If Both Sides Are Dishonest, Who Pays the Legal Costs?

Does dishonesty mean that nobody pays?

Not necessarily.

A recent Court of Appeal decision, Ward v Donnellan [2026] EWCA Civ 729, provides an important reminder about how courts approach legal costs where both parties have behaved dishonestly.

The starting point…

In civil litigation, the general rule is:

Costs usually follow the event.

In simple terms, the party who loses will normally be expected to pay the successful party's reasonable legal costs.

But judges have discretion to depart from that rule where the circumstances justify it.

What happened in Ward v Donnellan?

Several related claims were heard together following a dispute concerning an alleged property development partnership.

The main partnership claim failed completely.

However, the court found that both parties had been dishonest in different respects.

The trial judge decided that, because both sides had behaved badly, there should be no order for costs in relation to the partnership claim.

The claimant appealed.

The Court of Appeal disagreed.

The fact that both parties were dishonest does not automatically cancel out the normal costs consequences.

Instead, the court needs to look carefully at the individual claim and ask:

•   Who actually won the claim?

•  What was the nature and seriousness of the dishonesty?

•   Did the dishonest conduct affect the issues being decided?

•   Did it increase the cost of the litigation?

•   Which costs were reasonably incurred in dealing with the other party's case?

The Court of Appeal considered that the trial judge had not given sufficient attention to these separate issues.

So what happened?

The main partnership claim had failed, meaning the defendants were the successful parties.

The Court of Appeal therefore ordered the claimant to pay 50% of the defendants' costs of that claim.

Why only 50%?

Because the defendants were entitled to recover reasonable costs incurred in defending an unsuccessful claim and exposing the claimant's dishonesty.

But they could not expect to recover costs attributable to their own dishonest conduct.

The important lesson for litigants

This case demonstrates that dishonesty can have serious financial consequences — even when dishonesty exists on both sides.

It is not simply:

“Both parties behaved badly, so everyone pays their own costs.”

The court must take a more nuanced and proportionate approach.

And there's another important point:

Winning the case doesn't necessarily mean recovering 100% of your costs.

Your own conduct matters.

Your conduct throughout a dispute can affect not only whether you win — but also how much of your legal costs you ultimately recover.

The takeaway

Winning matters. But how you conduct the litigation matters too.

Good evidence, accurate instructions, proportionate conduct and careful case management can make a significant difference to the final outcome.

ELS Legal — Know the Facts. Manage the Case. Protect Your Position.

This post is for general educational purposes only and does not constitute legal advice. For further information please contact ELS Legal by telephone on 0203 149 8488 or by email at info@els.legal.