Court Refuses Costs-Only Joinder But Orders Consolidation in Will Dispute

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The High Court’s decision in Ivey & Ors v Lythgoe & Anor [2025] EWHC 2325 (Ch) demonstrates the narrow circumstances in which costs-only joinder CPR 46.2 is appropriate, particularly where non-parties actively contest liability for negligence.

Background to the Costs Application

The claimants challenged two wills of their deceased uncle, claiming he died intestate or alternatively seeking rectification. Their case centred on allegations that Trust Inheritance Limited (the will-writing company) had negligently implemented the deceased’s 2009 will instructions, removing not just one beneficiary as requested but also the deceased’s own family members.

The claimants had issued separate negligence proceedings against Trust Inheritance in the County Court but had not served particulars of claim. They then applied to either join Trust Inheritance as a costs-only party to the probate proceedings under CPR 46.2, or alternatively to consolidate the two sets of proceedings.

The Costs-Only Party Application

The claimants sought to join Trust Inheritance as a costs-only party to facilitate a future non-party costs order under section 51 of the Senior Courts Act 1981. They argued the rectification claims arose directly from Trust Inheritance’s negligence and that it was just and reasonable for the company to bear the associated costs.

The claimants cited authorities including Re Bimson, Gerling v Gerling, and Pead v Prostate Cancer UK where non-party costs orders had been made against solicitors for will drafting errors.

Trust Inheritance opposed costs-only joinder, arguing that the summary procedure for non-party costs orders was inappropriate where it actively contested allegations of negligence requiring a full trial on breach, causation, and quantum.

The Court’s Costs Analysis

HHJ Paul Matthews refused the costs-only joinder application, applying the principles from Deutsche Bank AG v Sebastian Holdings Inc [2016] EWCA Civ 23. The court emphasised that summary procedure under section 51 is only appropriate where the non-party has “a sufficiently close connection to the litigation such that it would not be unjust to bind them to the findings of fact made in the main action.”

The judge distinguished the cited authorities on the basis that in those cases, the solicitors had not resisted the applications. Here, Trust Inheritance contested liability, meaning complex issues of negligence, causation, and loss would require a full trial.

The court held it would be inappropriate to engage the summary jurisdiction before conclusion of the probate claim, stating: “if it would not be appropriate to engage the summary procedure after the conclusion of this claim, it is even less appropriate to do so before that conclusion.”

Consolidation as Alternative

Instead, the court granted the alternative application for consolidation under CPR 3.1(2)(h). Both claims arose from the same factual matrix and Trust Inheritance did not oppose consolidation. The effect was that Trust Inheritance became a party to the single set of consolidated proceedings to be managed in the High Court.

Following consolidation, the court exercised its power under CPR 3.1(2)(o) to order Trust Inheritance to attend mediation scheduled for 17 October 2025. However, recognising Trust Inheritance’s need for detail, the court ordered the claimants to serve particulars of claim in the negligence action by 17 September 2025, giving a month to prepare for mediation.

Practical Implications for Solicitors

This decision clarifies when costs-only joinder is appropriate versus consolidation where separate proceedings exist. The court’s analysis reveals several key principles:

Costs-only joinder requires uncontested liability: The summary procedure under section 51 works where non-parties do not seriously contest their involvement. Where liability is actively disputed, the full trial process is necessary.

Timing matters for costs applications: Courts will not engage summary costs jurisdiction before the underlying claim concludes, particularly where complex issues of causation and quantum require determination.

Consolidation offers broader remedies: Where separate proceedings exist against the same non-party, consolidation may achieve practical objectives (such as mediation orders) more effectively than costs-only joinder.

Documentary requirements for mediation: Even where courts order mediation, parties must have sufficient detail about claims against them to participate meaningfully.

The decision reinforces that section 51 applications work best where non-parties acknowledge their role in causing the litigation costs, rather than where substantive disputes about professional negligence require resolution through the full trial process.

Non Party Costs Orders | Court Of Appeal Decision

 

 

Liquidators Not Personally Liable For Costs Despite Erroneous Admission Of Foleys’ Proof Of Debt.

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Background

This matter concerns the liquidation of Saville Foley LLP (“the LLP”), involving two primary applications. The first application was submitted by Sanrose Investment Limited (“Sanrose”) on 3 August 2023, seeking the reversal of the decision by the LLP’s joint liquidators, Tyrone Courtman and Deviesh Raikundalia (“the Liquidators”) to admit the proof of debt submitted by Lawrence Foley and Jennifer Foley (“the Foleys”) for £502,428. Additionally, Sanrose sought a personal costs order against the Liquidators in case their application succeeded. The second application, dated 6 September 2023, was made by FWJ Legal Limited (“FWJ”), seeking the reversal or variation of the Liquidators’ decision to reject FWJ’s proof of debt dated 10 August 2023.

To provide context, the LLP was incorporated on 8 June 2011 to develop a property in Chelmsford, Essex (“the Property”). The initial members were the Foleys and the Savilles, with Foley Investments Limited (“FIL”), owned by the Foleys, eventually becoming one of the two designated members alongside Sanrose, owned by the Savilles. Despite numerous planning applications and agreements, the development was never completed, leading to significant discord and eventually to the winding-up of the LLP on 13 January 2021, ordered on Sanrose’s contributory petition.

The Liquidators, who were appointed on 1 February 2021, had to deal with the complexities arising from the claims submitted by the parties involved. These included Sanrose’s accepted loan proof of £450,000, FIL’s rejected proof of £450,000, and the Foleys’ accepted proof of £502,428. The dispute largely stemmed from the intricate financial interactions and contributions towards the aborted development project. Against this backdrop, the court was invited to determine the validity and accuracy of the Liquidators’ decisions regarding these proofs and the overall handling of costs incurred in these proceedings.

