An interim payment on account of costs can be made before the final costs are agreed. It means that the receiving party can obtain a portion of their costs on account without having to wait for the final costs to be agreed or assessed. Interim payments are dealt with under CPR 44.2, which sets out the general discretions which the Court has in relation to interim payment on account of costs. As a general rule, CPR 44.2 states that interim payments should be made.

CPR 44.2 (8) 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.”

Where the paying party does not agree to make an interim payment on account of costs, an application for interim payment can be made to the Court.

Coloplast A/S v Salts Healthcare Limited [2021]

This was a case with complex intellectual property and patent right facts, we will, however, be looking at the rulings around interim payment on account of costs and the importance of a costs budget. It should be noted that Salts Healthcare Limited was deemed to be the successful party in the case and, thus, Coloplast was to pay the costs incurred by Salts Healthcare Limited, costs subject to detailed assessment.

Costs Budgets were agreed and approved in this matter, and a costs management order had been made in July 2019. Salt’s total budget came in at £1,035.195.35 with the approved budget being £1,011.717. Salts submitted that a reasonable amount to be paid as an interim payment on account of costs should be 90% of the approved budget, which came in at over £910,000. 

While Coloplast did not take issue with making an interim payment or the amount of the approved budget, the issue they took was that making a payment on account of costs based on the budget would not allow the parties to ensure that the phases had not been overspent. 

The Court referred to CPR3.18 as a starting point which deals with interim payments where an order for costs has been made, i.e. costs management order.

The Judge in question stated that looking at the approved budget, it was hard to see where there had been an underspend by Salts and that this lack of clarity meant that there was a risk of an over-recovery on certain phases.

The Judge went on to make an order in favour of Salts, ordering the unsuccessful party to pay costs as an interim payment at 85% of the approved budget, totalling £671.628. Coloplast was ordered to pay this amount within 28 days. Should this sum on account not be paid within 28 days, Salts would have the right to apply for an interim costs certificate.

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.

We can advise you on issues relating to an interim payment on account of costs and how much can be expected to be received as a reasonable sum. We can advise on how to construct terms of settlement of damages within Tomlin Orders, or 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 will assist with your cash flow.

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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