Importers Service v Aliotta: £608,755.64 Interim Payment on Account [2026]

Detailed Assessment — 2026-07-29

The High Court ordered indemnity costs and an interim payment on account of £608,755.64, applying 90% to budgeted costs and 60% to other costs, and awarded interest from when the claimants’ costs were billed and paid.

Overview

Date: 29 July 2026

Judge: Mr Simon Gleeson

Court: High Court of Justice, Business and Property Courts, Business List (Chancery Division)

Citation: [2026] EWHC 1969 (Ch)

Case Number: BL-2024-001799

Nature of Proceedings: Consequential judgment following claims under section 423 of the Insolvency Act 1986

Key Issues:

Identifying the successful party where the claimants succeeded on only part of the relief sought
Allocating costs between several defendants
Indemnity costs following the fabrication and concealment of evidence
Interest on costs from the date on which they were billed and paid
Distinguishing budgeted and other costs when ordering an interim payment on account

In Importers Service Corporation v Aliotta [2026] EWHC 1969 (Ch), the Chancery Division ordered indemnity costs and an interim payment on account of £608,755.64. The judgment is particularly useful on the distinction between approved budgeted costs and other incurred costs when estimating a reasonable sum under CPR 44.2(8). The figure was an interim payment pending agreement or detailed assessment, not a final assessment of the claimants' recoverable costs.

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The Proceedings

The claimants sought relief under section 423 of the Insolvency Act 1986 in relation to transfers of assets by Aliotta Holdings Limited to some of its co-defendants. The application was ancillary to a main action brought by Importers Service Corporation against Mario Aliotta concerning alleged secret profits.

The claimants challenged two groups of transactions. They succeeded in relation to one but failed to obtain relief in relation to the other. The court had nevertheless rejected the defendants' central arguments and found that the 2025 transactions involved a collusive attempt by Mr Aliotta and the fourth to sixth defendants to put assets beyond the claimants' reach. The challenge to those transactions failed only because the court treated them as one economic transaction and found that the consideration was not an undervalue.

There was an additional procedural complication. Mr Aliotta was made bankrupt on 16 February 2026 following a petition which had been pending during the trial. The court held that the automatic stay did not prevent the section 423 proceedings, which sought relief concerning assets transferred to third parties. Any costs award relating to Mr Aliotta would, however, inure to his bankrupt estate. Under Heath v Tang [1993] 1 WLR 1421, he had no standing to make submissions concerning that liability.

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The Costs Decisions

1. Success Was Assessed in Substance

The claimants relied on the general rule in CPR 44.2(2) and the Court of Appeal's decision in Dr MN v NHS Foundation Trust L [2026] EWCA Civ 71. A party may recover its costs even where it has succeeded on only part of its claim.

The defendants argued that the claimants had failed in half of their case because they challenged two sets of transactions but obtained relief in relation to only one. The court rejected that numerical approach. The claimants had defeated the defendants' substantive explanations and established that the 2025 transactions were collusive. Their failure to obtain an order reversing those transactions resulted from the court's legal treatment of the transfers as a single economic transaction.

Conduct reinforced that conclusion. The substantive judgment included a finding that Mr Aliotta, Mr Sleater and Mr Whitehead had fabricated backdated board minutes pursuant to a collusive agreement to misrepresent the facts. The deceit was uncovered only shortly before trial. The court held that this conduct weighed against either an issues-based or percentage reduction.

At paragraph 13, the court concluded that the claimants were the successful parties in the action as a whole and that no discount should be applied. Their costs entitlement lay in principle against all the defendants, subject to the separate conclusions about particular defendants and applications.

2. Liability Depended on Each Defendant's Role

The fourth to sixth defendants argued that they were victims of Mr Aliotta's wrongdoing, had incurred different costs and should not be liable for work relating only to other defendants. They also sought to exclude costs concerning the 2025 transactions because the claimants had failed to reverse them.

At paragraphs 20 and 21, the court found that those defendants had made common cause with Mr Aliotta on the central issue. They defended the transfers by advancing a case that the transactions were not intended to put assets beyond the claimants' reach. They could instead have adopted a neutral position and agreed to abide by the court's determination of Mr Aliotta's intentions. Their failure on that primary issue justified making them jointly and severally liable with Mr Aliotta.

