Court of Appeal emphasises evidence is needed to support an application for a payment on account of costs

August 28, 2025 Helen ApplebyLeave a comment

The Court of Appeal has delivered an important reminder in Re Petrofac Ltd (Costs) [2025] EWCA Civ 1106 that, even in high value disputes, payments on account of costs will only reflect what the court considers reasonable, and that claims must be substantiated.

Following a successful appeal, the parties had reached agreement on liability to pay costs but had not been able to agree the amount of the payment on account to be made. The receiving parties put their costs at around £6.4 million and sought 60% of this. They argued their costs were justified as this was “restructuring litigation on a very significant scale”, while the paying parties argued these costs were excessive and disproportionate and that any payment should be limited to £500,000.

The Court of Appeal restated the power in CPR 44.2(8) to order payment of a reasonable sum on account of costs and referenced the principles of reasonableness and proportionality in CPR 44.3 which apply to assessment on the standard basis. Having concluded that the information provided was “inadequate to enable us to conclude, with any degree of confidence, that [the receiving party is] likely to recover anything approaching £6.4 million on a detailed assessment” the court ordered a payment on account of costs in the sum of £2 million.

In analysing the competing positions, the Court of Appeal stressed the three requirements of reasonableness, proportionality and substantiation.

What a party might subjectively be prepared to pay to advance its own interests in litigation was not the relevant test, and equally if a paying party had paid its own lawyers disproportionately high fees this did not make the fees claimed by a receiving party reasonable and proportionate. Inter partes the test was objective and was “the lowest sum that the receiving party could reasonably have been expected to spend in order to have its case conducted and presented proficiently”.

The information provided by the receiving party was inadequate to support their claim that they were likely to recover £6.4 million at detailed assessment. The court was particularly critical of the lack of breakdown of the fees claimed for solicitors, counsel and financial advisers, for example the type or hours of work by solicitors or counsel, or details about the financial advisory work and how it was charged. As regards to the solicitors, the rates charged by partners were close to twice the Guideline Hourly Rates and, while the Court felt that some uplift might be justifiable, no justification was provided beyond generic assertions of scale.

The judgment is a reminder of the need to adhere to principles of reasonableness and proportionality and to substantiate sums claimed when seeking payment on account of costs. The court was critical of bare claims and assertions and, in the absence of supporting detail, felt it needed to “err on the side of caution” in estimating the amount that might be recoverable.

Helen Appleby is an Associate in Clarion’s Costs and Litigation Funding Team and can be contacted at helen.appleby@clarionsolicitors.com or on 07774 045105.

An Order for a payment on account in Part 36 settlement

January 17, 2019October 13, 2020 Leave a comment

We found in Culliford & Anor v Thorpe [2018] EWHC 2532 (Ch) that a payment on account can be made by the Court after the judgement has been made and after the Order has been sealed. Previously, it had been widely understood that a Part 36 agreement, as it is a deemed Order for costs under CPR 44.9(b), provides authority for a party to apply for an Order for a payment on account and the Court can make such an Order upon settlement, as obligated pursuant to CPR 44.2(8).

However, in the High Court case of Finnegan v Frank Spiers [2018] EWHC 3064 (Ch ),a successful professional negligence claim from last year, Mr Justice Birss ruled that the Court does not have the power to make an Order for a payment on account where a claim is settled by way of Part 36, as the agreement does not provide authority to do so.

It was considered and argued by the Claimant Counsel that the decision for a payment on account should be based on the authority under CPR 44.9 for a deemed costs Order. The Part 36 agreement is a deemed costs Order and provides authority for costs to be assessed on the standard basis, outlined under CPR 44.3(2) and which Part 36 indicates. Counsel for the Claimant relied on the rule under CPR 44.2(8) – where an order has been made for costs to be assessed by way of detailed assessment, as they would be here, then an order shall be made for a payment on account.

Presiding over the case, Justice Birss ruled that Part 36 was a self-contained code, as is written within the part. He highlighted that it is clearly not entirely complete given the inclusion of the CPR 44.9; however, as it is a self-contained code, it should follow that it should be treated as such. Part 36 contains its own authority for the consequence of costs following settlement, and as such, there is no reason that CPR 44.2(8) should be followed when looking at whether to make an order for a payment on account. Justice Birss stated that much of CPR 44.2 is not applicable to Part 36 settlement and therefore one could not correctly apply CPR 44.2(8) to the rule. This is because the place for any authority for making a payment on account following Part 36 should be within the Part itself, from which it is absent. Furthermore, the Defendant Counsel argued that CPR 44.9 is in place in order to trigger the detailed assessment proceedings; however, it does not include any other provision of Part 44.2 when triggering the process, therefore highlighting that it should be no different when dealing with Part 36. Justice Birss dismissed the Claimant’s appeal.

