Costs Case Law Update – January 2026
Welcome to the Kain Knight Case Law Update for January 2026, written by Colin Campbell.
This month’s review features significant rulings on costs across various domains, covering everything from the mechanics of joint liability in multi-party actions to the recoverability of solicitor fees following the termination of a retainer.
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Getty Images (US) Inc & Ors v Stability AI Ltd (Re Costs) [2025] EWHC 3419 (Ch) – 17 December
Joanna Smith J determined costs issues following her judgment handed down on 4 November 2025 over which the parties were at loggerheads about the approach the court should take. She held that the claimants could not be said to be the winners because the defendant had substantially denied them the success that they had sought in the proceedings.
It followed that the defendant was awarded its costs of all claims that failed or were abandoned, together with its costs of all matters which were not or could not be specifically attributed to a specific issue. The result was a 30.6% reduction in the defendant’s overall costs, with an agreed interim payment of 70% of incurred costs (including out-of-budget costs of interim applications) and 90% of budgeted costs.
As to out-of-budget overspends for which no applications to vary the budget under CPR 3.15A had been made, a cautious approach was required: the interim award was limited to 20%.
The judgment can be found by clicking here.
Shufflebotham v Shuff-Wentzel (As Executrix of the Estate of Alan Shufflebotham) [2025] EWHC 3321 (Ch) – 17 December
Two executrices failed in their application to remove a third executrix (“D”) from the administration of an estate. HHJ Charman was required to decide (1) whether they should pay D’s costs personally or for payment to be made out of the estate; and (2) if the executrices were ordered to pay D’s costs personally, whether they should be able to recoup those costs from the estate via their indemnity as executors and trustees.
The judge held that the litigation had been hostile. It followed that D was entitled to a costs order against the executrices but with those costs to be recouped from the estate pursuant to their Indemnity, because they had acted honestly and reasonably in bringing the application. The fact that the court had ultimately decided not to remove D did not establish that seeking her removal was necessarily unreasonable.
The judgment can be found by clicking here.
The Russian Aircraft Litigation – Operator Policy Claims [2025] EWHC 3378 (Comm) – 17 December
Following Notice of Discontinuance served by the claimants on the “All Risk defendants” (“ARDs”), the issue for the court was whether those defendants should have their costs under CPR 38.6. It was the claimants’ case that the rule should be varied so that the War Risks defendants (“WRDs”) should pay the ARDs’ costs under a Sanderson order, alternatively under a Bullock order whereby the WRDs would indemnify the claimants for any costs payable by them to the ARDs.
Picken J held that whilst the court was not hidebound under CPR 38.6 to require the party discontinuing to pay the recipient party’s costs and that the court retained a discretion, Sanderson and Bullock orders were typically made where there was a successful defendant and an unsuccessful defendant. That was not the current position.
Whilst the ARDs had been successful, whether the claimants would succeed against the WRDs was an unknown. The right order was that the claimants would pay the costs of the discontinued claims against the ARDs on the express basis that the matter could be revisited after the trial, to decide if a Bullock order was appropriate.
The judgment can be found by clicking here.
Gagliardi v Evolution Capital Management LLC [2025] EWHC 3488 (Comm) – 19 December
Calver J was required to decide whether the CPR 36.17(4) benefits were payable where the claimant had offered to settle the claim and counterclaim for $3m and obtained judgment for $5.38m. The offer had been made on 12 September 2025, and the trial had opened on 6 October 2025.
The defendant contended that only 20 days had elapsed between the offer and the start of trial because there had been judicial reading days.
The Commercial Court Guide stated that if the trial was fixed with pre-allocated reading time prior to the first day of trial listing, the start of the trial was the first date of that pre-trial reading time.
Calver J held that that analysis was wrong. The Guide did not purport to and could not affect when a trial commenced for the purposes of the consequences of a part 36 offer. The start of the trial, 6 October, had been known to the parties and fixed.
That provided certainty.
Judicial reading days, on the other hand, could change. The clearest, most certain and straightforward interpretation of “the start of trial” for CPR rule 36 was that it was the date on which the parties were required to attend court with their lawyers and the trial actually commenced. As there was nothing unjust in applying CPR 36.17(4), the claimant was entitled to its benefits.
The judgment can be found by clicking here.
Thomas Barnes & Sons PLC v Blackburn with Darwen Borough Council [2026] EWHC 24 (TCC) – 13 January
The court was asked to make a non-party costs order under s.51 Senior Courts Act 1981 against the respondents, following the failure of the claim of the claimant’s administrators. The defendant had incurred costs of £995,000 and received £583,000 by way of security leaving a shortfall of £412,000.
HHJ Davies held that although the administrators had exercised a real degree of control as was appropriate to their position as officeholders, the respondents were the funders of the litigation and the persons who were substantially to benefit, and were properly to be treated as the real parties to the proceedings in very important and critical respects.
