COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE
MR JUSTICE NEWMAN
Strand, London, WC2A 2LL
B e f o r e :
Vice-President of the Court of Appeal (Civil Division)
LORD JUSTICE BUXTON
LORD JUSTICE CARNWATH
| THE QUEEN ON THE APPLICATION OF SONIA BURKETT
|- and -
|LONDON BOROUGH OF HAMMERSMITH AND FULHAM
Smith Bernal Wordwave Limited, 190 Fleet Street
London EC4A 2AG
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Official Shorthand Writers to the Court)
J.R. McManus QC and Andrew Tabachnik (instructed by the Respondents' Legal Services Division) for the Respondents
Simon P. Browne (instructed by the LSC's Policy and Legal Department) for the Legal Services Commission
Nigel Cooksley QC (instructed by the Law Society) for the Law Society
Crown Copyright ©
Lord Justice Brooke : This is the judgment of the court.
“The Applicant pay the costs of the First Respondent but the determination of the amount of such costs that it is reasonable for the Applicant to pay be postponed generally.”
That order has remained undisturbed. We were told that the claimant's bill of costs up to and including the hearing before Richards J amounted to about £10,500. The House of Lords, for its part, ordered the council to pay the claimant's costs in the Court of Appeal and the House of Lords, and we were told that the process of assessment of the claimant's bill had already begun when Newman J heard the substantive claim.
“…that the Defendant's costs be subject to detailed assessment if not agreed, and that the Defendant's costs should be set off against the costs which the House of Lords ordered the Defendant to pay the Claimant, linked to the amount of costs to which the Defendant is assessed as liable to pay according to the House of Lords and no more.”
|Party||Solicitors' bill||Counsel's fees||Other disbursements||Total|
|Court of Appeal
|House of Lords
(Leave hearing & two days)
“The charge created by subsection (6) above on any damages or costs shall not prevent a court allowing them to be set off against other damages or costs in any case where a solicitor's lien for costs would not prevent it.”
“The liability of a legally assisted party under an order for costs made against him with respect to any proceedings shall not exceed the amount (if any) which is a reasonable one for him to pay having regard to all the circumstances, including the financial resources of all the parties and their conduct in connection with the dispute.”
He held that the words “the liability of a legally assisted party” must be construed as a reference to a liability to pay.
“(i) Where proceedings have been concluded in which an assisted person… is liable or would have been liable for costs if he had not been an assisted person, no costs attributable to the period during which his certificate was in force shall be recoverable from him until the court has determined the amount of his liability in accordance with section 17(1) of the Act…
(3) The amount of an assisted person's liability for costs shall be determined by the court which tried or heard the proceedings.”
Again, Scott LJ interpreted the reference to “a person who… is liable …for costs” as meaning “a person liable to pay costs”.
“The operation of a set-off does not place the person whose chose in action is thereby reduced or extinguished under any obligation to pay. It simply reduces or extinguishes the amount that the other party has to pay. The operation of a set-off, in respect of the liability of a legally assisted person under an order for costs, does not require the legally aided person to pay anything. It does not lead to any costs being recoverable against the legally aided person. Accordingly, in my judgment, there is nothing in section 17(1) or in regulation 124(1) to prevent set-off. An assessment of the amount that it would be reasonable for the legally aided person to pay, is not, therefore, a precondition of, and, indeed, has nothing to do with, set-off.”
“(1) A direction for the set-off of costs against damages or costs to which a legally aided person has become or becomes entitled in the action may be permissible.
(2) The set-off is no different from and no more extensive than the set-off available to or against parties who are not legally aided.
(3) The broad criterion for the application of set-off is that the plaintiff's claim and the defendant's claim are so closely connected that it would be inequitable to allow the plaintiff's claim without taking into account the defendant's claim. As it has sometimes been put, the defendant's claim must, in equity, impeach the plaintiff's claim.
(4) Set-off of costs or damages to which one party is entitled against costs or damages to which another party is entitled depends upon the application of the equitable criterion I have endeavoured to express. It was treated by May J. in Currie & Co. v. The Law Society  QB 990, 1000, as a 'question for the court's discretion.' It is possible to regard all questions regarding costs as being subject to the statutory discretion conferred on the court by section 51 of the Supreme Court Act 1981. But I would not have thought that a set-off of damages against damages could properly be described as a discretionary matter, nor that a set-off of costs against damages could be so described.
