The receiving party is entitled to request an interim payment following service of a formal Bill of Costs. In some cases negotiations can continue for a long period of time due to various disputes between the parties and any payment on account can ensure reasonable cash flow whilst negotiations are ongoing. It is therefore in the receiving party’s best interests to provide notice to the paying party that should an interim payment on account of costs not be forthcoming, generally within 14 days, an application will be made to the Court.
There have been many instances of a paying party refusing to make a payment on account of costs within 14 days of a Bill being served formally. In cases of no interim payment being forthcoming the receiving party may apply to the Court for an Interim Payment Costs Certificate following the procedure set out under CPR 23.
Further guidance is also set out in CPR 47.16(1) which provides the following:
‘(1) The court may at any time after the receiving party has filed a request for a detailed assessment hearing –
(a) issue an interim costs certificate for such sum as it considers appropriate; or
(b) amend or cancel an interim certificate.
(2) An interim certificate will include an order to pay the costs to which it relates, unless the court orders otherwise.
(3) The court may order the costs certified in an interim certificate to be paid into court.
(4) Where the court –
(a) issues an interim costs certificate; or
(b) amends or cancels an interim certificate,
in detailed assessment proceedings pursuant to an order under section 194(3) of the 2007 Act, the receiving party must send a copy of the interim costs certificate or the order amending or cancelling the interim costs certificate to the prescribed charity’.
The amount to request as an interim payment on account of costs?
One case to consider in relation to making an application for an Interim Payment Costs Certificate is Mars UK Limited – v- Teknowledge Limited (1999) EWHC 226. In this case it was the Judge’s opinion that the appropriate figure which should be ordered as an interim payment was “two-thirds of the costs”. Although other factors in relation to each particular case should be taken into account, the judgment in this case is one which should provide some guidance on what to reasonably be requesting from the paying party and what we could be expecting to recover as an interim payment.
What are the benefits of the paying party making an interim payment?
With the deadline for Points of Dispute being 21 days from the date Detailed Assessment Proceedings are commenced, paying parties often request an extension of time for various reasons. With the harsh consequences of non compliance under CPR 47.11 (Default Costs Certificates), it is not uncommon for a paying party to request an extension. In my experience a receiving party may use this as an opportunity to allow an extension of time on the proviso that an interim payment is made.
Another important factor which may influence the paying party’s decision regarding whether or not to make an interim payment is, that interest will continue to accrue during the Detailed Assessment process until a payment on account is made.
Securing an interim payment on account of costs is beneficial for the receiving party and maintains a continuous cash flow for the firm. It also benefits the paying party in terms of the interest incurred and in maintaining a good rapport with the opponent. Paying parties should proceed with caution when refusing an interim payment early in the Detailed Assessment process and ensure that payments on account are requested at the earliest possible opportunity.