[1] Two situations can also be noted:

(1) where a claim is discontinued under CPR r.44.9, so a costs order is deemed to have been made, the court has jurisdiction to order an interim payment on account of costs - Barnsley v Noble [2012] EWHC 3822 (Ch) (Proudman J).

(2) where there has been acceptance of a Part 36 offer within the relevant period, the court may also order an interim payment on account of costs - Global Assets Advisory Services Ltd v Grandlane Developments Ltd [2019] EWCA Civ 1764.

[2] See:

(1) Days Healthcare UK Ltd v Pihsiang Machinery Manufacturing Co Ltd [2006] EWHC 1444 (QB); [2006] 4 All E.R. 233 (Langley J); and

(2) Mars UK Ltd v Teknowledge Ltd [2000] FSR 138 (Jacob J) at 153

[3] In Gutmann v London MTR South Western Trains Limited and Others [2021] CAT 36, the Competition Appeal Tribunal (Roth J with 2 others) said, at paragraphs 54 and 55:

'The Applicant reminds us that an interim payment should seek to reflect an estimate of the likely costs that will be recovered, with an appropriate margin to allow for an over-estimate: Excalibur Ventures LLC v Keystone Inc. [2015] EWHC V566 (Comm) per Christopher Clarke LJ at [22]-[24]. However, it is not appropriate to conduct an intensive review of a costs schedule for the purpose of arriving at an interim payment, and in light of the considerations set out above we find it difficult to come to a reliable estimate of the likely recovery in this case. Accordingly, we consider that the fair approach is to apply a very substantial reduction to the total in the revised costs schedule. Taking a very broad brush approach, we therefore adopt a round figure of £1 million (plus VAT).

Applying 65% to that figure (since there is no attempt to split off costs for resisting the applications for summary judgment), produces £650,000 + VAT. We therefore order that the Respondents pay a total of £780,000. Subject to any application to vary the date, that sum is to be paid within 21 days.'

[4] In Taylor v Savik [2024] EWCC 10, HHJ Matthews sitting in County Court at Bristol on 1.10.24, said under the heading 'Payment on account of costs', from paragraph 17:

'Issue (iii) relates to payment on account, under CPR rule 44.2(8). In Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC 566 (Comm), Christopher Clarke LJ said: LJ

"22. It is clear that the question, at any rate now, is what is a 'reasonable sum on account of costs' …

23. What is a reasonable amount will depend on the circumstances, the chief of which is that there will, by definition, have been no detailed assessment and thus an element of uncertainty, the extent of which may differ widely from case to case as to what will be allowed on detailed assessment. Any sum will have to be an estimate. A reasonable sum would often be one that was an estimate of the likely level of recovery subject, as the costs claimants accept, to an appropriate margin to allow for error in the estimation. This can be done by taking the lowest figure in a likely range or making a deduction from a single estimated figure or or perhaps from the lowest figure in the range if the range itself is not very broad.”

The trustee and the first respondent agree that a payment on account should be made, but disagree on quantum. The first respondent asks for £207,081.07, and the trustee offers £120,000 (increased from an earlier offer of £80,000). In cases where costs budgeting was carried out, and a costs management order made, the court will pay close attention to the budget. But there was no such budgeting here, and no such order.

The first respondent says she has incurred total legal costs of £267,049.98, though this does not include costs allowed to a litigant in person at the prescribed rate. She accepts that she was ordered to pay the trustee’s costs of particular applications, and must deduct from her total costs her own costs of dealing with those applications. She has estimated these at just under £20,000, and therefore claims the reduced sum of £247,509.98. To that sum she has added £11,341.36 by way of estimated interest, making a total of £258,851.34.

The first respondent asks for 80% of that total if her costs are to be assessed on the indemnity basis, or 70% if they are to be be assessed on the standard basis. She relies on the lengthy and complex nature of the proceedings, what she says is the ease of recovery of any overpayment (given that the first respondent owns a property), the lack of suggestion of any appeal, the fact that the trustee was funded by insurance, and the likelihood of an assessment in the short term.

The trustee challenges the high proportion of partner time in Thrings’ costs (299.5 hours out of 447.6), and the use of average hourly rates, which exceed the guidelines. She also challenges costs incurred by Elliot Mather, the first respondent’s solicitors in the POCA proceedings, and QCH Legal, who did work in connection with the restrictions registered on the land register.

It is undesirable for me at this stage to delve too deeply into these matters, but I say that, at first sight, these points are, at the least, worth further investigation in due course. I accept that the first respondent points to factors complicating and lengthening the proceedings, which she says justify so much partner time and at higher rates, but still I need to reflect the challenges in my assessment of the "reasonable sum".

The trustee also says that the "fact of duplication of work by Mr Timson cannot be doubted”, and that “there must be a serious risk that R1 will not readily repay any overpayment to her..." As to the first point, duplication of effort is not the point. Instead, it is whether the costs were reasonably incurred and reasonable in amount. As to the second, I doubt on the facts here that the risk is anything like as serious as the trsuteee makes out. I bear these points in mind, but I do not treat them as of any significant weight.

Given that I have decided to order costs on the indemnity basis, I consider that I am justified in ordering a payment on account that is higher than if costs were to be assessed on the standard basis. But in all the circumstances I think that 80% s too high, in a case where there was no costs management and there is much that will need to be examined on assessment.

Overall, I will order a payment on account of two thirds of £258,851.34, that is, £172,567.56. No good reason has been advanced for this to be payable in other than the usual 14 days' time, especially since it is three weeks since my judgment was handed down. The convenience of insurers is not a good reason...'