Mrs Aliotta's position was different. At paragraphs 22 to 24, the court found that she was a necessary party because legal title to shares had passed through her, but her participation at the hearing was minimal. She was unrepresented and advanced no substantive case beyond a trust argument which the court rejected. Although she could not be treated as successful, no relief was made against her. The court therefore made no order for costs between her and the claimants.

This part of the judgment illustrates that a multi-party costs order should reflect substance rather than party labels. A defendant drawn into the proceedings as a necessary link in a transaction may receive different treatment from defendants who actively support and advance the unsuccessful case.

3. Fabricated Evidence Justified Indemnity Costs

The court applied the established test in Excelsior Commercial and Industrial Holdings Ltd [2002] EWCA Civ 879, as clarified in Esure Services Ltd v Quarcoo [2009] EWCA Civ 595. Indemnity costs require conduct or circumstances outside the ordinary and reasonable conduct of proceedings.

Mr Aliotta did not resist indemnity costs against himself or Aliotta Holdings Limited. The fourth to sixth defendants argued that the fabrication of the board minutes had been instigated by Mr Aliotta and that their own aim had been to obtain shares which he had previously withheld from them.

At paragraph 28, the court rejected that distinction. The decisive conduct was not confined to creating the minutes. It included the collective attempt to conceal their falsity until almost the commencement of the action:

> those who engage in an endeavour to mislead the court by providing evidence which they know to be fabricated and seeking to conceal the fact of the fabrication should pay costs on the indemnity basis.

The indemnity order did not apply without distinction to every item. Mr Aliotta alone was liable for the costs of his unsuccessful late application made on 22 January 2026. The claimants also recovered the costs of a preservation-order application against the fourth to sixth defendants, but those costs were assessed on the standard basis. The defendants had refused binding undertakings and agreed to provide them only after the application for injunctive relief was issued.

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Interest on Costs

The claimants sought interest at 1% above Bank of England base rate from the time their costs were incurred. The defendants argued that costs became due only once the costs order was made and that only post-judgment interest should follow.

CPR 44.2(6)(g) gives the court a broad discretion to award interest on costs. Applying Jones v Secretary of State for Energy and Climate Change [2014] EWCA Civ 363, the court treated the purpose of interest as compensating a party deprived of the use of its money or required to borrow to fund its legal costs.

At paragraph 33, the court held that the relevant starting point was not simply the date on which work was done. Interest ran from when the costs had been billed and paid, because that was when the claimants had been deprived of the use of their money. The court awarded interest at 1% above base rate on that basis.

The distinction is important in practice. A receiving party seeking pre-order interest should provide evidence of billing and payment, not merely a schedule showing when work was undertaken.

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The Interim Payment on Account

The Governing Approach

CPR 44.2(8) creates a presumption that a reasonable sum should be paid on account where costs are ordered subject to detailed assessment. The task is to estimate the amount likely to be recovered and then apply a sufficient margin for error.

The court adopted the approach explained in Lifestyle Equities CV v Royal County of Berkshire Polo Club Ltd [2024] Costs LR 449. That approach requires the court to:

1. Estimate the costs likely to be awarded on detailed assessment.

2. Account for the effect of costs management and CPR 3.18 where applicable.

3. Treat approved budgeted costs differently from incurred costs recorded in a Precedent H but never approved by the court.

4. Apply an appropriate margin because the exercise is not an exact assessment.

The judgment also considered Thomas Pink Ltd v Victoria's Secret UK Ltd [2014] EWHC 3258 (Ch), where 90% of approved budgeted costs was ordered, and MacInnes v Gross (No 2) [2017] EWHC 127 (QB), where a 10% deduction was regarded as the maximum appropriate in a case involving an approved budget. By contrast, Cleveland Bridge UK Ltd v Sarens (UK) Ltd [2018] EWHC 827 (TCC) supports a greater discount for incurred costs which have not received prior approval.

In Lifestyle Equities, the resulting allowances were 90% for budgeted costs and 80% for incurred costs. Mr Gleeson regarded that framework as correct, while adjusting the percentages to reflect the evidence in the present case.

The Figures Before the Court

The claimants' Precedent T figure was £618,833.82, comprising:

Incurred costs of £165,544.14
Costs of £327,375 approved by Master Kaye
Additional varied budget costs of £125,914.68 agreed in January 2026

Their total costs were stated to be £809,507.66, which was £190,673.84 above the Precedent T figure.

