Musst Holdings Limited v Astra Asset Management UK Limited & Anor [2026] EWHC 1599 (Ch)

[2026] EWHC 1599 (Ch)BL-2021-000680IN THE HIGH COURT OF JUSTICEBUSINESS AND PROPERTY COURTS OF ENGLAND AND WALESCHANCERY APPEALS (CH D)Venue Royal Courts of Justice, Rolls Building, Fetter Lane, London, EC4A 1NLDate Friday, 26 June 2026MR JUSTICE LEECH
B E T W E E N:MUSST HOLDINGS LIMITEDClaimantASTRA ASSET MANAGEMENT UK LIMITEDDefendantsASTRA ASSET MANAGEMENT LLPDefendant
MR PETER KNOX KC and MS KATHARINE BAILEY (instructed by Taylor Wessing LLP) appeared for ClaimantMR GEORGE SPALTON KC and MR JONATHAN MO (instructed by Payne Hicks Beach) appeared for DefendantsHearing Hearing date: 29 April 2026
APPROVED JUDGMENT(Costs as Damages)
[1]In this judgment, I adopt the defined terms and abbreviations which I used in the reserved judgment which I handed down following the second trial on 20 February 2026 (the “Second Trial”): see [2026] EWHC 357 (Ch). I will refer to that judgment as the “Second Trial Judgment” to distinguish it from the Trial Judgment handed down by Freedman J following the First Trial and references below to paragraphs are intended to be references to the Second Trial Judgment (unless I state otherwise). In that judgment, I held as follows:(1) Musst is entitled to share in all management fees and performance fees earned by Astra in relation to both Crown II and Crown III because both were Funds managed or advised by Astra for the Current Strategy and were, therefore, Eligible Investments for the purposes of clause 3.1 of the Octave Contract: see [176] and [283].(2) Astra is bound by an issue estoppel which prevents it from disputing that on 5 November 2014 Astra LLP assumed the obligation to pay the Revenue Share to Musst of any Eligible Investment which fell within clause 3.1 of the Octave Contract and that in July 2016 Astra UK assumed that obligation in place of Astra UK: see [313]. (In the alternative, I also adopted the findings made by Freedman J.)(3) In the alternative to (2), on 4 February 2015 the Octave Contract was novated with the agreement of all parties so that Astra LLP assumed the obligations of Octave in relation to Crown II and on 28 July 2016 it was novated again so that Astra UK assumed the obligations of Astra LLP under the Octave Contract in relation to Crown II as well as Crown I and 2B: see [332].(4) Astra had committed breaches of clause 4.5 of the Octave Contract by failing to pay its Revenue Share to Musst but had not committed breaches of clause 11.3 although Musst was permitted to apply for further relief if Astra failed to give adequate undertakings: see [346] to [349].(5) Astra negligently made false representations to Musst upon which Mr Siddiqi and Ms Galligan had relied and owed a duty of care to Musst for the truth or accuracy of those representations: see [350] to [392].(6) Astra was not liable to Musst for deliberate concealment. In particular, it was not liable for breach of the contractual duty of good faith, Astra did not conceal from Musst any fact relevant to Musst’s cause of action for the payment of fees and any claim by Musst in contract or tort which accrued before 29 April 2015 was barred by the Limitation Act 1980: see [404] to [417]. (2). Costs as Damages[2]Mr Siddiqi gave evidence that Musst only discovered that the representations made by Astra were untrue when it obtained disclosure of Dr Adler’s email dated 3 February 2016 in the Defamation Claim and that if it had been disclosed earlier, Musst would have tried to have all of its claims (i.e. all of the claims in relation to Crown I, Crown II, Crown III and 2B) heard together see [393] to [395]. This evidence was not challenged and I accepted it. However, the parties had agreed that a further hearing would be necessary to determine the final relief to which Musst was entitled and I left open the question whether Musst was entitled to recover the additional expenditure which it had incurred as damages for negligent misrepresentation. For ease of reference I repeat what I stated at [396] to [401]:
“396. Mr Siddiqi’s evidence (which was again unchallenged) was that Musst was advanced £1.7 million in funding for the Second Claim and will be obliged to pay £3.4 million and a second issue fee of £10,000 if successful. It was also his evidence that Musst has taken out an ATE policy under which it will pay a deferred premium of £557,760 if successful. His evidence was that Musst would have avoided these costs if it had been able to pursue the claims in relation to Crown II and Crown III in the First Claim. He accepted, however, that Musst would have to give credit for the additional fees which it would have incurred in the First Claim to the litigation funder and the additional premium which it would have had to pay to the ATE insurer. 397. This gives rise to a complex issue on which the parties made only brief written submissions. Mr Knox and Ms Bailey relied on McGregor on Damages 22nd ed (2024) at 22—017 to 22—027 where the editor sets out the cases in which a claimant who relies on an independent cause of action may be able to recover damages for additional costs which it has incurred in earlier proceedings against the same party. Mr Spalton and Mr Mo relied on the decision of the Supreme Court in Hirachand v Hirachand [2024]UKSC 43, [2025] AC 599 and the article “Costs as Damages” by Professor Louise Merrett published in (2009) 125 LQR 468 which Lord Richards JSC cited at [38] to [41] of that decision. 398. Berry v British Transport Commission [1962] QB 306is one of the cases upon which McGregor relies for the proposition that one party may recover extra costs as damages from the same party if there is a separate and independent cause of action arising out of a different breach of contract or wrong. For example, Devlin LJ found as follows in Berry in support of this proposition: “I find it difficult to see why the law should not now recognise one standard of costs as between litigants and another when those costs form a legitimate item of damage in a separate cause of action flowing from a different and additional wrong.” 399. In Hirachand v Hirachand, however, the Supreme Court held that a claimant who had made a claim for financial provision under the Inheritance (Provision for Dependants) Act 1975 could not recover an additional sum for the success fee which was payable under a CFA as part of the financial provision to be made for her by the Court. They did so because the success fee payable under the CFA was part of the claimant’s costs and was not recoverable under the CPR costs regime. 400. A brief analysis of these competing authorities demonstrates that the present case gives rise to a novel point (and one which is unlikely to arise very often). Thus, McGregor does not go so far as to state that a claimant is able recover costs as damages in the same action even if that party has an independent cause of action. On the other hand, Hirachand is not authority for the proposition that a claimant is not entitled to recover costs as damages in the same action if they have a separate and independent cause of action and those costs constitute the loss which flows naturally from the relevant breach of contract or wrong. 401. In my judgment, it is not appropriate for me to reach a final decision on this issue in the absence of full argument and since it appears to be common ground that there will have to be a consequential hearing to fix the amount of any sums owed to Musst and of any damages, I consider it appropriate to direct further written and oral submissions on this point if the parties wish to argue it. If Mr Siddiqi’s evidence is accurate, then the amount at stake could be very substantial. It may also be that this point is no longer a live one because I have only found Astra LLP and not Astra UK liable for negligent misrepresentation. But if they wish to take it, the parties should have the opportunity to present further argument on this issue.” “I find it difficult to see why the law should not now recognise one standard of costs as between litigants and another when those costs form a legitimate item of damage in a separate cause of action flowing from a different and additional wrong.”