Costs Issues Before the Court

The court faced several key cost-related questions. Primarily, whether the Liquidators’ decision to accept the Foleys’ proof of debt was correct, which would determine whether Sanrose’s application to reverse that decision should succeed. Additionally, the validity of the Liquidators’ rejection of FWJ’s proof of debt, which depended significantly on the interpretation of the Deed of Assignment and Charge (“DOA”) between FWJ and FIL, was scrutinized. Finally, the issue of whether a personal costs order against the Liquidators was warranted, based on their conduct during the decision-making process, also needed to be resolved.

The Parties’ Positions

Sanrose, represented by Mr Nathan Webb, argued that the Liquidators had erred in admitting the Foleys’ proof of debt. They contended that the proof in question was not properly substantiated and that the evidence overwhelmingly supported the view that any outstanding sums were owed to FIL, not the Foleys personally. They suggested that inconsistencies and errors in financial documentation further supported this position, and they sought to have the decision reversed and costs awarded against the Liquidators personally for procedural failings.

The Foleys, representing themselves, struggled to clearly articulate their claim but appeared to assert that they were personally owed a debt due to their initial property contribution and other associated costs. They maintained that various payments and transactions with the Savilles equaled a legitimate personal investment in the LLP, qualifying them for such a debt.

FWJ, represented by Mr Adam Deacock, submitted that their claim should be recognised by virtue of the DOA with FIL, which they contended assigned FIL’s rights in the LLP’s liquidation to FWJ. They argued that the intent of the DOA encompassed any liquidation scenario, not limited to a member’s voluntary liquidation, raising questions about contractual interpretation.

The Liquidators, though adopting a largely neutral stance, defended their process and substantive rationality of the decisions made, particularly the acceptance of the Foleys’ proof of debt. They explained this was based on viewing the contributions made by the Foleys as loans and personal investments, aligning with the evidence available in various financial records and correspondence.

The Court’s Decision

In its analysis, the court determined that the Liquidators’ decision to admit the Foleys’ proof of debt must be reversed. The evidence suggested that any ongoing financial claim was more properly ascribed to FIL, not the Foleys personally. This conclusion was supported by the historical accounts, contractual documents, and previous legal positions stated by the parties. Consequently, the court ruled that FIL was the proper creditor, entitled to a debt of £450,000, and therefore should participate in the distribution of the LLP’s assets in liquidation.

Regarding FWJ’s claim, the court reasoned that the DOA between FWJ and FIL effectively assigned FIL’s rights in the LLP’s liquidation to FWJ, despite the specific reference to a member’s voluntary liquidation. By interpreting the DOA within its broader context and the factual backdrop of the compulsory liquidation, the court recognised FWJ’s entitlement to prove in the liquidation based on their rights under the DOA.

On the question of a personal costs order against the Liquidators, the court found no evidence of bad faith or irrational conduct. It was noted that the Liquidators acted in a quasi-judicial capacity and made decisions based on their professional judgment and available evidence. The procedural approach, including the meeting with Mr. Foley, was not deemed improper or indicative of bias. As such, a personal costs order against the Liquidators was not warranted.

In summary, the court’s decisions clarified the proper allocation of debts among the parties involved, affirming the rights of FIL and FWJ within the liquidation process while exonerating the Liquidators from personal costs liability due to the absence of misconduct or unreasonable behavior on their part.`

When Can A Liquidator Be Held Personally Liable For Costs?

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Introduction: The Liquidator’s Role and the Specter of Personal Costs

When a company faces insolvency, a liquidator steps in to manage its affairs. This crucial role involves realising assets, investigating the company’s dealings, and distributing proceeds to creditors. Naturally, this process incurs costs – from the liquidator’s own fees to legal and administrative expenses. Generally, these are paid from the insolvent company’s assets. The Insolvency Act 1986 (IA 1986) and the Insolvency (England and Wales) Rules 2016 (IR 2016) provide the framework for these costs. 

However, a significant concern for any insolvency practitioner is the possibility of being held personally liable for these costs. This blog post explores the principles and practices surrounding a liquidator’s personal liability for costs in UK insolvency proceedings.

The “Exceptional” Nature of Personal Liability

It’s a cornerstone of UK insolvency law that holding a liquidator personally liable for costs, especially litigation costs, is an exceptional measure. This protection is vital. Liquidators often pursue complex and contentious claims. If they constantly faced personal financial ruin for performing their duties, finding willing professionals would be challenging, and those who did accept might be overly cautious, harming creditors’ interests.

The law strives to balance protecting liquidators acting properly with providing recourse against those who demonstrate misconduct.

The General Rule: Costs are Paid from the Insolvent Estate

Insolvency Expenses: A Priority

The IA 1986 and IR 2016 stipulate that costs properly incurred in a winding-up are paid from the company’s assets, prioritised over most other claims. These include legal fees, accountancy costs, valuation expenses, the liquidator’s remuneration, and asset realisation costs. If reasonable and for the estate’s benefit, these are usually priority claims.

The Liquidator’s Indemnity

A liquidator acting correctly is generally entitled to an indemnity from the company’s assets for costs incurred, including litigation costs. This is crucial for enabling them to pursue claims for creditors’ benefit.

