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Indemnity Costs Awarded Against Professional Parties Who Engaged In Conduct Intended To Deceive the Court | Complicity in Sham Documents

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The High Court’s decision in Teixeira v Moaven [2026] EWHC 1542 (Ch) addresses the costs consequences where professional parties were found complicit in creating sham declarations of trust intended to deceive the court.

Background

This judgment, handed down by Master Bowles (sitting in retirement) on 30 June 2026, concerns the costs consequences following a five-day trial in which certain declarations of trust were found to be sham documents. The substantive judgment, reported at [2026] EWHC 1215 (Ch), had been handed down on 22 May 2026.

The underlying dispute centred on four properties held in the sole name of Amir Abbas Moaven (Abbas). On 19 April 2012, at a time when Abbas was gravely ill, he executed a series of documents described as declarations of trust (the Declarations of Trust). Those documents purported to confirm the existence of informal trust arrangements between Abbas, his brother Amir Ahmed Moaven (Amir), and their mother Shokouh Nazemi Tehran (Mrs Nazemi), whereby all three were said to have pooled their assets and to hold them in equal one-third shares. The purpose of the Declarations of Trust was to reduce the apparent size of Abbas’ estate, so as to diminish the claims of his wife, the Claimant Gabriela Mozerle Teixeira (Gabriela), their two children, Elis Teixeira Moaven (Elis) and Amir Aryan Moaven (Aryan), and to avoid taxation on the full value of his estate.

Following trial, Master Bowles determined that no such informal pooling arrangement had ever existed, that the Declarations of Trust were sham documents with no legal or equitable effect, and that the extensive evidence given by Amir at trial was a fiction designed to support the false narrative contained in the recitals to those documents. The Second Defendant, Behzad Faiz (Mr Faiz), was Abbas and Amir’s longstanding accountant. The Third Defendant, Marios Robert Pittalis (Mr Pittalis), was their longstanding conveyancing solicitor. All three, together with Abbas, were found to have been complicit in the creation and execution of the sham Declarations of Trust.

The procedural history leading to the trial was set out in detail at paragraphs 18 to 53 of the substantive judgment. In brief, Amir, Mr Faiz and Mr Pittalis had originally been named as executors of Abbas’ will. By order dated 23 July 2020, they were removed as executors and directed to account for the assets of the estate in their hands. They had failed to account properly, including in respect of rents accruing to the estate that had been paid instead to Mellcraft Ltd, a company controlled by Amir and incorporated by Mr Faiz as a receptacle for those rents. Simon Treherne (Mr Treherne) and Helen Bunker (Ms Bunker) were appointed by the court in 2020 as independent administrators of the estate in substitution for the removed executors.

By order of 2 May 2025, permission was granted to the independent administrators to bring proceedings as to the validity and effectiveness of the Declarations of Trust and as to the beneficial interests of Abbas’ estate, Amir and Mrs Nazemi in the properties (the Declarations of Trust claim). By the same order, Gabriela was given permission, later extended to Elis and Aryan, to bring proceedings under the Inheritance (Provision for Family and Dependants) Act 1975 (the 1975 Act), with the validity of the Declarations of Trust and the beneficial ownership of the properties to be determined within the context of both sets of proceedings. By order of 11 November 2025, the issues as to validity and beneficial ownership arising in both sets of proceedings were directed to be determined together, with Gabriela, Elis and Aryan acting as claimant in respect of those issues across both sets of proceedings.

By order of 3 June 2026, consequential upon the substantive judgment, the 1975 Act proceedings brought by Gabriela, Elis and Aryan were brought to a conclusion by way of settlement with the independent administrators. The costs application was heard on 3 June 2026, with the costs judgment handed down on 30 June 2026.

The Personal Interest of the Removed Executors

As accounting parties, Amir, Mr Faiz and Mr Pittalis each had a direct interest in the outcome of the trial. The extent of their accounting obligations as removed executors was necessarily dictated by the true extent of Abbas’ estate. If the Declarations of Trust had been upheld, their liability would have been substantially reduced.

By the court’s order of 11 November 2025, the independent administrators had been given permission to prosecute an account against the removed executors on the basis of wilful default. Amir had been in rent-free occupation of one of the properties (Holland Park) throughout his eight-year executorship. If Holland Park formed part of Abbas’ estate, all three removed executors were accountable for occupation rent. If the Declaration of Trust in respect of Holland Park had been valid, no such accountability would arise. Similarly, rents from another property (Harrow Road) had been diverted to Mellcraft Ltd. Had the relevant Declaration of Trust been upheld, the removed executors would have been accountable for only one third of the diverted rents rather than the whole.

More broadly, a number of leasehold properties had been transferred by the removed executors to Amir and Mrs Nazemi, in apparent breach of the self-dealing rule, and sold, traded or rented out by Amir, with rents paid into Mellcraft Ltd. If those leaseholds were shown to have formed part of Abbas’ estate, Amir, Mr Faiz and Mr Pittalis would be accountable to the estate for all losses. A finding that the Declarations of Trust reflected the truth of the pooling arrangements averred by Amir would have reduced the removed executors’ liability by two thirds. All three would have been well served had the case advanced by Amir succeeded.

Costs Issues Before the Court

The court was required to determine a number of distinct costs issues arising from the outcome of the trial.

The first and most fundamental issue was whether Amir, Mr Faiz and Mr Pittalis should be ordered to pay the costs of both Gabriela and her children and the independent administrators, and if so, on what basis. Costs on the indemnity basis were sought by both sets of receiving parties against all three of the removed executors. It was submitted that liability should be joint and several as between Amir, Mr Faiz and Mr Pittalis.

The second issue concerned the scope of the costs recoverable by each receiving party. Gabriela and her children’s claim was for the entirety of their costs of the proceedings, their claim having been fully resolved by the order of 3 June 2026. The independent administrators’ position was more limited: their entitlement to costs was confined to the costs of the trial leading to the substantive judgment, and did not extend to costs referable only to the general administration of the estate. A question arose as to whether costs described in their costs summary as “administrative” were properly referable to the trial and therefore recoverable as trial costs.

The third issue was whether the costs orders should be subject to any percentage reduction to reflect concerns raised by the paying parties as to duplication of work and resources between the two sets of legal advisers pursuing the same litigation objective, and as to any uplift in costs arising from the delay in initiating the Declarations of Trust claim, given that the dispute had been identified as early as 2013 but proceedings were not issued until July 2024.

The fourth issue was the quantum of any payments on account of detailed assessment, including the appropriate starting point and any further adjustments to reflect the concerns identified above. The question of the time allowed for payment also arose, given the substantial sums involved.

A further discrete issue arose in relation to Mr Pittalis specifically. His counsel submitted that, having been deceived by Amir’s dishonesty, he should bear no liability for the costs of either receiving party, and that Amir should instead be directed to pay his costs. In the alternative, it was submitted that his liability should be assessed on the standard basis, should not be joint and several, and should reflect only the costs attributable to his own conduct by way of a percentage of the overall costs.

The Parties’ Positions

Amir Ahmed Moaven

Through counsel, Ms Pemberton, Amir accepted liability for costs in respect of both Gabriela and her children and the independent administrators. It was candidly accepted that his conduct in advancing an entirely dishonest defence was manifestly outside the norm of acceptable litigation behaviour, and that he had no answer to the contention that costs should be assessed on the indemnity basis. Ms Pemberton also accepted that Amir’s costs liability should be joint and several with Mr Faiz and Mr Pittalis. She raised a question as to whether liability should also be shared by Mrs Nazemi’s estate, though the court noted that it was for those claiming costs to elect from whom costs were sought, and that if Amir wished to seek contribution or indemnity from Mrs Nazemi’s estate, he should have taken appropriate steps to do so.

Ms Pemberton’s primary submission on quantum was that the costs incurred by both receiving parties had been unreasonably incurred by reason of duplication and the unnecessary use of excessive resources, and that any costs order should be subject to a percentage discount to reflect that unreasonableness. She also raised the concern that costs had been inflated by the delay in prosecuting the challenge to the Declarations of Trust, and that this too should be reflected in a percentage reduction in recoverable costs.

Marios Robert Pittalis

Mr Pittalis’ position changed in the course of the proceedings. His earlier witness statement of 14 August 2025 had, at paragraph 15, entirely omitted any mention of the circumstances in which the Declarations of Trust had come into being and the fact that various alternatives, containing factually inconsistent recitals, had been prepared and executed before eventually alighting upon the formulation chosen to be advanced by way of the Declarations of Trust. His position at that stage, reflecting in essence the position advanced by Amir, was that he had simply drafted the Declarations of Trust as requested by Abbas.

His later witness statement of 30 January 2026, while for the first time acknowledging the context and circumstances in which the Declarations of Trust had come into being, nonetheless continued to assert their validity and contended that Gabriela and her children’s claims as to their validity should be dismissed. Reflecting that position, his skeleton argument robustly contended that Gabriela and her children’s claims as to the Declarations of Trust were ill-founded and that those claims should be dismissed.

By the end of the trial, all that had dissipated and Mr Pittalis was put forward by his counsel, Ms O’Neill, simply as someone who had become innocently involved in giving effect to Amir’s (and Abbas’) dishonest scheme. Reflecting that position, Ms O’Neill contended that her client should not have to pay any part of the costs of either Gabriela and her children, or those of the independent administrators. She contended, further, that her client, having been deceived by Amir’s dishonesty and duplicity, Amir should be directed to pay her client’s costs. In the alternative, she contended that any costs liability should reflect the difference in culpability as between her client and Amir and Mr Faiz, that his liability should not be joint and several, should be assessed on the standard and not indemnity basis, and should reflect, by way of a percentage of the overall costs, the costs attributable to Mr Pittalis’ conduct.

Behzad Faiz

Mr Faiz, although warned of the likelihood that costs would be sought against him, elected to take no part in the hearing on 3 June 2026, neither attending nor affording himself representation. He lodged a short statement as to his involvement as executor in respect of Abbas’ estate, which did not touch upon the circumstances or his own conduct in respect of the creation and execution of the Declarations of Trust.

The Court’s Decision on Liability for Costs

Amir Ahmed Moaven

The court accepted Ms Pemberton’s concession that Amir was liable for costs on the indemnity basis, jointly and severally with Mr Faiz and Mr Pittalis. His conduct in advancing an entirely fictional and dishonest case was manifestly outside the norm of acceptable litigation behaviour.

Marios Robert Pittalis

The court rejected Ms O’Neill’s submissions that Mr Pittalis had been deceived by Amir and should bear no liability. It was perfectly plain from the substantive judgment and from Mr Pittalis’ own detailed attendance notes of 17, 18 and 19 April 2012 that Mr Pittalis knew exactly what was going on and was fully involved in the creation and then selection of the sham Declarations of Trust.

He knew, as nobody else except Amir and Mr Faiz did before he gave his evidence at trial, that the multiple declarations of trust that he had prepared, setting out different and entirely inconsistent factual recitals, had been executed by Abbas. He knew, also and necessarily, that those recitals, given their inconsistency, could not each of them represent the truth. He was himself fully involved in the discussion on 18 April 2012 of the clutch of declarations then to hand, as to which declaration best served Abbas’ purpose in purportedly diminishing his estate, and which of those declarations were best capable of being sustained. As the court observed, the truth or falsehood of the declarations was never an issue in that debate. The declarations, and ultimately the Declarations of Trust, were, consistently with Mr Pittalis’ own conduct in 2002 when he drafted declarations of trust purportedly transferring all of Abbas’ then assets to his mother to preclude any matrimonial claims by Gabriela, never anything more than dispensable and interchangeable pieces of paper designed to obscure or hide the true facts from those concerned with Abbas’ estate. They were never intended to reflect or give effect to the truth.

Far from being duped by Amir, Mr Pittalis was complicit with Amir and with Mr Faiz in the creation and execution of the sham Declarations of Trust and complicit, therefore, in the creation of the state of affairs that had given rise to the trial. Notwithstanding that fact and his full and detailed knowledge of all the circumstances leading to the execution of those Declarations of Trust, Mr Pittalis chose both to give, in his 14 August 2025 witness statement, an abbreviated and misleading account of the provenance of the Declarations of Trust and, even after his disclosure in August 2025 of his attendance notes, to continue to assert the validity of the Declarations of Trust. His position only changed when, under forensic examination at trial, the true position as to the Declarations of Trust became indisputably clear.

In these circumstances, the court could see no reason at all as to why Mr Pittalis should not be liable in costs for his role in the conduct that, in complicity with Amir and Mr Faiz, had given rise to the trial. Correspondingly, given that complicity, there was no reason at all as to why that liability should not be joint and several with Amir and Mr Faiz. There was no sensible basis for any order that his costs, or any part of them, should be paid by Amir. Mr Pittalis was not an innocent bystander. He was a full participant in the creation of the sham Declarations of Trust and someone who had his own interest in asserting the validity of the Declarations of Trust. It had always been open to Mr Pittalis (or indeed Amir and Mr Faiz) to tell the truth about the Declarations of Trust and thereby obviate or reduce the need for the trial. They had each elected not to do so.

Behzad Faiz

The only distinction between Mr Faiz’ position and that of Mr Pittalis was that, unlike Mr Pittalis, he did not at any stage actively assert the validity of the Declarations of Trust. He was, however, equally as involved in their creation as was Mr Pittalis and equally, therefore, as responsible as Mr Pittalis for the creation of the state of affairs that had given rise to the trial. Like Mr Pittalis, it was in his interest to see the validity of the Declarations of Trust upheld. Like Mr Pittalis, he could have at any stage told the truth about the Declarations of Trust and obviated or reduced the need for the current trial. Like Mr Pittalis, he did not do so. Instead, he stood by while the costs of the trial were incurred and awaited events.

In these circumstances, looked at in the round, Mr Faiz’ position was in substance identical to that of Mr Pittalis, and Mr Faiz was ordered to pay the costs of the trial jointly and severally with Amir and Mr Pittalis.

The Basis of Assessment | Indemnity Costs

The court ordered that costs be assessed on the indemnity basis in respect of all three paying parties. As explained in Excelsior Commercial & Industrial Holdings Limited v Salsbury Hammer Aspden & Johnson [2002] EWCA Civ 879 and Esure Services Limited v Quarcoo [2009] EWCA Civ 595, the court’s discretion as to an award of indemnity costs arises where the conduct of the party in respect of whom indemnity costs is sought has been outside the norm to be expected in properly and reasonably conducted litigation. That conduct, as set out in CPR 44.5(a), includes conduct before as well as during the proceedings. It includes, but is not limited to, conduct amounting to misconduct or calling for moral condemnation. The width of the discretion as to conduct falling outside the norm is deliberately set wide to allow for the infinite variations and possibilities which arise in the course of litigation.

In this case the conduct of Amir, Mr Pittalis and Mr Faiz, which in concert with Abbas had given rise to the litigation, had been manifestly and radically outside the norm. They chose to deliberately put in place sham documents with the intention not merely of misleading those to whom they were deployed, but ultimately with the intention of misleading the court.