[3]I also held that as a consequence of Astra’s misrepresentations Musst lost the opportunity to claim its Revenue Share for the period from 1 December 2014 to 19 April 2015. I expressed the view that this claim was likely to be limited to US $715.81 but I gave the parties permission to make further submissions on this issue: see [402]. B. The Second Consequentials Hearing[4]On 29 April 2026 the further hearing took place. I will refer to it as the “Second Consequentials Hearing” to distinguish it from the consequentials hearing before Freedman J after which he handed down the Consequentials Judgment: see [2]. I heard detailed argument on the scope of relief to which Musst was entitled for Astra’s failure to comply with its contractual obligations and, in particular, what orders the Court should make (if any) to compel Astra to disclose and permit inspection of documents and to give the Claimant access to inspect the Defendants’ books and records. I also heard detailed argument on the issue of costs as damages.[5]In the event, Musst reluctantly agreed (at my prompting) to accept the undertakings which Astra was prepared to offer by the end of the hearing and to adjourn the contractual issues to a further hearing to see whether Astra performed the undertakings which it was offering and, if so, whether this process would provide sufficient information to enable Musst to calculate the fees to which it was entitled under the Octave Contract. By a consent order dated 29 April 2026 (the “Consent Order”) the parties agreed to adjourn the following issues to a further consequential hearing (the “Third Consequentials Hearing”), namely, any further order upon the Claimant’s negligent misrepresentation claim, interest (statutory and contractual), costs and permission to appeal. I also granted permission to Musst to apply for further relief in relation to its contractual claims at that hearing, which has now been fixed for 30 June 2026.[6]Although I heard full argument on the scope of the relief to which Musst was entitled for breach of clauses 4.1 and 11.3 of the Octave Contract, it would not be appropriate for me to make any further findings at this stage on the question whether Astra has complied with those obligations and, if not, what (if any) further relief the Court should award. I will, if necessary, address these issues at the hearing on 30 June 2026. In this second judgment, I therefore address only the issue of costs as damages. II. Costs as Damages C. The Law (1). The Compensatory Principle[7]Mr Knox and Ms Bailey submitted that as a matter of general principle the victim of a tort is entitled to compensation to place them in the position in which they would have been if the tort had not been committed. They placed particular reliance on the statements of principle set out in CCC v Sheffield Teaching Hospitals NHS Foundation Trust [2026] UKSC 6, [2026] 2 WLR 385 where the Supreme Court overruled the long-standing decision in Croke v Wiseman [1982] 1 WLR 71, in which the Court of Appeal had held that awards of damages cannot be made for the “lost years” which reduce the life span of a young child as a result of clinical negligence.[8]Although the issue for the Supreme Court was very different, the reasoning of the Court was relevant to the issue which I had to decide because the members of the Supreme Court relied on what I will call the “compensatory principle” to overrule what appeared to have been an artificial or arbitrary rule limiting recovery. In their judgment, Lord Reed PSC and Lord Briggs JSC articulated that principle at [53] to [54] and [56] to [57]:
“53. It is trite law that, as a general principle, the damages to be awarded for loss caused by tort are compensatory. In broad terms, and subject to any relevant limitations on recovery (for example, such as may arise in some cases from the limited scope of the duty owed, or from the need for recoverable losses not to be too remote a consequence of the tort), the claimant is entitled to be placed in the position he or she would have been in if the tort had not been committed. A classic statement of this principle is that of Lord Blackburn in Livingstone v Rawyards Coal Co (1880) 5 App Cas 25, 39: “I do not think there is any difference of opinion as to its being a general rule that, where any injury is to be compensated by damages, in settling the sum of money to be given for reparation of damages you should as nearly as possible get at that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation.”
That general principle applies just as much where the claimant was injured as a young child as where the claimant was injured as an adult. The court cannot properly exclude the recovery of compensatory damages, as a matter of principle, on the ground of the claimant’s age. 54. A precise assessment of the loss suffered is not always possible. That was recognised by Lord Blackburn in Livingstone v Rawyards Coal Co when he spoke of getting “as nearly as possible” to the sum which would restore the claimant to the same position as he would have been in if he had not sustained the wrong. Similarly, Lord Shaw of Dunfermline spoke in Watson, Laidlaw & Co Ltd v Pott, Cassels & Williamson 1914 SC (HL) 18, 29-30 of restoration by way of compensation being “accomplished to a large extent by the exercise of a sound imagination and the practice of the broad axe”, and of the attempt of justice “to get back to the status quo ante in fact, or to reach imaginatively, by the process of compensation, a result in which the same principle is followed”.” 56. Difficulty of assessment is no reason for awarding no damages or merely nominal damages. As Bowen LJ said in Ratcliffe v Evans [1892] 2QB 524, 532-533:
“In all actions accordingly on the case where the damage actually done is the gist of the action, the character of the acts themselves which produce the damage, and the circumstances under which these acts are done, must regulate the degree of certainty and particularity with which the damage done ought to be stated and proved. As much certainty and particularity must be insisted on, both in pleading and proof of damage, as is reasonable, having regard to the circumstances and to the nature of the acts themselves by which the damage is done. To insist upon less would be to relax old and intelligible principles. To insist upon more would be the vainest pedantry.”
That principle was reaffirmed more recently in One Step (Support) Ltd v Morris-Garner [2019] AC 649, para 38 :
“Evidential difficulties in establishing the measure of loss are reflected in the degree of certainty with which the law requires damages to be proved.” 57. Accordingly, where it is clear that the claimant has suffered substantial loss—as the injured child undoubtedly has—but the evidence does not enable it to be precisely quantified, the court must assess damages as best it can on such evidence as is reasonably available. It has to do so, notwithstanding that the loss cannot be measured precisely or with certainty, if the compensatory principle is to be honoured.” “I do not think there is any difference of opinion as to its being a general rule that, where any injury is to be compensated by damages, in settling the sum of money to be given for reparation of damages you should as nearly as possible get at that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation.” “In all actions accordingly on the case where the damage actually done is the gist of the action, the character of the acts themselves which produce the damage, and the circumstances under which these acts are done, must regulate the degree of certainty and particularity with which the damage done ought to be stated and proved. As much certainty and particularity must be insisted on, both in pleading and proof of damage, as is reasonable, having regard to the circumstances and to the nature of the acts themselves by which the damage is done. To insist upon less would be to relax old and intelligible principles. To insist upon more would be the vainest pedantry.”
[9]Lord Stephens JSC also framed the compensatory principle very simply at [152] in the following way:
“The principle is that a claimant is entitled, as a matter of right and of justice, to have the court quantify their full loss notwithstanding forensic difficulty.”
I have found that Astra is liable for negligent misrepresentation and that Musst suffered damage as a consequence, namely, the additional costs or expenditure of funding two actions rather than one. Mr Knox and Ms Bailey submitted, therefore, that on the face of it there was no reason why it was not entitled to recover those additional costs or the additional expenditure notwithstanding any difficulties or quantification. They also submitted that nothing in Hirachand (above) or Professor Merrett’s article should lead to a different conclusion or prevent the Court applying the compensatory principle in the present case. (2). The Costs Principle[10]Mr Spalton and Mr Mo relied on a competing principle or rule of law which I will call the “costs principle” that the costs of bringing a claim are not recoverable as substantive damages in the same action or a subsequent action issued by the receiving party against the paying party for the purpose of recovering them. They placed particular reliance upon the following statements of principle set out by Lord Richards in Hirachand at [32] to [34]:
“32. In the context of civil proceedings generally, the liability (if any) of one party to pay some or all of the costs incurred in the proceedings by another party is treated as a separate matter from the substantive relief sought in the proceedings, and the costs of the proceedings will not be recoverable as part of any substantive relief. The Court of Appeal so held in Cockburn v Edwards (1881) 18 Ch D 449, in which Cotton LJ said at pp 463–64: “I am of opinion that the difference between solicitor and client costs and party and party costs in an action cannot be given by way of damages in the same action, the latter costs being all that the Plaintiff is entitled to. Costs in another action stand on quite a different footing.” 33. This principle applies notwithstanding that in many cases where damages are sought in tort or for breach of contract or breach of statutory duty, or where equitable compensation is claimed, the loss suffered by the claimant could properly be said to include the costs incurred in pursuing the claim. In Seavision Investment SA v Evennett (The Tiburon) [1992] 2 Lloyd's Rep 26, 34, Scott LJ said: “It is often the case that the costs of litigation would, if ordinary principles governing the recoverability of damages were applicable, represent recoverable damages. This is so not only in contract cases but also in tort cases. If A sues B on a negligence claim, whether in contract or in tort, the incurring by A of the costs of and incidental to the action will often, perhaps usually, be a foreseeable consequence of the negligent act. But it is, I believe, well settled that the recovery by A from B must be by way of an order for costs made in exercise of the section 51(1) discretionary power.” 34. The same is true where A seeks to obtain in a further action against B any costs in excess of those awarded in the first action. As it is put in McGregor on Damages , 22nd ed (2024) (“ McGregor ”), para 22–003: “It would make nonsense of the rules about costs if the successful party in an action who has been awarded costs could automatically claim in a further action by way of damages the amount by which the costs awarded to them fell short of the costs actually incurred by them”.” “I am of opinion that the difference between solicitor and client costs and party and party costs in an action cannot be given by way of damages in the same action, the latter costs being all that the Plaintiff is entitled to. Costs in another action stand on quite a different footing.” “It is often the case that the costs of litigation would, if ordinary principles governing the recoverability of damages were applicable, represent recoverable damages. This is so not only in contract cases but also in tort cases. If A sues B on a negligence claim, whether in contract or in tort, the incurring by A of the costs of and incidental to the action will often, perhaps usually, be a foreseeable consequence of the negligent act. But it is, I believe, well settled that the recovery by A from B must be by way of an order for costs made in exercise of the section 51(1) discretionary power.”
