HSBC Bank Plc v 5th Avenue Partners Ltd & Ors

An interim payment of costs should be ordered only for the amount the receiving party will almost certainly collect. The applicant bears the burden of proof and the risk that its evidence does not permit recoverable costs to be identified with sufficient certainty. The assessment may be rough and ready, particularly where the evidence does not separate recoverable from irrecoverable work, but uncertainty must be resolved in favour of the paying party. The court may make a broad estimate by applying deductions for identifiable categories of doubtful costs and then allowing for likely reductions on assessment.

The judgment concerned the second stage of costs issues following earlier orders in litigation involving HSBC, the SLM Investors and other defendants. The first stage had determined the primary costs orders. This stage was confined to HSBC’s applications for interim payments on account of costs from the SLM Investors. HSBC’s evidence provided overall figures for solicitors’ costs, counsel’s fees and disbursements, but did not separately quantify several categories that might not be recoverable. The court therefore had to determine what sums HSBC would almost certainly collect and how those sums should be allocated between Mr Mann and Mr So and Mrs Lu.

The application for interim payments was granted. The court ordered £800,000 to be paid by Mr Mann and £800,000 to be paid by Mr So and Mrs Lu. Those payments were not expected to result in double recovery by HSBC.

1. Applicable standard. An interim payment should be based on the amount that the receiving party will almost certainly collect. HSBC bore the burden of proof and the risk that its evidence failed to identify recoverable costs with the requisite certainty.
2. Effect of inadequate evidence. HSBC’s evidence proceeded on assumptions that the costs order would be expressed broadly and that particular categories of costs would be recoverable. Those assumptions were wrong or uncertain. The evidence did not separate recovery costs, costs relating only to other defendants, costs concerning Mr Leonard’s evidence, costs of the deceit claim against Mr Mann, or costs of the adjournment.
3. Estimation. Dismissing the application altogether would have been too extreme because the court was satisfied that substantial costs would be recoverable. Assessment of an interim payment was often rough and ready, and in this case necessarily more so than usual. The court therefore applied deductions for asset recovery work, costs attributable to other defendants, the adjournment, Mr Mann’s deceit claim and Mr Leonard’s evidence, and made a further allowance for likely reductions on detailed assessment.
4. Calculation and allocation. The court assessed the minimum costs almost certainly recoverable from the SLM Investors as a whole at £1.6 million. It rejected an attempt to identify a single common sum payable jointly and concluded that £800,000 was recoverable from Mr Mann and £800,000 from Mr So and Mrs Lu.