Musst Holdings Limited v Astra Asset Management UK Limited & Anor

Litigation costs incurred in proceedings are generally recoverable only through the applicable costs regime, not as substantive damages in the same or later proceedings against the same party. An exception requires both a separate cause of action and proceedings which were not subject to the ordinary rules for recovery of costs. The exception does not apply merely because the claimant proves that the costs were caused by the defendant’s wrong. ATE premiums and litigation-funding fees are litigation costs where they provide protection against litigation expenses or adverse costs. They are therefore not recoverable as damages where recovery would undermine the costs regime.

The judgment concerned the consequential relief following the Second Trial Judgment, in which Astra was found liable for negligent misrepresentation. Musst established that, had Astra disclosed relevant information, it would have pursued related claims in one action rather than two. It claimed the additional ATE premiums, litigation-funding fees and issue fee incurred as a result.

The court had to decide whether those items were recoverable as damages, whether the exception to the costs principle applied, and, alternatively, how any recoverable costs should be assessed.

1. Claim dismissed. The court held that the additional ATE premiums, litigation-funding fees and second issue fee were not recoverable as damages.
2. The compensatory principle requires the court to assess substantial loss even where precise quantification is difficult. Here, however, quantification was not impossible. The decisive issue was the competing costs principle.
3. The costs principle prevents recovery of litigation costs as substantive relief in the same action or a subsequent action between the same parties. Its purpose is to preserve the costs regime and prevent recovery by a side wind.
4. The exception requires both conditions identified in Professor Merrett’s analysis: the claimant must have a separate cause of action, and the earlier proceedings must not have been subject to the ordinary rules for recovery of costs. Musst satisfied the first condition through negligent misrepresentation, but both claims were ordinary civil proceedings governed by those rules.
5. Section 58C(1) of the Courts and Legal Services Act 1990 also prohibited recovery of the ATE premiums as damages. The reasoning concerning success fees in Hirachand v Hirachand was adopted and applied.
6. The funding fees were voluntary or collateral payments. In any event, their substance was an indemnity against legal costs and adverse costs. They were therefore properly characterised as litigation costs. “But for” causation and reasonable foreseeability did not justify recovery.
7. The £10,000 issue fee and any additional legal, expert or counsel costs were likewise litigation costs outside the exception.
8. As an alternative observation, if additional legal costs had been recoverable as damages, they would have been assessed on the standard basis. The court dismissed the claim for costs as damages and reserved consequential matters for the Third Consequentials Hearing.

The judgment followed the Second Trial Judgment, [2026] EWHC 357 (Ch), and addressed costs as damages at a further consequential hearing. The judgment records that the Trial Judgment and Consequentials Judgment had been upheld by the Court of Appeal, but gives no citation for those decisions.