Court has the power to limit recoverable costs following assessment, says judge

Prince Harry and other claimants face indemnity costs order in high-profile claim

A court that has awarded indemnity costs has the power to impose a limit or ceiling on the amount of recoverable following detailed assessment, the judge in the Prince Harry case has ruled.

However, Mr Justice Nicklin decided not to do so because he had no principled way of setting a figure.

His decision to award indemnity costs, and order an interim payment of £9.5m, made headlines around the world, with ACL chair David Bailey-Vella’s comments on it reported by around 130 outlets here and abroad.

But arguably the most legally significant part of Baroness Lawrence & Ors v Associated Newspapers Ltd (Consequential Matters) [2026] EWHC 2207 (KB) was the question of capping recoverability.

Nicklin J explained: “The claimants accept, correctly, that if costs are ordered to be assessed on the indemnity basis, the receiving party is not confined to the figures in its approved costs budget.

“But the claimants submit that it does not follow that Associated should be permitted to seek recovery, subject only to detailed assessment, of the full amount now said to have been incurred. Associated’s response is that there is no power, or at least no principled basis, for imposing a retrospective cap of the kind proposed, and that any such order would be unfair and arbitrary.”

The judge held that the court did have jurisdiction, in principle, to make an order that costs otherwise subject to assessment should be subject to a quantified ceiling or cap.

CPR 44.2 gave the court “a wide discretion as to whether costs are payable by one party to another, the amount of those costs, and when they are to be paid”, he said, while the Court of Appeal’s ruling in SCT Finance Ltd v Bolton [2003] 3 All ER 434 was binding authority that the court’s general costs discretion was “wide enough to permit an order for detailed assessment subject to a quantified ceiling”.

CPR 3.19 did not affect this, said Nicklin J. While “plainly relevant to the caution with which a court should approach any form of costs cap” and showing that costs capping was exceptional, this rule dealt with prospective costs and did not address “the court’s jurisdiction at the conclusion of proceedings to decide what costs order should be made under CPR 44.2”.

But Nicklin J stressed that the power “must be exercised in accordance with principle. It should not be used to avoid the ordinary process of assessment, nor to impose an arbitrary figure in place of the evidence-based scrutiny that is the function of the costs judge”.

He enumerated three points of principle limiting the power. First, “a cap cannot properly be imposed merely because the court considers the amount of costs claimed to be very high” – the court must be careful not to duplicate, or pre-empt without evidence, matters that properly fall for assessment.

Second, an award of indemnity costs “does not mean that there is no protection for the paying party”. Third, if a cap was imposed, the court must be able to explain why the selected figure was principled.

“The danger is that the figure becomes no more than a broad impression of what the court considers ‘too much’. That is not a sufficient juridical basis. If the cap is based on causation, reliance, conduct, a distinct stage of litigation, or some other identifiable factor, the court must identify the factor and explain how it leads to the figure selected. Otherwise, the cap will be vulnerable to the criticism that it is arbitrary.”

In any event, Nicklin J decided not to impose a cap. He acknowledged that Associated’s claim for costs of £34m – far in excess of not only its approved budget but the figures it put forward during the costs management process – was, on its face, “excessive and as giving rise to real concerns as to whether all of the costs now claimed by Associated were reasonably incurred and are reasonable in amount”.

He also recognised that much changed after the original costs management process.

But these were matters for the costs judge – it would be “unsafe for this court, at this stage, to select a maximum recoverable figure”.

The judge went on: “The court does not have before it the materials that would be required to undertake anything approaching an assessment. I do not have a bill of costs. I do not have the detailed schedules that will be prepared for assessment. I do not have points of dispute or replies. I do not have evidence explaining, phase by phase and item by item, why the costs were incurred, what work they represented, whether that work was caused by developments in the proceedings, and whether the amounts claimed are reasonable.”

The claimants sought a cap of £18-20m, the cover provided by after-the-event insurance they said they obtained by reference to the costs information available to them at the time. Even if this was the case, the judge said, it did not produce a principled figure for a cap.

“It also does not establish that the proper remedy is to restrict Associated’s recoverable costs, rather than to leave reasonableness and recoverability to detailed assessment.”

He added that he had considered whether a more limited form of order might be appropriate, such as a cap by reference to particular phases, a date, or categories of work. “In principle, such an order may be permissible. But the same difficulty arises.”

The “proper protection” for the claimants lay in the detailed assessment process, he concluded.

The consequentials ruling followed the judge’s comprehensive dismissal of the cases brought by Baroness Lawrence, Elizabeth Hurley, Sir Elton John, David Furnish, Sir Simon Hughes, Prince Harry and Sadie Frost – whose claims were issued separately but tried together. They alleged that their private information has been misused by the newspaper group.

Nicholas Bacon KC, David Sherborne, Ben Hamer and Ed Grigg (instructed by Sheridans Solicitors and Thomson Heath Jenkins & Associates) for the claimants. Antony White KC, Andrew Caldecott KC, Catrin Evans KC, Roger Mallalieu KC, Sarah Palin, Hannah Glover and Ben Gallop (instructed by Baker & McKenzie) for the defendant.