UK: Controversial Constitutional Court Ruling On Advance Costs Orders

Last Updated: 25 September 2012
Article by Tomáš Borecký and Ian Parker

The Constitutional Court has ruled that a claimant's rights to judicial protection and to a fair trial were infringed by an order to pay advance costs of €792,850.

The basis for the decision was that:

  • a party's right to a court proceeding, although not absolute, must be effective and could not either be limited by the court or reduced in a way which affected the subject of the litigation;
  • an order to pay €792,850 in advance costs (in addition to the maximum court fee) was a disproportionate and arbitrary restriction on the Claimant's right to a court proceeding, because this was enough to pay its legal fees 30 times over; 
  • the District Court had failed to examine the claimant's means to pay this amount of advance costs.

The case was referred back to the District Court for a new ruling.

The Constitutional Court's line of reasoning is difficult to understand, given that:

  • the wording of the Civil Procedure Code (section 141a) does not require the court to consider the party's means; indeed it clearly makes it the responsibility of the relevant party to show that it fulfils the conditions for exemption;
  • the amount ordered to be paid was merely the fixed percentage (5%) of the claim specified in the Civil Procedure Code (section 141a);
  • there has been no decision declaring CPC section 141a unconstitutional;
  • the Constitutional Court has previously reached the opposite decision in a similar case and offered no reasoning in this case to explain its change of view.

Judicial orders to pay court costs in advance were introduced into the Civil Procedure Code from 1 January 2012.

Courts can, at the defendant's request, order a claimant (unless exempt from paying costs) to pay advance costs within 60 days where he is seeking damages in excess of 400 times the minimum subsistence level for an adult. The court can also order costs to be paid in advance by the defendant.

If a claimant fails to pay by the deadline (and the defendant does pay where ordered to do so), the proceedings can be discontinued by court order within 15 days of the deadline expiring.

This change was introduced to protect the parties in high value claims and to eliminate speculative claims. In some cases, defendants were being ordered to pay costs to protect against the risk of an unsuccessful claimant being unable to pay costs (for instance, where it had already assigned the receivable to an off-shore company, against which it could not be enforced).

In the case, the claimant had assigned its claim to an offshore company which joined the proceedings. This company argued that the court was not justified in deciding that the claimant did not satisfy the conditions for an exemption from costs.

The deficiencies in this judgment may only serve to further reduce trust in the court system, which could further damage the business climate already suffering from the crisis. 

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 21/09/2012.

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