[11]As Lord Richards pointed out, the costs principle has often been invoked where there is a difference between the costs which a successful party has actually incurred and their assessed costs but it also applies where no order for costs has been made at all: see Quartz Hill Consolidated Gold Mining Co v Eyre (1883) 11 QBD 674. In Quartz Hill the Court of Appeal held that the costs which a company incurred in defending a winding up petition were not recoverable as damages in a subsequent action for malicious prosecution (although the Court also held that the claim was actionable without proof of special damage). (3). The Exception[12]There is an exception to the costs principle which Lord Richards described as of “uncertain limits”. The obvious situation in which the costs of an earlier action are recoverable is in a professional negligence claim brought by a former client against a firm of solicitors for defective drafting which exposed the client to unnecessary legal proceedings or, to give another example, a claim against solicitors and counsel for conducting a claim incompetently. For example, if solicitors and counsel fail to take an obvious point when defending legal proceedings and, as a consequence, the client has lost when they should have won, there is no dispute that the client is entitled to recover both their own costs and the costs which they were ordered to pay to the opposing party. There is an issue whether the client is entitled to be indemnified in full against the costs which they have had to pay (to which I will return). But there is no dispute that in principle the client is entitled to recover the costs of the litigation as damages.[13]Where a party to an earlier action brings a new claim against a third party (such as a firm of solicitors), there is no obvious policy reason why the Court should not apply the compensatory principle or why the costs principle is engaged to prevent recovery at all. The claim does not (or does not usually) involve a collateral attack on the earlier decision or on the award of costs or even the rules limiting the recovery of costs. Indeed, the claimant will usually rely on the adverse costs order to justify recovery. More difficult, however, are those cases in which the claimant and the defendant are the same in both actions, as in Quartz Hill or in Berry v British Transport Commission. In Berry the Court of Appeal distinguished Quartz Hill on the basis that the earlier proceedings involved criminal proceedings in which costs were not recoverable. In HirachandLord Richards adopted Professor Merrett’s explanation for the difference between the two cases at [38] to [41]:
“38. In her analysis of these exceptional authorities in Costs as Damages (2009) 125 LQR 468, Professor Louise Merrett summarised the present state of the law as follows, at p 480: “Provided, therefore, the claimant can rely on a separate cause of action, he can claim damages relating to the costs of foreign proceedings, or even earlier English proceedings, provided those proceedings were not subject to the ordinary rules for the recovery of costs in civil cases”
. The decision in Quartz Hill has long been criticised in cases where a second claim for malicious prosecution is brought: see Berry at p 338 (per Danckwerts LJ), p 317 (per Ormerod LJ) and pp 325–326 (per Devlin LJ) and McGregor at paras 22-018–22-022. However, the important point for present purposes is that the general irrecoverability of costs as part of a substantive award was (and remains) the state of the law when the 1975 Act was enacted and when the 1990 Act was amended to include section 58A(6).” 39. Professor Merrett persuasively argues that the restrictions on the recovery of costs between the same parties, whether recovery is sought in the proceedings in which the costs were incurred or in subsequent proceedings, is based on policy considerations, namely that such recovery would undermine the costs regime. 40. By contrast, in a case where A has, as a result of the actionable wrong of B, incurred costs in proceedings with C, these policy considerations do not in principle apply so as to prevent A from recovering such costs as damages from B. Although there is debate about the amount of such costs that may be recovered (see McGregor at paras 22-003–22-012 and the cases there cited), the principle is well established: see, for example, British Racing Drivers’ Club Ltd v Hextall Erskine & Co [1996]3 All ER 667. 41. Thus, as Professor Merrett put it, at p 468, “The basic rule of English law is that, unless the claimant can rely on a separate cause of action, litigation costs can only be recovered as costs, and not as damages”.” (4). Merrett: Costs as Damages[14]In her article “Costs as Damages” (2009) 125 LQR 468, Professor Louise Merrett argued that the justification for the costs principle is one of policy, that it is the purpose of the costs regime to determine what are fair and recoverable costs and there is no other reason to permit a party to litigation to recover more. She stated that policy justification in the following terms at 474-5 (footnotes omitted):
“It can be seen that the policy justification for the rule has two limbs. First, the rules on the assessment of costs reflect the fact that there are good policy reasons for encouraging parties to exercise restraint which is to the benefit of all those who need to resort to litigation; and secondly, it would undermine the costs rules and, therefore, the policy behind those rules, if the party claiming costs in an assessment could seek to recover any unrecovered costs as damages.”
[15]Professor Merrett then explored the exception in some detail before concluding that a claimant must satisfy two necessary conditions before they may recover costs as damages: first, the claimant must have a separate cause of action and, secondly, costs could not have been awarded in the earlier proceedings. In support of her thesis, Professor Merrett cited Berry (above) and also the decision of the Court of Appeal in Union Discount Co Ltd v Zoller [2001] EWCA Civ 1755, [2002] 1 WLR 1517 (to which Mr Spalton also took me). In that case, the claimant sought to recover damages for the defendant’s breach of an exclusive jurisdiction clause providing for determination in the English Courts by commencing an action in the US Courts. Professor Merrett expressed her views as follows at 478-9 (again footnotes omitted): “However, the scope of this exception is not entirely clear. The Court of Appeal in Zoller identified two reasons why the claim should succeed:(1) the US court could not have awarded costs, and(2) the existence of an independent and separate cause of action (namely, breach of the jurisdiction agreement). But it is unclear whether both factors need to be present, or whether each is sufficient to justify a departure from the basic rule. Is it enough that the claimant can rely on a separate cause of action? What if proceedings had been commenced in a foreign jurisdiction where costs had been awarded? Applying the two-stage justification considered above, a claim for damages should still be available because there is no danger of undermining the English costs regime. Damages should also be possible even if the earlier proceedings were in England, provided costs could not have been awarded in the earlier English proceedings. This is illustrated by the decision in Berry v British Transport Commission. The claimant claimed damages for malicious prosecution. The damages claimed were the costs of the criminal proceedings less the small amount of costs already awarded. The question was whether the rule in Quartz Hill applied. Both cases involved claims for malicious prosecution, the only difference being that the claimant in Berry was trying to recover costs of earlier criminal rather than civil proceedings between the same parties. According to the Court of Appeal, that made all the difference. Devlin L.J. said: "[The basic rule's] usefulness, such as it is, is confined to civil cases. Its effect is to set up an artificial or conventional measure of damage when the loss consists of expenditure on litigation. This conventional measure avoids the danger … that a party might otherwise in every sort of case bring a second set of proceedings against the same opponent for his extra costs. But that is not a danger that can arise in relation to criminal costs except in the one case of malicious prosecution. The conventional measure is also useful as one way, though not in my opinion the best way, of keeping down the costs of litigation." As this passage makes clear, the two-stage policy justification for the basic rule does not prevent a claim in the situation in Berry for two reasons. First, the fact that costs cannot be recovered in criminal cases is not to discourage lavish spending on proceedings, a policy which would be undermined if the claimant could bring a claim for damages in relation to unrecovered costs. Secondly, there is not the risk that every party who does not get his costs will try to bring a claim in damages; such a claim can only be made where the facts support a claim for malicious prosecution, i.e. where there is a separate cause of action that the claimant can rely on. Provided, therefore, the claimant can rely on a separate cause of action, he can claim damages relating to the costs of foreign proceedings, or even earlier English proceedings, provided those proceedings were not subject to the ordinary rules for the recovery of costs in civil cases.” "[The basic rule's] usefulness, such as it is, is confined to civil cases. Its effect is to set up an artificial or conventional measure of damage when the loss consists of expenditure on litigation. This conventional measure avoids the danger … that a party might otherwise in every sort of case bring a second set of proceedings against the same opponent for his extra costs. But that is not a danger that can arise in relation to criminal costs except in the one case of malicious prosecution. The conventional measure is also useful as one way, though not in my opinion the best way, of keeping down the costs of litigation."[16]Although the Court of Appeal did not state in terms that both conditions had to be satisfied before a claimant could recover damages, the reasoning of Schiemann LJ (who delivered the judgment of the Court) clearly supports Professor Merrett’s thesis. This is apparent from two passages in particular. After citing Berry (and the passage set out above), Schiemann LJ stated as follows at [11] and [12] before identifying the unusual features of the case at [18]: “11. From the passages which we have emphasised it is clear that Devlin LJ considered that, in a case such as the present, where there was in the earlier action no prospect of obtaining costs although there had been no fault on behalf of the successful party, there was no policy inhibition on granting him the amount of those costs as damages in a later action if he had available to him an appropriate cause of action. 12. Further, Devlin LJ was clearly unhappy with the reasoning which had led to the rule in English civil cases even where it did apply. In our judgment, just as a malicious prosecutor should not be able to rely for his own benefit on any policy consideration which is designed to keep down the cost of litigation, so a person who starts totally unnecessary proceedings in a foreign jurisdiction in breach of an exclusive jurisdiction clause should not be able to rely on such policy considerations.” “18. It is important to emphasise that in the present case the following unusual features are all present:(i) The costs which the claimant seeks to recover in the English proceedings were incurred by him when he was a defendant in foreign proceedings brought by the defendant in the English proceedings.(ii) The claimant in the foreign proceedings brought those proceedings in breach of an express term, the exclusive jurisdiction clause, which, it is assumed for present purposes, has the effect of entitling the English claimant to damages for its breach.(iii) The rules of the foreign forum only permitted recovery of costs in exceptional circumstances.(iv) The foreign court made no adjudication as to costs.” (5). ATE Premiums[17]It was common ground that ATE premiums are not recoverable under the CPR costs regime. Mr Spalton and Mr Mo submitted that this was because of section 58C(1) of the Courts and Legal Services Act 1990 (the “1990 Act”), which provides as follows:
“58C Recovery of insurance premiums by way of costs (1) A costs order made in favour of a party to proceedings who has taken out a costs insurance policy may not include provision requiring the payment of an amount in respect of all or part of the premium of the policy, unless such provision is permitted by regulations under subsection.”
