In Dana Gas PJSC v Dana Gas Sukuk Ltd & Ors [2018] EWHC 332 (Comm) Lord Justice Leggatt considered the principles relating to payments on account of costs.  In particular the approach the court should take when there were weighty commercial matters but the costs claimed appeared to be unrealistic.

When the amount of costs claimed is so obviously unsustainable, it is particularly difficult to form a realistic estimate of the level of costs likely to be recovered on a detailed assessment.”


The claimant had been ordered to pay costs to the fifth defendant.  Those costs included the costs of the preliminary issue trial and various applications. The fifth defendant (BlackRock) then applied for an order for payment on account of costs. They submitted a statement claiming  £408,000 in relation to a trial of a preliminary issue and  an additional £1,473,087  in relation to a series of applications.  BlackRock sought 60% of those costs on account.



The judge reviewed the relevant principles.

    1. The court’s task under CPR r.44.2(8) is to identify what is “a reasonable sum on account of costs”. I respectfully agree with Christopher Clarke LJ when he said in Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC 566 (Comm), at para 22, that this test does not require the court to find the irreducible minimum which would be recovered on a detailed assessment (unless in the particular case that happens to be the reasonable sum to award). What is a reasonable sum to be paid on account will depend on the circumstances, the chief of which is that there will, by definition, have been no detailed assessment and thus an element of uncertainty, the extent of which may differ widely from case to case, as to what will be allowed on detailed assessment: see the Excalibur case at para 23. A logical approach is to start by estimating the amount of costs likely to be recovered on a detailed assessment and then to discount this figure by an appropriate margin to allow for error in the estimation.
    2. The rationale for making such a discount, as I see it, is that in general the prejudice involved in being ordered to pay money which turns out not to be due and then having to recover it is likely to exceed the prejudice suffered by the party entitled to its costs of having to wait for payment until the amount receivable has been assessed (particularly when interest will be running in the meantime). Accordingly, any payment on account should generally tend to err on the side of awarding less than is ultimately likely to be recovered on detailed assessment.
    3. Other relevant factors to take into account include: the difficulty, if any, that may be faced in recovering the costs awarded; the likelihood of a successful appeal; the means of the parties; the imminence of any assessment; any relevant delay and whether the paying party will have any difficulty in recovery in the case of any overpayment: see the Excalibur case at para 24.
    4. When in heavy commercial litigation eye-watering amounts of costs are claimed on assessment or on account, it is common for the costs claimant to seek to justify the level of costs claimed by reference to the size of the claim. BlackRock has sought to do so here. I certainly accept that the sum at stake is a relevant factor in considering whether costs have been reasonably and proportionately incurred and are reasonable and proportionate in amount. But the fact a party stands to gain or lose a fortune if it wins or loses the case may also be a reason why it chooses to spend money on legal fees which goes beyond, and sometimes well beyond, the amount of costs that it can expect to get back from the other party if successful. As I said in Kazakhstan Kagazy Plc v Zhunus [2015] EWHC 404 (Comm) at para 13:
“In a case such as this where very large amounts of money are at stake, it may be entirely reasonable from the point of view of a party incurring costs to spare no expense that might possibly help to influence the result of the proceedings. It does not follow, however, that such expense should be regarded as reasonably or proportionately incurred or reasonable and proportionate in amount when it comes to determining what costs are recoverable from the other party. What is reasonable and proportionate in that context must be judged objectively. The touchstone is not the amount of costs which it was in a party’s best interests to incur but the lowest amount which it could reasonably have been expected to spend in order to have its case conducted and presented proficiently, having regard to all the relevant circumstances. Expenditure over and above this level should be for a party’s own account and not recoverable from the other party. This approach is first of all fair. It is fair to distinguish between, on the one hand, costs which are reasonably attributable to the other party’s conduct in bringing or contesting the proceeding or otherwise causing costs to be incurred and, on the other hand, costs which are attributable to a party’s own choice about how best to advance its interests. There are also good policy reasons for drawing this distinction, which include discouraging waste and seeking to deter the escalation of costs for the overall benefit for litigants.”
  1. I have followed this approach in the present case. Thus, the comments made below should not be understood as expressing any view on whether the work done and fees charged by BlackRock’s lawyers represented good value for money. The only question is whether the costs incurred exceed the sums which are likely to be recoverable from Dana Gas.”



The judge considered the costs claimed in relation to the trial.

