Car-Wizard v Vixen: Budget Revision and Part 36 Costs [2026] EWHC 2177 (Ch)

Detailed Assessment — 2026-08-17

Car-Wizard Ltd v Vixen Surface Treatments Limited [2026] EWHC 2177 (Ch) confirms that a costs budget may be revised promptly during an adjourned trial when unforeseen additional work is a significant development. The court also applied the full Part 36 consequences, awarded indemnity costs throughout and ordered a £214,000 payment on account.

Overview

Date: 17 August 2026

Judge: HHJ Paul Matthews, sitting as a Judge of the High Court

Court: High Court of Justice, Business and Property Courts in Bristol, Circuit Commercial Court (KBD)

Citation: [2026] EWHC 2177 (Ch)

Nature of Proceedings: Ruling on paper concerning a costs budget revision and consequential matters following judgments on liability and damages

Key Issues:

Whether the claimant could revise its costs budget during an adjourned trial after judgment on liability
Whether the claimant had beaten its Part 36 offer and whether the usual consequences would be unjust
The appropriate costs order, basis of assessment and interest rates
The appropriate payment on account where costs had been budgeted

---

The Facts

In Car-Wizard Ltd v Vixen Surface Treatments Limited, the High Court in 2026 considered a costs budget revision and the costs consequences of an unbeaten Part 36 offer in a commercial dispute between a small vehicle repair business and a supplier of commercial lathes. The trial took place in October and November 2025. Judgment on liability was handed down on 26 March 2026, with damages subsequently assessed in a separate judgment on 3 July 2026.

The separation of liability and quantum was not originally planned. Following representations made by the defendant after circulation of the draft judgment, the judge required further submissions on damages and adjourned the trial for that purpose. On 13 April 2026, before those further submissions had been received, the claimant applied to increase the trial phase of its costs budget by £19,710, from £275,201.79 to £294,911.79, an overall increase of about 7%.

The claimant had made a Part 36 offer of £65,000 on 24 October 2024. The relevant period expired on 14 November 2024. It ultimately recovered £86,140, before the addition of interest. The ruling addressed the budget revision, the consequences of that offer, interest, the overall costs order, indemnity costs, a payment on account and the additional amount under CPR 36.17(4)(d).

The judge was sharply critical of the conduct of the litigation. He found that there had been little co-operation, that the dispute had become longer and more expensive than necessary, and that the defendant and its legal team bore the main responsibility. He also referred to the destruction of relevant records after the dispute arose and intervention by someone in the defendant's legal team which led its engineering expert to reconsider his report (at [3]-[5]).

---

Key Holdings

1. The Budget Revision Was Made During an Adjourned Trial

The defendant relied on Queensgate Place Ltd v Solid Star Ltd & Ors (No. 3) (Consequential Matters) [2024] EWHC 2139 (Ch) and the statement in Elvanite Full Circle Ltd v AMEC Earth & Environmental (UK) Ltd [2013] EWHC 1643 (TCC) that an application to amend an approved budget after judgment is a contradiction in terms.

HHJ Paul Matthews distinguished those cases. The trial had not concluded because liability and quantum had always been intended to be decided together. The judge had adjourned the trial for further submissions on damages and handed down the liability judgment in the meantime because preserving its confidentiality would have been difficult. Further, the claimant applied before the additional submissions had even been received or considered. There was no unexplained delay of the kind present in Queensgate and Elvanite (at [9]-[10]).

The judge also noted decisions in which trial judges had allowed upward revisions after trial, including Cranstoun v Notta [2021] Costs LR 47 and Barry v Barry [2025] 4 WLR 56. Neither appeared to have been cited in Queensgate (at [8]).

The important practical distinction was between a truly retrospective attempt to revise a budget after the relevant work and proceedings had concluded, and an application made promptly while an adjourned trial remained ongoing and before the unexpected work was done.

2. Further Submissions Were a Significant Development

The judge rejected the defendant's contention that there had been no significant development under CPR 3.15A. His decision not to deliver the draft judgment on both liability and quantum, and instead to require further submissions on damages, created the need for additional work which nobody had contemplated when judgment was reserved.