[5] In Dexiz SA v Regione Emilia Romagna [2024] EWHC 3238 (Comm), Bryan J said, at paragraphs 11, 12 and 14 (Brescia is seemingly a reference to Deutsche Bank and Dexia v Provincia di Brescia [2024] EWHC 2967 (Ch), Hildyard J):

'There should also be a substantial interim payment on account in respect of those costs under CPR 44.2(8). That interim payment should reflect an assessment of Dexia’s likely level of recovery, with an appropriate margin for error, and take account of all the circumstances: see Excalibur Ventures LLC v Texas Keystone Inc and Ors [2015] EWHC 566 (Comm) at [14]–[24].

I am satisfied that, as in Brescia, a reasonable payment on account in circumstances where the costs are to be assessed on the indemnity basis is 80% of the amount claimed in the Statement of Costs, i.e., 80% of £594,762.17, which is £475,809.73. Indeed, I consider that that is a conservative figure in circumstances where Dexia’s costs in this case are significantly lower than either of the banks in Brescia, where the interim payment was set at 80% (above the 75% sought by the banks). I am also satisfied that there is also no risk of Dexia being unable to repay any amounts if that becomes necessary following detailed assessment.

...

Accordingly, and for the above reasons, I order Emilia Romagna to pay ... an interim payment on account of those costs in the sum of £475,809.73.'

[5a] In Magomedov v TPG Group Holdings (SBS) LP [2025] EWHC 304 (Comm) ('Magomedov'), Bright J on 14.2.25 considered the law on interim payment on account of costs. 

On 17.1.25, Bright J had handed down judgement '...on the substantive merits of the various Defendants' applications for summary judgment and/or challenging the jurisdiction of the court.' (paragraph 1). The Defendants were successful. On consequential matters, including costs, there was:

(a) agreement reached between the Claimants and some of the 22 Defendants, but,

(b) issues still to be determined (paragraph 3):

(i) the quantum of interim payments (including whether there should be any interim payment to 14th Defendant and to 21st Defendant and 22nd Defendant); and

(ii) the timing of any payments to be made in excess of the security sums held by the Claimants' solicitors, Seladore.

Interim payment on account of costs - quantum

As to the quantum of an interim payment on account of costs, Bright J said, at paragraph 4:

'It is well established that assessing the quantum of an interim costs order does not require the court to establish the irreducible minimum. The court should estimate the likely level of recovery, subject to an appropriate margin to allow for error. The court very often goes about the task by applying a percentage reduction to the costs actually incurred by the successful party. However, in any given case, the court's approach will reflect the circumstances of the particular case.'

Bright J then dealt with three particular features of the Magomedov case/claim for interim payment on account of costs:

(a) substantial costs sums incurred. At paragraphs 5 and 6, he said:

'In this case, one relevant feature was the fact that the sums at stake were extremely large, even by the standards of this court. Another was that the hearing was unusually lengthy and the issues were numerous and intricate, by the standards of the average hearing on summary judgment/jurisdiction.

These points alone made it inevitable that the costs incurred would be very substantial. So, therefore, must be the sums ordered as interim costs.'

Some of the main parties put in cost claims of c.£2.5m each, others with figures around c.£700,000 and still others, around £300,000.

(b) security for costs sums dealt with 9 months earlier. At paragraphs 7 and 8, he said:

'It is also noteworthy that there was a lengthy hearing in May 2024 on security for costs, for which most of the Defendants provided estimates of the costs they expected to incur at the hearing, which were then the subject of some discussion and analysis before I ordered the quantum of security to be provided in relation to each relevant Defendant. This gave rise to a debate between the parties, following my judgment, as to the relevance of the parties' estimates in May 2024, and the sums that I said should be secured. The Claimants argued that the May 2024 exercise should be treated as akin to costs budgeting. Most of the Defendants argued that the May 2024 exercise was irrelevant and should be ignored.

'My view on this is that the May 2024 exercise was not carried out as a costs budgeting exercise and it would be wrong to treat it as if it had been. If a party under-estimated or over-estimated in May 2024, this cannot affect the quantum of what would otherwise, objectively, be a reasonable sum to have incurred as costs by January 2025. Furthermore, as often happens, there were a number of developments in the litigation, which could not have been anticipated in May 2024 and which led to there being additional issues and/or additional evidential areas that required investigation. I therefore do not regard it as surprising that some Defendants incurred significantly more costs than they had estimated 8 months earlier. Nevertheless, the earlier estimates provide at least a rudimentary cross-check.'

(c) detailed points on the respective schedules - e.g. on schedules guideline hourly rates

'Several of the parties made detailed points on the respective schedules – for example, by reference to the guideline hourly rates set out in the White Book for the purposes of summary assessment, by reference to the number of counsel involved at various stages and by reference to other specific elements. I found some of these points useful, but I do not consider it necessary to descend to the same level of detail in this judgment. I do note, however, that the guideline hourly rates are not used in detailed assessments, and that this litigation is, furthermore, of a kind that may be thought to justify rates above even the highest guideline bands.'

Bright J then set out his general approach to the applications before him. At paragraphs 10 and 11, he said:

'My general approach is to begin with the costs actually incurred by each Defendant; to consider this both by reference to that Defendant's estimate, in May 2024, and by reference to the significance of the role played by that Defendant at the hearing and in the litigation more broadly; to deduct the appropriate percentage, if I have already ruled that the Defendant should not recover 100% of its costs; then to apply 70% if awarded costs on the indemnity basis and 60% if on the standard basis. I consider that these percentages, applied as I have described, should allow a sufficient margin of error.

This is inevitably broadbrush. However, that is unavoidable in this context. The quantum of the interim payment must be reasonable, but it does not have to be precisely correct. Indeed, it is not expected to be precisely correct. Determining the correct figure can only be achieved by detailed assessment. At that stage, if the interim payment turns out to have been excessive, the party that overpaid will be entitled to reimbursement. The incorporation of a healthy margin of error, before arriving at the figure for the interim payment, should make this unlikely, but the principle is important.'

