Barclays Bank UK PLC & Ors, R (on the application of) v Financial Ombudsman Service Limited

Costs ordinarily follow the event where a claimant succeeds in a fully contested judicial review, but the recoverable proportion may be adjusted for a distinct unsuccessful issue. The court should assess that adjustment by considering the reasonableness and importance of the issue and the additional costs it caused, rather than applying a mechanical time calculation. A public body has no automatic immunity from an adverse costs order: a claimed chilling effect must be evidenced and sufficiently plausible. A payment on account should be realistic, allow a margin for error, and reflect the amount likely to be recovered on detailed assessment.

This was a consequential costs judgment after four banks succeeded in judicial review claims against the Financial Ombudsman Service. The substantive judgment had quashed ombudsmen decisions concerning the Service’s jurisdiction over complaints about unfair credit relationships under section 140 A of the Consumer Credit Act 1974: R (Barclays & Ors.) v Financial Ombudsman Service [2026] EWHC 1555 (Admin).

The banks sought their costs on the standard basis and payments on account of 60 per cent. The Financial Ombudsman Service accepted that costs should follow the event but argued for reductions based on partial success, duplication, litigation conduct and the possible chilling effect of costs on a public dispute-resolution body. The issues were the recoverable proportion and the realistic amount of any payment on account.

Disposition and costs

1. Successful parties and costs basis. The banks established a fundamental error of law and obtained the quashing relief sought. Costs therefore followed the event. Standard-basis costs and indemnity costs were distinct. As no indemnity application was made, the court did not need to decide whether the Financial Ombudsman Service’s conduct met the higher threshold described in Excelsior Commercial & Industrial Holdings Ltd v Salisbury Hamer Aspden & Johnson [2002] EWCA Civ 879.
2. Proportion recoverable. Applying the issue-based approach in R (M) v London Borough of Croydon [2012] EWCA Civ 595, the court considered the reasonableness of pursuing an unsuccessful issue, its importance and the additional costs it caused. Barclays failed its A1P1 ground, but that ground occupied little time and had limited impact. A point which the defendant had reserved but did not argue, and a catch-all sub-ground which added nothing, did not justify further reductions. The permitted but unpleaded defence under section 31 (2A) of the Senior Courts Act 1981 failed and illustrated the defendant’s chequered approach. Barclays recovered 92 per cent of its costs. Santander, NatWest and Vanquis recovered 100 per cent because their submissions were focused, non-duplicative and necessary to address their individual cases, and their litigation conduct was reasonable.
3. Chilling effect. Applying the approach in Competition and Markets Authority v Flynn Pharma Ltd [2022] UKSC 14, there was no automatic immunity from adverse costs for a public body. A chilling effect had to be factually assessed and shown to be sufficiently plausible. The Financial Ombudsman Service was not a statutory regulator, the dispute concerned a hard-edged legal question, no supporting evidence had been filed, and no plausible effect on ordinary ombudsman decision-making was shown. The argument did not justify reducing the banks’ costs.
4. Payments on account. Applying Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC 566 (Comm), the court recognised a general presumption in favour of a reasonable payment on account, subject to a margin of error and the amount likely to be recovered on detailed assessment. The proceedings were complex, protracted and of wider public importance. The defendant was ordered to pay 50 per cent of the identified recoverable costs: 50 per cent of 92 per cent for Barclays and 50 per cent of the claimed costs for each other bank, within 14 days. The FCA was to bear its own costs.

This was a first-instance consequential costs judgment. The court records that, after a fully contested judicial review trial, it had allowed the four claims and quashed the impugned ombudsmen decisions in R (Barclays & Ors.) v Financial Ombudsman Service [2026] EWHC 1555 (Admin) . This judgment determined the resulting costs applications.