(5) If and to the extent that a set-off of costs awarded against a legally aided party against costs or damages to which the legally aided party is entitled, cannot be justified as a set-off (i) the liability of the legally aided party to pay the costs awarded against him will be subject to section 17(1) of the Act of 1988 and regulation 124(1) of the Regulations of 1989; and (ii) the section 16(6) charge will apply to the costs or damages to which the legally aided party is entitled.”
Costs and set-off
“The issue in this appeal is whether, in a case where one party is legally aided, an order for costs in favour of the other party can direct that those costs be set-off against either damages or costs to which the legally aided party has become, or may in future become, entitled in the action.”
(i) What is the nature of the court's jurisdiction as to costs?
(ii) Is “set-off” when ordered between two amounts of costs subject to the same rules as a set-off relied on as a defence to a substantive claim?
(iii) In the present case, was the set-off ordered by Newman J not open to him because of either (a) the rules as to community funding; or (b) lack of mutuality between the two amounts that were to be set off against each other?
(iv) As to mutuality, was the relevant beneficiary of the costs order in the House of Lords the LSC rather than Mrs Burkett?
(v) If the answers to these questions support the decision of this court in Lockley, does earlier authority nonetheless prevent our following that decision?
The nature of the court's jurisdiction as to costs
“It is possible to regard all questions regarding costs as being subject to the statutory discretion conferred on the court by section 51 of the Supreme Court Act 1981. But I would not have thought that a set-off of damages against damages could properly be described as a discretionary matter, nor that a set-off of costs against damages could be so described.”
“[A] set-off for damages or costs between parties may be allowed, notwithstanding the solicitor's lien for costs in the particular cause or matter in which the set-off is sought.”
“How can any solicitor possibly have an equity against B to make B pay costs which B is ordered to pay to A when B cannot recover from A the costs which A is ordered to pay B? How can any solicitor have an equity to make B pay instead of setting them off? If this matter were free from authority I should say it is the most extraordinary equity I have ever heard of.”
Set-off as a defence to a substantive claim
Costs protection at first instance
The counterparty to the House of Lords costs order
(i) “All money payable to or recovered by a client in connection with a dispute by way of damages, costs or otherwise….shall be paid to the client's solicitor” (reg 18)
(ii) “The solicitor shall pay all money so received by him to the [LSC]” (reg 20(1)(b))
(iii) “Where, in relation to any dispute to which a client is a party….there is a client's costs order or client's costs agreement the [LSC] may take any steps, including proceedings in its own name, as may be necessary to enforce or give effect to that order or agreement” (reg 23(1)(b))
“22(4) Except as expressly provided by regulations, any rights conferred by or by virtue of this Part on an individual for whom services are funded by the Commission as part of the Community Legal Service or Criminal Defence Service in relation to any proceedings shall not affect –
(a) the rights or liabilities of any parties to the proceedings, or
(b) the principles on which the discretion of any court or tribunal is normally exercised.”.
“A set-off of costs against costs, where all are incurred in the prosecution and defence of the same action, seems so natural and equitable as not to need any special justification”.
“[T]his means that the assisted person never obtains the slightest entitlement as beneficiary to a single penny payable by virtue of an order in his favour for costs….Any order for costs is only made in the name of the assisted person for the purposes of identification and taxation….No set-off can arise because the money never belongs to the assisted person; it belongs to the Legal Aid Fund…”
“In the present case, I understand, development has begun. Park J queried what exactly Mrs Burkett is now expecting by way of remedy. The European Court certainly envisages a possibility of the permission being quashed and compensation being given to the developer, but I do not realistically think Mrs Burkett expects that. However, that is an important aspect to be considered, because there is a great danger in these cases of losing sight of the fact that the remedy is being sought on behalf of a specific person… ”
Following the withdrawal of the substantive appeal, we have not been given any more information on this issue. Nor have we had to consider what practical relief Mrs Burkett could realistically have expected to obtain – now, or indeed at any previous stage of these protracted proceedings.
ORDER: Appeal dismissed; Appellant to Respondents cost of appeal if not agreed. Application for permission to appeal to House of Lords refused. Further orders as per agreed minute of order
(Order does not form part of approved judgment)