The ruling has caused much debate, and was a topic of discussion at the annual Association of Costs Lawyers Conference, in which even the Counsel for the Defendant, Mr Rupert Cohen, agreed with costs judges that perhaps the decision went the wrong way. I am sure that it will not be the last time we see argument over this point and will discuss further any decisions that arise on this blog.

CAN AN APPLICATION FOR A PAYMENT ON ACCOUNT NOW BE MADE AFTER THE JUDGMENT?

October 18, 2018October 26, 2018 Leave a comment

The time for making the application for a payment on account is changing.

It has been established that any request for a payment on account should be requested as soon as possible following the settlement of the substantive matter. The application is made with the Trial Judge when the liability decision is made, or in the event that an agreement is made between the parties, when the Consent Order is drawn.

Pre-Jackson

Originally the rule under CPR 44.3 provided the Court with discretion regarding whether to Order a payment on account and it laid out the circumstances to be taken into account when exercising its discretion as to costs.

At this point it was not a requirement for the court to make an order.

Post-Jackson

Following 1^st April 2013 and the Jackson reforms, CPR 44.2(8) now provides that:

“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.”

Therefore, where a party has made an application at the judgment of the substantive matter, unless there is a good reason as to why he should not, the judge will order a payment on account to be made.

Following Ashman v Thomas [2016] EWHC 1810 (Ch) the judge found that, where the application for a payment on account was made prior to the order had being sealed, the Court had discretion to include this request where that request was reasonable. This is one instance where the Court has allowed the application to be made after the judgment. However, this is still in close proximity to the judgment. The application had been made between the hearing and the sealing of the order, rather than weeks later, therefore the judge saw fit to include the order for a payment on account.

The next point at which a party can request a payment on account, is when requesting an interim payment upon Detailed Assessment proceedings when the application for a hearing is made under CPR 47.12.

However, following this judgment it now seems that an application for a payment on account can be made after the judgment has been made. His Honour Judge Matthews, sitting at the High Court in Culliford & Anor v Thorpe [2018] EWHC 2532 (Ch) ordered a payment on account on behalf of the Defendant following the parties successful defence and counterclaim in a possession matter and was awarded costs to be assessed on the standard basis. The Defendant did not make an application at the time the judgment was made, however raised the matter of a payment on account after the order had been sealed. Despite this, the court ordered the Claimant to make a payment on account.

HHJ Matthews averred that there was nothing within the rules from preventing him making and order for a payment on account: –

“Although rule 44.2(8) contemplates that the court will decide this question at the time of making the order for costs, to my mind this does not exclude the possibility that the court should decide it later. I see no justification in the rules or authorities for the claimants’ view that, if an application is not made at the time, the next opportunity arises only after detailed assessment proceedings have been commenced.”

It was pointed out that the mere fact that the Defendant did not raise the question of a payment on account, was a good reason not to award one at a later time.

Not only has the court made an award for a payment on account, he ordered the Claimant to pay the Defendant the full amount as requested. The judgment of Thomas Pink Ltd v Victoria’s Secret UK Ltd [2014] EWHC 2631 (Ch) was relied on and HHJ Matthews stated that the amount was wholly reasonable where the approved budget was £45,580.00 and the Defendant had only requested £30,000.00.

It is interesting to consider the ruling in this matter, which may now open doors for many more applications and orders for payments on accounts to be made.

It will also be interesting to see whether in future cases, the Court will take into consideration the judgments of Capital For Enterprise Fund A LP and another v Bibby Financial Services Ltd [2015] and Cleveland Bridge UK Ltd v Sarens (UK) Ltd [2018] EWHC 827 (TCC). Should a party request a payment on account in the sum of 90% of the total approved budget, should the 90% be applied to incurred costs and how much weight the Court will put on the comments made at the CCMC regarding incurred costs, specifically if such comments have not been recorded.

Forgot to secure a payment on account of costs at the final hearing? All may not be lost…

October 2, 2017September 5, 2018 Joanne ChaseLeave a comment

This brief judgment concerned whether or not a party could seek an order for a payment on account of costs after a costs award had been ordered, but before detailed assessment proceedings had begun.

In Ashman v Thomas [2016] EWHC 1810 (Ch), judgment had been given extempore on preliminary issues on 21 June 2016. Following the hearing, and as part of seeking to agree terms of the order, the defendant sought a payment on account of costs. On 23 June 2016, 2 days after the hearing, the defendant served a costs schedule totalling circa. £48,650. The claimant disputed the defendant’s entitlement to a payment on account on the basis they had failed to make the request at the time the order was made. The claimant relied on there being no provision within the rules for the defendant to now seek a payment on account of costs until they had commenced detailed assessment proceedings and sought an interim costs certificate under CPR 44.16(1).

