Henderson v MoD [2026]: Without Prejudice Costs Breakdowns and Bills of Costs

A without prejudice costs breakdown was higher than the certified bill eventually served. The Ministry of Defence said that showed overcharging. The court refused to let it use the breakdowns, and still criticised how they had been put together.

Ian Henderson & Anor v Ministry of Defence [2026] EWHC 2645 (SCCO), handed down by Costs Judge Whalan on 16 October 2026, answers two practical questions for anyone preparing or negotiating costs. Can a without prejudice costs breakdown be used in detailed assessment? And does a lower final bill prove that the earlier figures were inflated?

On these facts the answer to both was no. The breakdowns kept their without prejudice status: the gap between them and the certified bills fell a long way short of the unambiguous impropriety needed to displace it, and a long way short of any form of CPR 44.11 misconduct. Underneath is a distinction costs draftsmen work with every day: a record of the costs actually incurred is not the same thing as a properly drawn claim for the costs recoverable from the paying party.

The short answer

A lower certified bill is not, by itself, evidence that an earlier without prejudice breakdown was dishonest. The figures can legitimately differ, because drawing a bill involves a far more careful assessment of what is recoverable than producing a breakdown. But the case is no licence to serve loose figures: the court said more could have been done to rationalise the costs, and that the paying party could have been warned about likely duplication and disproportionality once the breakdowns were being used in substantive negotiations.

What happened in Henderson v Ministry of Defence?

The two claimants brought claims for deafness sustained in the course of their military service, part of a substantial cohort of noise-induced hearing loss claims against the MoD. There was an informal protocol for the initial consideration of costs in settled NIHL claims. In each case the claimants’ solicitors served a without prejudice breakdown schedule of costs and the MoD made a payment on account. Certified bills of costs followed, with notices of commencement.

On the MoD’s figures, the certified bills were lower than the breakdowns in both cases:

Both bill totals included the cost of drafting, checking and signing the bill; the differences were calculated against the relevant net figures.

The MoD wanted to plead that the disparities amounted to misconduct under CPR 44.11. As a prerequisite, it applied for permission to adduce and rely on the without prejudice breakdowns at the detailed assessment. The parties agreed the schedules were, prima facie, without prejudice documents, so the only real question was whether the exception for unambiguous impropriety applied.

Why can a breakdown be higher than the final bill?

Because drawing a bill is not simply adding up every attendance recorded on the file. A time-recording system may accurately show the work done. That does not mean every entry should be recovered from the paying party. Drawing the bill means deciding:

• what falls within the costs entitlement;
• whether the work was reasonably incurred;
• whether the time spent was reasonable;
• whether work has been duplicated;
• whether the right fee-earner grade and rate have been applied;
• whether an item is properly recoverable inter partes; and
• whether the resulting costs are proportionate.

A solicitor may genuinely have spent 30 minutes reviewing a document, and the time record may be entirely accurate. If only 12 minutes was reasonably required, the recoverable amount is properly reduced. Those are not contradictory positions. One is about what happened; the other is about what the paying party can reasonably be required to pay.

What without prejudice privilege protects

Without prejudice privilege exists so that parties can negotiate freely: make concessions, discuss figures and explore compromise without every statement later being used against them. It attaches to communications genuinely made in an attempt to settle a dispute. It is not created simply by writing “without prejudice” at the top of a document; the nature and purpose of the communication matter.

Nor is it lost just because a negotiating position later changes. A party may offer a reduced figure to settle, reassess particular items or rationalise its costs claim when drawing the bill, and none of that is, by itself, misconduct. Communications made “without prejudice save as to costs” are different again: they can be deployed on the relevant costs decision at the appropriate stage. Check which basis a breakdown was actually served on before assuming it is in or out.

The unambiguous impropriety exception

The privilege is strong but not absolute. One recognised exception is unambiguous impropriety, and it is a demanding threshold. The judge applied Unilever v Procter & Gamble and Motorola Solutions Inc v Hytera Communications Corp Ltd [2021] EWCA Civ 11, in which Males LJ described it as “a test which, deliberately, is difficult to satisfy” and noted that the cases in which it has been applied have been truly exceptional.

The threshold protects the purpose of the rule. If every revised figure or concession could later be recast as misconduct, parties would stop negotiating openly. An apparent inconsistency between what was said in negotiations and what is later claimed is not the same thing as an abuse of the privileged occasion.

