Lemos v Church Bay: ATE Insurer Not Liable for Assessment Costs
Detailed Assessment — 2026-09-16
In Joanna Lemos & Ors v Church Bay Trust Company & Ors [2026] EWHC 2402 (SCCO), Costs Judge Nagalingam refused to shift detailed assessment costs to the paying parties' ATE insurer under CPR 47.20. The alleged obstruction was not proved, and the insurer's points of dispute had helped reduce the bill.
Overview
Date: 16 September 2026
Judge: Costs Judge Nagalingam
Court: High Court of Justice, Senior Courts Costs Office
Citation: [2026] EWHC 2402 (SCCO)
Nature of Proceedings: Application by the second and third claimants to make their ATE insurer jointly and severally liable for the defendants' detailed assessment costs, with a 100% contribution between the claimants and insurer.
Key Issues:
- Whether CPR 47.20 permitted the court to transfer liability for detailed assessment costs to an interested-party ATE insurer
- Whether non-party costs order principles concerning an intermeddler or the real party to litigation assisted the claimants
- Whether the insurer's alleged control, delay, points of dispute and settlement conduct justified a different costs order
- Whether the insurer's work had instead contributed to the substantial reduction of the defendants' bill
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In Joanna Lemos & Ors v Church Bay Trust Company & Ors [2026] EWHC 2402 (SCCO), the High Court's Senior Courts Costs Office considered whether CPR 47.20 could make an ATE insurer liable for detailed assessment costs after it had been joined as an interested party. Costs Judge Nagalingam dismissed the application, finding that it was speculative, that the insurer's interests were aligned with those of its insured claimants, and that the insurer's involvement had played a central role in securing a substantial reduction in the receiving parties' bill.
The Facts
The underlying proceedings were a claim under section 423 of the Insolvency Act 1986. Following a trial in June and July 2023, the claim was dismissed. By an order dated 18 October 2023, the claimants were ordered to pay the defendants' costs on the standard basis, with £957,814 payable on account. The first claimant's position was later settled separately, leaving the second and third claimants as the relevant paying parties.
The defendants made a Part 36 offer of £1,372,005.79 in November 2023. After a draft bill and then a formal bill were produced, the notice of commencement dated 27 June 2024 claimed £1,655,531.11, of which £241,804.59 was claimed against the first claimant. BCR Costs Limited prepared points of dispute on behalf of the second and third claimants. A £600,000 offer was made on their behalf in January 2025.
BCR Legal Assist Limited, the claimants' ATE insurer, was added as an interested party by consent on 14 August 2025. Its role was confined by the order to filing submissions and evidence and participating in hearings on matters affecting its interest. A preliminary issues hearing followed concerning the relationship between costs budgeting orders and the detailed assessment. The court decided those issues in the defendants' favour in November 2025, but made no finding that the points taken were hopeless or unreasonable.
In January 2026, the defendants offered to accept the £957,814 already paid on account against the bill, together with bill preparation costs and assessment costs. The second and third claimants accepted the bill figure after Gowling WLG resumed conduct. Main action costs, including bill preparation, were ultimately agreed at £1,011,135.40, leaving £53,321.40 after credit for sums paid. BCR Legal Assist Limited paid the full £1 million indemnity limit.
The remaining dispute concerned the costs of the assessment. The second and third claimants, supported by the defendants, sought an order making themselves and BCR Legal Assist Limited jointly and severally liable to the defendants, coupled with an order that BCR provide a 100% contribution as between itself and the claimants. They relied solely on CPR 47.20 by the hearing, expressly abandoning any application under section 51 of the Senior Courts Act 1981 and making clear that they did not seek a non-party costs order.
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Key Holdings and Analysis
1. Detailed assessment remains part of the original proceedings
The court began by identifying the legal character of the detailed assessment. The assessment flowed from the costs order in the underlying section 423 proceedings and was not a new set of proceedings. At [167], Costs Judge Nagalingam held:
> Detailed assessment in these circumstances is therefore not new proceedings, but in fact part of the existing proceedings which led to the costs order in the Defendants’ favour.
That point mattered because the second and third claimants remained the parties against whom the original costs order had been made. BCR Legal Assist Limited was not added as an interested party until August 2025, almost two years after the costs order, and the order adding it did not make it liable for assessment costs.
The judge also gave practical guidance about delay. A receiving party is not relieved of the time limits in CPR 47.7 and CPR 47.14 merely because negotiations continue. If compromise is not progressing, the receiving party should serve the notice of commencement, seek a default costs certificate where appropriate and request a detailed assessment hearing. At [161], the court put the point directly:
> To put it bluntly, a receiving party must realise when the time has come to cease chasing, cease negotiations, and instead make their best and final offer, have a bill drawn, get it served and set the matter down for assessment.
2. CPR 47.20 addresses entitlement, not the source of payment
CPR 47.20(1) provides the usual order that the receiving party is entitled to the costs of detailed assessment, subject to the court making some other order. The claimants argued that the reference to some other order permitted the court to impose liability upon the interested-party insurer.
