Baroness Lawrence v Associated Newspapers: Indemnity Costs [2026] EWHC 2207 (KB)

Detailed Assessment — 2026-08-21

The High Court ordered indemnity costs throughout after dismissing the claimants' privacy claims, but refused to cap Associated Newspapers' claimed costs of £34.48 million. Nicklin J ordered £9,544,355 on account and confirmed that the defendant must still prove its recoverable costs on detailed assessment.

Overview

Date: 21 August 2026

Judge: Mr Justice Nicklin

Court: High Court of Justice, King's Bench Division

Citation: [2026] EWHC 2207 (KB)

Nature of Proceedings: Consequential judgment following dismissal of privacy claims, determining the basis of costs, an application for a ceiling on recoverable costs and a payment on account

Key Issues:

Whether the claimants' conduct justified indemnity costs throughout the action
The effect of an indemnity costs order in budgeted litigation
Whether CPR 44.2 permits a retrospective ceiling on costs subject to detailed assessment
Whether a proposed ceiling of £18 million to £20 million could be imposed against claimed costs exceeding £34.48 million
The correct payment on account of budgeted and pre-budget incurred costs

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The Background

Baroness Lawrence of Clarendon OBE and others v Associated Newspapers Limited, decided by the High Court in 2026, addresses indemnity costs, costs budgeting, retrospective costs caps and payments on account following the dismissal of high-profile privacy claims. Mr Justice Nicklin ordered the claimants to pay Associated Newspapers Limited's costs on the indemnity basis, refused to cap the recoverable costs and ordered a payment on account of £9,544,355.

The substantive claims were dismissed after an 11-week trial in [2026] EWHC 1637 (KB). The claimants accepted that they should pay Associated's costs and make a payment on account. The principal disputes at the consequentials hearing were whether assessment should be on the standard or indemnity basis and how much should be paid before detailed assessment. A further question arose during the hearing: whether the court could place a quantified ceiling on the costs recoverable under an indemnity costs order.

The scale of the exposure was exceptional. Associated said that it had incurred £34,481,622.54 by 9 July 2026. The figure was a claim for costs, not an award. It remained subject to detailed assessment. Associated's revised approved budget for future costs had been £5,187,919, while the claimants' revised approved budget was £4.434 million. The claimants argued that the substantial departure from the costs information available during budgeting, together with their decisions about after-the-event insurance, weighed against indemnity costs or supported a ceiling of £18 million to £20 million.

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Indemnity Costs

1. The Court Must Evaluate the Conduct in the Round

Nicklin J began with the established distinction between the two bases of assessment. On the standard basis, costs must be reasonable and proportionate, with doubt resolved in favour of the paying party. On the indemnity basis, proportionality does not control recovery and doubt about reasonableness is resolved in favour of the receiving party. Unreasonable costs may still be disallowed.

Drawing on Three Rivers District Council v Bank of England, Thakkar v Mican, The New Lottery Company Ltd v The Gambling Commission and other authorities, the Judge held that an indemnity order requires conduct or circumstances taking the case outside the norm. The hurdle is high, but moral condemnation, dishonesty or bad faith is not essential. The court may consider the cumulative effect of several matters rather than require each criticism to justify indemnity costs by itself.

The exercise must not proceed backwards from defeat at trial. A failed claim is not necessarily one that was unreasonable to bring. The court must ask what was known, or should reasonably have been appreciated, when the allegation was advanced and as the evidence developed. Earlier procedural costs orders also matter. They do not prevent the same history from informing the overall assessment, but the court must avoid double counting.

The Judge also rejected the idea that conduct by lawyers, experts or witnesses is irrelevant unless it can be attributed personally to the litigant. Relying on Excalibur Ventures LLC v Texas Keystone Inc (No 2), he explained that the relevant principle was broader than agency. The court may consider the conduct of people whom a party chose to engage or enlist in presenting the case.