Why the MoD’s argument failed

The judge’s reasons turned on what the breakdowns were and how they had been used:

• they were served primarily to support applications for interim payments;
• he did not accept that it had been the claimants’ intention or purpose to use them to induce a final settlement;
• the schedules claimed exclusively costs which the claimants had actually incurred;
• there was one genuine, isolated mistake (the second claimant’s breakdown wrongly included the costs of a failed application), and it was later corrected; and
• the breakdowns contained no fundamental errors of calculation, and there was no misrepresentation.

On that footing the MoD’s case fell a long way short of demonstrating unambiguous impropriety, and the inconsistency between breakdowns and bills was a long way short of any form of CPR 44.11 misconduct. The breakdowns keep their without prejudice status, and the MoD is not entitled to adduce or rely on them in the detailed assessment, which is part-heard and listed for 25–29 January 2027.

The court still criticised the breakdowns

This is the part practitioners should not skip. Although privilege survived, the judge said that “more could have been done to rationalise the costs” in the fairly detailed breakdowns. And once the MoD was using them in substantive negotiations, the claimants’ solicitors could have alerted it to the likely presence of some duplication and disproportionality.

A document can keep its privilege while the process used to prepare it falls short of good practice. Those two things should not be confused. Privilege is not a substitute for good costs preparation.

An informal breakdown is not a certified bill

An informal breakdown may be produced from time-recording data to support negotiations or a payment on account, before the scrutiny that formal bill preparation involves. A certified bill does a different job. It is the receiving party’s formal claim in detailed assessment, it must contain the certificates in Precedent F required by Practice Direction 47, and it must be drawn within the actual costs entitlement. It should be more than a reproduction of the time ledger.

How the earlier document was described matters too. A breakdown presented as “total recorded time, subject to review” is a different thing from one expressly represented as a complete, vetted statement of recoverable costs. The problem is not necessarily the reduction; it is whether the earlier figure was accurately described and honestly presented. It helps to keep three figures distinct:

• Recorded costs: the work and expenditure shown in the firm’s records.
• Claimed costs: the items the receiving party seeks from the paying party.
• Assessed or agreed costs: the amount ultimately allowed or compromised.

They are related figures. They are not necessarily the same, and they should not be described as if they were.

What about CPR 44.11?

CPR 44.11 lets the court act where a party or its legal representative fails to comply with a rule, practice direction or court order in connection with an assessment, or behaves unreasonably or improperly. The court may disallow all or part of the costs being assessed, or order the party or representative at fault to pay costs caused to another party.

Those are serious powers. But a bill being reduced because particular items are not recoverable is a different thing from a party behaving improperly in presenting its costs. A significant reduction is not proof of misconduct, and an allegation of misconduct does not make privileged material admissible. In Henderson the MoD needed the privileged breakdowns to make the misconduct allegation, and could not have them.

Henderson compared with Kapoor v Johal

The contrast with Kapoor v Johal [2024] EWHC 2853 (SCCO) is instructive. There a bill claiming £258,583.78 was assessed at nil under CPR 44.11, where the client had been invoiced in the region of £84,000. The bill sought far more than the client was ever liable to pay, and the indemnity principle made that fatal.

That is a different kind of problem. In Kapoor the sums claimed could not lawfully be recovered from the paying party at all. In Henderson the question was whether a gap between informal breakdowns of costs actually incurred and the later certified bills was enough to defeat privilege. Similarly, HD v North Devon Healthcare Trust [2026] shows an unenforceable retainer taking the recoverable costs to nil through the indemnity principle. Those cases should not be collapsed into a broad proposition that a reduction equals misconduct.

Henderson compared with LM1 v Seacroft

In LM1 Limited v Seacroft Film Investments Limited [2026] EWHC 2212 (Ch), a £74,075.60 bill was struck out because it claimed the costs of the whole action when the entitlement under the settlement agreement was to the costs of the counterclaim. The problem was not that the figure looked high; it was that the bill claimed outside the entitlement. LM1 was allowed to redraw it.

The lesson is the same one from the other direction. The recoverability exercise starts with the actual entitlement, and work that genuinely happened is not recoverable merely because it happened. Drawing a bill takes more than exporting the firm’s time records accurately.

