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PI and Civil Litigation

Law - practice - procedure

17 JUL 2015

Payment on account of costs: analysis of the decision in Excalibur Ventures v Texas Keystone Inc

Daniel Neill

Barrister

Payment on account of costs: analysis of the decision in Excalibur Ventures v Texas Keystone Inc
Barrister, Guildhall Chambers

Before 1 April 2013, r 44.3(8) provided that the court 'may order an amount to be paid on account before the costs are assessed'. The court had a broad discretion both as to whether to make an order and as to the amount. Following Jackson LJ's Review of Civil Litigation Costs, that rule was replaced by r 44.2(8) which provided:

'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 a good reason not to do so.'

The court's discretion was narrowed: it 'will order' a payment ('unless there is a good reason not to do so'), and that payment will be a 'reasonable sum'.

Of course, that begs two questions: 'what is a good reason?' and 'what is a reasonable sum?' Christopher Clarke LJ considered the latter question in Excalibur Ventures v Texas Keystone Inc [2015] EWHC 566 (Comm). In doing so, he reviewed the case law, not all of it consistent, on the question. Some cases proposed that the amount to be paid on account should be the 'irreducible minimum' of what may be awarded at detailed assessment, others rejected that proposition. His lordship agreed with the latter: there was no such principle. First, that putative principle (an irreducible minimum) worked with a differed criterion than the one allowed by the rules (a reasonable sum). Secondly, if only the 'irreducible minimum' were allowed then on one interpretation that could mean accepting every objection that could not be described as merely fanciful. On neither basis was the proposition a sustainable one.

Properly put, the question was not one of definition but of determination. His lordship went on to set out how a reasonable sum may be determined. First, he explained, it constitutes the estimated level of recovery subject to an appropriate margin for error. Secondly, he continued, the method of assessment may involve either making a deduction from an estimated figure or taking the lowest figure in a likely range. Finally, he observed, the court must also take account of all relevant factors. These will include, inter alia, the likelihood of a successful appeal, the imminence of any assessment, and whether the paying party will have any trouble recovering monies paid in the case of any overpayment.

His lordship did not explain, beyond the reference to all relevant factors, how the court should estimate the level of recovery. Presumably, its first recourse should be to the parties' approved costs budget. The figures contained therein should assist it in arriving at an estimated figure or a likely range, taking account of all relevant factors, and that figure may then be reduced accordingly. Certainly, such recourse is consistent with the joined-up approach to costs reforms promoted by Jackson LJ's Review.

In the instant case, his lordship allowed 80% of the costs claimed as a reasonable sum. That was based on an initial figure of 85% of the sum claimed and a subsequent deduction of 5% to reflect the margin for error; in arriving at the latter, his lordship remarked, it was appropriate to take a figure not too much below the estimated figure.

In personal injury cases, where recovery of costs is frequently a protracted process, r 44.2(8) is a real boon and the judgment of Christopher Clarke LJ a useful guide to its application.

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