Brandalised v Banksy: Indemnity Costs for Litigation Deployed as Leverage [2026] EWHC 795 (KB)
Detailed Assessment — 2026-04-01
Nicklin J orders indemnity costs against Brandalised after finding defamation proceedings against Banksy were pursued as leverage exploiting his anonymity, but refuses non-party costs order against sole director.
Overview
Date: 1 April 2026
Judge: The Honourable Mr Justice Nicklin
Court: High Court of Justice, King's Bench Division, Media & Communications List
Citation: [2026] EWHC 795 (KB)
Case No: KB-2023-003469
Nature of Proceedings: Applications for indemnity costs, a non-party costs order against the sole director/shareholder, and a payment on account following discontinuance of a defamation claim
Key Issues:
- Whether the claimant's conduct in pursuing defamation proceedings took the case "out of the norm" so as to justify indemnity costs
- Whether proceedings were deployed to exert pressure by exploiting the defendant's well-known desire to preserve his anonymity
- Whether the sole director and shareholder of the corporate claimant should be made personally liable for costs under s.51 Senior Courts Act 1981
- The distinction between the threshold for indemnity costs and the higher threshold for non-party costs orders against directors
- Payment on account of costs
---
In Full Colour Black Ltd (t/a Brandalised) v The Artist Known As "Banksy" & Anor [2026] EWHC 795 (KB), Mr Justice Nicklin ordered indemnity costs against the corporate claimant after finding that defamation proceedings had been pursued not for vindication but as an instrument of leverage, exploiting Banksy's well-known concern to preserve his anonymity. The non-party costs order sought against the sole director and shareholder was, however, refused: the court drew a clear distinction between conduct warranting indemnity costs against a company and the more exacting threshold required to displace the principle of limited liability.
---
The Facts
Full Colour Black Limited ("FCB"), trading as Brandalised, was a company established in 2007 specialising in the commercialisation of contemporary street art, including works by Banksy. Andrew Gallagher, FCB's sole director and shareholder, had been photographing Banksy's art since 2001. FCB's business model involved granting licences to exploit photographs of Banksy's artworks for commercial use, principally on clothing and greeting cards, without Banksy's consent.
Banksy, the internationally renowned pseudonymous street artist, has consistently opposed the commercial exploitation of his works and has never licensed such exploitation. The Second Defendant, Pest Control Office Limited, acts as Banksy's exclusive licensee and authentication body. A notice on its website states: "neither Banksy or Pest Control licence the artist's images to third parties."
The parties had a fractious history stretching back over a decade. FCB commercially exploited Banksy's artworks knowing that the Defendants objected, while repeatedly proposing commercial arrangements that were refused. Crucially, as the judge observed, FCB's business model was "legally precarious": while a photograph may itself attract copyright protection, that copyright does not displace the copyright in the underlying artistic work, and reproducing photographs of Banksy's works on merchandise without his consent carried an inherent risk of infringement (at [13]).
---
The Defamation Claim and its Conduct
The Instagram Post
In October 2022, FCB collaborated with the fashion retailer GUESS on a clothing collection marketed as "GUESS X BRANDALISED WITH GRAFFITI BY BANKSY", displayed prominently in GUESS's flagship Regent Street store. On 18 November 2022, Banksy posted a photograph of the window display on his Instagram account (which has over 14 million followers) with the message:
> "Attention all shoplifters. Please go to GUESS on Regent Street. They've helped themselves to my artwork without asking, how can it be wrong for you to do the same to their clothes?"
The post attracted widespread public and media attention and led to crowds gathering outside the store, causing its temporary closure.
Proceedings as Leverage
FCB issued defamation proceedings on 6 September 2023. The judge found that the claim was, viewed objectively, without any real prospect of success: an honest opinion defence would, in all likelihood, have disposed of it (at [120]). However, that defence was never pleaded by the Defendants. Mr Justice Nicklin concluded that this was a tactical decision: reliance on honest opinion would have required Banksy to give evidence that he genuinely held the opinion expressed, thereby carrying a risk to his anonymity (at [42]).
The judge identified a series of features demonstrating that FCB pursued the proceedings not for vindication but to exploit Banksy's sensitivity about his identity:
1. The "reservation of rights" in the Particulars of Claim. FCB included a sentence stating: "The Claimant reserves the right to seek an order that [Banksy] identifies himself for the purposes of these proceedings" (at [30]). Mr Justice Nicklin described this as "gratuitous (perhaps even provocative)" (at [39]).
2. Correspondence pressing for Banksy's "full name" in the Acknowledgment of Service, despite having named him as "the artist known as Banksy" in the Claim Form (at [34]).
3. Media briefings. FCB's trade mark attorney, Aaron Wood, was quoted in The Sun stating: "the worst thing that could happen to Banksy is if he gets unmasked by appearing in court" (at [33]). This was consistent with earlier public statements by Mr Wood acknowledging that Banksy could not sue for copyright infringement without risking identification (at [12]).