At paragraphs 12 to 18, he then made his determinations.

Time to Pay

Bright J then turned to the date for payment of the interim payment of account of costs order. The Claimants (the paying party) asking for 3 months to pay, as they did not have ready liquid funds (beyond those with their solicitor, as the security for costs fund). At paragraphs 19 and 25, he said:

The other matter to be resolved in relation to interim payments is the date on which such payments should be made. The Claimants have said that they do not have ready liquid funds to provide further cash in addition to the sums held by Seladore since May 2024 as security for costs, and have asked to be given three months.

It is not clear to me when the Claimants consider this period of three months should start. However, it is relevant to note that my draft judgment was circulated at 13:15 on 3 January 2025. Accordingly, the Claimants have known for approximately 1 ½ months that they faced the prospect of paying substantial costs; and it cannot have come as any surprise to them, any more than it has surprised me, that the costs incurred by the Defendants have in many cases substantially exceeded the sums estimated and awarded as security in May 2024. Accordingly, they should have been making plans for significant payments from no later than 3 January 2025.

Moreover, the Claimants already owe significant amounts in costs that have been awarded to various Defendants at various earlier points in the litigation, some of which have been outstanding for some time.

Precisely who is providing the funds for the Claimants' legal expenses, and from where, is unclear... For the purposes of the costs awards in the light of the judgment, the Claimants served the Tenth Witness Statement of Mr Keillor of Seladore. This witness statement stated, on the basis of information given to Mr Keillor by Mr Daniyal Magomedov (the son of the First Claimant), that it remains the case that the Claimants are not prepared to reveal the names or locations of the entities that hold the funds that have provided funds for the litigation and hold the assets that (it is said) must now be liquidated in order to provide cash to fund interim payments. Nor does this witness statement provide any details as to those assets.

This vague, second-hand evidence is unsatisfactory. Furthermore, even if taken at face value, it confirms that the Defendants have no real prospect of enforcing a court order awarding costs in their favour against the Claimants themselves, and no ready way of enforcing against the funding entities whose details are being withheld.

Above all, the secrecy upon which the Claimants insist makes it impossible for the court to gauge not only the reality of the Claimants' asserted inability to pay promptly, but also the reasons why they failed to take account of the contingent need to do so.

In the circumstances I will allow a further 21 days from the date of this judgment, i.e. until 7 March 2025. This will have the effect of allowing the Claimants over two months from the date when my substantive judgment was circulated in draft. I consider this generous.'

[6] In Yerbury v Azets Hlodings Ltd [2025] EWHC 758 (KB), Sweeting J dealt briefly with the issue of payment on account of costs, where the appellant had been unsuccessful on the appeal before him. At paragraphs 6 to 8, he said:

'The Respondent's submissions on the draft order also addressed the matter of an interim payment on account of costs. Where costs are ordered to be subject to detailed assessment, as is the case here, an interim payment is the default position under CPR r.44.2(8).

The Appellant did not address specifically why an interim payment should not be ordered or its amount, beyond his general argument that there should be no order as to costs. As I have already rejected the Appellant's arguments regarding costs, there is also no reason to depart from the default position in relation to an interim payment.

Therefore, in accordance with CPR r.44.2(8), I will order that the Appellant make a payment on account of the Respondent's costs in the sum of £10,000; being a reasonable assessment at this stage of the minimum sum which the respondent is likely to recover by reference to the schedule of costs but allowing generous room for argument.'

[7] In Barry v Barry [2025] EWHC 819 (KB), Dias J, under the heading 'IV. Issue 5 – payment on account', said, at paragraphs 42 to 55:

'42. The claimants seek a payment on account of costs under CPR 44.2(8). The principle of such a payment is not disputed by the defendant, but the amount is disputed.

43. The claimants seek a payment on account of costs of 60 per cent of incurred costs and 90 per cent of estimated costs from the last budgeted costs (as of 28 February 2025). The defendant does not dispute the principle of payment on account of costs. However, he argues for different amounts. There should be 50 per cent of incurred costs; 90 per cent of costs budgeted in July 2022; and 50 per cent of the revised upward variation granted in February 2025.

44. The court received further written submissions from counsel and is, as ever, grateful to them both. I take the two issues separately and in turn (5A: incurred costs; 5B: budgeted costs).

Issue 5A: incurred costs

45. The claimants submit that as a result of the Part 36 outcome, they should be awarded 60 per cent of incurred costs. The claimant relies on Thomas Pink Ltd v Victoria's Secret UK Ltd [2014] EWHC 3258 (Ch), [2015] 3 Costs LR 463 ("Thomas Pink"), where the court granted just over 50 per cent of incurred costs.

46. The defendant submits that the court should follow the principles set out in two authorities, Cleveland Bridge UK Ltd v Sarens (UK) Ltd [2018] 2 Costs LR 333 ("Cleveland Bridge") at paras 8-22, 31 and Sharp and Others v Blank and Others [2020] Costs LR 835 at paras 18-20 ("Sharp"). The payment on account should be 50 per cent of incurred costs.

