Court scrutinises interim costs recovery

Following a successful appeal against Petrofac’s restructuring plans under Part 26A of the IA1986, the Court of Appeal considered whether Saipem and Samsung were entitled to a £3.75 million interim payment on account of litigation costs. 

In an earlier hearing, the Court of Appeal allowed Saipem and Samsung’s appeal against the sanctioning of Petrofac’s restructuring plans. It considered the appellants sought an interim payment of £3.75 million (approximately 60% of their claimed £6.4 million costs), covering solicitors, counsel, and financial advisers.

The court found the supporting documentation insufficiently detailed. For example:

• The solicitor’s invoices lacked adequate breakdowns of work done, hourly rates, and fee-earner seniority.
• Counsel’s fees were largely unexplained, with only partial disclosure of brief fees and refreshers.
• Expert evidence invoices were vague, lacking engagement letters or clear descriptions of services rendered.

The court reiterated that recoverable costs must be reasonable and proportionate, not merely reflective of what a party is willing to pay. It emphasised that high costs incurred by the plan companies did not justify similarly high costs for the appellants. The judgment cited established principles, including the need for clear justification when exceeding guideline hourly rates and the importance of objective assessment over subjective valuation.

Ultimately, the court rejected both the appellants’ £3.75 million request and the respondents’ £500,000 offer, concluding that £2 million was a reasonable interim payment. The decision underscores the judiciary’s concern over escalating costs in restructuring litigation and the need for transparency and proportionality in cost recovery.

Saipem S.P.A. and other companies v Petrofac Ltd and another company [2025] EWCA Civ 1106, [2025] Costs LR 1481