It was this latter aspect which, over and above the entirely dishonest case advanced at trial by Amir, rendered the case an appropriate one for an order for indemnity costs. The discussions that took place on 18 April 2012 centred upon the sustainability of the various forms of declaration of trust that might be put in play, meaning their sustainability, if challenged, before a court. Similar discussions took place after Abbas’ death, as recorded in Mr Pittalis’ attendance notes of 31 May 2012 and 12 April 2013, in respect of the Declarations of Trust as executed and in respect of their sustainability if challenged before the court.

The conduct of Amir, Mr Pittalis and Mr Faiz in respect of the Declarations of Trust was, from the very outset, directed towards the creation of sham documents which could be sustained in court and which might or would deceive the court. That conduct was, in consequence, central to and causative of the current trial and it was for that reason, and in consequence of their role in the creation of sham documents for those purposes, that they should now, the dishonest nature of the documents having been exploded, be liable on the indemnity basis for the costs that had had to be incurred in exposing the deceitful nature of the Declarations of Trust.

The position was compounded by the conduct of Mr Pittalis (and Mr Faiz) at trial. The court had already discussed Mr Pittalis’ active opposition, up until trial, to the attacks made upon the validity of the Declarations of Trust. Even, however, when the point came when he appreciated that the Declarations of Trust were unlikely to be sustained, his position was not to tell the truth as to the Declarations of Trust but to stand by and abide events. That was the position adopted by Mr Faiz from the outset. While in many circumstances it may be legitimate for a litigant to abide events, where the party standing by is both aware of the truth and, more importantly, is at the source of the conduct whereby, to his or her knowledge, an untrue case is being advanced before the court, that conduct is in itself sufficiently outside the norm as to warrant an award of indemnity costs.

In reaching these conclusions, the court did not found itself on any moral condemnation of the conduct of either Mr Faiz or Mr Pittalis, but rather upon the causative nature of their conduct in enabling a false case to be brought to court and in standing by while that false case was advanced. The court nonetheless observed that the conduct of Mr Faiz and Mr Pittalis, as professional men owing professional obligations of probity and integrity, was extraordinary. There appeared to have been in neither of them any loyalty to the truth, or even any interest in the truth. They manifestly saw nothing at all wrong in the preparation and deployment, on behalf of a client, of false and deliberately misleading documents. They appeared to have seen their role as entirely functional, having no interest or concern either in the content or consequences of the documentation that they brought into being.

Scope of Recoverable Costs

Gabriela and her children’s claim was for the entirety of their costs of the proceedings, their claim having been fully resolved by the order of 3 June 2026. The position of the independent administrators was different. Their prospective entitlement to costs was limited to the costs of the trial leading to the substantive judgment. They were not entitled to claim or recover, at this stage, any of their costs appertaining only to their steps and actions in relation to the general administration of Abbas’ estate.

The independent administrators contended that because Amir’s position had amounted to an assertion of a general partnership, and because much if not all of their investigations had borne upon or related to that question, all or virtually all of their incurred costs in the administration should be regarded as referable to the current trial. The court was not persuaded. It was plain from the letter before action dated 24 January 2023 that the question of partnership was not then an issue that the administrators had in mind. That position was confirmed by the July 2024 application itself, which did not advert to the question of partnership or seek declaratory or any relief as to that question. The question of partnership was only raised as an issue for trial in November 2025 and was not pursued at trial. Amir, in his December 2025 witness statement, stated in terms that he did not claim that he and Abbas had worked within a formal partnership.

In the result, the court indicated that for purposes of any determination of a payment on account, the independent administrators should exclude from their costs summary the bulk of the costs described in that summary as administrative. It would be for the costs judge to determine what, if any, element of these so-called administrative costs were properly related to the trial and recoverable as trial costs.

In regard to Mr Pittalis and Mr Faiz, they were before the court only in respect of the issues relating to the Declarations of Trust and the facts allegedly underlying those declarations. Unlike Amir, whose involvement with the 1975 Act claims embraced the issues relating to section 423 of the Insolvency Act and the application of section 10 of the 1975 Act, Mr Pittalis and Mr Faiz were not before the court in respect of any aspects of the 1975 Act claims, save as they related to the validity of the Declarations of Trust and the size of Abbas’ estate. They should not bear any liability for the costs of those aspects of those claims which did not bear upon those issues. The court made an allowance of ten percent to reflect those aspects of Gabriela and her children’s costs which were unrelated to the validity of the Declarations of Trust.

Duplication, Delay and Detailed Assessment

Ms Pemberton and Ms O’Neill drew the court’s attention to the possible dangers of duplication of work and of an excessive application of resources when two separate sets of legal advisers pursue the same litigation end. The court’s impression was that the bulk of the trial preparation had fallen on the independent administrators, with Gabriela and her children’s claim riding on their coat tails, and with therefore, on the face of it, little obvious duplication of work and resources. Nonetheless, it was not inappropriate for counsel to raise those concerns.

The answer, however, to that legitimate concern was not for the court to make some speculative deduction from the recoverable costs in order to reflect those concerns, but for those matters to be given proper consideration as and when there was a detailed assessment of the extent of the recoverable costs. The same approach was appropriate in dealing with any potentially uplifted or unreasonably incurred costs arising out of the fact that, although the dispute as to the validity of the Declarations of Trust was identified very early on (2013), the dispute was not crystallised by the inception of the current proceedings until the independent administrators’ application was issued in July 2024.

The court was in no position, at this stage, to determine, other than by way of pure speculation, whether the costs sought by the independent administrators or by Gabriela and her children had been unreasonably or unnecessarily uplifted by reason of delay and, if so, to what extent. That question could only be resolved by the detailed examination of the conduct of those claiming the relevant costs as part of the process of detailed assessment.

In that consideration, the costs judge dealing with any detailed assessment would necessarily be alive to the independent administrators’ case that any delay in initiating the Declarations of Trust claim had to be seen in the context of email correspondence from Amir in the summer of 2023, in which he repeatedly indicated his early intention to seek a declaration as to the validity of the Declarations of Trust. It was the independent administrators’ submission that, given those indications, they could not be criticised for any delay in initiating the Declarations of Trust claim. While the court thought there was force in those submissions, and certainly sufficient force to preclude the court from reaching any conclusion at this stage adverse to the independent administrators arising out of any alleged delay, the question of delay, the responsibility for that delay and any uplift in costs incurred consequential upon delay remained open for examination and determination as part of any detailed assessment.

Payment on Account

It was not submitted either by Ms Pemberton or Ms O’Neill that the court should not make an order for the payment of costs on account. Nor, given the order that costs be paid on the indemnity basis, was there any serious opposition to the proposition that, as a starting point in the determination of the reasonable sums to be paid on account of costs, the court should work on the assumption or rule of thumb that, on detailed assessment, the claiming parties would recover something in the order of eighty percent of their claimed costs. Nor was it suggested, other than in respect of time to pay, that the amount payable should be dictated or informed by the paying parties’ ability to pay.

What was submitted, reflecting the concerns as to duplication, use of excessive resources and, in respect of the independent administrators’ costs, the prospect or possibility that the costs estimates placed before the court by the independent administrators included costs not properly recoverable as costs of the trial, was that the court should make appropriate allowances in respect of those matters in order to avoid over recovery.

The court’s task, as explained by Christopher Clarke LJ in Excalibur Ventures LLC v Texas Keystone Inc. [2015] EWHC 566 (Comm), was not simply to find a figure which reflected the irreducible minimum to be expected on recovery. The court was looking to determine a reasonable sum which reflected all relevant factors. These included, on the one hand, that the claiming parties were already out of pocket in respect of the costs that they had had to incur and the desirability, where possible, of the court determining a figure which was sufficiently close to the likely figure recoverable on assessment as to avoid the need for such an assessment. On the other hand, where there was a perceived risk that the receiving party might not, or might not be in a position to, repay the sum awarded on account, then that factor would come into play in reducing to a ‘safe’ sum the amount payable on account.

The court was not persuaded that, in this case, that last risk was material. As a result of the findings at trial and the settlement consequential upon those findings of the 1975 Act proceedings, there would seem to be no significant risk that the two receiving parties in this case would be unable to repay any over recovery that might arise, were it to be the case that the amount directed to be paid on account turned out to exceed the costs recoverable on assessment.

That said, reflecting the submissions made by Ms Pemberton and Ms O’Neill and the concerns that they had properly raised, some further allowances in reduction of the eighty percent starting point were appropriate.

The costs estimate provided on behalf of Gabriela and her children placed their estimated costs in the sum of £229,361. In regard to Mr Pittalis and Mr Faiz, that base figure fell to be reduced by ten percent, to £206,425. Eighty percent of that figure would be £165,140. A further five percent of that base figure, however, should be deducted to reflect the matters which had been raised by counsel, resulting in an amount of £154,819, say £154,800, to be paid jointly and severally by Mr Faiz and Mr Pittalis on account of the costs incurred by Gabriela and her children. In Amir’s case, the ten percent deduction was inapplicable, with the result that while he was jointly and severally liable with Mr Pittalis and Mr Faiz in the sum of £154,800 payable on account, he was separately liable on account for an additional sum of £17,221.

In regard to the independent administrators, Mr Faiz and Mr Pittalis received no special allowance. However, for purposes of payment on account, the court left out of account the bulk of the costs described in their costs summary as administrative, resulting in a base figure for purposes of payment on account of £455,544.39. Eighty percent of that figure was £364,465.61. However, to further reflect the possibility that costs not properly referable to the trial had been included in the costs summary, the court considered it fair that the figure payable on account should reflect seventy percent of the base figure rather than eighty percent. That figure, for which Amir, Mr Pittalis and Mr Faiz were all jointly and severally liable, was £318,881, say £318,880.

In regard to the payment of these very substantial sums, the court considered it unrealistic to make the usual fourteen day order. Payment of the sums due on account was ordered to be made by 4 p.m. on 21 September 2026.

Conclusion

Amir, Mr Pittalis and Mr Faiz were ordered to pay the independent administrators’ costs on the indemnity basis. They were ordered to pay Gabriela and her children’s costs on the same basis. In respect of both sets of costs, their liability was joint and several. In regard, however, to Mr Faiz and Mr Pittalis’ liability for Gabriela and her children’s costs, their liability was subject to an allowance of ten percent to reflect those aspects of those costs which were unrelated to the validity of the Declarations of Trust. Both sets of costs were subject to detailed assessment, if not agreed, and the court gave permission for the immediate commencement of that assessment.

Substantial payments on account were ordered. Mr Faiz and Mr Pittalis were ordered to pay jointly and severally £154,800 on account of Gabriela and her children’s costs. Amir was jointly and severally liable with them for that sum, and separately liable for an additional £17,221. All three were ordered to pay jointly and severally £318,880 on account of the independent administrators’ costs. Payment was to be made by 4 p.m. on 21 September 2026.

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The High Court’s decision in Mannings Organisation Ltd v Joseph Henry Manning [2026] EWHC 1491 (KB) concerned the assessment of an interim payment on account of costs following an unsuccessful discharge application where overlapping issues with the main injunction application made it impossible to produce a statement confined to discharge costs alone.

Background

This judgment, handed down on 17 June 2026 by Andrew Kinnier KC sitting as a Deputy Judge of the High Court, dealt with a single issue: the assessment of the sum to be paid on account of costs by the defendant, Joseph Henry Manning (“Joseph Senior”), following the determination of a discharge application in proceedings brought by Mannings Organisation Limited and Mannings Amusements Limited (together, “the Claimants”).

The judgment should be read alongside two earlier decisions in the same proceedings: the judgment dated 14 May 2026 on the injunction and discharge applications ([2026] EWHC 1160 (KB)), and the consequential judgment dated 3 June 2026 ([2026] EWHC 1344 (KB)), which addressed costs, case management directions, and related matters. The costs order was made on 3 June 2026, following an earlier order on 18 May 2026.

By way of brief background, the proceedings involved an injunction application and a related discharge application brought by Joseph Senior. The discharge application was vigorously pursued and included serious allegations against the Claimants’ solicitors and counsel who had attended the hearing before Foster J on 2 December 2025. The discharge application was ultimately unsuccessful, and Joseph Senior was ordered to pay the Claimants’ costs of that application.

The Claimants were represented by Richard Power KC, instructed by Greenwoods Legal Services Limited. Joseph Senior was represented by Thomas Grant KC and Hugh Jeffery, instructed by Boodle Hatfield.

At the consequential hearing, the Claimants had not served a statement of costs dealing exclusively with the discharge application. They were therefore directed to file and serve such a statement by 4 p.m. on 3 June 2026, with Joseph Senior permitted to serve brief written submissions in response by 4 p.m. on 5 June 2026. Mr Power KC then sought and was granted permission to respond to Joseph Senior’s submissions, lodging his note on 8 June 2026. The statement of costs was re-sent on 9 June 2026, as it had not initially reached the judge. The matter was then determined on the papers.

Costs Issues Before the Court

The court was required to determine two related but distinct questions. First, what costs had the Claimants actually incurred in relation to the discharge application, given that those costs could not be cleanly separated from the broader costs of the litigation. Second, what reasonable sum should be ordered to be paid on account of those costs, in accordance with CPR 44.2(8).

The difficulty in answering the first question arose from the nature of the proceedings. The injunction and discharge applications, while formally distinct, shared a number of overlapping issues, particularly the heavily contested questions of whether there was a serious triable issue and whether full and frank disclosure had been given to Foster J at the without notice hearing on 2 December 2025. Because of this overlap, the Claimants’ solicitors took the view that it was not possible to produce a statement of costs dealing exclusively with the discharge application. Instead, they submitted a statement setting out the Claimants’ total costs of the proceedings (£165,355.84) and sought to apportion a percentage of those costs to the discharge application.

The second question required the court to apply the principles governing interim payments on account of costs, as set out in CPR 44.2(8) and elaborated upon in Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC 566 (Comm). A further contextual factor was the imminence of the trial, which was listed in a window commencing 20 July 2026.

The Parties’ Positions

The Claimants’ position

The Claimants acknowledged that it was not possible to distinguish the costs of the discharge application from the other costs of the litigation. They submitted a statement of costs covering all costs incurred in the proceedings (£165,355.84) and put forward 40% of that total as a good faith estimate of the costs attributable to the discharge application, producing a figure of £66,142.34.

Mr Power KC provided a more granular breakdown in support of that estimate. He submitted that it was appropriate to allocate half of counsel’s brief fee (£16,250) and other fees for advice and documents (£8,000) to the discharge application, together with half of the solicitors’ attendance time (£6,000) and the full costs of preparing the witness statement of Mr Wallis (£11,160). That produced a sub-total of approximately £40,000, representing roughly one quarter of the total costs of the proceedings. When attendance costs and other items were factored in, the Claimants’ solicitors’ estimate of 40% was said to be fair.

On the question of the payment on account, the Claimants submitted that 75% of the incurred costs was a reasonable figure. It was said that the discharge application had been hard fought, that the Claimants’ solicitors had sought to delegate work where appropriate to non-Grade A fee earners, and that the costs of preparing Mr Wallis’ statement had been reasonably incurred given the need to respond to serious allegations. A discount of 25% was said to be more than sufficient to address any criticisms raised by Joseph Senior.

Joseph Senior’s position

On behalf of Joseph Senior, Mr Grant KC and Mr Jeffery submitted that the Claimants’ statement of costs was not confined to the discharge application and impermissibly covered all costs incurred between 3 December 2025 and 3 June 2026. The statement sought the application fee for continuation of the injunction application, which was said to be symptomatic of the Claimants’ deliberate decision not to assist the court by providing a statement confined to the discharge application but instead to claim all their costs of the proceedings.

