Interim payments on account of costs: insufficient information or inadequate justification will result in a payment significantly below 60%
The matter of Saipem S.P.A. and other companies v Petrofac Ltd and another company [2025] EWCA Civ 1106 concerned a companies action relating to restructuring in the Business and Property Courts. Saipem and Samsung and were the Appellants to the action and were successful. The total costs claimed by the Appellants amounted to £6.231,195, of which a 60% interim was sought. No statement of costs was provided and the Court concluded that, based on the information it had available to it, it was impossible to estimate the likely recovery at assessment. As a result, the Court ordered the Respondent to make an interim payment in the sum of £2 million, which was equal to less than a third of the costs claimed.
Background
The Appellants did not prepare a statement of costs ahead of the consequential matters hearing; they simply provided a list of the billed amounts. The Appellants said that there was insufficient time to prepare an N260 and that this level of detail was not required for consideration of an interim payment in any event. The Court found that, whilst there was no particular rule specifying the level of detail required, a schedule of costs should be filed to provide the court with sufficient information to assess the appropriate level of any payment on account. The Court also set a timetable for submissions.
The following day the Appellants provided two tables setting out details of the numerous invoices raised together with zip files containing copies of the invoices, some of which contained an accompanying time breakdown sheet. This provided an item-by-item breakdown which included a narrative along with some fee earner details and hourly rates information. The hourly rates information varied between individuals and between invoices, with some fees being raised in dollars and some in sterling. The highest of these hourly rates amounted to £1,096ph. In terms of Counsel’s fees, only very limited information was provided with only a handful of fee notes. The total fees supported by fee notes amounted to £241,080, which was less than 25% of the overall amount claimed by Counsel. The expert invoices also provided very little detail as to the work done; £840,158 was specified to relate to “expert evidence” and £1,383,494 was detailed as “financial advice”.
The Respondents’ position
The Respondents alleged that the costs were excessive and disproportionate. This was on the basis that the trial lasted only 8 days, there was no substantial evidence of fact and the Appellants did not adduce expert evidence to challenge the Respondents’ evidence on the post-restructuring value. It was noted that the hourly rates charged were significantly in excess of the permitted guideline rates and that around half of the work was completed at partner level; as such, a higher level of work should have been delegated. It was also submitted that there was significant reliance on Counsel. Expert fees were considered to be excessive given that no challenge was raised with regards to the expert’s valuation. The “financial advice” was considered to be unparticularised and not a recoverable cost of litigation. The Respondents submitted that there was insufficient information to enable the court to determine the appropriate level of a payment on account and that, if the court were inclined to make such an order, it should be limited to £500,000.
Appellant’s position
The Appellants submitted that the costs were reasonable in comparison to the professional fees incurred by Rs in formulating the plans ($111 million) and also given the size of the claim ($1billion). It was noted that the time breakdowns were disclosed in error and it was submitted that the documents were privileged. With regards to hourly rates, the Appellants referred the parties to the hourly rates guidance, which states that significantly higher rates could be justified where substantial and complex litigation involved factors such as urgency, importance and international elements. However the Appellant did not explain how these factors applied to the matter at hand. With regards to expert fees, it was argued that financial advice was necessary to due to the complexity of the plans.
The Legal Framework on Interim Payments
CPR 44.2(8) states that, where a detailed assessment is ordered, an order for an interim payment must also be made unless there is good reason not to do so. The Court referred to the matter of Excalibur Ventures LLC v Texas Keystone Inc. [2015] EWHC 566 (Comm) where it was stated that to order an amount equivalent to an “irreducible medium” would not be the correct approach and a reasonable amount will depend on the circumstances of each claim.
The court also considered the matter of Kington SARL v Thames Water Utilities Holdings Limited [2025] EWCA Civ 1003, where the Court of Appeal referred with approval to the observations of Leggatt J in Kazakhstan Kagazyp plc v Baglan Abdullayevich Zhunus [2015] EWHC 404 (Comm) on reasonableness and proportionality; the touchstone is not the amount of costs which it is in a party’s best interests to incur, but the lowest amount which it could reasonably have been expected to spend in order to conduct the case proficiently.
Hourly Rates
The court agreed the guidance makes it clear that the guidelines are broad approximations only and that certain factors may justify a significantly higher hourly rate. The Court referred to Samsung Electronics Co Limited v LG Display Co Ltd [2022] EWCA Civ 466 which states that it is not sufficient simply to assert that a case is complex or high value; a clear and compelling justification must be provided for the uplift on the guidelines. The guideline for London 1 already assumes that the litigation qualifies as “very heavy commercial work” and so, this in itself would not be sufficient.
Whilst the guideline refer to summary assessment, it is clear that these are a helpful starting point in all cases. The fact that lawyers on both sides of a case are being paid disproportionately high amounts by their own clients does not absolve the court from its obligation ensure such costs are reasonable and proportionate. The costs incurred by the paying party may be relevant but these factors are not decisive.
Decision
The Court considered that the costs incurred by the Respondents in devising the plans initially was not an appropriate comparison; the two tasks were clearly different. From the limited information received, it was clear that the hourly rates charged by partners were approaching twice the guideline rate for London band 1. Whilst some uplift may be justifiable, no explanation was provided other than that this was restructuring litigation “on a very significant scale” and that the court bundles were vast.
With regards to Counsel’s fees, the Court had fewer concerns here however it remained that insufficient detail had been provided in order to consider the fees incurred. It was not relevant that the Respondents had not challenged these fees, the court were still entitled to scrutinise them. With regards to expert fees, it was accepted that it may be appropriate to seek financial advice on the effect of the restructuring plan and that it may well be preferable for forensic accountants, rather than lawyers, to analyse such information. However, again, no explanation was provided as to why this work was required and there was a lack of any information as to how the expert fees were calculated.
The detail provided by the Appellants on costs was insufficient to reach a conclusion that the recovery on assessment was likely to be anything close to the amount claimed. The Court was unable to estimate with any real confident the amount that Appellants were likely to recover at detailed assessment. As such, the Court could not make an order for 60% of the total claimed. The sum of £500,000 proposed by the Respondents however was too low and the appropriate sum to reflect the substantial uncertainly was £2m.
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