Mind Justify Part 36 Withdrawal Of An Accepted Part 36 Offer?

The High Court’s decision in Chinda v Cardiff & Vale University Health Board [2025] EWHC 2692 (KB) establishes that client vulnerability and medical conditions affecting concentration do not justify withdrawing an accepted Part 36 offer where no objective change of circumstances has occurred.

Background

The claim concerned a delay in the diagnosis of spinal tuberculosis which resulted in the Claimant sustaining a severe neurological injury [§2]. By reason of his injuries, the 35-year-old Claimant is essentially paraplegic, wheelchair-bound, with no movement in both legs [§3]. He suffers from significant neuropathic pain, paraesthesia and burning sensations, together with bladder, bowel and sexual dysfunction [§4]. There was also a small but material risk of future deterioration affecting his upper limbs [§5].

The Defendant, Cardiff & Vale University Health Board, admitted a breach of duty in failing to arrange an MRI scan when the Claimant attended the Emergency Department on 4 August 2020 [§2]. Judgment was entered for the Claimant on the basis of admissions made in the Defence, with damages to be assessed [§8]. A trial on quantum was listed for 2 October 2025 [§8].

A round table meeting took place on 1 July 2025, concluding at approximately 4:25pm [§9-10]. During this meeting, the Claimant, for the first time, indicated a wish to settle on a provisional damages basis [§10]. No settlement was reached, and it was agreed that the Claimant would propose terms [§11]. The following day, on 2 July 2025 at 3:42pm, the Claimant’s solicitors made a Part 36 offer which included a retained lump sum, a variable periodical payments order, and an order for provisional damages [§12, §29]. This offer was made on the basis of instructions given by the Claimant at the RTM on 1 July 2025 [§12].

On 8 July 2025, less than seven days later, the Claimant’s solicitors notified the Defendant of the Claimant’s wish to withdraw this offer [§13]. However, the Defendant accepted the offer on 22 July 2025 [§13]. The Claimant then issued an application on 29 July 2025 seeking permission to withdraw the Part 36 offer [§14]. By consent, the trial on quantum was vacated, and the court was asked to determine this application [§15].

Costs Issues Before the Court

The central costs issue was whether the court should grant the Claimant permission to withdraw his Part 36 offer pursuant to CPR 36.10 [§16]. The rule requires that where an offeree serves notice of acceptance of an offer before the expiry of the relevant period, that acceptance has effect unless the offeror applies to the court for permission to withdraw the offer within seven days of the notice of acceptance [§16(2)(b)]. The court must be satisfied that there has been a change of circumstances since the making of the original offer and that it is in the interests of justice to give permission [§16(3)]. The application turned on the interpretation and application of CPR 36.10(3).

The Parties’ Positions

The Claimant argued that there had been a change of circumstances sufficient to justify withdrawal [§22-26]. He relied on his medical condition, which caused him significant pain and fatigue, asserting that he found the RTM “really quite overwhelming and exhausting” and that “as a result of my fatigue and pain, I was unable to focus, think clearly and fully consider the instructions I provided to my solicitors on the day” [§22]. The Claimant characterised his condition as rendering him vulnerable and affecting his ability to provide clear instructions during the round table meeting [§26].

The Claimant stated that after the meeting, he had the opportunity to rest, reflect, and seek independent financial advice from an IFA and the author of his Periodical Payment Suitability report, leading him to prefer a lump sum award over the periodical payments structure originally offered [§17, §23]. He said that his revised offer, made on 29 July 2025, was for a lump sum of £7,350,500 – identical to an alternative lump sum offer previously made by the Defendant at the RTM [§25(iii)]. The Claimant also noted that the provisional damages element was now more limited (relating only to upper limb deterioration, not bladder/bowel/sexual function), being more favourable to the Defendant [§25(iv)].

The Claimant further argued that he had notified the Defendant promptly of his wish to withdraw (less than seven days after making the offer, and well before acceptance) [§25(i)], and that all quantum issues were agreed, with the only remaining dispute being the form of the award [§25(v)].

The Defendant opposed the application, contending that no relevant change of circumstances had occurred [§27-28]. They argued that the Claimant’s change of mind, based on a reassessment of known facts, did not meet the threshold required by CPR 36.10(3) [§28]. The Defendant highlighted that the Claimant’s Part 36 offer was made at 3:42pm on 2 July 2025, almost a full day after the round table meeting concluded at 4:25pm on 1 July, allowing ample time for reflection [§29(ii)]. During this time, the Claimant could have rested, discussed the case with his family, or delayed making any offers until after obtaining financial advice [§29(ii)].

The Defendant explained that when considering whether to accept the Claimant’s Part 36 offer, it had concluded that the periodical payment structure proposed was more advantageous than a pure lump sum settlement, offering financial certainty and avoiding over or under-compensation given the Claimant’s impaired life expectancy [§30, §40]. The Defendant submitted that permitting withdrawal on these grounds would undermine the predictability and certainty fundamental to the Part 36 regime [§31].

The Court’s Decision

Senior Master Cook refused the Claimant’s application for permission to withdraw the Part 36 offer [§41]. In applying CPR 36.10(3), the court found that there had been no relevant change of circumstances [§38]. The Claimant’s reassessment of his preferences, influenced by his medical condition and subsequent advice, was characterised as a change of mind rather than a change in circumstances [§38].

The court acknowledged the Claimant’s vulnerability but found this did not constitute a change of circumstances for several reasons [§32-35]:

First, the amended overriding objective and Practice Direction 1A, which address vulnerability, relate to ensuring parties can participate fully in proceedings and give their best evidence [§33]. The emphasis is on participation in proceedings and the giving of evidence, not on decision-making about settlement offers [§33-35].

Second, at no point before the hearing had it been suggested that the Claimant might be vulnerable “in the sense that his ability to instruct his representatives might be adversely affected” [§34]. The Claimant’s specialist personal injury solicitors “should be presumed to be aware of his difficulties, particularly as they were referred to in the expert medical evidence obtained by them” [§35]. If there had been any real concern, the solicitors should have raised the issue or ensured their client had sufficient space to give instructions [§35].

Third, the Claimant did not assert that he lacked capacity to make his decision, and the Part 36 offer was made by solicitors acting on his behalf [§37].

The court emphasised that Part 36 is a self-contained procedural code designed to promote certainty and predictability in settlement negotiations [§36]. Parties and their advisors “need to know where they stand when offers to settle are made or considered” [§36]. The court referred to authorities such as Cumper v Pothecary and Retailers v Visa, which establish that a change of circumstances must be “some significant alteration in the circumstances surrounding the case” – such as new evidence putting a wholly different complexion on the case or a change in the legal outlook from a new judicial decision – and not merely a reevaluation of existing facts [§18-20, §39].

The court rejected the Claimant’s submission that there was no real difference between the original and revised offers [§40]. The Defendant had concluded that a periodical payment settlement was more advantageous, providing financial certainty and avoiding over or under-compensation in a case where life expectancy was impaired [§40].

The court concluded that “to hold otherwise would be to introduce an unacceptable degree of uncertainty into what should be a certain process” [§38]. Consequently, the Claimant was held to his original Part 36 offer [§41].

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

The Supreme Court’s decision in Process & Industrial Developments Limited (Appellant) v The Federal Republic of Nigeria (Respondent) [2025] UKSC 36 establishes that costs orders should ordinarily be awarded in the currency of invoicing and payment, rejecting calls for courts to investigate which currency most accurately reflects a party’s loss.

Background

The appeal arose from a costs order following the successful application by the Federal Republic of Nigeria to set aside two arbitration awards in favour of Process & Industrial Developments Limited. The arbitration awards, dated 2016 and 2017 [§2], had originally granted P&ID sums exceeding US$6.6 billion plus interest, with Nigeria’s total liability surpassing $11 billion by the time of trial [§2]. Nigeria brought a challenge under section 68 of the Arbitration Act 1996 on the grounds of serious irregularity, specifically that the awards were obtained by fraud and were contrary to public policy. The Commercial Court, before Knowles J, upheld Nigeria’s challenge in a judgment dated [2023] EWHC 2638 (Comm), setting aside the awards [§2].

