Servicios de Salud v Viva: 55% Costs and a 60% Payment on Account [2026] EWHC 2333 (Ch)
Detailed Assessment — 2026-09-14
In Servicios de Salud del Instituto Mexico del Seguro Social Para el Bienstar v Viva Enterprises Limited & Anor [2026] EWHC 2333 (Ch), the High Court dealt with the consequentials following a trial about the supply of ventilators during the COVID-19 pandemic. Richard Smith J ordered the First Defendant to pay 55% of the Claimant's costs on the standard basis, awarded pre-judgment interest on those costs at Bank of England base rate plus 1% from the dates the invoices were paid, and ordered a payment on account of 60% of the Claimant's costs schedule.
Overview
Date: 14 September 2026
Judge: Mr Justice Richard Smith
Court: High Court, Chancery Division
Citation: [2026] EWHC 2333 (Ch)
Nature of Proceedings: Consequentials judgment following trial: costs, interest on costs, payment on account, judgment rate interest, release of security and permission to appeal
Key Issues:
- Identifying the successful party where the claim succeeded on a contractual basis that had not been pleaded
- Whether a costs award to such a party breaches the indemnity principle
- A 55% proportionate costs order reflecting a failed fraud claim
- No separate costs order for an individual defendant who defeated the claim against him
- Standard basis costs despite findings of dishonesty against the paying party
- Pre-judgment interest on costs at base rate plus 1% from payment of the invoices
- A payment on account of 60% of the costs schedule
- Refusal to defer judgment rate interest for six months
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The Facts
In Servicios de Salud del Instituto Mexico del Seguro Social Para el Bienstar v Viva Enterprises Limited & Anor [2026] EWHC 2333 (Ch), the High Court dealt with the consequentials following a trial about the supply of ventilators during the COVID-19 pandemic. Richard Smith J ordered the First Defendant, VEL, to pay 55% of the Claimant's costs on the standard basis, awarded pre-judgment interest on those costs at Bank of England base rate plus 1% from the dates the invoices were paid, and ordered a payment on account of 60% of the Claimant's costs schedule. The judgment is a compact illustration of how the court fixes a proportionate costs order, a payment on account and interest on costs after a long trial in which the winner lost most of its pleaded case.
The Claimant's predecessor, INSABI, a Mexican public health body, agreed on 12 April 2020 to buy 1,000 ventilators from the First Defendant, Viva Enterprises Limited (VEL), and paid US$59.2m up front. VEL failed to comply with the agreed delivery schedule and was in breach by May 2020. In June 2020 the parties exchanged correspondence which the court found varied the contract (the June Agreement). VEL refunded 30% of the price on 19 June 2020 and delivered 50 units from one supplier by 3 July 2020. It then claimed credit for a further 465 units delivered to INSABI by a separate Mexican supplier, Encore. The court found at trial that VEL and Encore had engaged in a "covert scheme" to pretend that Encore's own deliveries had been made on VEL's behalf.
The Claimant pleaded claims in misrepresentation (including fraud), repudiatory breach for non-delivery and unjust enrichment, and a personal deceit claim against the Second Defendant, Mr Robert Dangoor, VEL's managing director. Each of the pleaded claims failed as framed. The court nevertheless held, as a matter of construction of the June Agreement, that INSABI had become entitled to a pro rata refund for the 650 units not delivered by 3 July 2020. At the consequentials hearing the judge rejected the Defendants' argument that this was an impermissible unpleaded "third man" theory, entered judgment for US$38.48m, and gave the Claimant permission to amend its Particulars of Claim after trial to plead the liquidated claim: [57]. Permission to appeal was refused, but the order for payment of the judgment sum was stayed pending any application to the Court of Appeal: [94] to [95].
Costs were argued at the same hearing. The Claimant said it was the successful party and should recover its costs subject to a reduction it put at 30%, or 15% if the court marked the Defendants' dishonesty, with an award on the indemnity basis. The Defendants said the Claimant should recover nothing and should pay their costs, with the costs of the misrepresentation claim on the indemnity basis, conceding only a 10% discount for the covert scheme. If any award was made in the Claimant's favour, they said the misrepresentation claim represented 60% of the costs of the whole action: [67] to [72].
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The Court's Reasoning
1. The Claimant was the successful party despite losing every pleaded claim
The judge began with the conventional first question. He had no doubt about the answer:
> In this case, I am in no doubt that the Claimant is the successful party overall. It set out to recover the unrefunded price of 700 ventilators, albeit it was willing to give some credit for 50 of them. The Claimant has been awarded an amount corresponding to 650 units. The fact that it did so on a different contractual basis from that advanced does not, to my mind, alter its success.
That is [73]. The test looks at what the party set out to achieve and what it obtained, not at which legal route delivered the result.
