In Mousavi-Khalkali v Abrishamchi & Anor [2020] EWCA Civ 1493 we have a rare case of the Court of Appeal considering an appeal on an order that a party pay a sum on account of costs.


The Court of Appeal was considering an appeal in relation to an issue of jurisdiction.  The appellant also appealed against the judge’s decision to make an order that the appellant pay a sum on account of costs in the sum of £325,000.


Lord Justice Phillips held that the sum of £325,000 was well within the range of the sums that could be awarded.

The Costs Appeal
    1. CPR 44.2(8) provides that where the court orders a party to pay costs subject to detailed assessment, it will order that party to pay a reasonable sum on account of costs, unless there is good reason not to do so.
    2. In Excalibur Ventures LLC v Texas Keystone Inc. [2015] EWHC 566 (Comm), Clarke LJ rejected the proposition that the test for the sum to award was the “irreducible minimum”, emphasising that the question is what is a “reasonable sum on account of costs”. He further stated:
“What is a reasonable amount 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. Any sum will have to be an estimate. A reasonable sum would often be one that was an estimate of the likely level of recovery subject…to an appropriate margin to allow for error in the estimation. This can be done by taking the lowest figure in a likely range or making a deduction from a single estimated figure or perhaps from the lowest figure if the range itself is not very broad.”
    1. The respondents’ total costs of the proceedings were £633,000 (on which no VAT was chargeable), described by the Judge as “an eye-watering sum”.
    2. In determining the reasonable sum for a payment on account, the Judge adopted the middle of the three approaches suggested by Clarke LJ in Excalibur, referring to the endorsement of that approach by Leggatt LJ in Dana Gas v Dana Gas Sudek [2018] EWHC 332 (Comm) at [6]:
“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.”
    1. Taking that approach, the Judge considered the amount of likely recovery. He noted that the appellant’s costs had been just under £263,000 including VAT, but also recognised that the matter had complications arising from the need to obtain evidence from overseas and the fact that the appellant raised new points that needed to be “chased down and answered”. The Judge also bore in mind repeated warnings that disputes as to jurisdiction must not be allowed to get out of hand or involve disproportionate sums being spent. The Judge concluded as follows:
“21. At the moment I am engaged in an estimating exercise. Taking account of the fact that an element of those costs are to be awarded on the indemnity basis and also taking into account the points made by [the respondents] I nonetheless cannot conceive that the figure on detailed assessment will exceed £450,000 and that might well be a generous figure.”
    1. The Judge then considered what discount to apply, stating:
“22…In my judgment the discounting should be quite substantial given the scale of the sums though I have to guard against double discounting given that I have already discounted the £633,000 figure by a significant sum.”
On that basis, the Judge arrived at a figure of £325,000
    1. The appellant accepted the very limited basis on which this court could interfere with the Judge’s exercise of his discretion in this regard, referring to the well-known principle identified by Brooke LJ in Tanfern v Cameron Macdonald [2000] 1 WLR 1311 at [32]:
“…the appellate court should only interfere when they consider that the judge of first instance has not merely preferred an imperfect solution which is different from an alternative solution which the Court of Appeal might or would have adopted, but has exceeded the generous ambit within which reasonable disagreement is possible.”
  1. The appellant contended that, in taking the figure of £450,000 as an estimate of the costs the respondents were likely to recover, the Judge did indeed stray outside the bounds of reasonable disagreement. Mr Goodfellow, on the appellant’s behalf, argued that that was an “astonishing” sum, divorced from the reality of the sum the respondent might ultimately be awarded. He suggested that £200,000 would be a very good recovery.
  2. In my judgment the level of the respondents’ total costs, whilst perhaps on the high side, is not particularly surprising in the context of proceedings in the Business & Property Courts which involved a worldwide freezing injunction and a two-day hearing on jurisdiction and discharge, with both leading and junior counsel instructed. That remains my view even though the sums at stake were relatively small in Business and Property Court terms: the appellant chose to apply for draconian relief, did so without making full and frank disclosure and raised a panoply of issues and arguments throughout the proceedings. The costs of defending such proceedings with vigour will necessarily have been very substantial, regardless of the sums claimed.
  3. In that context, the Judge cannot be criticised for taking a starting point of £450,000, particularly as the costs relating to the WFO were awarded on an indemnity basis. Further, his application of a 28% discount (in arriving at a figure of £325,000) appears entirely reasonable. Whilst I might have ordered payment of a slightly lower sum, the sum chosen by the Judge was well within the ambit of his discretion.
  4. It follows that I would also dismiss the Costs Appeal.