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19 August 2021
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Can’t pay? The court will make the order anyway. The march of the payment on account goes on.

The Debt Respite Scheme introduced as part of Covid-19 related regulations last year will not protect a party from being ordered to make a payment on account of costs.

The parties to Axnoller v Brake have provided several judgments in 2021, however rather than analysing the most recent judgment at the time of writing (providing hardcopies of bundles to an opponent), I want to take us all back to the far more interesting decision of HHJ Matthews on 4 June 2021.

This decision concerned whether a payment on account should be made following an order that the defendant pay the claimant’s application costs on the indemnity basis. So far, so normal.

The payment on account has continued to advance over the last decade, starting with CPR rule 44.2(8) being modified during the Jackson reforms to create a positive onus on the court to make such an order.

"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".

The court has long grappled with the jurisdiction to make an order for an interim payment, in cases such as Global Assets Advisory Services Ltd & Anor v Grandlane Developments Ltd & Ors [2019] EWCA Civ 1764 and RXK (A Child) v Hampshire Hospitals NHS Foundation Trust [2019] EWHC 2751 (QB).

The ambit of when an order can be made has arguably grown over time, leaving many practitioners with only one area on which to mount a defence. Axnoller addresses one attempt to fight on this ‘Alamo’, the less often argued part of CPR rule 44.2(8): “unless there is good reason not to do so”.

The discretion as to what constitutes a good reason is naturally broad and given the multitude of regulations created in response to the Covid19 pandemic, it was inevitable that a party would make their last stand using these regulations.

Specifically, that because under Part 3 of the Debt Respite Scheme the order for a payment on account of costs cannot be enforced, that the inability to enforce creates a good reason not to make the order.

HHJ Matthews found that the fact an order may become a debt subject to a moratorium on enforcement does not constitute a good reason not to make such an order. Nor can such an order be subject to a moratorium prior to it having been made. The Debt Respite Scheme prevented the enforcement steps to recover a debt, not the creation of a debt itself.

Like a glacier, the ground on which to resist a payment on account is shrinking by the year. So how can practitioners make a last stand on behalf of their client?

  • During live proceedings, admissible offers if made early may minimise a payment on account. 
  • Future orders necessitating costs being repaid to a party may frustrate a payment on account.

 If a party has only succeeded on one issue and those costs cannot be disentangled from the other issues costs then the Court will not be able to arrive at a reasonable payment on account. 

If all else fails, dispute the reasonable sum – focus on limiting your client’s immediate liability rather than engaging in an all or nothing approach.

Jack Ridgway is a Senior Costs Lawyer at Bolt Burdon Kemp and is a Council member of the Association of Costs Lawyers.

ARTICLE FROM THE ASSOCIATION OF COSTS LAWYERS FOR THOMSON REUTERS DISPUTE RESOLUTION BLOG - on 19 August 2021

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