In pursuing the section 68 challenge, Nigeria incurred substantial legal costs, totalling £44.217 million (excluding interest) in relation to an eight-week trial [§1]. These costs were billed by Nigeria’s solicitors in sterling across 116 invoices, and payments were made by Nigeria in sterling between November 2019 and November 2024 [§1, §22]. Following the substantive decision, a dispute arose regarding the currency in which costs should be awarded. P&ID sought to have the costs order denominated in naira, Nigeria’s national currency, citing significant depreciation of the naira against sterling in recent years, particularly after Nigeria ceased pegging its currency to the US dollar in 2023 [§3]. Knowles J delivered an ex tempore ruling on 8 December 2023, awarding costs in sterling [§5], which was subsequently upheld by the Court of Appeal in a judgment dated 12 July 2024 ([2024] EWCA Civ 790) [§6]. P&ID appealed to the Supreme Court on the sole issue of the currency of the costs award.

Costs Issues Before the Court

The central costs issue before the Supreme Court was whether the judge erred in exercising his discretion to award costs in sterling rather than naira [§1]. The court was required to determine the correct legal principles governing the choice of currency for costs orders under the court’s discretionary powers. Specifically, the issue involved the applicability of the test proposed by P&ID, derived from the decision in Cathay Pacific Airlines Ltd v Lufthansa Technik AG [2019] EWHC 715 (Ch) [§4], which suggested that costs should be awarded in the currency that most accurately reflects the loss suffered by the receiving party in funding its litigation. This raised broader questions about the nature of costs awards, including whether they are compensatory in the same manner as damages, and the extent to which the court should inquire into a party’s funding arrangements when determining the currency of costs.

The Parties’ Positions

P&ID argued that the court should adopt a principle akin to that applied in damages cases, such as Miliangos v George Frank (Textiles) Ltd [1976] AC 443 and Owners of the Eleftherotria v Owners of the Despina R [1979] AC 685, where judgment could be given in a foreign currency to reflect the claimant’s actual loss [§7]. P&ID contended that an award of costs is compensatory and designed to indemnify the receiving party against the loss incurred in litigation. Therefore, the currency should be that which most truly represents the underlying loss, which in this case was naira, as Nigeria had allegedly converted naira into sterling to pay its legal fees [§7, §8]. P&ID challenged the Court of Appeal’s distinction between an indemnity against loss and an indemnity against liability, asserting that there was no material difference in this context [§8]. They also dismissed concerns about disproportionate inquiries into funding arrangements, citing Lord Wilberforce’s rejection of similar arguments in damages cases [§9].

Nigeria maintained that the costs order should be in sterling, as its solicitors had billed in sterling and payments were made in sterling [§5, §6]. Nigeria emphasised that an award of costs is a discretionary remedy under section 51 of the Senior Courts Act 1981 and CPR rule 44.2, not a compensatory award for loss [§12-13]. They argued that the court should not embark on an inquiry into how a party funds its litigation, as this could lead to complex and disproportionate satellite litigation [§6, §20]. Nigeria also highlighted practical difficulties, such as the need to apply multiple exchange rates to 116 invoices if costs were awarded in naira, which would complicate the assessment process [§22]. They distinguished the Cathay Pacific case, noting that it involved invoices in euros, but argued that the proposed test of “reflecting loss” was not appropriate for costs orders.

The Court’s Decision

The Supreme Court dismissed the appeal, upholding the award of costs in sterling on the standard basis [§31]. The court provided several key reasons for its decision.

Costs Awards Are Not Compensatory

First, the court fundamentally distinguished costs awards from damages, noting that damages aim to compensate for loss in tort or breach of contract [§11], whereas costs are a discretionary remedy under statute and the CPR, intended as a contribution towards litigation expenses, not a full indemnity for loss [§12-16]. As Lord Hodge and Lady Simler stated: “An award of costs is no indemnity. It is a statutorily authorised award of a contribution toward the costs incurred in litigating in the courts of England and Wales” [§16]. The court emphasised that costs orders are based on the liability incurred to legal representatives, not on the actual loss suffered by the party [§15-16].

No Inquiry into Funding Arrangements

Second, the court affirmed that the discretionary nature of costs under section 51 of the Senior Courts Act 1981 and CPR rule 44.2 [§12-13] means that the court is not required to conduct an inquiry into the currency that reflects a party’s loss. Such inquiries could lead to disproportionate and expensive satellite litigation, contrary to the overriding objective of dealing with cases justly and at proportionate cost [§20]. The court stated: “there is no distinction in principle between a person, who in order to pay a solicitor’s invoice expressed in sterling, converts another currency into sterling, and a person who sells gold or valuable paintings to do so” [§19]. In either case, the court does not investigate how the litigant obtained funds to meet its liability to its solicitors [§19].

Clarification of Cathay Pacific

Third, the court addressed the Cathay Pacific case, clarifying that while there is jurisdiction to award costs in a foreign currency, the outcome in that case was correct but its reasoning was flawed [§24]. John Kimbell QC did not err in awarding costs in euros when a German company’s solicitors had billed and been paid in euros. However, “in so far as his reasoning for so doing rested on or was supported by a suggested requirement for an inquiry as to the currency which most truly reflects the loss which the receiving party has suffered, we respectfully disagree” [§24]. The court rejected the “loss reflection” test, noting that such inquiries “could add significantly to the cost of litigation in the English courts” [§24].

The General Rule

The court endorsed a general rule that costs should be awarded in sterling or in the currency in which the solicitor has billed the client and in which the client has paid or there is a liability to pay [§25]. This reflects the liability incurred by litigating in the English courts and promotes legal certainty [§25]. The court noted that there may be exceptional circumstances where costs are not awarded in the currency of payment—for example, if the parties’ choice of currency is “abusive or otherwise inappropriate,” such as using a currency with which neither party nor their lawyers have a real connection in order to speculate on currency appreciation [§25].

Forward-Looking Guidance

The court added that if it becomes common for parties to pay lawyers in foreign currencies, “it might be necessary to develop practice directions” to ensure proper notice, safeguard costs budgeting mechanisms, and protect paying parties from significant currency fluctuations [§26].

Application to This Case

Finally, the court noted that in this case, Nigeria’s solicitors had billed and been paid in sterling, and the costs assessment would be conducted in sterling, so there was no basis to deviate from the general rule [§27]. The court also dismissed P&ID’s windfall argument, observing in a postscript that “the depreciation of [Nigeria’s] currency internationally has resulted in a substantial diminution of the domestic purchasing power of the naira in Nigeria since 2019 and especially since 2023″ [§29].

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Apportioning Defendants’ Costs By Time | When Evolving Claims Engage Separate Interests

The High Court’s decision in Jon Flowith & Partners v Greaves & Ors [2025] EWHC 2738 (Ch) demonstrates how costs of separately represented defendants may be apportioned by reference to the evolving nature of their interests during strike-out applications.

Background

The judgment of 22 October 2025 addressed costs issues consequential to an earlier judgment dated 15 September 2025. The substantive hearing on 25 July 2025 concerned an application by the third defendant, IM Properties Development Limited (D3), to strike out the claimant’s claims against it. In the September judgment, the court ordered that the claimant’s claims against D3 be struck out unless the claimant applied within 28 days for permission to amend its particulars of claim to remedy identified defects [§3]. D3’s original position was that the particulars disclosed no reasonable grounds for bringing the claim, but it later modified its stance, advocating for a conditional strike-out order after considering the claimant’s skeleton argument [§3].

The first and second defendants (D1 and D2) participated in the application, primarily to protect their separate interests, particularly concerning the construction of clause 3.1(e) of the Promotion Agreement relating to the payment of “Owner’s Agent Fees” [§4-6]. The claimant’s Particulars of Claim had failed to specify whether D1/D2 or D3 were liable to pay these fees [§4], and D3 contended in its Defence that only D1/D2 were liable, whilst D1/D2 took the opposing position that D3 was liable [§5]. Prior to the hearing, D3 made an open offer to adjourn the application pending service of amended particulars by the claimant, on condition that the claimant paid the costs thrown away [§8]. This offer was rejected by the claimant [§8]. D1 and D2 indicated their agreement in principle with a consent order, subject to amendments ensuring their costs were also covered [§9]. At the hearing, D1 and D2 supported D3’s position that a conditional strike-out order should be made [§11].

Costs Issues Before the Court

The court was required to determine the costs liability arising from the strike-out application, specifically the application by D1 and D2 that the claimant should pay their costs of the application [§1]. The claimant contended that there should be no order as to costs [§1]. The key issues for determination were: whether the claimant, as the unsuccessful party on the application, should be liable for the costs of D1 and D2; whether D1 and D2 were entitled to their costs as separately represented parties with distinct interests; and how the costs should be assessed. A subsidiary issue was whether the costs should be subject to a summary assessment or a detailed assessment.

