Factual and Procedural Background
On 1 July 2025, the Court of Appeal allowed an appeal by the Appellants against an order sanctioning restructuring plans related to the Respondents. This judgment addresses the issue of an interim payment on account of the costs of those proceedings. After the main judgment, the parties largely agreed on consequential matters, including that the Plan Companies would pay the costs of certain parties’ applications and the appeal, subject to assessment if not agreed. However, the parties could not agree on the amount of an interim payment on account of those costs, which were substantial, with an initial claim exceeding £6.2 million and a sought interim payment of approximately £3.75 million. The parties disputed the adequacy of the breakdown and particularisation of the costs claimed, leading the Court to order a schedule of costs with sufficient detail to determine a payment on account.
Legal Issues Presented
- Whether an interim payment on account of costs should be ordered in respect of the substantial costs claimed.
- The appropriate amount of any such interim payment, given the information provided and the proportionality and reasonableness requirements under the Civil Procedure Rules.
- The adequacy of the information and breakdown of costs provided by the cost claimants to enable the Court to make a reasoned determination.
- The application of legal principles governing recoverable costs, including the assessment of reasonableness and proportionality of solicitors’, counsel’s and expert advisers’ fees.
Arguments of the Parties
Plan Companies' Arguments
- The total claimed costs of over £6.4 million are excessive and disproportionate given the litigation involved only eight days in court.
- The opposing parties provided wholly inadequate information to enable the Court to determine an appropriate payment on account.
- The Plan Companies contend that if an interim payment is ordered, it should be limited to £500,000.
- They object to incomplete narratives and the high hourly rates charged by solicitors, which exceed guideline rates without adequate justification.
- They highlight that a disproportionate amount of work appears to have been done at partner level rather than by junior fee-earners.
- They argue that fees for financial advisory work by Alvarez & Marsal are unparticularised and not necessarily recoverable, and that expert evidence costs are excessive given the limited challenge to the Plan Companies’ expert evidence.
Saipem and Samsung's Arguments
- The claimed costs are reasonable and proportionate considering the scale of the claims at stake (US$1 billion) and the professional fees already incurred by the Plan Companies (£111 million).
- The case is restructuring litigation of significant scale, justifying the costs claimed.
- Detailed narratives on some invoices were inadvertently disclosed and are privileged; therefore, full disclosure is not possible.
- The hourly rates charged by solicitors are justified under the Guide to the Summary Assessment of Costs for complex and high-value litigation, though no detailed explanation was provided.
- The use of Alvarez & Marsal for financial advisory and expert evidence was appropriate and necessary for the restructuring process.
- The Plan Companies do not expressly object to the fees charged by counsel, so a significant proportion of those costs should be paid on account.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC 566 (Comm) |
Definition and approach to "reasonable sum on account of costs" under CPR 44.2(8) |
The Court applied the principle that a reasonable sum is an estimate of likely recovery with an appropriate margin, considering all relevant factors including uncertainty and proportionality. |
| Harold v Smith [1860] 5 Hurl & N 381 |
Costs as indemnity to the receiving party |
Confirmed the principle that costs are an indemnity, but recoverable costs must be reasonable and proportionate. |
| Smith v Buller [1874-1875] LR 19 Eq. 473 |
Costs limited to those necessary for litigation |
Reaffirmed that costs must not be unreasonably incurred or excessive in amount under CPR 44.3. |
| R (Factortame) v Secretary of State [2003] QB 381 |
Recoverability of fees for external advisers such as forensic accountants |
Established that a party must demonstrate reasonableness and proportionality for such fees to be recoverable. |
| Kington SARL v Thames Water Utilities Holdings Limited [2025] EWCA Civ 1003 |
Objective test for recoverable costs as the lowest reasonable amount to conduct litigation proficiently |
Applied the objective standard emphasizing proportionality and discouraging excessive costs. |
| Kazakhstan Kagazyp plc v Baglan Abdullayevich Zhunus [2015] EWHC 404 (Comm) |
Objective test for reasonable and proportionate costs; distinction between costs reasonably attributable to the other party and those attributable to own choices |
Supported the approach that only the lowest reasonable amount necessary to present the case proficiently is recoverable. |
| Samsung Electronics Co Limited v LG Display Co Ltd [2022] EWCA Civ 466 |
Requirement for clear and compelling justification for solicitors charging above guideline hourly rates |
Held that mere assertion of complexity or commercial nature is insufficient justification for exceeding guideline rates. |
| Athena Capital Fund SICAV-FIS SCA v Secretariat of State for the Holy See [2022] EWCA Civ 1061 |
Reasonable and proportionate counsel's fees; scrutiny of costs despite lack of challenge from opposing party |
Confirmed that courts must scrutinize counsel fees to keep recoverable costs reasonable and proportionate. |
Court's Reasoning and Analysis
The Court began by rejecting the argument that the claimed costs were necessarily reasonable and proportionate simply because the Plan Companies incurred large costs. The Court emphasized that the paying party’s own disproportionate costs do not justify disproportionate recoverable costs by the receiving party.
The Court found the information provided by Saipem and Samsung insufficient to confidently estimate recoverable costs near the claimed £6.4 million. The solicitors’ invoices lacked non-privileged summaries or clear breakdowns of hours worked, seniority, and charging rates, with rates charged approaching twice the guideline hourly rates without adequate justification.
Regarding counsel’s fees, the Court noted the absence of detailed information on advisory work, time spent, or rates charged, limiting the ability to assess reasonableness. The lack of challenge by the Plan Companies to counsel fees did not preclude the Court from scrutinizing recoverability.
For Alvarez & Marsal’s fees, the Court accepted that financial and expert advice might be appropriate and recoverable in restructuring litigation, but the invoices lacked sufficient detail to assess reasonableness or proportionality. The Court acknowledged that some expert evidence charges were likely recoverable but had to err on the side of caution due to lack of information.
Overall, the Court applied established legal principles requiring that recoverable costs must be reasonable, proportionate, and supported by adequate information. It emphasized the need to keep litigation costs within reasonable bounds, particularly in restructuring cases involving financially distressed companies.
Holding and Implications
The Court ORDERED an interim payment on account of costs in the sum of £2 million, significantly less than the approximately 60% (£3.75 million) of the claimed total costs initially sought but substantially more than the £500,000 offered by the Plan Companies.
This decision reflects the Court's careful balancing of the substantial uncertainty arising from inadequate cost information and the need to avoid unduly restricting interim cost payments in complex restructuring litigation. The ruling imposes a clear requirement for detailed and transparent cost information to support claims for interim payments and underscores the Court’s commitment to controlling disproportionate litigation costs without setting new precedent beyond the established principles.