Monthly Legal Costs Update – September 2026
Here, in Kain Knight Costs Lawyers’ regular monthly legal costs update, we focus on those cases which we believe are likely to have a practical relevance for its members. We welcome feedback and if there is an area, topic or case you would like us to address, please let us know.
This August 2026 update has been written by Nick McDonnell and Colin Campbell.
The Long Vacation is three weeks old but the judgment pickings are by no means thin this month, even though the High Court is on holiday. On the last day of term, the Court of Appeal handed down an important judgment involving the Small Claims Track. In Orton v Barclays Bank UK Plc [2026] EWCA Civ 1025, the Court of Appeal dealt with the costs consequences where a mis-selling claim of payment protection insurance proceeding in the Small Claims Track, had been discontinued very shortly before trial.
The bank’s defence relied on limitation, absence of unfairness because of a redress payment it had made and quantum issues. But, in addition, several offers had been made for the claim to be ended on a “drop-hands” basis. Ultimately it threatened that if no notice of discontinuance was served, the bank would seek its costs including an order under CPR 27.14(2)(g) based on the appellant’s unreasonable behaviour.
Following the discontinuance, that threat was made good because the courts below awarded £2,138 in costs against the claimant. However, the Court of Appeal took a different view, holding that it was clear from the reference in CPR 27 to “the special procedure” for dealing with claims allocated to the small claims track, that the track was designed to be different. A key part was the “costs neutral” environment which extended to disapplying the costs consequences both of discontinuance under CPR 38 and under Part 36. Allowing the bank its costs would open the doors to enabling well-resourced parties to correspond their way out of the costs neutral regime and thereby, to blow the scheme of the Small Claims Track to bits.
The appeal was allowed!
Next, no less than four cases on costs budgeting, all a bit different! In Fuschillo v Johnson & Johnson [2026] EWHC 1925 (KB), the issue was whether to order budgeting in a substantial claim in which the Claimants (or where they were deceased, their estates/dependants) were seeking damages from the Defendants in negligence (contending that they had contracted malignant mesothelioma or ovarian cancer due to their exposure to mineral talc-based Baby Powder carrying Johnson & Johnson branding).
It was the Defendant’s case that an order for budgeting would enable the Court to retain control over the parties’ costs. The Claimants’ counterargument was that the suggestion for costs budgeting was premature, expensive and effectively “front-loaded” the costs. Hill J ordered budgeting because
(1) costs budgets were proportionate given both the sums at stake and the level of costs likely to be incurred by the parties.
(2) CPR PD 3D, paragraph 2(f) provided that an order for budgets might “…be particularly appropriate in personal injury and clinical negligence cases where the value of the claim is £10 million or more” as was the case before her.
(3) The parties had been able largely to agree directions through to trial, such that there was no reason to believe that there was any greater risk of there being extensive disputed variations than in any other piece of substantial litigation.
The second case, ML Technology Ltd v BEAT Sam Ltd [2026] EWHC 2142 concerned budget variation after trial and consequentials. Following a trial at which the judge concluded that no one had been the winner, he also observed that CPR 44.2(1) did not mandate the making of a costs order so as the outcome was effectively a draw, he made no order as to costs. As to costs budgeting, the judge refused a retrospective application by the claimant to increase its budget by £318,000 even though it had not been actively opposed by the defendant.
However, in Car-Wizard v Vixen Surface Treatments Ltd [2026] EWHC 2177 (Ch), HHJ Matthews allowed an at trial increase of £19,710 for the trial phase to cover the claimant’s written submissions on the question of the assessment of damages, which had not been foreseen by anyone: it was a significant development within CPR 3.15A making it mandatory to apply to vary the budget.
No such luck for the applicants in Watford Insurance Company Europe Ltd v Bassey & Anor [2026] EWHC 2126 (KB) however. Cavanagh J upheld the decision of the judge below that a variation under CPR 3.15A to increase the claimant’s budget by £238,350 should be refused because there had been no significant developments in the litigation. The judgment runs to 92 paragraphs and covers much additional ground about budgeting, variations and significant developments than this short summary can provide.
Next, a brace of interesting decisions in the Competition Appeals Tribunal.
The decision of Bacon J in Sciallis v Fender Musical Instruments Europe Ltd [2026] CAT 56 is to be commended as a guide about what happens when a Class Representative has failed to obtain funding for collective proceedings for three years and was “opaque” to the CAT about that fact. The answer was costs orders for the dismissal of the proceedings with costs on the indemnity basis from the moment that the CAT should have been informed in April 2023 of the breakdown of negotiations with the funder, such conduct being unreasonable to a high degree and outside the norm of litigation practice.
Meanwhile in Global-365 v Paypoint PLC [2026] CAT 67, the action had succeeded, but only to the extent that the claimants recovered damages of £169,334 plus interest against a claim for £113.2 million by the time of the trial being just 0.15% the award! However, the claimants were allowed 40% of their costs, on that basis (amongst others) it was open to the defendant from the outset of the litigation, to have made an offer, thereby gaining costs protection.
In Abbott v Ministry of Defence [2026] EWHC 2083 (KB), Garnham J and Master Brown had the task of deciding the liability for costs in proceedings for damages for noise induced hearing loss suffered by members of HM armed forces and test claims brought by two former soldiers.
The Claimants sought:
(i) an order for 95% of their costs in respect generic issues determined by an earlier judgment, including the two test cases, and
(ii) a payment on account of £6,013,822.09. The MOD contended that the outcome of the trial was genuinely mixed, that it was been the more successful party and that the appropriate order was no order as to costs.
The judges held that the Claimants had been largely successful on the major issues in the case, those that attracted most attention and required most work in the trial. In addition, the soldiers in the test cases had won damages. However, the MOD had been largely successful on the utility of military audiometry, latency, acceleration and cochlear synaptopathy and on loss of future earnings, in so far as that issue had been tested.
It followed that the MOD was ordered to pay 60% of the claimants’ common costs of the generic issues and a payment on account of £2,515,194.95.
Finally, pressure on space permits only a mention of a decision in the family court. In Sappleton v R1 [2026] EWHC 1783 (Fam), Lieven J made a third-party costs order in favour of the Legal Aid Agency where the applicant to a committal application, had used the proceedings to coerce, control and intimidate. Its purpose was to disincentivise abusers from using the system to perpetuate their abuse of former partners, and one way of doing that was by making costs orders that had some prospect of being enforced.
As always, these are a selection of the principal recent cases which are likely to be of use to practitioners and if any further information is required, please contact either Nick McDonnell or Colin Campbell at Nick.McDonnell@kain-knight.co.uk or Colin.Campbell@kain-knight.co.uk
