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Brendan McNeany, Partner, Samuel Phillips
Christopher McClure considers the impact of the decision in Finnegan v Frank Spiers  EWHC 3064 (Ch) on the applicability of CPR r. 44.2(8).
The question before the Court was phrased by Birss J in the following way:
“Whether the court has power to order a payment on account of costs in a situation in which a Part 36 offer has been accepted under rule 36.31 [sic – the rule is 36.13] and so by rule 44.9(1) it is deemed that a costs order has been made on the standard basis.”
The facts of the case are very straightforward. The claimant sued for damages and the defendant made a Part 36 offer which was accepted within the relevant period by the claimant.
The issues before the court centred on the construction and relationship between the Part 36 acceptance provisions (CPR r. 36.13) and the court’s discretion to order a payment on account of costs (CPR r. 44.2(8)).
Acceptance of a Part 36 offer within time grants a claimant an automatic right – an entitlement – to costs pursuant to CPR r. 36.13(1) and CPR r. 44.9(1)(b) deems the order made on the standard basis – the authority for assessment.
(NB: CPR r. 44.9(2) provides that, in the case of pre-action Part 36 acceptance, there is no deemed order for assessment. In such cases it will be necessary to issue Part 8 costs-only proceedings under CPR 46.14 in order to obtain an authority for assessment on a given basis.)
CPR r. 42.2(8) reads:
‘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.’
It was contended on behalf of the paying party/respondent that the court, by reference to this provision, had no discretion to order an interim payment on account of costs: Part 36 represents a self-contained code and, as such, in the absence of any provision within Part 36 as to payments on account of costs, there was no discretion to award the same.
It was further argued that CPR r. 44.2(8) (i.e. the payment on account of costs provision) could not apply because it did so only where ‘the court orders a party to pay costs’ which is not the case where there has been acceptance of a Part 36 offer within time: the award for costs is automatic under CPR r. 36.13(1) and the standard basis for assessment deemed pursuant to CPR r. 44.9(1)(b).
The receiving party sought to rely on the decision of the court in Barnsley v Noble  EWHC 3822 which held that a court did have power to make an order for payment on account of costs following service of a notice of discontinuance.
As with Part 36 acceptance, service of a notice of discontinuance deems a costs order to have been made on the standard basis by virtue of CPR r. 44.9(1)(c). To that extent it was submitted on behalf of the applicant that, if the court could make an order for payment on account of costs pursuant to a deemed order for assessment on the standard basis due to discontinuance, then it could equally do so where there had been acceptance of a Part 36 offer.
The Court in Finnegan distinguished Barnsley on the basis that CPR 38.6 (i.e. the notice of discontinuance provisions) renders the discontinuing claimant liable for costs “unless the court orders otherwise”. As such, the court’s discretion on costs is retained under the discontinuance provisions whereas the entitlement to costs which arises pursuant to acceptance of a Part 36 offer is automatic. Thus in a case of discontinuance the court retains its discretion to make an order for costs whereas there is no such discretion under CPR r. 36.13(1).
In summarising its decision in favour of the respondent, Birss J held that:
“[T]he place to find the court's ability to make a payment on account order after acceptance of a Part 36 offer is in Part 36 itself. It is absent from there. There is no reason, in my judgment, to read rule 44.2(8) to make a payment on account applicable when a Part 36 offer is accepted. So I distinguish Barnsley. In my judgment, it applies to discontinuances only.”
LLB (Hons), PG Dip (BVC)
Thursday 28th February 2019