Dana Gas PJSC v Dana Gas Sukuk Ltd & Ors

Under CPR r.44.2(8), a payment on account of costs must be a reasonable sum, not the irreducible minimum likely to survive detailed assessment. The court should estimate the costs likely to be recovered and apply a conservative discount for uncertainty and error. Relevant factors include recovery risk, appeal prospects, the parties’ means, the imminence of assessment, delay and the risk of overpayment. In heavy commercial litigation, the size of the claim may be relevant, but recoverable costs must be judged objectively. The proper measure is the lowest amount reasonably required for proficient conduct, rather than the amount a party considered it commercially advantageous to spend.

The claimant had been ordered to pay the fifth defendant’s costs after the defendant intervened in proceedings concerning an anti-suit injunction and a preliminary issue of English law. The claimant was also ordered to pay costs arising from several subsequent applications, on which the fifth defendant succeeded. Before detailed assessment, the fifth defendant applied under CPR r.44.2(8) for payments on account equal to 60% of its estimated costs.

The court therefore had to determine what constituted a reasonable sum on account for each costs order, having regard to the likely outcome of detailed assessment and the relevant circumstances.

1. The applications for payments on account were granted. The claimant was ordered to pay £175,000 on account of the costs of the preliminary issue trial and associated applications, and £250,000 on account of the costs of the later applications.
2. Under CPR r.44.2(8), the court must identify a reasonable sum on account. The exercise does not require identification of the irreducible minimum recoverable on detailed assessment. A logical approach is to estimate the amount likely to be recovered and then apply an appropriate margin for error.
3. The discount reflects the greater prejudice ordinarily caused by requiring repayment of an overpayment than by delaying payment of costs until assessment, particularly where interest is running. Other relevant factors include the difficulty of recovery, the prospects of appeal, the parties’ means, the imminence of assessment, relevant delay and the risk of difficulty in recovering an overpayment.
4. Following Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC 566 (Comm), the court adopted this approach to the assessment of a reasonable sum on account.
5. The amount at stake may be relevant to whether costs were reasonably and proportionately incurred. It does not, however, justify recovery of expenditure which exceeded the lowest amount that could reasonably have been expected to secure proficient conduct. Following Kazakhstan Kagazy Plc v Zhunus [2015] EWHC 404 (Comm), recoverability was judged objectively, by reference to the costs reasonably attributable to the litigation rather than a party’s own choice to spend more.
6. Applying those principles, the claimed hourly rates, extensive use of senior fee earners, attendance by four solicitors at hearings and aspects of counsel’s fees indicated that substantial parts of the claims were unlikely to be recovered on detailed assessment. A further conservative margin was appropriate.

The total payment on account was therefore £425,000, payable within 14 days.