Wine Enterprise Investment Scheme v Crowe: a Pyrrhic victory leaves the auditor as the successful party on costs

A claimant that succeeded in a professional negligence action against its former auditors but recovered only around 1.6 per cent of the sum it had claimed has been ordered to pay the bulk of the auditors' costs, in a consequentials ruling that reaffirms the substance-and-reality approach to identifying the successful party.

Richard Spearman KC, sitting as a deputy judge of the Chancery Division, gave judgement on 3 July 2026 in The Wine Enterprise Investment Scheme Ltd (in liquidation) v Crowe UK LLP [2026] EWHC 1662 (Ch), dealing with costs and permission to appeal following his March decision ([2026] EWHC 692 (Ch)). The company, acting by its liquidators, had advanced claims across seven audit years valued at between roughly £3.35 million and £8.42 million, arising from a fraud perpetrated by its directors that the auditors were said to have failed to detect. It recovered £101,965.95 plus interest.

On the first issue, the identification of the successful party for the period before expiry of the defendant's Part 36 offer, the deputy judge rejected the company's reliance on Fox v Foundation Piling Ltd [2011] 6 Costs LR 961. Following Magical Marking Ltd v Ware & Kay LLP and Brent LBC v Davies, he held that Fox, in which the point had become common ground, was the outlier, and that the correct approach lay in the line from Roache v News Group Newspapers Ltd to Medway Primary Care Trust v Marcus. Where a claimant recovers so small a fraction of what it claimed, the court asks who essentially won as a matter of substance, undistracted by the absence of a payment the claimant would plainly never have accepted.

The deputy judge had no doubt the company was not, in substance, the successful party. It conceded it would never have brought the action to recover around £139,000, it made no recovery on six of its seven causes of action, and the defendant had substantially denied it the prize it fought for. He described the outcome as a Pyrrhic victory. Reflecting that the defence had not succeeded entirely, he ordered the company to pay 85 per cent of the auditors' costs up to expiry of the Part 36 offer.

For the period after expiry, CPR 36.17(3) applied because the company had failed to beat the offer. The burden of showing injustice was a formidable obstacle, and the company's complaints that the defendant had run and abandoned bad points did not meet it. Embarking on an issue-by-issue analysis of that kind would erode Part 36 and invite satellite litigation. None of the defendant's conduct fell outside the norms of hard-fought commercial litigation, and the same criticisms applied with greater force to the company. The auditors were awarded their costs after expiry without deduction, together with interest.

The deputy judge declined to order indemnity costs. Applying Excelsior and the summaries in Three Rivers and Excalibur Ventures, he found nothing that took the case out of the norm. The claim was not speculative, weak, opportunistic or thin, as the defendant's own £3.175 million valuation demonstrated, and the rejection of the offer, though a mistake with hindsight, reflected a good-faith misjudgement rather than unreasonableness. The point mattered because, under Burgess v Lejonvarn, an indemnity award would have rendered the approved costs budget irrelevant; the auditors' actual costs stood at some £2.34 million.

Permission to appeal was refused on the grounds argued, including a contention of serious procedural irregularity over the scope of the pleaded case, which the deputy judge held to be manifestly baseless. A further hearing will address the remaining matters.