Case Analysis – Interim Payment on Account of Costs

Summary of (1) SAIPEM S.P.A. (2) SAIPEM SINGAPORE PTE LTD (3) SAMSUNG E&A CO., LTD (4) SAMSUNG E&A (THAILAND) CO., LTD v (1) PETROFAC LIMITED (2) PETROFAC INTERNATIONAL (UAE) LLC [2025] EWCA Civ 1106

This Court of Appeal judgment concerns the costs dispute following the successful appeal by Saipem S.p.A., Saipem Singapore Pte Ltd, Samsung E&A Co., Ltd, and Samsung E&A (Thailand) Co., Ltd against the sanctioning of restructuring plans for Petrofac Limited and Petrofac International (UAE) LLC.

Background

On 1 July 2025, the Court of Appeal allowed the appellants’ appeal against the High Court’s approval of restructuring plans under Part 26A of the Companies Act 2006. Following that decision, the parties agreed that Petrofac should pay the appellants’ costs of both the first instance and appeal proceedings, subject to assessment. However, they disagreed on the amount of an interim payment on account of those costs.

The appellants claimed £6.4 million in total and sought an interim payment of £3.75 million (approximately 60%). The Plan Companies objected, arguing the claim was excessive and inadequately supported.

Details of the Costs Claimed

The appellants submitted invoices from:

  • Mayer Brown (solicitors) – £3.15 million
  • Counsel – £1.03 million
  • Alvarez & Marsal (financial and expert advisory) – £2.22 million

The supporting documentation was sparse. Mayer Brown’s invoices lacked detailed narratives and timekeeping logs. Counsel’s fees were mostly unsupported by fee notes. Alvarez & Marsal’s invoices contained vague references to “Financial Advisory” and “Expert Evidence” workstreams, with no engagement letters or breakdowns of work performed.

Arguments from the Parties

Plan Companies’ Position: They argued the costs were disproportionate for litigation involving only eight court days and minimal evidential challenge. They criticised:

  • Mayer Brown’s high hourly rates and lack of delegation to junior staff.
  • Alvarez & Marsal’s vague and potentially non-recoverable advisory fees.
  • The absence of meaningful justification for counsel’s fees.

They proposed a maximum interim payment of £500,000.

Appellants’ Response: They defended the costs as proportionate given the scale of the litigation (US$1 billion claims) and compared them to the Plan Companies’ own professional fees (US$111 million). They cited the complexity and international nature of the case and argued that Alvarez & Marsal’s work was essential, particularly the “enrichment assessment” report.

Legal Framework

Under CPR 44.2(8), the court must order a reasonable interim payment unless there is good reason not to. The judgment draws on authorities such as Excalibur Ventures LLC v Texas Keystone Inc and Kazakhstan Kagazyp plc v Zhunus, emphasising that recoverable costs must be objectively reasonable and proportionate—not merely what a party is willing to pay.

The court reiterated that:

  • Solicitors’ fees should align with Guideline Hourly Rates, unless compelling justification is provided.
  • Counsel’s fees must also be reasonable and proportionate.
  • Costs incurred for strategic or client-preferred reasons are not necessarily recoverable.

Paragraph 34: Key Analysis

In paragraph 34, the court directly addresses the appellants’ argument that their costs were justified by comparison to the Plan Companies’ own professional fees. The court rejects this argument, stating that the two tasks—formulating the restructuring plans and opposing them—were fundamentally different. It emphasises that the fact a paying party incurred disproportionately high costs does not make the receiving party’s costs reasonable or proportionate.

This paragraph sets the tone for the court’s cautious approach, highlighting the need to assess costs independently of what either side spent and reinforcing the principle that recoverable costs must be objectively justified.

Court’s Conclusion

The court found the appellants’ cost submissions lacking in detail and justification. It noted:

  • Mayer Brown’s rates were nearly double the guideline rates without adequate explanation.
  • Counsel’s fees were insufficiently documented.
  • Alvarez & Marsal’s invoices were vague, though some expert evidence was useful.

Due to the uncertainty and deficiencies, the court declined to order a 60% interim payment. However, it also found the Plan Companies’ offer of £500,000 too low. Balancing these factors, the court ordered an interim payment of £2 million.