Petrofac Limited (Costs), Re

The Court considered the proper approach to an interim payment on account of costs under CPR 44.2(8) following its earlier substantive judgment allowing the appeal in the main restructuring plan proceedings. The court applied established principles: (i) an interim payment must be a "reasonable sum on account" and is an estimate of likely recovery on detailed assessment; (ii) recoverable costs must not have been unreasonably incurred or be unreasonable in amount (CPR 44.3(1)) and, on the standard basis, must be proportionate to the matters in issue (CPR 44.3(2)); and (iii) the court must assess what the receiving party could reasonably have been expected to spend to conduct its case proficiently, not what the receiving party chose to spend.

The court found the particulars provided by Saipem and Samsung to be inadequate: solicitors' invoices lacked non-privileged summaries or timekeeper logs, counsel's fees were largely unexplained, and the financial adviser invoices were unparticularised. The Guideline Hourly Rates in Appendix 2 to the Guide were a relevant starting point and uplift above those rates required clear and compelling justification which was not provided. Given the significant uncertainty, but rejecting the Plan Companies' offer of £500,000 as too low, the court made a payment on account of costs in the sum of £2,000,000.

This judgment, following the Court of Appeal's main decision in the Petrofac restructuring litigation, deals with an application for an interim payment on account of the successful creditors' costs. The applicants (Saipem and Samsung) sought payment on account of their costs of the Part 26A applications at first instance and of the appeal. The Plan Companies agreed to pay those costs if ordered but contested the quantum of any interim payment.

The court framed the issues as: (i) the legal test for an interim payment on account under CPR 44.2(8); (ii) what information a receiving party must provide to enable a court to estimate likely recovery on detailed assessment; and (iii) whether the particulars and supporting documents supplied by Saipem and Samsung justified the level of interim payment sought.

• Nature of the application: an order for a payment on account of costs claimed by Saipem and Samsung (initially c. £6.4m claimed; c. £3.75m sought as interim payment).
• Key evidence and procedural posture: the applicants provided summary tables and many invoices, but largely without non-privileged narrative, timekeeper logs or fee notes; some counsel fee notes were heavily redacted; financial adviser engagement letters were not provided.
• Court's reasoning: applying authorities including Excalibur and Leggatt J’s guidance in Kazakhstan Kagazyp, the court emphasised that recoverability is judged objectively and that guideline hourly rates form a helpful starting point. Uplifts above guideline rates require clear and compelling justification. The court found the information provided inadequate to estimate likely recoverable sums with confidence: solicitors’ profit costs lacked non-privileged breakdowns and timekeeper logs; counsel’s fees were largely unexplained; Alvarez & Marsal’s financial advisory and expert invoices were unparticularised.
• Conclusion: given the substantial uncertainty, the court declined to order anything near the interim sum sought but considered the Plan Companies’ offer of £500,000 too low. Balancing the uncertainties and the likely recoverability on detailed assessment, the court ordered a payment on account of £2,000,000.

The Court ordered a payment on account of costs in favour of Saipem and Samsung in the sum of £2,000,000. The court applied the principles in CPR 44.2(8) and related authorities: an interim payment must be a reasonable estimate of likely recovery on detailed assessment, judged by objective tests of reasonableness and proportionality. Because the particulars and supporting materials provided were deficient (insufficient non-privileged narratives, missing timekeeper logs, redacted fee notes and unparticularised financial adviser invoices) the court could not confidently estimate recovery near the amounts claimed and therefore exercised its discretion to order a lower interim sum reflecting the uncertainty.

Appeal to the Court of Appeal (Civil Division) from the High Court (Business and Property Courts, Insolvency and Companies List (ChD), Marcus Smith J, [2025] EWHC 1250 (Ch)). The Court of Appeal had previously handed down its main judgment allowing the appellants' appeal: [2025] EWCA Civ 821. This judgment, [2025] EWCA Civ 1106, addresses the consequential question of an interim payment on account of costs.