What is an Application for Interim Payment on Account of Costs?

On the successful conclusion of a claim, the receiving party is entitled to their costs, which are likely to be assessed if not subject to fixed costs.  An application for interim payment on account of costs can usually be made/requested to ensure cashflow in a matter in which the level of costs are being contested, 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. CPR 44.2 (8) in particular states:

“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 a good reason not to do so.”

The starting point on the conclusion of any case should therefore be how much of an interim payment on account of costs is reasonable to be paid, and not whether an interim payment should be paid at all.  It should also be noted that if an order is made in respect of a certain element of a claim, such as liability, mid-litigation, then an order for costs in relation to that issue should follow, and in turn a request and/or application for interim payment on account of costs can also be made.

When Can an Application for an Interim Payment on Account of Costs be made?

An application for interim payment on account of costs is usually made at the point of settlement but before agreement of any final order.  If you are intending to conclude a matter by way of a Tomlin/Consent Order, it is therefore imperative at this juncture that you seek to insert a clause for an interim payment on account of costs otherwise the opportunity will be lost to force the paying party’s hand until later in the assessment process.  If a matter has settled by way of a Part 36 acceptance, this also provides an opportunity to threaten an application to paying parties if no interim payment is forthcoming prior to the preparation of the Bill, and this position was re-enforced in the recent matter of Global Assets Advisory Services Ltd v Grandlane Developments Ltd [2019] EWCA Civ 1764.

Once the detailed assessment process has begun, your next opportunity to request an interim payment is by virtue of applying for an Interim Costs Certificate, as governed by CPR 47.16.    However, the CPR states that the Court can only issue, amend, or cancel an interim costs certificate “at any time after the receiving party has filed a request for a detailed assessment hearing.”  As such, this option is only open to receiving parties who have reached the end of the assessment process, and have actually lodged for the provisional/detailed assessment itself.

How has Case Law helped our Understanding of Making an Application for Interim Payment on Account of Costs?

The decision of Master Leonard in Warren v Hill Dickinson makes it clear that an Interim Costs Certificate can be issued in both, an inter parties assessment and a solicitor client assessment. It also confirms that an application can be made for these costs before the detailed assessment hearing has been requested, as long as the request has been made before the application is heard.

In another recent case, I v Hull and East Yorkshire Hospitals NHS Trust, Judge Robinson ordered an interim costs payment in an infant brain injury case where payment would not be made to the solicitors for 10 years or more. He stated that

 “failure to ensure adequate cash flow during the period of inevitable delay may lead to the perverse and undesirable consequence that solicitors are unwilling to take on cases such as this at an early stage”.

Judge Robinson also stated that;

“Rule 44.2(2) sets out the general rule that the unsuccessful party pays the costs of the successful party. Rule 44.6(c) gives the court power to order payment of costs ‘from or until a certain date only’.”

In the case of RXK v Hampshire Hospitals NHS Foundation Trust, it was decided that interim costs payments should be allowed in long lasting medical negligence cases. Master Cook that CPR 44.2(1) and 44.2(2) were broad enough to allow the court to make an order for interim costs of £150,000 to be made to the claimant’s solicitors. The solicitors had an earlier interim payment, as well as one from the Legal Aid Agency taking the total to £250,000. As the costs to date on the file were £410,000, it was agreed that these would be substantially higher by the time the case had been resolved.

What should be included in an Application for an Interim Costs Certificate?

It is not specified in the rules whether any particular factors should be considered, or if any test should be applied when seeking an Interim Costs Certificate.  Common law dictates that an amount of 50% on account of costs is reasonable in non-budgeted matters, with substantially higher amounts payable on account in budgeted matters given that expenditure with a case has already been approved.

When making any application for interim payment on account of costs, the Court should have a copy of the document outlining expenditure in the case (a Costs Budget or Statement of Costs).  If applying for an Interim Costs Certificate, it is recommended that the application is filed alongisde the Request for Provisional/Detailed Assessment with a copy of the Bill of Costs, and the Points of Dispute and Replies.  This enables the Court to form a view on the level of costs which are likely to be awarded at the assessment.

The ARC Costs team are always happy to help with costs challenges, and the writer can be contacted via email at info@arccosts.co.uk, or by telephone on 01204 397302. For more information on legal costs, please find out more about our speciality areas of expertise on our legal costs page.

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