German Property 50 SARL v Summers-Inman Construction and Property Consultants LLP

On an application for an interim payment on account of costs, the court should ordinarily order payment before detailed assessment, particularly where the paying party’s resources may be limited. The amount should be confined to the sum the successful party would almost certainly recover, rather than necessarily reflecting the costs incurred. Where a party has paid a third party’s costs in settlement, the payment may be recoverable if the underlying liability rests with the paying party and the settlement was reasonable. A reasonable settlement may be recoverable in full, even if it is towards the upper limit of reasonableness.

The claimant’s negligence claim concerning cost consultancy services for a German development was struck out for failure to comply with an unless order. The defendant had brought Part 20 proceedings against a third party to whom the relevant services had been subcontracted, but later discontinued those proceedings and paid the third party £250,000 in settlement of its costs.

The defendant sought an order for the costs of the main proceedings and the Part 20 proceedings, together with an interim payment under CPR 44.3(8). The central issues were the appropriate amount of an interim payment for the defendant’s own costs and whether the third-party settlement could be recovered in full.

1. Costs liability. The claimant was liable for the costs of the main proceedings because the claim had been struck out. It was also liable for the Part 20 costs because those proceedings arose from the claimant’s original claim and were reasonable in light of the subcontracted services.
2. Interim payment for the defendant’s costs. Under Civil Procedure Rules 1998 r 44.3(8), the general rule is that an interim payment should be made at the end of the case, before detailed assessment, absent exceptional circumstances. The payment should represent the minimum amount the successful party would almost certainly recover. The defendant’s costs of approximately £220,000 were reasonable, but an interim payment of £105,000 was appropriate.
3. Third-party settlement. Applying Biggin and Co Ltd v Permanite Limited [1951] 2KB 314, the defendant had to show that the £250,000 settlement was reasonable and related to a liability for which the claimant was ultimately responsible. That test was satisfied.
4. The settlement was reasonable because it followed detailed arm’s-length negotiations, the third party had carried out the relevant services and had a substantial interest in defending the claim, and the defendant had an incentive to minimise a payment that might prove irrecoverable. The £250,000 was therefore recoverable in full.
5. The claimant was ordered to pay £355,000 within 14 days, comprising £105,000 for the defendant’s own costs and £250,000 paid to the third party.