Petromec Inc v Petroleo Brasileiro SA Petrobras & Ors

Following a full trial and an order for costs, the normal approach under CPR 44.3(8) is to order a payment on account before detailed assessment. The trial judge is generally best placed to decide issues of principle concerning whether conduct or disclosure should affect the recoverability of costs. Such issues should be raised when the costs order is made and cannot ordinarily be reserved for the detailed assessment. A payment into court or existing security does not ordinarily replace a payment on account. The amount should be assessed conservatively, allowing a margin for possible reductions on detailed assessment.

The defendants applied under CPR 44.3(8) for £1.5 million on account of costs awarded after the claimant’s fraudulent and negligent misrepresentation claims were dismissed. The defendants’ estimated costs exceeded £2.8 million after agreed deductions. The claimant opposed the application, relying on alleged late disclosure, the existence of security, the absence of commenced detailed assessment proceedings and alleged excessiveness of the costs.

The central issues were whether the trial judge should determine the application, whether the normal approach in Mars UK v Teknowledge Limited [2000] FSR 138 applied, and whether the claimant could reserve objections concerning conduct and duplicated costs for the detailed assessment.

1. Application granted. The defendants were ordered to receive £1.29 million on account of their costs, after deductions of £110,000 for an agreed notional set-off and £100,000 as a conservative allowance for possible reductions on detailed assessment.
2. Under CPR 44.3(8), the discretion is unfettered. Following a full trial, the normal rule is that a successful party should receive a payment on account because the costs will probably be recovered, although the amount must be lower than the likely assessed total. The approach in Mars UK v Teknowledge Limited [2000] FSR 138 applied.
3. Dyson Limited v Hoover [2004] 1 WLR 1264 was distinguishable. It concerned a judge who had not heard the trial or inquiry and therefore lacked the trial judge’s knowledge of the issues. Here, the judge had heard the fraud trial and was best placed to decide, as a matter of principle, whether late disclosure should affect the costs.
4. Specific assessment issues remained for the costs judge, but a proposed wholesale reduction based on late disclosure was a matter of principle which should have been raised when the costs order was made. Relying on Aaron v Shelton [2004] EWHC 1162 (QB), the court held that the claimant could not raise the point later under CPR 45.5(3)(a). Doing so would amount to an abuse of process within the principles discussed in Henderson v Henderson [1843] 3 Hare 100 at 115 and Yat Tung Investment Co Limited v Dao Heng Bank Limited [1975] AC 581 at 590.
5. Security, a proposed payment into court and delay in commencing detailed assessment did not justify refusing an interim payment. The costs schedule and the seriousness and complexity of the fraud claim made the estimated costs not prima facie excessive, while individual items remained subject to detailed assessment.