The Parties’ Positions

The first and second defendants (D1 and D2) sought an order that the claimant pay their costs of the application. They argued that their separate representation was justified because they had distinct interests from D3, particularly regarding the construction of clause 3.1(e) of the Promotion Agreement concerning liability for Owner’s Agent Fees. They emphasised that the claimant’s case was developing through its skeleton argument and oral submissions, which engaged their interests directly [§21]. They also highlighted that the hearing could have been avoided had the claimant sought to amend its pleadings earlier.

The claimant (C) submitted that there should be no order for costs. It relied on the general principle that an unsuccessful party should not ordinarily have to pay two sets of costs [§17]. It cited Bolton MDC v Secretary of State for the Environment [1995] 1 WLR 1176 for the proposition that interested parties should only recover their costs if there was a specific issue requiring separate representation that was not covered by another party [§17]. The claimant argued that neither it nor D3 had suggested the court should determine the construction of the Promotion Agreement in a way that bound D1 and D2, and therefore their attendance was unnecessary [§15].

The Court’s Decision

The court held that the claimant, having lost the application [§12], should bear the costs of D1 and D2 incurred from the date of receipt of the claimant’s skeleton argument onwards [§16, §26]. However, costs incurred by D1 and D2 prior to that date were reserved [§15, §26]. The court refused to undertake a summary assessment of the costs, directing that they be subject to detailed assessment if not agreed, because it did not know the proportion of costs incurred during the relevant period [§26].

The court reasoned that D1 and D2 had a separate interest from D3 which required separate representation [§19]. This was evidenced by the competing constructions of clause 3.1(e) of the Promotion Agreement advanced by D1/D2 and D3 concerning liability for Owner’s Agent Fees [§5, §20]. The court rejected the claimant’s submission that D3 had not sought determination of this point, noting that D3 had indeed sought a determination that would bind D1 and D2 [§15].

Furthermore, the claimant’s evolving case, as set out in its skeleton argument and oral submissions, directly implicated D1 and D2. The claimant advanced claims that went beyond its pleaded case, including allegations that D1 and D2 had acted on behalf of D3 rather than just on their own behalf [§21(1)]. It was also confirmed at the hearing that the Owner’s Agent Fees claim was run against D1 and D2 alone (not D3), though the Particulars had not made this clear [§21(2)]. The court found that in circumstances where the claim was in “a state of some development from the original Particulars, and in a manner which engaged D1 and D2’s interests”, it was appropriate and prudent for D1 and D2 to attend the hearing given their different interest to D3 [§23].

The court noted that D1 and D2’s counsel at the hearing added value to the proceedings, including by answering the court’s question about whether D1 and D2 supported an unless order for the entirety of C’s claim against D3, making submissions about any revised draft pleading and D1/D2’s ability to respond to it, and addressing one point arising from C’s reply [§24]. Counsel was careful not to duplicate D3’s submissions [§24].

The court also found that the strike-out hearing, and thus the associated costs, could have been avoided entirely had the claimant sought to amend its pleadings in good time before the hearing [§13, §25].

For the period before receipt of C’s skeleton argument, the court reserved D1/D2’s costs. During this earlier period, D1/D2’s stance was that they wished to ensure the Owner’s Agent Fees point was not dealt with by the court at D3’s request in a way that decided against their construction [§14]. This was a stance “in opposition to D3 to that degree” [§15], which meant it would not be appropriate to order C to pay these costs. The outcome of the final hearing, particularly the view taken on the competing constructions of clause 3.1(e), would be relevant to how these earlier costs should be borne [§15].

Applying the principle from Bolton MDC, the court concluded that the circumstances justified an award of costs to D1 and D2 for the period after the claimant’s skeleton argument was served. The court noted that Bolton established that interested parties might recover costs not only where there was a separate issue, but also where they had “an interest which requires separate representation” [§18, emphasis in judgment]. The court found that D1 and D2, as separate defendants with different interests from D3, clearly satisfied this test [§19-23].

When Can “Neutral” Defendants Face Costs Orders In Judicial Review?

The Administrative Court’s decision in Medis Pharma Ltd v NHS Resolution [2025] EWHC 2616 (Admin) clarifies when defendants adopting a “neutral” role in judicial review may nevertheless face costs liability, while providing a stern reminder of the consequences of failing to comply with court directions for filing skeleton arguments.

Background

The Claimant, Medis Pharma Ltd, sought judicial review of a decision dated 25 November 2024 made by a committee of Primary Care Appeals, a service provided by the Defendant, NHS Resolution. The committee had refused the Claimant’s application for inclusion in the pharmaceutical list for distance selling premises under Regulation 25 of the NHS (Pharmaceutical and Local Pharmaceutical Services) Regulations 2013 [§1], which would have permitted it to operate the distance selling of medicines for the NHS. The refusal was primarily based on the committee not being satisfied that the Claimant’s procedures were likely to secure the safe and effective provision of essential services, with particular concerns raised about maintaining the correct temperatures for medicines during the delivery process [§9-11].

Following the commencement of judicial review proceedings on 4 February 2025 [§14], the Defendant filed an Acknowledgment of Service indicating it would take a neutral stance in the proceedings, analogous to that of a court or tribunal, and requested that no order for costs be made against it, relying on the case of R (Davies (No 2) v HM Deputy Coroner for Birmingham [2004] EWCA Civ 207 [§15]. Permission for judicial review was initially refused on the papers on 10 April 2025, with no order as to costs [§16]. The Claimant renewed its application, and at an oral hearing on 17 June 2025, permission was granted on two grounds (Grounds 1 and 3 only) [§16]. The order from that hearing, processed on 25 June 2025, included directions for filing a hearing bundle no later than 21 days before the substantive hearing and a skeleton argument no later than 14 days before the substantive hearing, and a direction that the costs of the permission hearing be “costs in the case” [§17-18]. The Defendant subsequently applied to vary this costs order [§18].

Further procedural issues arose when the Claimant failed to comply with directions in the 25 June 2025 order regarding the filing of the hearing bundle and skeleton argument. The parties were notified on 4 July 2025 that the substantive hearing would take place on 1 October 2025 [§19]. The bundle was filed late on 26 September 2025 (16 days late), and the skeleton argument was filed on 30 September 2025 (13 days late), the day before the substantive hearing [§20, §25]. The bundle was also incomplete, omitting highly relevant documents including the Defendant’s Acknowledgment of Service and Summary Grounds, and suffered from pagination inconsistencies between the court’s bundle and counsel’s bundle [§25]. The substantive claim for judicial review was ultimately dismissed, with both Grounds 1 and 3 failing [§46, §49-50].

Costs Issues Before the Court

The court was required to determine two distinct costs-related procedural issues [§21]. The first was the Defendant’s application to vary the costs order made at the permission hearing on 17 June 2025 from “costs in the case” to “no order for costs against the Defendant irrespective of the outcome of the proceedings” [§18]. The second issue concerned the consequences of the Claimant’s failure to file its hearing bundle and skeleton argument in accordance with the court’s directions, which engaged the principles governing relief from sanctions [§22].

The Parties’ Positions

Regarding the variation of the permission hearing costs order, the Defendant contended that the Deputy Judge had made an error in ordering “costs in the case” and had likely overlooked the Defendant’s written request for “no order as to costs”. The Defendant maintained that its role in the proceedings was entirely neutral, as it had only made submissions to assist the court and had not actively resisted the claim, thus making the Davies principle applicable [§30].

The Claimant resisted the application to vary the costs order [§30]. While the specifics of its written submissions on this point are not detailed in the judgment, its position was implicitly that the original order should stand.

Concerning the late filing of documents, the Claimant, through its counsel Mr Fazli, explained that its solicitors had assumed that counsel who attended the oral permission hearing would proactively deal with drafting and filing the skeleton argument once sent the directions. They had not formally instructed him to do so, nor had they checked on progress as the deadlines passed [§27]. The Claimant did not make a formal application for relief from sanctions or an extension of time prior to the hearing; instead, it simply filed the late skeleton argument the day before the hearing [§24, §28].

