CPR 44.2 (8)
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.
Travers v Poole Hospital NHS Foundation Trust – case no. C00LV184 – Liverpool County Court. District Judge John Baldwin agreed an interim payment of £7,780 (approximately 55%) based on rules amended in April 2013 which changed the emphasis from a discretionary ‘may order’ to a qualified mandatory ‘will order’ – ‘unless there is good reason not to do so’.
Dyson Appliances Ltd -v- Hoover Ltd (No.4)  EWHC 624 (Pat),  1 WLR 1264. The claimant accepted a payment in, entitling it to its costs. Before Laddie J, who had little knowledge of the case, it sought an interim payment before assessment. Laddie J said this: “Unlike either the costs judge at the interim certificate stage or Jacob J in Mars, I know very little about this case save that it has been fought on a grand scale and that very large sums of costs are involved. I am loathe to exercise an important discretion like this in favour of ordering an interim payment when doing so would achieve little, for the reasons I have already indicated. It would look more like playing roulette, than making an informed and reasoned assessment.” He went on: “In deciding how to exercise my discretion I take into account not just CPR 44.3.8 but the knowledge that the costs judge will be in a position to do a fairer job of ordering an interim payment under the powers that he has under CPR 47.15. The sums of money involved in this dispute are far too large to justify shooting from the hip. It seems to me preferable for the costs judge to consider taking a more careful aim than that. For these reasons I will not make an order for interim payment.”
Streetmap.EU Ltd v (1) Google Inc. (2) Google Ireland Ltd (3) Google UK Ltd (2016) Ch D (Roth J). Although it was appropriate to order that the successful defendant to a competition claim was entitled to a £1.6 million payment on account of its costs, enforcement of that order over the amount of £1 million was stayed pending final determination of the claimant’s appeal.
Aliston Albert Ashman v Clyde Caulson Thomas  EWHC 1810 (Ch) – Master Matthews. A request for an interim payment was made after the parties had agreed the judgment order and judgment had been handed down but before the judgment order had been sealed. Master Matthews held that there was no reason why the Court should not amend an order that had been made (but had yet to be perfected/sealed) to include provision for an interim payment of costs. Although the judgment was effective, the Court retained a right to amend and refine the precise terms of the Order up until the time it was sealed. See also the following decisions which support the position that the court can change its order before the order is perfected: Re Barrell Enterprises  1 WLR 19, CA and In the matter of L and B (Children)  UKSC 8.
Culliford & Anor v Thorpe EWHC 2532 (ch) – HHJ Paul Matthews (Sitting as a Judge in the High Court) – The trial judge had overlooked CPR 44.2(8) i.e. making an interim payment order when making the final Order. After the Order was sealed, the receiving party raised the issue with the paying party and an application for an interim payment followed. The paying party’s position was that the only appropriate mechanism for an interim payment was that contained in CPR 47.16(1) i.e. when an assessment hearing had been requested and, therefore, the Court had no jurisdiction to make a new order. The receiving party’s position was that they should not be forced to wait for the detailed assessment of the costs. In Ashman v Thomas, no order had been made for a payment on account in the final order but before the order was sealed, the Court was asked to amend the order, whereas in Culliford, the receiving party was asking the Court to make a new order. However, the Court found that there was nothing in the rules or authorities supporting the view that, if an application for an interim payment is not made at the time of the costs order, the next opportunity arises only after the detailed assessment proceedings have commenced. The Court concluded that it had jurisdiction and a discretion to make the order sought.
FAILURE TO MAKE A PAYMENT ON ACCOUNT
Nabila Kamal Soliman -v- Islington London Borough Council 2001 (Crane J – 16.07.2001). Judgment had been entered by consent for damages with costs to be assessed if not agreed. In the circumstances, it had been unreasonable for the Defendant’s insurers not to have conceded the principle that a payment on account of costs was appropriate. Costs of the subsequent application for an interim payment were allowed on the standard basis only.
Days Healthcare UK Ltd (formerly Dats Medical Aids Ltd) -v- (1) Pihsiang Machinery Manufacturing Co Lotd (2) Pihsiang Wu (3) Chiang Ching Ming WU . The paying party had refused to comply with an order requiring him to make an interim payment of the receiving party’s costs. The costs judge had the power to make an order stipulating that unless the order was complied with, the receiving party would be entitled to the full amount of the costs sought.
