Securing a Payment on Account for Solicitors at the conclusion of a claim can be crucial to cash flow. With many hours of work locked up in a matter, securing a timely payment on account is key.
CPR 44.2 (8) states that
“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.”
However, what about in matters that settle by way of Part 36 Acceptance, and hence there is no Court Order? The receiving party is then required to make an application to the Court under CPR 47.15 (1).
The case of Mars UK Ltd v Teknowledge Ltd (No. 2) [1999] 2 Costs LR 44 is often referred to when considering the level of interim payment to be awarded. It provides guidance on how to approach quantifying the interim payment to be awarded. The Judge calculated a rough estimate as to the likely level of costs to be awarded on Detailed Assessment, and ordered a payment on account at two thirds this figure.
But what about in the post Jackson era where a case has been subject to Costs Budgeting?
Where a matter proceeds to Trial, there has been guidance given in the cases of Thomas Pink v Victoria Secrets UK Ltd [2014] EWHC 3258 (Ch) and Excelerate Technology Ltd v Lindsay Cumberbatch & Anor [2015] EWHX B1 Mercantile.
In Thomas Pink, the Judge awarded a Payment on Account at 90% of the Costs Budget that had previously been approved by the Court. In reaching this decision, the Court took into consideration that should the matter proceed to a Detailed Assessment, then that Judge should not depart from the approved Costs Budget without good reason [The 10% reduction accounted for the fact that the costs may face a reduction from the Budget on a Detailed Assessment].
From a Paying Party’s point of view, if the pre budget incurred costs are grossly excessive, is this 10% deduction sufficient?
If the Court makes a costs management order under rule 3.15, the Costs Practice Direction 3E 7.3 states:
…When reviewing budgets, the Court will not undertake a detailed assessment in advance, but rather will consider whether the budgeted costs fall within the range of reasonable and proportionate costs”
Therefore, whilst a Legal Representative may request that the Judge place a note in the Case Management Order as to the level of the incurred costs, what happens if the matter proceeds to Trial and the Case Management Order does not comment on the level of those incurred costs? The Receiving Party potentially has the ability to recover the full amount of the budgeted costs with the level of pre Budget incurred costs never being looked at.
It is for the proactive forward thinking Party to ensure that this marker is placed during the life of the claim or, alternatively, objections should be raised as to the level of the requested payment on account on the grounds that the incurred costs had never been approved or deemed reasonable.
In Excelerate Technology Ltd, following Judgment, the Court ordered a Payment on Account at 90% of the approved Budget (despite this Payment on Account exceeding the level of damages awarded) on the basis that they would be payable in any event on Detailed Assessment.
The question therefore remains as to how a Receiving Party, subject to a Costs Management Order in a case that has not proceeded to Trial (and hence the complete Budget not been used), can secure the maximum Payment on Account? An application under CPR 47.15 (1) would still be required, and the Receiving Party should rely on either Thomas Pink or Excelerate Technology Ltd. However, because the matter has not proceeded to trial, a 90% award is unlikely.
If you have any questions or queries in relation this blog please contact Joanne Chase (joanne.chase@clarionsolicitors.com and 0113 336 3327) or the Clarion Costs Team on 0113 2460622.
