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22 May 2018
Order 22 of the Civil Procedure Rules provides that in any action for debt or damages, the defendant may at any time, on notice to the claimant, pay into court a sum of money which it considers sufficient to satisfy the claim. Payment into court can be made as soon as an appearance has been filed and until a judgment has been issued.
Except in the relatively rare case of the defence of tender before claim, payment into court is an attempt to reach a compromise, rather than a defence. In the words of Lord Justice Devlin:
"A payment into court is simply an offer to dispose of the claim on terms. The payment in implies no admission about the merits of the cause of action; there has been no adjudication on it, and therefore no estoppel is created."(1)
If the amount offered is accepted, the dispute is settled as by compromise, but it does not give rise to res judicata, nor does it indicate acceptance of liability(2) and is regarded not as a contractual arrangement but as a purely procedural issue.(3)
In a recent case decided by the Supreme Court,(4) the appellant was the defendant in an earlier action in the District Court of Paphos,(5) facing a claim of €1,463 for special damages in a road traffic accident with almost one year's statutory interest and expenses of €249 plus value added tax. In his defence, filed on May 5 2008, the appellant accepted liability, but claimed that the amount claimed was excessive, arguing that the actual damage did not exceed the €200 which his insurance company had previously offered to the claimant but which the claimant had rejected. A few days later he paid €762 into court to cover the claim, interest and costs. The claimant rejected the amount offered and the trial proceeded. The district court ultimately awarded the claimant damages of €171 with statutory interest, plus legal costs. The claimant did not challenge this decision.
The issue which was referred to the Supreme Court by way of the appeal was the district court's decision to order the defendant to pay all of the costs of the proceedings. The judge in the first instance court justified his decision on the grounds that the defendant's notice of payment into court did not specify the costs on account of which payment was being deposited, and that Order 22, Rule 1 could therefore not be applied.
In its judgment dated March 14 2018, the Supreme Court overturned the decision on the grounds that the judge in the first instance court had misinterpreted the Civil Procedure Rules – specifically Order 22, Rule 1(2).
Order 22, Rule 1(2) states:
"Where the money is paid into Court in satisfaction of one or more of several causes of action the notice shall specify the cause or causes of action in respect of which payment is made and the sum paid in respect of each such cause of action unless the Court or a Judge otherwise order."
In this case, the Supreme Court said that the claim and the costs were part of the same cause of action and the defendant was not required to apportion the amount paid between the claim and the costs. The specific provision relates to the deposit of an amount into court to satisfy one or more of several claims, in which case the notice of payment into court that is set out in Document 14 of the Civil Procedure Rules must specify the cause of action for which the payment is made and the amount that is offered regarding that cause of action. It has nothing to do with the distinction between the claim and the costs.
The Supreme Court concluded that the first instance court had erred in exercising its discretion. Not only did it misinterpret the relevant provision of Order 22, Rule 1(2), but it also unjustly deprived the defendant-appellant of his costs after the payment of the amount of €762 into court. Had the claimant accepted the payment into court, she would have recovered a net sum of €513 after deducting her expenses of €249. Instead, the claimant rejected the offer and ended up with a recovery of only €171. The general rule as illustrated by Odgers'(6) is that if the claimant is awarded a higher sum than the amount paid into court, the costs incurred after the payment is made will be awarded to him. However, the court may exercise its discretion in the matter, taking account of all relevant factors.
Consequently, the appeal succeeded. The first costs order was set aside and replaced by an order that the costs of the trial after the date of the payment into court should be paid by the respondent in the appeal (the claimant in the original proceedings).
For further information on this topic please contact Maria Hadjisavva at Elias Neocleous & Co LLC by telephone (+357 25 110 110) or email (email@example.com). The Elias Neocleous & Co LLC website can be accessed at www.neo.law.
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