Where the court orders a party to pay costs subject to detailed assessment, the party (the 'paying party') has been ordered to pay the other party's (the 'receiving party') costs, but the exact amount to pay, is to be quantified later, through a process known as a detailed assessment.

However, that detailed assessment process can take time, and the issue arises, should the paying party pay to the receiving party, a sum of money in the interim, while the exact quantification of costs remains still to be determined.

Where the CPR applies, CPR r.44.2(8) will govern the situation. CPR r.44.2 is entitled ‘Court’s discretion as to costs’ and r.44.2(8) reads:

‘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.’

As will be apparent, where the court does so order[1] a party (the paying party), to pay the receiving party's costs, subject to a detailed assessment, the court must (by the word 'will') order the paying party to pay to the receiving party, a reasonable sum on account of costs, unless there is good reason not to do so.

A few observations can be made on this:

(1) the purpose of the rule, is to enable the receiving party to receive a payment towards some of its expenditure on legal fees, so that it is not kept 'out of pocket' for the whole sum while the detailed assessment process progresses towards a final determination (if no agreement on quantum can be reached between the parties). For receiving parties with limited funds, this interim payment may ease financial difficulties, which might otherwise have pressurised the receiving party to settle for a lower sum than it might otherwise be entitled to, just to get early payment. It may also reduce the incentive on the paying party, to delay and prolong/protract the detailed assessment process[2].  

(2) In Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC 566 (Comm) (‘Excalibur Ventures’), Christopher Clarke LJ in the High Court observed:

'Under the new rule there is … a presumption that a payment will be made, subject to an exception, and a specific criterion as to amount.’ (Paragraph 14)

(3) In Bank St Petersburg PJSC v Arkhangelsky [2018] EWHC 2817 (Ch) (Hildyard J) the judge rejected a submission that inability to pay could constitute good reason for not making an interim payment order on account of costs, under r.44.2(8);

(4) There is no rule that the amount ordered to be paid on account should be the “irreducible minimum” of what may be awarded on detailed assessment. In Excalibur Ventures, Christopher Clarke LJ said, at paragraphs 22 to 24:

‘…It is clear that the question…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.

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.

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.’ [bold added]

In Excalibur Ventures, 80% of the sum claimed was held to be a reasonable figure in that case (paragraph 25)(though 60% was found reasonable in relation to certain Costs Claimants (paragraph 39))

In Boyle v Govia [2022] CAT 54 ('Boyle'), Marcus Smith J sitting the Competition Appeal Tribunal (as Sir Marcus Smith President of the Competition Appeal Tribunal) said, at paragraph 4:

‘It is common ground that the Tribunal may order a payment on account of costs. The principles governing the amount of costs to be ordered on account are not in dispute: the court or tribunal should seek to order a realistic estimate of the reasonable costs likely to be determined on detailed assessment, with an appropriate margin to allow for an overestimate: Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC 566 (Comm).’

(5) it must be recalled that, when determining the quantum of an order for an interim payment on account of costs, the judge is not undertaking a summary assessment of costs. The assessment of costs for the purposes of a final costs order, will come later. It is therefore not appropriate for the court when determining the quantum of an order for an interim payment on account of costs, to undertake an intensive review of the receiving party's cost schedule(s). In Boyle, Marcus Smith J said, at paragraph 10:

‘This is not a summary assessment of costs and I need to look at the matter in the round for the purpose of an interim payment. As set out by the Tribunal in Gutmann v London MTR South Western Trains Limited and Others [2021] CAT 36 at [54], it is not appropriate for me to conduct an intensive review of a costs schedule for the purpose of arriving at an interim payment.’[3].

SIMON HILL © 2023

BARRISTER

33 BEDFORD ROW

NOTICE: This article is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of Chambers or by Chambers as a whole.