On 7 July 2026, Nicklin J handed down judgment dismissing the claims brought against Associated Newspapers Limited (‘ANL’) by Baroness Lawrence of Clarendon OBE, Prince Harry, The Duke of Sussex, Elizabeth Hurley, Sir Elton John CH CBE, David Furnish, Sir Simon Hughes, and Sadie Frost Law ([2026] EWHC 1637 (KB)).
Having been unsuccessful at trial, the Claimants accepted that they must pay ANL’s costs and that they must make a payment on account of those costs. The fulsomeness of this acceptance needs to be considered in light of a joint press statement from Prince Harry and Baroness Lawrence on 7 July 2026 that Nicklin J’s dismissal of their claims was: ‘…a complete and obvious whitewash, but sadly not altogether unexpected’.
On 21 August 2026, Nicklin J handed down judgment dealing with two principal issues on those costs ([2026] EWHC 2207 (KB), the ‘Judgment’). First, whether the Claimants should pay costs on the standard or indemnity basis and second, the sum to be paid by the Claimants on account of costs.
This article discusses the Court’s order that ANL’s costs should be assessed on the indemnity basis and the interim payment that has been ordered. It reveals how the Judgment is a useful reminder of the conduct or circumstances which may take a case outside the norm such that an order for assessment on the indemnity basis may be made and the particular care that needs to be advanced and maintained in claims alleging dishonesty, fraud, bad faith or commercially unacceptable conduct. Those bringing and funding claims in the English courts should take heed; those defending such claims should ensure they are being well-advised as to the implications of the Judgment for their defence strategy. References in square brackets are to paragraphs of the Judgment.
The indemnity basis
ANL had sought an order that the Claimants should pay its costs of the action on the indemnity basis and not the usual, standard basis of assessment. Unsurprisingly, the Claimants submitted that standard basis assessment was the just order.
The Court has a wide discretion when considering whether costs should be assessed on the standard basis or on the indemnity basis. As explained at [8] of the Judgment, there must be some conduct, or some circumstance, which takes the case out of the norm and assessment should not be on the indemnity basis simply because serious allegations failed at trial [108].
Nicklin J reminds parties that serious allegations, especially allegations of dishonesty, fraud, bad faith or commercially unacceptable conduct ‘must be advanced and maintained with particular care’ [23]. Whilst such allegations being advanced without proper foundation, maintained unreasonably, or abandoned without explanation may be powerful factors in the Court’s overall assessment, they do not create an automatic entitlement to indemnity costs. The Court must exercise its discretion by reference to all the circumstances.
Nicklin J was satisfied that an order for indemnity costs should be made, save where costs orders have already been made, and the Judgment identifies the principal matters which when considered cumulatively take the litigation ‘well outside the norm’ and justify an order that ANL’s costs be assessed on the indemnity basis [106]. Several features were found to be important and are set out at [109], including:
(a) the speculative and substantially inferential character of the claims at their origin;
(b) the exceptional breadth of the pleaded case;
(c) the pursuit of allegations which, in material respects, lacked a proper evidential foundation or were irreconcilable with contemporaneous documents; and
(d) the putting of unpleaded allegations of unlawful information gathering to witnesses at trial.
Nicklin J also noted that the conduct relied on by ANL ran through the proceedings [110] and that once disclosure, case management rulings and witness statements exposed the limits of the evidence, the Claimants were ‘required to reassess whether the allegations could properly be maintained’ and did not do so [111]. Importantly, an inferential case may properly be advanced where the evidence supports it, but ‘an inferential case must be tested against the evidence as it emerges’ [121]. The Claimants had failed to do that here. Not a single allegation of serious wrongdoing was voluntarily withdrawn by the Claimants, which Nicklin J described as ‘striking’ [122].
The Judgment states that ‘[p]utting unpleaded allegations to witnesses in the witness box’ was ‘wholly unacceptable’ and that putting allegations of criminal or seriously improper conduct without proper pleading or evidential foundation ‘carries a real risk of reputational harm to individuals who have not been given proper notice of the case they are said to have to meet’ and this makes the unfairness ‘not merely procedural’ [136].
Corporate Defendants will note the fact that the claims made were openly attacking the reputation of ANL (an organisation unabashedly willing to court controversy and in a position to use its own front pages to fight back, and therefore potentially less likely to be negatively impacted by reputational attacks than many Defendants[1]) was an important reason for ordering indemnity costs. As the Judgment says, ANL faced not just minor factual suggestions, but allegations of criminal or seriously improper conduct being made in open court [136]. The damage this causes is heightened in proceedings attracting extensive media interest, in part encouraged by the Claimants themselves and their lawyers.