4. Tactical pleading in the Reply. Despite having pleaded in the Particulars of Claim that Banksy had published the Instagram Post and that the artworks were "by Banksy", FCB's Reply adopted contradictory positions: it resiled from its case on publication and declined to admit that Banksy created the artworks, requiring the Second Defendant to prove the point. The Defendants characterised this as ensuring the proceedings continued to carry a risk that Banksy might be compelled to give evidence (at [44]).
5. Settlement overtures linked to commercial demands. After new solicitors were instructed, FCB's without prejudice save as to costs correspondence sought not merely to settle the libel claim but to negotiate a "co-existence" agreement permitting FCB to continue exploiting Banksy's works. The Defendants' solicitors rejected this: "our clients do not wish, or intend, to work alongside your client going forwards or at all" (at [46]).
6. Discontinuance in the face of a substantive challenge. FCB discontinued only after the Second Defendant issued a summary judgment application, and no explanation was offered for the decision (at [126]).
---
Indemnity Costs: "Out of the Norm"
The Legal Framework
Mr Justice Nicklin set out the principles from Thakkar v Mican [2024] 1 WLR 4196 at [19]: indemnity costs require the receiving party to surmount "a high hurdle" by demonstrating "some conduct or some circumstance which takes the case out of the norm." The conduct must be "unreasonable to a high degree", though it need not amount to "a moral lack of probity or conduct deserving of moral condemnation" (at [92]).
The judge also drew on Hosking v Apax Partners LLP [2019] 1 WLR 3347, which established principles for indemnity costs following discontinuance:
- Discontinuance does not of itself justify an assessment of the merits (at [94(1)]).
- But a hallmark of cases falling "out of the norm" is that proceedings have been "high-risk litigation pursued, and often deliberately publicised, to exert pressure in the hope of extracting a settlement, with frail evidential support and little regard to their prospects of success at trial" (at [94(6)]).
- Where the Court has been "intentionally used as an instrument of leverage, an 'anvil for settlement', rather than as an adjudicator", indemnity costs may follow (at [94(7)]).
The Court's Conclusion
The judge was satisfied that FCB's conduct fell outside the norm (at [118]). The critical feature was:
> "that the proceedings were deployed to exert pressure relying upon Banksy's well-known concern to preserve his anonymity as central to his artistic expression. Mr Wood said as much in The Sun Article." (at [121])
Nicklin J rejected Mr Gallagher's evidence that the proceedings were brought for vindication. He found that evidence "inconsistent with the objective documentary record and with the inherent logic of the position which FCB adopted" (at [124]):
> "A claim which, viewed objectively, had no real prospect of succeeding by adjudication is difficult to reconcile with a purely vindicatory purpose; whereas it is readily explicable if the proceedings were regarded as creating leverage by reason of the continuing sensitivity around Banksy's anonymity."
The court ordered FCB to pay the Defendants' costs on the indemnity basis from 10 October 2023, the date on which the Defendants provided their substantive response and formally raised the issue of protecting Banksy's anonymity (at [128]).
---
Non-Party Costs Order: Refused
The Higher Threshold
The judge turned to the application against Mr Gallagher under s.51 Senior Courts Act 1981, applying the principles from Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] 1 WLR 2807 and Goknur Gida v Aytacli [2021] 4 WLR 101.
Mr Justice Nicklin emphasised that the two jurisdictions are distinct and that the thresholds are not co-extensive (at [107]):
> "it does not follow from my conclusion that FCB's conduct justifies an indemnity costs order that a non-party costs order against Mr Gallagher must also be made. The two jurisdictions have different functions and different thresholds."
For a non-party costs order against a director, the applicant must usually establish either that the director was seeking to benefit personally from the company's litigation, or that he was guilty of serious impropriety or bad faith (per Coulson LJ in Goknur at [41]).
Why the Application Failed
The judge found that despite Mr Gallagher's control of the litigation, the claim was brought in the company's name and sought relief for the company. Any personal advantage to Mr Gallagher would have been "indirect and incidental to his shareholding" (at [133]):
> "That is not unusual in the case of a small company whose shares are held by, and whose affairs are controlled by, a single director, and does not, without more, justify treating the director as the true litigant and transferring to him the company's costs liability."
Three additional factors weighed against the order:
1. Legal advice. The litigation strategy was formulated and implemented with the benefit of solicitors and Counsel. While this did not excuse the company's conduct, it was relevant to whether personal liability should attach to the director (at [134]).
2. Insufficient evidence of financial manipulation. Although there was material suggesting FCB's financial position had deteriorated, the judge did not have sufficient evidence that FCB was insolvent or undercapitalised at the time the litigation strategy was adopted, or that Mr Gallagher was deliberately using an impecunious corporate vehicle for risk-free litigation (at [135]).
