It is not often that the world of legal costs attracts mainstream media attention. Even more unusual is seeing former Costs Judges being interviewed on international news channels. Yet that is exactly what happened following the costs judgment in Baroness Lawrence & Ors v Associated Newspapers Ltd [2026] EWHC 2207 (KB).
Following the judgment, I have been surprised by the number of people, most with no involvement in litigation and little interest in legal costs, who have asked me to explain the difference between costs awarded on the standard basis and those awarded on the indemnity basis. In simple terms, the distinction can have a significant impact on the amount one party ultimately has to pay to another.
When a court orders costs on the standard basis (the usual order), the successful party can recover only those costs that were reasonably incurred, reasonable in amount and proportionate to what was at stake in the litigation. If there is any doubt about whether costs should be allowed, that doubt is resolved in favour of the paying party.
An indemnity costs order is significantly more favourable to the successful party. The requirement of proportionality falls away, and any doubt is resolved in favour of the receiving party rather than the paying party. Where the court has ordered that costs be budgeted, an indemnity costs order also removes the protection normally provided by approved costs budgets.
The practical consequences can be enormous. In this case, Associated Newspapers informed the Court that it had incurred legal costs of more than £34 million. The difference between a standard basis assessment and an indemnity basis costs assessment could therefore amount to many millions of pounds.
The widespread interest in this issue follows the dismissal of claims brought by Baroness Lawrence, Elizabeth Hurley, Sir Elton John, David Furnish, Sir Simon Hughes, Prince Harry and Sadie Frost against Associated Newspapers. After dismissing the claims, Mr. Justice Nicklin ordered the claimants to pay Associated’s costs on the indemnity basis, concluding that the litigation had been conducted in a manner that was “well outside the norm” and “unreasonable to a high degree”.
Importantly, the Court stressed that the order was not made simply because the claimants lost the case. Losing parties are routinely ordered to pay the winner’s costs, but indemnity costs are reserved for exceptional cases. The judge held that it was the cumulative effect of the way the claims were investigated, pleaded, pursued and publicised that justified the more severe costs order.
So why an Indemnity Costs award?
The Court identified a number of factors which, taken together, took the case well outside the norm:
- The claims were exceptionally wide-ranging. The claimants alleged widespread unlawful information gathering by Associated over many years. The judge found that the litigation was deliberately framed on a very broad basis in the hope that extensive disclosure would uncover evidence supporting the individual claims.
- The claimants failed to reassess their case as the evidence developed. Following disclosure, witness evidence and court rulings, allegations that had become increasingly difficult to support were not significantly narrowed or abandoned.
- Serious allegations continued to be pursued without sufficient evidential support. The claims included allegations of phone hacking, live-call interception, bugging and other criminal or highly improper conduct. The Court concluded that many of these allegations ultimately lacked a proper evidential foundation.
- Allegations were not withdrawn when they should have been. The Court was critical of the fact that serious allegations were often left hanging over journalists and other individuals, even after they were no longer actively pursued.
- Reliance on the Gavin Burrows evidence. The judge regarded the continued reliance on allegations made by Mr. Burrows significant because the evidence had become heavily compromised and lacked independent corroboration.
- The “Leveson Lies” allegations. Allegations that senior Associated personnel had lied to the Leveson Inquiry were among the most serious made in the litigation. The Court found that these allegations expanded the case well beyond what was necessary to determine the individual claims.
- Changing and unpleaded allegations at trial. The Court criticised putting serious allegations to witnesses without proper pleading or evidential foundation, and noted that important aspects of the case shifted during the trial itself.
- The publicity surrounding the claims. The judge considered the highly public launch of the proceedings and the use of strong language alleging criminal conduct to be a relevant aggravating factor.
The Court’s overall conclusion was that the litigation had been pursued on an unjustifiably broad basis, had taken on some of the characteristics of a public inquiry, and had imposed a very substantial burden on both Associated Newspapers and the numerous individuals accused of wrongdoing.
This briefing note is intended as a summary of the decision and should not be relied upon as legal advice.
Related People