2. The Cumulative Conduct Took the Case Well Outside the Norm

Nicklin J was satisfied that indemnity costs were justified throughout the action. This was not simply a case in which grave allegations failed. The claims and the way they were brought, pleaded, maintained and publicly advanced formed a connected course of conduct outside the ordinary and reasonable conduct of civil proceedings at [105]-[110].

The principal features included:

the speculative and substantially inferential origin of much of the case;
the exceptional breadth of the pleading and the attempt to use disclosure to establish the individual claims;
serious allegations against a large number of journalists, editors and others;
the continued pursuit of allegations lacking a proper evidential foundation or inconsistent with contemporaneous documents;
the failure to reassess and withdraw allegations as disclosure, case-management rulings and witness statements exposed evidential weaknesses;
continued reliance on the compromised evidence of Gavin Burrows;
the manner in which the allegations that senior Associated figures had lied to the Leveson Inquiry were introduced and pursued;
unpleaded allegations of unlawful information gathering being put to witnesses at trial; and
public presentation of allegations of criminality and serious impropriety that were not established.

The original generic case was described in an earlier judgment as exceptionally wide. It would have required an investigation resembling a public inquiry had the court not imposed limits through case management. As Nicklin J put it at [112]:

> “Civil litigation is not a public inquiry.”

The claimants were entitled to advance a properly supported inferential case. The problem was that serious allegations were pleaded on the widest possible basis before the evidential foundation had been established, then left substantially intact when later evidence required a critical reassessment. At [122], the Judge described the failure to withdraw grave allegations that were no longer pursued as unreasonable to a high degree.

The Burrows material was particularly important. It supported allegations of bugging, live-call interception, hardwire tapping and phone hacking, yet the claimants' camp knew before issue that Mr Burrows had withdrawn his cooperation and that his account was largely unsupported by contemporaneous documents. By trial, he denied involvement in the relevant articles, denied working for Associated and disputed the witness statement attributed to him. The allegations were nevertheless not withdrawn. The Judge held at [127] that continued reliance on this material was not an ordinary evidential failure at trial, but the result of maintaining serious allegations when the evidence was known, or ought to have been known, to be seriously compromised.

The trial itself also involved allegations advanced in forms different from the pleaded case, allegations put but not pursued, allegations left unwithdrawn and new allegations raised in cross-examination. The gravity of the alleged wrongdoing heightened both the procedural unfairness and the risk of reputational harm.

3. The Order Applied Throughout the Action

The court rejected both an issue-based order and an order beginning only from a later date. The material features overlapped and affected several phases. Trying to isolate particular issues would make the detailed assessment artificial and expensive. A later starting date would fail to reflect that the breadth of the pleading, the Burrows allegations, the public launch and the Leveson allegations had affected the litigation from an early stage.

The Judge did not find that every step was unreasonable, that every allegation was hopeless from the start or that any individual claimant had knowingly advanced a false case. He also did not find that every claimant had pursued the proceedings for a subjective collateral purpose. The order rested on the objective way in which the common case was framed and conducted, and its cumulative effect. The conclusion at [150] was that the conduct was unreasonable to a high degree and justified indemnity assessment throughout, subject to discrete costs orders already made.

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Costs Budgeting Did Not Prevent Indemnity Costs

The parties' budgets had been managed closely. At the first costs-management hearing, their combined proposed estimated costs exceeded £38.8 million and were held to be manifestly excessive and disproportionate. The court approved future budgeted costs of £4.084 million for the claimants and £4.445 million for Associated. Those figures were later varied to £4.434 million and £5,187,919 respectively.

The claimants argued that they had arranged ATE cover by reference to the approved budgets and the costs information provided by Associated. They said the later disclosure of a claim approaching £34.5 million left them exposed. They also relied on the effect of Burgess v Lejonvarn: an indemnity costs order removes the ordinary protection of CPR 3.18, under which the court will not depart from an approved or agreed budget on standard basis assessment without good reason.

