CIVIL PROCEDURE BACK TO BASICS 60: INTERIM ORDERS ON ACCOUNT OF COSTS: “CASH FLOW IS THE LIFEBLOOD OF BUSINESS”

Here we look at the rules relating to interim orders on account of costs, a subject of considerable importance in relation to practitioner’s cash flow and client’s pockets.

 CPR 44.2(8)

“(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.”

Note that there is a presumption that a court will make an order for a reasonable sum on account. There has to be a good reason not to make an order.

THE APPLICATION FOR INTERIM COSTS NEED NOT BE MADE AT THE HEARING ITSELF

In Culliford & Anor v Thorpe [2018] EWHC 2532 (Ch) HH Paul Matthews (sitting as a High Court judge) held that it was possible for the court to make an order  for an interim payment of costs after the date on which judgment was given.

“In my judgment, it is not the law that, once an order for costs has been made, drawn up and sealed, no further application can be made to the court for an order for a payment of a sum on account of those costs. There is nothing in the rules which so requires, and there may be good reason why payment of the sum on account is not considered at the time the order was made. “

A similar conclusion was reached by Master Matthews in Ashman v Thomas [2016] EWHC 1810 (Ch)

“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.”

THE AMOUNT OF THE INTERIM PAYMENT ON ACCOUNT OF COSTS

The fact that an action has been cost budgeted can make a difference to the amount. The judgment of  Mr Justice Birss in Thomas Pink Ltd -v-Victoria’s Secret UK Limited [2014] EWHC 3258 is instructive.

 

  1. The next point is as follows. The defendant submits that the fair quantification would be a sum of the order of £350,000. That is, I accept, a sum which one would ordinarily have awarded in a case like this before costs budgeting. The figure is a little over 50% of the incurred costs by the receiving party. Generally speaking, applying Mars v Teknowledge [2000] FSR 138, that would be the sort of figure one would expect to have awarded, possibly slightly more, possibly slightly less. The question is whether the costs budgeting rules have a significant impact on these orders.
  2. I have an action with an approved costs budget of about £678,000 and a request by the claimant for an interim payment of about £644,000. The question is what is a fair sum to award. It seems to me that the principle applicable in Mars v Teknowledge is still the same as it ever was. The court should strive to ensure that it does not overpay and should select a figure which is an irreducible minimum.
  3. Miss May refers to the sentence bridging pages 125 and 126 in the commentary on r3.18 in the current edition of the White Book. She submits that the impact of rule 3.18 is that unless there is a good reason to depart from the budget, the overall figure for assessed costs can never be less than the budget, but it can be less than the total of the budget sum, plus the reasonably incurred and reasonable in amount non-budgeted sum.
  4. The sum sought by the claimants is essentially the budgeted sum at the time they asked for it. It seems to me that the impact of costs budgeting on the determination of a sum for a payment on account of costs is very significant although I am not persuaded that it is so significant that I should simply award the budgeted sum. Bearing in mind that unless there is good reason to depart from the budget, the budget will not be departed from, but also taking into account the vagaries of litigation and things that might occur and the fact that it is, at least, possible that the assessed costs will be less, although no good reason why that is so has been advanced before me, I will make an award of 90% of the sum in the claimant’s budget (£644,829.10) rounded up to the nearest thousand. I will not do the mathematics in my head.

A SECOND ORDER FOR AN INTERIM PAYMENT ON COSTS CAN BE MADE

This was determined by HHJ Robinson in I -v- Hull & East Yorkshire NHS Trust (25th February 2019).  A copy of that judgment is available here*. I – interim payment of costs.  The claimant already had an interim payment of costs in an ongoing serious injury case.   The judge ordered a further interim payment of costs of £150,000.

32. In addition, another very significant fact is the likely delay between determination of liability and determination of quantum. Failure to ensure adequate cash flow during the period of inevitable delay may lead to the perverse and undesirable consequence that solicitors are unwilling to take on case such as this at an early stage.  It is everyone’s interests to determine liability as early as possible.  But if the consequence is that solicitors must then fund the quantum investigation for 10 years or more, they may not be anxious to take the case on early.  The delay is also an answer to the otherwise superficially attractive point made by Mr Stacey at paragraph 32 of his skeleton argument.  He submits that Switalskis must have willingly undertaken the delay in payment until quantum and quantum costs were determined.  There is some force in that point on the basis that quantum was expected to be determined in 2017, a delay of five years.  But in 2012, no-one anticipated a delay of double that, namely 10 years.

(The defendant was refused permission to appeal the order).