CPR 44.2(8) | Payments On Account In Civil Litigation

In the world of civil litigation, managing cash flow can be as crucial as the legal arguments themselves. When a court orders one party to pay another’s legal costs, the final amount is often subject to a detailed assessment process, which can take time. This is where Civil Procedure Rule (CPR) 44.2(8) comes into play, offering a mechanism for the winning party to receive a portion of their costs upfront. At TMC Legal, we believe in empowering our clients with clear insights into such vital procedural rules.

What is CPR 44.2(8)? The Power to Award Interim Costs

CPR 44.2(8) is a key provision within the rules governing civil litigation in England and Wales. It states: “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”.

This rule is part of the court’s broader discretion regarding costs. While the general principle is that the unsuccessful party pays the successful party’s costs (CPR 44.2(2)), CPR 44.2(8) specifically directs the court to order an interim payment when costs are heading for detailed assessment. The use of “it will order” signifies a strong starting point in favour of the receiving party, a shift from older, more permissive rules.

The main goal of CPR 44.2(8) is to allow a party who is owed costs (the “receiving party”) to get some of that money before the detailed assessment process concludes, which can often be a lengthy affair. This helps to:

• • • Alleviate financial hardship: It prevents the successful party from being significantly “out of pocket” for a long time.
    • Prevent unfair settlements: It reduces the risk that a receiving party, especially one with fewer resources, might feel forced to accept a lower overall costs settlement simply to get some funds quickly.

These aims are not just about financial convenience; they touch upon the fundamental principle of access to justice. An interim payment helps ensure the effective and fair operation of our civil justice system.

The Court’s Approach: “Will Order… Unless Good Reason Not To”

The wording of CPR 44.2(8) creates a strong presumption that an interim payment will be made. The responsibility falls on the paying party to convince the court that there’s a “good reason” why such a payment shouldn’t be ordered, or why a lower sum is justified.

What Counts as a “Good Reason”?

The CPR doesn’t list all possible “good reasons,” so it’s down to the court’s discretion based on the case specifics. However, case law gives us some clear pointers:

• • • Inability to pay is generally NOT a good reason: The paying party’s financial difficulties usually don’t negate the receiving party’s right to an interim sum. This was confirmed in Bank St Petersburg PJSC v Arkhangelsky EWHC 2817 (Ch).
    • Not asking immediately is NOT a good reason: Failing to request the payment when the initial costs order was made isn’t, by itself, a reason to refuse a later application, as seen in Culliford & Anor v Thorpe EWHC 2532 (CH). 

Potential “Good Reasons” might include:

• • • A grossly unreliable statement of costs: If the receiving party’s costs claim is so overinflated or flawed that the court can’t rely on it to determine a “reasonable sum” (FCA v Papdimitrakopoulos EWHC 3048 (Ch)).
    • Diminishing security for a defendant’s set-off: Especially in applications made mid-proceedings (NAX v MAX & Anor EWHC 3492 (QB)).
    • Part 36 offer acceptance: It has been argued that Part 36 (which deals with offers to settle) is a self-contained code and doesn’t provide for interim payments under CPR 44.2(8) if an offer is accepted under its terms.
    • Short time to final assessment: If the detailed assessment isn’t far off, the urgency for an interim payment might be less.
    • Ongoing issues affecting the final costs order: If substantive matters could lead to a different costs outcome at trial.

How Much? Determining a “Reasonable Sum”

If the court decides an interim payment is due, the next question is: how much?

The leading case, Excalibur Ventures LLC v Texas Keystone Inc EWHC 566 (Comm), established that the court should aim for a “realistic estimate of the reasonable costs likely to be determined on detailed assessment, with an appropriate margin to allow for an overestimate”. This refines earlier guidance like that in Mars UK Ltd v Teknowledge Ltd FSR 138, which suggested a “lesser sum than the likely full amount” on a “rough and ready basis”.

Importantly, the “reasonable sum” isn’t necessarily the “irreducible minimum” the receiving party might get. The court isn’t conducting a mini-assessment but making a pragmatic, predictive estimate based on available information, including costs schedules and, crucially, any approved costs budgets.

Factors Influencing the Amount:

• • • Likelihood of recovering the claimed costs.
    • Difficulty in recovering costs after detailed assessment.
    • Conduct of the parties (CPR 44.2(4) and (5) remain relevant).
    • Approved costs budgets: These are very significant. An approved budget often serves as a primary reference point.
    • Clarity of the costs statement: A clear, reasonable statement helps; an “overinflated statement of costs on which it is difficult to place any reliance” can lead to a nil award (FCA v Papdimitrakopoulos).

What Percentage Can You Expect?

