M5 Associates Limited v Simon Nevill Wetton & Anor

Contractual costs provisions generally govern costs where the contract allocates enforcement costs, but the court retains a discretion to make a different order. The discretion must be exercised by considering all the circumstances, including overall success, conduct, partial success and admissible settlement offers. A claimant who has already obtained the capped contractual liability may fairly bear the costs of pursuing an unsuccessful attempt to lift that cap through allegations of fraud, negligence or misconduct. Conversely, a party whose inadequate disclosure and inaccurate evidence caused further disclosure applications and a redetermination may be ordered to pay the resulting costs. Costs need not be assessed on the indemnity basis where the conduct, though causative, was not deliberate.

The judgment concerned consequential costs and interest following the dismissal of the claimant’s attempt to recover more than the defendants’ capped liability under a deed of guarantee. Judgment for the capped sum of £250,000 had already been entered against the defendants. The claimant then pursued allegations of fraud, negligence and misconduct, together with subsidiary claims, but failed to establish liability beyond the cap.

The claimant sought its enforcement costs and indemnity costs for later disclosure and redetermination proceedings. Mr Watkins accepted liability for costs up to the default judgment, but sought costs incurred in defending the balance of the claim and later applications. The court also considered whether an earlier interest order could be revisited in the absence of an appeal or timely application to set it aside.

1. The court held that the claimant was entitled under the deed of guarantee to recover enforcement costs, but that contractual allocation did not eliminate the court’s costs discretion. Under CPR r.44.5, the discretion was to be exercised consistently with Gomba Holdings (UK) Ltd v Minories Finance Ltd (No. 2) [1993] CH 171, while Forcelux Ltd v Binney [2009] EWCA Civ 1077 confirmed that the court could depart from the contractual position.

2. The applicable framework was CPR 44.2. Although the general rule is that the unsuccessful party pays the successful party’s costs, the court must consider all the circumstances, including conduct, partial success and admissible settlement offers. Overall success is relevant, as recognised in Sharp v Blank [2020] EWHC 1870, but it is not determinative.

3. Mr Watkins was ordered to pay the claimant’s costs up to and including the June 2024 default judgment on the standard basis. The claimant was ordered to pay Mr Watkins’s costs up to and including the first hearing on the standard basis. The claimant had chosen to pursue allegations which, if proved, would have lifted the cap, but failed to do so. That failure justified departure from the contractual costs provision.

4. Mr Watkins was ordered to pay, on the standard basis, the costs of the second specific-disclosure application and the redetermination insofar as they related to him. His failure to provide proper disclosure and his inaccurate evidence had caused those proceedings. The court found that the conduct arose from frailty of memory rather than deliberate avoidance, so indemnity costs were not justified.

5. The court declined to revisit the July 2025 interest order. In the absence of an appeal or timely application to set it aside, it was too late to reopen the rate or period of interest. The parties’ agreed 60-day moratorium on interest was recorded. An observation made when refusing permission to appeal did not constitute a binding determination rendering the redetermination a nullity.

The parties were directed to file an agreed draft order within 14 days.

The judgment followed an earlier judgment of the same court dated 17 October 2025, cited as [2025] EWHC 2682, which dismissed the claimant’s claim beyond the capped liability. Permission to appeal the redetermination judgment was refused by Popplewell LJ; no citation for that decision is stated.