Discussion: Issue 5A

47. The starting-point is that assessing the correct proportion of payment on account is always a matter of risk management. Further, incurred costs are not budgeted and thus not subject to court scrutiny let alone approval in the way budgeted costs are. That introduces an element of uncertainty. In Thomas Pink, the court that the correct proportion of incurred costs to be paid on account was 50 per cent. However, in Thomas Pink costs were awarded on the standard basis. There is greater confidence in the instant case as costs will be paid on the indemnity basis. CPR 44.3(3) provides:

"the court will resolve any doubt which it may have as to whether costs were reasonably incurred or were reasonable in amount in favour of the receiving party"

48. This materially affects the risk of overpayment on account as "any" doubt about reasonableness will be resolved in favour of the claimant. That said, the 60 per cent sought by the claimants is too high. The appropriate proportion is 55 per cent of incurred costs. This is the reasonable sum on account of costs that the court can have the requisite confidence will not exceed an estimate of the likely level of recovery, always being alert to and allowing for an appropriate margin of estimation error.

Issue 5B: budgeted costs

49. The claimants' primary position is that there should be no distinction between the different budgeted costs. However, very much as a secondary position, submits that if the court were minded to differ in approach, the 50 per cent figure proposed by the defendant is "far too low". The varied budget figure should be no lower than 85 per cent.

50. The defendant's case is that the costs subject to budget variation should effectively be "treated for the purposes of the payment on account as though they were incurred costs and not budgeted costs." The defendant submits that "the additional costs permitted as a result of the variation to the Claimants' budget should not be treated as budgeted costs to which CPR 3.18 applies. They should be treated in the same way as incurred costs".

Discussion: Issue 5B

51. The key point of embarkation is the principle that budgeted costs provide a reliable starting-point for payments on account because the management process has held them to be reasonable and proportionate ( MacInnes v Gross [2017] EWHC 127 (QB) ("MacInnes v Gross") at paras 25-27, as approved by the Court of Appeal in Harrison v University Hospitals Coventry & Warwickshire NHS Trust [2017] 1 WLR 4456 at para 40 ). However, as recognised in Sharp at para 19, there always remains the possibility of a good CPR 3.18 reason being identified to depart from the budget.

52. Here the defendant acknowledges that the budget variations were "reduced somewhat by the court in the draft judgment". It must follow that they have been subjected to a measure of judicial scrutiny. In light of this reality, the defendant's submission loses much of its force. The defendant advances a false equivalence between the costs in varied budget and incurred costs. As a result, the submission that the "percentage of 50% would be appropriate" – a classically incurred costs percentage - is based on an analysis that does not survive the fact that these budget variations were subject of detailed rival submissions in writing and orally, were partly refused by the court and partly granted. In Thomas Pink, the court ordered payment on account of 90 per cent of all the budgeted costs, including those subject to budget variation. Once more, the fact that costs will be awarded on the indemnity basis is of significance.

53. Doing the best the court can, the amount that should be paid on account as a result of the budgeted costs should be as follows (1) costs budgeted to July 2022: 90 per cent; (2) costs subject to variation granted by the court in February 2025: 80 per cent.

54. The payment of less than the full budgeted costs reflects the possibility that there may be "good reason" in accordance with CPR 3.18 to depart from the budgeted amount (see Cleveland Bridge, para 9, citing Coulson J in MacInnes v Gross). A budget is not a guarantee. Nor is a varied budget. For the varied budget, I make a further reduction from 90 per cent in recognition of the fact that these budgeted amounts did not receive the same degree of scrutiny that would occur at a CCMC. Thus the costs subject to the variation do not have the same level of "approval", to borrow a term from Coulson J, and thus the "degree of confidence" ( Cleveland Bridge, para 16) is correspondingly reduced.

Issue 5: conclusions

55. Therefore, the court orders the following payments on account:

5A: Incurred costs: 55 per cent;

5B: Budgeted costs:

i. As per July 2022 budget: 90 per cent;

ii. Variations granted February 2025: 80 per cent.'

[8] In Cotham School v Bristol City Council [2025] EWHC 1804 (Ch), HHJ Paul Matthews (sitting as a Judge of the High Court), handed down judgment ([2025] EWHC 1382 (Ch)) in a claim, wherein 'The successful party was Cotham, and the unsuccessful parties were BCC and Ms Welham, who both resisted the claim.' (paragraph 7). As to costs:

(1) 'The claimant ("Cotham") seeks an order for its costs of the claim on the standard basis, apportioned as to 10% against the first defendant ("BCC") and as to 90% as against the second defendant ("Ms Welham").' (paragraph 2)

(2) the Judge held that 'There is no reason that I can see not to apply the general rule.' (paragraph 7);

(3) as to apportionment, the Judge held 'I will accede to Cotham's suggestion that BCC should pay 10% of Cotham's costs and Ms Welham 90%, to be subject to detailed assessment if not agreed.' (paragraph 12)

(4) as to interim payment on account of costs, the Judge said, at paragraphs 13 and 14:

'That means that, unless there is a good reason not to do so, I must also order the defendant to pay the claimant "a reasonable sum" on account of such costs: CPR rule 44.2(8). In a case where there is an approved costs budget, the court will have more confidence as to what the costs once assessed may be. In Thomas Pink Ltd v Victoria's Secret UK Ltd [2014] EWHC 3258 (Ch), the judge made an order for a payment on account equal to 90% of the approved budget.

In this case I can see no good reason not to order a payment on account of a "reasonable sum". The issue is thus quantification. Ms Welham takes points on the size of Cotham's costs budget, arguing that some contingent costs were not incurred and that the wrong guideline rates were applied. I am not here trying summarily to assess the costs. They are for detailed assessment. So, I decline to get involved in the detail of these arguments. But because of them I must build in a bigger margin for reduction than I might otherwise do. Cotham asks for a payment on account of 60% of its approved costs budget (leaving a contingent cost not actually incurred out of account). I consider that 40% is a sufficient margin. So, I shall award 60% of the budget: BCC must pay £9,467, and Ms Welham £85,203.'

