A number of law firms have recently hit the scuppers financially. This demise can likely be attributable to one issue; cashflow.
The law on interim payments is simple. The court has the power, in CPR 44.2(8), when ordering a party to pay costs subject to detailed assessment, to also order the Paying Party to pay a reasonable sum on account of costs, unless there is good reason not to do so.
As those practicing in costs will know, and much to the frustration of their instructing solicitors, if a payment on account is not ordered when the authority for detailed assessment is made, there is no further mechanism to obtain a payment on account until a detailed assessment is requested. This can be hugely frustrating for a solicitor, who will need to await (at least) receipt of the Paying Party’s Points of Dispute, before requesting a detailed assessment hearing.
This grey area could, potentially, be abused by those Paying Parties who are in financial difficulty. Nothing currently prevents such a Paying Party serving their Points of Dispute, making no offers, forcing the Receiving Party to apply for an assessment to receive a penny in costs.
In the recent matter of Culliford & Anor v Thorpe, the trial judge did not order the Paying Party to make an interim payment when making his final Order. HHJ Paul Matthews, sitting as a Judge in the High Court, stated that he had ‘overlooked’ CPR 44.2(8). After the Order was sealed, the Receiving Party raised the issue with the Paying Party. No compromise was reached and an Application was made for an interim payment.
The Receiving Party’s case was that they should not be forced to wait for the final costs to be determined. The Paying Party argued that no request was made for an interim payment when the order was made, and if it had, it would have been opposed.
Reference was made to the matter of Ashman v Thomas, wherein no order for a payment on account was made at the time of the order being pronounced. Before the order was sealed, the Receiving Party wrote to the court and asked that an order for an interim payment be made. That case is different to the matter in hand. In Ashman, the Court was asked to amend an order not yet sealed, whereas in the present case the Receiving Party was asking the Court to make a new order.
Accordingly, it was the Paying Party’s position that the only appropriate mechanism was contained in CPR 47.16(1), when an assessment hearing had been requested and that, therefore, the Court had no jurisdiction to make a new order.
HHJ Matthews outlined that he had jurisdiction, and that there was nothing in the rules or authorities supporting the Receiving Party’s view that, if an application is not made at the time, the next opportunity arises only after the detailed assessment proceedings have commenced. Given that the Court had the jurisdiction to make such an order, it was then purely a matter of discretion on the facts.
The Court concluded that, on the facts, it was appropriate to order an interim payment. The Judge outlined that had the rule been brought to his attention when the Order was being made, he would have at least considered ordering an interim payment.
On the quantum of the costs to be ordered, the Court considered the Receiving Party’s approved costs budget in the sum of £45,580, to which a payment of £30,000 was requested and ordered.
This judgment provides some welcome encouragement to those solicitors who did not request a payment on account of costs when the final order was made, and can be a very useful tool in increasing cashflow.