Courts do have the power to order an interim payment on account of costs where a part 36 offer has been accepted, the Court of Appeal has ruled.
The appellants/claimants sought a final injunction restraining the respondents/defendants from using confidential information and possible damages. The appellants made a part 36 offer in December 2018 that was accepted within the relevant period, as a result of which there was a deemed costs order under rule 44.9.
A dispute about whether the consent order should include an order for an interim payment on account of costs of £215,000 blew up. Mr Justice Teare said it should not, and ordered the appellants to pay the respondents’ costs of the application of £22,500.
Overturning this, the Court of Appeal accepted the appellants’ argument that Birss J’s reasoning was wrong. Giving the unanimous decision of the court – whose members included Sir Rupert Jackson – Lady Justice Asplin said: “The jurisdiction to order a payment on account of costs pursuant to CPR rule 44.2(8) applies whether the underlying costs order is made pursuant to the general discretion of the court expressed in CPR rule 44.2 or, as in this case, is an order for costs which is deemed to have been made pursuant to CPR rule 44.9…
“I can see no reason why the power to make an order under CPR rule 44.2(8) should be restricted to circumstances in which the court has physically made the order as opposed to circumstances in which an order of the court is deemed to have been made.
“In both circumstances, it is the court which has ordered the party to pay the costs and, accordingly, it seems to me that the circumstances fall within the wording of CPR rule 44.2(8). A deemed order is no less an order of the court. It is made in order to enable the matter to be progressed in a fair and proportionate way without further need for costs to be expended and court time and resources wasted.
“It would be perverse if, as a result, the successful party was at a disadvantage because an interim payment on account of those costs could only be made where the original order for costs had been made following a hearing or by consent.”
Asplin LJ added that the rationale for ordering a payment on account of costs was the same whether or not the order for costs was an order which was deemed to have been made.
Noting that rule 44.2(8) provided that the court “will” make an order for an interim payment of account of costs “unless there is a good reason not to do so”, there was no basis for a distinction between cases in which the application for an interim payment was heard by the trial judge and those where it was not.
To rule otherwise would create a number of anomalies, Asplin LJ added, and “would also enable the party accepting the part 36 offer to determine whether it could be liable for a payment on account by choosing to accept a part 36 offer immediately before the expiry of the relevant period rather than a day afterwards. That cannot be correct.
“It seems to me that it is equally unjustifiable to seek to distinguish the circumstances in which a deemed order arises on a discontinuance, as Birss J did in relation to Barnsley v Noble.”
The court added that Birss J was wrong also to conclude that one could only look to the terms of part 36, and not part 44, to find the jurisdiction to order an interim payment of costs.
Noting that part 36 – though described as a self-contained procedural code – referred to other parts of the CPR, Asplin LJ said “there is nothing in the terms of part 36 which suggests 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 part 36 itself”.
This led to the conclusion that there was no conflict or tension between rules 36.13(1) and 44.2(8): “It is not necessary to determine which provision must prevail. The former entitles a party to its costs of the proceedings on a particular basis and is complemented or supplemented by the latter which creates the jurisdiction to order a payment on account of those costs. CPR r 44.2(8) does not undermine or conflict with CPR r 36.13(1) at all.”
The judge made the order for the interim payment in the sum of £225,000, which was Master Gordon-Saker’s order for a costs certificate.
Rupert Cohen (instructed by Stephenson Harwood) for the appellants. The respondents were unrepresented.