At [11], he said:

> “My decision not to deliver my draft judgment, but to invite further submissions on the assessment of damages, was such a development, giving rise to the need to incur further costs.”

The objection that the increase was excessive and involved duplication also failed. The defendant provided no particulars and did not disclose the additional costs it had itself incurred. The judge inferred that this was because its increase was at least as great as the claimant's. Having considered the work required, he approved the revised budget in full (at [12]-[13]).

3. The Claimant Beat Its Part 36 Offer

The defendant argued that damages attributable to lost work from a trade customer, SJ Curtis, should be excluded because that source of loss had not appeared in the claimant's statements of case. On that approach, it said, the award would have been £62,276.50, below the £65,000 offer.

The argument failed on two independent grounds. First, the offer included interest up to the end of the relevant period. Even on the defendant's proposed rate of 2% above base rate, the reduced damages plus interest would have been about £73,000. The claimant had therefore beaten the offer (at [19]).

Secondly, the loss itself had been pleaded, although its individual sources had not. The SJ Curtis material was evidence of the pleaded loss, had been disclosed and had been considered by the forensic accountants. The defendant knew the case it faced and suffered no prejudice. Nor had it made a counter-offer at or near the reduced amount for which it later contended (at [20]-[21]).

The court found no injustice in applying CPR 36.17(4). Referring to Downing v Peterborough & Stamford Hospitals NHS Foundation Trust and Briggs v CEF Holdings Ltd, the judge emphasised that the prescribed consequences are the default and that the burden of establishing injustice is a “formidable obstacle” (at [17]).

4. Enhanced Interest Reflected Both Compensation and Conduct

For the period from 1 June 2021 to 14 November 2024, the judge applied the compensatory principles summarised in Carrasco v Johnson [2018] EWCA Civ 87. The claimant was a small, one-man company. A rate of 2% above base was too low for a business with its general attributes. The court awarded 5% above base rate (at [22]-[25]).

For the period after expiry of the Part 36 relevant period, the court awarded the maximum 10% above base rate under CPR 36.17(4)(a). Drawing on OMV Petrom SA v Glencore International AG [2017] 1 WLR 3465, the judge rejected the proposition that dishonesty or similarly serious conduct was a prerequisite to the maximum rate. The defendant's approach had made the litigation longer, more complicated and more expensive, and there had been disclosure failures and interference with expert evidence (at [26]-[28]).

The same rates were applied to interest on costs: 5% above base before 14 November 2024 and 10% above base thereafter (at [42]).

5. Limited Recovery Did Not Displace the Claimant's Overall Success

The defendant accepted that the claimant was successful but sought a 25% reduction because the damages recovered were only a fraction of those claimed. The judge held that recovering less than pleaded was not, without more, a reason to deny the successful claimant all its costs. The claim had to be brought to secure any recovery, the costs of establishing liability were broadly the same whatever the quantum, there was no deliberate exaggeration, and the defendant had made no attempt to settle at about the sum ultimately recovered (at [30]-[31]).

The authorities were fact-sensitive. In Islam v Ali [2003] EWCA Civ 612, the claimant had failed to establish the basis of most of the claim. In Fulham Leisure Holdings Ltd v Nicholson Graham & Jones [2006] EWHC 2428 (Ch), success on liability and success on causation and quantum were divided between the parties, with broadly equal costs attributable to each. Neither dictated the outcome here (at [32]-[35]).

The defendant was ordered to pay 90% of the claimant's costs, subject to detailed assessment if not agreed.

6. Indemnity Costs Applied Throughout

From 14 November 2024, indemnity costs followed under CPR 36.17(4)(b). For the earlier period, the court applied the “out of the norm” test from Excelsior Commercial & Industrial Holdings Ltd v Salisbury Hammer Aspden and Johnson [2002] EWCA Civ 879 and Hosking v Apax Partners Ltd [2019] 1 WLR 3347.

The court considered cumulatively the defendant's approach to the allegations that the lathe was not new and could not cut tapered edges, the absence of evidence which might have been expected, the destruction of relevant documents and the interference with its expert's evidence. That conduct was sufficiently out of the norm to justify indemnity costs up to 14 November 2024 (at [37]-[41]). The combined effect was therefore an indemnity basis award for the whole period, although its legal foundation changed at the expiry of the Part 36 offer.