Joseph Senior’s submissions identified the same two questions. On the applicable legal principles, reliance was placed on Christopher Clarke LJ’s review of the authorities in Excalibur, and in particular the proposition that where there is doubt, it should be resolved in the paying party’s favour. It was also submitted that the imminence of the trial reduced the prejudice to the Claimants of having to wait for a general reckoning on costs, and that this was therefore not a case where a generous interim payment was warranted.

On the costs incurred, Joseph Senior’s primary submission was that the Claimants had done little to distinguish between the costs of the discharge application and the broader litigation costs. While some items could safely be attributed to the discharge application, such as the costs of preparing Mr Wallis’ statement (£11,160), others could not. It was submitted that 20% of the costs of the return hearing (assessed at £70,000) could reasonably be apportioned to the discharge application, producing a sub-total of £14,000. Adding the costs of Mr Wallis’ statement gave a best estimate of £25,160.

On the payment on account, Joseph Senior submitted that the Claimants’ costs were likely to be substantially reduced on assessment, with a recovery of between 50% and 60% being realistic. Taking the lower end of that range, the appropriate payment on account was said to be 50% of £25,160, namely £12,580 including VAT.

The Court’s Decision

Preliminary observations

The court addressed two preliminary points before turning to the substance. First, the suggestion that the Claimants had deliberately failed to assist the court by not providing a statement confined to the discharge application was rejected. As the Claimants’ solicitors had explained, the costs of the discharge application could not be satisfactorily separated from the other costs of the litigation. The decision to provide a statement of total costs with an apportionment was described as a pragmatic and reasoned one.

Second, the court noted the vigour with which the discharge application had been pursued on Joseph Senior’s behalf and the seriousness of the allegations made against the Claimants’ solicitors and counsel. Preparation of the Claimants’ response would necessarily have required their solicitors and counsel to review the documents in detail, to consider the draft witness statement and to give advice. Although the injunction and discharge applications were distinct, some points were inevitably relevant to both. That was especially so in relation to the heavily contested and linked questions whether there was a serious triable issue and whether full and frank disclosure had been given to Foster J.

Joseph Senior’s submission that only 20% of the Claimants’ total costs were properly attributable to the discharge application did not, in the court’s judgment, fairly reflect the seriousness of the allegation which he made, the substance of the work that would be required to respond, the nature of the issues arising in the discharge application or their connection with the substance of the injunction application. In these circumstances, Joseph Senior’s proposal that the allowed percentage of costs should be assessed by reference to the proportion of his skeleton argument that dealt with the discharge application was an unreliable way to assess the costs incurred.

Costs incurred

Having regard to the vigour with which Joseph Senior pursued the discharge application and the seriousness of the allegations which were made on his behalf, the court considered it reasonable to proceed on the basis that half of counsel’s fees (both for the return hearing and the associated work advising in conference and on documents) should be allocated to the discharge application. Similarly, half of the solicitors’ attendance time could be fairly assigned to that application. The costs of preparing Mr Wallis’ statement were exclusively concerned with the discharge application. Therefore, the costs incurred in respect of work which could be safely attributed to the discharge application was approximately £40,000, that is to say, very roughly 25% of the Claimants’ total costs of the litigation.

The costs of attendances on counsel and client, correspondence with the other side, work on the hearing bundles and work on counsel’s skeleton argument on the discharge application could not now be allocated between the discharge application and other litigation costs. In those circumstances, some caution should be exercised in reaching a view about how much of the Claimants’ total costs should be allocated to the discharge application. Doing the best it could and having regard to the nature and substance of the issues arising, the court allowed 10% of the total cost in relation to those items of work.

Therefore, 35% of the Claimants’ total costs were attributable to the discharge application, namely £57,874.44.

Payment on account

The court is required to determine a reasonable sum under CPR 44.2(8). As Christopher Clarke LJ found in Excalibur, a reasonable sum on account of costs will be an estimate dependent on the circumstances, the chief of which is that there will, by definition, have been no detailed assessment and so there is an element of uncertainty, the extent of which will differ widely from case to case as to what will be allowed on detailed assessment.

At paragraphs 23 and 24 of the Excalibur judgment, Christopher Clarke LJ explained that a reasonable sum would often be one that was an estimate of the likely level of recovery subject to an appropriate margin to allow for error in the estimation. That can be done by taking the lowest figure in a likely range or making a deduction from a single estimated figure or perhaps from the lowest figure in the range if the range itself is not very broad. In determining the amount, account needs to be taken of all the relevant factors including the likelihood, if it can be assessed, of the claimants being awarded the costs that they seek or a lesser and, if so, what proportion of them; the difficulty, if any, in recovering costs; the likelihood of a successful appeal; the parties’ means; the imminence of any assessment; any relevant delay and whether the paying party will have any difficulty in recovery if there is an overpayment.

There were, in the court’s judgment, two principal factors in assessing a reasonable sum in this case: the difficulty distinguishing the costs of the discharge application from the broader costs of the litigation and the imminence of the trial (to be heard in a window starting on 20 July 2026). As to the former, a balance needed to be struck between the difficulty identifying the costs that were truly attributable to the discharge application and the cautious approach already taken to determining the costs incurred in dealing with it. As to the latter, the expedited trial meant that the parties would not have to wait long for detailed assessment and some weight should be attached to that consideration.

For the sake of completeness, the court noted that Mr Grant KC and Mr Jeffery did not rely upon the likelihood of a successful appeal, any argument based on the parties’ financial resources or any potential difficulty recovering any overpayment from the Claimants as factors which may be relevant to increasing the discount that should be applied in assessing a reasonable sum to be paid on account.

Having regard to all the relevant circumstances (including the absence of any costs budgets), it was likely that the Claimants would recover between 65% and 75% of their costs of the discharge application. Bearing in mind that some allowance for error of estimation should be made, the payment on account should be calculated by reference to the lowest end of that range, namely 65% of the Claimants’ incurred costs. For the sake of convenience, the sum due was rounded down to £37,600.

Conclusion

Joseph Senior was ordered to pay the sum of £37,600 on account of the Claimants’ costs of the discharge application by 4 p.m. on 6 July 2026.

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Baxendale-Walker Principle Does Not Extend To Appellate Costs Against Regulatory Bodies

New Costs Blog, Payment on Account

The Court of Appeal’s decision in Dentons UK and Middle East LLP v Solicitors Regulation Authority Ltd [2026] EWCA Civ 655 addresses whether the costs protection afforded to regulatory bodies in first-instance disciplinary proceedings applies equally on appeal.

Background

Dentons UK and Middle East LLP (“Dentons”) is a solicitors’ firm that found itself subject to disciplinary proceedings brought by the Solicitors Regulation Authority Ltd (“the SRA”) before the Solicitors Disciplinary Tribunal (“the SDT”). The SDT reached a decision against Dentons, which Dentons then appealed to the High Court. That appeal was heard by Lang J, who dismissed it. Dentons pursued a further appeal to the Court of Appeal, which was heard over two days on 25 and 26 March 2026.

In its substantive judgment handed down on 27 April 2026 ([2026] EWCA Civ 508), the Court of Appeal allowed Dentons’ appeal. The SDT’s decision was quashed and the matter was remitted to the SDT to be determined on the basis of a different test set out in the Court of Appeal’s judgment. Dentons was therefore substantially the successful party in the appellate proceedings, though the case was not concluded outright in its favour given the remittal.

Following the substantive judgment, the parties were unable to agree costs, and the Court of Appeal was required to determine the appropriate costs orders in respect of both the appeal to Lang J and the further appeal to the Court of Appeal. It was common ground between the parties that the costs of the proceedings before the SDT itself were to be reserved to the SDT. The costs judgment was handed down on 21 May 2026 ([2026] EWCA Civ 655), with the constitution comprising Lord Justice Bean (Vice President of the Court of Appeal, Civil Division), Lord Justice Jeremy Baker, and Lord Justice Zacaroli.

Costs Issues Before the Court

Two distinct costs issues required determination. The first, and more substantive, was whether the SRA’s status as a regulatory body meant that no costs order should be made against it in respect of the appellate proceedings, notwithstanding that Dentons had been substantially successful. The SRA argued that the principle established in Baxendale-Walker v Law Society [2007] EWCA Civ 233 (“Baxendale-Walker 1”), which disapplied the ordinary costs-follow-the-event rule in disciplinary proceedings before the SDT, should be extended to cover appeals from the SDT as well.

The second issue, which arose only if the court rejected the SRA’s primary position and made a costs order in Dentons’ favour, concerned the appropriate amount to be ordered on account of costs pending detailed assessment. Dentons had filed costs schedules showing total costs of £793,679.60 exclusive of VAT across both appeals: £355,778.98 in the High Court and £437,900.62 in the Court of Appeal. The SRA’s own costs across the same proceedings were considerably lower, at £90,358.54 in the High Court and £89,479.13 in the Court of Appeal, making Dentons’ costs nearly 4.5 times greater than those of the SRA.

The Parties’ Positions

The SRA’s position

The SRA contended that no costs order should be made against it, relying on the principle in Baxendale-Walker 1. In that case, the Court of Appeal held that there was no presumption that costs should be awarded in favour of a solicitor who had successfully defeated disciplinary proceedings before the SDT. The reasoning was that the Law Society (and by extension the SRA) occupied a wholly different position to that of an ordinary civil litigant, given its independent obligation to bring properly justified complaints of professional misconduct to the SDT’s attention in the public interest. Exposing the regulator to adverse costs orders simply because properly brought proceedings had been unsuccessful risked a chilling effect on the exercise of its regulatory obligations.

The SRA further relied on a subsequent decision in the same proceedings, Baxendale-Walker v Law Society [2007] EWCA Civ 820 (“Baxendale-Walker 2”), in which Lord Phillips CJ expressed the view that the same principle applied equally to appellate proceedings under s.13 of the Solicitors Act 1974. The SRA argued that there was a tension between that approach and the line of authority suggesting that the ordinary CPR costs regime applied on appeal, and that Lord Phillips CJ’s approach was to be preferred.

Dentons’ position

Dentons argued that the Baxendale-Walker 1 principle was confined to proceedings before the SDT and did not extend to appeals. It relied on a consistent line of authority to that effect. In Bryant and another v Law Society [2007] EWHC 3043 (Admin), the Divisional Court applied the normal CPR approach to costs on an appeal from the SDT, though the court gave no consideration to either of the two Baxendale-Walker decisions. In Bass and Ward v SRA [2012] EWHC 2457 (Admin), Bean J reached the same conclusion having been referred to Baxendale-Walker 1, though Baxendale-Walker 2 was not cited. Most significantly, in Wingate v Solicitors Regulation Authority [2018] 1 WLR 3969, the Court of Appeal expressly confirmed that the Baxendale-Walker 1 principle did not apply on appeal, with Rupert Jackson LJ stating that parties arriving in the Administrative Court on appeal from the SDT entered a costs-shifting regime and stood on an equal footing, with the losing party ordinarily paying the winning party’s costs under CPR r.44.2.

The Court’s Decision

The regulatory body costs issue

The Court of Appeal rejected the SRA’s argument that the Baxendale-Walker 1 principle should apply to the appellate proceedings. The court held that it was bound by its own decision in Wingate, which had expressly considered and answered the question in the negative. The fact that Lord Phillips CJ’s comments in Baxendale-Walker 2 had not been cited to the Court of Appeal in Wingate did not render that decision per incuriam. The observations in Baxendale-Walker 2 were in any event obiter, since Lord Phillips CJ had determined the costs question in that case largely on the basis of the petitioner’s dishonesty rather than on the regulatory principle.

The court also expressed agreement with the reasoning in Wingate as a matter of principle. The rationale underpinning Baxendale-Walker 1 was that the SRA’s regulatory responsibilities required it to bring properly justified complaints to the SDT without fear of the chilling effect of an adverse costs order, placing it in a wholly different position to that of an ordinary civil litigant. That rationale did not, however, extend to the appellate context. Where the SRA had the benefit of a determination from the SDT and was challenging that determination on appeal, its position was more akin to that of a normal litigant. The court therefore confirmed that the ordinary costs-follow-the-event approach under CPR r.44.2 applied.

Having determined that the SRA was not protected from an adverse costs order by reason of its regulatory status, the court considered the appropriate order. Dentons was substantially the successful party following the second appeal, but the SDT’s decision had been quashed and remitted rather than resolved outright in Dentons’ favour. Balancing those two considerations, the court ordered that the SRA pay 65% of Dentons’ costs of both the appeal to Lang J and the further appeal to the Court of Appeal, with those costs to be subject to detailed assessment if not agreed.

Payment on account

On the question of the appropriate payment on account, the court applied the approach set out in Excalibur Ventures LLC v Texas Keystone [2015] EWHC 566, identifying a fair estimate of the likely level of recovery subject to a margin to allow for error in estimation. The court was not assessing the costs, but determining what amount should be paid pending detailed assessment.

65% of the total costs incurred by Dentons was £515,891.74. The court noted that while the matter was no doubt of considerable importance to Dentons, the question on assessment of costs payable between litigants was not whether it was reasonable for Dentons to choose to instruct such expensive solicitors and counsel, but whether it was reasonable for the resulting cost to be imposed on the SRA. Given the enormous amount of Dentons’ costs for a matter that lasted a day in the High Court and involved substantially a repeat of the same arguments at a hearing of less than two days in the Court of Appeal, the court concluded that a substantial discount was appropriate in arriving at a fair estimate of the likely level of recovery. The court ordered the SRA to pay £200,000 within 21 days on account of the total costs incurred by Dentons across both appeals.

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A Near Full-Value Part 36 Offer On A Binary Recognition And Enforcement Claim Held To Be ‘Genuine’ Where The Strength Of The Claim Justified It

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The King’s Bench Division’s decision in Timokhin v Timokhina [2026] EWHC 1194 (KB) addresses whether a Part 36 offer representing a 9% discount on a binary recognition and enforcement claim was a genuine attempt to settle or a strategic device to secure indemnity costs.

Background

The underlying proceedings concerned a dispute between two Russian national former spouses, Alexander Valeryevich Timokhin (the claimant) and Anna Anatolyevna Timokhina (the defendant), about the recognition and enforcement in England and Wales of two Russian judgments relating to a contested post-nuptial agreement. The trial judgment ([2026] EWHC 439 (KB)) found in favour of Mr Timokhin and rejected the several objections advanced by Ms Timokhina. The Russian judgments were ordered to be recognised and enforced, with the debt arising from those judgments quantified at £417,416.67.

The consequentials judgment ([2026] EWHC 1194 (KB)), handed down by Mr Justice Dexter Dias on 19 May 2026, dealt with four applications: a stay of enforcement pending a domestic appeal and pending Russian bankruptcy proceedings, costs, interest, and payment on account. The claimant was represented by Matthew Bradley KC and William Birch, instructed by Brown Rudnick LLP. The defendant was represented by Charles Samek KC, Jennifer Perrins and Bláthnaid Breslin, instructed by Goodman Ray LLP.

