Henderson v Ministry of Defence: without prejudice costs schedules remain protected

The Senior Courts Costs Office has refused to lift without prejudice privilege from informal costs breakdowns served in military deafness claims, ruling that the Ministry of Defence failed to show unambiguous impropriety.

Costs Judge Whalan gave his judgement in Henderson and McPherson v Ministry of Defence [2026] EWHC 2645 (SCCO), handed down on 16 October 2026. It resolves a preliminary point in two linked detailed assessments, which are listed for hearing from 25 to 29 January 2027.

An informal protocol under strain

Hugh James, acting for both claimants, has conducted around 11,500 noise-induced hearing loss claims against the MoD, thought to be fewer than 10% of the total caseload. In about January 2020 the firm agreed an informal protocol with the MoD's solicitors, Keoghs LLP and Plexus Law. Claimants would provide a without prejudice schedule of costs and disbursements, with a view to securing an early payment on account of 50%.

Over time the MoD began using the schedules as a basis for negotiating substantive costs settlements. Where no settlement followed, a certified bill was served. The arrangement ended around August 2024, when the MoD pointed to discrepancies between schedules and bills and alleged systematic overcharging.

The figures in the two cases were notable. Mr Henderson's breakdown totalled £44,939.52, against a bill with a net total of £37,261.29. Mr McPherson's breakdown stood at £162,601.36, against a net bill figure of £132,052.75. The MoD said the gaps reflected reductions of 29.4 and 52.3 hours respectively.

The MoD's case

The MoD sought permission to deploy the breakdowns at assessment as a prerequisite to alleging misconduct under CPR 44.11. It argued that inflated schedules, served to induce overpayment, amounted to unambiguous impropriety and that privilege was being used to shield that conduct. It pointed to the fact that a costs draftsman acting for Hugh James had made a settlement offer in one case exceeding the eventual bill. It relied on Ramsey v Instore, GSD v Wardman [2017] EWCA Civ 2144 and the same court's recent decision in McNamee v LB Brent [2025] EWHC 2612 (SCCO).

The claimants accepted that the schedules were prima facie without prejudice. They maintained that the documents recorded costs actually incurred, were produced mainly to support payments on account, and were never intended to represent inter partes recoverability. Lower figures in the bills, they said, resulted from external draftsmen applying professional judgement, and from a decision to narrow the issues.

The court's approach

Costs Judge Whalan applied the high threshold confirmed by the Court of Appeal in Motorola Solutions Inc v Hytera Communications Corp [2021] EWCA Civ 11, under which the exception is deliberately difficult to satisfy and nothing less than unambiguous impropriety will do. A statement that contradicts a party's open position is insufficient unless it demonstrably abuses the privilege.

On the evidence, he found that the schedules claimed only costs the claimants had actually incurred. The bills were lower because cost lawyers had anticipated challenge and excluded items such as routine internal correspondence, funding work and time considered excessive or duplicated. The breakdowns were served chiefly to support interim payments, and the judge did not accept that the claimants intended to induce a final settlement, still less one at an inflated value.

Time for an unsuccessful disclosure application had been included in Mr McPherson's breakdown. The judge treated this as a genuine, isolated error that was later corrected, not evidence of systematic overcharging.

McNamee was distinguished. There, a series of fundamental errors, including incorrect hourly rates and fee earner grades, had grossly inflated an informal statement of costs. Nothing comparable occurred here.

Criticism, but no impropriety

The judge did not give Hugh James a clean bill. More could have been done to rationalise the detailed breakdowns, a task later performed easily by draftsmen with no day-to-day knowledge of the cases. When it became clear the MoD was using the schedules for substantive negotiation, the firm could reasonably have flagged likely duplication and disproportionality.

Even so, there were no fundamental calculation errors and no misrepresentation, and any inconsistency between the without prejudice and open positions fell well short of CPR 44.11 misconduct. The claimants may therefore maintain privilege, and the MoD cannot adduce the breakdowns at the part-heard assessments. Further consequential matters will be considered on a date to be fixed if necessary.