[18]Section 58C(5) defines the term “costs insurance policy” as “a policy insuring against the risk of the party incurring a liability in those proceedings”. Section 58C(2) also provides that the Lord Chancellor may by regulations provide for the payment of premiums relating to clinical negligence claims provided that those regulations meet certain criteria. Mr Spalton and Mr submitted that the ATE policy which Musst took out was a “costs insurance policy” and that none of the exceptions permitted by section 58C (or any regulations made under it) apply. Mr Knox and Ms Bailey did not submit otherwise and I accept the submission made on behalf of Astra.[19]Section 58C(1) (above) is in a very similar form to section 58A(6) of the 1990 Act which provides that a costs order may not include provision for the payment of a success fee under a CFA. In Hirachand the Supreme Court rejected an argument that the prohibition in section 58A(6) only applied if provision for the payment of a success fee was included in a costs[20]As Lord Richards pointed out there is no statutory definition of “costs order” for the purposes of section 58A(6): see [78]. He also described the effect of section 58A(6) in very simple terms at [85]:
“The position is simply that the judge cannot in determining the appropriate relief include directly or indirectly any allowance for the success fee.”
There is no definition of “costs order” for the purpose of section 58C(1) either. Furthermore, I can see no reason to distinguish between the meaning or application of the same term in both sections. I therefore adopt and apply the reasoning of Lord Richards to the term “costs order” in section 58C(1). (6). Litigation Funding Agreements[21]Litigation funding agreements (“LFAs”) are more problematic. Section 58AA of the 1990 Act regulates damages-based agreements (“DBAs”). Section 58B was intended to regulate LFAs but it has never been brought into force. In R (PACCAR Inc) v Competition Appeal Tribunal[2023] UKSC 28, [2023] 1 WLR 2594 the Supreme Court held by a majority that LFAs fell within the definition of DBAs and were also regulated by section 58AA. It would not be right for me to express a view on the question whether the relevant LFA or LFAs are also DBAs for the purpose of section 58AA because the agreement or agreements were not in evidence and neither party argued this point or relied on the section.[22]But in any event, neither section 58AA nor section 58B contains an equivalent provision to section 58A(6) or section 58C(1) prohibiting the recovery as costs of a commission payment or fees paid under an LFA. It was common ground that the sums paid by a litigating party to a funder under an LFA are not recoverable as costs. But the important issue which arises starkly in the present case is why. Are they litigation costs but excluded or prohibited by the costs regime imposed by the CPR and which the Court must apply or are they not litigation costs at all? If they should not be characterised as litigation costs but expenditure which falls totally outside the costs regime, then the costs principle does not apply to prevent recovery and the Court should apply the compensatory principle. On that hypothesis, the question whether the funder’s fees fall within the exception to the costs principle simply does not arise at all.[23]CPR Part 44 contains no exhaustive definition of “costs” although they are expressed to include “fees, charges, disbursements, expenses, remuneration, fee or reward allowed to a litigant in person under rule 46.5”: see CPR Part 44.1. Mr Spalton drew my attention to Essar Oilfields Services Ltd v Norscot Rig Management PVT Ltd [2016] EWHC 2361 (Comm), [2017] Bus LR 277 in which His Honour Judge Waksman QC (as he then was) concluded that the costs of obtaining litigation funding fell within the meaning of “other costs” in section 59(1)(c) of the Arbitration Act 1990: see [68] to [70]. However, the judge rejected the argument that the section should be construed consistently with the CPR and considered that the two contexts were very different. He stated as follows at [51]:
“The difference between these contexts is made abundantly clear where section 59(1)(c) defines the costs of arbitration as including, not just legal costs, but “other costs” too. There is no parallel provision in the CPR. The CPR 's own definition of costs in rule 44.1 is clearly more limited. It is true that the arbitrator did refer in the Award and the addendum to CPR Pt 44 , but it is plain that this was essentially because of the provisions dealing with standard and indemnity costs and the different bases of assessments, as opposed to going to the meaning of “other costs”
. Accordingly, the approach taken by the courts under the CPR as to what can and cannot be awarded by way of costs is of little direct relevance here. The relevant context is thus the Act itself and the wide scope of procedural powers conferred upon the arbitrator.”[24]Mr Spalton and Mr Mo also drew my attention to Nosworthy v Royal Bournemouth & Christchurch Hospitals NHS Foundation Trust [2020] 4 WLUK 387 where Master Brown sitting as a member of the Senior Costs Office held that interest payable on disbursements is not recoverable. One reason which the judge gave for this was that the costs of funding litigation are not recoverable as a matter of principle stating as follows at [25]:
“It is clear that in general the costs of funding are not recoverable as an item of costs in a Bill of Costs: see Hunt v R.M. Douglas (Roofing) Ltd. [1987] 11 WLUK 221 in which Purchas LJ held "there is no duty imposed upon the court to award party and party costs on an indemnity basis and by established practice and custom funding costs have never been included in the category of expenses, costs or disbursements envisaged by the statute and RSC O.62". As Mr. McDonald put it, the cost of funding litigation is not recoverable in and of itself (referring to the decision in Hunt cited above for the pre-CPR position and F&C Investments (Holdings) Limited v Barthelemy and Anor [2012] EWCA Civ 843 for the post CPR position).”
[25]Neither party was able to cite any further English authority on the question whether sums payable by a receiving party under an LFA should be characterised as litigation costs for the purposes of the CPR and the related but wider question whether they are recoverable as damages at all. In Hunt Leather Pty Ltd v Transport for NSW [2025] HCA 53, however, the High Court of Australia considered these issues and upheld the decision of the Court of Appeal of New South Wales that a “commission” payable under an LFA was not recoverable as damages in a group action for private nuisance. In their judgment, Gordon and Edelman JJ (with whom the other members of the Court agreed) set out the context for their decision at [166] and [167] (footnotes omitted):
“166. A further question that arose before the trial judge, and which was the subject of a separate judgment, was whether group members to whom TfNSW was liable for private nuisance, and who had entered into a litigation funding agreement in connection with the proceedings, were entitled to claim as damages their reasonable litigation funding costs without needing to show: (i) that the nuisance of TfNSW rendered them impecunious so as to require litigation funding; (ii) that they would have pursued their claims against TfNSW without litigation funding if they had the means to do so; or (iii) that they negotiated over the terms of the litigation funding agreement. It seems that this issue had never been decided prior to this case, although related claims have been held to be reasonably arguable. Both the trial judge and the Court of Appeal held, more generally, that litigation funding costs were not recoverable as damages. That conclusion was correct. 167. The context in which this question arose was the litigation funding agreement entered into by various group members, by which the funder, International Litigation Partners No 16 Pte Ltd, undertook to pay all reasonable legal costs and disbursements associated with the litigation, to meet any adverse costs orders and provide security for costs, and to provide litigation management services. There was evidence that without the litigation funding agreement Hunt Leather and Ancio Investments would not have the financial resources to pay the legal costs of the proceedings or to take on the risk of adverse costs orders. In exchange for the funder's undertakings, the group members agreed to reimburse the funder for its costs and to pay a funding commission that ranged between 25% and 40% of any settlement or judgment sum. In the case of Hunt Leather and Ancio Investments, the commission was 40%. The amount of the litigation funding costs claimed by Hunt Leather and Ancio Investments as damages was that 40% commission.”
