Procedural Fairness in Costs: A Provisional “No Order” Cannot Stand Without Hearing Submissions

1. Introduction

The Court of Appeal considered whether a costs disposition (“no order as to costs”) could properly be made where, at the time the trial judge formed a view, the parties had not been heard on costs and the judge had expressly described the view as preliminary—yet later refused to hear the successful defendant’s submissions at the consequentials hearing on the mistaken basis that the point was already finally decided.

The underlying dispute concerned alleged misappropriation and non-delivery of historic sports cars acquired through intermediaries. The claimant alleged that various defendants, including the appellant (a defendant who ultimately succeeded at trial), were involved in removing vehicles from storage (“the raid”) and in attempted disposal of a Porsche 959. The trial judge dismissed the claimant’s claim against the appellant, but expressed a preliminary view that the appellant should not recover costs because the appellant had “escaped examination” through evasion and non-disclosure and had not told the truth in material respects.

The appeal was confined to the costs order between the claimant (respondent) and the appellant.

2. Summary of the Judgment

The Court of Appeal held that the trial judge committed a serious procedural irregularity (CPR 52.21(3)(b)) by refusing to hear costs submissions after indicating that the costs view in the main judgment was merely provisional pending further argument. That refusal infringed procedural fairness (natural justice).

The costs order was therefore set aside. However, the Court of Appeal exercised the costs discretion afresh (CPR 52.20) and, on the binding findings about the appellant’s conduct, reached the same outcome: no order as to costs between the claimant and the appellant. Accordingly, the appeal was dismissed in result.

3. Analysis

3.1 Precedents Cited

• Royal Sun Alliance Insurance Ltd v Tughans (A Firm) [2022] EWHC 2825 (Comm), [2022] 4 WLR 110 and Contra Holdings Ltd v Bamford [2022] EWHC 2799 (Comm): cited for the importance of resolving consequential matters promptly after judgment. The Court of Appeal treated delay as a practical contributor to what went wrong at the consequentials hearing (the judge not being taken back to the “preliminary” wording).
• Barton v Wright Hassall LLP [2018] UKSC 12: relied on below by the appellant to underline that litigants in person must comply with the CPR; relevant context for the parties’ conduct but not determinative of the appellate outcome.
• McDonald v Rose [2019] EWCA Civ 4, [2019] 1 WLR 2828: authority that time to seek permission to appeal runs from the order/judgment appealed; used to explain that once time expires, leave must come from the Court of Appeal on matters determined by the main judgment.
• Boreh v Djibouti [2017] EWCA Civ 56: cited for the proposition that there is generally no free-standing right to appeal factual findings absent an appealable order (relevant to rejecting timeliness objections: the appellant only had something to appeal once an adverse costs ruling was made).
• Widlake v BAA Ltd [2009] EWCA Civ 1256, [2010] 3 Costs LR 353: endorsed the general rule (costs follow the event) and recognised that exceptionally egregious misconduct may justify depriving a successful party of costs as a punitive sanction, while cautioning against treating ordinary litigation dishonesty as automatically warranting such a penalty.
• Abbott v Long [2011] EWCA Civ 874, [2012] RTR 1 (approving Walsh v Singh [2011] EWCA Civ 80, [2011] 2 FLR 599): relied upon for proportionality: where misconduct has not caused wasted costs, the court must be satisfied that depriving a party of costs is a proportionate sanction.
• Ward v Donnellan [2026] EWCA Civ 729: recent authority emphasising that “out-of-the-ordinary” costs orders based on misconduct require constant regard to the applicant’s conduct; and that dishonest conduct by a successful party does not automatically displace the “costs follow the event” starting point. The Court drew from the quotation of Hutchinson v Neale [2012] EWCA Civ 345, [2012] 5 Costs LR and the need to evaluate the nature, degree, and litigation impact of the misconduct.
• Bank of Tokyo-Mitsubishi UFJ Ltd v Baskan Gida Sanayi Ve Pazarlama SA [2009] EWHC 1696 (Ch), [2010] 5 Costs LR 657: used for the “full range of measures” to ensure a dishonest but successful party does not gain from wrongdoing, and the importance of considering the applicant’s conduct when seeking exceptional costs relief.
• Grupo Torras v Al-Sabah 5 July 1999: relied upon as an example where a successful defendant’s dishonest or incompetent conduct could be linked to the claimant’s decision to sue, justifying significant reductions in the successful party’s recoverable costs.
• Sulaman v Axa Insurance plc [2009] EWCA Civ 1331, [2010] 3 Costs LR 391: used to reject the notion that a precise “calculation” of time/cost wasted by lies is necessary; lies can be “insidious” and make litigation more difficult in ways not easily quantified, supporting broad-brush costs assessment.

3.2 Legal Reasoning

(a) Ground 2: refusal to hear submissions was a serious procedural irregularity

The Court of Appeal treated Ground 2 as logically prior. The trial judge had flagged a provisional costs view in the main judgment precisely because submissions had not been heard. Yet at the consequentials hearing, after the claimant asserted the “no order” indication was final, the judge stated he was “not about to revisit” it and explicitly closed the door to further argument, telling counsel that the point was “for the Court of Appeal”.

That was an error in approach: the “preliminary view” was not a determination, and procedural fairness required hearing the appellant before making (or confirming) an adverse costs order, especially where the intended order departed from the “costs follow the event” starting point. The Court held the error necessarily met CPR 52.21(3)(b) and was “serious”.

