Costs Orders, Assessment & Payments on Account
VAT On Costs In Liquidation | Moller & Ors v One Touch Solution Ltd (08/01/2026)
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
Non-Party Costs Order Against Secured Creditors Who Funded Insolvent Company’s Failed Claim (13/01/2026)
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.
Hospira Three-Question Test Applied in Multi-Claim IP Litigation (15/01/2026)
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
Fixed Recoverable Costs Irrelevant to Solicitor-Client Assessment (18/01/2026)
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.
CFA Termination | Accepting Repudiation Instead Of Using Contractual Rights Left Solicitor With Nothing (19/01/2026)
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
Executors Lose Estate Indemnity After Hostile Removal Litigation (19/01/2026)
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.
Does Removal As Trustee Always Mean Loss Of Indemnity? (29/01/2026)
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
Part 36 Liability Offers | Mundy Overruled by the Court of Appeal (19/01/2026)
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.
Wrongful Interference With Goods Against Police Mandates Multi-Track Allocation | Part 36 Acceptance Does Not Oust Fixed Costs (31/01/2026)
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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