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In Fitzroy Street Capital Inc & BMB Avenue Road Limited v Manning and others (SCCO, Senior Costs Judge Gordon-Saker, 14 December 2022), the Senior Courts Costs Office has confirmed that it has jurisdiction to strike out a paying party’s Points of Dispute and order the receiving party’s costs to be assessed in the sum claimed where the paying party has failed to make a payment on account. The case resolves an ambiguity in previous decisions as to whether such a jurisdiction exists.
Facts
The paying party were the Claimants in the underlying dispute and had been unsuccessful at trial. Following judgment, the Claimants failed to comply with two orders requiring a payment on account. However, the Claimants had engaged in the detailed assessment proceedings and had filed Points of Dispute which made a number of serious points about the costs claimed by the Defendants.
The Defendants made an application for an unless order that unless the Claimants make the payment on account, the Claimants’ Points of Dispute would be struck out and the Defendants’ costs would be assessed in the total amount sought by the receiving party (approx. £2 million).
Issues
The Claimants resisted the application on the basis that the court had no jurisdiction to make such an order, relying principally on the comments of Langley J in Days Healthcare UK Ltd v Pihsiang Machinery Manufacturing Co Ltd [2006] EWHC 1444 (QB); [2006] 4 All E.R. 233.
The issue in Days Healthcare was whether the court had the power to make a debarring order preventing the paying party from participating in a detailed assessment and/or the power to make a final costs order in the sum sought by the receiving party as a sanction for failure to make a payment on account.
The Judge (Langley J) held that the court did have the power to make a debarring order in those circumstances. But Langley J did not appear to decide whether the court has the power to order that the receiving party’s costs be paid in the total amount claimed without assessment as a sanction for failure to make the payment on account. However, Langley J concluded that such an order would be wrong given on the facts of that case given that Points of Dispute had been filed by the paying party:
“30. … [I do not] think, at least on the present hearing, it would be right, even if there is jurisdiction to do so (which [counsel for the paying party] submits there is not) simply to permit [the receiving party] to have the costs in effect rubber-stamped in the amount claimed. There should be an assessment. But the [paying party] must not be permitted to participate further in that assessment unless they make payment to [the receiving party] of the interim payment...”
Therefore, while Days Healthcare did not rule out that such a jurisdiction existed, it was not conclusive as to its existence.
The Claimants also relied on Porter Capital Corporation v Masters [2014] 3 Costs LR 528. The Claimants argued that this case pointed to the conclusion that such a jurisdiction did not exist. In Porter Capital Corporation, the High Court considered whether, in ordering a party to make a payment on account of costs, it had jurisdiction to make an order that, in the event of a default in payment, the receiving party should be allowed to enter judgment for the total amount of costs claimed.
The Judge in Porter Capital Corporation questioned whether he had jurisdiction to impose such a sanction for non-compliance. Counsel referred him to Day’s Healthcare. The Judge considered that Days Healthcare did not establish that he had jurisdiction to make the order sought:
“7. In order to respond to a doubt I had expressed as to my jurisdiction to make the order sought, [counsel] referred me to the decision of Langley J in 1Days Healthcare UK Ltd v Pihsiang Manufacturing Co Ltd [2006] EWHC 1444 (QB). What Langley J said in that case at para 30 reinforces my doubts as to the jurisdiction to order that the claimant should have judgment for the amount claimed without an assessment, but he did decide that the court had jurisdiction to debar the defendant from participating in the assessment..”
In response to the Claimants’ arguments, the Defendants relied on changes to the overriding objective made in 2014. By those changes, enforcing compliance with rules, practice directions and orders forms part of dealing with a case justly and at proportionate cost. The Defendants submitted that, in light of those changes, Days Healthcare would be decided differently today, and the court would have accepted that it had jurisdiction to make the order sought by the Defendants.
Decision
Senior Costs Judge Gordon-Saker accepted that in principle the Court had jurisdiction to make the order sought by the Defendants. But the Senior Costs Judge noted that in practice there should be a distinction between a case where a party has served Points of Dispute and where they have not. In the former case, per Langley J’s comments in Days Healthcare, the Points of Dispute should generally not be ignored. Rather, the appropriate order in those circumstances is a debarring order.
The Senior Costs Judge considered that this was precisely the position in the present case. The Defendants were therefore unsuccessful in obtaining the order they sought. The Senior Costs Judge instead made an unless order that the Claimants be debarred from participating further in the detailed assessment unless the payment on account was made.
Implications
The decision confirms that there is jurisdiction to make an unless order that if a payment on account is not made the paying party must pay the receiving party’s costs in the total amount claimed without further assessment. Practitioners should therefore be aware of this important and potent tool which is available to the court when dealing with a paying party who breaches a court order by failing to make a payment on account.
But the Senior Cost Judge’s observations should also be noted: where Points of Dispute have been filed, per Days Healthcare, they should generally not be ignored and struck out. A debarring order is therefore likely to be more appropriate and proportionate in most cases where Points of Dispute have been filed.
However, the Judge’s comments notwithstanding, given that it has been confirmed that the jurisdiction exists, there is no reason why an unless order as sought by the Defendants in this case would not be appropriate in certain circumstances (e.g. the most egregious cases of non-compliance with orders requiring a payment on account).
Harley Ronan acted for the Claimants.
