Global Assets Advisory Services Ltd v Grandlane Developments Limited  EWCA Civ 1764
The case concerned the Court’s ability to award an interim payment in respect of costs following settlement of a claim pursuant to a Part 36 offer. The position had previously been, following the High Court decision in Finnegan, that the Court lacked jurisdiction to award an interim costs payment in such circumstances. The basis being that Part 36 was a complete code, Part 36 did not provide any mechanism by which the Court could make such an Order and CPR 44.2 was only relevant in circumstances where the Court was making a costs Order (compared to the automatic deemed Order made following Part 36 acceptance).
The power for the Court to order a payment on account of costs is contained within Civil Procedure Rule 44.2(8) which provides:
“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.”
The question was whether that Rule could be invoked in Part 36 acceptance cases.
The Court found that there was no reason why the power under CPR 44.2(8) should be restricted solely to circumstances in which the Court has physically made a costs Order rather than one being deemed to be made. In both circumstances it was held that the Court had made the Order, a deemed Order was still an Order of the Court but achieved through a proportionate and resource saving route. It was considered that the rationale for an interim payment, namely to permit a receiving party to recover part of their expenditure ahead of any assessment, was the same whether or not the Order was deemed to have been made. It was decided that the wording of CPR 44.2(8) also could not form the basis of a distinction between cases in which the application for an interim payment was heard by the Trial Judge or not. It applies whether or not it is the Trial Judge hearing an application for an interim payment.
The Court noted that although a “self contained procedural code” there was nothing within Part 36 to suggest it is entirely freestanding and that all costs consequences of a Part 36 offer are to be found solely within Part 36 itself. Given the ability to look outside Part 36 itself the Court considered that there was no conflict or tension present in the Rules. Part 36 gives the entitlement to costs and CPR 44.2(8) creates the jurisdiction to award an interim payment in respect of those costs.
Going forward paying parties will no longer be able to rely upon the Finnegan decision in order to avoid making a payment on account of costs in cases that settle pursuant to a Part 36 acceptance. This decision may once again result in a flurry of applications for interim payments by Claimants at the conclusion of the case. Those applications are in the main very likely to succeed. The presumption in the Rule is that a payment “will” be ordered unless there is “good reason” not to do so. While there is no guidance as to what constitutes good reason it is likely to be considered a high bar and therefore rarely indulged. Defendants should be very cautious indeed in declining interim payments as an application is likely to swiftly follow with a costs liability likely to attach. In the generality of cases a prompt interim costs payment is no bad thing as it does mitigate interest on costs that otherwise accrues at an almost punitive rate of 8% per annum.
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