When Interlocutory Costs Orders Survive Discontinuance But Underlying Conduct Is Penalised

When proceedings are discontinued, interlocutory costs orders already made typically survive intact. But for costs not yet ordered, courts may reduce awards—even for successful contempt applications—where serious concerns exist about the propriety of the underlying litigation.

Costs discontinuance contempt proceedings CPR 38.6 interim orders reversal

MEX GROUP WORLDWIDE LIMITED V FORD & ORS [2025] EWHC 2689 (KB)

In MEX Group Worldwide Ltd v Ford & Ors, the High Court determined costs following the discontinuance of proceedings and discharge of a worldwide freezing order obtained under section 25 of the Civil Jurisdiction and Judgments Act 1982. The central issue was whether the claimant MGWL should pay the defendants’ costs under CPR 38.6 despite having proved contempt against them for failing to provide asset disclosure. The WFO had been obtained by material non-disclosure and other defendants had succeeded in having it discharged on that ground and for want of jurisdiction. Freedman J held that MGWL must pay the defendants’ costs as the discontinuing party, but modified the order to reflect the proven contempt. MGWL recovered only 50% of its contempt costs to 13 December 2024 on the standard basis, and nothing thereafter. Existing interim costs orders for unjustified adjournments stood despite the discontinuance. The court refused indemnity costs given the multi-directional nature of the costs orders.
Link to full judgment

The starting point is that the overall order for costs should reflect the fact that MGWL had effectively lost the action due to the discontinuance... The Court should be cautious about eroding that starting point by chiselling away issue by issue in the circumstances where there is a grave question as to whether the action should have ever been brought, whether the WFO should ever have been granted and at least from the time of the decision of the Court of Appeal on 8 August 2024 and from the application to set aside the WFO on 27 September 2024 as to whether the action should have been pursued. Applying the principles set out by Moore-Bick LJ in Brookes v HSBC Bank plc, there is a burden on the discontinuing party to show good reason to depart from the presumption.

Citations

Ashany v Eco-Bat Technologies Ltd [2018] EWCA Civ 1066 Discontinuance by a claimant does not automatically set aside prior interlocutory costs orders; the discretion to depart from the usual rules must be exercised in accordance with principles recognising earlier valid court rulings. Bloomsbury International Ltd v Holyoake [2010] EWHC 1150 (Ch) Reputational consequences of a freezing order may be recoverable as general damages under a cross-undertaking only where a strong causative link with the injunction is established based on the facts and evidence. Brookes v HSBC Bank Plc [2011] EWCA Civ 354 Where a claimant discontinues proceedings, the defendant is ordinarily entitled to their costs unless the claimant can show a good reason to depart from the default rule under CPR 38.6. Cheltenham & Gloucester BS v Ricketts [1993] 1 WLR 1545 A court may order an inquiry into damages following the discharge of an injunction if there is credible evidence of loss, although enforcement of the cross-undertaking remains discretionary. Dar El Arkan v Al Refai [2016] 6 Costs L.O. 865 Discontinuance of a claim does not unwind prior interlocutory costs orders, which stand unless expressly reversed, reflecting the principle that costs orders are intended to be final at the time made. Energy Venture Partners Ltd v Malibu Oil and Gas Ltd [2014] EWCA Civ 1295 On fortification applications, a claimant must show a good arguable case of loss directly caused by the injunction, and loss must be realistically and intelligibly estimated. Financiera Avenida SA v Shiblaq [1991] The Times, 14 January (CA) A defendant may recover only such losses under a cross-undertaking as are caused by the injunction itself, not by the underlying litigation, which gives rise to no such entitlement. Harley Street Capital Ltd v Tchigirinski [2005] EWHC 2471 (Ch) Loss must be specifically caused by the preventative effect of a freezing injunction to be compensable under a cross-undertaking; general reputational damage is usually insufficient. Malhotra v Malhotra [2015] 1 BCLC 428 For an inquiry into damages under a cross-undertaking to be ordered, the applicant must produce credible evidence of non-trivial loss arguably caused by the injunction. Nelson’s Yard Management Co Ltd v Eziefula [2018] EWCA Civ 1066 A discontinuing claimant must show a change in circumstances or conduct by the defendant to justify departing from the rule that they pay the defendant’s costs. Phoenix Group Foundation v Cochrane [2018] EWHC 2179 (Comm) Applicants seeking fortification must show a good arguable case that the injunction caused a real risk of loss, supported by a meaningful estimation of quantum. PJSC National Bank Trust v Mints [2021] EWHC 1089 (Comm) Damages claimed under a cross-undertaking must be shown to arise from the injunction’s coercive effects and not from reputational harm or the initiation of proceedings. Safeway Stores Ltd v Twigger [2011] 2 All ER 841 A claimant who discontinues a claim is presumed liable for the defendant’s costs and must apply to displace this presumption when seeking to avoid liability for costs already incurred. Teasdale v HSBC Bank Plc [2010] EWHC 612 (QB) To avoid the presumption that a discontinuing claimant pays the defendant’s costs, the claimant must establish exceptional circumstances such as unreasonable conduct by the defendant. Tharros Shipping Co Ltd v Bias Shipping [1994] 1 Lloyd’s Rep 577 For a defendant to enforce a cross-undertaking, any loss claimed must flow directly from the injunction, not from related proceedings or market perceptions of the litigation. Yukong Line Ltd v Rendsburg Investments Corp [2001] 2 Lloyd’s Rep 113 A defendant seeking to enforce a cross-undertaking must show credible evidence of loss caused by the injunction; discretionary refusal requires special circumstances or misconduct.  
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Key Points

