Part 36 And Interim Payments On Account of Costs

Derrick Yirenki v Ministry of Defence [2019] EWHC 1955 (QB)

Following the decision of Birss J in J P Finnegan v Spiers (t/a Frank Spiers Licensed Conveyancers) [2018] EWHC 3064 (Ch) which we reported on last year, HHJ Rawlings has found that the court has no power to award a payment on account of costs in circumstances where the substantive action has settled by way of acceptance of a Part 36 Offer.

“It may be that it creates a disincentive to a claimant to accept part 36 offers but it seems to me that such disincentive would be very slight, there are many advantages to a claimant in engaging in the process of making and accepting part 36 offers. The disincentive of not being able to receive a payment on account of costs which will be assessed in due course is not a sufficient disincentive to mean that part 36 offers will not work effectively to promote settlement of claims”

He rejected an alternative argument that he had the power in any event to order a payment on account under the wide discretion afforded to him by s51 of the Senior Courts Act 1981.

“Section 51.1 … says that, subject to the provisions of any other enactment or rules of court, the costs of and incidental to the proceedings are in the discretion of the court. Whilst that wording is potentially wider than just determining who is to pay costs and to what extent, it is still difficult to read into that provision, a discretion to order a payment on account of costs… The CPR already sets out the circumstances in which a court can order a payment on account of cost to be assessed and I do not consider that there is scope for finding that there is a separate and wider power to order a payment on account of costs to be assessed than is contained in CPR 44.2 (8).”

With statutory interest running at 8% it does of course remain the clear interests of a paying party to make an interim payment on account of costs at an early stage.

** This decision has effectively been overturned by the Court of Appeal in Global Assets Advisory Services Ltd & Anor v Grandlane Developments Ltd & Ors [2019] EWCA Civ 1764 **

DERRICK YIRENKI v MINISTRY OF DEFENCE [2019] EWHC 1955 (QB)