However, this indemnity isn’t absolute. Costs must be “reasonably incurred” and for the “benefit of the estate”. Doubts about the “appropriateness, fairness or reasonableness” of sums claimed can be resolved against the office-holder. Remuneration should reflect the “value of the service rendered,” not just time spent. Negligence or misconduct can jeopardise this indemnity. The Practice Direction on Insolvency Proceedings (PDIP) provides further guidance on remuneration applications.  

Even if costs are legitimate estate expenses, the actual availability of assets is key. Adverse costs orders against the company in liquidation rank as an expense, potentially depleting funds before the liquidator’s own remuneration for that litigation is met.

Personal Liability as a Non-Party: A High Bar to Clear

A liquidator directs litigation for the company but isn’t usually a personal party. However, courts can make costs orders against non-parties, which is how a liquidator might become personally liable.

The Court’s Power: Section 51 Senior Courts Act 1981

Section 51 of the Senior Courts Act 1981 grants courts wide discretion over costs, including against non-parties. CPR 46.2 outlines the procedure, requiring the non-party to be joined for costs purposes and given a chance to be heard. This discretion must be exercised “justly”.

Exceptional Remedy: Protecting the Public Function

A non-party costs order is an “exceptional” remedy. This was highlighted in Symphony Group PLC v Hodgson QB 179. For liquidators, this exceptionality is rooted in public policy: they perform a vital public function, and routine personal liability would undermine the insolvency system.

The Metalloy Supplies Test: “Impropriety or Bad Faith”

The Court of Appeal in Metalloy Supplies Ltd v M A (UK) Ltd BCC 165 established that personal liability for a liquidator arises only from their “impropriety or bad faith”. In Metalloy, no such conduct was found.  

What Constitutes “Impropriety” or “Bad Faith”?

These terms aren’t rigidly defined. “Bad faith” implies dishonesty or malicious intent. “Impropriety” is broader, suggesting conduct unacceptable for a liquidator, a serious deviation from professional standards – more than mere negligence. The Hong Kong case Super Speed Limited (in Liquidation) v Bank of Baroda affirmed that “impropriety,” not just “unreasonableness,” is needed. Pursuing purely speculative litigation or acting for personal gain rather than creditor benefit could be deemed improper.  

Security for Costs: The Primary Recourse

Metalloy Supplies also stressed that defendants sued by an impecunious company (like one in liquidation) should primarily seek security for costs. Failure to do so can weaken a later application for a personal costs order against the liquidator.  

This high “impropriety” threshold prevents overly defensive liquidations, encouraging robust action for creditors. Security for costs applications act as a filter, reserving personal orders for genuinely blameworthy conduct.

When Else Might a Liquidator Face Personal Costs? Judicial Considerations

Beyond the “impropriety or bad faith” test for non-party costs orders (NPCOs), other factors can influence a liquidator’s personal cost exposure.

Unreasonable Conduct and the “Perversity” Test

Courts are reluctant to interfere with a liquidator’s commercial judgment. Intervention requires the liquidator to have “done something so utterly unreasonable and absurd that no reasonable man would have done it” – the “perversity” test from Re Edennote, affirmed in Re Edengate Homes (Butley Hall) Ltd EWCA Civ 626. This is a “formidable test”. While mainly for substantive decisions (like asset sales), perverse conduct in litigation could support personal costs liability, likely overlapping with impropriety. 

Litigation for Personal Gain

If litigation is pursued for the liquidator’s personal benefit (e.g., to generate fees) rather than for the company or creditors, this strongly indicates impropriety and can lead to personal costs or denial of indemnity. The Irish case of United Power Limited saw a provisional liquidator personally liable for costs of an unsuccessful application to increase his own remuneration, deemed self-serving. Similarly, in the Australian case Australia’s Residential Builder Pty Ltd (in liquidation) v Wiederstein (No.2), an appeal pursued solely to meet the liquidator’s fees resulted in personal costs.

Broader Misconduct

General misconduct can also lead to personal costs or loss of indemnity. The “Ballyrider Principles” (from Irish law, but reflecting UK concepts) suggest indemnity can be denied for misfeasance, bad faith, serious negligence, unfitness for office, or dishonesty. Section 212 IA 1986 allows action against office-holders for misfeasance. Australian examples (often sharing common law roots) include unreasonably defending proceedings, rejecting sensible settlements, provoking litigation through self-interest, or causing unnecessary costs through poor communication.

Litigating in the Liquidator’s Own Name

A distinction exists when a liquidator sues in their own name (e.g., for wrongful trading under s.214 IA 1986 or misfeasance under s.212 IA 1986 ). Here, they are a direct party. The rule “costs follow the event” (CPR 44.2(2)(a)) applies more directly, making them prima facie personally liable if unsuccessful. While indemnity from company assets is expected, it can be lost through misconduct.

Specific Contexts: Environmental Liabilities

In areas like environmental protection, liquidators might face personal statutory liabilities, for instance, for remediation costs if their actions or omissions regarding environmental hazards are deemed unreasonable.

These considerations span a spectrum from “unsatisfactory” conduct (which may not be enough for intervention, as in Re Edengate Homes ) to “unreasonable” conduct, “perversity,” and ultimately “impropriety or bad faith.” 

Losing the Shield: Denial of Indemnity from Company Assets

Even without a direct NPCO, a liquidator’s finances are hit if denied indemnity from company assets for costs incurred.

Why Might Indemnity Be Denied?

Indemnity relies on proper conduct for the estate’s benefit. It can be denied for:

  • Misfeasance or breach of duty: Abusing powers, breaching fiduciary duties, or negligence causing loss.
  • Bad faith: Dishonest or improperly motivated actions.  
  • Serious negligence: Culpable negligence, though simple errors in judgment might be excused. 
  • Unreasonable cost incurrence: Unnecessary or excessive costs.
  • Actions for personal benefit: Prioritising personal gain over the estate’s interests. 