  • Where a claimant discontinues proceedings, CPR 38.6(1) presumes the claimant must pay the defendant’s costs. The burden is on the claimant to show good reason for departing from this, and practical or financial reasons for discontinuing will not suffice. [117-121, 135]
  • Interlocutory costs orders made during proceedings are not automatically reversed by discontinuance. Such orders are self-contained, dealing with costs of specific applications. A defendant ordered to pay costs during litigation (e.g., for causing adjournments) does not automatically get those payments back when the claimant discontinues. [120, 136]
  • While existing orders survive, when determining costs not yet ordered, the court may reject issue-by-issue accounting where special circumstances exist—such as serious concerns the action should never have been brought or was pursued for improper purposes. The court can then take a holistic view favoring the overall successful party. [131-135]
  • A party’s unreasonable litigation conduct (such as causing adjournments through inadequate applications) can justify interlocutory costs orders against that party even where they are ultimately the overall successful party. Such orders address specific misconduct rather than case merits. [136-137]
  • Where contempt is proven but underlying proceedings are discontinued in suspicious circumstances, the court may award only a proportion of contempt costs to the applicant. This balances marking the seriousness of contempt against disapproval of pursuing the main action improperly. [138-141]

"In my judgment, the circumstances of this case are different such as to justify a modified departure from those usual circumstances. That is to reflect the fact that it now appears the WFO should either not have been obtained or that it should have been withdrawn such that the initiation and/or continuation of the committal proceedings were not justified... There should nonetheless be a modified costs order in respect of the Contempt Application...in order to mark the fact that Mr Smith and CSM were in breach of the court orders in failing and refusing to provide the information. They also raised points about service which were rejected."

