“Turnover is vanity, profit is sanity, cash is king” (Pehr G Gyllenhammer – CEO Volvo)
In recent months the Courts have handed down three cases which relate to costs interim payments at the end of and during cases.
The starting point for costs interim payments are found at CPR 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
and under CPR 44.9 (a case where a deemed costs order has been made).
The long held rationale behind making interim payments can be found in case law and in the notes to CPR 44.2, which state that the receiving party is able to recover some of its expenditure before the detailed assessment is finally completed, which can be some considerable time after the costs order has been made.
If an interim payment as to costs cannot be agreed, then the receiving party can make an application for a sum on account.
It had previously been held that the acceptance of a Part 36 offer during the relevant period (21 days) cannot lead to the making of an order for an interim payment. The argument was that as Part 36 is a complete code which does not include any provision in respect of interim payments, the Court do not have discretion to order one to be made. The Court of Appeal in Global Assets Advisory Services Ltd v Grandlane Developments Ltd EWCA Civ 1764 disagreed and stated:
'‘…there is nothing in the terms of CPR Part 36 which suggest that it is entirely freestanding and that all costs consequences of the acceptance of a Part 36 offer are to be found within the four corners of CPR.’'
Therefore, if a Part 36 offer is accepted in the relevant period, the receiving party can make an application for an interim payment. As such relying on Part 36 as a reason not to make a payment on account will no longer be seen as acceptable by the court.
In the case of I v Hull & East Yorkshire NHS Trust, the court considered an application for interim payments during an ongoing case which could not be resolved in the imminent future. The claimant was sadly catastrophically injured at birth, judgment had been entered at an approval hearing and an order for an interim payment on account of costs had been made and paid. Five years later, the claimant sought a further interim payment on account of costs. The defendant refused the payment and an application was made. The District Judge at first instance refused the application and the claimant appealed the decision.
HHJ Robinson allowed the appeal. In doing so he noted that the final costs Order is “still some three or so years away, and that will be 10 years after liability has been conceded.” and that:
“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 cases such as this at an early stage. It is in 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 defendant sought leave to appeal the decision and this was refused.
This brings us to the case of RXK v Hampshire Hospitals NHS Foundation Trust. In this case Master Cook addressed the need for evidence to support an application for an interim payment in similar circumstances as to I v Hull & East Yorkshire NHS Trust. The Master noted that:
“…this sort of application has become common in high value clinical negligence and personal injury claims where there is likely to be substantial delay before quantum can be determined by the court.
The Master then made a short judgment finding that applications for interim payments in these cases are, in reality, seeking a costs order to a specific date, and that the receiving party is seeking an interim payment of these specific costs. The Master held that any application ought to address issues to include but not limited to, type of funding, likely costs, likely damages and a likely date of any trial or trial window before the court would grant the application.
The Master also reiterated that; “The need for solicitors engaged in heavy and protracted litigation to expect adequate cash flow is now understood and enshrined in the rules.”
Therefore, paying parties must be aware that the courts accept the basic principle that in litigation ‘cash is king’.
For more information, please contact Gareth Jones, Solicitor.