[26]Like Musst, the claimants in Hunt Leather submitted that they had suffered a recoverable loss by incurring the 40% commission as a cost of vindicating their claims. Some of the claimants also contended that the commission was a loss which they would not have suffered but for the nuisance committed by the tortfeasor (as I have found in relation to Musst). Even so, this claim was rejected for the following reasons (again footnotes omitted):
“169. Even if all the submissions above by Hunt Leather and Ancio Investments were accepted, the funding commission still would not be recoverable as damages because any such loss was not "the kind of damage ... which [TfNSW was] under a duty to prevent". The tort of private nuisance, as a tort against land, permits recovery of damages which reflect the decreased value of land and any losses that are "consequential upon the injury to the land". The 40% commission is neither an injury to land nor a loss that is consequential upon the injury to land. As the Court of Appeal rightly said, the funding commission is not "a consequence of any actionable nuisance". 170. Many of the reasons given by the Court of Appeal for rejecting this part of the cross-appeal by Hunt Leather and Ancio Investments reinforce the basic point that the funding commission was not a consequence of an injury to land: that different damages would be payable for the same private nuisance to different plaintiffs depending upon the voluntary arrangements that each entered into with a litigation funder; that an analogy can be drawn with the exclusion from damages of irrecoverable legal costs incurred in the same litigation (and a similar analogy can also be drawn with the exclusion from damages of additional expenses to manage a damages award where the intellectual abilities of the plaintiff were not impaired by the tort); and that the entitlement of the litigation funder to its commission only crystallises upon settlement or entry of judgment.”
[27]Mr Spalton and Mr Mo also took me to the decision of the Court of Appeal of New South Wales below, which is reported at [2024] NSWCA 227, (2024) 115 NSWLR 489. The Court of Appeal (Bell CJ, Leeming and Mitchelmore JJA) gave a single judgment in which they gave five reasons why the fee or commission payable under the LFA was not recoverable. The first of those reasons was that the fee or commission was a voluntary payment and not to be regarded as the foreseeable loss caused by Transport for NSW’s nuisance. They stated as follows at [194] to [198]:
“194. First, there can be no doubt that the entry into the funding agreements was a voluntary act by some group members. Moreover, the premise of common question 10 was that no assumption was to be made that the group member was impecunious or that any impecuniosity was brought about by the tortious conduct of the defendant, thereby serving to emphasise the voluntariness of the group member’s decision. Their decisions to do so, or to choose not to do so, might be attended by very different considerations. A supermarket which is a franchisee and a supermarket which is a branch of a major listed Australian company might both be affected in similar ways by the construction of the Sydney Light Rail, but each might have quite different approaches as to how they would approach the decision to enter into the funding agreement. 195. Those and similar considerations suggest that there are difficulties in treating the cost of the funding agreement as a component of the damages for which TfNSW would be liable. It seems decidedly odd that TfNSW would be liable for 40% more to a franchisee who entered into a funding agreement, than to a public company which operated a similarly sized and similarly affected supermarket next door. The group members who entered into funding agreements have chosen to bargain away the risk of being exposed to an adverse costs order and a liability to pay security for costs, as explained by the primary judge: 109. What the plaintiffs have really done is enter into a bargain with a third party, by which they agreed to give the third party an amount of money in return for the third party taking the risk on the litigation. The loss arises from the plaintiffs’ own conduct or decision to pursue the litigation on a risk free basis. Without reference to the defendant, the plaintiffs have increased “their loss” by 40% so as to ensure that they did not bear any costs associated with the litigation. They have not otherwise reduced their loss of profits flowing from the defendant’s conduct. They have agreed to “take a loss” on the amount they actually recover from the defendant by way of actual losses caused by the defendant, so as to enable them to not only pursue the litigation but to do so on a risk free basis. 110. The funder’s commission is different from litigation finance provide by a third party to a plaintiff to enable the plaintiff to pay its legal costs. The funder’s commission represents the funder’s return on its investment. The funder did not lend money to the plaintiffs. It agreed to pay the plaintiffs’ expenses in return for a slice of the damages. 111. In those circumstances, the causal chain between the defendant’s conduct and the loss has been broken. The plaintiffs’ conduct in entering into such an agreement was an intervening act which broke the causal chain between the tortious conduct and the so called loss. I do not accept that the defendant caused the claimed loss, being the funder’s commission. 197. We respectfully agree, although rather than describing the plaintiffs’ decision as being to increase “their loss” by 40%, we would say that they have promised to pay 40% of the damages to which they would otherwise have been entitled in return for an indemnity as to the costs of the litigation (including the potential liability for adverse costs orders and orders for security for costs). But we cannot accept the cross-appellants’ submission that the “real benefit” of the funding agreement was the prosecution of the proceedings. The “real benefit” was an indemnity for the certainty of the incurring of legal costs, and the practical certainty of a liability to provide security for costs, and the potential liability for an adverse costs order, all of which were incidents of the lead plaintiffs’ decision to prosecute the proceedings, and which were the quid pro quo for the funder’s “commission”. 198. In those circumstances, the litigation funder’s fee is not to be regarded as a foreseeable loss caused by the defendant’s nuisance, but instead as the voluntary act of the particular plaintiff.”
[28]Secondly, the Court placed reliance on the fact that if the funder’s commission of 40% was recoverable, there would be every incentive for every group member, large or small, to enter into such an agreement and that there would be no incentive to bargain for a smaller fee. They stated that:
“We fail to see how that would serve any of the ends to which the legal system is directed.”
Thirdly, the Court relied on the fact that the benefit of the funding agreement to the group members was in meeting their costs but that if the commission was characterised as a cost or expense of the litigation, it was not recoverable at all:
“202. Thirdly, at least in large measure, the benefit of the funding agreement was in meeting the group members’ costs and any liability for an adverse costs order or an order for security for costs. This suggests that if the quid pro quo provided by the group member – namely, the commission – were recoverable at all, it would be recoverable as a cost or expense of litigation, rather than as a component of damages. But if that is the correct characterisation, it presents an obstacle to the claim for the same amount as damages, in accordance with the principle in Anderson v Bowles [1951] HCA 61; (1951) 84 CLR 310 at 323; [1951] HCA 61: The legislature having determined that costs shall not be recoverable in proceedings of the character now in question, it would be contrary to the principles which these cases exemplify if they were included in the damages and thus were made recoverable by a side wind. 203. A Full Court of the Federal Court said in Gray v Sirtex Medical Ltd (2011) 193 FCR 1; [2011] FCAFC 40 at [15]: A distinction has long been drawn between damages and legal costs, such that a successful plaintiff cannot recover its costs of the proceedings from the defendant as damages, even though the defendant’s wrongful act caused the plaintiff to incur those costs: Cockburn v Edwards (1881) 18 Ch D 449 per Jessel MR at 459, per Brett LJ at 462 and per Cotton LJ at 463; Ross v Caunters [1980] 1 Ch 297 at 324E-G: Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358 at 365F-366B; Seavision Investments S.A. v Evennett & Clarkson Puckle Ltd (The “Tiburon”) [1992] 2 Lloyd’s Rep 26 at 34; Queanbeyan Leagues Club Ltd v Poldune Pty Ltd [2000] NSWSC 1100 at [45] and [46]; McGregor on Damages, 18th ed (Sweet & Maxwell, London, 2009) at [17-003]. A plaintiff’s ability to recover its costs of the proceedings from a defendant depends instead upon the exercise of a judicial discretion; and the amount (if any) that the plaintiff recovers is not assessed in the same way as damages, but “taxed” according to the applicable rules of Court. As Jessel MR put it in Cockburn at 459: ... it is not according to law to give to a party by way of damages the costs as between solicitor and client of the litigation in which the damages are recovered. The law gives a successful litigant his costs as between party and party, and he cannot be said to sustain damage by not getting them as between solicitor and client. To substantially the same effect is the rule stated by Devlin LJ in Berry v British Transport Commission [1962] 1 QB 306 at 328 that expenditure on litigation is not recoverable loss.”
