In the recent case of (1) Fitzroy Street Capital Inc (2) BMB Avenue Road Limited v (1) Lee Antony Manning (2) Matthew David Smith (3) Barclays Bank Plc, Barrister Shaman Kapoor was successful in obtaining an Unless Order, requiring a paying party to comply with a previous Payment on Account of Costs Order.

What is a Payment on Account of Costs?

On the successful conclusion of any claim, the receiving party is entitled to claim their costs from the paying party, which are likely to be assessed if not subject to fixed costs. 

An interim payment on account of costs can usually be requested from the Court to ensure adequate cash flow in a matter in which the level of costs are being contested at an early stage, and also to reduce the level of interest accruing.

CPR 44 sets out general rules on costs and states that the Court has discretion on whether interim payments on account are payable, how much are payable, and when they are to be paid.

Under 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.”

An application for a payment on account of costs is usually not necessary to made at the point of settlement, as such a clause can be inserted into a final order either by the Court, or by consent if any settlement is reached, but before agreement of a final order for costs.

If the parties fail to make allowance for an interim payment on account of costs at this stage, then an application for an Interim Costs Certificate can be applied for to be granted by the Court.  The Rules are somewhat ambiguous as to the granting of such an application under CPR 44.2(8) however, if such an opportunity has passed, an application can be made at the point of having lodged for a detailed assessment under CPR 47.16.  An Interim Costs Certificate will order a payment from the Paying Party to the Receiving Party to be made before detailed assessment has concluded.

Sanctions for Non-Payment of a Payment on Account of Costs

In the case of 1) Fitzroy Street Capital Inc (2) BMB Avenue Road Limited v (1) Lee Antony Manning (2) Matthew David Smith (3) Barclays Bank Plc, an Unless Order was granted as a sanction for non-payment of the payment on account of costs.

Unless Orders are made by the Court and provide specific instructions which one party must follow to prevent sanctions, such as the striking out of a claim, from being applied.

Such an Order will usually stipulate the consequences that will apply if the party has not complied with the Unless Order instructions within a specified period of time. Sanctions for non-compliance to the Order will be proportionate to the ordered instructions.

Whilst Mr Kapoor requested a Sanction Order to strike out the Points of Dispute in the aforementioned case, the Senior Costs Judge instead granted an Unless Order debarring the Paying Party from participating in the detailed assessment proceedings until the payment on account of costs had been satisfied.

Although the Senior Costs Judge did not agree to strike out the Points of Dispute in this case, they acknowledged that the Court still had the power to do so where it deemed appropriate. This acknowledgement is contrary to some interpretations of the decision made by Langley J. in the case of Days Healthcare UK Ltd v Pihsiang Machinery Manufacturing Co Ltd and Ors [2006] EWHC 1444 (QB).

How can ARC Costs Assist?

ARC Costs are a team of specialist Costs Draftsmen and Costs Lawyers who can assist you in any costs matter, from preparing a Costs Budget, a Bill of Costs, negotiating on costs and representing you throughout detailed assessment proceedings.

As independent experts, we regularly represent Paying and Receiving parties in costs disputes, and we ensure that the best outcome is always achieved for our client.

We can advise you on all costs issues, including in relation to the obtaining/contesting of a payment on account of costs.

We also often advise on how to construct terms of settlement within Tomlin Orders to include appropriate interim costs provisions, or the wording of Part 36 offers to allow for recovery of an interim payment on account of costs. Obtaining an interim payment on account of costs prior to the sometimes-lengthy conclusion of detailed assessment proceedings can be crucial in many cases, and will assist with your cash flow.

We can also advise and assist clients in obtaining Unless Orders and Sanction Orders for non compliance with specific Costs Orders.

Should you wish to discuss your query further, please contact us on 01204 397302 or info@arccosts.co.uk. Alternatively, you can complete our online query form, and we will contact you to discuss your query further.

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