Monthly Legal Costs Update – August 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.
In Ward v Rai [2026] EWCA Civ 816 on a second appeal, the issue was whether a costs judge in detailed assessment proceedings had erred in principle in refusing to strike out a point of dispute (point 23) challenging 134.1 hours work on documents in the claimant’s bill of costs, which had been served in a 24 page schedule of objections only two clear business days before the hearing of the assessment.
At the first appeal (see [2025] Costs R 1143), the court had held that although the costs judge’s decision was a discretionary case management decision, the refusal to strike out point 23 had meant that the assessment could not be completed in the allocated two days and required an adjournment to a third day. The Court of Appeal disagreed holding that appellate courts should not interfere with discretionary case management decisions simply because they disagreed with them or otherwise considered that they would have taken a different course.
The judge at first instance had disclosed no error of principle or failure to take relevant matters into account in reaching his decision, nor did it otherwise fall outside the generous ambit of his discretion. Although it would have been open to the judge to have struck out point 23 and not permit reliance on the annotated schedule, and another judge might have taken that course, he had not been obliged to do so. He could have imposed a costs sanction instead.
The decision to allow the appeal had been wrong and the first instance decision was restored. The resulting Court of Appeal judgment seems to tell practitioners one thing whilst also seemingly demonstrating another.
It reaffirms the importance of compliance with Practice Direction 47 and Ainsworth v Stewarts Law LLP yet ultimately permits a clear example of non-compliance. In doing so, the Court has left legal practitioners asking an uncomfortable question: If these Points of Dispute survive, what will it take for them not to?
In possibly the last judgment in the long running Mastercard litigation, in Innsworth Capital Ltd, R (On the Application Of) v The Competition Appeal Tribunal [2026] EWHC 1393, the CAT reviewed the terms of the settlement of the funded collective proceedings brought against Mastercard by Walter Merricks, as class representative.
Mastercard had agreed to pay £200m including costs against a claim initially pleaded at up to £14 billion. Innsworth Capital, the funder, sought judicial review of the CAT’s determination 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, plus a profit of 50% of that expenditure.
The Court refused to interfere with the CAT’s conclusion, holding that it was one which it was entitled to reach and was within the wide powers conferred upon it as an expert and specialist tribunal.
Accordingly, the judicial review failed.
In Roday v Optical Express Ltd [2026] EWHC 1486 (KB), 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.
The defendant sought indemnity costs and failed. The loss did not mean that the circumstances of the claim or the Claimant’s conduct, took the case “outside the norm”. In addition, the defendant’s case was weakened because it had refused 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.
In Musst Holdings Ltd v Astra Asset Management UK Ltd & Anor (Costs as Damages) [2026] EWHC 1599 (Ch), Leech J at the third consequentials hearing, decided whether Musst could recover as damages, additional costs (After the Event (“ATE”) insurance premiums and litigation funding fees “(LFAs”)) as a consequence of having to fund two actions rather than one.
Musst argued that as the victim of a tort, it was entitled to compensation to place it in the position it would have been had the tort not been committed. 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. Leech J held that but for Astra’s negligent misrepresentation and breach of contract, Musst would have issued a single claim thereby avoiding paying two ATE premiums, two LFA fees, and the second issue fee of £10,000. However, none of those costs were recoverable as damages.
Firstly, s. 58C (1) Courts and Legal services Act 1990 prohibited recovery of the ATE premiums as damages. Secondly, the LFAs fees were properly characterised as litigation costs and were irrecoverable under the existing costs regime, so the claim failed.
The judgment is a reminder that costs cannot normally be recovered as damages, although there are exceptions which did not apply in the Musst case.
Next a judgment about “who was the winner”.
In Wine Enterprise Investment Scheme Ltd v Crowe UK LLP (Formerly Clark Whitehill LLP) [2026] EWHC 1662 (Ch), the claimant had sued its former auditors in respect of 7 audit years with claims ranging between £8,423,962 and £3,352,635.
Judgment was given for claimant £101,965.95, plus interest at 3% above base rate, about 1.6 % of the damages claimed! On 4 February 2025, the defendant had offered of £3.175m under Part 36 plus a costs inclusive “Calderbank” offer on the same date for £3.78 million.
In terms of who had won, the Judge held that that had been the defendant which would have costs up to the expiry of the Part 36 offer discounted by 15% because the defence had not been wholly successful. There being no automatic provision in the CPR that a defendant whose offer is successful should be entitled to indemnity basis costs thereafter, the judge ordered costs on the standard basis to reflect the fact that the case had not been speculative, grossly exaggerated, or opportunistic.
In Carl v Limbani [2026] EWCA Civ 856, the Court of Appeal made the relatively rare decision to overturn a costs order made by a trial judge but then exercised its discretion afresh to make the same order!
The action concerned claims by the claimant that money he had paid over to intermediaries to acquire historic sports cars had been misappropriated. The trial judge dismissed the action with no order as to costs. In his judgment, he had offered his preliminary view that there should be no order, but that he was prepared to hear further submissions before making a final determination. However, at the consequentials hearing, the Judge had refused to hear from the defendant’s counsel on the basis that the issue had already been finally determined.
The Court held that in doing so, the Judge had misdirected himself and occasioned a serious procedural irregularity. It followed that the decision could not stand and the discretion of the Court of Appeal needed to be exercised afresh. However, when that had been done, the appropriate order was still no order as to costs, as there was nothing in the claimant’s conduct to make that order inappropriate, so the defendant’s appeal was dismissed.
Finally, in Hoffman v Finalto Group Ltd [2026] EWHC 1702 (Comm) Butcher J dealt with what happens when a party withdraws a Part 36 offer.
What costs consequences should follow?
In Hoffman, the Defendants offered to settle the whole proceedings for £3.5million on 27 August 2025 under Part 36 expressed to expire on 29 September 2025. Thus, it could not have the automatic Part 36 costs consequences and was a ‘without prejudice save as to costs’ offer, to be taken into account in deciding on the appropriate order as to costs under CPR 44.2(4)(c). However, had that offer been accepted, the Claimants would have recovered significantly more than they actually did under the judgment and the counterclaim would have been withdrawn.
It followed that it was unreasonable to carry on with the litigation, after that offer had been made. Given the limited success on the claims, the claimants were awarded two thirds of their costs up to 29 September, but the justice of the case did not require that after the date of expiry of the offer, they should pay the Defendants’ costs. The claimants had established that the sums were due to them under an Equity Term Sheet which had been wrongly repudiated, that Mr Hoffman was entitled to some employment-related payments, and that the counterclaim failed.
The appropriate order from 30 September 2025 was no order as to costs.
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