For the purposes of this article, the focus is on the costs-related issues, namely the application of CPR Part 36, the appropriate rate of enhanced interest on costs, interest on the debt, and the quantum of the payment on account. The stay applications are addressed only insofar as they provide relevant context.

Costs Issues Before the Court

The claimant had made a Part 36 offer on 20 May 2025, with the relevant period expiring on 10 June 2025. The offer represented a 9% discount on the full value of the claim, specifying a figure of £380,000. At trial, the claimant succeeded in full, beating his own Part 36 offer.

The costs issues before the court were therefore as follows. First, whether it would be unjust, within the meaning of CPR 36.17(5), to impose the standard Part 36 consequences under CPR 36.17(4), namely indemnity costs from the expiry of the relevant period, enhanced interest on costs and an additional 10% payment. Second, if the Part 36 consequences were to apply, what rate of enhanced interest on costs should be ordered. Third, what rate of interest should be awarded on the debt itself. Fourth, what sum should be ordered by way of a payment on account of costs.

The defendant’s primary submission on the Part 36 issue was that the offer had not been a genuine attempt to settle the proceedings, as required by CPR 36.17(5)(e), on the basis that a 9% discount on a binary recognition and enforcement claim was effectively tokenistic. The defendant also raised a subsidiary argument that the offer was underspecified, confusing, equivocal or indistinct.

The Parties’ Positions

The claimant’s position

The claimant submitted that the Part 36 consequences under CPR 36.17(4) should follow in the ordinary way. It was argued that the offer of £380,000, representing a discount of just under 10% on the full claim value, was a genuine and reasonable attempt to settle. The claimant’s position was that the strength of his case justified a high offer level, and that the binary nature of recognition and enforcement claims did not render a high percentage offer inappropriate or illusory. The claimant further submitted that the defendant had raised arguments with poor prospects of success, some of which were floated and then disappeared with little more, and that her case had obvious weaknesses, particularly in its family law aspects. On the interest rate on costs, the claimant sought 8% above base rate. On interest on the debt, the claimant proposed a commercial rate of 5% from the date of the second Russian judgment (11 October 2023) to the expiry of the relevant period. On the payment on account, the claimant sought 65% of his costs, pointing to the volume of work necessitated by the defendant’s diffuse array of objections, some of which were first ventilated or particularised in detail only as trial approached.

The defendant’s position

The defendant submitted that it would be unjust to impose the CPR 36.17(4) consequences. Her primary argument was that the offer was not a genuine attempt to settle, relying on CPR 36.17(5)(e). It was contended that, given the binary yes/no nature of a recognition and enforcement claim, a discount of only 9% was effectively a device to secure an indemnity costs award rather than a meaningful invitation to compromise. The defendant also submitted that she had raised important arguments with very real merits, characterising her points as “entirely reasonable”, and that the offer was underspecified, confusing, equivocal or indistinct. On the interest rate on costs, the defendant submitted, on a contingent basis, that 1% above base rate was appropriate. On interest on the debt, the defendant raised a pleading objection, submitting that interest had not been pleaded as required by CPR Part 16 and should therefore not be awarded. On the payment on account, the defendant submitted that the lowest figure in the likely range was no more than 55%, criticising the scale of the costs incurred by the claimant.

The Court’s Decision

Part 36 consequences | was it unjust to apply CPR 36.17(4)?

The court confirmed the well-established starting point that the burden of establishing injustice rests on the unsuccessful party, and that this burden represents a formidable obstacle. The court cited ABFA Commodities Trading Ltd v Petraco Oil Company [2024] EWHC 706 (Comm) and the frequently cited passage from Briggs J in Smith v Trafford Housing Trust [2012] EWHC 3320 (Ch), to the effect that the court does not have an unfettered discretion to depart from the ordinary costs consequences under Part 36, and that to hold otherwise would undermine the salutary purpose of the regime in promoting compromise and avoiding unnecessary expenditure of costs and court time.

The court also noted the need for vigilance against very high settlement offers being used strategically, as a device to secure an indemnity award rather than as a genuine attempt to settle. However, on the facts, the court rejected the defendant’s submission that the offer fell into that category. The court accepted that a discount in the early 90% range was justified given the strength of the claimant’s case. The claimant had a rational and reasonable basis to conclude that his prospects were strong, and a discount of just under 10% was therefore sober and realistic rather than tokenistic or illusory. The court did not accept that the binary nature of recognition and enforcement claims rendered a high offer inappropriate. Binariness is inherent in such claims, and the more pertinent factor was the strength of the claim itself.

The court also rejected the defendant’s characterisation of her own arguments as having “very real merits” or being “entirely reasonable”. Some of her arguments had poor prospects of success, some legal points were raised and then disappeared with little more, and the family law aspects of her case were described as particularly unconvincing. The court further rejected the submission that the offer was underspecified, confusing, equivocal or indistinct, noting that it was perfectly clear that the offer related to the King’s Bench claim, and that clarification had been provided when requested.

The court also noted that the defendant had applied very late in the day to amend her initial defence, a recognition of the limitations of her original position, but the amended defence fared no better and had obvious weaknesses of its own. It was to the credit of the claimant’s legal team that even though it could have applied to adjourn the trial in light of the amendment, it determined to retain the trial listing and do its best to avoid incurring yet more costs.

Taking into account all the circumstances under CPR 36.17(5), the court concluded that the defendant had not come close to establishing that it would be unjust to order the CPR 36.17(4) consequences. The court also noted, by reference to the passage from Briggs J in Smith v Trafford, that the essential purpose of Part 36 is to visit costs consequences upon parties of whom it can properly be said that they ought to have settled by accepting the other party’s offer, rather than taken the matter to trial. The defendant had a reasonable and realistic opportunity to accept a genuine settlement offer from the claimant. She failed to take it. Instead, she persisted in a case that was materially flawed in key respects, with some parts of it largely devoid of merit.

Enhanced interest on costs | what rate?

The parties disputed the rate of interest to be granted on costs. The maximum is 10% above base rate. The claimant applied for 8%. The defendant, on a contingent basis, submitted that it should be 1%. The court rejected the defendant’s proposal as unrealistically low. However, the court also considered 8% to be too high, noting that while the defendant took a series of bad points, not all of them were fundamentally flawed or highly likely to fail, and that the court was not persuaded that in the three months from offer to trial the disruption to the claimant was as acute as he maintained. The correct interest figure was held to be 6% above base rate.

Interest on the debt | the pleading point

The defendant submitted that interest on the debt should not be awarded since it had not been pleaded by the claimant as required by CPR Part 16. The court rejected this objection. The short point was that CPR 16.1 makes plain that Part 16 is inapplicable to a Part 8 claim, which this was. In any event, the Court of Appeal had considered the question of a failure to plead interest in El Ajou v Stern [2006] EWCA Civ 120, in which Carnwath LJ held that a pleading failure is not necessarily fatal to a claim for interest, and that where the point had been raised, the judge could give leave to amend on appropriate terms if necessary. The court exercised its discretion to award interest on the debt at a commercial rate of 5% from the date of the second Russian judgment (11 October 2023) to the expiry of the relevant period.

Payment on account | what percentage?

Approximately 70% of the costs incurred (exclusive of VAT) fell to be assessed on an indemnity basis as a Part 36 consequence. In accordance with Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC 566 (Comm), per Christopher Clarke LJ at paragraphs 23 to 24, the court was required to arrive at a “reasonable sum” of likely recovery, allowing for uncertainty and margin for error.

Given the level of interest granted combined with the indemnity basis also granted, the court judged that there were good prospects that the claimant would recover 65% of his costs following detailed assessment. This was close to what the claimant might expect on a standard assessment. As to the defendant’s criticism of the scale of the costs incurred by the claimant, the court had fully in mind the scale of the work necessitated by the diffuse array of objections to recognition and enforcement the defendant placed before the court. It took the court over 100 pages of trial judgment to deal with them. The claimant had no option but to undertake the necessary professional work to meet the shifting and expanding case, some aspects of which were first ventilated, or particularised in detail, as the trial was imminent. The court rejected the defendant’s submission that the lowest figure in the likely range was no more than 55%.

Conclusion

The court ordered standard basis costs up to the expiry of the relevant period and indemnity basis costs thereafter. On interest, the court ordered: interest on the debt at 5% from the second Russian judgment (11 October 2023) to the expiry of the relevant period, then at 6% above base rate thereafter; interest on costs incurred prior to the expiry of the relevant period at 5%; interest on costs incurred after the expiry of the relevant period at 6% above base rate; interest on costs incurred after judgment at 6% from the date the cost was incurred; and interest on the debt at 8% from the date of the order for payment until payment under the Judgments Act 1838. The court also ordered a 10% additional payment under CPR 36.17(4)(d)(ii) and a payment on account of 65% of costs. The court also refused both applications for a stay of enforcement, finding that the balance of prejudice fell decisively in favour of the claimant and that there was a real risk of dissipation by the defendant.

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The King’s Bench Division’s decision in Lodhia v Twelve Trees Management Company (Bromley-by-Bow) Limited & Ors [2026] EWHC 1177 (KB) addresses the costs consequences of discontinuance where a claimant sought to displace the usual rule under CPR 38.6 on multiple grounds.

Background

Mr Amar Lodhia, a leaseholder at the Maltings residential estate in East London, brought defamation and malicious falsehood claims against five defendants: Twelve Trees Management Company (Bromley-by-Bow) Limited (“TTMC”), the corporate entity managing the estate; Urang Group Limited trading as Urang Property Management (“Urang”), the property management company; and three individual residents who were also TTMC directors, Mr Thomas Squires (the third defendant), Mr Andrew Cregan (the fourth defendant), and Mr Tasleem Malleck-Amode (the fifth defendant). Mr Lodhia described himself as a legal consultant, social entrepreneur, and public interest advocate. He worked as a supervised legal consultant at JSC Chambers and was undertaking a postgraduate degree at the University of Law.

The claim arose from a newsletter sent to leaseholders on 6 March 2025, authored by Mr Squires and distributed by Urang. The newsletter criticised Mr Lodhia’s litigation activities, accused him of lying and making baseless allegations, stated that he was bankrupt and had no formal legal training, and referred to a previous general civil restraint order made against him. It encouraged leaseholders to seek independent legal advice before acting on his recommendation to withhold service charge payments.

Proceedings were issued on 15 May 2025. The original Particulars of Claim sought damages for defamation and malicious falsehood against all five defendants in relation to eleven statements in the newsletter. Mr Lodhia had been made bankrupt on 10 June 2024 and was automatically discharged on 10 June 2025, meaning the claim was issued during his bankruptcy.

Rather than filing a defence, the TTMC defendants applied on 15 July 2025 for summary disposal, seeking: a declaration under section 10 of the Defamation Act 2013 that the court lacked jurisdiction to hear defamation claims against the fourth and fifth defendants; strike-out or summary judgment on remaining claims against those defendants; strike-out or summary judgment on the malicious falsehood claim against the first and third defendants; and strike-out of paragraphs concerning the defendants’ insurance position. By order dated 13 November 2025, Steyn J listed the summary disposal application and a trial of preliminary issues as to meaning for hearing on 21 and 22 January 2026.

On 11 January 2026, Mr Lodhia applied to amend his Particulars of Claim. The proposed amendments deleted the fourth and fifth defendants entirely, abandoned all malicious falsehood claims, reduced the statements complained of from eleven to six, and removed the paragraphs concerning insurance. This conceded the summary disposal application in its entirety, despite Mr Lodhia having previously described it as “misconceived”.

On 15 January 2026, Mr Lodhia applied to postpone the January hearing, which was granted on 19 January 2026 by Collins Rice J, who attached particular weight to a letter from Dr Myrto Tsakopoulou, a Complex Emotional Needs and Complex Trauma Lead Psychologist at East London NHS Foundation Trust, dated 15 January 2026. That letter stated that Mr Lodhia’s treatment had been extended and that he was required to attend hospital on Thursdays, one of which fell during the listed hearing dates. The defendants subsequently raised questions about the authenticity of that letter.

A relisting appointment took place on 12 February 2026, which Mr Lodhia failed to attend. By order dated 16 February 2026, the matter was relisted for 6 and 7 May 2026. On 19 February 2026, Mr Lodhia applied again to postpone the May hearing on the grounds that his preferred counsel, Mr Chiffers, was unavailable. On 4 April 2026, he applied for a stay of proceedings until 30 September 2026 to facilitate mediation. Both applications were refused by Steyn J on 17 April 2026.

On 29 April 2026, Mr Lodhia made a further application to postpone the May hearing, supported by his tenth witness statement, which explained that he had only recently become aware that he was required to sit oral assessments at the University of Law on 6 and 7 May. Steyn J refused the application as originally framed but, in light of a subsequent witness statement indicating that the 6 May assessment could be rescheduled, ordered that the hearing proceed on 6 May only. She also expressed concerns about the authenticity of documents exhibited by Mr Lodhia and the truthfulness of his witness statement, and made directions for further evidence to address those concerns.

On 30 April 2026, Mr Lodhia filed a notice of discontinuance of the entire claim. Steyn J directed that the 6 May hearing be shortened to half a day to deal with consequential matters and outstanding costs issues. The hearing before Linden J took place on 6 May 2026. Mr Lodhia appeared in person. Jonathan Price KC and Percy Preston appeared for the TTMC defendants, instructed by rradar Limited. Greg Lazarev of Lazarev Cleaves LLP appeared for Urang. Judgment was handed down on 18 May 2026.

Costs Issues Before the Court

The costs issues arising at the 6 May hearing were numerous and arose against the backdrop of Mr Lodhia’s notice of discontinuance filed on 30 April 2026. The court was required to determine the costs consequences of several distinct procedural events, as well as the applicable basis of assessment and the question of an interim payment on account.

Before turning to the substantive costs issues, two preliminary points were raised by Mr Lodhia. First, he argued that his trustees in bankruptcy, Begbies Traynor, and his father (who held a lasting power of attorney over his property and financial affairs) should have been served before any costs determination could be made. Second, he contended that he was not personally liable for any adverse costs order, on the basis that such liability would attach to the bankruptcy estate. The court dealt with both points as threshold matters before proceeding to the substantive costs questions.

The substantive costs issues were: first, the costs of the summary disposal application brought by the TTMC defendants on 15 July 2025, which was effectively conceded by Mr Lodhia’s amendment application of 11 January 2026; second, the costs of the three applications to postpone hearings and the application for a stay, all made by Mr Lodhia; third, the costs consequences of the notice of discontinuance filed on 30 April 2026, with the central question being whether the presumption under CPR Rule 38.6 should apply or whether the court should “order otherwise”; fourth, whether any costs awarded in the defendants’ favour should be assessed on the indemnity basis; and fifth, whether an interim payment on account of costs should be ordered pursuant to CPR Rule 44.2(8) and, if so, in what sum.

The indemnity basis issue was ultimately not pursued by Mr Price KC at the hearing, on the basis that liberty to apply would be preserved pending the outcome of the further evidence directed by the court. The remaining issues were determined on the evidence before the court on 6 May.

An additional procedural matter arose from the TTMC defendants’ invitation to the court to make directions for further evidence in light of concerns about the veracity of certain evidence given by Mr Lodhia and the authenticity of certain documents produced by him. These concerns went beyond those already addressed in Steyn J’s 29 April Order and formed a significant part of the hearing.