[9] In Kington SARL v Thames Water Utilities Holdings Ltd [2025] EWCA Civ 1003 ('Kingston'), Sir Julian Flaux Chancellor of the High Court, Lord Justice Zacaroli and Sir Nicholas Patten in the Court of Appeal, gave a single judgment. The judgment followed an earlier judgment, wherein the Court of Appeal had dismissed '...the appeal against the order of Leech J sanctioning the restructuring plan (the "Plan") in respect of Thames Water Utilities Holdings Limited (the "Plan Company").' (paragraph 1). The Kingston judgment, was on the issue of costs of the appeal (paragraph 1). The Court of Appeal held '...the Plan Company was, overall, the successful party and is entitled to a costs order in its favour.' (paragraph 22). 

The Court of Appeal then said 'That is not to say that the Plan Company is entitled to all of its costs.' (paragraph 23) and then '...we consider that the Plan Company is entitled to recover 60% of its costs from TWL and Kington.' (paragraph 26).

Under the heading 'Payment on account of costs', the Court of Appeal said, at paragraphs 27 to 31:

'27. In considering an appropriate amount to order on account of costs, particularly where the costs claimed are as high as they are in this case, the following comment from Leggatt J (as he then was) in Kazakhstan Kagazy PLC v Baglan Abdullayevich Zhunus [2015] EWHC 404 (Comm) is apposite:

"In a case such as this where very large amounts of money are at stake, it may be entirely reasonable from the point of view of a party incurring costs to spare no expense that might possibly help to influence the result of the proceedings. It does not follow, however, that such expense should be regarded as reasonably or proportionately incurred or reasonable and proportionate in amount when it comes to determining what costs are recoverable from the other party. What is reasonable and proportionate in that context must be judged objectively. The touchstone is not the amount of costs which it was in a party's best interests to incur but the lowest amount which it could reasonably have been expected to spend in order to have its case conducted and presented proficiently, having regard to all the relevant circumstances. Expenditure over and above this level should be for a party's own account and not recoverable from the other party. This approach is first of all fair. It is fair to distinguish between, on the one hand, costs which are reasonably attributable to the other party's conduct in bringing or contesting the proceeding or otherwise causing costs to be incurred and, on the other hand, costs which are attributable to a party's own choice about how best to advance its interests. There are also good policy reasons for drawing this distinction, which include discouraging waste and seeking to deter the escalation of costs for the overall benefit for litigants."

28. We note that (i) approximately £1.4 million was incurred by the Plan Company's solicitors and (ii) Counsels' fees (across the three Counsel at the hearing) were in excess of £800,000. The hourly rates for the Plan Company's solicitors (e.g. £1,232 to £1,400 for a partner) are far in excess of the guideline rates, with no real justification offered, other than that this was a complex case. As this Court pointed out in Samsung Electronics Co Ltd v LG Display Co ltd [2022] EWCA Civ 466, per Males LJ at §6, in order to justify departure from the guideline rates "a clear and compelling justification must be provided." Although there are no guideline rates for Counsel's fees, it is important to stress that only a reasonable and proportionate fee may be recovered from the other side: Athena Capital Fund SICAV-FIS SCA v Secretariat of State for the Holy See [2022] EWCA Civ 1061, per Males LJ at §7.

29. In circumstances where the Plan Company instructed more than eight professionals (three Counsel and solicitors across five levels of seniority), where the appeal was mostly confined to issues of law (albeit that Kington's appeal involved a review of the judge's findings on valuation), and where the parties had argued the same issues before the judge only a matter of weeks earlier, we consider that there is a greater than usual risk of overlap between the work done by the various professionals.

30. [Counsel for Plan Company] sought a payment on account of 40% of the claimed costs. That was a conservative estimate, he submitted, of what would be allowed on assessment, taking into account the issues we have identified above. We consider it is not conservative enough, and will order a payment on account of 35%: that would result in the total costs claimed being reduced to a still very generous amount, in all the circumstances, of £791,000. When applied to 60% of the costs incurred, the resulting payment on account, rounded up, is £475,500.

31. Each of Kington and TWL will accordingly be ordered to pay £237,750 on account of the Plan Company's costs.'

[10] In Saipem SpA v Petrofac Ltd [2025] EWCA Civ 1106 ('Saipem SpA'), the Court of Appeal (Snowden LJ; Zacaroli LJ; Sir Christopher Floyd) handed down a judgment which dealt '...with the issue of an interim payment on account of the costs of the proceedings.' (paragraph 1) following their main judgment, handed down on 1.7.25, '...allowing an appeal by the Appellants against the order of Marcus Smith J sanctioning restructuring plans in relation to the Respondents: [2025] EWCA Civ 821.' (paragraph 1). The parties agreed that the unsuccessful respondents (Plan Companies; the 'paying parties') would pay the successful appellant's (Saipem/Samsung; the 'receiving parties') costs (first instance and appeal) on the standard basis (paragraph 2), subject to detailed assessment. However, '...the parties were unable to agree the amount of an interim payment on account of those costs, which are very significant.' (paragraph 3). The receiving parties said their costs were £6.2m and sought a 60% interim payment on account of costs order (so £3.75m) (paragraph 3).

N260 Schedule Required?

