Court gives interim costs guidance

In the recent case of Dana Gas PJSC v Dana Gas Sukuk Ltd & Ors [2018] EWHC 332 (Comm), the Court has given useful guidance on its approach to assessing a reasonable sum when ordering a payment on account of costs.

The Fifth Defendant (BlackRock) intervened in the proceedings following the granting of an injunction in Sharjah in the United Arab Emirates. The Sharjah injunction prevented the original four Defendants and the Claimant (Dana Gas PJSC) from proceeding with the litigation before the English court and had been obtained by three shareholders of the Claimant only the day before the trial of the English action was due to start.

On the day of the trial, BlackRock applied to the English court without notice for and obtained an interim anti-suit injunction prohibiting the Claimant from pursuing or taking any steps in the Sharjah proceedings. Following the hearing, BlackRock was added as a Defendant to the English action and directions were given for the trial of a preliminary issue of English law.

Judgment on the preliminary issue was handed down on 17 November 2017, with BlackRock the successful party. The Claimant was ordered to pay BlackRock’s costs of the preliminary issue trial, including the costs of its applications to be joined to the proceedings and the interim anti-suit injunction and the costs of opposing adjournments. An estimate of those costs was put forward totalling £408,000.00, of which 60% was requested as a sum on account.

A second costs order was made by the Court in relation to a number of applications and cross applications in the matter of which BlackRock was the successful party. A further costs statement was put forward, totalling £1,473,087, of which BlackRock requested 60% to be paid on account.

On assessing the reasonableness of these requests, the Court referred to CPR 44.2(8) i.e. the requirement for the Court to identify “a reasonable sum on account of costs”. The matter of Excalibur Ventures LLC v Texas Keystone Inc was considered, and the Court felt the correct approach was to start by estimating the amount of costs likely to be recovered on a detailed assessment and then to discount this figure by an appropriate margin to allow for error in the estimation. One particular point made by the Court was the question of there being an overpayment by the Paying Party and the difficulties that may be encountered in recovering that overpayment. That was a situation the Court wished to avoid, hence the cautious approach adopted.

The Court, very helpfully, indicated a number of factors to be taken into account when ordering an interim payment. This included the difficulties, if any, that may be faced in recovering the costs award; the likelihood of a successful appeal; the financial means of the parties; the imminence of any assessment; any relevant delay and whether the paying party is likely to have difficulty in recovering an overpayment.

The Court then considered the actual level of costs claimed, and its constituent parts, in particular, the hourly rates sought, the proportion of work done by Grade A fee earners, representation at Court hearings and the level of Counsel fees. Having taken these factors into consideration, with regard to the first costs order, the Court believed a reasonable recovery on assessment would be in the range of £200,000-£250,000 (against the £408,000 claimed). Building in the margin for error as outlined, the Court ordered a sum of £175,000.00 to be paid on account. Applying the same factors to the second costs order, the Court estimated that a reasonable recovery on assessment would be £300,000-£400,000 (against £1,473,087 claimed). The Court ordered an interim payment of £250,000 against these costs.

This Judgment gives a valuable insight into how the Courts will assess a reasonable amount to be paid by way of interim costs and it is worth bearing in mind the need for detailed reasoning in support of the sum sought, giving, for example, justifications for significant hourly rates or the level of Counsel fees.