Costs Case Law Update – June 2026
Welcome to the Kain Knight Case Law Update for June 2026, written by Colin Campbell.
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The New Lottery Company Ltd & Anor v The Gambling Commission [2026] EWHC 1311 (TCC) - 22 May 2026
Joanna Smith J dealt with the liability for costs following the failure of the claimants’ action seeking damages of over £1 billion, together with a declaration of ineffectiveness which, if granted, would potentially have brought the National Lottery to a standstill. The Judge held that all the costs should be paid costs on the indemnity basis because the claimants’ conduct had been out of the norm.
The touchstone for that was unreasonableness, which needed to be “to a high degree”, by which was meant not merely wrong or misguided in hindsight. The claimants had made numerous serious and wide-ranging allegations (including of impropriety and dishonesty) from beginning to end. In addition, the list of issues, which had originally run to 64 issues in the “Process” Claim and 17 issues in the “Modifications” Claim, had been very substantially reduced, often without any proper notice.
The claimants thereby had caused very significant disruption to the Court and to the other parties. Nor was it appropriate to “salami slice” the costs by reference to individual issues or periods of time. Additionally, there was nothing in the authorities to suggest that proportionality was a relevant factor in considering whether to make an order for indemnity costs. It followed that the Commission, as the winning party, was entitled to recover all its costs on the indemnity basis, subject to detailed assessment.
The judgment can be found by clicking here.
Broadfield Law UK LLP (formerly BDB Pitmans LLP) v Barnes [2026] Costs LR 781 - 3 June 2026
In proceedings under the Solicitors Act 1974, the issue for the Court of Appeal on appeal was whether the retainer between the claimant and her former solicitors was a contentious business agreement (CBA) within the definition of s.59, viz an agreement as to remuneration by reference to an hourly rate. If so, the solicitors would be required to apply to court to enforce it and to seek a determination of its validity and effect under s.61, in which case the proceedings that the firm had issued to recover sums due under their bill would have been an abuse of the court’s process.
The Court rejected that analysis advanced by the claimant.
An agreement as to remuneration was an agreement as to the amount that the solicitors were to be paid for their services, the essence of which was certainty. An agreement that provided that the solicitor be paid between £150 and £250 per hour depending on the nature of the work and the complexity of the case, gave no certainty. The client would not know what he was letting himself in for, merely that there was a maximum hourly rate set within the range. The retainer set out the rates for certain named fee earners which were subject to unspecified increases at unspecified times, for example, on promotion or attaining professional qualifications.
It followed that the agreement was not an agreement as to the solicitors’ remuneration but simply an indication of the rate of charging on which the solicitors proposed to make up their bill. The Court unanimously dismissed the claimant’s appeal.
The judgment can be found by clicking here.
Various Claimants v Mercedes-Benz Group AG [2026[ EWHC 1335 (KB) - 4 June 2026
In the “Dieselgate” litigation, the court (Constable J and SCJ Rowley) gave their judgment in the third tranche of costs budgeting when dealing with expert evidence and ADR. It was the claimants’ submission that earlier judicial criticisms had been taken on board about “over lawyering” resulting from there often being a number of layers of solicitor representation on the claimants’ side. However, the court expressed concern that, despite repeated judicial criticism, the claimants’ budgets continued to include figures acknowledged by the claimants’ counsel as requiring substantial reduction. Against claims for experts of £6.06m, the court allowed £5,411m.
As regards ADR, the court observed a dramatic reduction in the claimants’ ADR budget from approximately £11m to £1,985m. However, it was also clear that meaningful discussions were unlikely to take place before judgment on liability, and negotiations would only likely occur before the quantum trial. It followed that the claimants’ assumptions still overstated the likely settlement activity and £1,625,436.00 was the appropriate figure to allow.
The judgment can be found by clicking here.
Innsworth Capital Ltd, R (On the Application Of) v The Competition Appeal Tribunal [2026] EWHC 1393 - 10 June 2026
Following the settlement of the funded collective proceedings brought against Mastercard by Walter Merricks, as class representative, on terms that Mastercard would pay £200 million inclusive of costs against a claim initially pleaded at up to £14 billion, Innsworth Capital, the funder, sought judicial review. The basis of its challenge was a review of the order made by the Competition Appeals Tribunal (‘the CAT’) for the distribution of the proceeds of the settlement.