An initial point arose. What level of detail must a party that seeks a interim payment on account of costs order, provide to the court and paying party, to support their claim for costs (here c.£6.2m). Initially in Saipem SpA, to support their claim, the receiving parties provided (only) a 'breakdown' - which '...simply listed the total amounts billed by their solicitors...by counsel...and by their financial advisers...' (paragraph 4). The paying parties objected to this, arguing that '...this was not a proper explanation or particularisation of the fees claimed. They contended that [receiving parties] should provide a detailed schedule of costs in accordance with Form N260, which is the form for use in relation to summary assessment of costs in fast track trials and hearings lasting no more than one day as required by CPR PD44 paragraph 9.5. [The receiving parties] responded that they could not provide a schedule in Form N260 in the time available and that the same level of detail required for summary assessment was not necessary for the Court to be able to determine an amount to be paid on account of costs.' (paragraph 5)

As to this, the Court of Appeal in Saipem SpA said, at paragraph 6:

'It is true that the CPR does not prescribe any particular information or form for determination of an interim payment on account of costs. Accordingly, by an order dated 8 July 2025, we directed that [receiving parties], “serve and file a schedule of costs, providing sufficient detail for the Court to determine the amount of a payment on account”. We also set a timetable for the sequential filing of short written submissions.''

The law: interim payments on account of costs

Later, under the heading 'The law: interim payments on account of costs', at paragraphs 21 to 33, the Court of Appeal said:

'21. The power to make an order for a payment on account of costs is contained in CPR 44.2(8), which provides that,

“Where the court orders a party to pay costs subject to detailed assessment, it will order that party to pay a reasonable sum on account of costs, unless there is good reason not to do so.”

22. In Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC 566 (Comm)., Christopher Clarke LJ reviewed the earlier authorities and stated, at §§22-24,

“22. … It is clear that the question, at any rate now, is what is a “reasonable sum on account of costs”. It may be that in any given case the only amount that it is reasonable to award is the irreducible minimum. I do not, however, accept that that means that “irreducible minimum” is the test. That would be to introduce a criterion (a) for which the rules do not provide (b) which is not the same as the criterion for which they do provide; and (c) which has potential drawbacks of its own, not least because it begs the question whether it means those costs which could not realistically be challenged as to item or amount or some more generous test. On one approach it admits of every objection to costs, which cannot be treated as fanciful.

23. What is a reasonable amount will depend on the circumstances, the chief of which is that there will, by definition, have been no detailed assessment and thus an element of uncertainty, the extent of which may differ widely from case to case as to what will be allowed on detailed assessment. Any sum will have to be an estimate. A reasonable sum would often be one that was an estimate of the likely level of recovery subject, as the costs claimants accept, to an appropriate margin to allow for error in the estimation. This can be done by taking the lowest figure in a likely range or making a deduction from a single estimated figure or perhaps from the lowest figure in the range if the range itself is not very broad.

24. In determining whether to order any payment and its amount, account needs to be taken of all relevant factors including the likelihood (if it can be assessed) of the claimants being awarded the costs that they seek or a lesser and if so what proportion of them; the difficulty, if any, that may be faced in recovering those costs; the likelihood of a successful appeal; the means of the parties; the imminence of any assessment; any relevant delay and whether the paying party will have any difficulty in recovery in the case of any overpayment.”

23. It follows that in making any estimate of the likely level of recovery of costs on a detailed assessment, the court will have to consider the tests to be applied on that assessment. The long-standing principle is that costs between litigating parties are given by the law as an indemnity to the receiving party: Harold v Smith [1860] 5 Hurl & N 381. The old rule was that the costs recoverable were limited to the costs which were necessary to enable the receiving party to conduct the litigation and no more: Smith v Buller [1874-1875] LR 19 Eq. 473. Under the CPR, the same basic approach applies, but the test of necessity has been replaced by a requirement that the costs must not have been unreasonably incurred or be unreasonable in amount (CPR 44.3(1)); and (on assessment on a standard basis) that the costs must be proportionate to the matters in issue (CPR 44.3(2)).

24. The recoverable costs of litigation will normally include the fees, charges and disbursements of a party’s solicitors and barristers, together with any experts who give evidence pursuant to orders made by the court under CPR 35. It will be for the party claiming to recover the fees or charges of any other external adviser or person to demonstrate that they meet the tests set out above: see e.g. the role of the forensic accountants whose fees were in issue in R (Factortame) v Secretary of State [2003] QB 381.

25. On the application of the reasonableness and proportionality tests to the quantum of any costs sought to be recovered, in Kington SARL v Thames Water Utilities Holdings Limited [2025] EWCA Civ 1003 at §27, the Court of Appeal referred with approval to the observations of Leggatt J (as he then was) in Kazakhstan Kagazyp plc v Baglan Abdullayevich Zhunus [2015] EWHC 404 (Comm) at §13. Leggatt J emphasised that what a party might subjectively consider reasonable to pay to advance its own interests in litigation is not the relevant test. The relevant test when assessing recoverable costs between the parties is an objective one, and is the lowest sum that the receiving party could reasonably have been expected to spend in order to have its case conducted and presented proficiently,

“In a case such as this where very large amounts of money are at stake, it may be entirely reasonable from the point of view of a party incurring costs to spare no expense that might possibly help to influence the result of the proceedings. It does not follow, however, that such expense should be regarded as reasonably or proportionately incurred or reasonable and proportionate in amount when it comes to determining what costs are recoverable from the other party. What is reasonable and proportionate in that context must be judged objectively. The touchstone is not the amount of costs which it was in a party’s best interests to incur but the lowest amount which it could reasonably have been expected to spend in order to have its case conducted and presented proficiently, having regard to all the relevant circumstances. Expenditure over and above this level should be for a party’s own account and not recoverable from the other party. This approach is first of all fair. It is fair to distinguish between, on the one hand, costs which are reasonably attributable to the other party's conduct in bringing or contesting the proceeding or otherwise causing costs to be incurred and, on the other hand, costs which are attributable to a party’s own choice about how best to advance its interests. There are also good policy reasons for drawing this distinction, which include discouraging waste and seeking to deter the escalation of costs for the overall benefit for litigants.”

