It is notoriously difficult to successfully appeal costs decisions. In F & C Alternative Investments (Holdings) Ltd v Barthelemy (No 3) [2012] EWCA Civ 843, Davis LJ explained that costs orders involve an evaluative exercise entrusted to the trial judge, whose familiarity with the case places them in a position that an appellate court cannot replicate. It follows that an appellate court will interfere only where the judge has erred in principle, considered irrelevant factors, overlooked relevant matters or reached a decision that is plainly unsustainable (see also SCT Finance v Bolton [2002] EWCA Civ 56). However, in the recent case of Ward and others v Donnellan and others [2026] EWCA Civ 729, the Court of Appeal overturned the first instance judge’s decision to make no order as to costs following the failure of a claim in which both parties were dishonest.
Three related claims were tried together. The main dispute (the ‘partnership claim’) concerned Mr D’s contention that he and Mr W had entered into an oral partnership agreement for the purpose of property development. Following a 15-day trial, the judge rejected the partnership claim and made significant findings of dishonesty against Mr D in relation to various aspects of his case. However, the judge also found that Mr W had acted dishonestly in respect of his claim. Given the serious misconduct of both parties, the court concluded that no order for costs should be made in relation to the partnership claim. Mr D appealed.
In considering the appropriate approach to costs where dishonesty is established, Lewison LJ drew guidance from the decision of the Court of Appeal in Hutchinson v Neale [2012] EWCA Civ 345. In Hutchinson, Pitchford LJ reaffirmed that the ordinary rule remains that costs follow the event, even where the successful party has acted dishonestly. The existence of dishonesty does not, without more, displace that principle. Rather, the court must assess the seriousness of the misconduct, the extent to which it affects the issues in dispute, and whether it has unnecessarily increased the expense of the litigation. The central question is whether the dishonest conduct has so infected the proceedings that a departure from the usual costs consequences is required in the interests of justice.
Lewison LJ also endorsed the approach in Ahuja Investments Ltd v Victorygame Ltd [2021] EWHC 2730 (Ch), a case in which dishonesty featured on both sides of the dispute. In this case, HHJ Hodge recognised that although the defendants had advanced a dishonest defence, the litigation itself had been initiated by an unsuccessful claimant whose own conduct was also tainted by dishonesty. In those circumstances, the costs order had to reflect the misconduct of both parties without losing sight of the fact that the defendants had nevertheless been required to defend the claim. The exercise, therefore, involved balancing competing considerations: denying recovery for costs attributable to dishonest conduct while ensuring that the successful party was not deprived of those costs properly incurred in resisting an unmeritorious claim.
Applying those principles, Lewison LJ concluded that the trial judge’s costs order could not stand. While acknowledging both the breadth of the trial judge’s discretion under Civil Procedure Rule 44 and the appellate court’s limited role in reviewing costs decisions, Lewison LJ found that insufficient attention had been paid to the distinct claims that had been tried together and held that findings of dishonesty could not simply be aggregated into a single global assessment; their significance had to be examined in the context of the particular claim to which they related.
In respect of the partnership claim, several factors justified a costs order in favour of the defendants. The claim had failed entirely and, as the successful parties, the defendants were therefore entitled to the usual rule that costs follow the event. Further, the claimant had also relied on dishonest evidence in support of his case, and the defendants were entitled to recover the costs reasonably incurred in exposing that dishonesty. However, the defendants could not expect to recover costs for advancing dishonest aspects of their own case. Lewison LJ concluded that any costs order had to reflect both parties’ misconduct and avoid imposing a disproportionate penalty on one dishonest litigant while overlooking the failings of the other. Lewison LJ ordered the claimant to pay 50% of the defendants’ costs of the partnership claim.
The decision in Ward provides a useful reminder that dishonesty, even on both sides of the litigation, does not automatically displace the fundamental principle that costs follow the event. The decision confirms that costs consequences must be carefully assessed in light of the particular claim in issue, the nature and significance of the dishonest conduct, and the extent to which it has affected the litigation.
Although costs remain a matter of broad judicial discretion, the Court of Appeal’s judgment demonstrates the limits of that discretion and reinforces the need for a principled and proportionate approach to costs where both parties have been dishonest.
Masood Ahmed is associate professor of law at the University of Leicester. Dr Lal Akhter is a fellow of the Chartered Institute of Arbitrators, a lawyer, independent arbitrator and a mediator associated with Docket Live (Leicester) and Wiseman Solicitors (Bolton)
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