Carl v Limbani [2026] EWCA Civ 856 is a Court of Appeal decision that costs practitioners will want on their radar. It confirms that a defendant who successfully defends a claim can still be denied his costs, and potentially sanctioned further, where the court finds his conduct before and during the litigation to have been dishonest.

For costs lawyers and draftsmen advising on CPR 44.2 departures from the general rule, the judgment offers a clear, recent illustration of how the court’s discretion operates when success and dishonesty sit side by side.

Background to the Case

The underlying dispute arose from an elaborate fraud involving historic sports cars. Bernard Carl, a collector, brought claims in conversion and conspiracy against Vikash Limbani, connected to attempts to acquire vehicles through intermediaries, including a car dealer, Richard Edwards, who took money for cars and diverted the proceeds for his own purposes. Mr Carl’s claims against Mr Limbani ultimately failed for want of sufficient evidence and because of findings about the limited capacity in which Mr Limbani had acted.

Despite that success, the trial judge indicated, as a preliminary view given before hearing any submissions, that there should be no order as to costs. This reflected concerns that Mr Limbani had escaped proper scrutiny of his own conduct through evasion and non-disclosure during the proceedings.

The Procedural Irregularity

At a consequentials hearing some five months later, the judge treated that preliminary indication as a final, settled decision and declined to hear further submissions from Mr Limbani’s counsel on the point, telling him his remedy lay with the Court of Appeal. Giving the leading judgment, Foxton LJ accepted this was a serious procedural irregularity falling within CPR 52.21(3)(b): a provisional view expressed without argument remains just that, and refusing to hear submissions the parties had been promised meant the resulting order had to be set aside.

Importantly, this procedural failing did not automatically favour Mr Limbani. The Court of Appeal approached the costs question afresh rather than treating the original judge’s preliminary view as a starting point, since a view formed without argument could not properly shape the appellate task.

The Test for Departing from the General Rule

Under CPR 44.2, the general rule is that the unsuccessful party pays the costs of the successful party, but the court retains discretion to make a different order having regard to all the circumstances, including the conduct of the parties.

Surveying the relevant authorities, including Widlake, Ward v Donnellan, and Bank of Tokyo-Mitsubishi, Foxton LJ reaffirmed that a successful party’s reprehensible conduct can justify departing from the general rule on any of three bases: to reflect the costs consequences flowing from the dishonesty, as a proportionate sanction for that conduct in its own right, or because the conduct caused the other party to bring or pursue the claim in the first place.

 Foxton LJ’s formulation was that a costs order in these circumstances needs to reflect the consequences of the successful party’s conduct on the proceedings, while also constituting a proportionate sanction for that conduct.

Applying the Test to Mr Limbani’s Conduct

The factual findings about Mr Limbani’s conduct, including a misleading account given in his defence and witness statement, and a false statement to the police concerning a Ferrari that had never existed, remained binding, and his attempts to challenge them on appeal largely failed. His medical evidence provided no answer to dishonesty findings that rested on the improbability of his account rather than on how he presented as a witness.

Applying the three-limbed approach, the Court of Appeal found that Mr Limbani’s false account to the police was an important reason Mr Carl pursued him at all, meaning Mr Limbani could fairly be said to have brought the proceedings on himself. Separately, his dishonest evidence at trial justified a costs sanction regardless of its effect on the litigation.

By contrast, Mr Carl was found blameless, and his hope of extracting evidence against other parties as part of a settlement did not undermine an otherwise genuine claim that had succeeded factually to a significant degree. On that basis, the Court of Appeal dismissed the appeal, meaning Mr Limbani, despite defeating the claims against him, recovered no costs.

What This Means for Costs Practitioners

Carl v Limbani is a useful reminder that success on the pleadings is not, by itself, determinative of costs entitlement. Where a paying party can point to dishonest conduct by an otherwise successful opponent, whether in pre-action correspondence, disclosure, witness evidence, or statements made outside the litigation itself, there may be a proper basis to seek a departure from the general CPR 44.2 rule.

Practitioners advising clients on litigation conduct should also take note of the procedural lesson: preliminary costs indications given without argument are not final, and parties are entitled to make submissions before any costs order is treated as settled.

FAQs

Can a party who wins their case still lose on costs?

Yes. Under CPR 44.2, the court has discretion to depart from the general rule that the loser pays the winner’s costs, including where the successful party’s own conduct, such as dishonesty, has been reprehensible or has contributed to the litigation being brought.

What conduct might justify a costs sanction against a winning party?

The court in Carl v Limbani identified conduct including dishonest evidence, misleading statements in a defence or witness statement, and false accounts given outside the proceedings, such as to the police, as capable of justifying a departure from the general rule.

Is a preliminary costs indication from a judge final?

No. As Carl v Limbani confirms, a provisional view on costs given before hearing submissions is not a final determination, and parties retain the right to make submissions before any costs order is treated as settled.