Full Colour Black Limited v The artist known as “Banksy” & Anor [2026] EWHC 795 (KB)

April 2, 2026

Full Colour Black Limited v The artist known as “Banksy” & Anor [2026] EWHC 795 (KB): indemnity costs after a discontinued libel claim

In Full Colour Black Limited v The artist known as “Banksy” & Anor [2026] EWHC 795 (KB), Mr Justice Nicklin considered the costs consequences of the discontinuance of a libel claim brought by Full Colour Black Limited, trading as Brandalised, against Banksy and Pest Control Office Limited. The substantive libel action had been discontinued before determination. The question was whether the ordinary rule following discontinuance was sufficient, or whether the case justified a more serious costs sanction.

The Court held that it did not fall within the ordinary run of discontinued litigation. FCB was ordered to pay the Defendants’ costs on the indemnity basis from 10 October 2023. The judge concluded that the proceedings had been pursued in a manner, and for purposes, which were unreasonable to a high degree and outside the norm. Central to that conclusion was the finding that the libel proceedings had been used as a means of exerting pressure by reference to Banksy’s well known concern to preserve his anonymity. The separate application for a non-party costs order against Andrew Gallagher, FCB’s sole director and shareholder, was however refused.

Factual background

The judgment places the libel claim in the context of a much longer commercial conflict. FCB had for years commercially exploited photographs of Banksy’s works on merchandise. The Defendants’ position, repeatedly maintained, was that this involved unauthorised commercial exploitation of the underlying artistic works and could not lawfully be justified merely by reference to copyright in photographs. Nicklin J accepted that FCB’s business model, at least so far as Banksy works were concerned, was legally precarious because copyright in a photograph does not displace copyright in the underlying artistic work. The judgment traced a history of disputes stretching back more than a decade, including repeated complaints by or on behalf of Banksy and repeated efforts by Mr Gallagher to press for a confidential commercial arrangement under which FCB could continue exploiting the works. That historical correspondence mattered because it showed a recurring theme: references by Mr Gallagher to the consequences for Banksy if litigation forced public scrutiny of his claims and identity.

The immediate dispute arose from the 2022 GUESS collaboration. FCB licensed GUESS to use photographs and digital image files derived from Banksy works in a clothing collection marketed under the description “GUESS X BRANDALISED WITH GRAFFITI BY BANKSY”. The Regent Street store display prominently used imagery derived from Flower Thrower and wording which, on any ordinary view, suggested some form of authorised collaboration. Banksy had given no permission. On 18 November 2022, he posted on Instagram a photograph of the display with the invitation to shoplifters to visit the Regent Street store because GUESS had “helped themselves” to his artwork without asking. The post attracted major public attention, crowds gathered outside the store, and the display was then altered. Pest Control later complained formally to GUESS that the public had been misled into believing that Banksy had authorised or endorsed the collaboration.

FCB’s libel claim followed. In pre-action correspondence the company alleged that the Instagram post defamed it. Proceedings were issued in September 2023 against both Banksy and Pest Control. FCB pleaded that the post meant that it had stolen Banksy’s artwork by licensing images to GUESS without permission or other legal authority. Importantly, the Particulars of Claim also included a sentence stating that FCB reserved the right to seek an order that Banksy identify himself for the purposes of the proceedings. After service, FCB’s solicitors also pressed for Banksy’s full name to be given in the acknowledgment of service. Those steps later assumed substantial importance in the costs dispute.

The issues before the court

The judgment was not a decision on liability for libel. The claim had already been discontinued. The issues were instead costs issues of some significance.

The first issue was whether, notwithstanding CPR 38.6, the circumstances justified an order that FCB pay costs on the indemnity basis. That required the Court to decide whether the conduct of the litigation, viewed in the round, took the case outside the norm.

The second issue was whether Andrew Gallagher should personally bear those costs under section 51 of the Senior Courts Act 1981. That raised the distinct and more demanding question whether, despite the corporate form, it was just to make him personally liable as the real party to the litigation or on the basis of serious impropriety.

The decision therefore sits at the intersection of three themes: costs after discontinuance, improper collateral use of litigation, and the limits of personal costs liability for directors controlling a corporate claimant.

The court’s reasoning

Nicklin J began from orthodox costs principles. Discontinuance does not, without more, justify indemnity costs. Nor is the mere fact that a claim appears weak enough. The question is whether there is conduct or a circumstance taking the case out of the norm and, where the complaint is about conduct, whether it was unreasonable to a high degree. The judge drew in particular on Thakkar v Mican [2024] 1 WLR 4196 and Hosking v Apax Partners LLP [2019] 1 WLR 3347. The latter was especially important because it recognises that, following discontinuance, the Court may look at the documentary record and the way proceedings were pursued in order to assess whether they had become a form of leverage rather than a genuine route to adjudication.

Against that legal background, the judge held that the libel claim was, viewed objectively, without any real prospect of success. That conclusion did not involve a final adjudication on the merits, but it did matter that an honest opinion defence would in all likelihood have disposed of the claim and probably would have done so on a summary judgment application. The judge had already observed that honest opinion was “far and away the strongest defence”. The absence of such a defence from the Defence was treated as tactically explicable: pleading honest opinion would have increased the risk that Banksy himself might need to give evidence, thereby reopening the very anonymity problem the Defendants were trying to avoid.

The decisive feature, however, was not merely weakness of the libel claim. It was the purpose for which the proceedings were used. Nicklin J found that the claim had been pursued as a means of exerting pressure by exploiting Banksy’s desire to remain anonymous. The judge relied not only on the procedural steps taken in the litigation itself, but on the broader documentary history. Earlier correspondence from Mr Gallagher had explicitly raised the prospect that litigation would require Banksy to give evidence and place his identity at risk. Public statements by Aaron Wood over a number of years had made much the same point. That background illuminated the later conduct of the libel proceedings.

