If dishonesty has infected a case, then costs can be curative. However, the extent of the departure from the usual starting point, that costs follow the event, will depend on which parts of the case have been infected. In Ward & Ors v Donnellan & Ors [2026] EWCA Civ 729, the Court of Appeal overturned the first instance judge’s decision to make no order as to costs following the failure of a claim in which both principal parties were found to have been dishonest. In arriving at this decision, the Court of Appeal found that, in evaluating what costs order should be made, the first instance judge had: (a) overlooked the costs incurred by the successful defendants in exposing the claimant’s dishonesty; (b) failed to penalise the unsuccessful claimant for supporting his failed case with dishonest evidence; (c) given too little weight to the principle that the unsuccessful party should pay the successful party’s costs; and (d) failed to take into account that the only reason that any costs were incurred in relation to one issue was that the claimant had chosen to litigate in the first place.
Summary of the facts
Three related actions were heard together. In one action, “the Partnership Claim”, the claimant, Mr Donnellan, asserted that he and the principal defendant, Mr Ward, had formed a partnership (alternatively were joint venturers) to develop property. Mr Donnellan’s pleaded case in the Partnership Claim was that the partnership was orally agreed. After a 15-day trial and in a judgment of 103 pages, the judge made serious findings of dishonesty against Mr Donnellan in relation to important parts of his case and the Partnership Claim failed in its entirety. The Judge was also highly critical of Mr Ward, finding substantial dishonesty. In light of the dishonesty of both Mr Donnellan and Mr Ward, the Judge made no order as to costs in respect of the Partnership Claim.
The impact of findings of dishonesty
Lewison LJ, with whom LJs Arnold and Falk agreed, found instructive the judgment of Pitchford LJ in Hutchinson v Neale [2012] EWCA Civ 345 (a boundary dispute). In that judgment, Pitchford LJ confirmed that the starting point, in circumstances where the successful party is found to have been dishonest, is that costs follow the event. To warrant a departure from the starting point, Pitchford LJ said that there must be an evaluation of the nature and degree of the dishonesty, its relevance to and effect upon the issues arising in the trial, and its tendency to create an unwarranted increase in the costs of the action to either or both of the parties. In Hutchinson, the dishonest defendants had prevailed, but, for Pitchford LJ, the issue was whether the defendants’ dishonesty so infected the action that justice required they should recover no costs at all in successfully defending it.
Where there was dishonesty on both sides of the litigation, Lewison LJ cited the “exemplary approach” of HHJ Hodge in Ahuja Investments Ltd v Victory Game Ltd [2021] EWHC 2730 (Ch). In his judgment, HHJ Hodge noted that a dishonest case had been advanced and this had spawned a dishonest defence. However, what had caused the costs to be incurred in the first place was the institution of the claim. Bearing this in mind, HHJ Hodge was always going to order the claimant to pay a proportion of the defendants’ costs. In fixing that proportion, HHJ Hodge sought to impose a costs sanction proportionate to the gravity of the defendants’ misconduct but also proportionate to the dishonesty of the unsuccessful party which had led to this litigation. In this respect, he sought not only to disallow the defendants’ costs of advancing a dishonest defence, but to compensate the claimant for its costs of establishing that dishonesty.
The award
Although Lewison LJ referred to the Judge’s broad discretion in Part 44 of the Civil Procedure Rules and the fact that the trial judge is better placed than an appeal court to make a costs order which best fits the justice of the case, he still overturned the Judge’s decision. Lewison LJ emphasised that, where multiple claims are tried together, the relevance of dishonesty must be evaluated claim by claim: it was wrong to make a global costs order without distinguishing between the issues to which the different findings of dishonesty related. In respect of the Partnership Claim, in arriving at the view that the more appropriate order was for the claimant to pay 50% of the defendants’ costs, Lewison LJ took into account the following considerations:
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- The costs of the Partnership Claim were incurred solely because the claimant chose to bring it.
- The Partnership Claim failed in its entirety and the starting point was that the unsuccessful party should pay the successful party’s costs.
- The claimant supported his case by dishonest evidence. The defendants ought to recover their costs of proving that dishonesty.
- The defendants should not be entitled to recover any part of their costs incurred in advancing a dishonest case and the claimant ought to be able to recover his costs of proving that dishonesty. This could be achieved either by reducing the proportion of costs to which, as the successful parties, they would otherwise be entitled to recover, or by a direction to the costs judge to disallow the costs of advancing the dishonest case.
- Any costs order must not unduly penalise one of two dishonest parties.
Takeaway
The case is a warning to defendants tempted to shore up a good defence with bad evidence. Dishonesty by a successful party may justify a substantial reduction in its recoverable costs, or even an adverse costs order, but it does not erase the starting point that costs follow the event. The court must still examine what dishonesty mattered, to which issues, and at what cost.