The judge distinguished entitlement to assessment costs from the source of the money used to discharge that entitlement. CPR 47.20 does not dictate which funds a liable party must call upon. At [172] to [174], the court explained:
> CPR 47.20(1) does not dictate the source or sources of funds a paying party calls on when the sum they are liable for has crystallised, whether by agreement or assessment. CPR 47.20(1) simply addresses which party is entitled to the costs of the detailed assessment proceedings.
>
> Accordingly, the exception must be limited to the question of entitlement, rather than the source or sources of funds once the amount of the entitlement has been concluded.
>
> To put it another way, the ‘usual order’ decides entitlement without dictating how that entitlement is later discharged.
The claimants did not seek to deprive the defendants of assessment costs or to give another party an entitlement to them. They accepted the defendants' entitlement but sought to transfer their own liability to BCR Legal Assist Limited. CPR 47.20 could not alter the existing main-action costs order, and civil procedure rules generally address who is liable rather than who ultimately writes the cheque.
The court did not hold that CPR 47.20 could never affect an interested party. At [204] to [206], it accepted that the rule was not drafted so restrictively that an interested party could never be the subject of some other order. The discretion is broad and CPR 47.20(3) is not exhaustive, but the rule is directed principally to the parties' conduct. On the facts, there was no proper basis for using that discretion to shift the claimants' assessment liability to their insurer.
3. Non-party costs principles did not assist the claimants
Although no non-party costs order was sought, the claimants invited the court to draw upon principles concerning intermeddlers and the real party to litigation. The judge found that those principles did not fit the case.
BCR Legal Assist Limited's involvement was not wanton or officious under Travelers Insurance v XYZ [2019] UKSC 48. Nor had the insurer funded or controlled the proceedings in the sense required by the real-party authorities. Payment under an insurance policy was not equivalent to an outside third-party funding arrangement. The insured claimants had purchased the policy and its indemnity, so the judge regarded them, rather than the insurer, as the source of the funding for this purpose.
The court also rejected the suggestion that success or failure on the preliminary issues should generate a discrete costs order. Preliminary issues formed part of the detailed assessment. Parties commonly win some points and lose others, but the overall outcome, offers and conduct determine the assessment costs order. As the judge stated at [200]:
> As both expert costs counsel know, it is not at all uncommon to win and lose various points during the course of a detailed assessment but it is the overall result that matters, when contrasted with offers (if indeed any were made) and factors such as conduct.
4. The budgeting points were legitimate and the £600,000 offer was genuine
The applicants characterised points in the points of dispute as aggressive, obstructive or hopeless. The court rejected that description. The earlier judgment on the preliminary issues had made no adverse finding about their merits. Instead, they raised legitimate questions about the interpretation of the costs management orders and their relevance on detailed assessment. At [216], the judge observed:
> This is because the issues raised identified legitimate areas of doubt which required judicial interpretation and decision. They were points that were legitimately taken against the Defendants and may well have found favour with a different judge.
The court also rejected the description of the £600,000 offer as absurd. The defendants had served a bill for £1,655,531.11 but ultimately accepted £1,107,814 in aggregate from all three claimants. When the first claimant's £150,000 settlement was added to the £600,000 offer, the resulting £750,000 was closer to the aggregate settlement than the original bill was. The offer was consistent with the budgeting arguments and the remaining objections.
At [257] to [258], the court concluded:
> Further, the fact an offer is less than a payment on account does not render that offer worthy of ridicule nor automatically render the offer unrealistic. For the avoidance of doubt, I do not consider the offer of £600,000, when looked at in its proper context, could reasonably be described as “absurd”.
>
> It was a real and genuine offer to settle.
5. Delay and obstructive conduct were not proved
The claimants alleged an eight-month delay caused entirely by BCR Costs Limited. The court found that no party had been compelled to wait. The defendants controlled when to commence detailed assessment and when to request a hearing. Agreed extensions were unsurprising in a substantial assessment, particularly where a payment on account had supported cash flow. Any costs incurred during periods of delay should in any event have been limited.
The criticism of the points of dispute was similarly unsupported. Only isolated examples were identified. Even if a point were hopeless, the court noted that a hopeless objection should be capable of a short reply at little cost. The evidence did not establish aggressive or obstructive conduct.
The judge was particularly critical of the counterfactual case that settlement would have occurred early without the insurer. The witness evidence on that issue was speculative, inferential and inconsistent with the chronology. There was no evidence that Gowling WLG's return to the negotiations itself caused the defendants to alter their position.
By contrast, the points of dispute and preliminary issues had required the defendants to confront the risks of assessment. At [271] to [273], the judge found:
> It is clear to me that by producing points of dispute (which I consider were mutually beneficial to the 2nd and 3rd Claimants and the Interested Party), and running arguments (albeit not wholly successful), the Interested Party’s involvement has played a central role in convincing the Defendants to come down significantly from the sums they were originally seeking.