Nicklin J accepted that these were real practical consequences, but they did not alter the threshold question. Once the claimants' conduct justified indemnity costs, the loss of the ordinary budgeting protection was not a reason to refuse the order. The ATE position did not give the claimants a substantive defence to the costs consequences of their conduct.

That did not make the budget irrelevant. At [180], the Judge said that the costs-management orders and budgets could provide useful context on detailed assessment. The Costs Judge could examine whether later developments explained departures from earlier assumptions, including work arising from the Burrows evidence and the trial lasting 11 weeks rather than the anticipated nine.

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The Court Had Jurisdiction to Impose a Retrospective Cap

1. CPR 44.2 Is Wide Enough to Permit a Ceiling

The claimants argued that, even if costs were assessed on the indemnity basis, the court could direct that the amount recoverable after assessment should not exceed a stated ceiling. Nicklin J accepted that jurisdiction existed.

CPR 44.2 gives the court a broad discretion over whether costs are payable, their amount and the time for payment. The examples in CPR 44.2(6) are inclusive rather than exhaustive. SCT Finance Ltd v Bolton was binding authority that the court could order detailed assessment subject to a quantified ceiling. Equitable Life Assurance Society v Ernst & Young showed how a limit could be grounded in a principled causation analysis.

The prospective costs-capping regime under CPR 3.19 did not remove the separate power exercised at the end of proceedings under CPR 44.2. CPR 3.19 concerned future costs and required caution, but it did not abrogate the jurisdiction recognised in SCT Finance.

2. A Cap Must Have a Principled Evidential Foundation

The existence of the power did not allow the court to substitute an impressionistic figure for detailed assessment. Nicklin J identified three controls at [165]. First, the amount cannot be capped merely because the costs claimed appear very high. Secondly, indemnity assessment continues to exclude costs unreasonably incurred or unreasonable in amount. Thirdly, the selected figure must be linked to a principled basis such as causation, reliance, conduct, a distinct stage or another identifiable factor.

The central warning was concise:

> “Indemnity assessment is not a blank cheque.”

The distinction is between a principled direction shaping assessment and a broad-brush figure that replaces the assessment process without the evidence needed to justify it.

3. The £18 Million to £20 Million Cap Was Refused

The Judge regarded Associated's claimed costs of £34,481,622.54 as striking, largely unexplained and, on their face, excessive. They were unprecedented in the Media and Communications List. That concern was not a summary assessment and did not determine what Associated would recover.

The court had no bill, detailed schedules, points of dispute, replies or phase-by-phase evidence explaining the work and increases. Later developments might explain some of the difference, but that could only be tested on evidence. The proposed range of £18 million to £20 million, though linked by the claimants to budgeting information and ATE cover, did not provide a principled way to select one ceiling rather than another.

A cap would therefore have been broad-brush and potentially arbitrary. It could also unfairly prevent Associated from proving that costs above the ceiling were reasonably incurred and reasonable in amount. The prospect of a long and expensive detailed assessment did not justify replacing that assessment with an unsupported maximum.

The court refused the cap at [181]-[183], not for want of jurisdiction, but because the jurisdiction could not fairly be exercised on the available material. The claimants' protection would lie in a rigorous detailed assessment.

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The £9,544,355 Payment on Account

The payment on account was a separate exercise from both the indemnity-costs decision and the proposed ceiling. It did not determine the costs ultimately recoverable on detailed assessment.

The claimants accepted that the payment should include 90% of Associated's approved budgeted costs. The remaining dispute concerned incurred pre-budget costs. Associated proposed 65%; the claimants proposed 40%.

At [186], Nicklin J emphasised that the exercise was necessarily broad-brush but was not itself an assessment. The court had to choose a reasonable sum in light of the likely recovery and the uncertainties of assessment. The reductions made when budgeting estimated future costs could not simply be applied to incurred pre-budget work. That earlier work had been undertaken in response to the exceptionally wide generic case before later case-management controls narrowed the issues.