The legislature having determined that costs shall not be recoverable in proceedings of the character now in question, it would be contrary to the principles which these cases exemplify if they were included in the damages and thus were made recoverable by a side wind. A distinction has long been drawn between damages and legal costs, such that a successful plaintiff cannot recover its costs of the proceedings from the defendant as damages, even though the defendant’s wrongful act caused the plaintiff to incur those costs: Cockburn v Edwards (1881) 18 Ch D 449 per Jessel MR at 459, per Brett LJ at 462 and per Cotton LJ at 463; Ross v Caunters [1980] 1 Ch 297 at 324E-G: Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358 at 365F-366B; Seavision Investments S.A. v Evennett & Clarkson Puckle Ltd (The “Tiburon”) [1992] 2 Lloyd’s Rep 26 at 34; Queanbeyan Leagues Club Ltd v Poldune Pty Ltd [2000] NSWSC 1100 at [45] and [46]; McGregor on Damages, 18th ed (Sweet & Maxwell, London, 2009) at [17-003]. A plaintiff’s ability to recover its costs of the proceedings from a defendant depends instead upon the exercise of a judicial discretion; and the amount (if any) that the plaintiff recovers is not assessed in the same way as damages, but “taxed” according to the applicable rules of Court. As Jessel MR put it in Cockburn at 459: ... it is not according to law to give to a party by way of damages the costs as between solicitor and client of the litigation in which the damages are recovered. The law gives a successful litigant his costs as between party and party, and he cannot be said to sustain damage by not getting them as between solicitor and client.[29]Fourthly, the Court relied on the fact that the funder’s commission only accrued upon the entry of judgment (or alternatively settlement), which confirmed the Court’s view that the funder’s fee or commission was properly characterised as a litigation cost:
“Fourthly, the entitlement of the litigation funder to its commission only accrued upon the entry of a judgment (or alternatively settlement). That not only tends to confirm the force of the previous point but also presents a conceptual difficulty, if not a paradox, identified by the primary judge at [67]: At the time of the assessment of damages and entry of judgment, the plaintiffs had not paid any amount to the litigation funder. Indeed, they did not become liable to pay any amount to the litigation funder at the time that the nuisance occurred. Whilst liability to pay might be viewed as a loss capable of being subject to an award of damages, it is a feature of this aspect of the claim that the liability to pay (which is said to be the loss) did not crystalise until after a judgment was otherwise entered in favour of the plaintiffs (whether by Court determination or agreement) for a sum of money. The plaintiffs only become liable to pay the funder’s commission after they become entitled to receive a sum from the defendant by way of a judgment (either determined or by consent). The plaintiffs are thus seeking to recover “a loss” which does not crystalise until after the defendant has been ordered, or has agreed, to compensate the plaintiffs in respect of their economic loss. It is a loss which the plaintiffs are not even obliged to tell the defendant about until a time of their choosing.”
At the time of the assessment of damages and entry of judgment, the plaintiffs had not paid any amount to the litigation funder. Indeed, they did not become liable to pay any amount to the litigation funder at the time that the nuisance occurred. Whilst liability to pay might be viewed as a loss capable of being subject to an award of damages, it is a feature of this aspect of the claim that the liability to pay (which is said to be the loss) did not crystalise until after a judgment was otherwise entered in favour of the plaintiffs (whether by Court determination or agreement) for a sum of money. The plaintiffs only become liable to pay the funder’s commission after they become entitled to receive a sum from the defendant by way of a judgment (either determined or by consent).[30]In that context the Court also rejected the argument that reasonable foreseeability was a sufficient touchstone for liability: see [207]. Fifthly, and finally, the Court relied on the fact that there was no authority to support the recovery of the funder’s fee or commission (apart from a single decision in which the judge had refused to strike out the claim): see [208]. They summarised their conclusion at [209]:
“For those reasons, the funder’s commission is to be regarded as the incurring of a liability by the group members’ separate voluntary decisions, rather than a consequence of any actionable nuisance. If that be wrong, then at least in the premises of common question 10, which is that it is unnecessary to establish that the nuisance rendered a group member impecunious, we would not regard the scope of the defendant’s liability to extend to the funder’s commission.”
D. The Facts (1). The ATE Premiums[31]Mr Siddiqi’s evidence was that Musst received a payment of approximately £3.95 million from Astra when the Trial Judgment and the Consequentials Judgment were upheld by the Court of Appeal and that £475,000 of this sum was paid to its insurer. He also gave evidence that Musst “will owe a deferred and contingent premium to the insurers on a win” in relation to the claims which I have decided in its favour in the Second Trial Judgment. The ATE insurance policy was not in evidence and Musst did not seek permission to rely on it for the Second Consequentials Hearing. But as I say, Mr Knox and Ms Bailey did not challenge the application of section 58C(1). (2). Litigation Funding[32]It was also Mr Siddiqi’s evidence that Musst paid approximately £2.2 million to its litigation funders out of the payment of £3.95 million made by Astra, that the funder (whom I assume to be the same) advanced £1.7 million to fund the second action up to the Second Trial and that Musst was contractually obliged to pay a “2x multiple return” or £3.4 million if successful at trial. Again, the LFA was not in evidence before me and Musst did not seek permission to rely on it for the Second Consequentials Hearing. Nevertheless, I understood Mr Siddiqi’s evidence to be that the return was only payable if Musst was successful at trial. Mr Spalton certainly submitted that this was the position (see below) and Mr Knox did not suggest otherwise. As I say, Mr Knox and Ms Bailey referred to the return payable to the litigation funder which Mr Siddiqi described in evidence as a “fee” in their Skeleton Argument and I will do the same. (3). Other Costs[33]Finally, Mr Siddiqi gave evidence that Musst incurred a second issue fee of £10,000. He did not state the total amount of legal costs which Musst had incurred to its solicitors and counsel up to and including the Second Trial. But he gave evidence that Musst paid approximately £1.2 million to its legal representatives for the costs of the first claim. I assume that this included all of the legal costs which Musst incurred up to the handing down of the CA Judgment. These costs were set out in a letter dated 23 April 2023 from Taylor Wessing LLP to Stewarts Law.[34]Mr Siddiqi’s evidence on all of these heads of loss was set out in his witness statement for trial, it was not challenged and I have already accepted it in the Second Trial Judgment. Further, although the total amount of Musst’s Revenue Share remains in dispute, Astra agreed to pay US $1.86 million into court before the Second Consequentials Hearing (and, indeed, has now done so). Unless Musst recovers at least twice that sum, it stands to recover almost nothing itself after paying the ATE premiums and the litigation funder.[35]As things currently stand, therefore, the party who is entitled to receive most (if not all) of Musst’s Revenue Share under the Octave Contract is an unknown litigation funder. By comparison, the claimant in Hirachand was awarded reasonable provision of £138,918 out of the estate but she was liable to pay an uplift of £48,175 to her solicitors under the CFA and the funder in Hunt Leather was entitled to a 40% commission. On the other hand, if the Court permits recovery of the fee payable under the LFA, this will have the effect of requiring Astra to pay damages of two or, possibly, three times the total amount of Musst’s Revenue Share. E. Application (1). Causation[36]I have found on the facts that if Astra had disclosed the contents of Dr Adler’s email dated 3 February 2016 or Astra had complied with its obligations under clause 4.1 of the Octave Contract, then Musst would have issued a single claim in relation to all three managed accounts: see the Second Trial Judgment, [394]. I also recorded Mr Siddiqi’s unchallenged evidence that Musst would have avoided paying two ATE premiums and two separate fees to the litigation funder, if it had been able to pursue the claims relating to Crown II and Crown III in the First Claim: see [396]. Given that this evidence was unchallenged, I find on the facts that but for Astra’s negligent misrepresentation, Musst would have avoided paying two ATE premiums and two LFA fees. (2). Uncertainty[37]Musst claims as damages the difference between the following:(a) (A) the ATE premium which it paid to the ATE insurer in the First Claim (1) and the premium which it is liable to pay in the Second Claim (2) plus the fee which it paid to the litigation funder in the First Claim (3) and the fee which it is now liable to pay to the funder in the Second Claim (4) plus the second issue fee of £10,000 (5) less(b) (B) the ATE premium (1) plus the fee of litigation funder (2) which it would have paid on the assumption that all of the claims had been heard and tried together.[38]In formulating the claim I have not included the additional legal costs which Musst no doubt incurred by bringing the First Claim and the Second Claim separately. Although Musst’s pleaded case extended to the “extra cost of bringing these second proceedings” Mr Siddiqi only gave evidence about the second issue fee of £10,000 and Mr Knox and Ms Bailey did not address separately the additional costs of solicitors, counsel and experts or seek permission to call further evidence to prove those costs. In my analysis of Musst’s claim, therefore, I focus primarily on the ATE premiums, the funder’s fees and the second issue fee of £10,000 although I return to the question of legal fees at the end of this judgment.