>
> The Defendants, who purport to be neutral as to the outcome of this application but supportive of the 2nd and 3rd Claimants making of the application, make no suggestion whatsoever that they would have belatedly accepted settlement in the sum of the payment on account absent any points of dispute or the running of arguments to the preliminary issues hearing.
>
> There is a clear link, as is so often the case in detailed assessments, between the drafting of points of dispute / running of certain points and subsequent compromise.
6. The insurer's and insureds' interests were aligned
BCR Legal Assist Limited had a legitimate interest in establishing whether the indemnity limit would be exhausted. Before that became inevitable, both insurer and insureds benefited from reducing the defendants' costs below £1 million. A lower figure reduced the insurer's contractual payment and protected the claimants from personal liability above the indemnity limit.
The court rejected the suggestion that the indemnity should be treated as a war chest to be spent in settlement. It was instead the fund from which an established liability would be paid. Preparing points of dispute and funding leading counsel on the budgeting issue served the mutual interests of insurer and insureds.
The insurer had paid the full £1 million indemnity and had not sought to avoid its contractual obligations. There was no contractual case that it had agreed to meet assessment costs regardless of the indemnity limit, and no allegation that it had acted outside the policy by taking a leading role in the costs process.
7. The application was dismissed and the defendants' costs faced scrutiny
Costs Judge Nagalingam dismissed the application at [343] to [344], holding that it lacked merit and was entirely speculative. The evidence did not support the alleged exclusion of the claimants, aggressive conduct, unreasonable points or the proposition that the insurer had caused the need for assessment.
The judgment did not, however, endorse the level of the defendants' assessment costs. Those costs had already been ordered to be assessed on the standard basis. The judge described the level claimed as "frankly astonishing" and warned that the defendants would need to work "incredibly hard" to avoid significant reductions. A consequential hearing was to address the costs flowing from the judgment and the summary assessment of the defendants' assessment costs.
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Practical Implications
For Costs Lawyers
1. Separate entitlement from payment mechanics. CPR 47.20 is principally concerned with entitlement to detailed assessment costs. An application intended to redirect an existing paying party's liability to an insurer requires a sound legal basis beyond identifying the insurer as a possible source of funds.
2. Do not isolate preliminary issues from the assessment as a whole. Success on one preliminary point will not ordinarily produce an immediate costs order. The overall assessment result, offers and conduct remain central.
3. Test allegations of delay against procedural control. A receiving party that can serve a bill, seek a default costs certificate or request a hearing may struggle to attribute the whole period of delay to the opponent. The costs said to arise during the delay should also be identified and evidenced.
4. Support conduct applications with documents, not counterfactual belief. Assertions that another representative would have settled earlier are unlikely to suffice. The applicant should prove the conduct alleged, its causal effect and the additional costs said to result.
5. Assess offers in the context of the pleaded objections and final compromise. An offer below a payment on account is not automatically unrealistic. The bill, the disputed legal issues and the eventual settlement all inform whether an offer was genuine.
For Litigation Practitioners
1. Address an insurer's costs exposure when it is joined. If parties intend an interested-party insurer to face costs consequences, the joinder order should deal expressly with that question. Silence may be important, particularly where the insurer was not a party when the original costs order was made.
2. Distinguish insurance indemnity from third-party funding. Payment under cover purchased by the insured is not, without more, evidence that the insurer is the real party or controls the litigation for non-party costs purposes.
3. Identify actual conflicts rather than assuming them. Below an indemnity limit, insurer and insured may share the same objective of reducing adverse costs. A theoretical difference in financial incentive does not establish exclusion, improper control or unreasonable conduct.
4. Keep detailed assessment moving while negotiating. Continuing negotiations do not suspend procedural time limits. Receiving parties should decide when to serve, make their best offer and secure a hearing date.
5. Expect assessment costs themselves to be tested rigorously. Even where the receiving party is entitled to assessment costs, a very high claim remains subject to the standard basis, proportionality and close scrutiny of the work reasonably incurred.
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Conclusion
Lemos v Church Bay Trust Company confirms that adding an ATE insurer as an interested party does not itself transfer the insured paying parties' liability for detailed assessment costs. CPR 47.20 permits flexibility over assessment costs, including in an appropriate case involving an interested party, but it is not a general mechanism for directing which fund or insurer must discharge an existing liability.
The decision is also a fact-sensitive warning about conduct allegations in costs proceedings. The applicants could not prove that the insurer had excluded them, caused the delay or advanced unreasonable points. On the contrary, the insurer-funded points of dispute and preliminary arguments contributed to a reduction from a £1,655,531.11 bill to aggregate settlements of £1,107,814.
For costs practitioners and their clients, the central lesson is to define liability clearly, preserve contemporaneous evidence of control and negotiation, and distinguish an assessment's overall outcome from success on individual points. A substantial assessment costs claim may remain vulnerable even where the receiving party retains its entitlement in principle.
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Citation: Joanna Lemos & Ors v Church Bay Trust Company & Ors [2026] EWHC 2402 (SCCO)
Full judgment available at: National Archives
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