Can the court order a payment on account under CPR 44.2(8) following acceptance of a Part 36 Offer? Court of Appeal says yes.

GLOBAL ASSETS ADVISORY SERVICES LTD & ANOR V GRANDLANE DEVELOPMENTS LTD & ORS [2019] EWCA CIV 1764

In November last year we reported on the case of Finnegan v Frank Spiers [2018] EWHC 3064 (Ch) in which Mr Justice Birss held that there is no jurisdiction to award a payment on account under CPR 44.2(8) where a claim is settled by way of acceptance of a Part 36 Offer.

At that time we commented:

“This is a surprising decision and one that appears to run contrary to the development of the rules and general direction of case law on the subject of payments on account… Why should the position be any different where settlement is achieved following acceptance of a Part 36 Offer? … Can it really have been the intention of the rules committee to make such a fundamental distinction between cases which conclude at trial or by way of consent order, and those which settle upon acceptance of a Part 36 Offer?”

Well, it seems that Lady Justice Asplin in the Court of Appeal (no doubt an avid reader of our blog) agrees with our commentary.

Giving the leading judgment in this case, she rejected the reasoning of Birss J in Finnegan and concluded that there is no distinction to be drawn between circumstances in which the costs order has been made by a judge rather than having been deemed to have been made pursuant to CPR r 44.9.

“A deemed order is no less an order of the court. It is made in order to enable the matter to be progressed in a fair and proportionate way without further need for costs to be expended and court time and resources wasted. It would be perverse if, as a result, the successful party was at a disadvantage because an interim payment on account of those costs could only be made where the original order for costs had been made following a hearing or by consent.”

She rejected any suggestion of a distinction between a deemed costs order made on discontinuance under CPR 38.6 and that made after acceptance of a Part 36 Offer under CPR 44.9(1)(c).

“Such a distinction requires one to accept that if a deemed costs order is made pursuant to CPR r 44.9(1)(c) on discontinuance pursuant to CPR 38.6, the court retains jurisdiction to make an order for a payment on account of costs, but where a Part 36 offer in relation to the whole claim is accepted within the relevant period pursuant to CPR 36.13(1) and a deemed order arises under CPR r 44.9(1)(b) it does not. In my judgment, that cannot be correct.”

Nor of a tension between CPR 36.13(1) and CPR 44.2(8).

“..there is nothing in the terms of CPR Part 36 which suggests that it is entirely freestanding and that all costs consequences of the acceptance of a Part 36 offer are to be found within the four corners of CPR Part 36 itself… once one has concluded that it is possible to look outside CPR Part 36 itself, it seems to me that there is no conflict or tension between CPR r 36.13(1) and CPR r 44.2(8) at all. It is not necessary to determine which provision must prevail. The former entitles a party to its costs of the proceedings on a particular basis and is complemented or supplemented by the latter which creates the jurisdiction to order a payment on account of those costs. CPR r 44.2(8) does not undermine or conflict with CPR r 36.13(1) at all.”

As a point of interest, in our report on Finnegan last year we made reference to a case which had not featured in argument, namely Astonleigh Residential v Goldfarb [2014] EWHC 4100 (Ch). In that case, the court reached a similarly sensible (in our view) conclusion as to the interaction of CPR 36 and CPR 44.2(8), commenting that:

“It seems to me that what is discussed in Cooke (sic) as to the power to make such an order where there is acceptance of the Part 36 Offer, is all concerned with matters of practicality and whether one would be coming before the court or not. There is no suggestion that it is a matter of jurisdiction and there is certainly no suggestion in the CPR itself that in such circumstances there is no power to grant such an order.”

The judge in that case, Mrs Justice Asplin (as she then was).

GLOBAL ASSETS ADVISORY SERVICES LTD & ANOR V GRANDLANE DEVELOPMENTS LTD & ORS [2019] EWCA CIV 1764