It was, therefore, just that they, rather than the defendant itself as the successful defending party, should have to pay the costs under a non-party costs order.
The judgment can be found by clicking here.
Limbu & Ors v Dyson Technology [2026] EWHC 24 (TCC) – 13 January
When undertaking case management, the court was required to make decisions in relation to strike-out and withdrawal applications concerning the Reply. It was common ground that swathes of the Reply should come out. However, it was the defendants’ contention that the Reply infringed the basic rules of pleading and that those passages should be struck out in addition.
Pepperall J held the real purpose of a Reply was to refute a ground of defence and not to repeat or embellish what already appeared in the Particulars of Claim or to make general observations or comments.
The offending passages were struck out pursuant to r.3.4(2)(b) but with costs limited to 50% because the application had been pursued aggressively and without proper regard to the parties’ duty under CPR 1.3. Against a claim for £61,366.03 in which over 100 hours on documents was not remotely justified, costs of £12,000 were reasonable, meaning that £6,000 was payable.
The judgment can be found by clicking here.
McGann v Eldonian Community Trust Ltd [2026] EWHC 66 (Ch) – 15 January
The court dismissed a Petition for the winding up of the respondent Company. The Company had instructed its solicitors for reward, but counsel had provided his services free of charge. The court was satisfied that the petitioner should pay the respondent’s solicitors’ costs on the indemnity basis, and also to make a payment of £20,325 to the Access to Justice Foundation in respect of the services provided by counsel.
That was possible and would not infringe the indemnity principle where the court exercised its jurisdiction under Section 194(3) Legal Services Act 2007 which expressly applied to proceedings in a civil court, including insolvency proceedings.
The Charity Commission also sought its costs and was made a party to the proceedings for the purpose of costs only. There had been reason to instruct counsel to attend the initial hearing of the Petition, and those costs were summarily assessed at £1,580.25.
The judgment can be found on Thomson Reuters™ by clicking here.
Smithstone v Tranmoor Primary School [2026] EWCA Civ 13 – 16 January
Overruling Mundy v Tui UK [2023] Costs LR 153, the Court of Appeal (Bean LJ, Phillips, Stuart-Smith LJJ) held that a Part 36 offer to split liability 90/10 was to be treated as a genuine offer to compromise. In a case where liability was to be tried before quantum, the benefits of a liability-only offer in saving costs and court time were obvious.
However, it could not be said that the outcome of the case, being a settlement for £2,650, was a finding that that was more advantageous to the claimant than a 90:10 apportionment of liability.
Accordingly, without a determination on liability, CPR 36.17(4) was not engaged, and the costs fell within the fixed costs regime, since the defendant’s refusal to admit liability or to engage in settlement negotiations before reaching the door of the court, did not make it unjust for that regime to apply.
Município De Mariana v BHP Group (UK) Ltd & Anor [2026] EWHC 73 (TCC) – 19 January
O’Farrell J determined costs issues after the trial of key issues in claims for compensation under Brazilian law, for losses suffered following the collapse of the Fundão Dam in Brazil. It was the claimants’ position as the successful parties that the defendants should pay their costs of the proceedings up to the conclusion of the Stage 1 Trial totalling £189 million, with a payment on account in the sum of £113.5 million, together with pre-judgment interest.
Taking into account that the claimants had failed to establish any liability under Articles 116 and 117 of the Corporate Law, 90% was appropriate, with a payment on account of £43m.
The paucity of information available to the court indicated that a very cautious approach needed to be taken to the broad-brush assessment of the likely level of recovery of the costs for the purpose of determining a payment on account. The remaining costs would not be assessed until the conclusion of the proceedings.
The judgment can be found by clicking here.
Nigeria v VR Global Partners LP [2026] EWCA Civ 25 – 23 January
Males, Andrews and Lewis LJJ upheld the order below to stay an application by Nigeria for a third-party costs order (“TPCO”) until after the conclusion the detailed assessment (“DA”) of its costs, claimed at £44m plus interest.
Nigeria contended that as the defendant did not carry on business and had no assets, TPCOs should be made under s.51 Senior Courts Act 1981 against the respondents, and that both matters should proceed in tandem.
Those submissions failed.
The trial judge below had been extremely familiar with the case and had dealt with all subsequent case management issues. He had not regarded it as overwhelmingly likely that Nigeria would be entitled to anything like the £24.2 million which it claimed over and above the £20 million which it had already received.
Obiter – the court was dismayed to be told that the DA would require at least 50 days, potentially lasting almost twice as long as the trial and would involve millions of pounds. That was the worst kind of satellite litigation, thereby prejudicing many other court users who needed to have their costs assessed.
If necessary, a sampling approach should be adopted, which would be likely to produce as fair and as reasonable a result as detailed scrutiny in oral argument of every item in the bill.
The judgment can be found by clicking here.