3. The conduct did not cross the higher threshold. The evidence did not establish "dishonesty towards the Court, deliberate manipulation of the corporate form to render the company unable to meet an adverse costs order, or other conduct of a markedly different order from aggressive or opportunistic litigation strategy" (at [136]).
The delay in bringing the non-party costs application provided a further discretionary reason against the order (at [137]).
---
Payment on Account
FCB did not resist a payment on account; the only matter to be resolved was quantum. The judge directed that, if not agreed, the amount and timing of the payment on account would be resolved on the basis of further written submissions (at [139]).
---
Practical Implications
For Costs Lawyers
1. Indemnity costs following discontinuance require more than abandonment. The default position under CPR 38.6(1) is that the discontinuing party pays costs on the standard basis. This case confirms that to obtain indemnity costs, the receiving party must show conduct "out of the norm", but it illustrates that litigation pursued as leverage rather than for adjudication will meet that threshold.
2. The Hosking framework for discontinued claims. Costs lawyers advising on applications for indemnity costs following discontinuance should look for the hallmarks identified in Hosking v Apax Partners: high-risk litigation, deliberate publicity, frail evidential support, and pursuit of settlement rather than vindication. The timing of discontinuance, particularly in the face of a substantive challenge, supports the inference.
3. Indemnity costs do not automatically translate to non-party costs orders. The two jurisdictions are distinct. A finding sufficient for indemnity costs against a company does not, without more, justify personal liability against a director. A separate, more exacting analysis is required: either personal benefit or serious impropriety amounting to bad faith. Costs lawyers should advise clients accordingly when framing applications.
4. Evidence is key for non-party costs applications. The Defendants' application against Mr Gallagher failed, in part, because they lacked sufficient evidence of FCB's financial position at the time the litigation strategy was adopted. Parties considering non-party costs orders should gather evidence of the company's solvency, any asset transfers, and the director's personal benefit at an early stage.
For Litigation Practitioners
1. Proceedings used as leverage attract severe costs consequences. This judgment reinforces that the court will scrutinise the purpose for which proceedings are pursued. Defamation claims (or indeed any claims) used to exert pressure for collateral purposes, such as commercial negotiations, risk an indemnity costs order even where the conduct falls short of formal abuse of process.
2. Pleading strategy is subject to forensic scrutiny. The court examined FCB's pleading decisions in granular detail, including the "reservation of rights" to unmask Banksy, the tactical non-admissions in the Reply, and the contradictions between the Particulars of Claim and the Reply. Practitioners should be aware that such decisions will be examined closely on any subsequent costs application.
3. Media briefings can be evidential. Public statements by FCB's trade mark attorney were relied upon as evidence of FCB's litigation strategy. Practitioners and their advisors should exercise caution with public commentary about ongoing proceedings.
4. The principle of limited liability remains robust. Despite finding improper conduct justifying indemnity costs, the court refused to pierce the corporate veil for costs purposes. Directors of single-director companies should not assume personal costs exposure merely because the company's litigation was conducted improperly, provided there is no evidence of deliberate financial manipulation or personal benefit beyond the ordinary incidents of shareholding.
---
Conclusion
This judgment is a significant illustration of the court's willingness to order indemnity costs where proceedings are found to have been pursued for an improper collateral purpose, even where the conduct falls short of a formal finding of abuse of process. Mr Justice Nicklin's detailed analysis of the litigation history, from pre-action correspondence through to the without prejudice save as to costs negotiations, demonstrates the forensic approach the court will take when assessing whether a case falls "out of the norm."
The refusal of the non-party costs order is equally instructive. Despite the clear finding that FCB's conduct was improper, the court drew a firm line between the indemnity costs threshold and the more exacting standard required to impose personal liability on a director under s.51 Senior Courts Act 1981. The distinction between the two jurisdictions is not a technicality: it reflects the fundamental policy that limited liability protects directors from the costs consequences of corporate litigation, even where that litigation is conducted improperly, unless the director has acted with serious bad faith or used the company as a vehicle for risk-free personal litigation. The judgment provides a valuable framework for practitioners advising on the interaction between these two distinct costs jurisdictions.
For the Defendants, the practical outcome is an indemnity costs order from 10 October 2023, which shifts the burden on assessment: any doubt as to whether costs were reasonably incurred or reasonable in amount will be resolved in their favour. For FCB, the financial consequences may be significant. For Mr Gallagher, the principle of limited liability holds, though the judgment's findings about the purpose for which the litigation was pursued will remain on the public record.
---
Citation: Full Colour Black Ltd (t/a Brandalised) v The Artist Known As "Banksy" & Anor [2026] EWHC 795 (KB)
Full judgment available at: BAILII
Analysis by Mackenzie Costs, costlawyer.co.uk
Related Specialist Support
Related Cases
View all case law updates | Our services | Contact us