The Preliminary Issues

Bankruptcy

Mr Lodhia’s position throughout the proceedings was that he was not personally liable for any adverse costs order and that such liability would attach to the estate in bankruptcy. He relied on sections 283 and 306 of the Insolvency Act 1986 and submitted that the trustees should be given the opportunity to respond to what he called “the potential non-party costs order”.

Linden J rejected this argument. The judge held that any order against Mr Lodhia would not be a bankruptcy debt or liability for the purposes of section 382 of the Insolvency Act or Part 14 of the Insolvency Rules 2016, given that there was no relevant “obligation incurred before the commencement of the bankruptcy”. The newsletter was not written until after his bankruptcy, and any order would be made long after the bankruptcy and his discharge from it.

In any event, the trustees had been aware of the proceedings for some time and had not expressed any wish to participate or make representations. Their view, which the court shared, was that Mr Lodhia was liable in respect of any order for costs against him and they were not. The court noted that if Mr Lodhia thought the trustees should be before the court, it was open to him to take steps to bring this about.

Lasting Power of Attorney

Mr Lodhia argued that his father should have been served in accordance with CPR Rules 6.13 and 6.25 because he had entered into a lasting power of attorney with his father in respect of his property and financial affairs. He submitted that he was a “protected party” to whom CPR Rule 21 applies.

Linden J rejected this argument. There was no evidence that Mr Lodhia lacked capacity or had lacked capacity at any stage of the litigation. His Particulars of Claim and other documents boasted in detail of his alleged public profile, abilities and successes. He described himself as working as a legal consultant at JSC Chambers, being responsible for day-to-day handling of leaseholder disputes, having considerable success in pre-action litigation, and having brought at least two other claims in his own name.

While Mr Lodhia described himself as disabled and vulnerable, and submitted evidence from Dr Tsakopoulou stating that he had complex post-traumatic stress disorder and required reasonable adjustments, Dr Tsakopoulou did not suggest that Mr Lodhia lacked capacity to conduct the proceedings. The judge observed that the evidence fell far short of establishing lack of capacity, and that Mr Lodhia’s performance at the hearing cast real doubt on whether he continued to experience the impairments identified by Dr Tsakopoulou.

The Costs of the Summary Disposal Application

Mr Lodhia sought dismissal of the summary disposal application on the ground that it was “otiose” in light of his proposed amendments, and sought his costs of that application and the amendment application on the basis that the defendants had failed to comply with the Pre-Action Protocol for Media and Communications Claims (“the PAP”).

In his fourth witness statement, dated 10 January 2026, Mr Lodhia said he had sent a letter to the solicitors for TTMC on 6 March 2025 which complied with the PAP, and a further letter of claim to TTMC and Urang on 7 March 2025 by first class post. He stated that no defendant responded at all to either letter of claim, and there was no acknowledgement, substantive response, or engagement of any kind with the Protocol. As he had no factual confirmation as to which individual defendants authorised, edited, approved or authored the newsletter, he was forced to plead on the basis of reasonable inference. He sought further information in July 2025 but did not receive it until he read the witness statements supporting the summary disposal application. The defendants should therefore pay his costs.

The defendants’ position was that there was no breach of the PAP, nor any failure to engage in pre-action correspondence. The amendment application conceded the summary disposal application and discontinued against the fourth and fifth defendants. Mr Lodhia should pay the costs of the summary disposal application and the costs thrown away by reason of the amendments regardless of the outcome of the application for costs on the subsequent discontinuance of the proceedings as a whole.

Linden J agreed that Mr Lodhia should pay the defendants’ costs of the summary disposal application, the discontinuance against the fourth and fifth defendants, and the amendment application in any event. The judge did not accept that there was any breach of the PAP by the defendants, nor any failure to engage reasonably with Mr Lodhia in correspondence. Even if this was wrong, the judge did not accept that this made any difference to Mr Lodhia’s approach to starting, pleading and pursuing his case. His approach in the correspondence to the arguments which subsequently formed the basis of the summary disposal application was also unreasonable and directly gave rise to the need to make that application.

The PAP does not specifically require a prospective claimant or defendant to identify who authorised, edited, approved or authored the publication, nor does CPR Practice Direction 53B specifically require these matters to be pleaded. The principal target of the claim in defamation is the publisher of the statements complained of. In this case the publisher was TTMC, as was apparent on the face of the newsletter and as Mr Lodhia was well aware.

There was an issue as to whether Mr Lodhia actually asked who authorised, edited, approved or authored the newsletter prior to commencing proceedings. In the 6 March 2025 pre-action letter, the furthest he went was to seek “a written explanation of how these defamatory statements were approved for publication and by whom”. There was also an issue as to whether the second pre-action letter of 7 March 2025 was really sent, given that it was sent by post only and not by email, and the defendants’ evidence was that it was not received.

Even assuming the 7 March letter was posted and received, the judge did not accept that there was a failure to engage or a breach of the PAP. Rradar responded to the 6 March letter on 20 March 2025, pointing out that Mr Lodhia’s letter did not comply with the PAP in that it did not identify the specific statements complained of or give details of the serious harm alleged. Instead of providing the information requested, Mr Lodhia set a deadline of 24 March for various demands to be met. The correspondence continued, and on 24 March he stated that proceedings had been issued on CE File, despite not being under any limitation pressure.

The original Particulars of Claim, dated 25 March 2025, correctly pleaded that Mr Squires was the principal author and editor of the newsletter. The case against the fourth and fifth defendants was not pleaded simply on the basis that they were authors; it included allegations about piercing the corporate veil and particulars of the case that they were not acting as agents of TTMC. This was not a case in which the pleader based his case on an allegation that they were authors in circumstances where the true position had not been revealed to him in correspondence, and then discontinued that case when the true position became apparent.

On 13 June 2025, rradar wrote to Mr Lodhia stating that he was right to plead that Mr Squires was the author but arguing that there was no viable case against the fourth and fifth defendants. The terms of section 10 of the Defamation Act 2013 were set out, as were the flaws in Mr Lodhia’s case. The difficulties with piercing the corporate veil were also pointed out. He was invited to discontinue against the fourth and fifth defendants and told that an application would be made if he did not do so.

He did not do so. Instead, Mr Lodhia continued robustly to dismiss rradar’s arguments, to assert that the fourth and fifth defendants were personally liable, and to contest other aspects of the defendants’ position. On 26 June 2025, rradar wrote again, repeating the arguments which subsequently formed the basis for the summary disposal application and stating that they would seek instructions to make that application if he persisted. There was a further attempt to persuade Mr Lodhia on 30 June 2025, but he continued to dismiss the defendants’ arguments up to and including 15 July 2025.

The judge rejected Mr Lodhia’s argument that there was unreasonable conduct by the defendants prior to issuing the summary disposal application. He was given every opportunity to make concessions which would avoid the need for an application to the court, but he did not do so. If anyone was unreasonable it was Mr Lodhia in filing his claim so soon and then failing to engage with the defendants’ arguments, which were clearly explained to him but ignored.

As to causation, Mr Lodhia accepted that the position was clear from the witness statements served in support of the summary disposal application. However, this did not cause him to reflect or alter his approach. On 15 July 2025 he immediately responded that the defendants’ arguments were “misconceived”. On 20 August 2025, he filed a formal response which again described the summary disposal application as “misconceived” and continued to assert his claims as pleaded. It was not until 11 January 2026 that he indicated he wished to concede the summary disposal application.

When asked why, if the information he said he sought was critical, he did not discontinue shortly after 15 July when he had this information, Mr Lodhia told the court that he understood he had been ordered or required to resist the summary disposal application by Master Armstrong’s Order of 16 December 2025. The judge regretted to say that he did not regard this answer as truthful, not just because Master Armstrong’s Order did not require him to do any such thing, but also because the Order postdated by a number of months his decision to take the position that the summary disposal application was “misconceived”.

The judge was satisfied that Mr Lodhia should pay the costs of the summary disposal application given that the defendants were wholly successful. He should also pay the fourth and fifth defendants’ costs of the proceedings given that he discontinued against them: there was no change of circumstances and no unreasonable conduct on their part. He should pay the costs thrown away by reason of his application to amend given that the need to amend arose through his approach to the proceedings.

The Costs of the Postponement and Stay Applications

Mr Lodhia made three applications to postpone hearings and one application for a stay. The first postponement application, made on 15 January 2026, was granted by Collins Rice J on 19 January 2026. She attached particular weight to medical evidence in the form of a letter from Dr Tsakopoulou dated 15 January 2026, stating that Mr Lodhia’s treatment had been extended and he was required to attend hospital on Thursdays, one of which fell during the listed hearing dates.

By the time of the 6 May hearing there was an issue as to the authenticity of Dr Tsakopoulou’s letter, given that until his application on 15 January 2026, the basis for saying a postponement was required was the non-availability of Mr Chiffers. Before this, Mr Lodhia did not mention the need to attend hospital although the defendants said he must have been aware of it in December.

Linden J was willing to assume for present purposes that the 15 January 2026 letter was entirely genuine. Even on this assumption, however, Mr Lodhia should pay the costs of the first application to postpone. His emails of 22 December 2025 first proposed the postponement on the grounds that he had instructed counsel who was not available for the hearing. Insofar as that was the true reason for his application, it was an unreasonable basis for a postponement and the defendants were fully entitled to refuse to agree. Even taking his evidence about the need to attend hospital at face value, his application succeeded on a ground introduced very late in the day. The defendants’ skeleton argument had been filed on 14 January and preparations were necessarily well advanced. The just course was to order that Mr Lodhia pay any costs thrown away by reason of the postponement.

On 19 February 2026, Mr Lodhia applied to postpone the May hearing on the grounds that Mr Chiffers was not available. On 4 April 2026 he issued an application to stay the proceedings until 30 September 2026 to facilitate mediation. On 17 April 2026, both applications were refused by Steyn J. She referred to the 15 January application and noted that Mr Lodhia had failed to attend the listing appointment on 12 February 2026. She found that he had no reasonable excuse for failing to do so, particularly given that the hearing was being relisted at his request. She noted that there had been delay in the proceedings and that Mr Lodhia had had plenty of time to instruct alternative counsel or represent himself. She noted that the defendants were willing in principle to engage in mediation but agreed with them that this did not mean the proceedings should be stayed given the delays.

Linden J was satisfied that the costs of the second postponement application and the application for a stay should be borne by Mr Lodhia given that both applications failed.

On 29 April 2026, Mr Lodhia filed a further application to postpone the May hearing, supported by his tenth witness statement dated 24 April 2026. The application notice appears to have been signed by Mr Chiffers as his representative although Mr Lodhia conducted the correspondence. This explained that on 21 April 2026 he had become aware that he was required to attend oral assessments at the University of Law on 6 and 7 May 2026. He had attempted to reschedule these assessments but had been told by the Programme Lead, Ms Salome Verrell, that they could not be rescheduled.

In response, the defendants filed evidence casting doubt on the veracity of what Mr Lodhia had said in his tenth witness statement and questioning the completeness of the documents he had exhibited. Mr Lodhia then submitted an eleventh witness statement dated 29 April 2026, explaining that on 29 April he had been told that the oral assessment on 6 May could be rescheduled and he was therefore able to attend on that day but not on 7 May. His position was now that the preliminary issues as to meaning could be determined but that the issues as to costs should be postponed.

On 29 April 2026, Steyn J refused Mr Lodhia’s application as framed but, in light of his eleventh witness statement, ordered that the hearing would take place on 6 May 2026 starting at 10am. She expressly refused Mr Lodhia’s request to postpone the hearing of the issues in relation to costs. She also expressed concerns about the authenticity of certain documents exhibited by Mr Lodhia and the truthfulness of his witness statement, and made directions for further evidence to allay those concerns.

Mr Lodhia argued that his application was successful because the defendants resisted it and argued that one day would not be sufficient. Linden J held that his application was not successful in that the hearing was not vacated, as he originally asked. He did then modify his application but unsuccessfully argued that it should not deal with the issue of costs. On balance the judge took the view that he should pay the costs of this application.

The Costs of Discontinuing the Claim

Following Steyn J’s 29 April Order, on 30 April 2026 at 7.55am Mr Lodhia sent a letter offering a drop hands settlement. At 6.14pm, he emailed the defendants’ solicitors a signed notice of discontinuance of the whole claim. The covering email said that any application for costs would be resisted and referred to Mr Squires’ comments at the AGM on 29 April as unreasonable conduct relevant to costs under CPR Rule 44.2. Mr Lodhia also said that if the defendants sought their costs he intended to issue a further claim based on Mr Squires’ actions. The email concluded that the relentless nature of the litigation, and in particular Mr Squires’ actions, had had a profound and serious effect on Mr Lodhia’s health. The email did not suggest that the actions of Mr Squires, or the alleged position in relation to Mr Lodhia’s health, had caused him to decide to discontinue. No explanation for this decision was provided.

Mr Lodhia argued that the usual consequences of discontinuing proceedings, as set out in CPR Rule 38.6, should not follow. He put forward a number of reasons why the presumption identified in this rule was rebutted and the defendants’ costs should be disallowed.

Linden J applied the principles set out by Moore-Bick LJ in Brookes v HSBC Bank plc [2011] EWCA Civ 354. These provide that when a claimant discontinues, there is a presumption that the defendant should recover costs; the burden is on the claimant to show a good reason for departing from that position; the fact that the claimant would or might well have succeeded at trial is not itself a sufficient reason; if it is plain the claim would have failed, that is an additional factor in favour of applying the presumption; the mere fact that the claimant’s decision to discontinue may have been motivated by practical, pragmatic or financial reasons will not suffice to displace the presumption; if the claimant is to succeed in displacing the presumption he will usually need to show a change of circumstances to which he has not himself contributed; however, no change in circumstances is likely to suffice unless it has been brought about by some form of unreasonable conduct on the part of the defendant which in all the circumstances provides a good reason for departing from the rule.

At paragraph 10 of Brookes, Moore-Bick LJ stated that “a claimant who seeks to persuade the court to depart from the normal position must provide cogent reasons for doing so and is unlikely to satisfy that requirement save in unusual circumstances.”

The judge also referred to Nelson’s Yard Management Co v Ezieful [2013] EWCA Civ 235, in which Beatson LJ stated that “the context for the Court’s mandatory consideration of all the circumstances under CPR 44.3 is the determination of whether there is a good reason to depart from the presumption imposed by CPR 38.6.”

The judge proceeded on the assumption, derived from Scheinberg v Van Doorn [2019] EWHC 3220, that it was open to him to disallow the defendants’ costs or make an order in Mr Lodhia’s favour even without a change of circumstances, if there was unreasonable conduct on the defendants’ side. This gave Mr Lodhia the most favourable possible analytical framework.

The judge considered Mr Lodhia’s arguments individually and cumulatively but held that they did not amount to a relevant change of circumstances brought about by unreasonable conduct on the part of the defendants which in all the circumstances provided a good reason for departing from the rule. Nor did they amount to unreasonable conduct on the part of the defendants which would cause the court to disallow their costs in whole or in part.

The judge briefly addressed Mr Lodhia’s key arguments.

