COST BITES 36: THE POINT OF A PAYMENT ON ACCOUNT IS TO REIMBURSE THE SUCCESSFUL PARTY IMMEDIATELY

November 24, 2022 · by · in Applications, Costs, Interim Payments

In Tulip Trading Ltd v Ver [2022] EWHC 2970 (Ch) Mrs Justice Falk considered the factors involved when making an interim payment on account of costs.

“The point of a payment on account is to provide the successful party with some amount to allow them to reimburse their costs immediately and not await detailed assessment.”

THE CASE

The defendant, Mr Ver, had been successful in an application setting aside an order that he be served out of the jurisdiction.  There is a forthcoming appeal pending in relation to other defendants in the case on similar issues.    The judge held that the claimants should pay the costs involved.  Issues arose as to the amount of the interim payment and whether the payment should be held in escrow pending Court of Appeal decisions.  The judge held that 50% of the sums claimed was the appropriate figure in all the circumstances.  She rejected the argument that the sums should be held in escrow.

 

THE JUDGMENT ON COSTS

Costs
    1. As to costs, Mr Ver seeks a summary assessment of his costs of the application. He accepts that his costs of the claim should be subject to detailed assessment but seeks a payment on account. TTL accepts the principle of a costs award against it but says there should be a detailed assessment of the costs of both the claim and the application, that the payment on account should be much lower than sought by Mr Ver and that any payment on account should go into an escrow.
    1. As to the question of summary assessment, I have concluded that the costs of both the claim and the application should be subject to detailed assessment. I note that the costs of the application as claimed, at around £129,000, are very high in relation to the costs of the claim, at around £63,000. Although I have a costs schedule in relation to the application confirming that the £129,000-odd of costs claimed do relate to it, there clearly has been very significant overlap in the work, and the distinction between the claim and application is somewhat artificial in my view. There are also some legitimate questions that have been raised by TTL in relation to the very substantial counsel’s fees claimed in relation to the application, which, excluding today’s hearing, exceed £60,000.
    1. As to the question of interim payment, which obviously now relates both to the costs of the claim and the costs of the application (and I appreciate I have not specifically heard from Mr Charlton on the question of interim payment in respect of the costs of the application), I regard the 80 per cent of the claimed costs sought in respect of the costs of the claim as extremely high.
    1. Mr Friedman pointed me to the summary in the White Book, section 44.2.12, as to the matters that should be taken into account in determining a payment on account. I take account of all relevant factors including the likelihood of Mr Ver being awarded the costs he seeks, or a lesser amount and, if so, what proportion of those, the difficulty, if any, in recovering those costs, 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 overpayment.
    1. The figure I have in mind is much nearer to 50 per cent than 80 per cent. I want to come back to the precise number when I have heard from Mr Charlton again in relation to payment on account in relation to the costs of the application, because I think the right thing to do is to award a single figure, but I am currently minded to award much closer to 50 per cent, taking account of the factors to which I have just referred.
    1. In relation to whether the payment should go into escrow, Mr Friedman made some fairly strong submissions that it should, in particular pointing to the fact that not even Mr Ver’s instructing solicitors appear to know with certainty where he is. He points to the high degree of personal animosity and the risk of inability to obtain recovery, pointing fairly to the fact that although Mr Ver has paid a previous costs order, that was very limited, £9,000, and in the circumstances that TTL is concerned about, where they have succeeded on an appeal, the total amounts involved could be substantially larger.
    1. Nevertheless, I am overall minded to conclude that an escrow account is not the right way forward, and rather it is preferable to take account of the risk of non-recovery in determining the level of payment on account. In reaching that conclusion, my starting point has to be the CPR rule that, unless there is a good reason to do otherwise, I should order payment of a reasonable sum on account of costs.
    1. Regarding the respective means of the parties, the fact that Mr Ver may be very well off does not seem to be determinative. In principle, the starting point is that he is entitled to a payment on account. Further, it was TTL’s choice to sue Mr Ver in this jurisdiction. It presumably must have taken into account the prospects of enforcement in deciding to do so. It seems to me that, overall, an escrow is an unnecessary additional complication that will lead to further questions about what happens to that escrow amount if and when the Court of Appeal issue their decision.
    1. The point of a payment on account is to provide the successful party with some amount to allow them to reimburse their costs immediately and not await detailed assessment. Whilst I understand TTL’s concerns, it seems to me that the right approach is to order a relatively modest payment on account.
(After further submissions)
  1. I think the right way to proceed is a payment on account of £95,000, which represents, very roughly, 50 per cent. It is not particularly relevant but, if a breakdown is required between the application and claim, I have allowed £30,000 in respect of the claim and the balance, £65,000, in respect of the application.