Douglas v Channon: 70% Costs Despite a Failed Counterclaim [2026]
Detailed Assessment — 2026-10-02
The High Court upheld a 70% costs award despite the defendant's failed monetary counterclaims. Douglas v Channon explains mixed success, percentage costs orders and the limits of a costs appeal, while distinguishing the £108,402 payment on account from final assessed recovery.
Overview
Date: 2 October 2026
Judge: Mr Justice Linden
Court: High Court of Justice, King's Bench Division, High Court Appeal Centre Bristol
Citation: [2026] EWHC 2475 (KB)
Hearing date: 29 July 2026
Nature of Proceedings: Appeal from a boundary determination and a costs order made by His Honour Judge Mitchell at Plymouth County Court
Key Issues:
- Identifying the successful party where a claim and counterclaim both contain unsuccessful elements
- Using a percentage costs order rather than separate orders on the claim and counterclaim
- Accounting for a failed counterclaim and changes in the successful party's case
- The limits of appellate interference with a trial judge's costs discretion
- Distinguishing a payment on account from the costs ultimately recoverable on assessment
In Sarah Douglas v Ronald Channon [2026] EWHC 2475 (KB), the High Court upheld an order requiring the claimant to pay 70% of the defendant's costs, despite her success in defeating his monetary counterclaims. The decision illustrates how the court can assess success by reference to the main issues and the costs they generated, rather than simply counting claims won and lost. It also shows why a costs appeal needs to identify an error in the trial judge's reasoning, not merely propose a different percentage.
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The Facts
Ms Douglas and Mr Channon owned neighbouring properties in Torquay. Their dispute concerned the boundary between them, but the proceedings also included allegations of trespass, nuisance, harassment and damage associated with works to the land. Ms Douglas sought a boundary declaration, damages and injunctive relief. Mr Channon defended the claim and brought his own counterclaim, including claims for damages and a declaration about the boundary.
Following a trial in August 2025, HHJ Mitchell declared the boundary along the line supported by Mr Channon's expert. Apart from that declaration, the claim and counterclaim were dismissed. The judge treated the boundary as the principal issue. He also regarded Ms Douglas's unsuccessful claim concerning stabilisation works as an important part of the litigation.
The costs order required Ms Douglas to pay 70% of Mr Channon's costs of the proceedings, subject to detailed assessment on the standard basis if not agreed. It also required a £108,402 payment on account. Ms Douglas obtained permission to appeal on two grounds: the boundary determination and the costs order. Linden J dismissed both grounds and therefore the appeal.
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Key Holdings
1. Success depends on the substance of the litigation
The claimant argued that she should not have to pay the defendant's costs when she had defeated his counterclaim. Her pleaded appeal grounds referred to counterclaims exceeding £200,000, and her oral argument emphasised their substantial value and the work they had caused: [30] and [31].
The High Court did not disregard that success. It upheld the trial judge's assessment of its significance relative to the rest of the case.
At [34] to [36], Linden J set out the relevant CPR 44.2 framework. The general rule favours the successful party, but the court may make a different order. It must consider all the circumstances, including partial success and the parties' conduct.
The trial judge had been entitled to identify Mr Channon as the successful party because he won on the principal boundary issue. His case was not materially different from the boundary the judge adopted: [38]. Ms Douglas had also lost her stabilisation claim, and the judge found that those two issues accounted for the bulk of the costs: [40].
The practical point is not that the boundary winner always recovers costs. It is that success is an evaluative question. Defeating a substantial counterclaim does not necessarily outweigh losing the issues that chiefly explain why the proceedings were brought and where most of the costs were incurred.
2. A percentage order can reflect the failed counterclaim
The trial judge expressly recognised that Ms Douglas had succeeded on the monetary counterclaims. He also accepted that the counterclaim had caused significant costs. He reflected those matters by reducing the defendant's recovery to 70%: [15] and [41].
Linden J said at [41]:
> The weight to be given to these factors was a matter for the Judge
The claimant's success was therefore not overlooked. The real complaint was that the judge should have given it greater weight and made no order as to costs.
The claimant relied on the approach discussed in The Square Mile Partnership Ltd v Fitzmaurice McCall [2006] EWHC 236 (Ch), where competing success on the claim and counterclaim led to no order as to costs. Linden J summarised that reasoning at [32]. It did not dictate the result in this different case.
Nor did the appeal challenge the decision not to make separate costs orders on the claim and counterclaim. No issue-based order was sought. The claimant had herself recognised the assessment difficulties that separate orders could create: [33].
Douglas supports a percentage order as a practical response to mixed success on its facts. It does not establish a general prohibition on separate or issue-based orders, or a standard 30% deduction for an unsuccessful counterclaim.
3. A costs appeal is a review, not a fresh allocation exercise
CPR 52.21 governs the appeal. Linden J explained at [16] that an appeal generally reviews the lower court's decision. The appeal court may allow an appeal where that decision was wrong or unjust because of a serious procedural or other irregularity.