In addition, the claimant alleged that the defendant was in breach of CPR 44PD 9.5 (4)(b), as they had failed to serve a costs schedule 24 hours before the hearing. Master Matthews dismissed this point on the basis that PD 9.5 (4)(b) concerned summary assessment of costs and was not applicable to detailed assessment.

The main issue between the parties was whether an order could be made to include a term for a payment on account of costs when that request had not been made at the actual hearing.

Master Matthews considered 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”,

and decided that there was good reason to consider the defendant’s request on the basis that it had been made after the hearing but before the order was sealed. The court retains power to alter its judgment or order until it is perfected and sealed in accordance with Re Barrell Enterprises [1973] 1 WLR 19, CA.

The defendant sought a payment on account of costs in the sum of £20,000. The claimant challenged the statement of costs on several grounds, including excessive hourly rates, signature of the statement by the firm and not individual solicitor, and failure to identify which costs the statement related to.

Master Matthews accepted that the statement was restricted to preliminary issues only, and he was also not concerned with the signature challenge on the basis that the matter was not subject to a summary assessment.

He was, however, in agreement with the claimant that the hourly rates were excessive. Furthermore, he believed that some of the work undertaken by the Grade A Solicitor could have been delegated to a more junior fee earner. He stressed that “the paying party should not be asked to pay more than is reasonable and proportionate”.

Taking the above into consideration, Master Matthews agreed that a payment on account of costs was justified, however, given the excessive level of costs claimed, the award was limited to £17,500, to be paid within 14 days.

This short judgment contains several reminders about good practice. The filing of a statement of costs before any hearing ensures that the issue of a payment on account of costs can be dealt with as soon as a costs award has been made, as per CPR 44.2(8).

However, if the receiving party did not secure an order for a payment on account of costs at the time the costs award was made, they still have an opportunity to seek inclusion within the order prior to it being sealed by the Court. A statement of costs is likely to prove essential in quantifying the amount of the payment on account to be made.

If you have any questions or queries in relation this blog or legal costs in general please contact Joanne Chase (joanne.chase@clarionsolicitors.com and 0113 336 3327) or the Clarion Costs Team on 0113 246 0622.

The allowance of out of scope work in relation of Precedent H Costs Budgets –AND- Increased reliance is being placed on the Costs Budget when quantifying the level of the payment on account of costs.

January 23, 2015April 13, 2021 Joanne ChaseLeave a comment

The judgment of H.H. Judge Simon Brown Q.C in Excelerate Technology Ltd -v- Cumberbatch [2015] EWHC B1 Mercantile addresses the issue and the Court’s approach to any out of scope work in respect of Precedent H Costs Budgets.

In the case, areas of the Claimant’s costs fell outside of the scope of their approved budget and the Claimant made a claim for those additional costs. HHJ Simon Brown accepted that the claim for out of scope costs could be assessed independently of the budget and allowed a further £12,330.00. These costs related to 2 interim hearings, an application and the costs of the First Defendant’s IVA.

HHJ Simon Brown demonstrated how PD 3E (para 7.9) to CPR Part 3 can be applied (para 7.9 of PD 3E – If interim applications are made which, reasonably, were not included in a budget, then the costs of such interim applications shall be treated as additional to the approved budgets.

The importance of detailed assumptions has now been seen in practice. Without these detailed assumptions, establishing and formulating an argument to support any out of scope work would have been a challenging and perhaps impossible task.

Focusing on the scope of the budget is, as we are all aware, essential. However, the continual analysis of the case plan is paramount. Yet again we see a further instance of the new wave of legal project management. As a result of efficient project management, the Claimant was able to persuade the Court that a further £12k could be claimed in addition to the amount of the budget, resulting in an increased recovery of costs.

Interestingly, the court allowed a substantial payment on account of costs in the sum of £155,409.66, despite the fact that this was disproportionate to the judgment debt of £158,243.00 in assessing a reasonable percentage for an interim payment. This is a further instance of a budget being the determining factor when quantifying the level of the payment on account of costs, adding weight to the decision in the case of Thomas Pink v Victoria Secrets UK Ltd [2014] EWHC 3258 (ch) where a payment on account of costs of 90% of the budget was awarded.

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Tag: payment on account

Court of Appeal emphasises evidence is needed to support an application for a payment on account of costs

An Order for a payment on account in Part 36 settlement

CAN AN APPLICATION FOR A PAYMENT ON ACCOUNT NOW BE MADE AFTER THE JUDGMENT?

Forgot to secure a payment on account of costs at the final hearing? All may not be lost…

The allowance of out of scope work in relation of Precedent H Costs Budgets –AND- Increased reliance is being placed on the Costs Budget when quantifying the level of the payment on account of costs.