[39]Whilst the precise quantification of the differential(a) (A) less(b) (B) might be a complicated exercise and would probably require evidence of fact from the ATE insurer and the litigation funder (and possibly expert evidence), I do not consider that it would be impossible to quantify that differential. Nor do I consider that such an exercise would engage the difficult issues which arise in complex personal injury claims such as CCC v Sheffield Teaching Hospitals NHS Foundation Trust (above). The Business and Property Courts are used to assessing damages by reference to complex counterfactuals. I take the view that the impossibility or difficulty of quantification is not an issue in the present case. (3). The ATE Premiums[40]In my judgment, the ATE premiums which Musst has already paid to its insurers in this action are not recoverable as damages in the present action. I have reached this conclusion for two reasons. First, I am satisfied that section 58C(1) prohibits recovery of the ATE premiums as damages for the reasons which Lord Richards gave in Hirachand and that it makes no difference whether Musst claims the premiums as damages or costs.[41]Secondly, I am satisfied that the exception to the costs principle does not apply in the present case. In my judgment, both conditions which Professor Merrett identified in her article, must be satisfied before the exception is available, namely, that the claimant can rely on a separate cause of action and that the earlier proceedings are not subject to the ordinary rules for the recovery of costs in civil cases. In the present case, the first condition is satisfied but not the second. Both the First Claim and the Second Claim are subject to the ordinary rules for the recovery of costs.[42]I accept that in Hirachand it was unnecessary for the Supreme Court to decide whether both conditions had to be satisfied because the claimant was not relying on an independent cause of action. However, Lord Richards set out and approved Professor Merrett’s final conclusion that both conditions were necessary for recovery: see [38] (above). Moreover, that conclusion is clearly supported by the reasoning of the Court of Appeal in Union Discount Co Ltd v Zoller. Finally, the policy behind such a rule is that to permit recovery in cases to which ordinary rules of costs apply would be to undermine the costs regime. Indeed, it was this reason of policy which led Lord Richards to construe section 58A(6) as widely as he did. (4). Litigation Funding[43]The same reasoning necessarily applies to the fees which were (or are) payable by Musst to its litigation funder if those fees are properly characterised as litigation costs which are irrecoverable under the existing costs regime and are not characterised as separate and independent losses for which Musst has an independent cause of action in the tort of negligent misrepresentation. If the funder’s fees are not properly characterised as litigation costs but as separate and independent losses, then the costs principle does not apply and the compensatory principle should lead to recovery (however novel the claim).[44]Mr Spalton and Mr Mo submitted that recovery in the present case would be inconsistent with the costs regime which the Court enforces to control costs. They also submitted that it is inconsistent with the wider principles which apply to the assessment of damages in tort for the following reasons:
“52.1. Litigation funding arrangements are voluntary actions between parties to a funding agreement. The constituent terms, including the level of the funder’s fee, represent a commercial bargain. The client agrees to pay the funder’s fee in exchange for ensuring that they do not bear any costs associated with the litigation—that is the benefit of the client’s bargain. From the funder’s perspective, the funder’s fee is a return on its investment. As the HCA noted, the funding arrangements, precisely because they are a commercial bargain and are irrecoverable legal costs, do not sit easy with the nature of damages—the decision to agree the funder’s fee at that particular level is voluntary and operates as a novus actus, thereby preventing recovery as damages. 52.2. By analogy and for similar reasons, it is not reasonably foreseeable for a claimant to obtain funding with a funder’s fee set at a particular level. This is particularly when the well settled expectation of participants in the litigation system is for the costs regime to apply. Permitting irrecoverable costs as damages would circumvent that expectation. This is especially true when what is being sought is the costs of these proceedings (see the long line of authority cited above, noting that the litigation costs of proceedings are not recoverable as substantive relief). 52.3. A policy issue also arises because if a funder’s fee is recoverable as damages in tort, it would incentivise every litigant to enter into such an agreement. There is no downside to doing so, and there would be no incentive to bargain for a lower funder’s fee. This is particularly forceful since litigation funders are self-interested commercial parties seeking to profit from litigation. 52.4. Further, as noted by the HCA, there is a peculiar conceptual difficulty with permitting these costs as damages. The loss comprises of inter alia the ability to pay the funder’s fee, but that only crystallises when judgment is entered. Hence, the loss accrues when the defendant is ordered to compensate the claimant. At the time of making the claim, the loss has not crystallised. This is paradoxical, not least because it is tantamount to suggesting that the successful litigant has caused himself loss by winning. 52.5. Finally, if (as in Hunt Leather) the funder’s fee were calculated as a percentage of the damages, there could never be true compensation for the client because, upon recovering the funder’s success fee, the client would then be obliged to pay a slice of that to the funder—this is conceptually confused. While this does not arise in the instant case, it is submitted this is an important policy consideration because if a funder’s fee is recoverable as damages, there will be spillover effects on all such fees (not just multiples, as here).”
[45]I have not found this an easy issue to decide. But I have reached the conclusion that the fees which Musst has already paid to the funder under the LFA and the fees which it is now liable to pay are properly characterised as litigation costs and are not recoverable as damages for the following reasons:(1) Although the LFA itself was not itself in evidence, Mr Siddiqi gave evidence that the fee was only payable if Musst was successful at trial. I find, therefore, that liability for the first fee only accrued due after the First Trial Judgment (subject to appeal) and that the liability for the second fee only accrued after the Second Trial Judgment (again subject to appeal) and not before.(2) What a successful claimant chooses to do with an award of damages is not usually relevant to the Court’s assessment or quantification of that award. For example, if Musst had entered into a deed of covenant to give any damages which it recovered from Astra in the Second Claim to charity, this would have been res inter alios acta and irrelevant to their quantification. It would not have provided Astra with an argument that Musst had suffered no loss and, in the same way, it is legally irrelevant that Musst has contracted to pay £3.4 million (or up to £3.4 million) out of any damages which it recovers to a litigation funder.(3) I have found that Musst would have avoided incurring liability for two funder’s fees if it had included the claims for Crown I, Crown II and Crown III in the First Claim (although Mr Siddiqi accepted that Musst would have to give credit for the increased fee payable to the funder as a consequence). Moreover, I accept that this was also reasonably foreseeable given that Mr Siddiqi, Mr Mathur and Mr Holdom were experienced and sophisticated finance professionals, the terms of the Octave Contract and Mr Mathur’s knowledge that Musst required litigation funding.(4) However, I agree with all of the judges in Hunt Leather that this makes no difference and that the fees payable under an LFA are voluntary or collateral payments. In my judgment, neither “but for” causation nor reasonable foreseeability should be sufficient to justify recovery. In my example of the gift to charity, Musst would not have agreed to pay (and then paid) to the fortunate charities the damages which it recovered in the Second Claim but for Astra’s negligent misrepresentation. Likewise, it makes no difference whether Mr Mathur knew that Mr Siddiqi was an altruist committed to using the Revenue Share to charitable causes.(5) But even if I am wrong and the funder’s fees are not voluntary or collateral payments, then in my judgment they should properly be characterised as litigation costs. As the Court of Appeal of NSW stated in Hunt Leather, the quid pro quo for those fees was an indemnity against the costs of both the First and Second Claims. If either claim had failed, the ATE insurers would have been liable for the adverse costs orders and the funder would have been liable to pay Musst’s own costs to solicitors, counsel and experts (and, possibly, also the ATE premiums themselves). I see no real commercial difference, therefore, between the ATE premiums and the funder’s fees.(6) For all of the reasons which Mr Spalton and Mr Mo gave in their Skeleton Argument and which Mr Spalton developed persuasively in his oral submissions, it would undermine the present costs regime if Musst were entitled to recover as damages the additional finance costs of purchasing an indemnity either against its own legal costs or against any adverse costs awarded against it. As Master Brown pointed out in Nosworthy v Royal Bournemouth & Christchurch Hospitals NHS Foundation Trust, the Court has never permitted successful parties to recover their cost of funding costs and disbursements (and a statutory award of interest is intended to compensate the receiving party for the delay in payment).(7) In my judgment, therefore, the costs principle applies just as much to the commission or fees payable under an LFA as it applies to ATE premiums and in the present case it applies to the funder’s fees which Musst has paid (or agreed to pay) to its funders following both the First Claim and the Second Claim. I have already found that the ATE premiums do not fall within the exception and for the same reasons the funders fees do not fall within the exception either. (4). Other Costs[46]There can be no dispute that the issue fee for the Second Claim of £10,000 is a litigation cost. Since I have held that the present case falls within the costs principle and not the exception, I hold that the cost of issuing the Claim Form in the Second Claim is not recoverable. In case there is any doubt, I also hold that any additional costs which Musst has incurred in having to instruct solicitors, counsel and experts in the Second Claim are not recoverable either because they do not fall within the exception to the costs principle.

