The case raised the novel question of whether an order for interim payment on account of costs under CPR r.44.2(8) can be enforced by way of charging order. The short answer is "yes".
The facts
The Claimants had been the successful party in underlying proceedings, obtaining costs orders in their favour. In particular, the Defendants were ordered to pay ('the Costs Order') (i) the Claimants' costs to be assessed on the standard basis if not agreed, and (ii) the sum of £118,800 on account of costs by 4pm on 10 November 2017 ('the Payment on Account').
The Defendants did not pay any part of the Payment on Account to the Claimants, who then obtained a charging order against the First Defendant's property ('the Property') on 5 February 2019.
By October 2023, the Defendants had still not made any payment to the Claimants, they made an application for an order for sale of the Property under CPR Part 73. The application was resisted by the Defendants.
Detailed assessment proceedings had not been commenced by the Claimants when the application was heard.
The issue
The Defendants' argument was that the Payment on Account was based on a contingent liability which had yet to be determined, and therefore is not yet due. This is based on the premise that until there has been a detailed assessment, the sums due under the Costs Order cannot be properly ascertained; consequently, the sum of £118,800 is not yet payable as it is an interim payment on account of the Costs Order. It followed that methods of enforcement that require a sum to be due (including a charging order) was not available. The options available to the Claimants, on the Defendants' case, were to get on with detailed assessment, or to pursue other available methods of enforcement, such as debtor questioning, proceedings for contempt or an unless order debarring the Defendants from taking part in detailed assessment.
Alternatively, the Defendant argued that the Court should not exercise its discretion to grant an order for sale, relying on, among other things, the Claimants' delay in commencing detailed assessment proceedings.
The outcome
Master Kaye carried out a detailed analysis of the law relating to detailed assessment, charging orders and payments on account, and reached the following conclusions:
- There are competing interests for both the paying party and the receiving party when considering what steps to take in relation to a detailed assessment. The system of checks and balances contained in CPR Part 47, which coupled with an assessment of the risks, costs and benefits overall will result in a bespoke decision for each paying or receiving party in each case. It was therefore open to the Claimants to enforce the Payment on Account before commencing detailed assessment proceedings; there is no need for the court to interfere in that process unless an application is made under CPR r.47.8.
- The authorities draw a clear distinction between, on the one hand, unassessed costs and contingent liabilities (which could not be secured by way of a charging order because they were not ascertained) and, on the other hand, payments on account and interim payments (which could be secured by charging order).
- The determination of the 'reasonable sum' to be paid on account of costs under CPR r.44.2(8) is a binding judicial determination based on all the circumstances of the case, including inter alia the risk of overpayment, and will be ordered to be paid by a specific date. It is therefore an ascertained sum which can be properly enforced; if not, it would fundamentally undermine the concept of interim payments and policy behind them.
Accordingly, Master Kaye concluded that the Payment on Account was an order requiring the Defendants to pay money which has become due within the meaning of section 1 of the Charging Act 1979, and could therefore be enforced by way of charging order.
In exercising her discretion, Master Kaye made an order for sale, noting that the delay in commencing detailed assessment proceedings had "very limited weight".
Lesson learnt
Orders for payment on account of costs are enforceable by way of charging order, even where detailed assessment proceedings have not been commenced. This may seem, in hindsight, to be a matter of common sense; however, before this case, there was no binding authority on whether payments on account could be enforced. Of course, as noted by Master Kaye, what steps a receiving party should take in these circumstances will depend on their own analysis of the risks and benefits in their particular circumstances.
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