Denial of indemnity means the liquidator cannot use company funds to cover costs for which they are liable.

The Practical Problem: Insufficient Assets

A major risk is when the insolvent company lacks assets to cover all liquidation costs, including adverse costs orders. Even with impeccable conduct, an indemnity is worthless without assets to back it. If the liquidator is personally liable for costs (e.g., from losing a case brought in their own name, or an NPCO), they bear any shortfall. This risk drives the use of litigation funding and creditor indemnities.  

Practical Steps for Liquidators to Mitigate Personal Cost Risks

Liquidators must be diligent in managing the risk of personal liability.

1. Thorough Pre-Litigation Assessment: Rigorously assess the merits of any legal action, including potential costs, prospects of success, asset availability, and net benefit to creditors. Obtain comprehensive legal advice. 

2. Document Decisions Clearly: Meticulously record all significant decisions, especially regarding litigation, including rationale and advice received. This is vital if conduct is later challenged.   

3. Anticipate Security for Costs Applications: Be prepared for defendants to seek security for costs when the company is the claimant.

4. Explore Funding and Indemnities: If estate assets are insufficient, actively seek litigation funding or specific indemnities from interested creditors. Scrutinise funding agreements for adequate protection against adverse costs. Consider After The Event (ATE) insurance. 

5. Avoid Conflicts of Interest and Personal Benefit: Never pursue litigation primarily for personal gain (e.g., fee generation) rather than genuine creditor benefit.

6. Act Reasonably and Proportionately: Conduct litigation reasonably, consider sensible settlement offers, and avoid vexatious tactics. Unreasonable refusal to settle or pursuing hopeless cases can lead to adverse costs.  

These steps are essential for defending against allegations of impropriety or unreasonable conduct.

Conclusion: Balancing Protection and Accountability

UK law makes personal liability for liquidators an exceptional outcome. Costs are generally paid from the insolvent estate. An NPCO against a liquidator typically requires “impropriety or bad faith” (Metalloy Supplies Ltd). Security for costs is the primary defendant recourse.  

Liquidators acting honestly, diligently, reasonably, and in creditors’ best interests are generally well-protected. Proper procedure, careful advice, transparent decisions, and good records are key.

The law balances the public interest in enabling liquidators to perform their duties effectively against the need for accountability and remedies for misconduct.

Regarding Sanrose Investment Ltd v Foley & Ors, its precise impact on this area awaits further detailed legal reporting and analysis.

The legal framework empowers liquidators to act robustly for creditors while incorporating safeguards against improper conduct, maintaining the integrity of the insolvency regime.

Table 1: Key UK Case Law on Liquidator Personal Liability for Costs

Case Name & Citation Court Year Core Principle(s) Regarding Liquidator Costs Liability Snippet(s)
Metalloy Supplies Ltd v M A (UK) Ltd [1997] BCC 165 Court of Appeal 1996/7 Personal liability exceptional; requires “impropriety or bad faith.” Security for costs is the standard remedy. Public policy protects liquidators.
Symphony Group PLC v Hodgson [1994] QB 179 Court of Appeal 1994 Orders for costs against non-parties are exceptional. (Cited in Metalloy)
Re Wilson Lovett & Sons [1977] 1 All E.R. 274 High Court 1977 When a liquidator acts in their own name, personal liability for costs follows standard procedures (indemnity usually expected). (Cited in Metalloy)
Re Edengate Homes (Butley Hall) Ltd [2022] EWCA Civ 626 Court of Appeal 2022 “Perversity” test for court interference with liquidator’s decisions (so utterly unreasonable and absurd no reasonable liquidator would have done it).
Goknur v Aytacli [2021] EWCA Civ 1037 Court of Appeal 2021 NPCO against director of insolvent company rare; may apply if director is “real party” seeking personal benefit; impropriety/bad faith relevant.

 Table 2: Thresholds for Scrutiny of Liquidator’s Conduct Regarding Costs/Decisions

Test/Threshold Primary Context Key Case Authority (UK, if available) Description/Application Snippet(s)
Impropriety or Bad Faith Non-Party Costs Order against liquidator for litigation brought by the company. Metalloy Supplies Ltd Serious misconduct, dishonesty, or improper use of position. High threshold. Negligence generally insufficient.
Perversity Challenge to a liquidator’s commercial or administrative decision. Re Edengate Homes Decision so utterly unreasonable and absurd that no reasonable liquidator would have made it. Very high bar.
Litigation for Personal Benefit/Self-Interest NPCO or denial of indemnity. Goknur v Aytacli (directors, analogous for liquidators) Liquidator is the “real party” to the litigation, seeking personal gain rather than creditor/company benefit. Can demonstrate impropriety.
Misconduct leading to Denial of Indemnity Liquidator seeking to recover costs from the insolvent estate. (Principles, Ballyrider – Irish, illustrative) Includes misfeasance, bad faith, serious negligence, unfitness, dishonesty, or incurring costs unreasonably or not for estate benefit.

Blank Space? | Costs Budgeting In Cases Without A Stated Value

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Ever found yourself with a Part 7 claim form where the “value” section is conspicuously blank? This often happens when the main goal isn’t a straightforward sum of money – think of applications for injunctions, or TOLATA (Trusts of Land and Appointment of Trustees Act 1996) claims seeking orders about property occupation, ownership shares, or whether a property should be sold. Sometimes, the financial value is genuinely up in the air when proceedings kick off.

