Kerry Underwood

INTERIM PAYMENTS ON ACCOUNT OF COSTS: TWO NEW CASES

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Interim Costs Orders After Acceptance Of A Part 36 Offer

In

Global Assets Advisory Services Ltd & Anor v Grandlane Developments Ltd & Ors [2019] EWCA Civ 1764

the Court of Appeal held that a court can make an interim order for costs after a claimant has accepted a Part 36 offer within time.

The claimant accepted the defendants’ Part 36 offer in time and consequently the defendants were liable for the claimants’ costs.

The trial judge declined to make an interim payment for the claimants’ costs on the grounds that he should follow the decision in

Finnegan v Spiers [2018] 6 Costs LO 729; [2018] EWHC 3064 (Ch).

Here the Court of Appeal allowed the claimants’ appeal and held that the court had power to order an interim payment in circumstances where a claimant had accepted a Part 36 offer.

Although Part 36 is described as a self-contained procedural code about offers to settle made pursuant to the procedure, the Court of Appeal said that there is nothing in the terms of Part 36 which suggests that it is entirely freestanding and that all costs consequences of the acceptance of a Part 36 offer are to be found within “four corners of CPR”.

The court’s power to order an interim payment on account of costs pursuant to CPR 44.2(8) applied.

The decision in Finnegan v Spiers was based on the fact that Part 36 itself made no provision for a payment on account of costs, and nor did it provide the court with any discretion in such circumstances.

Here the Court of Appeal stated that section 51 of the Senior Courts Act 1981 creates a broad statutory discretion of the court in relation to the costs of an incidental to all proceedings in the High Court, but that is made expressly subject to the rules of court.

The Court of Appeal held that the jurisdiction to order a payment on account of costs pursuant to CPR 44.2(8) applies where there is a deemed order under CPR 44.9, and such a deemed order arises on acceptance of a Part 36 offer.

The finding to the contrary in Finnegan was wrong.

There is no need for the court physically to have made an order to trigger CPR 44.2(8) – a deemed order is sufficient.

A deemed order is no less an order of the court than an actual order and it is made in order to enable the matter to be progressed in a fair and proportionate way without further need for costs to be expended and court time and resources wasted.

It would be perverse if, as a result, the successful party was at a disadvantage because an interim payment on account of those costs could only be made where the original order for costs had been made following a hearing or by consent”. (Paragraph 17).

The policy decision behind payments on account of costs are the same in either case, and that is to enable a receiving party to recover part of its expenditure on costs before the possibly protracted process of detailed assessment – see

Days Healthcare UK Ltd v Pihsiang Machinery Manufacturing Co Ltd [2006] EWHC 1444 (QB) .

Furthermore, the making of such an order may reduce the points of dispute in the detailed assessment and discourage the paying party from prolonging the assessment itself – Mars UK Ltd v Teknowledge Ltd [2000] FSR 138.

A person entitled to costs should not be kept out of the portion of those costs to which he is plainly entitled, pending a detailed assessment.

Those policy reasons remain the same whether or not the order is deemed to have been made; in both circumstances something should be paid without delay. (Paragraph 18).

This approach is consistent with the reasoning of the court in

Barnsley v Noble [2013] EWHC 3822 (Ch)

where the court held that it had power to order a payment on account where a deemed costs order had been made where a claim had been wholly discontinued.

There the court held that it had jurisdiction to order a payment on account of costs despite the fact that a discontinuance pursuant to CPR 38.6 gave rise to a deemed, rather than an actual, costs order.

“…CPR 44.12 [CPR r 44.9] is clear in its terms and the mischief which a costs order on account seeks to redress (namely that the person entitled to costs should not be kept out of the portion of costs to which he is plainly entitled pending detailed assessment) is the same whether there is a deemed order following discontinuance or an actual order following trial…” (Paragraph 26 in Barnsley v Noble).

