Payments on Account – A Guide to When and How
Our Helena Nkansah discusses when an application for a payment on account can be made and the different mechanisms available.
Payment on Account applications historically could be done where there was an authority to assess costs. For example, a Part 36 settlement, a Sealed Consent Order or a Notice of Discontinuance. Along with this, an N244 application was filed at Court submitting a request for a payment on account.
CPR 44.2(8) allows a party to make an application for payment on account of costs where the court has ordered a party to pay costs subject to Detailed Assessment. And unless there is good reason not to do so, the Court will order a reasonable sum on account of costs.
CPR 44.3(8) previously read:
“Where the court has ordered a party to pay costs, it may order an amount to be paid on account before the costs are assessed.” CPR 44.2(8) is an updated version of this provision and whilst the ‘before the costs are assessed’ aspect is lost, there is more bite given the word ‘may’ becomes ‘will’.
In our experience we tested different scenarios as we believed that the opportunity to apply under CPR 44 could be much wider than under CPR 44.3(8). We found that the Courts were willing to consider ‘Payment on Account’ applications after the initial time for applying under CPR 44 had expired and before the need to apply under CPR 47 kicked in – the results for these were typically successful, though were very subjective. This is a position supported by the recent case of Culliford & Anor v Thorpe  EWHC 2532 (Ch). Whilst these can still be tested, we do consider the most appropriate time to request a payment on account, to be when a Consent Order is agreed, at the final hearing when the Judge makes the final Order or upon a Detailed Assessment Request.
So, and realistically, when is the best time to make a request or an application?
A request should be made as soon as the Court orders a party to pay costs, or as soon as there is an agreement for a party to pay costs. In this instance, if settlement is reached on a ‘without prejudice save as to costs’ basis, the best time to seek such payment, would be within an agreed Consent Order and in line with the supporting case law Mars UK Ltd v Teknowledge Ltd. In this judgement it was found;
“where a party is successful the court should on a rough and ready basis also normally order an amount to be paid on account, the amount being a lesser sum than the likely full amount.”
Doing such request at this stage, could simply save costs and the Courts valuable time. It would also be of benefit to cash flow.
The other cost-effective alternative on pre-litigated matters, would be to factor in such request at the time Part 8 proceedings are issued – Either in the body of the Claim form, or within the Draft Directions Order. Whilst a Court should order a payment on account in these circumstances (pursuant to CPR 44.2(8)) our experience is hit and miss and many Courts will not apply CPR 44.2(8). Paying Parties will often object to such a provision (wrongly in our view).
If both of the above are missed, then the last alternative would be an application in line with the rules, being an interim cost certificate, under CPR 47.16. This would be filed on a request for a Detailed Assessment Hearing, which we can appreciate, can be many months after liability for costs has been determined. This pretty much suggests, that once the opportunity to make an application early on under CPR 44 is lost, the party will have no other option but to wait until they can apply under CPR 47.
Following a recent decision from Mr Justice Birss, the High Court ruled that they have no power to order a payment on account of costs after a part 36 offer is accepted. He said; the place to find the court’s ability to make an order following acceptance of a part 36 offer was “in part 36 itself” – which makes no provision for it. There is no reason, in my judgment, to read rule 44.2(8) to make a payment on account applicable when a part 36 offer is accepted.”
So where does this leave payments on account on Part 36 offers?
For the receiving party, not in an ideal position if settlement has already been concluded. It is therefore our advice that if settlement is likely to be reached under the terms of a Part 36, then it is strongly recommended that you try to seek an agreement on a payment on account within a Consent Order at the time of conclusion. If this is refused, then an interim costs certificate can later be requested at the Detailed Assessment Hearing stage under CPR 47.16.
The Part 36 issue is one which is unlikely to go away anytime soon and we are aware of a number of cases progressing on this exact point. We would therefore expect to see further guidance on the issue in the not too distant future.
If you are in any doubt then contact your costs specialist prior to compromising the claim where they will be able to assist and guide you on to the provisions to incorporate and rely upon to support the obtaining of a payment on account of costs.
If you have any queries arising from this discussion, then please do not hesitate to contact Helena Nkansah who can provide practical assistance.