In Finnegan v Spiers (t/a Frank Spiers Licensed Conveyancers) [2018] EWHC 3064 (Ch) Mr Justice Birss, on Appeal from the Order of District Judge Kelly, considered the question of whether or not the Court had the power to order a payment on account of costs where a Part 36 offer had been accepted under Rule 36.31, thereby creating a deemed costs Order on the standard basis pursuant to Rule 44.9(1).
At first instance District Judge Kelly summarised the facts of the case at paragraph 4 of her judgment:
“4. … The claimant brought this claim against the defendant for damages arising from professional negligence. On 23 March 2017 the claimant accepted a Part 36 offer made by the defendant. Further to the Part 36 offer, on 30 May 2017 the parties executed a settlement agreement. The Settlement Agreement at clause 7 states that ‘The defendant shall pay the claimant’s reasonable costs on a standard basis to be assessed if not agreed up to 24 March 2017.’ There is no specific reference in the Settlement Agreement to an interim payment on account of costs. However, by clause 3.1.2 of the Settlement Agreement, the second of the instalments that the defendant was to pay the claimant was a sum of £45,111.65 which included interest and disbursements. I am told that of the £45,111.65 disbursements were in the region of £30,000. To that extent the payment did include a sum on account of the costs incurred by the claimant.
The Claimant subsequently issued an application for an Order for a payment on account of costs of £19,000.00. District Judge Kelly subsequently concluded that the Court had no power to make an order for a payment on account because Part 36 was a complete code and the Rules did not make provision for a payment on account in these circumstances. The Claimant sought permission to appeal which was granted on 13 March 2018.
On Appeal Mr Justice Birrs considered the relevant Rules, in particular CPR 36, 44.9(1) and 44.3(8), and concluded that District Judge Kelly had been right to hold that the Court had no discretion to order a payment on account of costs where the matter had concluded by way of acceptance of a Part 36 offer. The Appeal was therefore dismissed.
The reasoning behind his finding was set out at paragraphs 30 and 31 of his judgment:
- In my judgment, the right way to look at this is to consider the broad relationship between Part 36 itself and rule 44.2. Given the existence of rule 44.9, it can be said that Part 36 is not an entirely comprehensive code, nevertheless the consequences of acceptance of an offer are spelled out inside Part 36 itself. They have the effect that the majority of rule 44.2 (and other parts of Part 44 as well no doubt) cannot be applicable to such a situation. Part 36 deals with the incidence of costs and the basis of assessment. In my judgment, as the respondent submitted, the purpose of rule 44.9 as it relates to Part 36 is simply to deem a costs order to be made so that the detailed assessment provisions can be triggered. That purpose of the deeming provision is nothing to do with bringing into play any other parts of Part 44 such as rule 44.2.
- The exercise of considering a payment on account in a Part 36 case is different in kind from the exercise conducted after trial, but that difference alone is not a reason not to do it. What the difference does indicate however is that 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.
Given the prevalence of Part 36, it is surprising that this point has not come before the Courts before now. Furthermore, whilst the decision appears logical when considering the wording of the Rules, it seems somewhat illogical that a Solicitor has no authority to request a payment on account of costs where a case settles pursuant to Part 36, yet they do if the case settles by some other means.