Legal Cost Specialists

Timing of orders for interim costs payments

I have previously commented on the issue of the timing of orders for interim costs payments.

CPR 44.2(8) reads:

“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.”

CPR 47.16(1) reads:

“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.”

I had always read this to mean there were two stages at which such an order could be made:

  1. At the same time an order for costs is being made (usually following a trial).
  2. After a request has been filed for a detailed assessment hearing.

If an order for a payment on account had not been made when the costs order was being made, the next opportunity to obtain an order for an interim payment would not arise until after a request for a detailed assessment hearing had been made.  This is the view shared by the authors of Cook on Costs.

This issue came up for determination in the recent case of Ashman v Thomas [2016] EWHC 1810 (Ch) (19 July 2016).

Chancery Master Matthews had given judgment and awarded costs to the defendant.  Subsequently, when trying to agree the terms of the order, the parties fell out over an attempt by the defendant to include a term for a payment on account of costs, which the claimant objected to.  The matter was referred back to the Master for a decision to be made on written submissions.

The claimant argued that a payment on account should be sought at the time that the costs order is made.  The alternative was that an interim costs certificate may be issued at any time after the commencement of the detailed assessment process, under CPR 44.16(1).  (This is a typo in the judgment and should clearly be CPR 47.16(1)).  As there had been no request for a payment on account at the time the order was made and as no detailed assessment proceedings have yet been commenced, no order should be made (ie the Cook on Costs view).  (Actually, if this is what the claimant argued it was not 100% correct.  An interim costs certificate can only be issued once a request for a detailed assessment has been filed; it is not sufficient that detailed assessment proceedings have been issued.)

The Master resolved the issue in the defendant’s favour on the basis:

“The substantial point, as it seems to me, is whether a request for a payment on account can only be made at the hearing itself.  If so, then, once the parties come to draw up the order for the court’s approval, it is too late to argue for its inclusion.

The general rule is that an order takes effect from the moment it is made by the court, not when it is entered and sealed by the court office: see Holtby v Hodgson (1890) 24 QBD 103; CPR 40.7.  But the court retains power to alter its judgment or order at any time until it is entered and perfected by sealing: Re Barrell Enterprises [1973] 1 WLR 19, CA. This power is not restricted to exceptional circumstances: Re L (Children) [2013] 1 WLR 634, Sup Ct.

There is nothing in the rules, nor any case of which I am aware, to alter the general rule in the context of payments on account of costs. Indeed, the mandatory terms of CPR rule 44.2(8) (subject to the existence of a ‘good reason’) mean that there is even more reason to exercise the power when the matter is drawn to the court’s attention than there might otherwise be.  Accordingly I conclude that there is no objection in principle to considering the Defendant’s request for a payment on account of costs, and indeed good reason to do so, when this is sought after the hearing but before the order is sealed. I shall therefore do so.”

Of course, this decision rather evades the issue.  The Master did not expressly decide that no general power existed to make an order under CPR 44.2(8) at any stage.  Rather, he decided that he had the power to “alter” his order, prior to it being entered and sealed, to include provision for an interim payment.

Nevertheless, it is clearly implicit in his decision that this route was only open to him because the final order had not been entered and sealed.  Otherwise, the defendant would have had to wait until after filing a request for a detailed assessment hearing.  Usually, if no request is made when judgment is being handed down, any subsequent request is made long after the final order has been entered and sealed.

5 thoughts on “Timing of orders for interim costs payments”

  1. Another recent case is Travers v Poole Hospitals. The judgment of the Regional Costs Judge is at this link

    The Regional Costs Judge decided that the court should order a payment on account at the same time as it makes a Part 8 costs-only order.

    At paragraph 24 of the judgment, the Regional Costs Judge disagrees with paragraph 21.3 (e) of the SCCO Guide.

  2. Some large cases could warrant these costs building …… excuse me, interim payment applications but usually a fall out about the amount not the principal.

