The Court of Appeal has considered how a ‘reasonable sum’ is arrived at in respect of payments on account of costs in the recent judgment in Mousavi-Khalkali v Abrishamchi [2020] EWCA Civ 493.
A payment on account of the successful Respondent’s costs was ordered pursuant to CPR 44.2(8) which states:
“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.”
The Respondent’s costs totalled £633,000 against the Appellant’s costs of £263,000. The trial judge had ordered a payment on account of £325,000 using the approach in Excalibur Ventures LLC and Dana Gas.
The judgment in Excalibur Ventures confirms that the test is not the ‘irreducible minimum’ but rather what is a ‘reasonable sum’. One suggested approach was to start with an estimation of the costs likely to be recovered and then to discount that figure to allow for a margin of error. This approach was endorsed in the Dana Gas judgment and was the approach used by the trial judge in Mousavi-Khalkali.
The judge estimated a maximum of £450,000 being recovered at assessment, allowing for the nature of the litigation (which included a worldwide freezing order) and the fact that an element of indemnity costs had been ordered. A discount was then applied (28%), taking into account the scale of the sums, to arrive at £325,000.
The Appellant argued that £200,000 would be a good recovery and that the judge had strayed ‘outside the bounds of reasonable disagreement’.
On appeal, it was found that the sum ordered by the trial judge (£325,000 against the total costs of £633,000), whilst possibly higher than another judge may have ordered, was well within the ambit of his discretion and the appeal was dismissed. The decision therefore confirms the approach in Excalibur Ventures and Dana Gas.
Helen Spalding is an Associate in the Costs and Litigation Funding Department at Clarion. You can contact her at helen.spalding@clarionsolicitors.com or on 0113 288 5639.