Equally, the court would not apply 65% merely because that percentage sometimes appeared in cases concerning unbudgeted costs. The exceptional total, and the need for close scrutiny of hours, fee-earner levels, rates, duplication and reasonableness, required a substantial margin.

The resulting payment was £9,544,355, rounded down to the nearest pound. It comprised:

£4,669,127.10, representing 90% of approved budgeted costs; and
£4,875,228.24, representing 60% of incurred pre-budget costs.

The choice of 60%, rather than the 65% sought, reflected the court's concerns about the overall scale while recognising that assessment would be on the indemnity basis. The payment was ordered globally without deciding the final allocation between common and individual costs, and without prejudice to Associated's ability to seek a further payment on account. It was payable by 28 August 2026.

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Practical Implications

For Costs Lawyers

1. Keep the three exercises separate. The basis of assessment, any ceiling on recoverable costs and the amount of an interim payment answer different questions. A figure ordered on account is not the assessed entitlement.

2. Use budgets as evidence, not an automatic indemnity cap. An approved budget does not constrain indemnity recovery under CPR 3.18, but it can remain important context when testing why costs departed from earlier assumptions.

3. A retrospective cap needs more than an alarming total. The application should identify the juridical basis for the ceiling and evidence connecting that basis to the proposed figure. A range chosen because the claim looks excessive will not suffice.

4. Indemnity assessment still requires a detailed challenge. Paying parties should test work, hours, grades, rates, duplication, causation and reasonableness. The absence of proportionality does not make every item recoverable.

5. Payments on account must reflect assessment risk. Budgeted costs, incurred costs and work undertaken before effective case management may justify different percentages.

For Litigation Practitioners

1. Reassess serious allegations throughout the case. Disclosure, witness statements and case-management rulings may remove the basis for allegations that were arguable when pleaded. Failure to withdraw them can affect costs across the action.

2. Plead grave allegations precisely. Putting unpleaded allegations of criminal or seriously improper conduct in cross-examination creates procedural unfairness and a substantial indemnity-costs risk.

3. Publicity can form part of the costs analysis. Where serious allegations are actively publicised, later fail and are not clearly withdrawn, the public presentation may add to the cumulative case for indemnity costs.

4. ATE cover does not fix adverse costs exposure. Decisions taken by reference to budgets and disclosed costs may be commercially important, but they do not prevent indemnity costs where conduct crosses the required threshold.

5. Do not assume an early strike-out application was required. In complex fact-heavy litigation, the successful party's failure to seek summary disposal does not establish that the losing party acted reasonably in maintaining its case.

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Conclusion

Baroness Lawrence v Associated Newspapers is a significant costs decision on the interaction between litigation conduct, indemnity assessment and costs management. Its central message is that the court must examine the cumulative course of the litigation without treating defeat itself as misconduct. Here, the breadth of the case, the maintenance of unsupported grave allegations, the failure to reassess, the use of compromised evidence and the conduct of the trial justified indemnity costs throughout.

The decision also confirms a potentially important jurisdiction to impose a quantified ceiling on costs subject to assessment, including indemnity costs. That power is exceptional and demands a principled evidential foundation. Even a claim exceeding £34.48 million, described by the trial judge as excessive on its face, could not be capped by selecting a broad figure without the materials required for assessment.

The £9.54 million order was a payment on account only. Associated must still prove its recoverable costs on detailed assessment. The judgment therefore combines a severe costs consequence for the claimants' conduct with a clear reminder that indemnity assessment remains an evidence-based scrutiny of reasonableness.

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Publisher: Mackenzie Costs

Citation: Baroness Lawrence of Clarendon OBE & Ors v Associated Newspapers Limited [2026] EWHC 2207 (KB)

Full judgment available at: The National Archives

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