The Court’s Decision

Variation of Permission Hearing Costs Order

The court dismissed the Defendant’s application to vary the costs order from the permission hearing [§30]. Deputy High Court Judge David Pievsky KC declined to assume that the permission judge had been unaware of or had overlooked the Defendant’s costs request. It was considered equally if not more likely that the permission judge was aware of the request but did not find the proposed order satisfactory [§30].

Furthermore, the court was not persuaded that the Defendant’s stance was entirely neutral. It noted that the Defendant’s Summary Grounds of Resistance had, at several points, sought to ‘push back’ on points made by the Claimant on issues of fact and alleged errors [§30]. The Defendant’s participation was limited and its submissions moderate and careful, but it was not entirely neutral [§30]. Consequently, the Defendant’s participation was not considered to have attained the same neutral status as a party who took no part at all, or who had merely responded saying it was neutral as to the outcome [§30].

The court also noted the Claimant’s subsequent breach of a court order, and decided that the appropriate course was to leave any final determination on the costs of the proceedings until the case’s conclusion [§30]. Following circulation of the judgment in draft, the parties ultimately agreed that there should be no order as to costs of the proceedings [§51].

Relief from Sanctions for Late Filing

On the issue of the Claimant’s failure to comply with court directions, the court applied the three-stage test from Denton v TH White Ltd [2014] EWCA Civ 906, as adapted for judicial review in R (Liberty) v SSHD [2018] EWHC 976 (Admin) [§22-23].

      • Stage 1 — Seriousness of breach: The court found the breach to be significantly more serious than the delays that had troubled the Divisional Court in Liberty [§26]. The skeleton argument was required to be filed by 17 September 2025 but was not filed until 30 September 2025, the day before the substantive hearing. The hearing bundle was due 21 days before the hearing but was not filed until 5 days before. The bundle was also incomplete, omitting highly relevant documents like the Defendant’s Acknowledgment of Service and Summary Grounds, and the pagination used for the court’s bundle was inconsistent with the pagination in counsel’s bundle [§25].
      • Stage 2 — Reason for breach: The court found there was no good reason for the failures [§27]. The Claimant’s solicitors had assumed counsel would proactively draft and file documents after being sent the directions and notice of the hearing, but had not formally instructed him to do so or checked whether progress was being made as deadlines passed [§27]. Even on the basis of what the court was told, there was no good reason for the breach [§27].
      • Stage 3 — All circumstances: The court considered several aggravating factors. The Claimant did not file any application for relief from sanctions or an extension of time once aware of the breach, instead simply filing the skeleton argument the day before the hearing as though no breach had occurred [§28]. As stated in Liberty, this approach is inappropriate: the litigant fails to face up to being in breach of a court order and presents the document as a fait accompli [§28].

However, unlike in Liberty (where the Divisional Court ordered the defendants to pay the claimant’s costs of the extension application on an indemnity basis [§23]), a costs sanction was not workable here because the other parties had incurred no costs in relation to any application [§28]. The claim also could not be said to raise matters of wider public importance such as were engaged in Liberty [§28].

The court indicated it was minded to allow the Claimant to rely on the hearing bundle filed on 26 September 2025, but minded to refuse any extension of time for the skeleton argument filed on 30 September 2025 [§29]. Mr Fazli fairly conceded that no application for extension could realistically succeed [§29]. The court explained that this meant Mr Fazli would need to rely closely on the original Statement of Facts and Grounds (treating it as his skeleton argument) along with relevant bundle passages, rather than the late-filed skeleton [§29]. This was the approach taken [§29].

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Percentage-Based Costs Order Upheld For Litigation With Mixed Outcomes

The High Court’s decision in Daniel Family Homes Limited v Gold [2025] EWHC 2697 (Ch) confirms the formidable obstacle facing parties who seek to challenge percentage-based costs orders on appeal.

Background

The proceedings originated in the County Court at Oxford, where Daniel Family Homes Limited (DFH) brought a claim for possession of 28 Rogers Lane, Stoke Poges, Slough (the Property) and sought damages for trespass. The defendants, Jeffrey Gold and Patricia Gold, resisted the claim and brought a Part 20 Claim. They asserted a beneficial interest in the Property through proprietary estoppel, a resulting or constructive trust, or a Declaration of Trust. They also claimed repayment of loans totalling £629,576.53 plus interest. [§5]

DFH and Mr Daniel, the Part 20 defendant, denied the Golds had any beneficial interest. They contended that an agreement existed for the Golds to pay rent for their occupation, which would be set off against the loan amounts, resulting in no money being owed. They later alleged an Assured Shorthold Tenancy (AST) had been agreed in 2008. They also claimed a set-off for charges related to the storage of Mr Gold’s vehicles on Mr Daniel’s land. [§6]

A five-day trial took place before HHJ Melissa Clarke in November 2024. In her judgment dated 10 December 2024, the Judge found that the Golds had no beneficial interest in the Property and that no Declaration of Trust had been executed. [§9(i)] She found that the Golds had become trespassers after a notice to quit expired on 2 June 2021, and she made a possession order. [§9(vi), §24] However, she did not award damages for trespass from that date. On the financial issues, the Judge found that certain loans had been made by the Golds, including a loan of £121,000 [§9(ii)], but that there was no agreement for them to pay rent (and thus no rent to set off) and no agreement for interest to be paid on the loans, save for two early documented loans. [§9(iii), §9(iv)] She also rejected the claim for a set-off regarding car storage charges, finding no binding agreement due to insufficient evidence of fresh consideration. [§9(v)] Following the hand down of judgment, the Judge heard submissions on costs and ordered that each party pay 50% of the other party’s costs. [§10]

Both parties appealed aspects of the order with the permission of Michael Green J. DFH and Mr Daniel appealed on five grounds, including the costs order. Mr and Mrs Gold cross-appealed on three grounds. The appeals were heard together by Mr Justice Cawson in the High Court. [§2-3]

Costs Issues Before the Court

The costs issue before the High Court was whether HHJ Clarke erred in her exercise of discretion when making the costs order following trial. [§11(v)] The appellants, DFH and Mr Daniel, challenged the order that each party pay 50% of the other’s costs. They argued the Judge incorrectly stated that 50% of the Golds’ costs related to their money claim, failed to have sufficient regard to the Golds’ conduct in the proceedings, and failed to properly reflect the fact that DFH and Mr Daniel had been successful in reducing the amount claimed on the money counterclaim. [§11(v)]

The Parties’ Positions

Mr Thakerar, for DFH and Mr Daniel, submitted that the Judge exercised her discretion incorrectly. He argued that the Judge was wrong to state that 50% of the Golds’ costs had been spent on their money claim, suggesting this was an unsupported estimation. He further contended that the Judge failed to have adequate regard to the conduct of Mr and Mrs Gold during the proceedings and that insufficient weight was given to the success of DFH and Mr Daniel on specific issues, notably in successfully defending the beneficial interest claim and reducing the quantum of the successful money claim. [§60]

Mr Taylor, for Mr and Mrs Gold, would have defended the Judge’s costs order as a proper exercise of her wide discretion. He would have argued that the Judge was entitled to take a broad, percentage-based approach to reflect the mixed outcome of the litigation, where both parties had enjoyed significant successes and failures.

The Court’s Decision

Mr Justice Cawson dismissed the appeal on the costs issue (Ground 5), expressing only a provisional view because there would inevitably be argument regarding the costs of the appeal and cross-appeal and how his decision on the substantive grounds might impact the Judge’s costs order below. [§57] He held that the Judge had a wide margin of appreciation in costs matters and that an appellate court would only interfere where a clear error of principle was established. No such error was identified. [§59]

The court made several key observations in upholding the costs order. Firstly, it rejected the criticism that the Golds’ solicitors had not produced a Statement of Costs at the conclusion of the trial. It noted there is no presumption in favour of summarily assessing costs after a five-day trial, and therefore no expectation for the parties to have produced such statements. [§58]

Secondly, the court emphasised that the Judge had explicitly considered an issue-based costs order as an alternative but rightly concluded that a percentage-based approach was more appropriate in the circumstances. This was a decision well within her discretion. [§59]

Finally, the court found that the Judge had the significant advantage of having presided over the entire trial and seen how the various issues unfolded. She was therefore in the best position to assess the overall success of the parties and the impact of their conduct. [§60] The argument that insufficient weight was given to the appellants’ success on certain issues did not establish a clear error of principle. The court stated it would require “a great deal of persuading” to substitute its own discretion for that of the trial judge and concluded that the 50/50 costs order was one she was entitled to make. [§61-62]

Additional Outcome

It should be noted that whilst the costs appeal was dismissed, the court allowed Ground 2 of the appeal, holding that the Judge had erred in not awarding damages for trespass from 2 June 2021. Mr Justice Cawson awarded damages at a rate of £2,000 per month from June 2021 to the date of judgment (approximately £84,000), and thereafter at the agreed rate of £100 per day. [§29] This substantive success on appeal would inevitably affect the final costs position between the parties.