26. Some guidance as regards the recoverable level of solicitors’ fees can be obtained from the Guideline Hourly Rates included in Appendix 2 to the Guide. Those figures have most recently been up-dated with effect from 1 January 2025. For “very heavy commercial and corporate work” by centrally based London firms (London band 1) the guideline hourly rates range from £566 for Grade A fee earners (solicitors with over 8 years’ experience) to £205 for Grade D fee earners (trainee solicitors and paralegals).

27. The Guide makes clear, at §27, that the Guideline Hourly Rates are “broad approximations only”, and that in substantial and complex litigation, other factors may justify a significantly higher rate. However, as Males LJ observed in Samsung Electronics Co Limited v LG Display Co Ltd [2022] EWCA Civ 466 at §§4-6, it is not sufficient simply to assert that such factors are present: a clear and compelling justification must be provided,

“4. [The Guide] recognises [at §29] that in substantial and complex litigation an hourly rate in excess of the guideline figures may sometimes be appropriate, giving as examples “the value of the litigation, the level of the complexity, the urgency or importance of the matter, as well as any international element”. However, it is important to have in mind that the guideline rates for London 1 already assume that the litigation in question qualifies as “very heavy commercial work”.

5. LG has not attempted to justify its solicitors charging at rates substantially in excess of the guideline rates. It observes merely “that its hourly rates are above the guideline rates, but that is almost always the case in competition litigation”.

6. I regard that as no justification at all. If a rate in excess of the guideline rate is to be charged to the paying party, a clear and compelling justification must be provided. It is not enough to say that the case is a commercial case, or a competition case, or that it has an international element, unless there is something about these factors in the case in question which justifies exceeding the guideline rate.”

28. Although, by its terms, the Guide relates to a summary assessment of costs, it is nevertheless clear that that the Guideline Hourly Rates also represent a “helpful starting point” for a detailed assessment: see §28 of the Guide. As such, if a payment on account of a detailed assessment is sought by reference to materially higher rates than in the Guide, a clear and compelling justification should be provided: see Thames Water at §28.

29. The same principles as explained by Leggatt J in Kazakhstan Kagazyp are applicable to counsel’s fees, whether charged on the traditional basis of a brief fee and refreshers, or by reference to an hourly rate. Whatever a party may have been willing to pay to secure the services of counsel to advance its own interests, it is only able to recover the lowest amount which it could reasonably have been expected to spend in order to have its case conducted and presented proficiently, having regard to all the relevant circumstances.

30. So, in Athena Capital Fund SICAV-FIS SCA v Secretariat of State for the Holy See [2022] EWCA Civ 1061, after referring to Samsung v LG, Males LJ stated, at §7,

“Counsel’s fees are not subject to guideline rates in the same way that solicitors’ fees are, but it is nevertheless important to stress that, whatever clients may be prepared to pay their own counsel, only a reasonable and proportionate fee may be recovered from the other side.”

31. In Athena Capital Fund, Males LJ also made the point at §8, echoing the policy comments made by Leggatt J in Kazakhstan Kagazyp, that the fact that lawyers on both sides of a case are being paid disproportionately high amounts by their own clients does not absolve the court from its obligation to keep the recoverable costs of litigation within reasonable and proportionate bounds,

“It is a striking feature of the present situation, that although almost every possible point has been taken on both sides in the course of this appeal, there has been no challenge either to the appellants’ solicitors’ hourly rates or to the brief fees and other fees charged by their counsel. However, the costs payable by the losing party on the standard basis are limited to those which are reasonable and proportionate. Where the costs of the paying party are also disproportionately high, that can make no difference. In any event the court will scrutinise cost schedules in order to keep levels of recovery within reasonable bounds.”

32. To similar effect is the comment in the Guide at §11,

“The costs which the paying party has incurred for its own representation may be relevant when considering the reasonableness and proportionality of the receiving party’s costs. However, they are only a factor and are not decisive. Both parties may have incurred costs which are unreasonable and disproportionate, but only reasonable (and, on the standard basis, proportionate) costs may be allowed.”

33. The principles that we have set out above are of particular relevance when assessing the recoverable costs of restructuring litigation. The extraordinarily high level of costs that has been seen in recent Part 26A cases is a matter of very considerable concern, especially given that, by definition, the proceedings relate to the affairs of a plan company that is in financial difficulty. If Part 26A is to have the utility that Parliament plainly intended it to have when it was introduced in 2020, the Court should do what it can to keep costs within reasonable and proportionate bounds.'

On the facts

On the facts, the evidence tendered by the receiving parties was lacking detail. But the headline figures were:

(a) solicitors £3,156,152

(b) Counsel £1,026,120

(c) financial advisors (expert evidence) £ 840,158

(d) financial advisors (financial advice) £1,383,494

Total: £6,405,924

The paying parties said this was excessive, and said £500,000 was appropriate. In the end, the Court of Appeal ordered £2m interim payment on account, after stating;

'...we are unable to estimate the amount that [the receiving parties] are likely to recover on a detailed assessment with any real confidence, we do not consider that we can make an order for a payment on account of anything like 60% of the £6.4 million that they claim. That said, and notwithstanding the manifest deficiencies in the information provided, we think that it is likely that the receiving parties] will recover materially more than the £500,000 offered by the Plan Companies.' (paragraph 43)

The Court of Appeal's analysis is set out, at paragraphs 32 to 42. 