GENERAL PRINCIPLES AND LEVEL OF PAYMENT ON ACCOUNT
The general level of payment usually allowed was for, a Standard Basis assessment, about 50% – 60%. For an Indemnity Basis assessment, this may increase to about 60%-70% (or roughly 10% more than what might be have been allowed if the costs were to be assessed on a Standard Basis) [Hurndell -v- Hozier  EWHC 321 (Ch) Justice Morgan]. However, more recently, things have changed with the impact of the costs management rules.
Mars UK Ltd -v- Teknowledge Ltd (No. 2)  IP & T 26, Jacob J. Before costs are assessed under CPR 44.3(8), the court should “on a rough and ready basis” also (normally) order an amount to be paid on account to the successful party, the amount being a lesser sum than the likely full amount. The payment on account should be for such amount “which he will almost certainly collect“. In this instance the Judge allowed 2/3rds of the amount likely to be recovered on assessment.
Beach -v- Smirnov  EWHC 3499 QB, Ouseley J. An interim payment should be for a sum that was “an irreducible minimum of costs which I am going to order to be paid – a sum which is very likely to be exceeded by the order following detailed assessment”
Cummings -v- Blackmore  EWCA Civ 1276,  1 WLR 983. The Claimant succeeded at a High Court trial in March 2005 and the judge awarded him his costs. At the time, his costs were estimated to be £382,000 and the judge ordered £100,00 to be paid on account. The Claimant commenced detailed assessment proceedings in August 2007. The bill of costs was for a sum of almost £500,000. The Defendant failed to serve points of dispute in time resulting in a default costs certificate. The certificate was set aside in January 2088 and the Defendant served points of dispute in April 2008. The district judge refused the Claimant’s application for a further payment on account. The Claimant’s appeal was allowed. The correct test was that, if there was a sum in excess of £100,000 which the court was almost certain would be awarded ultimately by way of costs, then a further interim payment in that sum should be ordered. In allowing the further appeal, it was held (1) the principle that the receiving party should not be kept out of money, that will almost certainly be due to him, any longer than is necessary is an important consideration which normally carries significant weight but gives rise to no presumption and; (2) it is a matter to be considered by the court along with all other material factors which vary from case to case when exercising the wide discretion given by r.44.3(8). Mars UK Ltd v Teknowledge Ltd  F.S.R. 138; Dyson Ltd v Hoover Ltd. (No.4)  EWHC 624 (Ch);  1 W.L.R. 1264.
Webster -v- Ridgeway  EWHC 318 – Mr Justice Nichol. “Where a litigant has a costs order in his favour there may well be some inevitable delay where the precise amount to which he is entitled is ascertained by a detailed assessment. Yet if he is bound to receive a certain part of those costs there is no justification in making him wait even for that part.‘
Fitzroy Robins -v- Mentmore Towers  EWHC 98 – Mr Justice Coulson. Awarded 50% where costs were to be assessed on the Standard Basis.
Scullion -v- Bank of Scotland  EWHC 225. Awarded 53.47% i.e. £100k where costs were to be assessed on the Standard Basis and the bill was estimated at £187,000.
Gollop -v- Pryke ChD 29.11.2011. There was no rule that the Court should be conservative or that the payment on account should be the ‘irreducible minimum’ of what would be awarded by way of costs.
United Airlines Inc -v- United Airways Ltd  EWHC 2411 (Ch). The Court should undertake a reasonable assessment of what was likely to be awarded by way of costs on assessment.
Oakhurst Property Developments (Lowndes Square No.2) Limited -v- Blackstar (Isle of Man) Ltd  EWHC 1131 Ch – Mr Justice Morgan. Awarded 50% of the sums claimed.
INDEMNITY BASIS COSTS ORDERS:
Digicel St Lucia -v- Cable & Wireless  EWHC 288 – Mr Justice Morgan. Awarded £8m interim payment (58.9%) on account of indemnity costs.
Rutherford -v- Seymour Pierce  EWHC 375 (QB) – Mr Justice Coulson. Ordered costs to be assessed on the indemity basis with a payment of £45,000 out of £63,000 (71%).
