Berntsen & Anor v Tait & Anor

The discretion to order an interim payment on account of costs under the former Civil Procedure Rules 1998 Part 44.3(8) is at large and requires consideration of all the circumstances. The risk that payment may frustrate or stifle a genuine claim, including because of impecuniosity, is a relevant factor, but there is no universal requirement for specific evidence. The evidential question is one of degree. An appellate court should not infer misdirection from brief reasons where the materials show that the first-instance judge understood the relevant principles and factors. A stay pending payment may be appropriate, including for costs already incurred.

Mr Berntsen and Mr Richardson, members of Coniston Hotel (Kent) LLP, brought proceedings concerning the conduct of the respondents as the LLP’s former administrators under paragraphs 74, 75 and 78 of Schedule B1 to the Insolvency Act 1986.

Norris J struck out certain complaints, required substantial amendment and particularisation, ordered the appellants to pay 85 per cent of the respondents’ costs, and directed an interim payment of £45,000 by a specified date, with a stay pending payment or further application. Permission to appeal was limited to the interim payment and associated risk of stifling a genuine claim. The central issues were whether impecuniosity and possible stifling were relevant, what evidence was required, and whether the judge had erred in principle.

Vos LJ delivered the leading judgment. Sharp LJ and Moore-Bick LJ agreed. The appeal was dismissed.

1. It was open to the appellants to argue on appeal that the interim costs order might stifle a genuine claim. That argument was an extrapolation from the impecuniosity submission made below, even though the stifling formulation had not been expressly advanced.
2. Under the former Civil Procedure Rules 1998 Part 44.3(8), the discretion to order an interim payment on account of costs was at large. The court was required to consider all the circumstances. The possibility that payment might frustrate or stifle a genuine claim was therefore a relevant factor.
3. There was no general principle requiring specific evidence before an argument based on impecuniosity or stifling could be advanced. The question was one of degree. Here, there was some evidence of financial difficulty, but no detailed evidence of assets, litigation funding, future funding, or inability to satisfy the order. It was not obvious from the material before Norris J that payment would stifle the proceedings. He was nevertheless entitled to take the appellants’ financial pressures into account.
4. The judge had not erred in principle. The transcript showed that he had the costs discretion, the overriding objective and the relevant financial factors in mind, and he had allowed a lengthy period for payment. Applying the appellate restraint explained in Camertown Timber Merchants Ltd v Sidhu [2011] EWCA Civ 1041 and Piglowska v Piglowski [1999] 1 WLR 1360, the Court of Appeal would not substitute its own discretion for that of the first-instance judge.
5. A stay pending payment was not necessarily inappropriate merely because the costs had already been incurred. The court left fuller consideration of that issue to a case in which it was central. The interim payment order and stay therefore remained in force.

1. High Court of Justice, Chancery Division (Companies Court): Norris J struck out pre-administration complaints and fraud allegations, required amendment and particularisation of the claim, ordered payment of 85 per cent of the respondents’ costs and directed an interim payment of £45,000, with a stay pending payment or further application.
2. Court of Appeal (Civil Division): Permission was granted on the interim-payment issue only. The appeal was dismissed: [2013] EWCA Civ 1520.