[11] In Ellis v John Benson Ltd [2025] EWHC 2257 (KB), Freedman J said the following, under the heading 'Payment on account of costs', at paragraphs 20 to 21:

'The Represented Claimants seek 90% of the budgeted costs on the basis of an award of indemnity costs. I have not ordered indemnity costs. Nonetheless, it is appropriate to grant a higher percentage than the usual in a case where costs have been budgeted. That is because the Court is entitled to assume that a large percentage of the approved cost budget will be recoverable. The relevant provision is CPR 44.28 which provides where the court orders a party to pay costs "subject to detailed assessment, it will order that party to pay a reasonable sum on account of costs, unless there is good reason not to do so." Even in cases where the order is for cost to be paid on the standard basis, the courts have ordered a payment on account of 90% of an approved costs budget: see MacInnes v Gross 2017 EWHC 127 (QB) and Sheeran v Chokri [2022] EWHC 1528 (Ch). In the latter case, Zacaroli J (as he then was) said at [41]:

"That is because on a detailed assessment the court will not depart from an agreed or approved budget unless satisfied that there is good reason to do so. I propose to adopt the same approach taken by Birss J in Thomas Pink Ltd v Victoria's Secret UK Ltd [2014] EWHC 3258 (Ch) and, taking into account the vagaries of litigation and the possibility of at least some departure on detailed assessment, I will order 90% of those cost which were included in the agreed budget as estimates. That comes to the sum of £810,000."

My provisional view is to order a large payment on account of costs. It should contain a reduction to take into account that just under £13,000 of the costs may be attributed to the Unrepresented Claimants. In the event that JBL wish to persuade the Court to take a different view, they may do so in a very brief submission. I have in mind at the moment a payment on account of 85% of the budgeted costs. Since the handing down of this judgment in draft, the parties have accepted that the payment on account should be by reference to 85% of the budgeted costs, removing such costs as are attributable to the Unrepresented Claimants, but there are issues which may arise as to a stay which have not yet been resolved.'

[12] In Fernandez v Fernandez [2025] EWHC 2530 (Ch), HHJ Paul Matthews (sitting as a Judge of the High Court), under the heading 'Payment on account of costs' said, at paragraphs 29 to 33:

'CPR rule 44.2(8) provides that:

"Where the court orders a party to pay costs subject to detailed assessment, it will order that party to pay a reasonable sum on account of costs, unless there is good reason not to do so".

In Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC 566 (Comm), Christopher Clarke LJ said:

"22. It is clear that the question, at any rate now, is what is a 'reasonable sum on account of costs'…

23. What is a reasonable amount will depend on the circumstances, the chief of which is that there will, by definition, have been no detailed assessment and thus an element of uncertainty, the extent of which may differ widely from case to case as to what will be allowed on detailed assessment. Any sum will have to be an estimate. A reasonable sum would often be one that was an estimate of the likely level of recovery subject, as the costs claimants accept, to an appropriate margin to allow for error in the estimation. This can be done by taking the lowest figure in a likely range or making a deduction from a single estimated figure or perhaps from the lowest figure in the range if the range itself is not very broad."

The total of the respondents’ statement of costs for the appeal was £77,663.91 (including VAT), compared with £67,046.34 (including VAT) for Julian’s. The respondents ask for 60% of their figure, rounded down to £46,000, and payable in 14 days. Julian submitted that it was “inappropriate to rely on the Respondents’ costs schedules”, because they were “inflated and disproportionate”. He commented that appellants’ costs were always greater than respondents’. As he put it, “Responding to an appeal is sitting in the box seat – simply saying the judge below was correct”. The respondents say that they had to spend “time and resources to unpick the sheer volume of mis-directions of fact and law that [Julian] has advanced”.

I cannot resolve this dispute summarily. That must be left to detailed assessment. I have to decide whether to order a payment on account and, if so, in what sum. As to the former question, the rule requires me to make such an order “unless there is good reason not to do so”. So, the burden lies on Julian to persuade me not to. His submissions really go to quantum rather than to the principle, although he does say that where a costs schedule is inflated or disproportionate it would be inappropriate to order a payment on account. I disagree that there is any automatic connection. In the present case I am not satisfied that there is a good reason not to order a payment on account.

As to quantum, there are a number of points that I must bear in mind. One is that the rates sought by the respondents exceed the guideline rates, and will therefore need to be justified. Another is that there are questions raised about some of the specific work charged for by the respondents’ solicitors, and about possible duplication of effort (which can only be resolved on detailed assessment). As Julian says, DJ Wales himself expressed some concerns about the respondents’ costs below. I think I should be cautious, but not over-cautious. I will therefore order Julian to pay a sum equal to 50% of the £77,663.91, that is £38,832 (to the nearest pound) within 14 days.'

[13] This case is not particularly insightful. In CRF I Ltd v Banco Nacional de Cuba [2025] EWHC 2786 (Comm), there was a tripartite situation: 

(a) creditor/assignee (CRF)

(b) principal debtor (BNC)

(c) guarantor (Cuba)

'BNC and Cuba brought a challenge to the English Court's jurisdiction'. BNC's challenge failed. Cuba's challenge succeeded. In essence, CRF was ordered to pay Cuba's costs (the costs of Cuba-specific issues; not common costs), subject to a detailed assessment. As to what level of interim payment was to be ordered, Butcher J faced the challenge that Cuba had not prepared information with just on the costs of Cuba-specific issues. Butcher J said, at paragraphs 23 and 24:

'I considered that it was unlikely to be a sum as low as £200,000-£250,000; and that it was reasonable for present purposes, in the absence of a breakdown of costs by Cuba which reflected the order in its favour, to take the sum of £500,000. That is not to say that Cuba will not be able, once it has performed a proper breakdown, to recover a greater sum, but is the sum which I consider it safe to use for the purposes of the present application.

I will make an order for an interim payment on account of 60% of those costs, namely £300,000.'

Later, at paragraph 27, Butcher J indicated he would make a 'conventional order' that 'CRF shall make the payment of £300,000...to Cuba within 21 days of the date of the order herein.'