(b) The appellate task after a serious procedural error

Because the first-instance discretion was vitiated by serious irregularity, usual appellate deference to discretionary decisions did not apply. The respondent argued the provisional “no costs” indication should remain the “starting point” for the Court of Appeal. Foxton LJ rejected this as counterintuitive: provisional indications are not determinations, and their presence should not change the appellate exercise where the eventual decision is procedurally flawed. The issue was “fully at large”.

(c) Re-exercising the costs discretion: CPR 44.2 and misconduct

The Court restated the statutory framework (CPR 44.2, including conduct factors in CPR 44.2(4)-(5)) and drew from the authorities two key routes by which a successful party may be deprived of costs:

• Remedial: to prevent recovery of costs incurred advancing a false case, and to compensate the other party for costs incurred exposing falsity (Bank of Tokyo-Mitsubishi).
• Sanctionary/proportionate penalty: where misconduct is sufficiently serious to justify a costs penalty even if precise cost causation cannot be quantified (Widlake; Abbott; Sulaman).

The Court emphasised that costs determinations are inherently summary; causal effects of dishonesty are approached with common sense rather than as if litigating a separate cause of action. Precise quantification is not required (Sulaman).

(d) Binding conduct findings and attempted challenges

For the purpose of re-determining costs, the Court treated the trial judge’s “conduct findings” about the appellant as binding unless successfully challenged on appeal. The appellant attempted to attack various findings (including objections to the police officer’s evidence as hearsay and complaints about disclosure findings). The Court dismissed the key challenges:

• The hearsay objection was “hopeless”: hearsay is admissible in civil proceedings (Civil Evidence Act 1995, s.1(1)); authenticity was not disputed; and the judge did not rely on the statements for their truth but found them false, using them instead to determine what was said and by whom.
• Criticisms of litigation conduct findings (non-compliance with disclosure obligations and engagement) were not sufficiently developed or practically determinable on the appeal record; the Court placed no reliance on those narrower procedural findings.
• Nonetheless, the Court relied on the more fundamental point: the appellant’s defence and witness evidence gave a misleadingly minimalist account and omitted key matters (e.g., issues connected to the police call and the “storage” payments) which were plainly relevant to the issues being tried.

(e) Why “no order as to costs” was justified on the facts

The Court’s reasons were twofold:

1. Conduct that brought the proceedings on himself: the appellant’s recorded account to the police (including a false element about an F40) was an important factor in the claimant’s decision to sue; it was found to have been made at the instigation of another defendant to conceal non-existence of the vehicle. This was the kind of conduct which can link a successful defendant to the commencement of litigation (Grupo Torras; Bank of Tokyo-Mitsubishi).
2. Dishonesty meriting a proportionate costs sanction: the appellant’s evidence (defence, witness statement, and oral testimony) was found untruthful on significant matters (relationship with the key intermediary; the police call; and the “storage” payments). The Court considered that, taken together, it warranted denying costs even though the appellant ultimately escaped liability due to legal thresholds (e.g., lack of possession for conversion; acting as an instrument of an employer in conspiracy analysis).

The Court rejected the suggestion that the claimant’s conduct should weigh against “no order”: the claimant had an arguable claim and (while not succeeding in liability) succeeded “to a significant extent” on factual aspects. The trial judge had also found the claimant’s conduct “blameless throughout”, which the Court treated as a powerful answer to any attempt to impugn the claimant’s litigation behaviour.

4. Impact

• Reinforcement of natural justice in costs consequentials: if a judge signals that costs views are provisional and submissions will be heard, the judge must hear them; a later refusal will likely constitute a serious procedural irregularity under CPR 52.21(3)(b).
• Provisional costs indications are not “anchors” on appeal: where the eventual order is vitiated by procedural error, the appellate court should not treat a provisional indication as shifting the baseline for its de novo exercise.
• Successful defendants can be deprived of costs where their conduct helped generate the claim: even if ultimate liability fails on legal elements (e.g., possession or scope of conspiracy), dishonesty that reasonably fuels suspicion and drives the claimant to sue can justify “no order” as a combined remedial and sanctionary response.
• Hearsay challenges must be properly framed: the decision illustrates the limited traction of late “hearsay” points in civil litigation, particularly where the evidence is used not for truth but to establish what was said and where authenticity is not disputed.

5. Complex Concepts Simplified

• “Costs follow the event”: usually, the losing party pays the winning party’s reasonable legal costs (CPR 44.2(2)(a)). The court can depart from this if justice requires.
• “No order as to costs”: each side bears its own costs. It is an exceptional outcome where one party “wins” but the court considers it unjust to award them costs.
• Provisional (or “preliminary”) view on costs: a non-binding indication given without hearing full argument, intended to help parties settle costs. It is not a final ruling and cannot justify refusing later submissions.
• Serious procedural irregularity (CPR 52.21(3)(b)): a significant procedural error in the lower court process (here, denying a party the chance to be heard on costs) that can justify setting aside the decision.
• Hearsay in civil cases: statements made outside court can generally be admitted, with the main question being weight rather than admissibility (Civil Evidence Act 1995).

6. Conclusion

Carl v Limbani [2026] EWCA Civ 856 confirms that when a court flags a costs view as provisional and anticipates further submissions, procedural fairness requires that those submissions be heard. A refusal to do so is a serious procedural irregularity warranting appellate intervention.

Yet the decision also illustrates that, even after setting aside a procedurally flawed costs order, an appellate court may reach the same “no order” outcome where binding findings show that the successful party’s dishonesty both helped trigger the litigation and merits a proportionate costs sanction. The case therefore sits at the intersection of two principles: robust protection of the right to be heard on costs, and a willingness to deny costs to a successful party whose conduct makes a costs award unjust.