Two recent Grand Court decisions confirm the governing principles on interim payments
In the first decision In the Matter of the Poulton Family Trust (Unreported, 13 March 2023) (Poulton Family Trust) Justice Kawaley considered the principles and authorities relating to: (i) The court’s practice of dealing with applications for interim payments on account of costs on the papers; and (ii) The approach to be taken, and the factors to be taken into account, in considering an application for an interim payment on account of costs.
The application in this case was for an interim payment of US$3 million in circumstances where a standard costs order was made and the total costs claimed by the plaintiffs were US$5 million. The application was opposed on the ground of unreasonableness in the amount claimed and that the paying party (the second defendant) was impecunious.
Justice Kawaley observed that it is not unusual for applications for interim payments of costs to be dealt with on the papers on a summary basis without any extensive articulation of the governing legal principles. However, because the second defendant was a litigant in person, he felt “obliged in the interests of open justice to set out the governing principles more fully that would otherwise be the case”.
Referring to his own judgment in Al Sadik v Investicorp Corporation  (2) CILR 585, Justice Kawaley helpfully summarised the governing principles under Cayman Islands law as follows:
- GCR O.62, r.4(7)(h) confers an unfettered discretion on the court to order payment of interim costs;
- The principle that a successful party should be paid some of his costs immediately and before taxation is not simply ‘an important consideration’, it is the governing and predominant principle articulated by the interim payment on account of costs rule;
- Whether or not a payment on account should be ordered will almost invariably require an assessment of whether there is a good reason notto order an interim payment and/or a good reason for requiring the successful party to be deprived of any costs until the taxation process is completed;
- There is an implicit assumption in O.62, r.4(7)(h) that an interim payment should be made.
It was also held that reasonableness is clearly a factor to be taken into account when determining whether to make an order for interim costs. Further, impecuniosity did not provide grounds for refusing to make an order in this case (but may be relevant to enforcement). Ultimately, the court concluded the plaintiffs were entitled to an interim payment.
In determining the appropriate amount to award, Justice Kawaley opined that on a standard basis taxation, the plaintiffs were likely to recover 60 per cent of their US$5 million costs (it being generally assumed that on standard basis taxation, the successful party will be awarded between 60 and 75 per cent of their actual costs). Justice Kawaley ordered an interim payment representing 25 per cent of the 60 per cent the plaintiffs would be “likely to recover” and rounded it up to US$1 million.
In the second decision of In the Matter of Performance Insurance Company SPC (In Official Liquidation) (FSD 70 of 2020, Unreported, 24 March 2023), Justice Parker considered the court’s discretion to make an interim payment and followed the principles laid out in Scully Royalty v Raiffeisen Bank CICA (Civil) Appeal 21 of 2020 (Unreported, 8 April 2022) (where the Court of Appeal agreed with the principles set out by Justice Kawaley in Al Sadik).
In determining the quantum to award as an interim payment, Justice Parker took a less conservative approach than Justice Kawaley and awarded:
- In respect of the applicant’s standard costs order, an amount representing approximately 43 per cent of the costs claimed; and
- In respect of the applicant’s indemnity costs order, an amount representing just below 75 per cent of the costs claimed.
These cases demonstrate the court has a pro-creditor approach to interim payments. Accordingly, the court will usually award an interim payment unless there is a “good reason” for not doing so. The amount the court awards will of course depend on whether costs have been awarded on the standard or indemnity basis: on the standard basis, a party might expect an interim payment of up to 50 per cent of its total costs and where costs have been awarded on the indemnity basis, the successful party might expect an interim payment of up to 75 per cent.