Whatever the reason, getting to grips with the costs implications from day one is absolutely vital. The general rule that the loser pays a portion of the winner’s costs still applies. So, understanding the costs management rules is key to managing your client’s expectations and your firm’s exposure.  

And things are about to get even more interesting. A significant shake-up to costs budgeting is coming with new pilot schemes under Practice Directions 51ZG1, 51ZG2, and 51ZG3, set to run from 6 April 2025 for three years. These pilots, applying to claims issued on or after this date in specific courts, aim to simplify costs budgeting, making it more proportionate. Expect new, streamlined costs budgeting forms, like the much-talked-about Precedent Z, which is tipped to be a more concise document.

This means we’re heading into a temporary dual system: claims issued before 6 April 2025, or those in courts not part of the pilots, will stick with the current costs management rules in CPR Part 3. Claims falling under the pilots will follow the new Practice Directions. This split demands extra vigilance to ensure you’re on the right track.

The new pilots consistently stress “proportionate cost” , a clear signal from the Civil Justice Council’s review which called for a more flexible approach. For claims without a stated monetary value – often seeking significant non-monetary outcomes – this idea of proportionality becomes particularly nuanced.  

Why is “No Value Stated” on the Claim Form?

As mentioned, it’s usually because:

  • The main relief isn’t monetary: Injunctions, TOLATA orders for sale or declarations of property rights, specific performance. 
  • Genuine uncertainty: Sometimes, the financial value is truly unknown at the start, perhaps needing disclosure or expert evidence to crystallise.
  • A word of caution: Deliberately omitting a value that could have been reasonably stated might not sit well with the court and could influence case management.

The reason for the blank space can subtly affect how a judge views the case, even if the rules seem to treat all such claims the same initially. The court has discretion, often signalled by the phrase “unless the court orders otherwise” in the new pilot Practice Directions. Be ready to explain the omission clearly in the Directions Questionnaire (DQ) and at any Case Management Conference (CCMC).

The rise of digital claim portals like OCMC and DCP might eventually lead to more structured input about a claim’s nature, even if “no value stated” remains an option.

Track Allocation: The First Big Step (CPR Part 26)

Allocating a claim to the small claims, fast, intermediate, or multi-track is a crucial early decision. For “no value stated” claims, CPR 26.7(2) says the court will allocate it to the track it “considers most suitable having regard to the matters mentioned in rule 26.8(1)”.  

The court looks beyond just money, considering factors from CPR 26.8(1) like : 

      • The nature of the remedy sought.
      • Likely complexity (facts, law, evidence).
      • Number of parties.
      • Value and complexity of any counterclaim.
      • Amount of oral evidence needed.
      • Importance of the claim to non-parties.
      • Parties’ views on allocation.
      • Parties’ circumstances.

The Directions Questionnaire (DQ) is your main chance to provide this information and argue for a suitable track. Many non-monetary or complex claims end up on the multi-track. The multi-track is the default for cases not fitting other tracks, often those valued over £100,000, but complexity or the remedy sought can also lead here. 

If necessary, the court can assess a financial value itself, disregarding undisputed amounts, interest, costs, and contributory negligence (CPR 26.8(2)).

Don’t forget the Intermediate Track, introduced in October 2023. It generally covers claims between £25,000 and £100,000, with trials up to three days and limited expert evidence. If a “no value stated” claim (like a declaration with limited factual dispute) seems to fit these complexity criteria, it could be allocated here. This is significant because the intermediate track usually means Fixed Recoverable Costs (FRC), which would generally override standard costs budgeting.

Costs Budgeting: Keeping Up with Changes

Once a “no value stated” claim lands on a track requiring costs management (usually the multi-track), the budgeting rules kick in. How this works depends on whether your claim is under the existing CPR or one of the new pilot schemes.

Scenario 1: The Current Rules (Claims NOT Under the New Pilots)

This applies to claims issued before 6 April 2025, or those issued after but outside the pilot’s scope, if allocated to the multi-track where CPR 3.12 mandates costs management. 

      • The Form: Precedent H.
      • Filing Deadlines (CPR 3.13):
        • If the claim form states a value less than £50,000, file Precedent H with the DQ. 
        • For any other case (including claims over £50,000 or where value is unstated/problematic), file it no later than 21 days before the first CCMC. 
        • The “No Value Stated” Dilemma: Since there’s no stated value “less than £50,000,” the safer bet is the “any other case” rule (21 days before CCMC). Some play it extra safe and file with the DQ anyway to avoid any doubt.
      • Precedent H Detail: It needs incurred costs and estimated future costs for each litigation phase, verified by a statement of truth. If total budgeted costs are under £25,000 OR the stated claim value is under £50,000, you might only need the first page. Again, for “no value stated” claims, caution suggests a full Precedent H if unsure.
      • The Big Stick (CPR 3.14): Fail to file on time, and your recoverable costs for future work could be slashed to just court fees, unless the court orders otherwise. Relief is possible (Denton test) but not guaranteed.
      • Budget Discussion Reports (Precedent R): If budgets are filed, represented parties must file an agreed Precedent R no later than 7 days before the first CCMC.

The ambiguity around CPR 3.13 filing deadlines for “no value stated” claims is a real headache. Getting it wrong can be costly.

Scenario 2: The New Pilot Schemes (Claims From 6 April 2025)

For Part 7 claims issued on or after 6 April 2025 that fit the specific criteria of the new pilot schemes (PD 51ZG1, PD 51ZG2, and PD 51ZG3), the rules change. These pilots run for three years, until 6 April 2028. 