While each case is fact-specific, some general benchmarks have emerged:

• • • Historically, around 50% of costs claimed was a common starting point.
    • More recently, awards in the region of 65-70% of costs subject to detailed assessment are common. For example, in Cleveland Bridge UK Ltd v Sarens (UK) Ltd EWHC 827 (TCC), 70% of incurred costs was awarded.
    • For costs already approved within a costs budget, the percentage can be much higher, often up to 90%. Cases like Thomas Pink Ltd v Victoria’s Secret UK Ltd EWHC 3258 (Ch) (90% of approved budget) and MacInnes v Gross EWHC 127 (QB) (budget less 10%) illustrate this.

The “certainty factor” plays a big role here. Approved budgets have already undergone judicial scrutiny, giving the court more confidence in those figures compared to unbudgeted incurred costs.

When Might an Interim Payment Be Inappropriate?

Despite the strong presumption, certain situations can make an interim payment unsuitable:

• • • Part 36 Settlements: As mentioned, if a Part 36 offer is accepted, it’s argued that Part 36 rules govern costs recovery, and these don’t explicitly provide for CPR 44.2(8) interim payments. If an interim payment is desired in such a scenario, it should be negotiated and included in any settlement agreement or Consent Order.
    • Unreliable Costs Statements: If a costs claim is so grossly inflated or unreliable that the court cannot determine a reasonable sum (FCA v Papdimitrakopoulos).
    • Prejudice to the Paying Party: This includes risks to the paying party’s security for a potential future set-off of their own costs, especially in mid-proceedings applications (NAX v MAX & Anor). The court will consider the entirety of the paying party’s potential costs recovery (Chernunkhin v Danilina EWCA Civ 1802, cited in commentary on NAX v MAX ).
    • Mid-Proceedings Applications: Courts may be more cautious if substantive liability issues are unresolved or if there’s a real chance the trial judge might make a different final costs order. The time until final resolution is also key; an “exceptionally long period” might support an interim payment (X v Hull, referenced in NAX v MAX analysis ), but a standard timeframe (e.g., 18 months to trial) might not.

Arguments For and Against

For the Receiving Party (Supporting an Interim Payment):

1. 1. Essential Cash Flow: Covers incurred legal expenses and funds the detailed assessment process. 
   2. Reduces Financial Pressure: Prevents being forced into a lower settlement due to immediate financial needs.
   3. Access to Justice: Ensures practical benefit from successful litigation.
   4. Fairness: Realises part of an established entitlement promptly. 
   5. Enables Proper Detailed Assessment: Provides funds to effectively engage in the assessment process.
   6. The Rule is Mandatory: CPR 44.2(8) says the court “will order” payment unless there’s good reason otherwise.

For the Paying Party (Opposing or Seeking a Lower Sum):

1. 1. Risk of Overpayment: Concern that the interim sum might exceed the finally assessed costs, making recovery of the excess difficult (mitigated by the Excalibur “margin for error” principle). 
   2. Inflated/Unreliable Claim: Argument that the overall costs claim is excessive or poorly substantiated.
   3. Preserving Set-Off Security: An interim payment might deplete funds needed for the paying party’s own potential costs recovery or other set-offs.
   4. Costs Not Yet Finalised: The final amount is unknown until detailed assessment concludes.
   5. Premature Application: If outstanding issues could affect ultimate costs liability or if the time to assessment is short.
   6. Procedural Bars: Such as the Part 36 acceptance scenario.

Timing and Procedure

The best time to apply for an interim payment is usually when the court makes the order for costs subject to detailed assessment. However, applications can be made later. Culliford & Anor v Thorpe confirmed the court’s jurisdiction to hear later applications, even after the main costs order is sealed. Not asking initially isn’t automatically a “good reason” to refuse a later request , though promptness is generally advisable.

In some long-running cases (e.g., complex clinical negligence), where liability is resolved but quantum will take years, ‘prospective’ costs orders with interim payments for costs up to a certain date might be considered. 

Enforceability: A Binding Order

An order for an interim payment under CPR 44.2(8) is not just a suggestion; it’s an enforceable court order. Master Kaye confirmed it’s “a final judicial determination or decision of a reasonable sum to be paid,” not contingent on the detailed assessment outcome. Failure to pay can lead to enforcement action, such as charging orders or orders for sale.

Strategic Steps

For Receiving Parties:

• • • Submit a realistic, well-supported costs statement.
    • Highlight any approved costs budgets. 
    • Apply promptly , though later applications are possible.
    • Anticipate and counter potential “good reasons” for refusal.
    • Frame arguments around the policy aims of CPR 44.2(8).

For Paying Parties:

• • • Thoroughly scrutinise the costs claim for genuine inflation or unreliability. 
    • Articulate specific, evidenced “good reasons” for opposition.
    • Provide supporting evidence for your arguments.
    • Engage constructively on the “reasonable sum,” arguing for an appropriate “margin for error”.

Conclusion

CPR 44.2(8) is a vital mechanism for ensuring fairness and managing the financial realities of litigation. It strongly favours an interim payment on account of costs unless the paying party can demonstrate a compelling “good reason” otherwise. Understanding the principles from key cases like Excalibur Ventures and the impact of costs budgets is crucial for both those seeking and those facing such applications.