The CAT had determined that despite the very poor outcome of the claim, a just and reasonable return for the claimant funder was reimbursement of its expenditure of between £41 million and £46 million, together with a profit of 50% of that expenditure. Males LJ and Morris J declined to interfere with that decision. The CAT’s conclusion was one which the Tribunal was entitled to reach and was well within the wide powers conferred upon it as an expert and specialist tribunal. Accordingly, the judicial review failed.
The judgment can be found by clicking here.
Roday v Optical Express Ltd [2026] EWHC 1486 (KB) - 16 June 2026
Griffiths J decided the liability for the costs of a defamation action which the Claimant had lost because the court found that on the civil standard of proof, the defamatory meanings had been substantially true. However, that did not mean that the circumstances of the claim or the Claimant’s conduct, took the case “outside the norm” such as to justify an award the costs on an indemnity basis.
The defendant’s claim for indemnity basis costs was also weakened because it had refused even to entertain the possibility of attempting Alternative Dispute Resolution which had been suggested to them by a judge at a previous hearing and followed up in correspondence from the Claimant’s solicitors. It followed that the appropriate costs order was that the unsuccessful claimant would pay the defendant’s costs of the action on the standard and not the indemnity basis.
Ward v Donnellan [2026] EWCA Civ 729 - 12 June 2026
Following a 15-day trial involving three actions (the Partnership claim, the Part 20 claim brought by Debonair and the Possession claim), the issue for the Court of Appeal was whether the court below had been correct in making no order as to the costs of the action in circumstances where there had been dishonest conduct on both sides.
The Court held that the starting point for the consideration of any order for costs of an action was CPR 44.3(2)(a), that costs should follow the event. From this point, the court would consider the conduct of the parties under 44.3(2)(b), but there was no general rule that a finding of dishonest conduct by the successful party would replace the usual starting point. Where dishonesty was found on both sides, the court should assess the conduct of each party separately and avoid an order that imposed a disproportionate penalty on one dishonest party while visiting no financial consequence on the other. A costs order that stripped the successful party of all recovery, including those properly incurred costs, went beyond what was required to neutralise the advantage gained from the successful party’s own misconduct. Where several actions were tried together, the relevance of any party’s dishonesty needed to be evaluated separately in relation to each action.
Taking those factors into account, the effect of the judge’s order was that the Ward parties, despite being the successful parties, had not been entitled to recover any of their costs in successfully resisting the Partnership Claim or in advancing the Part 20 claim, not even those which were reasonably and properly incurred, nor any part of their costs in relation to the successful Part 20 Claim, nor in exposing dishonesty in the Partnership Claim. The Court held that the judge’s starting point should have been an order for costs in the defendants’ favour subject to adjustments to ensure that they did not recover any costs which had been incurred in advancing a dishonest case.
The correct order was that the losers in the Part 20 claim would pay Debonair’s costs of the Part 20 claims in full, and Mr Donnellan would pay 50% of Mr Ward’s costs of the Partnership claim, so the appeal was allowed to that extent.
Musst Holdings Ltd v Astra Asset Management UK Ltd & Anor (Costs as Damages) [2026] EWHC 1599 (Ch) - 26 June 2026 - Mr Justice Leech
At the third consequentials hearing, the issue for the court was whether Musst could recover as damages, additional costs (including an After the Event (“ATE”) insurance premium and litigation funding fees “(LFAs”) ) as a consequence of having to fund two actions rather than one.
Musst argued that as a matter of general principle, the victim of a tort was entitled to compensation to place them in the position in which they would have been if the tort had not been committed (the “compensationary principle”). Astra contended that the costs of bringing a claim were not recoverable as substantive damages in the same action or a subsequent action issued by the receiving party against the paying party for the purpose of recovering them (the “costs principle”).
Leech J observed that that there was an exception to the costs principle, but held that it did not apply in the case before him. Where the claimant and the defendant were the same in both action, it was necessary for the claimant to have a separate cause of action and that the costs claimed as damages could not have been awarded in the earlier proceedings.
Applying those principles, whilst the court had found that but for Astra’s negligent misrepresentation and breach of contract, Musst would have issued a single claim and would thereby have avoided paying two ATE premiums, two LFA fees, plus the second issue fee of £10,000, none of these costs were recoverable as damages. That was because (1) s.58C (1) Courts and Legal Services Act 1990 prohibited recovery of ATE premiums as damages and (2) the LFAs were properly characterised as litigation costs and were irrecoverable under the existing costs regime : they were not characterised as separate independent losses for which Musst had an independent cause of action in the tort of negligent misrepresentation.
The £10,000 fee fell within the costs principle but not the exception, and was, accordingly, also irrecoverable.