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When Interlocutory Costs Orders Survive Discontinuance But Underlying Conduct Is Penalised

The High Court’s decision in MEX Group Worldwide Limited v Ford & Ors [2025] EWHC 2689 (KB) addresses how courts allocate costs where discontinuance, proven contempt, and wrongfully obtained injunctions intersect. 

Background

MGWL obtained a worldwide freezing order on 20 October 2023 requiring defendants including Mr Smith and CSM to disclose assets. Mr Smith and CSM failed to comply with the disclosure obligations. Other defendants successfully applied to discharge the WFO on 15 December 2023 due to material non-disclosure by MGWL. MGWL’s appeal was dismissed on 8 August 2024. Meanwhile, MGWL issued contempt proceedings against Mr Smith and CSM on 22 March 2024.

After two adjournments in June and July 2024, for which Mr Smith and CSM were ordered to pay costs on account totalling £50,000, contempt was proven on 13 December 2024. On 7 March 2025, MGWL discontinued the underlying Scottish proceedings, causing the WFO to be discharged. The court was required to determine the costs consequences. The Scottish court had already awarded costs against MGWL on an indemnity basis with a 75% uplift.

Costs Issues Before the Court

The court faced multiple competing costs principles. Under CPR 38.6, a discontinuing claimant is presumed liable for the defendant’s costs. However, the established principle is that a defendant found in contempt ordinarily pays the claimant’s contempt costs, often on an indemnity basis. At the same time, the WFO had been obtained by material non-disclosure and should never have been granted. The court also had to consider whether existing interim costs orders made against the defendants should stand despite the discontinuance, and whether an inquiry as to damages should be ordered under the cross-undertaking despite the proven contempt.

The Parties’ Positions

MGWL submitted that costs should be determined on an issue-by-issue basis. It sought to recover the costs of the contempt application, arguing that it had succeeded in proving the contempts. MGWL also sought costs of resisting various applications including those for cross-examination of witnesses and for a stay. It emphasised the defendants’ conduct in failing to comply with the WFO and in seeking unjustified adjournments. MGWL contended that contempt proceedings typically attract indemnity costs in the applicant’s favour.

Mr Smith and CSM argued that they were the overall winners due to the discontinuance. They relied on the presumption in CPR 38.6 that MGWL should pay their costs of the entire proceedings. They sought an order reversing the interim costs orders made in MGWL’s favour. They highlighted the serious non-disclosure by MGWL in obtaining the WFO and the findings of the Court of Appeal, which demonstrated that the WFO should never have been granted. They pointed to the Scottish court’s indemnity costs order as showing the appropriate approach to MGWL’s conduct.

The Court’s Decision

The court held that the starting point was that MGWL had effectively lost the action due to the discontinuance. Applying CPR 38.6(1) and the principles established in Brookes v HSBC Bank plc, the presumption was that MGWL must pay the defendants’ costs. MGWL had failed to displace this presumption. Its practical and financial reasons for discontinuance were insufficient, and there was no unreasonable defendant conduct that would justify a departure from the usual rule. The court rejected MGWL’s issue-by-issue approach, stating that it would be “cautious about eroding that starting point by chiselling away issue by issue in the circumstances where there is a grave question as to whether the action should have ever been brought, whether the WFO should ever have been granted.”

The court then addressed how this general approach should be modified to account for the specific circumstances. First, the court held that the costs orders made at the adjournment hearings in June and July 2024 should stand despite the discontinuance. Following the reasoning in Dar El Arkan v Al Refai rather than the obiter dictum in Safeway Stores Ltd v Twigger, the court held that interim orders do not automatically fall away on discontinuance. These orders stood because they reflected specific unreasonable behaviour by Mr Smith and CSM in seeking unjustified adjournments, separate from the overall merits of the case.

The treatment of the contempt costs required more nuanced consideration. Ordinarily, a defendant who refuses to provide disclosure information under a WFO and is found in contempt would be liable for the contempt costs, typically on an indemnity basis. However, the court identified significant mitigating factors. The WFO should never have been granted due to material non-disclosure. The WFO would likely have been discharged on jurisdictional grounds had the defendants applied, as had occurred with the other defendants. The discontinuance of the Scottish proceedings raised serious questions about whether there was ever a proper basis for the underlying claim. Moreover, MGWL had continued the contempt proceedings even after losing its appeal in the Court of Appeal on 8 August 2024, which raised serious concerns about its motivation.

In light of these factors, the court ordered that MGWL should recover only 50% of its contempt costs from inception to 13 December 2024, to be assessed on the standard basis rather than the indemnity basis typically awarded in contempt cases. This reflected the court’s serious misgivings about MGWL’s conduct in pursuing the WFO despite the non-disclosure issues and the Court of Appeal’s decision. As the court observed, whilst an issue-by-issue approach is sometimes the fairest, it was not appropriate in this case to the extent that it would lead to a departure from the overall starting point, which was that Mr Smith and CSM were the successful parties.

From 13 December 2024, when the court ordered that the contempt penalty hearing and the set-aside application be heard together, the costs of both applications became inextricably linked. From that point, no further costs were awarded to MGWL for the contempt application. Instead, the costs of the action were awarded to Mr Smith and CSM.

The court made no order as to costs for several specific applications, including applications for permission to appeal the contempt findings, applications to cross-examine witnesses, and an application for a stay pending other proceedings. This reflected the court’s view that while these applications were unsuccessful, they were not entirely unmeritorious in the context of the overall concerns about the action.

On the question of the basis of assessment, the court declined to award indemnity costs to Mr Smith and CSM despite the Scottish court having done so. The court noted that the costs orders were multi-faceted and involved orders going in different directions, with the defendants having been unsuccessful on various applications. The decision to make a standard order as to costs reflected the overall justice of the case, where costs were awarded in different directions and proportions.

The final costs order was that MGWL should pay Mr Smith and CSM’s costs of the action on the standard basis, subject to MGWL recovering 50% of the contempt costs from inception to 13 December 2024 on the standard basis, the existing orders in MGWL’s favour totalling £50,000 standing, and no order as to costs for the specified applications.

In relation to the cross-undertaking as to damages, the court ordered an inquiry into the losses claimed by Mr Smith and CSM, finding that there was credible evidence that the WFO had caused loss. MGWL had argued that the defendants’ contempt should bar the inquiry, but the court rejected this. The existing costs orders already addressed the contempt conduct, and the more significant factor was that the WFO should not have been obtained or maintained. The defendants had been denied the opportunity to prove the WFO was wrongly obtained due to the discontinuance.

Key Takeaway

This decision demonstrates that discontinuance costs principles will generally prevail even where contempt has been proven, particularly where the underlying injunction was wrongly obtained. Proven contempt may reduce the defendants’ costs recovery for specific periods or applications where their conduct was unreasonable, but it will not reverse the overall costs liability where the claimant discontinues. Material non-disclosure in obtaining a freezing order will contaminate all subsequent costs applications, even where the applicant succeeds on discrete issues such as contempt. Interim costs orders reflecting specific unreasonable conduct will generally survive discontinuance and need not be reversed.

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Costs Capping Inappropriate Where Unrecovered Costs Shift To Non-Party Tenants

The Court of Appeal’s decision in Spender v FIT Nominee Ltd [2025] EWCA Civ 1319 establishes that costs capping orders must be refused where their effect would be to transfer costs risk from appellant parties to non-parties through service charge recovery provisions.

