Kington SARL & Ors v Thames Water Utilities Holdings Limited & Anor

On an appeal from the sanction of a restructuring plan, the ordinary costs approach under CPR rule 44.2 applies. Even if a different approach is appropriate at first instance, an unsuccessful objecting creditor appealing a sanction decision will ordinarily pay the successful plan company’s costs.

Success is assessed overall. Partial success on a legal issue, or on a discrete part of the relief sought, may justify a substantial reduction in the successful party’s costs, but does not displace its overall success where the appeal is dismissed. A payment on account must reflect objectively reasonable and proportionate recoverable costs, rather than the expenditure a party chose to incur.

Leech J sanctioned a restructuring plan for Thames Water Utilities Holdings Limited: [2025] EWHC 338 (Ch). Kington, representing Class B creditors, and Thames Water Limited appealed. The Court of Appeal had dismissed that appeal, while varying the plan’s releases of claims against the plan company’s officers and advisers.

This judgment determined the costs of the appeal. The plan company sought 80% of its costs from Kington and Thames Water Limited. They contended that the special costs approach said to apply to objecting creditors in scheme and plan proceedings should extend to an appeal, or that they had been successful in substance because of their success on legal issues.

The central questions were whether ordinary appellate costs principles applied and, if so, what reduction and payment on account were appropriate.

1. The Court ordered Kington and Thames Water Limited severally to pay 60% of the plan company’s appeal costs. Each was liable for half of that recoverable sum, namely 30% of the plan company’s total costs, and each was ordered to pay £237,750 on account.

2. The Court did not decide whether the first-instance approach summarised in Re Virgin Active Holdings Ltd [2021] EWHC 911 (Ch) was correct. Assuming it was, its rationale did not extend to an appeal. At first instance, the plan company seeks the court’s discretionary sanction and opposing creditors’ submissions may assist the court’s scrutiny. Once sanction has been granted, the company needs no further order to implement the plan. An appeal is an expression of dissatisfaction with the decision. Costs should therefore ordinarily follow the result under CPR rule 44.2, subject to the Court’s discretion in an individual case.

3. The plan company was overall successful. The appeal had been dismissed and sanction upheld. The Court’s disagreement with aspects of the judge’s legal analysis did not alter that result because the challenges to sanction failed on the facts. The variation to the releases, the absence of any costs claim against Mr Maynard, and the appellants’ useful success on legal issues justified reductions. Their legal success could guide a future restructuring, but it did not justify reducing the plan company’s recovery to nil.

4. In fixing a payment on account, the Court applied the objective standard that only reasonable and proportionate costs are recoverable. The very high solicitor rates, counsel’s fees, number of professionals instructed, and risk of duplicated work meant that 40% of the costs claimed was not sufficiently conservative. A payment on account of 35% of the costs claimed, applied to the 60% recovery, was appropriate.

• Court of Appeal (Civil Division): In this judgment, [2025] EWCA Civ 1003, the court determined the costs consequences of its earlier dismissal of the appeal against sanction and varied the costs position as set out in the order.
• High Court, Insolvency and Companies List (ChD): Leech J sanctioned the restructuring plan: [2025] EWHC 338 (Ch).