The claimants sought an interim payment on account of £646,263.78. Their calculation comprised:

£383,706.87, representing 90% of budgeted costs to the extent incurred
£262,556.90, representing 70% of other incurred costs of £375,081.29

The defendants opposed the amount, arguing that an interim payment exceeding the relevant incurred and budgeted figures was excessive.

Why the Court Allowed 90% and 60%

At paragraph 39, the court accepted that 90% of the budgeted amount should be paid. That reflected the prior scrutiny given to approved budgeted costs and the approach in Thomas Pink, MacInnes and Lifestyle Equities.

The substantial uplift in the total costs required greater caution for the other costs. Those costs had not received the same prior approval and required detailed assessment. Rather than the 70% sought, the court allowed 60%.

The calculation was:

£383,706.87 for budgeted costs, at 90%
£225,048.77 for other costs, at 60%
Interim payment on account: £608,755.64

The court observed that the result was conveniently below the overall Precedent T figure of £618,833.82. The order did not determine the claimants' final recovery. It required the defendants to pay a reasonable sum immediately while the remaining costs were left for agreement or detailed assessment.

Nor does the judgment create a general rule that every case should produce 90% of budgeted costs and 60% of other costs. The percentages reflected the approved budget, the substantial uplift and the information before the court. The underlying requirement remains an evidence-based estimate of the amount likely to be recovered, subject to a margin for error.

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Practical Implications

For Costs Lawyers

1. Distinguish the payment on account from final recovery. The £608,755.64 was an interim payment under CPR 44.2(8). It was not a summary or detailed assessment of the claimants' total costs.

2. Break the claim into the correct costs categories. The application should identify approved budgeted costs, incurred costs recorded but not approved, varied budget sums and any costs outside the budget. Different levels of prior scrutiny may justify different interim percentages.

3. Explain substantial departures from the budget. The court reduced the allowance for other costs from the 70% sought to 60% because the uplift required detailed assessment. Evidence should connect the additional expenditure to developments in the litigation.

4. Do not present a percentage as a rule. Previous decisions are useful comparators, but the court must still estimate a safe minimum recovery from the evidence in the individual case.

5. Prove when costs were billed and paid. A claim for compensatory interest before the costs order should be supported by invoices, payment records or other evidence showing when the client was deprived of its money.

6. Reflect mixed bases of assessment. Although the principal costs were indemnity costs, the preservation-order application remained on the standard basis. The bill and any interim calculation should preserve such distinctions.

For Litigation Practitioners

1. Success is assessed in substance, not by counting issues. Partial failure will not necessarily justify an issues-based or percentage costs order where the party succeeded on the dispute's central substance.

2. A defendant's litigation stance affects costs liability. Parties who make common cause with the principal wrongdoer may face joint and several liability even if they also describe themselves as victims.

3. A neutral position can matter. A necessary party who does not advance the unsuccessful case may receive materially different treatment from parties who actively defend it.

4. Fabricated evidence creates an obvious indemnity risk. Responsibility extends beyond the person who first creates a false document. Knowing reliance upon it and concealment of its falsity can be enough.

5. Binding undertakings should be addressed promptly. Offering only contractual undertakings where binding undertakings are reasonably required may expose a party to the costs of a preservation application.

6. Budget variation should not be delayed. Substantial additional expenditure should be addressed through the costs management process where possible. Leaving it until the payment-on-account stage increases uncertainty and the discount applied.

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Conclusion

Importers Service Corporation v Aliotta brings together several practical costs issues in a single consequential judgment. It confirms that success is assessed in substance, that liability between defendants depends on the part each played, and that attempting to mislead the court with fabricated evidence is a clear route to indemnity costs.

Its most useful contribution is the treatment of the interim payment on account. The approved budgeted element attracted a 90% allowance, while other costs received 60% because the substantial uplift still required detailed assessment. The resulting £608,755.64 was payable on account only and did not fix the claimants' final recoverable costs.

The judgment also provides a valuable reminder that interest before the costs order is compensatory. The evidential question is when the receiving party was billed and paid the costs, not simply when the work took place. This analysis is published by Mackenzie Costs as part of its coverage of significant costs decisions.

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Citation: Importers Service Corporation and ISC Europe Limited v Mario Aliotta and Others [2026] EWHC 1969 (Ch)

Full judgment available at: The National Archives

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