For discretionary decisions, the recognised grounds for intervention include legal misdirection, procedural unfairness, taking irrelevant matters into account, omitting relevant matters and reaching a plainly wrong result outside the permissible range: [17(ii)]. The judge referred to Tanfern v Cameron MacDonald (Practice Note) [2000] 1 WLR 1311 and G v G (Minors: Custody Appeal) [1985] 1 WLR 647.
The trial judge had heard the evidence and received detailed written costs submissions. He was better placed to decide which issues mattered most, where the costs arose and what weight conduct deserved. The appellant had not supplied the detailed analysis needed to undermine those conclusions: [37].
An argument that another judge might reasonably have chosen no order as to costs is not enough. The appeal must explain why the order actually made falls outside the trial judge's lawful discretion.
4. Changes in a successful party's case do not automatically remove its costs entitlement
Ms Douglas argued that Mr Channon's boundary case had evolved before trial and that the expert's final line was not precisely the legal boundary identified in the judge's reasoning.
The factual appeal failed. The trial judge had been entitled to treat the difference between the expert's line and the relevant edge of the former hedge as immaterial. He had sufficient evidence, including photographs and a site visit, to reach that conclusion: [24] to [29].
On costs, Linden J held that the evolution of Mr Channon's case did not mean he had failed on the boundary issue. The trial judge had expressly considered the change when exercising his discretion and was best placed to assess its significance: [39].
The same distinction applies to litigation conduct. A change of position may be relevant to costs without determining the entire costs outcome. Practitioners should identify the work and expense caused by the change, rather than assume that it deprives an otherwise successful party of recovery.
5. Part 36 was background to the order, not a new ruling
The trial judge's reasons, reproduced at [15], referred to the defendant's Part 36 offer not having been beaten. They also recorded intransigence on both sides. At [42], Linden J confirmed that the trial judge had considered whether the CPR 44.2 factors called for further adjustment and had decided they did not.
The appeal judgment does not give the offer's terms, its date or a separate analysis of the Part 36 costs consequences. It should not be cited as deciding a new rule about Part 36, or as explaining how a particular offer must be compared with the outcome.
Its useful holding concerns the costs discretion and the treatment of mixed success. The passing reference to Part 36 should remain in that context.
6. The payment on account was not the assessed costs
The order described at [1(ii)] required payment of £108,402 on account. The final amount recoverable remained subject to agreement or standard-basis detailed assessment, with the defendant entitled to the 70% share ordered.
The trial judge's reproduced reasons at [15] used budgeted costs including VAT of £309,720 and allowed 50% of the 70% share as a payment on account. Those reasons give the intermediate figure as £216,840. The correct 70% calculation is £216,804, and half of that is £108,402, which matches the recorded order. The discrepancy is therefore in the intermediate figure reproduced in the reasons, not in the ordered payment when calculated from the stated budget total.
The decision does not prescribe a general 50% payment-on-account benchmark. It records the calculation used in these proceedings and leaves the distinction between the interim payment and final assessment intact.
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Practical Implications
For Costs Lawyers
1. Map costs to the main issues. A submission on mixed success should identify which issues generated the significant work. The value of a failed counterclaim is relevant, but it does not itself establish the appropriate deduction.
2. Explain the proposed form of order. Compare a percentage order with separate claim and counterclaim orders. Address shared work and the assessment difficulties each option would create.
3. Separate the percentage award from quantum. A 70% entitlement does not turn a budget figure or payment on account into the final assessed recovery. Advise on each stage separately.
4. Identify an appealable error. Before recommending a costs appeal, distinguish a missed factor or legal misdirection from disagreement about the weight the trial judge gave a factor he expressly considered.
For Litigation Practitioners
1. Do not count claims as if each carries equal weight. Success on the main dispute may justify a costs award even where the successful party's own damages claims fail.
2. Support conduct arguments with their consequences. Explain how changes of case, abandoned allegations or an unsuccessful counterclaim affected preparation, evidence and trial time.
3. Put the alternative order before the trial judge. If separate or issue-based orders are sought, explain why they would work in practice. An appeal is not a substitute for that exercise.
4. Keep the interim liability clear. A payment on account may be payable before assessment resolves the final figure. Report the amount in the order accurately, including where the judgment's accompanying arithmetic differs.
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Conclusion
Douglas v Channon confirms that a failed counterclaim does not necessarily prevent a defendant recovering a substantial share of the proceedings' costs. The trial judge could identify the main issues, recognise the claimant's success on the counterclaim and reflect that success through a percentage reduction.
For costs practice, the decision is most useful on the quality of the analysis needed at first instance and on appeal. The court needs a reasoned account of success, conduct and the costs generated. A different view of the appropriate percentage does not, without more, justify appellate intervention.
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Analysis by Mackenzie Costs, costlawyer.co.uk.
Citation: Sarah Douglas v Ronald Channon [2026] EWHC 2475 (KB)
Full judgment available at: The National Archives
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