      • New Forms: Say hello to Precedent Z (Simplified Costs Budget), Precedent RZ (Simplified Budget Discussion Report), and Precedent TZ (Simplified Variation Form). Precedent Z is expected to be much shorter than Precedent H. 
      • CPR 3.13 & 3.14 Don’t Apply: For claims in these pilots, the old filing and sanction rules are out. 
      • Pilot Filing Deadlines (generally, unless court orders otherwise):
        • Precedent Z: File and serve no later than 21 days before the first CCMC. 
        • Precedent RZ: Represented parties served with a Precedent Z file and serve no later than 7 days before the first CCMC. (PD 51ZG3 has a 14-day rule for defendants and claimants usually don’t file one ). 
      • Pilot Sanctions: If you don’t comply (e.g., fail to file Precedent Z), the court may impose sanctions, which may include limiting your recoverable costs to court fees. This is more discretionary than the old CPR 3.14.

Let’s break down the main pilots for “no value stated” claims:

1. Practice Direction 51ZG1 (Business and Property Courts / Work)

      • Scope: Part 7 multi-track claims (issued 6 April 2025 – 6 April 2028) in the Business and Property Courts (BPC) of England and Wales, BPC in Manchester/Leeds, or “Business and Property work” in the County Court at Manchester, Leeds, or Central London.  
      • Key Rule for “No Value Stated” (Para 5): If a claim has no stated value, seeks only non-monetary relief, OR parties can’t agree if it’s £1m+, then unless the court orders otherwise, the claim is treated as having a value of £1 million or more.  
      • What this means:
        • If treated as >= £1 million: The court will not automatically make a Costs Management Order (CMO) unless it’s satisfied it’s necessary for justice and proportionate cost (PD 51ZG1, para 6(a)). If a CMO is made, the court directs the budget form (Precedent Z, H, or updated Z) (PD 51ZG1, para 6(b)). 
        • If treated as < £1 million (e.g., by court order or party agreement): At the CCMC, a CMO using Precedent Z is the default, unless a CMO isn’t required (PD 51ZG1, para 7(b)).  
      • Important: Regardless of this valuation, all represented parties (except litigants in person) must still file and serve a Precedent Z no later than 21 days before the first CCMC, unless the court says otherwise (PD 51ZG1, para 4). 

2. Practice Direction 51ZG2 (Certain County Court Claims <£1 million)

      • Scope: Part 7 multi-track claims (issued 6 April 2025 – 6 April 2028) valued at less than £1 million, where costs management would normally apply, and which are not under PD 51ZG1 or QOCS rules (PD 51ZG3). This pilot applies to such claims in the County Court at Central London, or the Leeds or Bristol District Registries.
      • “No Value Stated”: PD 51ZG2 does not have the same default £1m+ valuation rule as PD 51ZG1. So, if a “no value stated” claim is in one of these County Courts and isn’t “Business & Property work,” the court will assess its notional value. If it’s deemed <£1m, PD 51ZG2 applies.
      • If PD 51ZG2 applies: Parties file Precedent Z (21 days before CCMC) and Precedent RZ (7 days before CCMC). A CMO using Precedent Z is the likely default (PD 51ZG2, paras 4, 5, 6). 

3. Practice Direction 51ZG3 (QOCS Cases in specific High Court Registries)

      • Scope: Part 7 multi-track QOCS claims (issued during pilot period) in the District Registry at Manchester or Birmingham. 
      • All parties (except LiPs) file Precedent Z 21 days before CCMC. Defendants file Precedent RZ 14 days before CCMC. Claimants usually don’t file RZ. 
      • CMO for Defendant’s costs isn’t automatic.
      • Parties can give notice to seek a split trial or full Precedent H budgeting.

What if no CMO is made under the Pilot Schemes? If the court doesn’t make a CMO:

      • The Precedent Z budgets are treated as costs estimates (PD44, paras 3.2-3.7 apply).
      • Parties usually need to file and serve an updated Precedent Z no later than 28 days before trial (or trial window/7 days before PTR, whichever is earlier), unless the court says otherwise.

The default valuation in PD 51ZG1 (para 5) for “no value stated” claims in BPC/designated B&P work is a big shift. It means costs management isn’t automatic if the claim is treated as £1m+. This will likely lead to arguments at the CCMC.

Real-World Examples & Strategic Thinking

Let’s see how this might play out:

A. Claim for Purely Non-Monetary Relief (e.g., an injunction, or a TOLATA claim for a declaration or order for sale).

      • Under PD 51ZG1 (BPC/B&P work in specified CCs, issued on/after 6 April 2025):
        • Default: Treated as >= £1 million (PD 51ZG1, para 5).
        • Result: CMO not automatic. All file Precedent Z. CCMC decides if CMO is needed.
      • Under PD 51ZG2 (Specific CCs, not B&P, notional value <£1m, issued on/after 6 April 2025):
        • Court assesses notional value. If <£1m, PD 51ZG2 applies. Parties file Precedent Z. CMO with Precedent Z likely.
      • Outside Pilots (issued before 6 April 2025, or in non-pilot court):
        • Likely multi-track. Standard CPR Part 3 costs management. Precedent H 21 days before CCMC.

B. Claim Where Monetary Value is Genuinely Uncertain at Outset.

      • Under PD 51ZG1: If parties can’t agree if value is £1m+, treated as >= £1 million by default (PD 51ZG1, para 5). Implications as above.
      • Under PD 51ZG2: Court assesses notional value. If <£1m, PD 51ZG2 regime (Precedent Z) applies.
      • Outside Pilots: Likely multi-track. Precedent H 21 days before CCMC.