7. The Approved Budget Anchored a £214,000 Payment on Account

CPR 44.2(8) requires a reasonable payment on account unless there is good reason not to order one. Applying Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC 566 (Comm), the court sought a realistic estimate of likely recovery with an appropriate margin for uncertainty.

Costs budgeting provided a useful starting point, but the distinction between incurred and estimated costs remained important. Estimated costs had been approved by the court, whereas incurred costs had not, so the latter required a greater margin for error (at [45]).

The claimant requested £236,000, calculated as 70% of incurred costs and 90% of estimated costs. The court instead allowed 65% of the £148,244 incurred costs and 80% of the £146,668 estimated costs, producing a payment on account of £214,000 (at [46]). The judge rejected the defendant's proposed 50%, particularly given the award of 90% of the claimant's costs.

Finally, the additional amount under CPR 36.17(4)(d) was ordered at 10% of the £86,140 award plus interest (at [47]).

---

Practical Implications

For Costs Lawyers

1. Identify whether the trial has truly ended. A judgment on one part of a claim does not necessarily make a budget revision too late. Where the trial has been adjourned and unforeseen work remains, the procedural reality and the timing of the application will be central.

2. Separate incurred and approved estimated costs. When proposing a payment on account, apply a larger discount to incurred costs which have not been approved. Approved future costs provide a more robust anchor, but still require a margin for assessment risk.

3. Calculate Part 36 comparisons on the correct basis. Where the offer includes interest, the judgment comparison must include the relevant accrued interest. Comparing only the bare damages figures can produce the wrong result.

4. Trace the basis of an indemnity costs award by period. Conduct may justify indemnity costs before expiry of the relevant period, while CPR 36.17(4)(b) supplies the entitlement afterwards.

5. Support allegations of excess or duplication with figures. A bare objection is unlikely to carry weight. Comparative information about the objecting party's own expenditure may be particularly relevant.

For Litigation Practitioners

1. Apply to revise promptly and before the work is done. The claimant's timing was decisive. It applied after the unforeseen development arose but before preparing the additional submissions.

2. A lower recovery does not automatically dictate a percentage costs reduction. The court will examine what drove the costs, whether the unsuccessful element was distinct, whether the claim was exaggerated and whether the opponent made a realistic offer.

3. The injustice exception remains demanding. Once CPR 36.17(4) is engaged, its consequences are the default. A paying party needs case-specific facts capable of overcoming the formidable obstacle identified in the authorities.

4. Litigation conduct affects multiple financial consequences. Aggressive case management, disclosure failures and interference with expert evidence influenced indemnity costs and the maximum enhanced interest rate.

5. Part 36 exposure extends beyond indemnity costs. The claimant received enhanced interest on damages and costs, an additional amount and indemnity costs. Parties evaluating offers should model the combined exposure, not merely the principal claim.

---

Conclusion

Car-Wizard Ltd v Vixen Surface Treatments Limited provides a practical illustration of costs management where an unforeseen development occurs during an adjourned trial. The decision does not establish that budgets may routinely be revised after judgment. Its force lies in the particular chronology: the trial remained unfinished, the additional work had been required by the court, and the application was made promptly before that work was undertaken.

The ruling also demonstrates the cumulative financial effect of beating a Part 36 offer. The claimant secured 90% of its costs on the indemnity basis, enhanced interest on both damages and costs, a 10% additional amount and a £214,000 payment on account. Mackenzie Costs' analysis is that the decision is especially useful when distinguishing a genuinely prospective budget revision from a retrospective attempt to regularise expenditure, and when valuing the full consequences of an unaccepted Part 36 offer.

---

Citation: Car-Wizard Ltd v Vixen Surface Treatments Limited [2026] EWHC 2177 (Ch)

Full judgment available at: The National Archives

Related Specialist Support

Costs Budgeting and Detailed Assessment: Precedent H, dispute documents, negotiations and assessment strategy.
Costs Lawyer Support: Direct help with costs procedure, strategy, drafting and advocacy.
Bills of Costs: Clear, defensible traditional and electronic bills prepared for recovery.