2. The indemnity principle argument failed
The Defendants argued that the Claimant had incurred no costs in recovering the liquidated sum because it had never pleaded that claim, so any costs award would breach the indemnity principle. The judge dismissed the point in one sentence at [74]: "The Claimant has incurred a liability for costs in bringing these proceedings." The question was not whether costs had been incurred but whether the Claimant should be awarded them, which turned on all the circumstances, including how the Claimant had presented its claims.
3. A 55% proportionate order reflected the failed misrepresentation claim
The judge accepted that the misrepresentation claim had caused significant costs, had been put on an ambitious basis including an allegation of fraud, and had failed at a number of levels: [74]. The result was a proportionate order under CPR 44.2(6)(a):
> I have decided that the appropriate proportion is 55%, reflecting a significant discount on account of the misrepresentation claim and the other arguments advanced by the Claimants at trial which did not prevail as framed.
That is [77]. The figure sits between the Claimant's proposed 30% reduction and the Defendants' proposed 60%. The court did not conduct an issue-by-issue accounting; it fixed a single percentage on a broad view of the litigation.
4. No separate costs order for the successful individual defendant
The personal deceit claim against Mr Dangoor failed and he was the successful party on it. The judge nevertheless declined to make a separate order in his favour. The vast majority of the costs of defending the deceit claim would have been common with VEL's costs of defending the misrepresentation claim, a point borne out by the Defendants' own limited evidence of costs specific to Mr Dangoor: [75]. His success was instead reflected in the discount applied to the Claimant's costs:
> To award costs separately for the deceit claim against Mr Dangoor would run the risk of a double discount against the Claimant’s costs were he then to seek to recover from the Claimant the common costs of the related claims. Such a course would not be just, not least when, although Mr Dangoor was apparently jointly and severally liable for the Defendants’ costs, it was VEL which paid them.
That is [78]. Where an individual defendant and his company have run a common defence with common costs, the court may deal with his success through the percentage rather than through a cross-order.
5. Dishonesty was material but did not reduce the discount
The Defendants relied on TMO Renewables Ltd (In Liquidation) v Yeo [2022] EWCA Civ 1409 for the proposition that a finding of dishonesty is not a trump card. The judge accepted that but held that his findings on the covert scheme were material to the outcome: [76]. The Claimant argued that the discount should be pared back to 15% to mark that dishonesty. The judge refused:
> I also make clear that the (45%) percentage reduction against the Claimant’s costs has not itself been reduced or ‘pared back’ on account of the Defendants’ dishonest conduct. In my view, such a ‘penalty’ would not be justified in circumstances in which the Claimant’s costs of addressing the ‘covert scheme’ are already encompassed by my order.
That is [79]. The costs of meeting the dishonest defence were already within the 55%; the court would not add a further uplift for conduct on top.
6. Standard basis, not indemnity
Both sides sought indemnity costs on different parts of the case: the Claimant because of the Defendants' dishonesty, the Defendants because of the failed fraud allegation. The judge refused both:
> Although elements of the claims and defences highlighted by the parties today might have attracted indemnity costs if looked at in their individual right, viewing the matter in the round and having regard to the countervailing factors on each side, it would not be appropriate for the entire costs order to be framed in that way. Accordingly, the costs I have ordered the Defendants to pay shall be on the standard basis.
That is [80]. The judgment does not analyse the indemnity test in detail. The point of practice is that where each side can point to conduct by the other, the court may treat the factors as cancelling out and leave the basis at standard.
7. The order covered the whole costs schedule except the injunction
The costs order encompassed all categories of costs claimed in the Claimant's schedule, save only the costs of the injunction application. Liability for the injunction costs was adjourned with the Defendants' related applications on their undertakings and the cross-undertaking in damages: [81], [96]. The Defendants' complaints about the level of costs in other categories were "properly matters for assessment": [81].
8. Pre-judgment interest on costs at base rate plus 1%
The Claimant sought pre-judgment interest on its costs on the footing that it had paid its solicitors and been out of the use of that money. The judge agreed:
> It was common ground that the Bank of England base rate plus 1% was the appropriate rate. I accept this and that this should be applied from the date of the Claimant’s (or INSABI’s) payment of the relevant invoices.
That is [82]. The order therefore runs from the dates of actual payment of each invoice, not from a single notional date.
9. A 60% payment on account
The judge set out the test at [83]:
> In approaching the question of the amount of the payment on account, the authorities indicate that I am not looking for the irreducible minimum rather than an estimate of the likely recovery, subject to an appropriate margin for error and the potential effect of other factors impinging on recoverability and/ or risk of recovery, and overpayment.
The Defendants argued for a figure nearer 50% than 65% of the percentage allowed. They said nearly half the costs claimed related to a flawed and disproportionate disclosure exercise, that the security for costs application had cost more than the trial witness statements, that the Claimant had claimed the costs of a proprietary injunction application on which it had failed, and that the hours claimed for the consequentials hearing were unfeasible: [84].
