Security for Costs in Solicitor-Client Assessment: Protecting Against a Hollow Victory — Bugsby v Stewarts Law

Detailed Assessment — 2026-02-16

In Bugsby Property LLC v Stewarts Law LLP, Senior Costs Judge Rowley stayed detailed assessment proceedings for three months and ordered that any resumption be conditional upon a £200,000 interim payment, where a Delaware-incorporated client with no UK assets had failed to articulate any substantive challenge to its former solicitor's approximately £4.5 million bill. The decision confirms that the full CPR case management toolkit — including security for costs under CPR 25.26(1), interim payments, and stays — is available in solicitor-client assessments under Part III of the Solicitors Act 1974.

Overview

Date: 16 February 2026

Judge: Senior Costs Judge Rowley

Nature of Proceedings: Application for security for costs / stay of detailed assessment proceedings under Part III Solicitors Act 1974

Key Issues:

Whether detailed assessment proceedings were genuine or constituted a sham
Whether security for costs should be ordered against a foreign-incorporated client
Whether a stay or interim payment was the more appropriate remedy
Proportionality of proceeding to a full assessment where entitlement to proceeds was uncertain

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The Facts

Bugsby Property LLC, a Delaware-incorporated company, instructed Stewarts Law LLP in litigation against Legal and General. The case was funded by third-party litigation funders Therium and Omni Bridgeway. The litigation proved successful, yielding approximately £27.6 million in proceeds.

The distribution of those proceeds was governed by an Amended Priorities Agreement (APA) dated 19 July 2021, which established a waterfall mechanism for payment. Stewarts Law's total bill came to approximately £4.5 million, of which around £2.5 million had already been paid through Therium, leaving approximately £2 million outstanding. It remained unclear, however, whether the claimant would ultimately receive sufficient funds from the proceeds waterfall to cover the assessed bill.

The detailed assessment proceedings had progressed slowly, a fact the court attributed to the underlying uncertainty about whether Bugsby would receive any claim proceeds to satisfy whatever sum was ultimately assessed. In the absence of any substantive challenge to the bill, the genuineness of the assessment itself was called into question.

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The Application: Security or Stay?

Stewarts Law applied for one of two alternative orders: either security for costs of £200,000, or a stay of the detailed assessment proceedings pending the resolution of the claim proceeds distribution by Andrew Onslow KC.

The jurisdictional basis for the application was straightforward. Senior Costs Judge Rowley confirmed that the court possessed jurisdiction under the Civil Procedure Rules Part 25, noting that:

> "Proceedings under Part III of the Solicitors Act 1974 are brought in accordance with CPR Part 67."

Since Bugsby was a Delaware-incorporated company without assets in the United Kingdom, it satisfied the threshold requirements under CPR 25.26(1) for a security for costs application. This is a notable jurisdictional confirmation: although assessment proceedings under the Solicitors Act 1974 are sometimes treated as sui generis, the court was clear that the ordinary security for costs regime applies to them in full.

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The Genuineness of the Assessment

A key strand of the court's analysis concerned whether the assessment proceedings were being pursued in good faith. Senior Costs Judge Rowley noted that the claimant had failed to specify any substantive challenges to the bill. This was significant: a party seeking detailed assessment is ordinarily expected to identify the areas where the bill is disputed, and the absence of any articulated complaint raised a legitimate question about the purpose of the proceedings.

The court observed that the production of a costs breakdown alone would cost approximately £200,000, and that a full assessment hearing would require approximately 20 court days. These figures underscored the scale and cost of the exercise — costs that would ultimately be borne by one or both parties, with no guarantee of meaningful recovery. Without identified challenges, the proportionality of such an exercise was doubtful, and the proceedings risked being used as a tactical device rather than a genuine attempt to have costs assessed.

The slow progress of the proceedings reinforced these concerns. The court noted that the pace of litigation had been shaped by the underlying uncertainty about whether Bugsby would receive any funds under the APA waterfall. If no funds were forthcoming, the entire assessment exercise would serve no practical purpose, regardless of its outcome.

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The Order: Interim Payment and Stay

Rather than ordering security for costs, Senior Costs Judge Rowley opted for what he described as the "more standard order" of requiring an interim payment of £200,000 on account of costs, coupled with a three-month stay of proceedings.

The stay was directed at allowing time for Andrew Onslow KC to determine the distribution of claim proceeds under the Amended Priorities Agreement. This determination would clarify whether Bugsby was likely to receive any funds and, consequently, whether there was any practical purpose in continuing the assessment.

The order therefore achieved two objectives: it provided the defendant with some financial protection through the interim payment, and it paused the proceedings until the commercial reality of the situation became clearer. The interim payment also served as a practical test of the claimant's seriousness: a party genuinely committed to having costs assessed would be prepared to invest in that process.

Stewarts Law was also awarded its costs of the application.

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The Litigation Funding Dimension

The case also raises interesting questions about the role of third-party litigation funding in solicitor-client costs disputes. The underlying litigation was funded by Therium and Omni Bridgeway, and the distribution of proceeds was governed by a complex waterfall structure. The solicitor's fees sat within that waterfall alongside the funders' returns and the client's own entitlement.

This structure created a degree of circularity: the client sought to reduce the solicitor's bill through assessment, but whether the client would benefit from any reduction depended on the waterfall distribution — which itself had not yet been determined. The court's decision to stay proceedings pending the Onslow KC determination recognised this commercial reality. There was little point in conducting a costly assessment if the outcome would have no practical effect on the parties' positions.

For solicitors dealing with funded matters, this is an important reminder that the contractual framework governing the distribution of proceeds can have a direct impact on the dynamics of any subsequent costs dispute.

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Key Takeaways

For Solicitors

1. Foreign-incorporated clients create security exposure — Where a client is incorporated outside the jurisdiction and has no UK assets, the solicitor can apply for security for costs under CPR 25.26(1) in assessment proceedings, just as in ordinary litigation.

2. Interim payments can substitute for security — The court may prefer a more conventional interim payment order over formal security, particularly where the primary concern is the genuineness of the assessment rather than the risk of non-recovery.

3. Failure to identify challenges undermines credibility — A party who seeks detailed assessment but cannot articulate any substantive challenge to the bill risks the court treating the proceedings as a sham or tactical device.

4. Funded cases require careful waterfall analysis — Where litigation proceeds are subject to a distribution waterfall, the commercial value of an assessment may depend entirely on whether the client has any realistic entitlement to funds after other priority claims are satisfied.

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Conclusion

Bugsby v Stewarts Law is a practical illustration of the court's willingness to manage detailed assessment proceedings robustly where there are doubts about their genuineness. The decision confirms that the full range of case management tools available in ordinary litigation — including security for costs, interim payments, and stays — are equally available in solicitor and client assessments under Part III of the Solicitors Act 1974.

The case also highlights the particular risks for foreign-incorporated clients who seek assessment: without UK assets and without substantive challenges to the bill, such clients face a realistic prospect of being required to put money on the table before the assessment can proceed. For solicitors, the decision provides a useful precedent for managing assessment proceedings where the client's commitment to the process appears questionable.

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Citation: Bugsby Property LLC v Stewarts Law LLP [2026] EWHC 275 (SCCO)

Full judgment available at: BAILII

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