The President of the High Court, Mr Justice Peter Kelly has issued a Practice Direction (HC71) titled “Payment on Account of Costs Pending Taxation” which came into effect on 24 April 2017 and is a welcome development in the area of litigation costs.

Practice Direction Payment on Account

Practice Direction HC71 provides that, where there is no dispute as to liability for the payment of costs and where the Court deems it appropriate, an Order may be made for the payment of a reasonable sum on account within a specified period, pending the taxation of costs.

Background

Traditionally, where the successful party in a court case was awarded their costs the solicitor acting for the successful party would draft a bill and seek to agree it with the solicitor for the unsuccessful party. Where the bill could not be agreed, it would be submitted to the taxing master. On review of the bill and having heard evidence from both sides the taxing master would make a determination. This process has become very lengthy.

Kelly J considered this approach in Costello v HSE (21 March 2017). Specifically, he referenced cash flow problems in relation to delays in the taxation system and he proposed making an order that the defendants make an interim payment of costs on account. On foot of this case, Practice Direction HC71 was published.

New system

Under HC71 at the conclusion of a case, the judge will consider a draft bill from the successful party’s solicitor. The judge has discretion, should he/she deem appropriate, to make an order of an interim payment of a reasonable part of that bill. Any payment made would be on the basis of an undertaking from the successful party’s solicitor to repay any excess monies paid out should the interim fee exceed the amount allowed by the taxing master.

Factors to consider

It is important to note that the courts have discretion as to whether to make an order for an interim payment of costs on account. The English courts have considered factors such as the financial circumstances of the parties and whether there is a likelihood of an appeal in determining whether to exercise this discretion.

The question of what is a reasonable sum is also a factor that a court will have to consider on a case by case basis.

It is hoped that HC71 will relieve some of the financial burden on legal practitioners from litigation costs and ultimately result in a more efficient process in taxing costs.