The judge ordered a payment on account of 60% of the costs claimed in the Claimant's costs schedule, excluding the injunction costs, within 14 days of hand-down: [85]. The Defendants had framed their submission as a percentage of the costs allowed; the judge expressed his figure as a percentage of the costs claimed in the schedule. The parties were asked to produce a draft minute of order, and whether the 60% is applied before or after the 55% proportion is a matter for that order.
10. Judgment rate interest was not deferred
The Defendants relied on Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC 566 (Comm) to argue that judgment rate interest on costs should not start for six months. The judge had regard to Christopher Clarke LJ's exposition but declined to defer for so long:
> With the costs information which has been available to the Defendants for some time, they are able to take informed steps much earlier to protect their position on costs, including by making appropriate offers to settle.
That is [86]. He extended the pre-judgment rate to 14 days after hand-down so that the payment on account could be made without exposure to the higher rate, with the judgment rate applying thereafter. The security for the Defendants' costs lodged in the Court Funds Office was released: [87].
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Interest on the Judgment Sum
The judgment also decided pre-judgment interest on the US$38.48m. The Claimant sought US Prime from July 2020. The judge held that a Mexican public body funded from the federal budget had no commercial borrowing costs and that US Prime was inapposite; late evidence of peso-denominated repo returns of 8.06% did not reflect the loss of use of money either. He awarded interest at the Effective Federal Funds Rate plus 1%: [61] to [66]. The start date was set at 1 January 2022 rather than July 2020 because the Claimant's predecessor could have started proceedings, which were not issued until 28 October 2022, sooner than it did: [59], [66]. This ruling concerned interest on the judgment sum, not the separate award of interest on costs.
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Practical Implications
The following are practical conclusions from the decision, rather than additional rules laid down by the court.
For Costs Lawyers
1. Draft the order to fix what the payment on account is a percentage of. The judgment expresses the payment on account as 60% of the schedule and the recoverable costs as 55%. Where a proportionate order and a payment on account are made together, the minute of order should state expressly whether the payment on account is calculated before or after the proportion.
2. Claim interest on costs from the dates the invoices were paid. The order in Servicios runs from actual payment of each invoice at base rate plus 1%. A receiving party should be ready to prove those dates from its ledger, and a paying party should verify them.
3. Expect the court to resist a six-month deferral of judgment rate. The Excalibur argument failed because the paying party had long had enough costs information to make a protective offer. A paying party who wants a deferral needs to show it lacked the means to assess its exposure.
4. A proportionate order absorbs conduct. The 55% already encompassed the costs of meeting the dishonest defence, so no further uplift was allowed for conduct. Do not expect a separate conduct adjustment where the percentage already covers the same work.
For Litigation Practitioners
1. Success is measured by the outcome sought, not the route. A claimant who recovers the sum it set out to recover is the successful party even if every pleaded cause of action failed and the win came on construction. Do not argue an indemnity principle point on that footing; it was dismissed in a sentence.
2. A failed fraud allegation carries a heavy price even for the winner. The misrepresentation claim, put on an ambitious basis including fraud, was the main driver of a 45% reduction. Weigh the costs consequence of pleading fraud before adding it to a claim that can succeed without it.
3. A co-defendant who wins his own claim may get nothing separately. Where an individual and his company have common costs and one of them pays, the court may reflect the individual's success in the percentage rather than through a cross-order that risks a double discount.
4. Distinguish interest on the judgment sum from interest on costs. Delay in issuing reduced the former period here. Interest on costs ran from the date each relevant invoice was paid under a separate ruling.
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Conclusion
Servicios de Salud v Viva is a consequentials judgment after a substantial commercial trial, and its costs section shows the court working through the standard sequence: identify the winner, fix a proportion for the issues lost, decide the basis, set the payment on account and deal with interest. Each step was decided on a broad view rather than a mechanical count, and the judge was explicit that the dishonesty findings did not translate into a separate costs penalty once the costs of meeting the dishonest case were within the order.
The financial consequences for the paying party are significant. A payment on account of 60% of a schedule covering disclosure, security for costs, witness evidence and a lengthy trial falls due within 14 days, interest at base rate plus 1% has been running on the costs since the invoices were paid, and the judgment rate follows two weeks after hand-down. Permission to appeal was refused on all four grounds. The stay granted pending an application to the Court of Appeal applies to the judgment sum, not to the costs order.
This Mackenzie Costs analysis focuses on the costs rulings. The construction of the June Agreement, the post-trial amendment and the pre-judgment interest rate occupy most of the judgment and will be of interest to commercial practitioners in their own right.
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Citation: Servicios de Salud del Instituto Mexico del Seguro Social Para el Bienstar v Viva Enterprises Limited & Anor [2026] EWHC 2333 (Ch)
Full judgment available at: The National Archives
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