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PAYMENTS ON ACCOUNT OF COSTS
The decision of Chancery Master Matthews earlier this year in the case of Ashman v Thomas [2016] EWHC 1810(Ch) has led to some debate as to the exercise of the Court’s discretion in awarding a payment on account of costs to a successful party.
In that case, the Master concluded that there was no objection in principle to considering a request for a payment on account of costs when it was sought after the hearing but before the Order was sealed. The relevant rules are not perhaps as comprehensive as might be hoped when they are to be applied to cases which do not conclude at Trial.
It is perhaps useful therefore to consider the relevant provisions and associated case law (such as it is) by way of reminder.
There are 3 potential rules which govern the position, being the Court’s general case management powers under CPR 3.1 (2) (m); the specific rule for payments on account of costs found at CPR 44.2 (8) and the power to issue an interim costs certificate at CPR 47.16 (1). We shall take each of those in turn.
GENERAL CASE MANAGEMENT POWER
The Court’s general powers are set out in a non-exhaustive list at CPR 3.1 and the relevant provision for these purposes is:
3.1 (2)(m) take any other step or make any other order for the purpose of managing the case and furthering the overriding objective, including hearing an Early Neutral Evaluation with the aim of helping the parties settle the case.
Taken together with CPR 1.1 (“The Overriding Objective”) it can be said that it is within the Court’s power when dealing with a case “justly” to order that a payment on account should be made, particularly bearing in mind the amount of money involved and the financial position of each party.
SPECIFIC POWER
The main provision for payment on account is:
44.2 (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.
The rule works very well and is fairly straightforward for a matter which concludes at Trial. The Court will have had the opportunity of forming a view as to the nature and merits of the case. It may also have statements of costs or perhaps Budgets of the parties available. Therefore a relatively informed view as to what would be appropriate as a payment on account should be capable of being made.
It is worthy of some note that the Rule in its present form is beefed up from its predecessor. Whereas formerly the provision was that the Court “may order an amount to be paid on account” the provision now is that it will order the payment on account, unless there is good reason not to do so.
It has been held in cases such as Blackmore v Cummings [2009] EWCA Civ 1276 that it was an important consideration (albeit not a presumption) that a party should not be kept out of monies which would almost certainly be demonstrated to be due, longer than was necessary. In that case, it was held that all material factors have to be weighed in the balance and given the risk that even a conservative assessment may turn out to be wrong, if the Court is satisfied that it is likely that the paying party would be able to satisfy any sums ultimately awarded then there may not be a significant prejudice by delay in payment. A particular factor there was the conduct of the receiving party in delaying matters in relation to assessment of costs.
This requirement to look at all the circumstances may be found again in Mars UK Ltd v Teknowledge Ltd(Costs) [1999] 2 Costs LR 44. The factors at play there included the relative financial position of each party and the overriding objective. In order to deal with a case justly, it was found that where a detailed assessment was likely to be required, making an order for an amount which the receiving party would almost certainly recover was a closer approximation to justice than leaving the matter to that detailed assessment.
Both of those cases, whilst being helpful in relation to the general approach, were based upon the rule as it formally stood and were in relation to a matter which concluded at Trial. In Dyson Appliances Ltd v Hoover Ltd [2003] EWHC 624 (Ch) the Court considered the position where the matter did not conclude at Trial and felt that there should be no presumption for or against a payment on account of costs. The Court should be put in a position to enable it to undertake a fair assessment of what would be reasonable. Finally, in United Airlines Inc v United Airways Ltd [2011] EWHC 2411, it was held that in the context of the unfettered discretion, but with little by way of guidance as to how wide that discretion could be exercised, it was best to make a reasonable assessment of what was likely to be awarded.
In summary therefore, where a matter concludes otherwise than at Trial, there is certainly no automatic right to a payment on account of costs. The Court will have to look at all the circumstances, but in doing so should take account of the wording of the rule (“will order that party to pay…”); the financial position of the parties; the conduct of the parties and the amount of costs involved.
INTERIM COSTS CERTIFICATES
There is a specific power for the Court to issue an Interim Costs Certificate upon application by the receiving party:
47.16 (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
However, it should be noted that this power only arises once the receiving party has filed the request for detailed assessment. Without being pedantic, it is important to avoid the sometimes sloppy use of language here. Detailed assessment proceedings are commenced by the service of Notice of Commencement. The power for an Interim Costs Certificate does not arise at that point, but rather only when the matter is lodged with the Court for assessment.
The idea here is that at the point at which the matter has been lodged, the Court will have the Bill, Points of Dispute and Replies, such that it would be possible to form a view as to the likely recoverable costs. Whether it is realistic to expect a Judge or Costs Officer to plough through all of that documentation at that initial stage is perhaps questionable and it would certainly assist the receiving party if a calculation was presented to the Court as to the figure to which the Points of Dispute would reduce the bill if accepted in full.
Given recent decisions which we have reported upon on the question of proportionality, it will undoubtedly be the case that this will also be a factor in the Court’s mind when undertaking a conservative assessment of what might be reasonable as a payment on account. The paying party is now required to make an open offer at the time of serving Points of Dispute. It is sometimes the case that the open offer advanced does reflect the figure to which the Points of Dispute reduce the bill and if so that would be a useful tool for the Judge in considering the application. There is an obvious problem here in that it is not uncommon for an offer to be made of “£nil”, which offer probably complies with the Practice Direction in letter if not in spirit.
A further consideration for the Court should be the likely delay between the request for the Certificate and the Detailed Assessment. It is not uncommon for hearings to be listed many months in advance and it is to be hoped in those circumstances that the receiving party will not be kept out of some money pending that lengthy delay. Even Provisional Assessment dates are now being listed well beyond the hoped-for 6 weeks target. However, anecdotally at least, there does seem to be some reluctance for the issue of Interim Costs Certificates in Provisional Assessment matters.
In conclusion, our view is that requests should be made for voluntary payments on account as soon as possible following settlement. A reasonable time should be allowed for confirmation of the paying party’s position to be received. Any application, whether under CPR 44.2 (8) or for an Interim Costs Certificate should not assume any automatic entitlement but should set out as fully as possible the factors in favour of the Order/Certificate being made and ensure that the Court has all the information required to enable it to make a reasonable assessment.