Background

The case concerned an application for a costs capping order under CPR rule 52.19 in a dispute between tenants and their landlords regarding service charges. The appellants were 70 of the 436 tenants at St David’s Square in London E14, and the respondents were the landlord companies, which were ultimate subsidiaries of NatWest bank. The substantive proceedings related to the reasonableness of service charges for the estate’s security system. [§1]

The First-tier Tribunal had found in favour of the tenants, holding that the sums were reasonably incurred only to the extent of 19% of the charges demanded by the landlords. [§1] On the landlords’ appeal, the Upper Tribunal allowed the appeal, finding (subject to a concession on one aspect which was irrelevant to this application) that the charges were reasonably incurred. [§1] The tenants then appealed to the Court of Appeal. [§1]

In their appellants’ notice, the tenants had initially sought an order that both sides bear their own costs of the appeal, which was refused. [§2] The current application under CPR r52.19 was supported by a witness statement from Mr Liam Spender, who represented himself and the other appellant tenants. [§2] The tenants’ position was that without a costs capping order, their appeal would be stifled due to the disproportionate costs risk compared to their individual financial interests in the dispute. The tenants estimated the landlords’ costs at £150,000; counsel for the landlords gave an estimate of £90,000, which the court accepted as reasonable. [§3]

Costs Issues Before the Court

The court was required to determine whether to exercise its discretion to make a costs capping order under CPR r52.19, which applies to appeals from proceedings where costs recovery is normally limited or excluded at first instance. [§5] The key issue was whether such an order was appropriate in the context of landlord and tenant litigation, particularly considering the interaction between the Civil Procedure Rules and the cost recovery mechanisms under the Landlord and Tenant Act 1985. [§15-16]

The tenants argued that the usual costs rules would stifle their appeal, as the landlords’ estimated costs of approximately £90,000 were disproportionate to the £480,000 total service charge in dispute, which represented approximately £1,500 per individual appellant tenant (based on the total divided by 70 tenants in the litigation, though the overall value was spread across all 436 tenants on the estate). [§3, §18] They emphasised the inequality of arms between ordinary homeowners and corporate landlords, and the need to facilitate access to justice. [§3]

The Parties’ Positions

The appellant tenants contended that a costs capping order was necessary to facilitate access to justice. They submitted that without protection from adverse costs, they would be unable to pursue their appeal to vindicate their rights. They highlighted their success at first instance and the reversal by the Upper Tribunal, leaving them in an invidious position. [§3] The tenants pointed to the significant disparity in financial resources between the parties and the relatively modest individual financial stakes for each tenant. [§3]

The court noted that while the evidence from the tenants as to their financial position was not extensive, and that in other circumstances this might have been important, the decisive consideration related to the interaction between costs capping orders and the provisions of the Landlord and Tenant Act 1985. [§5]

The Statutory Framework

Both parties acknowledged that sections 19 and 20C of the Landlord and Tenant Act 1985 are relevant because they have a bearing on costs in proceedings of this kind. [§16] The starting point is that when there is litigation between a landlord and tenants, the landlord can often (depending on the terms of the lease) recover incurred litigation costs as part of the service charge. [§16] The general provisions of s.19 apply, so that only costs reasonably incurred can be charged via the service charge. [§16] Section 20C then gives the court power to prevent that recovery from taking place if it would not be just and equitable. [§16]

It was common ground that orders under section 20C are commonly made where the tenant succeeds. In such circumstances, it is not difficult to see why it would not be just and equitable for the landlord to recover, through the service charge, the costs of unsuccessfully prosecuting proceedings. [§17] On the other hand, it was also common ground that such orders are rarely made where the landlord wins in the litigation. [§17]

The Court’s Decision

The Court of Appeal refused the application for a costs capping order. [§21] Lord Justice Birss (with whom Lord Justice Nugee agreed) confirmed that CPR r52.19 was engaged because the appeal was from proceedings where costs recovery was limited at first instance. [§14(i)] The court derived several applicable principles from the case law [§14]:

(i) The rule applies (and only applies) in appeals in which, at first instance, cost recovery was limited or capped;

(ii) Engagement of the rule does not automatically mean an order is warranted (Glass v Freyssinet) – it means there is power to make the order in the exercise of the court’s discretion;

(iii) The discretion involves considering all circumstances, including the means of both parties and the need to facilitate access to justice (r52.19(2));

(iv) The fact an appeal is wholly unmeritorious is a reason not to make the order (Blair v Wickes);

(v) Facilitating access to justice is a factor of substantial weight (Lewison LJ in Shorts v Google);

(vi) Simply showing that the risk of adverse costs in the Court of Appeal is a deterrent is not enough, because that risk is meant to be a deterrent (Glass v Freyssinet). Bare assertions in the evidence will be treated with scepticism and evidence of means will need to be full and frank (Shorts v Google). However, evidence demonstrating that a party’s modest means has the result that they would not pursue the appeal due to the risk of adverse costs, whereas the other party can take that risk, would support making the order (Manchester College v Hazel and Shorts v Google). [§14]

The Effect of a Costs Capping Order in This Context

The decisive consideration was the interaction between costs capping under the CPR and the cost recovery provisions of the Landlord and Tenant Act 1985. [§19] The court found that if a costs capping order were made and the tenants lost the appeal, the 70 appellant tenants would pay costs up to the cap (for example, £25,000). The remainder of the landlord’s assessed costs (for example, £50,000 using a £75,000 total figure) would be unpaid. [§18-19]

In that case, no order under s.20C of the 1985 Act would be likely. Therefore, the landlord would be able to recover those unpaid costs as part of the service charge, from the tenants as a whole – that is, all 436 tenants. [§19] In other words, the effect of a capping order in these circumstances would be to shift the costs risk of this appeal from the 70 appellant tenants to the whole group of 436 tenants of the property. [§19]

As a result, the tenants who chose not to be involved in this appeal would bear the costs risk which the appellant tenants, who did wish to bring the appeal, did not wish to bear. [§19] Lord Justice Birss held: “That is not a result which accords with justice or the overriding objective.” [§19] Therefore, even if this was otherwise a proper case in which to make a costs capping order of some kind, the consideration of the operation of s.19 and s.20C of the 1985 Act undermined that position. [§19]

The “Real Contest” Analysis

Lord Justice Nugee emphasized this point in his concurring judgment. His Lordship observed that the purpose of the tenants seeking a costs-capping order was to limit their exposure to an adverse costs order if they lose the appeal. [§23] But the practical effect of such an order in the present case would mean that any costs not recovered from the appellant tenants would (so long as reasonable) be recoverable from the tenants on the estate as a whole. [§23]

Lord Justice Nugee stated: “So the real contest in the present case is not between the tenants who are appealing and their landlord; the real contest is between the 70 tenants who have brought the appeal and the other 366 tenants on the estate who have not. Once seen in that light, I think it inevitably follows that it would not be just to make the order that is sought.” [§23]

Distinguishing Prince of Wales Road

The court noted that in the landlord and tenant case of Prince of Wales Road RTM v Assethold Ltd [2024] EWCA Civ 1544, the problem identified in the present case did not arise, and so the fact there was a costs capping order in that case did not assist the appellants. [§20]

Implications for Practice

This decision establishes an important limitation on the availability of costs capping orders under CPR r52.19 in landlord and tenant appeals. Where the effect of a costs cap would be to transfer unrecovered costs from participating appellants to non-participating parties through statutory cost recovery mechanisms (such as service charge provisions), the court will refuse to make such an order even where the standard criteria for costs capping might otherwise be satisfied.

The decision demonstrates that courts will look beyond the immediate parties to an appeal and consider the collateral consequences of costs orders on non-parties who would be affected by the exercise of statutory cost recovery powers. This is consistent with the overriding objective’s requirement that cases be dealt with justly and at proportionate cost.

For practitioners advising tenant clients considering appeals from tribunal decisions, this decision highlights the importance of:

  • Understanding how costs may be recovered through service charge mechanisms under the relevant lease and the Landlord and Tenant Act 1985
  • Considering the impact of a costs capping application on non-participating tenants
  • Recognizing that inequality of arms and access to justice concerns may be outweighed by the risk of shifting costs to non-parties
  • Distinguishing cases involving RTM companies or other structures where the cost-shifting problem may not arise

The decision also reinforces that costs capping orders remain discretionary and fact-sensitive, requiring careful analysis of the statutory and contractual framework within which litigation costs may be recovered.

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Costs Of Appeals From The Court Of Protection

Dishonest Evidence And Baseless Allegations Justify Indemnity Costs Order

The High Court’s decision in Clarke v Guardian News & Media Ltd [2025] EWHC 2575 (KB) demonstrates when dishonest conduct in defamation proceedings justifies an order for indemnity costs and a substantial payment on account.

