J P Finnegan v Spiers (t/a Frank Spiers Licensed Conveyancers)

Acceptance of a Part 36 offer within the relevant period gives rise to the costs consequences specified by Part 36. The deemed costs order under rule 44.9 exists to trigger detailed assessment; it does not bring the general payment-on-account power in rule 44.2(8) into operation. A payment on account cannot therefore be ordered in that situation unless Part 36 itself provides for it. The position differs where another procedural rule preserves a discretion about costs, such as discontinuance under rule 38.6. A case decided under earlier wording of the payment-on-account rule does not govern the current wording.

The claimant appealed from District Judge Kelly’s refusal to order a £19,000 payment on account of costs after the claimant accepted the defendant’s Part 36 offer within the relevant period. The settlement agreement provided for the claimant’s reasonable costs on the standard basis, subject to assessment if not agreed. The district judge held that Part 36 was a complete code and that the rules provided no power to order a payment on account in those circumstances.

The appeal concerned the interaction between Part 36, the deemed costs order under rule 44.9, and the general provision in rule 44.2(8), including the effect of the authorities on deemed costs orders and the significance of the 2013 change in wording.

1. Appeal dismissed. District Judge Kelly was right to conclude that the court had no power to order a payment on account after acceptance of the Part 36 offer within the relevant period.
2. Part 36 is intended to operate as a complete code. Rule 36.13 specifies the incidence of costs and, where costs are not agreed, the standard basis of assessment. Rule 44.9(1) deems a costs order to have been made so that the detailed assessment provisions can be used. In the Part 36 context, that deeming provision does not activate the wider provisions of Part 44.
3. Rule 44.2(8) applies where the court has ordered a party to pay costs. Acceptance of an offer under rule 36.13(1) or (2) does not involve the court making such an order. The court therefore should not read rule 44.2(8) as supplying a payment-on-account power which Part 36 does not contain.
4. Barnsley v Noble was distinguished. Its reasoning concerned the former rule 44.3(8), and the discontinuance regime under rule 38.6 preserves a discretion to make a different costs order. It does not establish a general power applicable to every deemed costs order. Lahey v Pirelli Tyres establishes that a deemed costs order cannot be varied, but it was unnecessary to decide whether the present application was properly characterised as a variation. Fitzpatrick Contractors Limited v Tyco Fire and Integrated Solutions (UK) Limited concerned the former wording and supported the conclusion that payments on account should generally be made where appropriate, but did not govern the current rule.
5. The court declined to decide whether the current wording of rule 44.2(8) requires payment on account to be ordered at precisely the same moment as the costs order. The respondent’s notice therefore did not require determination.

• High Court (Chancery Division): appeal from the order of District Judge Kelly dismissed. The judge upheld the conclusion that no payment on account could be ordered after acceptance of the Part 36 offer within the relevant period.