The Court of Appeal also pointed out that if it were otherwise, then a late accepting claimant would be able to get a payment on account as CPR 36.13(4)(b) provides that the liability for costs must be determined by the court if the parties have not agreed it, but not if the offer is accepted within time.

Consequently, a claimant accepting in time would not be able to get an interim payment, but a claimant accepting a day late would. That would be perverse.

 

The Court of Appeal had the following to say about other anomalies:

 

“27. There would be a number of additional anomalies. Where a Part 36 offer is made before the action is commenced and is accepted within the relevant period, it is necessary to commence Part 8 proceedings pursuant to CPR r 46.14 in order to recover the costs to which a party is entitled. In those circumstances, therefore, it would be possible to make an order pursuant to CPR r 44.2(8). The same would be true in the circumstances set out in CPR r 36.14(4) or where the Part 36 offer relates only to part of the claim and the claimant abandons the balance of the claim within the relevant period because CPR r 36.13(2) contains a discretion as to costs.

28. Not only does such a distinction create perverse results, it would also enable the party accepting the Part 36 offer to determine whether it could be liable for a payment on account by choosing to accept a Part 36 offer immediately before the expiry of the relevant period rather than a day afterwards. That cannot be correct.

29. It seems to me that it is equally unjustifiable to seek to distinguish the circumstances in which a deemed order arises on a discontinuance, as Birss J did in relation to Barnsley v Noble. Such a distinction requires one to accept that if a deemed costs order is made pursuant to CPR r 44.9(1)(c) on discontinuance pursuant to CPR 38.6, the court retains jurisdiction to make an order for a payment on account of costs, but where a Part 36 offer in relation to the whole claim is accepted within the relevant period pursuant to CPR 36.13(1) and a deemed order arises under CPR r 44.9(1)(b) it does not. In my judgment, that cannot be correct.”

 

The Court of Appeal also considered the tensions between CPR 36 and other provisions of the Civil Procedure Rules, although here it held that there was no tension on the facts of this case:

 

“33. Once one has concluded that the terms of CPR Part 36 itself do not form an exclusive code as to the costs consequences of offers to settle which comply with Part 36, it is necessary to determine whether there is a tension or conflict between CPR r 36.13 and CPR r 44.2(8) which must be resolved. In this regard, Mr Cohen referred us to Lowin v W Portsmouth & Co Ltd [2017] EWCA Civ 2172[2018] 1 WLR 1890Broadhurst v Tan [2016] 1 WLR 1928Solomon v Cromwell Group plc [2012] 1 WRL 1048; [2011] EWCA Civ 1584 and Hislop v Perde [2019] 1 WLR 201. In each of those cases there was an apparent tension or conflict between two provisions of the CPR and it was necessary to determine first whether there was an actual tension which needed to be resolved and if so, which provision must prevail.

34. In this case, once one has concluded that it is possible to look outside CPR Part 36 itself, it seems to me that there is no conflict or tension between CPR r 36.13(1) and CPR r 44.2(8) at all. It is not necessary to determine which provision must prevail. The former entitles a party to its costs of the proceedings on a particular basis and is complemented or supplemented by the latter which creates the jurisdiction to order a payment on account of those costs. CPR r 44.2(8) does not undermine or conflict with CPR r 36.13(1) at all. I should add that although Mr Cohen made reference to the very wide statutory jurisdiction as to costs contained in section 51(1) of the Senior Courts Act 1981 and suggested that Birss J was wrong not to identify it as the source of the court’s jurisdiction to make an order for a payment on account, it seems to me that it does not take the matter any further. Section 51 provides expressly that it is subject to the Rules of court and as a result one is driven back to determine the relationship between CPR r 36.13 and CPR r 44.2(8).”

 

The Court of Appeal concluded that the decision in Finnegan v Spiers was wrong and that the decision in Barnsley v Noble is correct. There is no logical distinction to be made between the circumstances in which a deemed order is made on discontinuance and on the acceptance of a Part 36 offer.