Several features of the pleaded and procedural course of the action were treated as confirmatory. First, the Particulars of Claim contained the supposed reservation of a right to seek an order identifying Banksy. Secondly, after service FCB’s solicitors insisted that Banksy provide his full name in the acknowledgment of service. Thirdly, although FCB later did not pursue a naming application and the claim against Banksy was eventually stayed, the Reply then introduced non-admissions as to authorship of the artworks and Banksy’s role in publication, notwithstanding that FCB had earlier positively pleaded publication by Banksy and works “by Banksy”. The judge accepted the Defendants’ submission that this pleading shift had the effect of maintaining the possibility that Banksy might later have to give evidence, and so kept the anonymity pressure alive.

Another important strand in the reasoning was that there was little objective need to sue Banksy personally at all. Pest Control had accepted responsibility for publication at an early stage. In those circumstances, and bearing in mind the remedies sought, the judge considered that there was little legitimate forensic reason to insist on Banksy remaining a defendant. Any proper concern about future publication could have been met in other ways. The decision to name and keep him in the proceedings until case management effectively forced a different position was therefore treated as consistent with an intention to expose him to litigation risk, rather than a need for remedies unavailable against Pest Control alone.

The judge also attached weight to the without prejudice save as to costs correspondence shortly before discontinuance. FCB’s settlement proposals were not confined to compromising the libel proceedings. They sought to link settlement with broader commercial co-existence and a possible future arrangement permitting continued exploitation of Banksy’s works. That did not by itself prove abuse, but it supported the inference that the proceedings were being used as leverage towards a wider commercial accommodation which Banksy had consistently refused.

Finally, the timing of the discontinuance mattered. FCB discontinued after the summary judgment application had been issued and when the prospect of further significant costs had arisen. No satisfactory alternative explanation was advanced for the abrupt abandonment of the case. In the judge’s view, that was consistent with the inference that the proceedings had been dropped once they ceased to serve the pressure-inducing function for which they had been deployed. Taken cumulatively, these features justified indemnity costs from 10 October 2023, the date when the Defendants’ substantive response raised the anonymity issue squarely. The Court was careful, however, to limit the indemnity order to that period rather than all costs from inception.

The reasoning on the non-party costs application was materially different. Nicklin J accepted that Mr Gallagher controlled the litigation and was the company’s directing mind. But that was not enough. The law deliberately distinguishes between conduct sufficient to justify indemnity costs against a corporate litigant and the much more serious step of displacing limited liability by making a director personally liable. The judge referred to Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] 1 WLR 2807 and Goknur Gida Maddeleri Enerji Imalat Ithalat Ihracat Tiracet ve Sanayi AS v Aytacli [2021] 4 WLR 101. He held that the thresholds are not co-extensive. A director’s control, even sole control, and even aggressive or ill-advised litigation strategy, do not automatically make him the real party or justify a finding of the kind of serious impropriety needed for a section 51 order.

Here, any benefit to Mr Gallagher was indirect, flowing through his shareholding. The claim was brought in the company’s name for asserted corporate reputational and commercial loss. There was also insufficient evidence that he had manipulated the corporate form so as to make FCB a deliberately risk-free vehicle, or that his conduct reached the higher threshold of bad faith or serious impropriety required for personal liability. The judge therefore refused the non-party costs application, while observing that the company’s conduct nevertheless fully justified the indemnity costs sanction against FCB itself.

The decision

The Court ordered FCB to pay the Defendants’ costs from 10 October 2023 on the indemnity basis. The application for a non-party costs order against Mr Andrew Gallagher was refused. FCB was also required to make a payment on account of costs, with the amount to be determined if not agreed.

Conclusion

This decision is important is a strong reminder that the costs consequences of discontinuance depend not only on the fact of abandonment, but on the character of the litigation that has been abandoned. A claimant may discontinue, but if the Court concludes that the proceedings were being used as an instrument of leverage rather than adjudication, indemnity costs may follow.

Secondly, the judgment is an example of the Court looking at litigation in its full commercial and forensic context. Nicklin J did not confine himself to the formal pleadings. He examined the history of dealings, the way the claim was framed, the use of anonymity points, the media statements, the tactical pleading choices, the settlement correspondence, and the timing of the discontinuance. For media and defamation practitioners, that is a useful illustration of how a court may reconstruct objective purpose from the documentary record.

Thirdly, the judgment demonstrates that the presence of an arguable reputational complaint does not immunise a claimant from adverse costs consequences where the process is used for a collateral end. The Court’s conclusion was not simply that FCB had pursued a weak libel claim. It was that the claim had been pursued in a way that weaponised the pressure created by the possibility of Banksy’s unmasking.

Fourthly, the refusal to make Mr Gallagher personally liable preserves the distinction between strong judicial criticism of litigation conduct and the exceptional step of piercing the shield of limited liability for costs purposes. That distinction matters in cases involving owner-managed companies. Even where the director is plainly the strategist and the company’s case attracts severe criticism, section 51 remains a separate and more demanding jurisdiction.

For claimants, defendants, insurers and solicitors alike, the practical lesson is clear. Costs risk after discontinuance turns on forensic purpose as much as forensic outcome. Where a court concludes that proceedings were maintained as commercial pressure rather than a bona fide route to judgment, the consequences may be severe. But where personal liability is sought against those behind a corporate litigant, the court will still insist on a careful and separate analysis.

Further Reading

• Defamation Solicitors (Libel and Slander)
• The Honest Opinion Defence in English Defamation Law
• Qualified Privilege in Defamation
• Defamation Defences
• Elphicke v Times Media Ltd [2025] EWHC 1554 (KB)

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