Court has no power to order costs on account after Part 36 acceptance
Part 36 is regarded as the Jewel in the Crown of CPR, and the discerning eye of the judiciary says it is perfect, but a successful party might now hold it in slightly less value than previously.
The question posed to Mr. Justice Birrs on appeal re Finnegan v Frank Spiers (t/a Frank Spiers Licensed Conveyancers)  EWHC 3064 (Ch) was “whether the court has power to order a payment on account of costs in a situation in which a Part 36 offer has been accepted under rule 36.13 and so by rule 44.9(1) it is deemed that a costs order has been made on the standard basis. The payment on account provision in the CPR is rule 44.2(8).”
CPR Rule 36.13
(1) Subject to paragraphs (2) and (4) and to rule 36.20, where a Part 36 offer is accepted within the relevant period the claimant will be entitled to the costs of the proceedings (including their recoverable pre-action costs) up to the date on which notice of acceptance was served on the offeror.
(3) Except where the recoverable costs are fixed by these Rules, costs under paragraphs (1) and (2) are to be assessed on the standard basis if the amount of costs is not agreed.
CPR Part 44
Court’s discretion as to costs
(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.
Cases where costs orders deemed to be made
CPR Part 44.9
(b) rule 36.13(1) or (2) (claimant’s entitlement to costs where a Part 36 offer is accepted)
- I conclude from that analysis that it is not straightforward to reason from the relationship between one trigger of the deemed costs order and the terms of rule 44.9(1) to the relationship between another different trigger and that rule.
- Looking at rule 44.2(8) as a matter of language, it does have the temporal quality identified by the respondent. It provides that “where” the court makes an order for costs “it will” order a payment on account of a reasonable amount unless there is good reason not to.
- In my judgment, the right way to look at this is to consider the broad relationship between Part 36 itself and rule 44.2. Given the existence of rule 44.9, it can be said that Part 36 is not an entirely comprehensive code, nevertheless the consequences of acceptance of an offer are spelled out inside Part 36 itself. They have the effect that the majority of rule 44.2 (and other parts of Part 44 as well no doubt) cannot be applicable to such a situation. Part 36 deals with the incidence of costs and the basis of assessment. In my judgment, as the respondent submitted, the purpose of rule 44.9 as it relates to Part 36 is simply to deem a costs order to be made so that the detailed assessment provisions can be triggered. That purpose of the deeming provision is nothing to do with bringing into play any other parts of Part 44 such as rule 44.2.
ANALYSIS AND COMMENT
It remains to be seen whether someone else picks up this particular gauntlet, but the judgment appears clear and unambiguous and is bad news for anyone with pending applications for payments on account in circumstances, strictly as described above. Otherwise, and in all other respects where the Court makes an order for costs, then applications should not present any difficulty.
I however say this cautiously and can envisage a paying party perhaps trying to say, that for example the Court does not make an order for costs in the context of a Tomlin Order, instead such an Order is merely an endorsement of terms agreed between the parties. That being the case, it always was, and remains, best practice to include provision for a payment on account.
Notwithstanding the above, and if you envisage requirement for a payment on account, then a Tomlin Order with provision should provide the facility, although it is extremely likely that the additional associated cost and Court fee would not be recoverable from the Paying Party.
Wherever a claim is concluded at Trial, or judgment entered, then requests/applications should be made to the Court for payments on account of costs. In my experience, payments on account are less messy than separately dealing with liability costs under a forthwith order for costs.
Mischievously, I am waiting for someone to take the next step, and apply for a further payment on account, in addition to what might have been previously ordered when say judgment was entered, based on further spend in the context of an approved Budget, on the completion of further work, albeit provided the Defendant has not made a Part 36 offer.
Otherwise, with interest at 8% you would think the paying party would be keen to make an early payment on account, but for whatever reason, that is not always the case.
The other way of looking at the situation, is that 8% interest on costs is generous, and the amount thereof, especially on substantial costs is undeniably lucrative.
It is therefore the case, in the circumstances of a deemed costs order, that the receiving party is forced to wait until costs negotiation becomes deadlocked, and then when requesting Detailed Assessment, at the same time apply for an Interim Costs Certificate (if the paying party is refusing to make a payment on account). The below provisions of CPR are self – explanatory.
(1) The court may at any time after the receiving party has filed a request for a detailed assessment hearing
(a) issue an interim costs certificate for such sum as it considers appropriate; or
(b) amend or cancel an interim certificate.
(2) An interim certificate will include an order to pay the costs to which it relates, unless the court orders otherwise.
(3) The court may order the costs certified in an interim certificate to be paid into court.
(4) Where the court –
(a) issues an interim costs certificate; or
(b) amends or cancels an interim certificate,
in detailed assessment proceedings pursuant to an order under section 194(3) of the 2007 Act, the receiving party must send a copy of the interim costs certificate or the order amending or cancelling the interim costs certificate to the prescribed charity.
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Mark Balme – Senior Costs Consultant