IV. Basis of Assessment

[47]I have held that as a matter of principle the ATE premiums, the LFA fees and the second issue fee are not recoverable as damages. But if I am wrong, I go on and consider briefly an alternative argument which Mr Spalton and Mr Mo addressed in their Skeleton Argument. They argued that even when a party recovers costs as damages (as in the professional negligence examples which I have given above) those costs should be assessed on the standard rather than the indemnity basis.[48]If it had been necessary for me to do so, I would have followed the decision of Newey J (as he then was) in Hermann v Withers LLP [2012] EWHC 1492 (Ch), [2012] PNLR 28 and agreed with Saini J (as he then was) in Trafigura Pte Ltd v Gupta [2026] EWHC 159 (Comm) that the general rule is that when costs are awarded as damages, they are assessed on an indemnity basis. However, I would also have been tempted to follow the decision of His Honour Judge Stephen Davies in Partakis-Stevens v Sihan [2023] EWHC 1051 (TCC) and treat the present case as an exception to the general rule for the reasons which he set out at [58] to [63]:
“58. Whilst I am conscious that I may be accused of resurrecting the old heresy of making a distinction between costs incurred in previous actions and costs incurred in the same actions, it does seem to me that there are powerful arguments of principle and practical justice for awarding standard costs as damages in cases, such as this, where the costs claimed relate to proceedings which have been case and cost managed and have proceeded to a conclusion and even more so where, as here, the claims have proceeded in tandem in the same proceedings. I am satisfied that this should be my approach. 59. As regards principle, in my view a good starting point is to consider what ought reasonably to be in the contemplation of the parties at the time of the commission of the wrong in question. Under the current costs regime they must be taken to know that parties to civil litigation are required to act in accordance with the overriding objective, which means enabling the court to deal with cases justly and at proportionate cost. This is what underpins the principles which apply to the recovery of costs under CRP 44, whereby the expectation is that the parties will only recover standard costs, which are proportionate as well as reasonable, unless the conduct of the other party is such as to justify an award of indemnity costs. It is what also underpins the exercise by the court of its case management powers and its costs budgeting powers. 60. Given that in this case, as in most other cases, the court gives case management directions and makes costs management orders which enable the parties to litigate their dispute in accordance with the overriding objective whilst incurring only reasonable and proportionate costs, it is difficult to see the justification for saying that the party in breach ought to be held liable for costs incurred by the wronged party which exceed those which the court has decided are reasonable and proportionate, unless the conduct of the other party justifies an award of indemnity costs. If the wronged party chooses to instruct lawyers who undertake work which is more extensive and expensive than that which the court has determined is reasonable and proportionate, it is difficult to see why the party in breach should have to subsidise that additional cost. 61. In my view, it is not sufficient for the wronged party simply to say that because it is not uncommon for there to be a shortfall it is not unreasonable for the party in breach to have to absorb that shortfall. If the wronged party is unable to persuade the court to award indemnity costs, or to sanction an increase from the approved costs budget, or to depart from the approved costs budget on detailed assessment for good reason, then it is difficult to see why he should be able to require the wronged party to reimburse him the shortfall. In my view, there is a strong public interest in equating the recovery of reasonable and reasonably incurred costs as damages with what is recoverable by way of costs under CPR Part 44 on the standard basis and only to award indemnity costs where the circumstances are such as would justify that award under CPR 44. 62. In my view, these arguments apply with even more force where – as here - the costs claimed are costs which have been incurred and cost managed in the same litigation as the claim by the innocent party against the wronged party. The innocent party will know that both sets of costs will be cost managed and, in the majority of cases, there will be an overlap at least to some extent. To have a situation where either the separate costs are assessed on separate bases or, at the most extreme position contended for by the editor of McGregor, the subject of an assessment which is not undertaken on the standard or the indemnity basis but – presumably – by the trial judge applying solely common law principles of assessing damages, seems to me to be contrary to the overriding objective and practical justice and not compelled by principle. 63. If there is a justification for sanctioning an increase from the approved costs budget then the Romeros have their remedy under CPR 3.15A. If there is good reason for departing from the approved costs budget on detailed assessment then the Romeros have their remedy under CPR 3.18.”
[49]Nevertheless, it is unclear to me how this issue arises in the present case. If I had awarded damages to Musst for the additional ATE premium and the additional funder’s fee which it had to pay, I would not have held that they were subject to assessment on either the standard or the indemnity basis because they are not recoverable as costs on either basis. If Musst had claimed the additional legal and expert costs which it incurred in the Second Claim and which it would have avoided if both claims had been tried together, then I would have ordered those costs to be assessed on the standard basis for the reasons given by His Honour Judge Stephen Davies (above).[50]But Musst did not advance such a claim at the Second Consequentials Hearing or ask me to direct an inquiry in relation to those costs. Indeed, Mr Knox and Ms Bailey steered clear of such an argument and for an obvious reason which can be illustrated by the following example. Without prejudging the costs argument in any way, let it be assumed that I order Astra to pay 75% of Musst’s costs of the Second Claim to be assessed on the standard basis because it lost on some issues. Let it also be assumed that Musst is able to demonstrate that it would have avoided 50% of the legal and expert costs of the Second Claim if all of the claims had been tried together. Should the Court award Musst 50% of the difference between costs assessed on a standard basis and the costs which it would have recovered if they had been assessed on an indemnity basis? Should the Court award Musst some or all of the 25% costs which the Court disallowed when making an issues based costs order? Has Astra caused these losses at all by its negligent misrepresentation?[51]These are all difficult questions to answer. But in my judgment, this example illustrates well why costs are not recoverable as damages at all in the present case. It would undermine the costs regime if the Court were to award damages for any shortfall (and whatever the basis of assessment). But, as I say, this issue does not arise in the present case. I, therefore, dismiss the claim to recover costs as damages and I will hear any consequential issues which arise out of this judgment at the Third Consequentials Hearing.

order

see [77] to [85]. Lord Richards gave a number of reasons for reaching this conclusion. His fifth reason at [84] is the most important one for present purposes: “Fifth, the implications of Ms McDonnell's submissions arguably go far beyond claims under the 1975 Act. The basis of her submissions is that, while success fees are not recoverable under the costs regime contained in the CPR by reason of section 58A(6), there is no prohibition on their recovery as part of the substantive relief if they can properly fall within the scope of the substantive relief. Her submissions are, of course, confined to relief under the 1975, that being the subject of these proceedings. If allowing the recovery of success fees is permissible as part of an award under the 1975 Act, it is not clear to me why they should not as a matter of principle equally be recoverable as consequential loss in appropriate circumstances in claims for damages in tort or for breach of contract. But, it is well established by authorities, including those referred to above, that litigation costs are not recoverable as between the parties to the action in which such damages are awarded, and the basis of that principle is that the costs regime would otherwise be undermined.”