Monthly Legal Costs Update – July 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 July 2026 update has been written by Nick McDonnell and Colin Campbell.
Within a month of the Civil Justice Council publishing its first Report into the possible reform of Part III Solicitors Act 1974 (the Act), two decisions involving the Act have just been handed down by the Court of Appeal.
The first, Winros Partnership v Global Energy Horizons Corporation [2026] EWCA Civ 654 started life in the Senior Courts Costs Office on 31st March 2016! A decade later, the court refused permission to appeal against the judge’s ruling below that the defendant (GEHC) had not been guilty of an abuse of process in having raised an objection in its Points of Dispute which could have been argued before the Master earlier in the proceedings.
The second issue in Winros concerned a conditional fee agreement (CFA) made in March 2013. GEHC had committed a repudiatory reach which Winros elected to accept and to sue for damages. Winros subsequently billed GEHC £3m for work undertaken pre-termination. Below, GEHC contended successfully that Winros was not permitted to do that because at that point, there had been no win achieved under the CFA, so there was no contractual entitlement to payment and the bills should be assessed at nil.
Winros’s case on appeal was that the repudiatory breach constituted a “failure of basis” and that it had been justified for the firm to appropriate funds belonging to GEHC on a quantum meruit because GEHC had been enriched to the value of the firm’s work. The court disagreed, holding that the law of unjust enrichment cannot be deployed to subvert the express risk allocation freely negotiated by parties to a valid contract. Winros could not escape its contractual bargain by electing to accept the repudiatory breach and claim its fees through the law of unjust enrichment.
Its appeal failed, so the £3m bill remained assed at nil, although it is to be assumed that the claim for damages will continue, so the decade long case is not over yet.
The second case under the Act is Broadfield Law UK LLP (formerly BDB Pitmans LLP) v Barnes [2026] EWCA Civ 698. It concerned whether the retainer between the claimant and her solicitors had been a contentious business agreement (CBA) within the definition of s.59 of the Act, viz an agreement as to remuneration by reference to an hourly rate. If it had, 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. Below, the courts held that the agreement was insufficiently clear and certain to be a CBA.
That decision was correct.
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 a CBA was certainty. If the agreement 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, there was no certainty at all and no agreement as to remuneration by reference to an hourly rate. The rate payable was not identified so the client would not know what he was letting himself in for, even though there was a maximum hourly rate set within the range.
In the present case, whilst the rates were set out for certain named fee earners, even those rates were subject to unspecified increases at unspecified times, for example, on promotion or attaining professional qualifications. Accordingly the appeal was dismissed.
Away from the Act, in Cook v Skeggs [2026] EWHC 1132 (KB) Sweeting J gave a useful reminder of the general rule that costs should normally follow the event.
Below, the defendant had successfully resisted the claimant’s strike out and summary judgment application but had been ordered to pay 80% of the claimant’s costs. The judge reasoned that the application had been substantially justified when first made and that late amendments to the defence had completely changed the picture.
Sweeting J disagreed, holding that the touchstone for deciding the incidence of costs was an assessment of who had won. Not only had the decision below deprived the defendant of her costs of the application, but she had also been ordered to pay the claimant’s costs, despite the fact she had succeeded. He replaced the order by directing that the claimant pay 75% of the defendant’s costs of the application, with the 25% reduction reflecting her conduct in applying to amend the defence late.
Back in the Court of Appeal, in Dentons UK and Middle East LLP v Solicitors Regulation Authority Ltd [2026] EWCA Civ 655, the court allowed an appeal by Dentons, itself made on appeal from a decision of the Solicitors ’Disciplinary Tribunal (“SDT”) in proceedings brought by the Solicitors Regulation Authority Ltd (“SRA”).
The SRA contended that no costs order should be made against it to reflect the fact that it was a regulatory body discharging its responsibilities as a regulator which set it aside from an ordinary litigant in civil litigation.
That submission failed.
The SRA had the benefit of a determination by the SDT and had challenged it on appeal. Thus its position was more akin to that of a normal litigant. Dentons was entitled to 65% of its costs of the two appeals with £200,000 to be paid on account by the SRA within 21 days.
Following her 1121 paragraph trial judgment, in The New Lottery Company Ltd & Anor v The Gambling Commission [2026] EWHC 1311 (TCC), Joanna Smith J dealt with the costs of the failed action. The claimants had sought 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 Commission sought its costs on the indemnity basis and succeeded. The claimants conduct had been out of the norm. The touchstone for that was unreasonableness, which needed to be “to a high degree”, and that did not mean merely wrong or misguided in hindsight. This had been a huge and important claim, billed by the claimants, as “the most financially significant procurement process in UK history”. Numerous serious and wide-ranging allegations (including of impropriety and dishonesty) had been made from the start and by the end of trial, the list of issues, which had originally run to 64 issues in relation to the Process Claim and 17 issues in relation to the Modifications Claim, had been very substantially reduced, often without any proper notice. That had caused very significant disruption to the Court and to the other parties. It was not appropriate to “salami slice” the costs by reference to individual issues or periods of time. Nor was there anything 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.
In “Dieselgate” – see Various Claimants v Mercedes-Benz Group AG [2026] EWHC 1335 (KB) – Constable J and Rowley SCJ gave their judgment in the third tranche of costs budgeting. The costs management hearing dealt with expert evidence, namely Loss Assessment, Mechanical Engineering, Software Engineering, Consumer Behaviour and UK Vehicle Valuation and/or Pricing. It also addressed the proposed budgets for ADR.
On behalf of the claimants, it was submitted that earlier judicial criticisms had taken on board the “over lawyering” resulting from there often being a number of layers of solicitor representation on the claimant side being involved. Nonetheless, the court found that the sums claimed in the proposed budgets were still excessive and allowed £5,411,181.65 for the claimants and £12,858,057.16 for the defendants.
Finally, after over 8 years of litigation, the end might be in sight in Innsworth Capital Ltd, R (On the Application Of) v The Competition Appeal Tribunal [2026] EWHC 1393.
In funded collective proceedings brought against Mastercard by Walter Merricks, as class representative, there was a settlement in which Mastercard agreed to pay £200 million, a tiny fraction of the sum claimed. On judicial review, the funder, Innsworth, challenged the order made by the Competition Appeal Tribunal (‘the CAT’) for the distribution of the proceeds of that settlement. That challenge failed.
The CAT had determined that despite the very poor outcome of the claim, a just and reasonable return for the claimant funder would be reimbursement of its expenditure of between £41 million and £46 million, together with a profit of 50% of that expenditure. That conclusion was one which the CAT was entitled to reach and was well within the wide powers conferred upon it as an expert and specialist tribunal, so the judicial review failed.
Finally, again in the Court of Appeal, in Ward v Donnellan [2026] EWCA Civ 729, the court reversed the judgment below. The key issue in deciding the liability for costs in that case was allegations of dishonesty.
Below, the court had made no order for the costs of the action. That had been wrong. 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, in an appropriate case, consider the conduct of the parties under 44.3(2)(b), but Lewison LJ held that there is no general rule that a finding of dishonest conduct by the successful party will replace the usual starting point.
Accordingly, on the facts, 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 may have been incurred in advancing a dishonest case, so the appeal was allowed.
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
