Musst Holdings v Astra Asset Management: ATE premiums and litigation funding fees not recoverable as damages

Mr Justice Leech has held that neither after-the-event insurance premiums nor litigation funding fees are recoverable as damages for negligent misrepresentation in Musst Holdings Limited v Astra Asset Management UK Limited & Anor [2026] EWHC 1599 (Ch). The judgement, delivered on 26 June 2026, dismisses claims that could have multiplied Musst's recovery two to three times over, and resolves a novel point of law left open following the Second Trial Judgment in the same litigation.

The proceedings arose from Astra's negligent misrepresentation to Musst that it had no entitlement to a revenue share in respect of two managed funds. Had the true position been disclosed earlier, Musst would have brought a single set of proceedings rather than two consecutive actions. The resulting additional costs comprised two ATE premiums, a litigation funding fee payable under a "2x multiple return" arrangement representing £3.4 million if successful, and a second issue fee of £10,000. Whether those sums were recoverable as damages was left open for further argument at the Second Consequentials Hearing on 29 April 2026.

Leech J identified the central tension as one between two competing principles. The "compensatory principle", reaffirmed by the Supreme Court in CCC v Sheffield Teaching Hospitals NHS Foundation Trust [2026] UKSC 6, entitles a claimant to be placed in the position they would have been in had the tort not been committed. Against this, the "costs principle", confirmed in Hirachand v Hirachand [2024] UKSC 43, holds that litigation costs are not recoverable as substantive damages between the same parties, whether claimed in the same action or a subsequent one.

On ATE premiums, the judge held them irrecoverable on two independent grounds. First, section 58C(1) of the Courts and Legal Services Act 1990 prohibits costs orders from including ATE premiums, and following Hirachand, that prohibition applies equally where recovery is sought as damages rather than as costs. Second, the exception to the costs principle requires two cumulative conditions, drawing on Hirachand and the Court of Appeal's reasoning in Union Discount Co Ltd v Zoller [2001]: the claimant must rely on a separate cause of action, and the earlier proceedings must not have been subject to the ordinary rules for recovery of costs in civil proceedings. Musst satisfied the first condition (negligent misrepresentation) but not the second: both actions were ordinary English civil proceedings governed by CPR Part 44.

The same analysis disposed of the litigation funding fees. Leech J acknowledged established causation and reasonable foreseeability but held those factors insufficient to justify recovery. Applying Hunt Leather Pty Ltd v Transport for NSW [2025] HCA 53 in the English courts for the first time, the judge characterised the funder's fee as a voluntary and collateral payment. Liability for each fee crystallised only upon success; the arrangement was in substance an indemnity against litigation costs in exchange for a share of the proceeds. Permitting recovery would undermine the CPR costs regime, remove any incentive to negotiate competitive funding terms, and produce the paradox of a "loss" accruing only at the moment of winning.

The second issue fee of £10,000 was equally irrecoverable under the costs principle. Obiter, Leech J observed that if costs had been recoverable as damages, he would generally have followed Hermann v Withers LLP [2012] in awarding them on the indemnity basis, though he expressed sympathy for the standard basis approach adopted in cases where costs had been case-managed within the same proceedings.

Musst Holdings Limited v Astra Asset Management UK Limited & Anor [2026] EWHC 1599 (Ch). Mr Justice Leech. 26 June 2026. Peter Knox KC and Katharine Bailey (instructed by Taylor Wessing LLP) for the claimant. George Spalton KC and Jonathan Mo (instructed by Payne Hicks Beach) for the defendants.