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 in the detail assessment process (as to what are recoverable costs), than it might 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].

Update: four further cases

Fourt cases to consider are:

(1) Taylor v Savik [2024] EWCC 10, HHJ Matthews sitting in County Court at Bristol on 1.10.24, from paragraph 17[4].

(2) Dexiz SA v Regione Emilia Romagna [2024] EWHC 3238 (Comm), Bryan J, from paragraph 11[5];

(3) Magomedov v TPG Group Holdings (SBS) LP [2025] EWHC 304 (Comm) (see below); and

(4) Yerbury v Azets Hlodings Ltd [2025] EWHC 758 (KB)[6]

Update: Magomedov

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) issued 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.'

SIMON HILL © 2023-2025

BARRISTER

33 BEDFORD ROW

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