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Interim payments at the end of a trial

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Interim payments at the end of a trial

In Lifestyle Equities CV & Anor v Royal County of Berkshire Polo Club & Ors [2023] EWHC 2923 (CH) Mr Justice Mellor considered three issues relevant to costs whether a deduction should be made to the successful parties’ costs; the making of an interim payment, and whether a consequentials hearing should be included in the costs budget, or assessed separately.

The defendants had successfully defeated an action brought by the claimants and the claimants were ordered to pay the defendants’ costs. The consequentials hearing dealt primarily with the defendants’ application for an anti-suit injunction, on which the defendants were not successful. Mellor J then went on to deal with the costs issues.


Whether a deductions should be made to the defendants’ costs

The claimants’ submissions that the defendants’ costs should be reduced by a percentage was rejected by the judge. The claimants’ had accepted that the defendants were the winners but contended that their costs should be reduced by 20% on the basis of the defendants’ claims of abuse and threats which were abandoned at trial; the fact that he defendants conduct necessitated a Notice to Admit Facts by the claimants along with much related correspondence; the denials of joint liability by the second, third, and fourth defendants in respect of the liability of the first defendant; and the evidence of one witness which was rejected and which it was said took most of the time of any witnesses. 

Mr Justice Mellor considered each of the claimants’ arguments and also considered other factors which relates to the claimants’ conduct; some of which were sufficient to justify an award of costs on the indemnity basis for a proportion of the costs. Taking account of the factors on which the claimants relied, and the issues relating to the claimants’ conduct, Mr Justice Mellor came to the conclusion that no reduction should be made to the defendants’ assessed costs.


The interim payment

The defendants’ sought 85% of their incurred costs and 95% of their budgeted costs. The  defendants justified the proposed 85% in relation to incurred costs (as opposed to the ‘usual’ 70%) on the basis that their costs were lower than those of the claimants, and that the claimants had accepted in the Precedent R that the defendants’ incurred costs were reasonable. As to future costs, the defendants argued that there was good reason to go over the ‘usual’ 90% figure set out in Thomas Pink v Victoria’s Secret [2015] Costs LR 463 because the claimants had agreed their budget, and because the budget was entirely reasonable and only exceeded the total by less than 1%, even if the costs incurred in each phase slightly differed from those budgeted.

The claimants proposed a total of 41% of the defendant’s incurred costs and 90% of the budgeted costs.  The claimant’s change in position in relation to incurred costs, having agreed that they were reasonable at the time of the Precedent R was described by the Judge as ‘remarkable’. As to the budgeted costs, the claimants relied on the fact that the defendants could not recover costs they had not incurred where they were under budget, or costs which were over budget.

Mellor J was of the view that the defendants’ likely recovery would be relatively high and so calculated 80% of the incurred costs and 90% of the budgeted costs, which totalled £787,000. Taking all of the circumstances into account he therefore ordered an interim payment of £750,000.


The costs of the consequentials hearing

The defendants’ served a statement of costs, totalling £58,551.35, for the consequentials hearing, and requested that the costs be summarily assessed. These costs were in addition to the defendant’s budget.

The claimant submitted that these costs were already included in the defendants’ budget as a consequentials hearing was a normal aspect of a trial and should automatically be included in the trial phase. The automatic assumptions detailed at CPR PD3D include ‘Dealing with draft judgment and related applications’ and the defendants had made no application to vary their budget.

Mellor J accepted that in the majority of cases the consequentials are likely to be dealt with at the handing down and that it was only in more substantial cases where a separate hearing may take place. He noted the assumption at CPR PD3D creates an issue for the winning party as it is frequently the case that the winning party would need to carry out analysis of its incurred costs and divide them between various issues, where the losing party incurs considerably less cost in addressing the costs issues.

It is difficult to estimate how much work will be required in any costs analysis at the time of budgeting as the parties will not know which issues have been won and lost or on which party would be the winner. Mellor J therefore suggested that in substantial cases where a consequentials hearing is likely two sets of contingent costs should be considered for; one if the party is the winner and one where they are the loser.

In this case it was accepted that it would have been difficult at the budgeting stage to have anticipated the need for the hearing. However, the defendants budget had assumed 9 days in court for the trial when, in fact, only 7 days had been taken up. Considering all the factors, including the fact that the defendants’ had been awarded a high interim payment and that they did not succeed in their application for anti-suit relief, the Judge declined to summarily assess the costs. He did, however, leave it open to the defendants to argue at detailed assessment that there was good reason to depart the budget.