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Howard Dean

Howard Dean

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Interim payment on account of costs following acceptance of a Part 36 offer

AWARE07/10/2019
Costs Aware Autumn 2019

Why does the claimant want to agree a consent order to settle the claim when they have accepted the defendant’s Part 36 offer?

Some may say that as cash flow and costs maximisation are the two guiding principles of a successful claimant practice…. that is to say they incur the costs of seeking a consent order in order to obtain an interim payment…. nice work if you can get it!

But are these the real reasons?

The rules (CPR 44.2(8) provide that the Court has the power to order a party to make an interim payment on account of costs where the court has ordered the party to pay costs subject to detailed assessment.

But does the rule apply where the claimant accepts a Part 36 offer? The issue came before District Judge Kelly at first instance in Finnegan v Spiers [2018] EWHC 3064 (Ch).

The claimant accepted the defendant’s Part 36 offer and the parties executed a settlement agreement. Whilst there was no specific clause providing for an interim payment on account of costs, provision was made for the defendant to pay £45,000 including interest and disbursements of circa £30,000.

A few days later the claimant issued an application for a payment on account of costs. District judge Kelly decided that the Court had no power to make an order for a payment on account of costs because the entitlement to cost arose from acceptance of the Part 36 offer.

Part 36 is a complete code and the rules make no provision or provide a discretion to order a payment on account in these circumstances.

Upon appeal Mr Justice Birss agreed accepting the submission that Part 36 was a complete code and held that the Court has no power to order the payment of costs on account after a part 36 offer is accepted. He said,

‘The place to find a provision giving the court the ability to make a payment on account order after acceptance of a Part 36 offer would be in Part 36 itself. It is absent from there.

 Rule 44.2(8) applies when a court has ordered a party to pay costs. That is not what has happened when a Part 36 offer is accepted under r36.13(1) or (2). There is no reason, in my judgment, to read rule 44.2(8) in such a way as to make it applicable when a Part 36 offer is accepted.’

 So the real reason is that the Courts discretion under CPR 44.2(8) does not apply to cases where a Part 36 offer has been accepted in time.

Keoghs Comment

Preventing interest accruing is a good reason to voluntarily agree to a payment on account of costs following acceptance of a Part 36 offer. Agreeing to and endorsing a consent order formalising the acceptance of a Part 36 offer to provide for a payment on account is not.

In doing so the paying party is effectively consenting to recovery of the costs of obtaining an unnecessary consent..