A case that will no doubt continue to be discussed for the foreseeable future due to its high-profile nature, we again have a Prince Harry costs update. Following Mr Justice Nicklin’s judgment dismissing Prince Harry’s privacy claim against Associated Newspapers Ltd (ANL), the parties returned to the High Court for a two-day hearing to determine how the costs incurred over four years of litigation should be recovered.

At the centre of the argument was ANL’s application for costs on an indemnity basis, rather than the standard basis usually applied to a successful party. The judge has reserved his decision, but the arguments raised offer a useful illustration of how courts approach costs recovery in high-value, multi-party litigation.

The Budget Overspend Argument

ANL’s reported spend of £34.5 million is more than £18.6 million above its court-approved costs budget, set during the case’s earlier budget phases under a costs management order.

This gap is significant because a costs judge assessing whether to depart from the budget on detailed assessment will typically expect the paying party to show good reason to depart from the approved budgeted figures. Under CPR 3.18, courts will not normally depart from an approved costs budget without justification, and the scale of ANL’s overspend was a central plank of the claimants’ resistance to indemnity costs.

Nicholas Bacon KC, representing the claimants, argued that ANL’s own approach to litigation costs undermined its position: rather than showing restraint, ANL was said to have adopted an unusually high and unconstrained approach to spending, which sits awkwardly alongside a request to recover costs in excess of what was budgeted. Whether this argument persuades the court will likely turn on how far the excess costs can be attributed to the conduct of the claimants themselves, as opposed to ANL’s own litigation strategy.

Interim Payment: The Gap Between the Parties

Alongside the indemnity basis application, ANL sought an interim payment of £9,950,624.37 on account of costs, pending final detailed assessment. The claimants offered £8 million. This roughly £2 million gap reflects the genuine uncertainty that can exist between parties before a costs judge has ruled on the applicable basis, and illustrates why interim payment applications are rarely straightforward, even where liability for costs is not in dispute.

Insurance Shortfall and What It Means

The claimants’ combined adverse costs insurance cover was reported at £16.2 million, against ANL’s £34.5 million bill. Should the court order costs on an indemnity basis, the shortfall the claimants would need to cover directly could reach approximately £18 million. This is a reminder, for practitioners advising clients ahead of litigation, of the importance of reviewing adverse costs cover against realistic, rather than budgeted, worst-case exposure.

What Happens Next

Mr Justice Nicklin’s decision on the applicable costs basis, and the amount of any interim payment, is expected in writing at a later date. We will cover the ruling and its implications for costs practitioners once it is handed down.

FAQs

What is the difference between indemnity costs and standard basis costs?

On the standard basis, costs must be proportionate to the matters in issue, and any doubt is resolved in favour of the paying party. On an indemnity basis, proportionality does not apply in the same way, and doubt is resolved in favour of the receiving party, which can allow a greater proportion of costs to be recovered.

Why does a costs budget overspend matter to a costs judge?

Where a party has an approved costs budget under a costs management order, CPR 3.18 means the court will not normally depart from the budgeted costs without good reason. A significant overspend can therefore affect how much of the excess costs a party is able to recover, even where indemnity costs are ordered.

What is an interim payment on account of costs?

An interim payment allows a receiving party to recover a reasonable sum on account of costs before the detailed assessment process, which can otherwise take many months to conclude.

Speak to Greener Costs Today

Costs disputes of this scale are unusual, but the underlying principles – budget compliance, the indemnity versus standard basis distinction, and interim payment practice – apply across cases of every size.

If you need support with costs budgeting, costs management, or detailed assessment, contact Greener Costs’ costs lawyers and costs draftsmen on 01204 263047 or info@greenercosts.co.uk.