Background

The case concerned a claim for defamation and data protection brought by the actor Noel Anthony Clarke against Guardian News & Media Ltd. The claim arose from a series of articles published by the defendant in 2021, which contained allegations of misconduct against the claimant. The claimant’s case was that these articles were defamatory and caused serious harm to his reputation. The defendant defended the claim on the grounds of truth and public interest. Following a liability trial, Mrs Justice Steyn handed down a judgment on 22 August 2025, dismissing the claimant’s claims in their entirety [§2]. The court found that the defendant had established both the truth defence and the public interest defence. The judgment also concluded that the claimant had advanced a baseless conspiracy allegation and had made dishonest statements in his evidence [§20-21]. The hearing on 23 September 2025 was convened to deal with consequential matters, including the resolution of several outstanding costs issues.

Costs Issues Before the Court

The court was required to determine four distinct costs issues following the dismissal of the claim. The first was the appropriate costs order to be made upon the dismissal of the claim [§1]. The second concerned the treatment of various ‘costs reserved’ orders made during the proceedings [§4]. The third issue was whether the costs should be assessed on the standard or indemnity basis [§13]. The fourth and final issue was whether the defendant was entitled to a payment on account of costs and, if so, in what amount [§25].

The Parties’ Positions

The defendant sought an order that the claimant pay its costs of the claim, to be assessed on the indemnity basis [§16]. It argued that the claimant’s conduct, including advancing and maintaining dishonest evidence and pursuing baseless allegations of conspiracy and dishonesty against the defendant’s witnesses, justified a departure from the standard basis. The defendant also sought a payment on account of costs in the sum of £3 million [§28], citing its incurred costs which were significantly in excess of £6 million [§26]. Regarding the ‘costs reserved’ orders, the defendant submitted that no further order should be made, meaning they would be treated as costs in the case [§6].

The claimant, who appeared in person [§19], did not formally contest that the defendant was entitled to its costs but opposed an order for indemnity basis assessment [§17]. He submitted that he had a right to bring the claim to defend his reputation, had relied on legal advice, and had made efforts to settle. He argued that his social media posts did not amount to courting publicity and urged the court to consider the devastating financial impact of the litigation on him and his family [§17]. He opposed any payment on account, or alternatively submitted that it should be modest, proportionate to his means, and stayed pending a potential appeal [§29]. In relation to the reserved costs, he argued that the interim non-disclosure application was unnecessary as he had given undertakings promptly, and that the proposed new defendants in the amendment and joinder application were never joined and incurred no costs [§7].

The Court’s Decision

The court ordered that the claimant pay the defendant’s costs of the claim, to be subject to detailed assessment on the indemnity basis [§24]. It found no reason to depart from the general rule that the unsuccessful party should pay the costs of the successful party [§2-3].

In deciding on the indemnity basis, the court applied the test from Three Rivers DC v Bank of England, which requires conduct that is “unreasonable” rather than morally condemnable [§16]. The court highlighted three specific factors justifying indemnity costs [§20-22]:

      1. First, the claimant had made statements in his pleaded case and evidence that were found to be untrue and dishonest. The court referred to the principle from Esure Services Limited v Quarcoo that where a claim is maintained dishonestly, “it will be normal for a court to seek to mark its disapproval” with an indemnity costs order [§20].
      2. Secondly, the claimant maintained a false case by advancing baseless allegations of dishonesty and bad faith against almost all the defendant’s witnesses, including untrue allegations that victims were lying and other serious allegations such as falsification of documents, theft, perversion of justice, and conspiracy — all of which caused distress, particularly to those recounting personal incidents of sexual misconduct [§21].
      3. Thirdly, the claimant made and maintained wholly unfounded allegations of dishonesty against three professional journalists. The court noted that when such allegations are made and not substantiated, courts have long shown themselves ready to respond with indemnity costs orders [§22].

The court also noted that while it was not necessary to show the unreasonable conduct increased costs, the conspiracy allegation had in fact “inevitably” and “significantly” increased the defendant’s costs [§23].

Regarding the ‘costs reserved’ orders, the court made no further order [§12]. This meant that the costs of the interim non-disclosure application and the amendment and joinder application would be treated as costs in the case, and thus payable by the claimant as part of the defendant’s overall costs. The court found the non-disclosure application was necessary due to a threat of publication for which the claimant and his legal team bore responsibility [§8]. On the amendment application, the court noted that the conspiracy allegation was without foundation and permission would have been refused as having no real prospect of success [§9].

The court ordered a payment on account of costs in the sum of £3 million, to be paid within 28 days [§39]. It held that there was no good reason not to make such an order, rejecting the claimant’s assertion of inability to pay as a relevant consideration at this stage, citing Bank St Petersburg PJSC v Arkhangelsky [§30]. The court emphasized that a party’s ability to pay is not relevant when considering what costs order to make in principle, but becomes relevant at the stage of enforcement [§18, §30].

The court found the sum of £3 million was a “reasonable sum” representing a reasonable estimate of the likely level of recovery. Applying Excalibur Ventures LLC v Texas Keystone Inc, the court noted that a reasonable sum often allows an “appropriate margin to allow for error in the estimation” [§35]. The court concluded that £3 million was “substantially lower than the defendant’s likely level of recovery on detailed assessment” and therefore allowed a “suitably wide margin of error,” particularly given the indemnity basis of assessment [§39]. The court addressed and rejected the claimant’s various objections to specific cost items, finding that the costs appeared to have been reasonably incurred in the context of the litigation [§32-38].

Finally, the court refused the claimant’s application to extend time for seeking permission to appeal [§42] and, consequently, refused to stay the costs order [§43]. It noted that the claimant had already had more than the usual period to consider an appeal and had not identified any potential grounds.

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Part 36 Validity, Protocol Breaches And Mediation Timing In Probate Disputes

The High Court’s decision in Ellis v Ellis & Ors Re: Care (Decd) [2025] EWHC 2609 (Ch) confirms that Part 36 offers in probate disputes remain valid even where the offeror does not yet own the assets being offered, and clarifies when it is reasonable to delay mediation pending disclosure.

Background

The dispute concerned the estate of Yeamon Keith Care, who died in March 2020. The Claimant, Luke Ellis, sought to propound the will dated 23 August 2016, under which he was the sole beneficiary of the residuary estate, primarily comprising a share in Tregear Farm. The Third Defendant, Vivian Care, the brother of the deceased, challenged the will on the grounds of lack of testamentary capacity, want of knowledge and approval, and due execution. Vivian also advanced a counterclaim for proprietary estoppel, asserting that the deceased had led him to believe he would inherit the farm. The First and Second Defendants were the executors of the estate and adopted a neutral stance throughout the proceedings [§2, §5, §92].

Pre-action correspondence commenced in June 2020, with Vivian indicating a challenge to the will [§7]. A Larke v Nugus request was made in July 2020 [§8]. Despite repeated promises, Vivian failed to provide a letter of claim outlining his case [§89]. Luke instructed solicitors in May 2021 and, after further delays, issued proceedings in July 2022 without a prior letter of claim [§15, §50]. Vivian served a defence and counterclaim [§53]. A case and costs management conference took place in May 2023 [§26, §57], and mediation was attempted in November 2023 but was unsuccessful [§32, §128]. The substantive trial occurred over several days in April and May 2024, with a further hearing in July 2024 [title page]. The substantive judgment, handed down in January 2025, upheld the validity of the will and dismissed all of Vivian’s claims [§1].

Costs Issues Before the Court

The court was required to determine the incidence of costs following the substantive judgment. The key costs issues were:

      • whether the general rule that costs follow the event should be departed from due to alleged unreasonable pre-action conduct by the Claimant;
      • whether the Claimant’s refusal to mediate until September 2023 warranted a costs sanction;
      • the applicability of the probate exceptions concerning the testator’s conduct causing the litigation and reasonable grounds for investigation;
      • the validity and consequences of the Claimant’s Part 36 offer dated 15 January 2024;
      • whether the Third Defendant should pay the litigation costs of the First and Second Defendants as executors; and
      • the appropriate payment on account of costs [§5-6].

The Parties’ Positions

The Third Defendant accepted that the Claimant was the successful party but contended that the First and Second Defendants were not successful [§5, §47]. He argued for no order for costs until September 2023 based on three grounds: unreasonable pre-action conduct by the Claimant, including a failure to serve a letter of claim before issuing proceedings [§7-20]; an unreasonable refusal to mediate until September 2023 [§21-33]; and the application of the probate exceptions [§34-40]. He submitted that the testator’s conduct, through promises and familial expectations, caused the litigation, and that there were reasonable grounds for investigation, particularly regarding due execution and testamentary capacity [§35-40]. He challenged the validity of the Part 36 offer, arguing it was uncertain and not a genuine attempt to settle [§41-46], and contended there was no principled basis for him to pay the executors’ costs [§47-48].