- - First, the alleged late disclosure of information as to authorship, editorship and publisher details, breaches of the PAP and failure to engage with the issues in correspondence had already been dealt with in the context of the summary disposal application. Insofar as the service of the statements of the third to fifth defendants in support of the summary disposal application was a relevant change of circumstances (which it was not), it occurred more than nine months before discontinuance. There was no unreasonableness on the part of the defendants in this regard.
  - Second, Mr Lodhia alleged that the defendants’ position on meaning had shifted in relation to two of the six statements complained of, adding to the costs of the preliminary trial as to meaning. There was nothing in this point. The defendants’ position did not materially shift and in any event their approach had no significant impact on costs. It was Mr Lodhia’s approach to pleading the statements complained of (complaining of eleven statements and then reducing this to six several months later) which unnecessarily increased the costs.
  - Third, Mr Lodhia relied on Mr Squires’ alleged defamatory statements about him at the 29 April AGM. It appeared that Mr Squires referred to the litigation and made uncomplimentary remarks which Mr Lodhia argued were implicitly about him. Assuming for present purposes that Mr Lodhia’s account and interpretation were accurate, the judge accepted that this was a recent development but did not regard it as a relevant change of circumstances. Mr Squires’ remarks were a reason for Mr Lodhia to continue with the claim rather than discontinue. Whatever Mr Squires said or implied on 29 April did not cause Mr Lodhia to discontinue. Rather, having decided that he wanted out of the litigation he alighted on this as a lever to use in an attempt to secure a drop hands settlement by threatening further proceedings, and to avoid paying the costs of the proceedings. Even if Mr Squires’ conduct was unreasonable, this was not unreasonable conduct of the litigation and in any event it had no bearing on the costs of the proceedings.
  - Fourth, Mr Lodhia relied on the fact that the defendants were insured in relation to the litigation. He said there was inequality of arms or resources between the parties. This was true but it was not a change of circumstances and did not amount to unreasonable conduct. Mr Lodhia’s own position was that he was aware the defendants were insured in December 2025. The fact that they were represented by qualified and competent lawyers may be a point of difference but this had been the position throughout the proceedings. He also said that although the defendants may be liable for the costs of their lawyers, the fact that they were insured against these costs rendered it unfair that he should have to pay them. This argument was misconceived for obvious reasons.
  - Fifth, Mr Lodhia relied on the alleged insolvency of TTMC, of which he implied he had first become aware from a report dated 9 December 2025. This, he said, was a change of circumstances. It also meant that TTMC would not be able to satisfy any adverse costs order. In fact, Mr Lodhia had a report dated 2 August 2025 which said that TTMC was insolvent. He relied on this report in his 20 August 2025 submissions resisting the summary disposal application and seeking to continue the litigation on all fronts. The insolvency issue was not a relevant change of circumstances and had no bearing on Mr Lodhia’s decision to discontinue or on the costs of the litigation. TTMC was insured against any liabilities in damages or costs, and in any event Mr Lodhia could recover against the other defendants.
  - Sixth, Mr Lodhia relied on the fact that he was discharged from bankruptcy after proceedings were issued. The judge had dealt with the bankruptcy issue above. Mr Lodhia’s discharge was not a relevant change of circumstances and did not amount to unreasonable conduct on the part of the defendants.
  - Seventh, he relied on the defendants’ refusal to accept various offers of settlement which he made and their alleged refusal to engage constructively with his proposals for mediation or other negotiation. The short answer, having considered the without prejudice materials, was that Mr Lodhia had not done better in these proceedings than any offer to settle which he made. He had recovered nothing and was liable to pay substantial costs even leaving aside the effect of his 30 April notice of discontinuance. On the other hand, the defendants did make a without prejudice save as to costs offer of settlement on 13 June 2025 which Mr Lodhia had failed to beat. They had also been prepared to engage in alternative dispute resolution through mediation. They engaged with Mr Lodhia’s proposals but it did not prove possible to reach agreement as to the terms of the mediation, let alone the terms of any settlement. There was no relevant change of circumstances and no unreasonable conduct on the part of the defendants such as would lead to any of their costs being disallowed.
  - Eighth, Mr Lodhia relied on a complaint which he had made to the Solicitors Regulation Authority about a point made in the defendants’ solicitor’s fourth witness statement. Although this would ultimately be a matter for the SRA to determine, there appeared to be nothing in the point. In any event, Mr Lodhia’s complaint and the witness statement were not a relevant change of circumstance and did not amount to unreasonable conduct on the part of the defendants such as would lead the court to disallow their costs.

The judge noted that Mr Lodhia also advanced what he described as “hopeless” arguments, including that he should not be required to pay twice given that part of the service charges which he pays goes towards TTMC’s budget for legal expenses, and that the doctrine of estoppel or approbation applied to prevent TTMC from recovering its costs. The judge observed that TTMC was entitled both to levy service charges and to claim its costs of the proceedings: there was no inconsistency and no question of double recovery.

The judge therefore ordered that Mr Lodhia would pay the costs of the proceedings up to the date of service of the notice of discontinuance. Those costs would be assessed on the standard basis, if not agreed, pending the responses to Steyn J’s 29 April Order and the judge’s directions for further evidence, and there would be liberty to apply in the light of that evidence.

Interim Payment on Account of Costs

Mr Lodhia did not advance any reason to depart from the presumption under Rule 44.2(8) that a reasonable sum should be paid on account of costs. His arguments were that no order for costs should be made in favour of the defendants and that, in any event, their Statements of Costs claimed disproportionately and unreasonably large sums. The judge held there was no good reason why an interim payment on account of costs should not be ordered in the case of both sets of the defendants’ legal representatives.

As to quantum, the judge applied the guidance given by Christopher Clarke LJ in Excalibur Ventures LLC v Texas Keystone Inc & Others [2015] EWHC 566 (Comm). Any figure ordered to be paid on account need not be “the irreducible minimum” in terms of what was likely to be recovered on a detailed assessment. A reasonable sum would often be one that was an estimate of the likely level of recovery subject to an appropriate margin to allow for error in the estimation.

As the judge understood TTMC’s Statement of Costs dated 5 May 2026, the figure of £112,779 plus VAT included the costs of the 6 May hearing rather than being limited to the costs to the service of the notice of discontinuance. In fairness to Mr Lodhia, the question whether he should pay TTMC’s costs of the 6 May hearing had not been the subject of submissions. The judge therefore reserved this issue and gave Mr Lodhia an opportunity to put in written submissions, limited to 5 pages, as to why he should not pay those costs and Urang’s costs of the hearing. The judge would then determine this matter on paper.

In the meantime, the judge worked on the rough and ready basis that approximately £25,000 of the £112,779 was in respect of the 6 May hearing so that approximately £90,000 related to the costs to service of the notice of discontinuance, which the judge treated as 30 April 2026.

Doing the best he could, the judge considered that a reasonable sum at this stage in respect of the costs to 30 April was £55,000 plus VAT. Although this was not a legally complex case, it was made more complex and expensive by Mr Lodhia’s approach. There were multiple emails, letters and witness statements from him generating voluminous material which required to be considered and responded to as appropriate. There were also the applications which generated additional costs, and there was the late postponement of the hearing in January. These considerations meant that the TTMC Defendants might well recover significantly more than £55,000 on a detailed assessment.

As for Urang’s costs, Mr Lodhia’s submission was that Lazarev Cleaves LLP had not been sufficiently involved to justify the figure of £7,364 plus VAT which was claimed. Mr Lazarev explained that in fact Urang’s costs could have been significantly higher. They instructed Counsel to advise them and thereafter had a watching brief in the sense that they were content for rradar and the TTMC Defendants to “make the going” rather than duplicate their efforts. Urang’s costs related principally to consideration of Mr Lodhia’s correspondence and witness statements. The judge rejected Mr Lodhia’s argument that Urang should not recover any of its costs.

As the judge understood Urang’s Statement of Costs, their costs to 30 April 2026 were in the order of £6,000 plus VAT. A reasonable sum at this stage in respect of those costs assuming assessment on a standard basis was £3,600 plus VAT.

Directions for Further Evidence

The judge made extensive directions for further evidence to address concerns about the veracity of certain evidence given by Mr Lodhia and the authenticity of certain documents produced by him. The judge explained to Mr Lodhia that Steyn J’s 29 April Order and these directions were not just relevant to the question whether costs should be assessed on the indemnity basis. Depending on what the evidence in response said, consideration might in due course be given to the question of proceedings for contempt of court. The judge expressly warned at paragraph 115 of the judgment that this possibility existed.

The directions covered: compliance with Steyn J’s 29 April Order; the 6 and 7 March 2025 letters of claim and associated certificates of service; Mr Lodhia’s dealings with Begbies Traynor; Dr Tsakopoulou’s letters; the role of Joseph Chiffers; and Mr Lodhia’s father’s role under the lasting power of attorney. The judge directed that the Order be served by the Defendants rather than by Mr Lodhia, noting that the experience in relation to Steyn J’s 29 April Order demonstrated that it would be “cleaner” for him not to be involved in the various witnesses’ compliance with the Order. This would ensure transparency and confidence in relation to the reliability of the responses received.

The judge gave liberty to apply to Begbies Traynor, Dr Tsakopoulou and Mr Chiffers to vary, set aside or stay the Order so far as it affected them, given that the Order had been made without giving them an opportunity to make representations.

CPR 38.6: Discontinuance And Costs – The Legal Principles

CPR 38.6 | Default Rule Disapplied On Discontinuance

CPR 38.6 | Post-Discontinuance Conduct Can Be Considered

CPR 38.6 Presumption Partially Displaced By 20% Due To Collateral Use Of Witness Statements

MEX Group v Ford | Costs After Discontinuance and Contempt

Indemnity Basis Costs Following Discontinuance

Indemnity Costs Awarded After Contempt Proceedings Used As Commercial Pressure

Commercial Litigation, Detailed Assessment, Indemnity Costs, New Costs Blog, Payment on Account

The High Court’s decision in Bargain Busting Ltd v Shenzhen SKE Technology Company Ltd [2026] EWHC 1146 (Ch) addresses the basis and quantum of costs following dismissal of a contempt application that the court found had been used to weaponise the criminal jurisdiction to pursue the applicant’s private interests.

Background

These proceedings arose from a contempt application brought by Bargain Busting Limited (“BBL”) against Shenzhen SKE Technology Company Limited, Stobbs IP Limited, Wan-Yi Tsai, and Jixuan Si. The contempt application was started in August 2025 and concerned allegations that the respondents had interfered with the administration of justice by writing to the Intellectual Property Office (“IPO”) to request that it delay registration of a trade mark pending the outcome of an application for permission to appeal to the Court of Appeal. The respondents included both the first defendant company and the solicitors and fee earners who had acted on its behalf, namely Stobbs IP Limited and two of its lawyers.

The substantive hearing took place before HHJ Paul Matthews, sitting as a Judge of the High Court in the Business and Property Courts in Bristol. On 23 April 2026, judgment was handed down ([2026] EWHC 933 (Ch)) dismissing the contempt application, together with associated strike out applications and a joinder application. The court commented adversely in that judgment on the use of the contempt jurisdiction in the circumstances of the case.

Following the handing down of the main judgment, written submissions were invited on consequential matters, including the basis of the costs order, the mode of assessment, whether a payment on account should be ordered, and permission to appeal. A clip of correspondence and attendance notes was also placed before the court for the purposes of those consequential matters. The consequential judgment was handed down on 13 May 2026.

BBL was represented by Aidan Eardley KC, instructed by Brandsmiths. The respondents were represented by Fiona Horlick KC and Charlotte Elves, with Kingsley Napley LLP acting for the first respondent and Hickman and Rose acting for the remaining respondents.

Costs Issues Before the Court

BBL accepted that it had been unsuccessful in the strike out applications, the contempt application, and the joinder application, and did not resist an order that it pay the respondents’ costs. The live issues before the court on consequential matters were therefore: first, whether those costs should be assessed on the standard basis or the indemnity basis; second, whether the costs should be subject to summary assessment or detailed assessment; and third, whether a payment on account should be ordered and, if so, in what amount. A fourth issue, namely permission to appeal, was also addressed.

The claimant calculated the total costs claimed by the respondents across their costs schedules as some £293,460. The court corrected this to £296,099.61 plus applicable VAT on the costs of Hickman and Rose, producing a total of £322,628.77. The respondents sought indemnity costs, relying on the conduct of BBL and its solicitors during the course of the litigation. BBL resisted the indemnity basis and submitted that, in any event, the costs should be subject to detailed assessment rather than summary assessment, and that no payment on account was appropriate.

The Parties’ Positions

The respondents’ position on the basis of assessment

The respondents argued that costs should be assessed on the indemnity basis. They contended that BBL by these proceedings had sought to weaponise the contempt jurisdiction against the defendants, to drive a wedge between the defendants and their lawyers, to strike fear and loss of professional status amongst the defendants’ lawyers, and to boast to the IP legal market.

The respondents relied on a number of features of BBL’s conduct during the litigation. First, an open offer of settlement had been made in August 2025, on the basis that BBL would discontinue and pay the respondents’ costs on the indemnity basis. That offer was maintained at various points and was not withdrawn until January 2026. Second, at a directions hearing on 16 January 2026, Trower J had remarked that the weaponisation of the contempt jurisdiction was a problem and that the application appeared to fall squarely into that category. Third, a letter dated 23 January 2026 from BBL’s solicitors had, in the respondents’ submission, threatened to report the second to fourth respondents to the Solicitors Regulation Authority unless the defendants agreed to pay BBL’s costs incurred in connection with the trade mark applications. Fourth, a without prejudice save as to costs telephone call on 11 March 2026 had, in the respondents’ submission, revealed that the contempt proceedings had been issued as a form of pressure on the defendants to cease attempting to persuade the IPO to delay registration of the trade mark.

BBL’s position on the basis of assessment

BBL submitted that the court had made no findings in the main judgment that its applications were abusive, or any other findings capable of taking the case out of the norm. It argued that the August 2025 offer was not a genuine offer to settle, as it required BBL to discontinue and pay costs on the indemnity basis. It also submitted that the respondents had not referred in correspondence to the points which ultimately succeeded, and had not made strike out applications until January 2026. As to the January 2026 letter, BBL submitted that it did not contain a threat to report the respondents to the SRA; rather, it explained that the conduct alleged would, if well-founded, amount to breaches of the SRA Code, and provided reassurance that BBL would not raise those matters in another forum if the contempt application were settled. BBL further submitted that the telephone call of 11 March 2026 had been mischaracterised, and that it represented a genuine attempt to resolve the proceedings.

Mode of assessment

The respondents submitted that summary assessment was appropriate, relying on paragraph 9.2 of CPR PD44, which provides that the court should make a summary assessment at the conclusion of a hearing lasting not more than one day. The hearing had lasted less than one day. BBL submitted that detailed assessment was appropriate, primarily because of the size of the costs claimed.

Payment on account

BBL submitted that a lack of clarity about the respondents’ costs made a payment on account inappropriate. The respondents sought a payment on account. BBL also raised points about duplication of effort between Stobbs IP and Kingsley Napley, both of whom had acted for the first respondent, and about the rates claimed in the costs schedules.