C. Claim Where Value is Omitted but Could/Should Have Been Stated.

      • Judicial View: Courts don’t like tactical omissions.
      • Impact: Could influence track allocation, costs management decisions (especially “unless court orders otherwise” clauses), and final costs recovery.

The “unless the court orders otherwise” in PD 51ZG1, para 5, will be a battleground. A party wanting a CMO (likely a defendant) will need to argue against the default >=£1m treatment or argue a CMO is needed anyway.  

For TOLATA claims, choice of court after April 2025 could be strategic. Issuing in a County Court designated for “Business and Property work” (e.g., Manchester, Leeds, Central London under PD 51ZG1 ) means the PD 51ZG1 default >=£1m rule applies to “no value stated” claims. Issue the same claim in a County Court under PD 51ZG2 (e.g., Bristol, or non-B&P list in Central London/Leeds) with a notional value <£1m, and PD 51ZG2’s simplified budgeting applies. 

Quick Comparison: “No Value Stated” Claims

Feature Standard CPR (Pre-Pilot / Outside Pilot) PD 51ZG1 (BPC/B&P Work in specified courts) PD 51ZG2 (Specific CCs, <£1m, non-B&P work)
Default Value for “No Value Stated” Court assesses (CPR 26.8(1)&(2)). Often multi-track. Treated as >= £1 million unless court orders otherwise (para 5). Court assesses notional value. If <£1m, PD 51ZG2 applies.
Budget Form Precedent H. Precedent Z (initially). Court may direct H or updated Z if CMO for >=£1m claim. Z if <£1m. Precedent Z.
Budget Filing Deadline Likely 21 days before CCMC (CPR 3.13(1)(b)). Risk if DQ deadline deemed to apply. 21 days before CCMC (Precedent Z). 21 days before CCMC (Precedent Z).
Sanction for Non-Filing CPR 3.14: Costs limited to court fees (unless relief). Discretionary: “may include” limiting to court fees (para 11). CPR 3.14 disapplied. Discretionary: “may include” limiting to court fees (para 9). CPR 3.14 disapplied.
Costs Management Order (CMO) Automatic? Yes, if multi-track & CPR 3.12 applies. No, if >=£1m (unless court deems necessary). Yes, if <£1m (unless not required). Yes (unless court deems not required).
Key Strategy for “No Value Stated” Clarify filing deadline; meticulous compliance. Justify track via DQ. Challenge/defend default >=£1m valuation? Argue for/against CMO at CCMC. Persuade court of notional value <£1m for PD 51ZG2.

Key Pointers for Your Practice

      • Early Assessment is King: Even without a stated value, internally assess potential financial implications, complexity, and importance. This helps anticipate track and budgeting needs.
      • The DQ is Your Stage: For “no value stated” claims, the Directions Questionnaire is where you make your case for track allocation, using CPR 26.8(1) factors.
      • Talk to Your Opponent: Early discussion on notional value and the applicable costs regime can save contested CCMC hearings.
      • CCMC Prep: Be ready to explain why no value is stated. If under PD 51ZG1, be prepared to discuss the default >=£1m valuation and CMO appropriateness.
      • CRITICAL – Know Your Regime: Is it standard CPR or a pilot scheme? This depends on issue date, court, and claim nature.
      • Budget Diligently: Precedent H or Z, make it realistic, well-supported, and on time. Don’t forget the statement of truth.
      • Sanctions Awareness: Know the difference: CPR 3.14 (fairly automatic) vs. pilot schemes (discretionary, but can still be severe).
      • Litigants in Person (LiPs): They generally don’t file budgets, but represented parties must still serve their budgets on LiPs.

Even though Precedent Z is “simplified” , it still needs careful preparation. The core principles of proportionality and reasonableness remain. The simplification is more about the form and process, not a free pass on justifying your costs. 

The next few years, especially during the pilot schemes (April 2025 – April 2028), will be a learning curve. Keeping up with how these new rules are applied in pilot courts will be essential.  

The Future of Costs Budgeting

These pilot schemes are a testing ground, driven by the Civil Justice Council’s call for a “more flexible approach” to costs management. Costs budgeting, in some form, is clearly here for the long haul.

The success of these pilots, especially for “no value stated” claims, will depend on consistent judicial application and clear guidance. If deemed successful, they could well shape the future of costs budgeting nationwide. So, getting to grips with these changes now isn’t just about the next three years – it’s about preparing for the future of civil litigation costs.

Need help with a Part 7 claim or understanding these upcoming costs budgeting changes? Contact the team at tmclegal.co.uk for expert advice.

Damages-Based Agreement Invalidated For Failure to Comply with Regulatory Requirements

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Background

The case of Reeves v Frain represents a complex and significant legal dispute involving probate proceedings and a detailed examination of Damages-Based Agreements (DBAs). The underlying dispute concerned the validity of a will dated 7 January 2014, made by Kevin Patrick Frain, which was challenged by his daughter, Louise Michelle Reeves. The Second and Fourth Defendants maintained that the 2014 will was invalid, alleging it was procured without the deceased’s consent.

On 31 January 2022, following an extensive trial, Green J delivered a judgment in favour of the Defendants, pronouncing probate of the deceased’s earlier will dated 18 April 2012 and declaring the 2014 will invalid. The court found that the Claimant had not proven that the deceased knew and approved the 2014 will. The estate in question was substantial, valued at approximately £100 million.