Hurndell -v- Hozier  EWHC 321 (Ch) – Mr Justice Morgan. Guidance given on the on amount of an interim payment. Morgan J agreed with the receiving party’s suggestion that where costs are to be assessed on the indemnity basis, at least 60% should be paid on account. He was also assisted, however, by a detailed breakdown of the costs which been incurred.
Mireskandari -v- The Law Society  EWHC 321 (Ch) – Mr Justice Henderson. Payment on account of £650,000 (60.07%) of costs to be assessed on the Indemnity Basis.
Excalibur Ventures LLC v Texas Keystone Inc  EWHC 566 (Comm) – Lord Justice Christopher Clarke. Payment on account of 80% awarded.
Clarke LJ:  “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 COSTS BUDGETED CASES
Thomas Pink Ltd -v-Victoria’s Secret UK Limited  EWHC 3258. The Claimants applied for a payment on account of costs in a budgeted case where the parties agreement on ‘incurred costs’ had been recorded and the Claimants budgeted costs would be limited to the amount in the budget if there was no good reason to depart from it on detailed assessment. The Court accepted that the impact of costs budgeting on interim payment awards is very significant but not to the extent that the court was persuaded to make an award of 100% of the budgeted costs. The Court considered that the vagaries of litigation meant that it was possible that the assessed costs will be less. The court awarded an interim payment of 90% of the sum in the Claimant’s entire budget rounded up to the nearest thousand because ‘incurred costs’ had been agreed. [NB: Had the incurred costs not been agreed, the court may have ordered 90% of budgeted costs but applied the usual basis (Mars v Tecknowledge) to the incurred costs i.e. 50-60%].
Capital For Enterprise Fund ALP and Maven Capital Partners UK LLP v Bibby Financial Services Ltd  6 Costs LR 1059. The Court directed that the Defendant should recover 70% of its costs of and occasioned by the claim. When ordering an payment on account, the Court commented that Thomas Pink Ltd -v-Victoria’s Secret UK Limited did not establish any principle other than that the level of the payment on account should be higher in a case where there has been cost budgeting than in cases where there has not. To order a payment on account of 90% of the approved budget, the court must have a high level of confidence that the receiving party will recover at least 90% of its budgeted costs on assessment. in this case, the Court awarded 80% of 70% of the Defendant’s budget.
Tibbs -v- Knight 2000. The court had a discretion to control excessive charging by trustees in bankruptcy at the behest of the bankrupt by ordering a detailed assessment of the trustee’s charges (at least where the estate was solvent). However, such an order would only be made where a prima facie case of overcharging was made out. There was no reason to refuse an immediate interim payment of the trustee’s charges pending such an assessment.
Harmon CFEM Facades (UK) Ltd -v- The Corporate Officer of the House of Commons 2000. Irrecoverability, as a result of liquidation, was not a bar to an order under CPR 25.7.1 for an interim payment.
(1) Rupert Allason (2) Westintel Research Ltd -v- Random House UK Ltd 2002. Where the party ordered to pay costs had limited resources the court would not force the receiving party to commence detailed assessment before ordering an interim payment.
RECOVERY OF THE BALANCE OF AN INTERIM PAYMENT WITH INTEREST
Bim Kemi -v- Blackburn Chemicals Ltd  EWCA Civ 889. Bim Kemi were ordered to repay costs paid by Blackburn Chemicals with interest. The Court awarded interest at 1% over base rate, the interest to run from the date when the costs were paid. NB: Parties will often include the following statement when making a payment on account: “In the event that costs are agreed or assessed at a lower amount, we reserve the right to recover any balance due plus interest, pursuant to CPR 44.3 (6)(g) and in accordance with the authority of Bim Kemi v Blackburn Chemicals Ltd  EWCA Civ 889”
HEAVY COMMERCIAL MATTERS
Dana Gas PJSC v Dana Gas Sukuk Ltd & Ors  EWHC 332 (Comm) – Lord Justice Legatt – The Court indicated a number of factors to be taken into account when ordering an interim payment. These 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 (a claim for costs of £408,000) the Court believed a reasonable recovery on assessment would be in the range of £200,000-£250,000. Building in a margin for error, the Court ordered a sum of £175,000.00 to be paid on account (42%).
Applying the same factors to the second costs order (a claim for costs of £1,473,087) the Court estimated that a reasonable recovery on assessment would be £300,000-£400,000. The Court ordered an interim payment of £250,000 against these costs (16.97%).