The Court’s Decision

Indemnity costs

The court ordered costs on the indemnity basis. HHJ Matthews confirmed that it was not necessary for the main judgment to have made findings on all matters relevant to the costs decision. The general conduct of the parties in litigation is not ordinarily an issue for determination in the substantive judgment, and the court may make supplementary findings for the purpose of consequential matters after giving the parties an opportunity to be heard. The court noted that it had, in any event, commented adversely on the weaponisation of the contempt jurisdiction in paragraphs 33 to 34 of the earlier judgment.

The court applied the well-established principle that an award of indemnity costs is appropriate where the conduct of the paying party or the circumstances of the case take it out of the norm: Excelsior Commercial and Industrial Holdings Ltd v Salisbury Hammer Aspden and Johnson [2002] EWCA Civ 879; Hosking v Apax Partners Ltd [2019] 1 WLR 3347, [42]. The court also noted the range of factors that may be taken into account in such an assessment, as set out in Three Rivers DC v Bank of England [2006] EWHC 816 (Comm), [25].

The court observed that the proceedings themselves were of an unusual nature, making very serious allegations against officers of the court, and potentially having far-reaching professional consequences for those officers. In terms of seriousness, the court put the allegations in the contempt application on the same level as allegations of dishonesty. The court noted that there is no presumption that a failure to make good allegations of dishonesty should normally lead to an order for costs on the indemnity basis; instead, it is a factor to take into account, and may be a reason for making such an order: Thakkar v Mican [2024] EWCA Civ 552.

Three factors were identified as particularly significant. First, the nature of the alleged contempt: writing to the IPO to request a delay in registration pending an application for permission to appeal was described as the kind of thing solicitors do routinely, and was supported by the IPO’s own published practice and decisions. The court found it difficult to understand how BBL’s solicitors could have formed the view that such conduct amounted to a criminal offence. Second, the January 2026 letter: notwithstanding BBL’s submissions, the court found, to the civil standard, that the letter was intended to be read as a threat to report the respondents to the SRA unless they agreed to BBL’s terms. Even if that intention could not be established, the letter fell to be judged by its effect on the reasonable addressee, and any reasonable addressee would have understood it as such a threat. Third, the without prejudice save as to costs telephone call of 11 March 2026: the court found that the call made clear that the claimant justified the issue of criminal contempt proceedings in August 2025 as a form of pressure on the defendants to cease trying to persuade the IPO to delay registration of their client’s trade mark. Criminal proceedings should not be used for such a purpose.

The court held that, whether or not these various factors would each individually justify an award of costs on the indemnity basis, taken together they did so overwhelmingly. The claimant made very serious allegations against the defendants, and lost. It was wrong and out of the norm for the claimant’s solicitors opportunistically to seek to use criminal contempt proceedings, in which the touchstone is the public interest in the administration of justice, in order to pursue their client’s private interests. It was wrong and out of the norm for the claimant’s solicitors to threaten the defendants with being reported to the SRA in order to persuade them to agree to their client’s terms.

Mode of assessment

The court ordered that the costs should be subject to detailed assessment. This was not simply because the amount of money involved was significant. It was because these were complex and hard-fought multi-party proceedings which had lasted about eight months. On any view, a lot of work had been done by all those involved. The fact that the hearing which put an end to these proceedings lasted less than one day did not tell the full story. Justice to both sides required a detailed assessment.

Payment on account

The court ordered a payment on account of £215,000 under CPR rule 44.8, which provides that where the court orders a party to pay costs subject to detailed assessment, it will order that party to pay a reasonable sum on account of costs, unless there is good reason not to do so. The court applied the guidance in Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC 566 (Comm), in which Christopher Clarke LJ stated that what is a reasonable amount will depend on the circumstances, the chief of which is that there will, by definition, have been no detailed assessment and thus an element of uncertainty. Any sum will have to be an estimate. A reasonable sum would often be one that was an estimate of the likely level of recovery subject to an appropriate margin to allow for error in the estimation.

The court noted that this was complex, high-value work carried out by specialists on both sides, which would amply justify the London 1 guideline hourly rate. The claimant’s solicitors claimed rates in their costs schedules of £1,100 and £605 for grade A, £550 and £500 for grade B, £380 and £370 for grade C, and £240 for grade D, all of which considerably exceeded the London 1 rate. In contrast, those claimed by the defendants’ and Mr Rebling’s solicitors fell partly within and partly outside the London 1 rates, whilst those for Stobbs IP itself (when acting for the first defendant) were all within the London 1 rates. The claimant made a point about duplication of effort between Stobbs IP and Kingsley Napley, both of whom acted for the first defendant. The claimant also made a point about VAT on Kingsley Napley’s costs schedule, but this had been corrected.

The court referred to Thomas Pink Ltd v Victoria’s Secret UK Ltd [2014] EWHC 3258 (Ch), in which the judge made an order for a payment on account equal to 90% of the approved budget. Given that there was no approved costs budget for these proceedings, the court considered it should be more cautious. Overall, the court considered it should build in a margin of about one third, and ordered the claimant to pay £215,000 on account of costs, to be paid to the three solicitors’ firms pro rata to their schedules of costs.

Permission to appeal

The court refused permission to appeal. Under CPR rule 52.6, in a first appeal the court may not grant permission to appeal unless either there is a real prospect of a successful appeal or there is some other compelling reason why an appeal should be heard. The phrase ‘real prospect’ does not require a probability of success (that is, more likely than not), but merely means a prospect which is ‘not unreal’: Tanfern v Cameron-MacDonald [2001] 1 WLR 1311, [21]; Re R (A Child) [2019] EWCA Civ 895, [31]. If the application passes that threshold test, however, the court is not obliged to give permission to appeal; instead it has a discretion to exercise.

The claimant put forward five grounds of appeal, each containing multiple sub-points.

First ground: public interest. This ground contained three points. The first was that the court had wrongly directed itself that the presence of a private interest rules out the possibility of a party invoking the law of criminal contempt. The court rejected this, clarifying that what it had sought to express was that it was impermissible to use criminal contempt proceedings simply for the purpose of pursuing private interests. The second point was that the court had misunderstood the significance of BBL’s submission that there is no requirement for a person who brings a contempt application as of right to demonstrate some wider public interest. The court held that even if it had misunderstood the “significance” of the submission, the claimant did not say the court was wrong to say that a wider public interest must be shown. The third point was that the court was wrong to hold that BBL could not show any sufficient public interest in prosecuting these allegations of criminal contempt. The court held that this was an evaluative judgment, essentially part of fact finding, and that appellate courts will not interfere with evaluative judgments unless compelled to do so.

Second ground: the ‘Representations’. The claimant argued that the court was wrong to break down the ‘Representations’ into indicative and subjunctive/imperative statements and to disregard the latter. The court held that this missed the point: the complaint was that the solicitors had said things that they knew to be untrue, but you cannot tell lies in making a request or issuing a command. Moreover, the court had expressly gone on to deal with the position if it were wrong to break down the ‘Representations’ in this way.

Third ground: ‘interference’. This ground contained two points. The first was that the court’s finding that there could be no arguable ‘interference’ with the administration of justice was vitiated by mischaracterisation of the claimant’s case and failure to take into account the entirety of the statements complained of in the three emails. The court held that the allegation of “mischaracterisation” was not understood, and that it could not give permission for a ground which it did not understand. To the extent that this point depended upon the second ground, it must fail. The second point was that the court was wrong to hold that there could be no interference in circumstances where the IPO alone had the power to decide to register, it knew exactly what the legal position was, and acted in accordance with its own internal guidance at the time. The court held that this was an attempt to appeal against findings of fact, but that the appellant court will not interfere with that unless it is satisfied that the judge was plainly wrong, that is, that the decision was one that no reasonable judge could have reached.

Fourth ground: ‘impropriety’. This ground contained two main points. The first was that the court had mischaracterised the impugned communications as submissions about the meaning and effect of the order of the High Court. The court rejected this, clarifying that its view was that submissions that an order of the court should not yet be implemented for some reason or another were, in this context at least, not improper. There was nothing about “submissions about the meaning and effect” of an order. The second point was that the court’s rejection of the claimant’s case on impropriety was vitiated by its finding that there was simply no real prospect of showing at the hearing of the contempt application that the third and fourth defendants were doing otherwise than asking the IPO to implement its own guidance. The claimant argued that the court was wrong to make that finding because the emails made no reference to the guidance or to the practices of the IPO, and the third and fourth defendants did not give evidence. The court held that the third and fourth defendants could not be obliged to give evidence, and had chosen not to. Realistically, the court was never going to hear from them. Accordingly, the only material before the court on which it could make a finding was the emails, the manual, the decisions of Dr Porter and their own experience as IP lawyers. On that basis the court was entitled to make its finding. Once again, the claimant was simply challenging the court’s finding of fact, and the court saw no real prospect of an appellant court overturning it.

Fifth ground: mens rea. The claimant argued that the court’s conclusion that there was no real prospect of showing that the third and fourth defendants acted with the relevant mens rea was vitiated by its finding that there was simply no real prospect of showing that they were doing otherwise than asking the IPO to implement its own guidance. The claimant argued that that finding was not open to the court, for the reasons given under the fourth ground. The court held that since the fourth ground failed, so did the fifth. The court also noted that the mens rea point was strictly unnecessary anyway.

Since none of these five grounds had any real prospect of success, the court could not give permission to appeal on any of them. The claimant did not suggest that there was any other compelling reason for an appeal, and the application was therefore dismissed.

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

Background

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

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

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

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

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

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

Costs Issues Before the Court

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

The Parties’ Positions

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

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

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

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

The Court’s Decision

Costs of the UO/SJ Application

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

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

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

Costs of the Inquiry

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

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

Costs of the AS Application

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

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HHJ Pearce held that a receiving party in creditors’ voluntary liquidation could recover VAT on assessed costs, as Regulation 111(5) of the VAT Regulations 1995 permits post-deregistration VAT recovery by the estate via liquidators. However, the paying party was not liable for VAT where no actual loss was suffered, with the court drawing a careful distinction between insured and insurer for input tax purposes.

Reserved Costs of Interim Applications Determined at Trial | Gable Insurance AG v Dewsall & Others (08/01/2026)

Deputy Judge Robin Vos determined the reserved costs of interim applications including freezing orders, search orders and contempt proceedings following trial. Applying the Dos Santos v Unitel principles, the court held that the trial outcome remained a relevant factor when costs had been reserved, awarding indemnity costs where a party had relied on a discredited investigative report and making cross-orders reflecting the differing outcomes on each application.

Summary Assessment | Disproportionate Costs Reduced and Recovery Halved for Aggressive Conduct (15/01/2026)

Mr Justice Pepperall reduced claimed costs of £61,366 related to a strike out application to £12,000 on summary assessment, finding them disproportionate, with recovery further limited to 50% due to the claimants’ aggressive conduct in breach of CPR 1.3. The court warned that the parties’ combined budgets of £12.7 million were “enormous” and should not be expected to receive approval at those levels.

“Extraordinarily High” Costs With “Paucity Of Information” Result In £43 Million Payment On Account (21/01/2026)

Mrs Justice O’Farrell DBE ordered a payment on account of £43 million from a £189 million costs claim in the Fundão dam litigation, adopting a cautious approach given the limited supporting evidence. The court stripped out over £109 million in sign-up and collateral costs, applied a 10% reduction for issues lost and awarded pre-judgment interest on costs under CPR 44.2(6)(g).

Costs Procedure & Case Management

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HHJ Stephen Davies made a non-party costs order under s.51 Senior Courts Act 1981 against secured creditors who funded an insolvent company’s failed construction claim. Applying Dymocks and Goknur, the court treated the creditors as the “real parties” to the litigation, ordering them to pay a further £995,000 beyond £583,000 in security already provided, holding that the provision of security for costs does not cap non-party costs liability.

CPR 3.14 | Relief From Sanctions Refused After Late Costs Budget (15/01/2026)

Recorder Singer KC refused relief from sanctions after a limited company failed to file its costs budget by the CPR 3.14 deadline, restricting future recoverable costs to court fees only. Applying the Denton three-stage test, the court held that the solicitors’ withdrawal did not constitute good reason, and that an unrepresented limited company remains subject to budgeting requirements unlike a litigant in person.

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Mrs Justice Joanna Smith DBE applied the Hospira v Novartis three-question framework to determine costs following mixed success in multi-claim IP litigation. The defendant was identified as the overall winner despite the claimants’ partial success on trade mark infringement, with the late abandonment of three substantial claims resulting in a net reduction of 30.6% from the defendant’s costs recovery and payments on account at 90% of budgeted and 70% of incurred costs.

Solicitor-Client Costs & Retainers

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Senior Costs Judge Rowley held that fixed recoverable costs are irrelevant to solicitor-client assessment under the Solicitors Act 1974 and the Non-Contentious Business Remuneration Order 2009. The court endorsed the SGI Legal v Karatysz “step back” methodology, confirming that the “swings and roundabouts” fairness rationale applies only inter partes and that contractual terms govern the solicitor-client relationship.

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Mr Justice Marcus Smith upheld a nil assessment of a solicitor’s bill where the firm accepted a client’s repudiatory breach rather than relying on its contractual termination clause. Applying Dargamo Holdings and Barton v Morris, the court held that the contractual risk allocation in CFAs precludes restitutionary claims, and that quantum meruit is available only as a “last resort” where the contract does not already address the scenario.

Unless Order Stands | Defendants Fail To Evidence Impecuniosity After Non-Payment Of Interim Costs (26/01/2026)

Costs Judge Nagalingam dismissed an application to discharge an unless order following non-payment of a £741,122.85 interim costs order in solicitor-client proceedings. Applying Tibbles and the Denton principles, the court held that impecuniosity must be supported by “detailed, cogent and proper evidence” per Michael Wilson v Sinclair, with the defendants’ ability to secure €200,000 for legal representation undermining their claim of inability to pay.

Inadequate Estimate Fails To Establish Special Circumstances Under s70(3) (27/01/2026)

Costs Judge Leonard refused an application for assessment of 19 solicitor’s bills totalling £195,954.60, finding no special circumstances under s.70(3) of the Solicitors Act 1974. The initial estimate of £10,000–£15,000 was expressly preliminary and superseded, and the client’s conduct — including seeking £1.3 million in litigation funding and expressing a preference to stay with the firm — demonstrated they would have made the same choices regardless of updated estimates.

Trust & Estate Costs

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HHJ Paul Matthews held that executors who defended removal proceedings in their own interests rather than for the estate’s benefit lost their entitlement to indemnity under Trustee Act 2000 s.31. Indemnity costs were awarded against the executors personally, the court applying Excelsior for “out of the norm” conduct including self-dealing, delay in administration and accelerating a property exchange to pre-empt an injunction.

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Deputy Master Holden held that trustees removed on hostility grounds retained their right to indemnity from the trust fund. Applying Price v Saundry, the court found the trustees’ costs were properly incurred through reasonable defence of dismissed misconduct allegations and a good-faith early settlement proposal, whilst making no order as to costs between the parties due to the claimants’ unreasonable conduct in pursuing exaggerated allegations without pre-action correspondence.

Part 36 & Fixed Recoverable Costs

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The Court of Appeal (Bean LJ, Phillips LJ, Stuart-Smith LJ) overruled Mundy v TUI UK Ltd, holding that CPR 36.17(4) enhanced costs consequences for Part 36 liability-only offers require an actual determination of liability rather than a global settlement. A 90:10 liability split remains valid in principle following Huck v Robson, and a court-approved settlement under CPR 21.10 constitutes “judgment” for Part 36 purposes.

