PI Brief Update

Liar, Liar, Costs Misfire: High Court Overturned on Costs Where Both Parties Dishonest - Georgina Pressdee, Temple Garden Chambers

26/06/26. On 12 June 2026, the Court of Appeal handed down its unanimous decision in (1) Alan Ward, (2) Luxap Limited, (3) Ebonair Investment S.A v (1) Anthony Donnellan, (2) Ricky Keane, (3) Bobi Howard [2026] EWCA Civ 729. The lead Judgment was given by Lord Justice Lewison. The issue for determination was whether Louise Hutton KC (sitting as a Deputy High Court Judge) had been wrong to make no order as to costs following the successful defence of the claim.

Background

The Claim

For purposes of the appeal, there were two claims:

1. The Partnership Claim: Mr Donnellan sought a declaration that he and Mr Ward had formed a partnership to develop property. The freehold was held by Ebonair Investment S.A, which Mr Donnellan alleged was a front for Mr Ward. Two other interests were flats in the building for which leases had been granted to Mr Keane and Ms Howard. Ebonair brought a Part 20 Claim against them seeking a declaration that those leases were held on trust for Ebonair. Judge Hutton KC concluded that Mr Ward had a sufficient beneficial interest in Ebonair to exercise at least significant control over its actions. She therefore rejected part of his defence that ownership of Ebonair was not a reason why he could not have reached the partnership agreement with Mr Donellan. However, the Judge ultimately concluded that there was no partnership or joint venture. As a result, Mr Keane and Ms Howard were found to hold the flats on trust for Ebonair.
2. The Possession Claim: Mr Keane sought possession of two flats in the building. This turned on whether he held the flats as a nominee for Ebonair or for the alleged partnership. It therefore failed on the same basis as the Partnership Claim.

Dishonesty

Judge Hutton KC was highly critical of the probity of both Mr Donnelly and Mr Ward, finding that they were willing to behave dishonestly or make untrue statements in order to achieve their ends.

Costs

Despite Mr Ward’s success, Judge Hutton KC made no order as to costs on the Partnership Claim or Part 20 on account of his dishonesty. The order was appealed on the basis that the Judge failed to take into account the extent of Mr Donnelly’s dishonesty and only paid lip service to the principle that costs follow the event.

Ruling

Lord Justice Lewison first noted that, on assessment, the costs of maintaining a dishonesty case are not recoverable because they would not have been reasonably incurred (Northstar Systems Ltd v Fielding [2006] EWCA Civ 1660). He then considered that Judge Hutton KC had been wrong to make no order as to costs because its effect was to deprive the Ward parties of any of their costs of successfully resisting the Partnership Claim or advancing the Part 20 Claim. The Ward parties were therefore not awarded their reasonably and properly incurred costs, including their costs in exposing the dishonesty of Mr Donnellan – on whom no financial penalty had been imposed.

When it came to the Part 20 Claim, Judge Hutton KC had concluded that it formed part of the matters in dispute on the main claim. Lord Justice Lewison considered that was wrong. A key issue in the Partnership Claim was who was the beneficial owner of Ebonair. The Part 20 Claim was brought by Ebonair itself – a corporation with legal personality. The ultimate owner of Ebonair was therefore irrelevant to the Part 20 Claim. Accordingly, Mr Ward’s dishonesty in relation to the Partnership Claim did not bear on the Part 20 Claim in the way that Mr Donnellan’s did.

Evaluating the relevance of dishonesty to each issue, Lord Justice Lewison awarded Ebonair its costs of the Part 20 Claim and ordered that Mr Donnellan pay 50% of the Ward parties’ costs of the Partnership Claim.

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