The Claimant argued that costs should follow the event in accordance with the general rule [§49]. He submitted that his issuance of proceedings without a letter of claim was justified due to the Third Defendant’s prolonged delays and failure to articulate his case despite having access to relevant documents [§50-56]. He maintained that his refusal to mediate prior to September 2023 was reasonable because he lacked necessary disclosure from the Third Defendant, including medical records and evidence supporting the proprietary estoppel claim [§57-61]. He opposed the application of the probate exceptions, contending that the testator’s conduct did not cause the litigation and that any investigation period had ended well before proceedings were issued [§62-69]. He asserted that the Part 36 offer was valid and should trigger the full consequences under CPR 36.17 [§70-72], and that the Third Defendant should pay the executors’ costs to avoid the successful party bearing them [§73-74].

The First and Second Defendants supported the Claimant’s position on costs [§75]. They argued that the Third Defendant’s challenge to the will necessitated their involvement and that it would be unjust for the estate or the Claimant to bear their litigation costs [§76]. They emphasised that their costs budget had been agreed, indicating an expectation that the unsuccessful party would pay [§77]. They submitted that the probate exceptions did not apply and that the Third Defendant’s conduct had prolonged the litigation unnecessarily [§78-79].

The Court’s Decision

Pre-Action Conduct

The court held that the general rule under CPR 44.2 should apply, with the Third Defendant paying the costs of the Claimant and the executors, subject to specific considerations [§80-83]. On pre-action conduct, the court found that the Claimant’s failure to serve a letter of claim was not a brazen breach of the protocol [§84]. The Third Defendant had ample time and material to formulate his claim from as early as August 2021, and the Claimant’s issuance of proceedings in July 2022 was a reasonable response to prolonged inactivity [§86, §89]. The court concluded that a letter of claim would not have altered the course of litigation or facilitated earlier settlement [§99].

The court made detailed findings about the Third Defendant’s delay in formulating his case. Despite having access to most key documents by late 2020, including the will file and signed authorities to obtain further records, no letter of claim was forthcoming despite repeated promises [§87-89]. The documents held out for—such as full Adult Social Care records and complete bank files—were not necessary to formulate the claim [§90-93]. The court found that the Third Defendant was able to plead his counterclaim without difficulty once proceedings were issued, demonstrating that sufficient information was available much earlier [§98].

Mediation

Regarding the refusal to mediate, the court determined that the Claimant’s delay in agreeing to mediate until September 2023 was justified [§100]. The Third Defendant had withheld key disclosure, including medical records and evidence on proprietary estoppel, until after the case management conference [§100, §106]. The court found it reasonable for the Claimant to await disclosure before engaging in mediation, and noted that the period of delay was relatively short and incurred minimal additional costs [§101, §107-108]. No costs sanction was imposed [§109].

The court rejected arguments based on Northamber Plc v Genee World Limited, noting that silence in response to mediation invitations is only “as a general rule” unreasonable, and each case turns on its own facts [§102-103]. The reasons given by the Claimant—lack of complete information about the estate and evidence supporting the proprietary estoppel claim—were reasonable in the circumstances [§104, §106].

Probate Exceptions

The court rejected the application of the probate exceptions [§110]. On the first exception (testator’s conduct), it held that the testator’s conduct did not cause the litigation [§110-114]. Familial expectations and promises, even if they existed, did not amount to conduct surrounding the will with confusion or uncertainty, following established authority such as Re Cutcliffe’s Estate [§110-111]. The court declined to depart from Re Cutcliffe, noting that recent authoritative decisions have endorsed it and the trend is to narrow rather than broaden the exception [§111].

The court found that the worst that could be said against the testator was that he did not live up to expectations he had allowed to develop within the family, based on intentions formed during his first wife Betty’s lifetime [§112, §39]. The testator had gone out of his way to engage professionals in making his will, which was in short form and perfectly clear [§113]. There was no confusion or uncertainty surrounding the will itself [§113].

On the second exception (reasonable investigation), the court found that any reasonable investigation period had ended by August 2021 for most issues, and by March 2022 for the due execution issue [§122]. The Third Defendant had sufficient information to assess the merits early on, and pursuing the claims beyond those points constituted hostile litigation.

The court made detailed findings on each challenged ground:

      • Testamentary capacity: The plentiful medical evidence did not suggest incapacity [§117]. The Third Defendant failed to admit this fact after service of a Notice to Admit Facts, and the court noted this could be taken into account under CPR 32.18(5) [§117]. The description of the deceased by the Third Defendant’s expert was alien to the true picture, and the Third Defendant would or should have been aware of the deceased’s acuity [§117].
      • Knowledge and approval: This was a professionally drawn will that accorded with detailed attendance notes of instructions [§118]. The Third Defendant had access to the will file long before proceedings were issued [§118]. Even without prior knowledge of a meeting where the deceased reviewed the draft will with his chosen executors, this ground was always going to be extremely difficult [§118].
      • Due execution: While there was an apparent conflict between the attestation witnesses’ evidence, the Third Defendant had spoken to both witnesses before issuing proceedings [§119]. The court found that any reasonable investigation should have factored in: (a) the strong presumption of due execution; (b) the professional standing of the witnesses; (c) careful instructions given on execution; and (d) an attendance note placing both witnesses at the surgery on the date of execution [§119]. An objective assessment of these factors, all available pre-issue, should have led to the conclusion that this would be difficult to succeed on and was “certainly going to be in the nature of hostile litigation” [§120].

The court emphasised that while reasonable investigations may justify a “no order as to costs” for a period, “once the parties are aware of the settled positions of the attestation witnesses, time must begin to run to decide whether the investigation phase is over” [§120].

Part 36 Offer

The court upheld the validity of the Claimant’s Part 36 offer, finding it sufficiently clear and a genuine attempt to settle [§123-129]. The offer represented a significant value (approximately 14.6% of the estate), and the Third Defendant’s objections were deemed pedantic or capable of resolution [§124-125, §128]. Issues such as whether the will would be formally admitted to probate or which party owned the third tractor were “technical details that could have been sorted out had the Part 36 Offer been accepted” [§125].

The court rejected arguments that the offer was invalid because the Claimant did not own the land being offered (it was vested in the executors) or that the bank’s charge created difficulties [§126]. It found these submissions “almost contrived” since the executors would obviously abide by any settlement and the estate’s net value would have allowed the bank to be paid [§126].

Consequently, the consequences under CPR 36.17(4) applied, including indemnity costs from the expiry of the relevant period and an additional amount [§129]. However, considering the offer was made only three months before trial, the court reduced the interest on costs to 5% above base rate to avoid injustice, while applying the other consequences in full [§134]. The court noted that “all circumstances of the case” included the Third Defendant’s conduct in relation to the personality disorder issue raised late in the proceedings [§134].

Executors’ Costs

The court ordered the Third Defendant to pay the executors’ litigation costs on the standard basis [§140]. It held that the executors’ costs were incurred solely due to the Third Defendant’s challenge, and it would be unjust for the Claimant or the estate to bear them [§137]. The court noted the executors’ neutrality and the agreement of their costs budget as supporting this outcome [§138-139].

The court rejected the Third Defendant’s argument that there was no principled basis for this order, observing that CPR 44.2(1) clearly encompasses executors as parties [§136]. The court emphasised that if the Third Defendant did not pay the executors’ costs, the Claimant would effectively bear them despite being the successful party, which would be “wholly unjust” [§137]. The court noted by analogy to administration pending suit cases that the losing party should pay such costs [§139].

Payment on Account

On payment on account, the court awarded the Claimant £94,000, representing 90% of budgeted costs and 75% of incurred costs, reflecting the approved budget and the indemnity basis applicable from February 2024 [§145-147]. The executors were awarded 85% of their budgeted costs (on combined incurred and budgeted costs of £20,278), considering the estate’s illiquidity and the need for efficient administration [§148].

The court applied the principles from Cleveland Bridge v Sarens, noting that where costs form part of an approved costs budget, payment on account should be no less than 90% of that budgeted amount [§144]. For incurred costs not subject to the approved budget, a more cautious approach of 75% was adopted [§145].

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