COURT HAS NO POWER TO MAKE AN ORDER FOR COSTS ON ACCOUNT AFTER ACCEPTANCE OF A PART 36 OFFER: HIGH COURT DECISION

In Finnegan v Frank Spiers (t/a Frank Spiers Licensed Conveyancers) [2018] EWHC 3064 (Ch) Mr Justice Birss concluded that the court has no power to order a payment on account of costs after a party has accepted a Part 36 offer.

 “I believe the correct analysis is that the place to find all the costs consequences of accepting a Part 36 offer is Part 36 and that includes the availability of payments on account, either expressly so or because the rules give a discretion about costs in other circumstances which apply, for example, to the late acceptance of a Part 36 offer but do not apply in this case.”

THE CASE

The claimant brought an action for damages and accepted a Part 36 offer made by the defendant. Shortly after the subsequent settlement agreement the claimant issued an application for an interim payment on account of costs.   The claimant issued detailed assessment proceedings thereafter and these were underway at the time when the application was heard.

THE DECISION OF THE DISTRICT JUDGE

The District Judge found that there was no authority on the topic.

She decided that the court had no power to make an order for a payment on account, essentially because Part 36 is a complete code and the rules make no provision for a payment on account in these circumstances, nor does the rules provide the court with any discretion in these circumstances in the circumstances of a deemed costs order.”

THE APPEAL

Birss J gave permission to appeal on the grounds that this was potentially significant point of practice.

THE DECISION ON APPEAL: THE COURT HAS NO POWER TO ORDER INTERIM COSTS IN THESE CIRCUMSTANCES

The appeal was dismissed.  Birss J considered the previous case law.

  1. I can see compelling reasons why a payment on account in a Part 36 case like this would be different from one considered after a trial, but that alone is not a reason not to do it, although it does show that the exercise is different in kind. What it does show, it seems to me, is that the place to find the court’s ability to make a payment on account order after acceptance of a Part 36 offer is in Part 36 itself. It is absent from there. 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 I distinguish Barnsley. In my judgment, it applies to discontinuances only.
  2. I would not say that Lahey precludes the order that the appellant seeks in this case, because I am not convinced that the correct way of looking at this case is as if it is seeking a variation of a deemed order unlike Lahey. I believe the correct analysis is that the place to find all the costs consequences of accepting a Part 36 offer is Part 36 and that includes the availability of payments on account, either expressly so or because the rules give a discretion about costs in other circumstances which apply, for example, to the late acceptance of a Part 36 offer but do not apply in this case.
  3. Accordingly, District Judge Kelly was right. To the extent that my reasons differ from hers, I have heard much fuller argument on it than she did on the issue and there is no need to consider the respondent’s notice.
  4. Finally, I wish to take the trouble to commend both counsel for their arguments and skeletons in this case. It was presented with economy and precision and I am grateful to both of them.