This situation was exacerbated by the fact the ANL trial ‘was also marked, in important respects, by a changing case. Allegations were advanced in a form different from the pleading. Some allegations were put but not pursued, yet not withdrawn. Others were not put but remained unwithdrawn. New and unpleaded allegations were advanced in cross-examination. In closing submissions, the Claimants advanced some cases in a way that did not correspond with the case put to witnesses’ [137]. In a fluvial blast from the past, Nicklin J returned to the language of Three Rivers,[2] noting that Prince Harry and others had advanced ‘a constantly changing case in order to justify allegations which they had made. This was not the disciplined presentation of serious allegations that the Court was entitled to expect, particularly after repeated case management rulings designed to ensure that the case was properly confined’ [137].
It was the cumulative effect of the Claimants’ conduct and the circumstances of the claim that was decisive for the Court in ordering costs on an indemnity basis. The Claimants’ conduct was found to be ‘unreasonable to a high degree’ [150] and the just order was for costs to be assessed on the indemnity basis save where costs orders have already been made.
The Court declined to impose a cap on the amount that ANL can recover under any indemnity costs order, whilst recognising in principle that the Court does have jurisdiction to make an order that costs otherwise subject to assessment should be subject to a quantified ceiling or cap [158]. Nicklin J stated that the Court’s power is ‘a broad discretionary one’ and it ‘should not be used to avoid the ordinary process of assessment, nor to impose an arbitrary figure in place of the evidence-based scrutiny that is the function of the Costs Judge’ [164].
The relevance of costs budgeting
The parties’ costs of the proceedings were subject to costs budgeting, in which the Claimants’ approved budget was £4.434 million and ANL’s approved budget was £5,187,919 (following approval of revised budgets). ANL said it had gone on to incur costs orders of magnitude beyond the approved budgets (incurring £34.5 million to 9 July 2026).
An order for indemnity costs allows winning parties to seek recovery beyond its approved budgets. The Claimants had submitted that they made decisions about ATE cover by reference to the costs information and budgeted figures available to them. The Judgment finds that these matters do not ‘alter the threshold question whether the case is outside the norm’ and ‘[n]or do they provide a reason to decline to make an indemnity costs order where, as here, the threshold is clearly crossed’ [144].
Interim payment
It was common ground that ANL is entitled to a payment on account. ANL sought a payment on account calculated by taking 65% of its incurred pre-budget costs and the Claimants contended that 40% of ANL’s pre-budget costs should be ordered. Nicklin J concluded that a reasonable sum on account comprises 90% of ANL’s approved budgeted costs and 60% of ANL incurred pre-budget costs (rounded down to the nearest pound) [189]. That gives a total of over £9.5 million.
What happens next?
Prince Harry and others have to pay the £9.5 million within a week of the Judgment. There has been extensive speculation as to how they will do so when some appear to have deeper pockets than others. The Claimants are reported[3] to have a combined £16.2 million in after-the-event (ATE) cover from Guildford-based Temple Legal against adverse costs; however, even if that is correct and all of that coverage can be called upon, a defence spend of around £34.5 million leaves a gap of roughly £18.3 million even before the Judgment increased the Claimants’ exposure more. And that gap will increase as ANL incurs further costs.
If the total amount of ANL’s costs (which appear already to be about £25 million more than the interim payment ordered) is not agreed between the parties, the Court will determine the amount owed through a detailed assessment costs process (itself likely to be an expensive and lengthy further stage in this dispute). In that detailed assessment, costs having been awarded on an indemnity basis will not be a ‘blank cheque’ [165(2)], but any doubt as to reasonableness will be resolved in favour of ANL as the winning party [7].
Any application for permission to appeal against Nicklin J’s original ruling and the Judgment must be filed by 2 October, with the deadline for filing any Appellant’s Notice with the Court of Appeal extended to 6 November. Until then, the Claimants and their ATE insurance backer face a growing financial risk.
Conclusion
The Judgment is an important reminder to those bringing claims of the conduct and circumstances which will take proceedings they commence outside the ordinary and reasonable conduct expected which may lead to an order for assessment on the indemnity basis. It reaffirms that the Court can and will order indemnity costs without a finding of dishonesty or bad faith against the Claimants.
By Kitty Kirton (Barrister at Hailsham Chambers) and Tom Snelling (Partner at Signature Litigation LLP)
[1] The Daily Mail’s editor defended its combative editorial style in a fiery November 2018 keynote speech at the Society of Editors annual conference in Manchester. He celebrated the paper’s role in ‘infuriating politicians, mandarins… and the rich and powerful’ arguing that true journalism must actively court debate rather than fear backlash: https://pressgazette.co.uk/news/ex-daily-mail-editor-paul-dacres-society-of-editors-conference-2018-speech-in-full/.
[2] Notably, the principles provided by Tomlinson J in Three Rivers DC v Bank of England [2006] 5 Costs LR 714 setting out factors in deciding whether unreasonable conduct has been demonstrated such that indemnity costs should be ordered.
1 Reader's comment