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Costs Judge Whalan held that a claim against the police for wrongful interference with goods fell within CPR 26.9(10)(e)(i) as it included an intentional tort, mandating multi-track allocation and excluding fixed recoverable costs. The court also held (obiter) that Part 8 costs-only proceedings issued after 1 October 2023 trigger FRCs for legacy settlements, and that Part 36 acceptance does not constitute “contracting out” under CPR 45.1(3).

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Unless Order Stands | Defendants Fail To Evidence Impecuniosity After Non-Payment Of Interim Costs

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The Senior Courts Costs Office’s decision in Fieldfisher LLP v Scherbakova & Anor [2026] EWHC 104 (SCCO) confirms that parties seeking relief from unless orders on grounds of impecuniosity must adduce proper evidence, not rely on inference.

Background

The Claimant, Fieldfisher LLP, provided legal services to the Defendants, Olga Scherbakova and Alexander Scherbakov, in relation to a contentious probate claim concerning their late father’s estate, under engagement letters dated December 2022 and January 2023 [§3, §5]. The Defendants ceased instruction in August 2023 [§7]. During the retainer, the Claimant issued invoices totalling £1,944,078.48, of which a substantial balance remained unpaid [§8].

The Claimant commenced proceedings to recover the unpaid fees as a debt [§9]. In their Defences, the Defendants admitted liability to pay costs subject to reasonableness [§20–21]. On 2 December 2024, HHJ Pearce entered judgment for the Claimant for an amount to be decided and transferred the matter to the Senior Courts Costs Office for “damages to be assessed” [§48]. A directions order on 29 April 2025 set a timetable for the assessment of the disputed fees, adopting a procedure akin to CPR 46.10 by analogy, though the proceedings were not brought under the Solicitors Act 1974 [§10–12, §24].

The Claimant’s application for an interim payment was heard on 7 July 2025 [§25]. The Defendants opposed it, alleging impecuniosity, but the court was not persuaded by the evidence provided [§28–30]. Costs Judge Nagalingam ordered the Defendants to pay an interim payment on account of £741,122.85 by 5 August 2025, with summarily assessed costs of £20,000 [§33]. The judge regarded this sum—approximately 50% of the outstanding balance—as modest [§30–32].

The Defendants did not pay, apply to vary, or appeal this order [§34]. On 12 August 2025, the Claimant applied for an unless order [§35]. The Defendants said they would be unrepresented due to a lack of funds and did not attend the hearing on 1 September 2025, instead submitting written representations—a course the court later characterised as a choice rather than a necessity [§37, §142]. The court made an unless order requiring payment by 22 September 2025, failing which the Defences would be struck out and judgment entered for the full claimed sum plus interest [§42]. The Defendants again did not pay by the deadline, instead issuing the present application on 22 September 2025 [§43].

Costs Issues Before the Court

The Defendants’ application, as refined at the hearing, raised three core costs issues for determination [§2, §191]. First, whether the unless order dated 1 September 2025 should be discharged pursuant to the court’s general case management powers under CPR 3.1(7). Second, and alternatively, whether the Defendants should be granted relief from the sanctions imposed by that unless order under CPR 3.9. Third, whether the interim payment order should be varied under CPR 25.20(6) to account for security the Claimant allegedly held over the Defendants’ Belgian properties, a route which the Defendants argued could also lead to the discharge of the unless order. The Defendants had abandoned their request for permission to appeal [§189].

The Parties’ Positions

The Defendants’ Position: The Defendants contended that enforcing the unless order would cause unjust enrichment, as the Claimant would recover the full invoice value without undergoing an assessment that would likely result in significant reductions [§65–66]. They relied on a report from a costs draftsman, Mr Stuart Waters, which criticised the level of fees, suggesting duplication, excessive internal meetings, and unreasonable time [§58–63]. The Defendants argued that this report constituted a material change of circumstances—an argument the court rejected, holding that these were points always capable of being raised earlier [§59, §75, §181–184].

They maintained they were impecunious and that an unless order would stifle their defence, constituting a denial of justice [§73, §80]. They submitted that the unless order was effectively a variation of the interim payment order under CPR 25.20(6)(b) and should be discharged [§71, §78]. They also argued that the Claimant had security over Belgian properties, an assertion the court found was unsupported by reliable evidence as to value or priority [§74, §204–209].

The Claimant’s Position: The Claimant argued there had been no material change in circumstances to justify varying or revoking the unless order under CPR 3.1(7) [§92–93]. The points in Mr Waters’ report were always available to the Defendants and did not justify revisiting the orders [§84]. The Claimant stressed that the Defendants had never provided cogent evidence of impecuniosity, a point noted when making both the interim payment and unless orders [§94, §101]. The fact the Defendants could now fund leading counsel with a €200,000 loan undermined their impecuniosity claim [§97, §105].

The Claimant submitted that CPR 25.20(6) was the wrong mechanism, as the unless order was a separate sanction for non-compliance, not a variation of the interim payment amount [§82, §116]. On relief from sanctions, the Claimant argued the breach was serious and significant, the reason for default (alleged impecuniosity) was unevidenced, and all circumstances pointed against granting relief [§118–121]. The Claimant also noted the Defendants had forgone the opportunity to trigger a Solicitors Act assessment, which would have stayed the debt claim [§133–135, §162].

The Court’s Decision

Costs Judge Nagalingam dismissed the Defendants’ application in its entirety [§248].

On CPR 3.1(7) and Discharge of the Unless Order: The court applied the principles from Tibbles v SIG plc [2012] EWCA Civ 518 [§113, §193–194]. It found no basis to discharge the unless order. There was no “manifest mistake” in the order’s formulation [§196]. Crucially, there was no material change of circumstances since the order was made [§199–200]. The contents of Mr Waters’ report represented arguments the Defendants could and should have raised at the earlier hearings [§181–182, §184]. The existence of Belgian properties was known at the interim payment hearing, and the court found the purported security was of uncertain value and potentially illusory given competing claims from Belgian tax authorities [§52, §204–209]. The court noted that the only apparent change was the Defendants’ newfound ability to raise €200,000 for legal fees [§201].

On CPR 25.20(6) and Variation of the Interim Payment Order: The court rejected the argument that the unless order was a variation of the interim payment order under CPR 25.20(6)(b) [§213–214]. The two were separate orders; the unless order imposed a conditional sanction for non-compliance with the first, not an adjustment of the payment amount [§214–215]. Even if wrong on this point, the court saw no basis to discharge the order for the same reasons outlined elsewhere [§222].

On Relief from Sanctions under CPR 3.9: Applying the Denton principles [§223], the court held:

- - Stage 1: The breach (non-payment of a substantial interim costs order) was serious and significant [§227].
  - Stage 2: The reason for the breach—alleged impecuniosity—was not made out. The Defendants had consistently failed to provide “detailed, cogent and proper evidence” of their financial position, including full and frank disclosure of their means and prospects of raising funds, as required by authorities such as Michael Wilson & Partners Ltd v Sinclair [2017] EWHC 2424 (Comm) [§103–104, §231, §250]. Their evidence relied on inference rather than disclosure [§177, §254].
  - Stage 3: Considering all circumstances, relief was not justified [§233–248]. The Defendants had ample opportunity to challenge the fees via a Solicitors Act assessment but did not [§135, §237]. They ignored the interim payment order without applying to vary or appeal it [§34, §164–165]. Their non-attendance at the unless order hearing was a choice, not a necessity [§142–143, §230]. There was no public interest in allowing parties to ignore court orders based on unevidenced assertions [§236]. The Claimant’s legitimate interest in not litigating further without payment was recognised [§185].

On Impecuniosity and Unjust Enrichment: The court found the Defendants had not established impecuniosity, even to a prima facie standard [§232, §247]. The claim that enforcing the unless order would lead to unjust enrichment was rejected [§262]. The judgment sum represented a contractual debt, and the entry of judgment consequent upon the Defendants’ default was “a consequence of the default”, not unjust enrichment [§263–265]. The loss of the chance to argue reasonableness at an assessment was a direct consequence of the Defendants’ own conduct in breaching court orders [§246, §264–265]. The court also accepted the Claimant’s assurance that any recovery would be netted off against any security held [§260].

Consequently, the unless order and its sanctions remained in effect. The Defendants were ordered to pay the Claimant’s costs of the application, to be summarily assessed on the standard basis [§269].

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“Extraordinarily High” Costs With “Paucity Of Information” Result In £43 Million Payment On Account

Commercial Litigation, Disbursements, New Costs Blog, Payment on Account

The Technology and Construction Court’s decision in Município de Mariana v BHP Group (UK) Ltd & Anor [2026] EWHC 73 (TCC) provides practical guidance on determining payments on account in high-value litigation where costs evidence is limited and no costs budgeting has taken place.

Background

On 14 November 2025, the court handed down its judgment following the Stage 1 Trial of this substantial group litigation concerning liability for the collapse of the Fundão dam in Brazil [§1]. The claimants, including the Município de Mariana and numerous other individuals and entities, succeeded on key issues including strict liability under Brazilian Environmental Law, fault-based liability under the Civil Code, limitation/prescription, and the standing of the Municipalities [§2, §17]. The defendants, BHP Group (UK) Ltd and BHP Group Limited, were unsuccessful on those core points.

A consequentials hearing was listed to determine matters arising from that judgment [§3]. The parties were unable to agree on costs, leading to the need for the court’s determination on several consequential issues.

Costs Issues Before the Court

The court was required to determine five principal matters following the Stage 1 Trial judgment [§3]. The claimants applied for: (i) an order that the defendants pay their costs of the whole proceedings up to the conclusion of the Stage 1 Trial, including consideration of scope and any reduction for issues lost; (ii) a payment on account of those costs; (iii) pre-judgment interest on costs; and (iv) an order for a detailed assessment of costs to proceed forthwith. In response, the defendants applied for permission to appeal the substantive judgment and, in relation to costs, argued that no immediate order should be made or, if one was made, that it should be limited in scope and amount.

The Parties’ Positions

The claimants’ position was that they were the successful parties in the Stage 1 Trial and were therefore entitled to their costs [§4]. They sought an order for the defendants to pay their costs of the whole proceedings to date, quantified at approximately £189 million. They requested a payment on account of 60% of that sum, equating to £113.5 million [§27]. The claimants also sought pre-judgment interest on costs at a commercial rate of 1% above base from 1 August 2023, the date at which half the fees were incurred, arguing they had a contingent liability to funders that should be compensated [§47]. They further applied for an immediate detailed assessment of their Stage 1 Trial costs and the costs of earlier jurisdictional challenges ordered by the Court of Appeal [§53].

The defendants’ primary position was that no immediate costs order should be made; any decision on costs should be deferred until after the Stage 2 Trial when the overall success of the litigation would be clearer [§6]. If the court was against them on that point, they argued that any costs order should be limited to the costs of the Stage 1 Trial only, not the entirety of the proceedings. They submitted that the claimants’ costs should be subject to a significant percentage reduction to reflect the issues on which the defendants had succeeded, namely: strict liability under Article 927 (sole paragraph) of the Civil Code; liability under Articles 116 and 117 of the Corporate Law; and certain issues regarding settlements and releases [§19]. The defendants said the payment on account sought was “outrageously high” [§6] and “shockingly excessive” [§28], and pointed to the disparity between the parties’ costs (£189m vs £125m) as raising proportionality concerns [§39]. They opposed any award of pre-judgment interest, arguing the claimants had not paid costs upfront and were not out of pocket [§48].

The Court’s Decision

The court granted the claimants a costs order but on terms more limited than they had sought. Applying the principles in Weill v Mean Fiddler Holdings Ltd [2003] EWCA Civ 1058 and Langer v McKeown [2021] EWCA Civ 1792, the judge held it was appropriate to make an immediate costs order in respect of the Stage 1 Trial, as the claimants had obtained substantial findings on key liability issues [§13–§17]. However, the scope of the order was confined to the costs “of, and incidental to, the Stage 1 Trial” [§18]. The court rejected the argument that the claimants were entitled to the costs of the whole litigation to date, as that would presume ultimate success for all claimants, which remained to be determined.

On the issue of a percentage reduction, the court accepted the defendants’ submissions that the claimants had lost on discrete issues [§19–§24]. The failed claims under Article 927 (sole paragraph) of the Civil Code and the Corporate Law, along with certain points on settlements, had required separate expert evidence and court time. The post-collapse conduct point was discounted as “negligible” in terms of costs incurred [§23]. The court held that a fair and proportionate reduction to the claimants’ recoverable Stage 1 Trial costs would be 10% [§24].

The court then turned to the contentious issue of the payment on account. There had been no costs budgeting for the Stage 1 Trial [§33]. The claimants’ evidence of costs was found to be at a “very high level” with a “paucity of information”, making a “very cautious approach” necessary [§38]. The judge noted the huge disparity between the parties’ costs and expressed concern over reasonableness and proportionality [§39].

Critically, the court held that substantial costs related to claimant sign-up, processing, and call centre operations were not recoverable as part of the Stage 1 Trial costs. Applying Motto v Trafigura Ltd [2011] EWCA Civ 1150 at [104]–[114] and Weaver v British Airways plc [2021] EWHC 217 at [41]–[51], the court held that it was necessary to separate sign-up and collateral costs from subsequent legal advice and assistance [§40]. If recoverable at all, such costs would form part of the costs of the overall proceedings, rather than the Stage 1 Trial.

Stripping out those costs and making further adjustments for funding and insurer-related disbursements, the court arrived at a working figure of approximately £80 million for the purpose of the payment on account calculation [§41]. Applying the 90% recovery rate to this figure yielded approximately £72 million. Adopting a cautious 60% estimate for the payment on account, the court ordered £43 million [§41–§42]. The order for this payment was stayed pending the determination of any application for permission to appeal [§46].

On pre-judgment interest, the court exercised its discretion under CPR 44.2(6)(g) to award interest, applying the principles from Jones v Secretary of State for Energy and Climate Change [2014] EWCA Civ 363 [§50]. Although the claimants had not funded the litigation directly, they faced a contingent liability to pay success fees from any damages awarded, representing a funding cost that reduced their ultimate recovery [§51]. The court awarded interest at 1% above base rate from 1 August 2023, the date by which half the fees were incurred — an approach the court described as “pragmatic and proportionate” — up to the date of the costs order [§52].

The court refused the claimants’ application for an immediate detailed assessment of costs, adhering to the general rule in CPR 47.1 that assessment should await the conclusion of proceedings [§54]. The judge found that an assessment would be “complex and protracted” and would be “disruptive” to the preparation for the Stage 2 Trial [§56].

Finally, the court refused the defendants’ application for permission to appeal [§73–§75]. Having reviewed the nine detailed grounds, which largely alleged a failure by the trial judge to engage with key issues and provide adequate reasons, the court held the appeal had “no real prospect of success” [§73]. The judge provided a reasoned rebuttal of each ground [§64–§72], concluding that the substantive judgment had adequately addressed the critical issues and evidence. There was “no other compelling reason” for the appeal to be heard [§74]. Permission was refused, though the defendants’ time to apply to the Court of Appeal was extended by 28 days [§76].