Does Henderson let firms send inflated breakdowns?

No, and reading it that way would be a serious mistake. It does not protect figures a solicitor knows to be misleading, and there is a real difference between an honestly prepared preliminary breakdown and knowingly advancing costs that were not incurred. Describing unreconciled figures as a definitive statement of recoverable costs could create real problems. Privilege does not turn inaccurate statements into accurate ones.

Nor does it stop the paying party challenging the final bill with admissible material: excessive time, duplication, seniority and delegation, hourly rates, the indemnity principle, recoverable disbursements, proportionality and the scope of the costs order all remain open. Henderson concerns an attempt to use privileged negotiating material to establish impropriety. It does not approve any item in the bills.

What claimant firms should do before sending a breakdown

Decide what the figure represents before it goes. If it is an initial extraction of recorded work, do not present it as though it has been through a full recoverability review. Where possible, check for obvious duplication, identify disbursements correctly and say whether the figures remain subject to a detailed costs review. And once substantive negotiations are under way, the other side should not be left under a materially misleading impression of what the figures are. That is exactly the point on which the court criticised the claimants’ solicitors here.

What it means for paying parties’ challenges

A difference between two figures may justify questions. It does not establish misconduct. A properly drafted challenge identifies the actual problem: work claimed that was never done, the same item claimed twice, costs beyond the entitlement, or a material misrepresentation. Those are different allegations needing different evidence from the ordinary case where a costs draftsman removed unreasonable or non-recoverable entries when drawing the bill. A lower certified bill is not a shortcut around without prejudice privilege; the route to challenging the bill remains detailed assessment and properly grounded Points of Dispute.

A checklist before certification

1. Entitlement: does the bill claim only the work permitted by the order or agreement?
2. Retainer: is the claimed work consistent with the client’s liability to the solicitor?
3. Time recording: are the entries accurate and supported?
4. Duplication: has repeated or overlapping work been identified?
5. Delegation: was the fee-earner grade reasonable for the task?
6. Rates: are the rates claimed properly supported?
7. Disbursements: are the invoices and fee notes available?
8. Proportionality: does the bill properly reflect the applicable test?
9. Earlier figures: are the material differences from any earlier breakdown understood?
10. Certification: can the receiving party properly sign the certificates as the bill stands?

The aim is not to force the final bill to match an earlier estimate. It is to make sure each figure is supportable for the purpose for which it was supplied.

What Henderson does not decide

The decision should not be taken to establish that:

• every document marked without prejudice is automatically privileged;
• informal costs breakdowns are immune from scrutiny;
• a substantial reduction can never indicate misconduct;
• knowingly false negotiating figures are protected whatever the circumstances;
• CPR 44.11 cannot apply where there were earlier negotiations;
• certified bills may include unreasonable or unrecoverable work; or
• the paying party cannot challenge the final bill because earlier negotiations were privileged.

The narrower point is the useful one. An honestly prepared breakdown may be higher than the later certified bill without that difference, by itself, amounting to unambiguous impropriety. What the document was, how it was described, why it was served and how it was used still matter.

How DMD Costs can help

DMD Costs prepares bills of costs and supports claimant solicitor firms with Points of Dispute, Replies and costs negotiations. The job is not to claim every recorded minute; it is to identify and present the costs properly recoverable from the paying party. That means examining the file, understanding the entitlement, assessing the recoverability of the work and knowing why the bill differs from any earlier breakdown. Reducing weak or duplicated items is not something to avoid just to make earlier figures match, and clear communication at the negotiation stage stops a legitimate revision becoming an unnecessary dispute.

Our legal costs drafting services cover bills of costs and Precedent S electronic bills, Points of Dispute and Replies, hourly-rate and proportionality disputes, costs negotiations, detailed assessment documentation and costs-only proceedings. Henderson arose in the MoD NIHL cohort; for military hearing loss claims specifically, see our MoD NIHL costs drafting service and our guide to MoD NIHL costs after settlement.

Instructions can be sent through the DMD Costs secure client portal, where firms can upload papers, monitor progress and request updates; it is also available as a mobile app. The fee is fixed and agreed before any work begins. Henderson is also listed in our costs case law index.

Case details

Source: the approved judgment on The National Archives. Figures, dates and quotations are taken from the judgment; the differences between the breakdowns and the bills are as identified by the MoD.