The Court of Appeal has unanimously held that the court has jurisdiction to order an interim payment on account of costs pursuant to CPR 44.2 where a Part 36 offer has been accepted within the relevant offer period, overturning the High Court’s decision that there was no such jurisdiction: Global Assets Advisory Services Ltd v Grandlane Developments Ltd  EWCA Civ 1764.
The Court of Appeal’s decision is significant as it clarifies that claimants in such circumstances, where a costs order is deemed made in the claimant’s favour, can obtain an interim payment on account of costs as if there were an actual costs order in their favour. It means that, in appropriate cases, claimants will be able to recover part of their costs without having to wait for the conclusion of the (often protracted) process of detailed assessment or negotiations to agree the quantum of costs.
Sarah Boyle, an associate in our disputes team, considers the decision below.
The claimants made a Part 36 offer to settle their claim. The defendants accepted within the “relevant period” for the purposes of CPR 36.13, so the claimants were deemed to be entitled to the costs of the proceedings up to the date of acceptance under CPR 44.9.
The claimants produced a draft consent order which included an order for an interim payment on account of costs. The defendants objected to the inclusion of the order for an interim payment, and the claimants submitted an application seeking such an order.
The High Court (Teare J) noted that, in Finnegan v Spiers (t/a Frank Spiers Licensed Conveyancers)  EWHC 3064, Birss J had found that there was no jurisdiction to make an interim order for payment on account of costs where a Part 36 offer had been accepted within the relevant period and a deemed order for costs had arisen under CPR 44.9. Teare J said it was his duty to follow the earlier decision, as he could not say he was convinced that it was wrong. However, he gave permission to appeal as he considered that the arguments to the contrary were substantial.
In summary, in Finnegan v Spiers, Birss J held that:
- Part 36 is a self-contained code which deals with all the costs consequences where a Part 36 offer is accepted, and would accordingly be the place to find the power to award interim payments if such power existed.
- The power to order interim payments on account of costs under CPR 44.2 applies where a court has ordered a party to pay costs. It does not apply where a Part 36 offer is accepted because, in those circumstances, there is only a deemed order.
- The decision in Barnsley v Noble  2 Costs LO 150, where the court ordered an interim payment on account of costs in circumstances where only a deemed costs order had arisen, could be distinguished as that decision specifically dealt with a deemed costs order made on discontinuance.
The claimants appealed against the refusal of their application.
The Court of Appeal allowed the appeal and made an order for an interim payment on account of costs.
There was nothing in the terms of Part 36 which suggested it was entirely freestanding. The judge had erred in trying to identify the source of the court’s jurisdiction to make an order for interim payment on account of costs solely within Part 36. The court had jurisdiction to make such an order pursuant to its general discretion under CPR 44.2, which applies whether an actual costs order is made or if an order for costs is only deemed to have been made under CPR 44.9.
There was no reason to restrict the court’s power to make an interim costs order under CPR 44.2(8) to where the court had physically made the order as opposed to where an order was deemed to have been made. A deemed order is no less an order of the court, and the rationale for ordering a payment on account is the same in both cases, namely to enable a receiving party to recover part of his expenditure on costs before the possibly protracted process of carrying out a detailed assessment.
Further, there was no logical distinction between the circumstances in which a deemed order was made on discontinuance and where a deemed order was made following the acceptance of a Part 36 offer. Barnsley v Noble had been correctly decided and should not have been distinguished.