 

Comment

This is an important decision, both in relation to the issue of an interim payment on account of costs, but also in relation to the interplay between Part 36 and other Civil Procedure Rules. 

 

Interim Payments On Account Of Costs Before Case Concluded

In

RXK v Hampshire Hospitals NHS Foundation Trust [2019] EWHC 2751 (QB) (21 October 2019)

a High Court Master held that the court had power under CPR 44.2(1) and 44.2(2) to order quantum costs, and an interim payment on account of such costs, before quantum had been decided.

In doing so the court endorsed the County Court decision in

X v Hull & East Yorkshire Hospitals NHS Trust [2019] 2 WLUK 723 (25 February 2019).

I dealt with the X v Hull & East Yorkshire Hospitals NHS Trust case in my blog –

COURT MAY ORDER INTERIM PAYMENT ON ACCOUNT OF QUANTUM COSTS BEFORE QUANTUM HAS BEEN RESOLVED .

Here, the court noted that this type of application was becoming common in high value clinical negligence and personal injury claims where there is often a long delay in the court determining quantum.

The Master pointed out that there was no High Court authority on the point and gave guidance as to how courts should deal with such matters.

The meaning of a successful party or unsuccessful party in CPR 44.2 is not confined to the outcome of the whole case and, as noted in X v Hull & East Yorkshire Hospitals NHS Trust [2019] 2 WLUK 723 the discretion in CPR 44.2 is very wide.

CPR 44.2(8) allows the court to make an interim payment on account of costs only where it has made a costs order that could be subject to detailed assessment.

Consequently, the application should cover costs to a specific date, and an interim payment on account of those costs, which is what happened in X v Hull.

The court should preserve security for the defendant and limit the risk of costs having to be repaid.

The court should take into account the factors in CPR 44.2(4) and (5) and sufficient information should be given to determine the matter on established principles and not as an “exceptionality test”.

Factors to be considered include:

1. the type of funding and payments made under it;

2. any Part 36 offer and its contents;

3. any payments on account of damages;

4. the likely damages to be awarded;

5. costs of quantum to date;

6. the likely hearing date;

7. any other relevant factors.

CPR 44.2

“(1) The court has discretion as to –

(a) whether costs are payable by one party to another;

(b) the amount of those costs; and

(c) when they are to be paid.

(2) If the court decides to make an order about costs –

(a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but

(b) the court may make a different order.

(3) The general rule does not apply to the following proceedings –

(a) proceedings in the Court of Appeal on an application or appeal made in connection with proceedings in the Family Division; or

(b) proceedings in the Court of Appeal from a judgment, direction, decision or order given or made in probate proceedings or family proceedings.

(4) In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including –

(a) the conduct of all the parties;

(b) whether a party has succeeded on part of its case, even if that party has not been wholly successful; and

(c) any admissible offer to settle made by a party which is drawn to the court’s attention, and which is not an offer to which costs consequences under Part 36 apply.

(5) The conduct of the parties includes –

(a) conduct before, as well as during, the proceedings and in particular the extent to which the parties followed the Practice Direction – Pre-Action Conduct or any relevant pre-action protocol;

(b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(c) the manner in which a party has pursued or defended its case or a particular allegation or issue; and

(d) whether a claimant who has succeeded in the claim, in whole or in part, exaggerated its claim.

(6) The orders which the court may make under this rule include an order that a party must pay –

(a) a proportion of another party’s costs;

(b) a stated amount in respect of another party’s costs;

(c) costs from or until a certain date only;

(d) costs incurred before proceedings have begun;

(e) costs relating to particular steps taken in the proceedings;

(f) costs relating only to a distinct part of the proceedings; and

(g) interest on costs from or until a certain date, including a date before judgment.

(7) Before the court considers making an order under paragraph (6)(f), it will consider whether it is practicable to make an order under paragraph (6)(a) or (c) instead.

(8) 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 good reason not to do so.”

 

Written by kerryunderwood

October 29, 2019 at 6:46 am

Posted in Uncategorized

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