Key Findings In The Case

  • Upon discontinuance of the underlying proceedings by MGWL, the court determined that the costs of the English action (inclusive of associated applications other than contempt) should be borne by MGWL, treating Mr Smith and CSM as the overall successful parties. The discontinuance, viewed in substance as a capitulation, triggered the presumption under CPR 38.6(1), and MGWL failed to displace that presumption with good reason [135, 148].
  • The interim costs orders made by Ellenbogen J and Morris J in June and July 2024 (totalling £50,000) as sanctions for unreasonable conduct (seeking adjournments without proper justification) were upheld and not set aside, despite MGWL’s discontinuance of proceedings. The court found these interlocutory orders to be self-contained and unaffected by the claimant’s later withdrawal [136–137].
  • The court rejected MGWL’s attempt to recover all costs of the contempt proceedings. Although contempt was proven, only 50% of MGWL’s costs up to 13 December 2024 were allowed, and thereafter no further costs were awarded in MGWL’s favour. This was due to serious concerns about the propriety of MGWL’s conduct in bringing and maintaining the WFO, compounded by later developments including discontinuance and disclosure failings [139–141].
  • MGWL’s argument that it had succeeded on various interlocutory issues (e.g., service, cross-examination, and sanctions applications) did not displace the primary reality that MGWL had lost the action in substance. The court declined to adopt a strict issue-by-issue costs assessment, instead making a composite order reflecting the overall outcome and the exceptional features of the litigation [131–135].
  • The court did not order indemnity costs in favour of Mr Smith and CSM, despite serious findings regarding MGWL’s conduct and eventual abandonment of proceedings. This was because the final costs order comprised multiple directions—some in favour of MGWL, some neutral—warranting a standard costs order overall [144–145].

"I consider that there should be a modified departure from the usual order that the costs of the Contempt Application should all follow the event. This is a discretionary exercise having regard to the fact that on the one hand Mr Smith and CSM were in breach and contested the committal on grounds which were rejected and on the other hand the serious misgivings about the conduct of MGWL in seeking or continuing the WFO until the time when it finally withdrew."

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

Background

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

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

Costs Issues Before the Court

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

The Parties’ Positions

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

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

The Court’s Decision

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

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

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

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

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

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

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

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

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

Key Takeaway

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

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MEX GROUP V FORD AND ORS [2025] EWHC 2689 (KB) | MR JUSTICE FREEDMAN | CPR 38.6 | CPR 44.2 | CROSS UNDERTAKING AS TO DAMAGES | ENFORCEMENT OF CROSS UNDERTAKING | CONTEMPT OF COURT | WORLDWIDE FREEZING ORDER | WFO | DISCONTINUANCE AND COSTS | DISCHARGE OF WFO | INDEMNITY COSTS | STANDARD BASIS | AGENT AND CLIENT SCALE | JURISDICTION UNDER SECTION 25 CJJA | SECTION 25 CJJA 1982 | UNREASONABLE CONDUCT | GOOD ARGUABLE CASE | NON-DISCLOSURE | FULL AND FRANK DISCLOSURE | MATERIAL NON-DISCLOSURE | UNLAWFUL MEANS CONSPIRACY | PENALTY FOR CONTEMPT | DELIBERATE OMISSION | COULSON LJ | TINKLER J | LORD SANDISON | CHELTENHAM & GLOUCESTER BS V RICKETTS | YUKONG LINE LTD V RENDSBURG INVESTMENTS CORP | HARLEY STREET CAPITAL V TCHIGIRINSKI | PJSC NATIONAL BANK TRUST V MINTS | AL RAWAS V PEGASUS ENERGY LIMITED | ARLIDGE, EADY AND SMITH ON CONTEMPT | PHOENIX GROUP FOUNDATION V COCHRANE | ENERGY VENTURE PARTNERS V MALIBU OIL & GAS | BLOOMSBURY INTERNATIONAL V HOLYOAKE | THARROS SHIPPING CO LTD V BIAS SHIPPING | SAFERWAY STORES LTD V TWIGGER | BROOKES V HSBC BANK PLC | BUSINESS ENVIRONMENT BOW LANE V DEANWATER ESTATES LTD | DIRECTION HEARING FOR DAMAGES INQUIRY | COSTS OF COMMITTAL PROCEEDINGS | COSTS OF DISCHARGE APPLICATION | INQUIRY AS TO DAMAGES