Costs Update #28

The anatomy of a costs order: what Privatbank v Kolomoisky tells litigators about the phase that follows the verdict 

Trower J's consequentials judgment in one of the most complex fraud trials heard in England awarded £76.4 million on account of costs and set out, with unusual thoroughness, how courts approach indemnity costs, interim payments and interest. The principles deserve close attention.

There is a temptation after a long and successful trial, to treat the costs phase as a formality — the clearing up after the main event. JSC Commercial Bank Privatbank v Kolomoisky and Others [2025] EWHC 2909 (ChD) is a pointed reminder that it is nothing of the sort. 

The background, briefly: a fraud involving the misappropriation of approximately USD 2 billion from a Ukrainian bank through a recycling scheme built, as the judge found, "on dishonest foundations." When it came to costs, the Bank claimed £110,524,169.99 for the purposes of an interim payment application and sought £80 million on account. Trower J ordered £76.4 million — and spent considerable effort explaining why that figure was right, and why both the Bank's request and the Defendants' counterproposals were wrong. 

 On indemnity costs: conduct, not just character 

The Defendants' underlying behaviour — a fraud scheme with no commercial rationale, built on sham documents, collusive proceedings, and the theft of confidential information from Bank employees — was relevant, but not sufficient on its own. What took the case outside the norm, in the sense the authorities require, was the way the Defendants conducted the proceedings themselves. 

The judge identified five categories: the Defendants' dishonest denials maintained throughout trial on multiple central issues; disclosure failures so serious that the judge could not be satisfied all relevant documents had been produced; expert witnesses whose independence and reliability he found wanting in ways that ranged from evasive to extraordinary (one invoked the privilege against self-incrimination rather than answer questions about regulatory findings against him); late and shifting changes of case that required the Bank to respond to arguments that were subsequently abandoned; and pre-action conduct designed to obstruct the bringing of proceedings altogether. 

Crucially, the Defendants' attempt to isolate certain aspects of their defence — the limitation argument and the repayment defence — from an indemnity order was rejected. Where misconduct had a pervasive impact on the proceedings, issues based carve-outs are artificial. Courts assess the overall character of how litigation was conducted, not just the individual components. 

On interim payments: generosity has limits 

The Bank's submission that 72% of its claimed costs was a conservative starting point did not survive scrutiny. The judge applied different reductions to different categories, allowing 65% of profit costs (£42.4 million), 70% of counsel's fees (£10.5 million), and 75% of disbursements (£23.5 million). The result was £76.4 million — less than the Bank sought, more than the Defendants proposed. 

The reductions reflected specific concerns. Hourly rates for partners ran to £1,028 — well above guideline rates and requiring ‘clear and compelling’ justification under the Court of Appeal's recent restatement in Saipem v Petrofac. A trial team of eight counsel, including four silks, attracted scrutiny. Unusually high partner-to-associate ratios in the time recording invited challenge. The judge's message was consistent: indemnity costs change the standard of assessment, not the obligation to justify expenditure. 

The judgment confirms that interim costs payments are now a central tool of litigation strategy in long‑running commercial cases, deployed to give practical effect to costs entitlements even where appeals are in prospect.

The practical implication is that interim payment schedules should be prepared with detailed assessment in mind — explaining why each significant element of cost was genuinely necessary, not simply presenting a total and hoping that an indemnity order does the rest. 

 On interest: a serious sum, seriously argued 

The award of pre‑judgment interest on costs at base rate plus 3% reflects the court’s application of commercial borrowing principles to compensate a successful party which had been financing its own litigation since 2017. The rate was derived by equating the US prime with the base rate plus 1% (following Mamidoil, as approved in Kazakhstan Kagazy) and then adding a 2% uplift to reflect the Bank’s objective credit position as a nationalised Ukrainian institution, placing it above the most creditworthy commercial borrowing tier.

Post-judgment interest was deferred for amounts above the interim payment, following the approach in Involnert: even though the Bank had supplied a detailed schedule, it would not be just to run judgment-rate interest against a paying party before it has received sufficient information to assess its liability with any confidence. The practical consequence is a staged interest structure — base plus 3% until the interim payment falls due, then three months' grace before the judgment rate kicks in on the balance. 

In proceedings of this duration, the interest award is not peripheral. It is a material component of the overall recovery, and one that requires its own evidential and advocacy strategy from the outset. 

The headline from Privatbank v Kolomoisky  is a fraud verdict and a ten-figure judgment. The quieter lesson, for those who will be running complex litigation from now on, is that the costs phase begins on day one. The judgment illustrates that costs liability often turns as much on the way litigation is conducted as on the identity of the successful party.

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