The Defendants funded their legal action through Damages-Based Agreements (DBAs) with The London Litigation Partnership Ltd (LLP). These agreements were structured to provide legal representation in exchange for a percentage of any financial recovery. The DBAs were entered into in late 2020 and early 2021, with the Second Defendant’s agreement dated 16 February 2021 and the Fourth Defendant’s dated 16 December 2020.

Costs Issues Before the Court

The primary legal issues centred on the enforceability of the Defendants’ DBAs and whether they complied with the statutory requirements outlined in the Courts and Legal Services Act 1990 and the Damages-Based Agreements Regulations 2013. Specifically, the court was required to determine four key issues:

1. Whether the DBAs provided for payment out of sums recovered, as mandated by the regulations
2. Whether counsel’s fees were improperly charged as expenses in addition to the primary payment
3. Whether the payment was properly ‘netted off’ against inter partes costs recovery
4. Whether the DBAs had been wrongfully terminated or repudiated by the solicitors

The Parties’ Positions

The Claimant argued that the DBAs were unenforceable due to multiple regulatory breaches. Her primary contentions were that:

– The DBAs did not provide for payment exclusively from sums recovered
– Counsel’s fees were improperly charged as additional expenses
– The agreements failed to properly net off inter partes costs recovery
– The solicitors had effectively repudiated the agreements through their correspondence of 16 February 2022

The Defendants contended that the DBAs were valid and enforceable, arguing that:

– The definition of ‘financial benefit’ in the Act was broad and should be interpreted purposively
– The agreements substantially complied with regulatory requirements
– Any departures were immaterial and should not invalidate the entire agreement
– The solicitors had not repudiated the DBAs and the agreements remained valid

The Court’s Decision

Costs Judge Brown comprehensively rejected the Defendants’ arguments, finding that the DBAs were unenforceable on multiple grounds. The key findings were:

1. The DBAs failed to comply with the requirement to provide payment from sums recovered, as the claim was for a declaration and did not involve a quantifiable monetary recovery
2. Counsel’s fees were improperly charged as expenses, in violation of the regulatory framework
3. The agreements could not be saved through severance due to public policy considerations
4. The solicitors’ attempts to create a new private retainer were ineffective and potentially void

The judgment represents a stringent interpretation of the DBA regulations, emphasising client protection and strict compliance with statutory requirements. The court’s approach underscores the continuing significance of public policy considerations in litigation funding arrangements.

CPR 38 | Discontinuance | Default Rule Disapplied

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Trustees who unreasonably fail to provide pre-action trust documentation requested by a beneficiary can face adverse costs orders if proceedings are issued, even if later discontinued. The judgement confirms that historic incapacity which impacted ability to engage with requests will not prevent such orders without evidence it existed at that time. Here, the defendants were ordered to pay the majority of the claimant beneficiary’s costs despite arguing their incapacity meant they could not respond pre-action.

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Issuing Proceedings Without Letters Of Administration

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In English law, a person must have standing to initiate legal proceedings, specifically as an administrator. This standing is obtained through the issuance of letters of administration. If proceedings are commenced without this grant, they are considered a nullity. This principle applies to cases involving the administration of foreign estates, where proceedings without proper representation are deemed invalid.

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Beyond the Blue Pencil Test | Beneficiaries’ Wider Rights Under Section 71(3)

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“Whatever the reason for Lloyd LJ’s assumption, in my judgment it was wrong. For the reasons set out at [4] to [26] above, I would hold that there are material differences between applications under section 71(3) and those under section 71(1) because of the different nature of the interests of the third party that the different sub-sections are intended to reflect. The consequence of Lloyd LJ’s mistaken assumption is that his judgment cannot be relied upon as saying anything authoritative about the position that obtains where an application and assessment are brought under section 71(3): his judgment simply does not deal with that question. Furthermore, in my judgment there is no rational basis for transposing the principles that apply to a section 71(1) assessment, as identified in [95] of Tim Martin, to the different circumstances of an assessment pursuant to section 71(3). I would therefore reject the appeal under Ground 1 on the basis of principle and the absence of any binding authority that requires us to apply the Tim Martin principles to an assessment under section 71(3). In my judgment the Costs Judge was correct to find that Tim Martin was distinguishable and should be distinguished – essentially for the reasons he gave – and that the relevant principles to be applied are to be derived from In re Brown, which is binding on us.”

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Failure To Mediate And Validity Of Part 36 Offers In Probate Claims

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I have concluded that the claimant’s conduct was not such as to warrant a deduction from his costs. In reaching that conclusion I have in mind in particular (a) the fact that the claimant made most of the running in relation to settlement (b) the third defendant’s behaviour in her conduct of the claim and (c) the strong merits of the claim which either were known or should have been known to the third defendant and (d) the late stage at which the third defendant expressed a willingness to engage in ADR. Although the claimant did not explain his position in April and May 2023 it would not have been unreasonable to have concluded that the additional cost of mediation was not warranted. I do not consider that on the facts of this case it can be said that silence on the part of the claimant amounted to a refusal to undertake mediation (or some other form of ADR).

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CPR 44.2 And The Courts’ Discretion As To Costs

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“In my judgment the term “parties” is more likely than not to refer, when reading CPR 44 as a whole, to the parties between whom there is a dispute. There was no dispute between the First, Second and Fifth Respondents in this case…  As regards discretion, if there is a discretion to exercise, contrary to my finding above, the First Respondent claims it would be “grossly” unfair not to be able to recover the costs of preparing and attending court where the First Respondent was neutral as to the outcome. It is true that the First Respondent was neutral. There was no dispute between him and the other Respondents. In these circumstances, my judgment, it would be unfair to visit the First Respondent’s costs of attending court on these Respondents.”

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