  1. In considering the estimate of BlackRock’s costs of the preliminary issue trial (and associated applications) it is necessary to make allowance for the fact that, when BlackRock intervened in the proceedings, its solicitors and counsel had to be instructed at short notice and on an urgent basis. It is also right to bear in mind, however, that, when BlackRock was joined to the proceedings, the preparations for trial (including service of written opening submissions) were already complete and BlackRock was able to instruct counsel to argue the preliminary issue who had already prepared for the trial and whose brief fees had already been incurred by the Delegate.
  2. A number of criticisms of the costs claimed by BlackRock have been made by Dana Gas, of which the following are in my view valid. First, the hourly rates charged by BlackRock’s solicitors are extremely high. No fewer than nine fee earners were involved, of whom six had their time charged at hourly rates of over £700 (the top rate being £946). Even a trainee was charged out at £282 an hour. From my experience of assessing costs and reviewing cost statements and budgets in complex cases in the Commercial Court, competent representation can be obtained at much lower rates, in the region of around half the hourly rates paid in this case.
  3. Second, a very high proportion of the work was done by Grade A fee earners. Thus, of 37 hours attending on counsel and 38 hours attending on BlackRock, over half was spent by partners whose time was charged at £900 or £946 an hour. Of 56 hours attending on “others” (including the court and internally), almost half was spent by the same partners. In terms of efficient use of resources, the amount of work done by partners seems disproportionately large.
  4. Third, it appears that all court hearings were attended by four representatives of BlackRock’s solicitors, as well as by leading and junior counsel. These representatives included the two partners already mentioned whose hourly rates were £900 and £946 and an associate whose hourly rate was £760. I think it is seldom reasonable (particularly for hearings at which no witness is giving evidence) to claim the costs of attendance by more than two solicitors. At any rate, a claim for a greater number requires justification and none has been provided.
  5. Fourth, I think it likely that some element of the brief fee (of £45,000) of leading counsel for the without notice hearing will be disallowed on detailed assessment, particularly when the Sharjah injunction which prompted the application was only issued the day before and when most of the drafting appears to have been done by junior counsel (for whom total fees of £32,575 are claimed). In addition, no justification has been given for a fee of £6,500 charged for the same leading counsel’s “brief for main trial hearing”, when a different leading counsel appeared for BlackRock at that hearing (whose fees are also included).
  6. Taking all these factors into account, my very rough estimate of the amount of costs incurred by BlackRock in the preliminary issue trial and associated applications which is likely to be recoverable on a detailed assessment is in the range of £200,000-£250,000. Building in a further margin for error and to ensure conservatism, I consider that a reasonable sum to order Dana Gas to pay on account is £175,000. There are no other relevant factors which in my view require any adjustment to this figure.”


The judge considered that the costs claimed for the applications ( £1,473,087)  were also subject to criticism.
    1. Turning to the costs of the applications which were heard between 30 January and 1 February 2018, it can fairly be said that these were heavy applications and that the three day hearing involved a tight timetable for oral argument and must have required considerable preparation. Nevertheless, the sum of £1,475,076 claimed by BlackRock in my view bears no reasonable relationship to the level of costs likely to be regarded as reasonable and proportionate on a detailed assessment.
    2. An initial difficulty is that the level of detail provided in the cost statement is remarkably scant, particularly in view of the amount of costs claimed. I also agree with the submission made on behalf of Dana Gas that, in the absence of any proper explanation, it is extremely difficult to see how 1,481.5 hours of solicitors’ time could reasonably have been incurred in preparing for the hearing of applications which largely involved legal argument. BlackRock served three witness statements and one affidavit in relation to the applications. However, the amount of new relevant evidence contained in those documents (as opposed to submissions which were duplicated in skeleton arguments) was minimal.
    3. All the points made in relation to the costs claimed for the preliminary issue trial also apply again. The hourly rates charged by BlackRock’s solicitors are far higher than those which I would consider reasonable and proportionate. The amount of work done by high fee earners again appears disproportionate. Again, attendance throughout the hearing by four fee earners is included with no apparent justification. Counsels’ fees – after allowing, as I do, for the fact that BlackRock had to change back to their original counsel because the counsel who had appeared at the preliminary issue trial were unavailable for the hearing – are still higher than the level which I think likely to be upheld on a detailed assessment.
    4. When the amount of costs claimed is so obviously unsustainable, it is particularly difficult to form a realistic estimate of the level of costs likely to be recovered on a detailed assessment. Doing the best I can based on my knowledge of the case, I would estimate this figure at around a quarter of the amount claimed, in the region of £300,000-£400,000. This is based on an impression that something of the order of half the time spent was reasonably and proportionately incurred and that reasonable and proportionate charging rates (including greater use of more junior lawyers) would be roughly half those actually charged. Allowing an appropriate further margin of error and aiming on the side of conservatism, I consider that a reasonable sum to be paid on account is £250,000. Again, consideration of the other relevant factors mentioned earlier does not require any further adjustment.


  1. In the result, Dana Gas will be ordered to pay a total sum of £425,000 on account of costs, with payment to be made within 14 days.”