    Question:- In most most cases lets ask ourselves what is the purpose of these quick to fire, usually pro forma nuisance applications? Answer :- Just costs!

  3. This judgment does indeed evade the issue and no doubt paying parties will argue that it introduces a new requirement, namely that the application for an order for a payment on account of costs must be made no later than the point at which the substantive order for costs is sealed.

    If that is correct, this judgment will severely curtail the ability of receiving parties to obtain payments on account of costs and will do so in a way that runs counter both to the general development of the rules and to the existing practice in this area.

    The requirement that the application should be made before the substantive order is sealed is not obvious from the wording of the present CPR 44.2(8), which simply states:

    ‘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.’

    In its previous form, which applied before 1 April 2013, CPR 44.3(8) stated that: ‘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.’

    Until now, commentary on the new rule has, naturally, focused on the fact that the court must order a payment on account unless there is good reason not to do so, whereas under the old rule it was simply given the power, but not the obligation to order a payment on account.

    However, this latest judgment inevitably draws attention to the differences between the opening words of each provision. The beginning of the old rule (‘Where the court has ordered…’) certainly allowed the court to make an order for a payment on account at any time after it had made the substantive order for costs.

    There was plenty of supporting case-law, eg Blackmore v Cummings & Ors [2009] EWCA Civ 1276, where the Court of Appeal had no difficulty in entertaining an application not just for an order for a further payment on account made under CPR 44.3(8) (a previous payment on account having been ordered by the trial judge) but even after detailed assessment proceedings had been commenced. Although it declined to make the order sought, it did so not on grounds of lack of jurisdiction but on the particular circumstances of the case (see paragraphs 27-31).

    It was also established that the old rule enabled an order for a payment on account to be made where the substantive proceedings had ended without the court making any actual order eg where a deemed order for payment of costs arose on discontinuance, a situation that is covered by CPR 44.9(1) – see Barnsley v Noble [2012] EWHC 3822 (Ch) (Proudman J).

    The situation would be exactly the same where acceptance of a Part 36 offer had given rise to a deemed order for payment of costs – see Fitzpatrick Contractors Ltd v Tyco Fire and Integrated Solutions (UK) Ltd [2009] EWHC 274 (TCC) (Coulson J).

    I find it difficult to believe that the draftsmen of the new rule, which appears to have been intended to encourage the making of orders for payments on account, meant to impose a new restriction, namely that the application had to be made before the substantive order had been sealed.

    Is it indeed necessary to regard the order for a payment on account as forming part of the one substantive order? It seems to me that the wording of CPR 44.2(8) is capable of providing for two successive orders – the substantive one determining liability in principle for the costs, followed by a separate but derivative order for a payment on account.

    In my experience it is entirely routine for courts to entertain applications under the present CPR 44.2(8) long after the sealing of the substantive order. The courts have also been willing to make orders for further payments on account where the substantive order itself had contained a provision for a payment on account which turned out to have been inadequate once the bill had been prepared.

    If such applications are no longer to be entertained, it will make it harder to agree the terms on which substantive claims are settled if those terms have to include the amount of any payment on account of costs. Paying parties often resist the inclusion of such a provision or, if they concede it in principle, refuse to agree anything more than a nominal amount. The receiving party will not wish to jeopardise the entire settlement on this issue but, if no adequate payment on account can be agreed, his only remedy will be to request a detailed assessment hearing at the earliest possible date and pay the hugely inflated court fee for so doing, simply in order to be eligible to file an application for an interim costs certificate pursuant to CPR 47.16. This is hardly a way to save costs, or the court’s scarce resources.

    We do not know from the judgment in Ashman v Thomas what, if any, authorities were cited to the Master. It is an unfortunate feature of the case-law in this area – particularly in relation to the amount to be ordered by way of payment on account – that the large body of easily accessible case-law seems not to be referred to, with the result that there are significant inconsistencies in approach.

  4. Pingback: Interim costs payment | Legal Costs Blog

  5. Pingback: Timing of payments on account - GWS Law

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