England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT

		Royal Courts of Justice The Strand London
		Wednesday, 14 March 2001

1. MR JUSTICE JACKSON: This judgment is in five parts, namely Part 1, "Introduction", Part 2, "The Facts", Part 3, "The Present Proceedings", Part 4, "Was the Appeal Panel's decision on costs irrational?", and Part 5, "Remedy".

Part 1 -- Introduction

2. This is a claim for judicial review of a decision made on 27 July 2000 by a Panel of the Appeal Committee of the Institute of Chartered Accountants. The claimant is a chartered accountant. He challenges the refusal of the Appeal Panel to award to him the costs of disciplinary proceedings in which he was ultimately successful. The defendant to these proceedings is the Institute of Chartered Accountants ("the Institute"). The claimant has been ably represented in this court by his wife, Mrs Alison Gorlov. The Institute has been ably represented by counsel, Miss Monica Carss-Frisk.
3. The hearing of the claimant's claim took place yesterday and lasted for a day. I said that I would reflect upon the parties' submissions overnight and give judgment this morning. This I now do.Before embarking on the facts and issues in this case, I must first set out the legal framework. The Institute is managed by its Council. The Council is authorised by the charter of the Institute to delegate its functions by bye-laws. The Council is rightly concerned to uphold proper standards of professional behaviour by its members. To this end the Council has made disciplinary bye-laws.
4. The provisions of the disciplinary bye-laws which are relevant to the present case read as follows:

"Complaints

9(1) Any person may bring to the attention of the Secretary any facts or matters indicating that a member, a firm or a student may have become liable to disciplinary action under these bye- laws or the Joint Disciplinary Scheme; and it is the duty of every member, where it is in the public interest for him to do so, to report to the Secretary any such facts or matters of which he is aware.

....

(3) In these bye-laws any facts or matters which:

(a) have come to the attention of the Secretary under paragraph (1) or otherwise; and

(b) indicate that a member, a firm or a student may have become liable to disciplinary action under these bye- laws or the Joint Disciplinary Scheme, are referred to as a 'complaint'.

....

Processing of complaints by Secretary

10(1) If, as regards any complaint, the Secretary is of the opinion that it is one which gives rise to public concern in the United Kingdom, he shall lay it before the Investigation Committee.

....

Initial consideration of complaints so laid

12(1) This bye-law applies where a complaint is laid before the Investigation Committee under bye-law 10.

(2) The Investigation Committee shall first of all decide whether in its opinion the complaint is one which gives rise to public concern in the United Kingdom.

(3) If the Investigation Committee:

(a) decides that in its opinion the complaint is one which gives rise to public concern in the United Kingdom; and

(b) considers that in all the circumstances the complaint ought to be reported to the Executive Committee to be dealt with under the Joint Disciplinary Scheme,

it shall on behalf of the Institute forthwith certify that it is of that opinion and report the complaint to the Executive Committee.

(4) If the Investigation Committee does not report the complaint to the Executive Committee under paragraph (3), it shall either:

(a) refer it back to the Secretary to be processed by him under paragraphs (2) to (5) of bye-law 10 as if he had not laid it before the Investigation Committee under paragraph (1) of that bye-law; or

(b) proceed to deal with it under bye-law 15.

....

Complaints not referred to Joint Disciplinary Scheme

15(1) Where a complaint laid before the Investigation Committee is not reported to the Executive Committee under bye-law 12(3) and is not referred back to the Secretary under bye-law 12(4)(a), the Investigation Committee shall consider whether the complaint discloses a prima facie case and, if it finds that it does not, shall dismiss the complaint.

(2) If the Investigation Committee finds that the complaint discloses a prima facie case it may:

(a) refer the whole or part of the complaint to the Disciplinary Committee as a formal complaint; or

...."

5. Bye-laws 19 to 25 deal with the conduct of disciplinary proceedings before a disciplinary tribunal. That tribunal comprises three members of the Disciplinary Committee.
6. Bye-laws 26 to 34 deal with appeals from the disciplinary tribunal. I need not set out these provisions verbatim. Suffice it to say that the appeal is heard by an Appeal Panel. That Panel is drawn from members of the Appeal Committee.
7. Bye-law 33(6) provides as follows:

"On an appeal against an order made by a tribunal, the panel appointed to hear the appeal:

(a) may by order reduce or cancel the amount of any costs ordered by the tribunal to be paid by the defendant;

(b) may, whether the appeal is successful or not, order the defendant to pay to the Institute by way of costs of the appeal such sum as the panel may in its absolute discretion determine;

(c) may, if it finds the complaint wholly unproved or finds that it has been proved in part only, order the Institute to pay to the defendant by way of costs such sum as the panel may, subject to and in accordance with regulations, in its absolute discretion determine."

8. Having set out the relevant bye-laws, I now turn to the facts of the present case.

Part 2 The Facts

9. The claimant is chartered accountant. On 28 March 1998, the claimant was appointed liquidator of Clearway Recycling Limited ("Clearway"). On a date before 21 May 1998, the claimant agreed to act as nominee for Mr Lonsdale and Mr Laverty in respect of their proposals for individual voluntary arrangements. Mr Lonsdale and Mr Laverty were directors of Clearway. The claimant duly performed the duties of nominee. However, he was not subsequently appointed to the office of supervisor of the individual voluntary arrangements of Mr Lonsdale and Mr Laverty.
10. On 24 June 1998, Mr P M Davies, the joint administrative receiver of Clearway, complained to the Institute about the claimant's conduct. The thrust of Mr Davies' concern was that it was not proper for the claimant to perform the roles of liquidator of the company and nominee for its directors at the same time. The secretariat of the Institute duly considered this matter. On 17 December 1998, an official of the Institute wrote to the claimant formulating two complaints:

"(1) That P Gorlov accepted the appointment as liquidator of Clearway Recycling Ltd when a material professional relationship existed between Mr Gorlov/his firm and the company/its directors in contravention of paragraph 6.0 of Guidance note 1.202 on Insolvency Practice; and

(2) That P Gorlov accepted the appointment as nominee in respect of the Individual Voluntary Arrangements of Terence Laverty and Andrew Lonsdale, being the directors of Clearway Recycling Limited, when a material professional relationship exists between Mr Gorlov/his firm and the company/its directors in contravention of paragraph 7.0 of Guidance Note 1.202."

11. The secretariat laid these two complaints before the Investigation Committee pursuant to bye-law 10(1). The Investigation Committee met and considered this case on 4 May 1999. Pursuant to bye-law 12, the Committee decided to deal with the matter under bye-law 15. Acting under bye-law 15, the Committee concluded that the second of the two complaints disclosed a prima facie case. I presume that the Committee decided that the first complaint did not disclose a prima facie case. The documents before me are silent on this aspect.
12. On 7 September 1999, the Investigation Committee resolved, pursuant to bye-law 15(2)(a) to prefer the following formal complaint (which the Committee had formulated in a letter dated 7 May 1999) to the Disciplinary Committee:

"That P Gorlov accepted the appointment as nominee in respect of the Individual Voluntary Arrangements of Terence Laverty and Andrew Lonsdale, being the directors of Clearway Recycling Limited, when a material professional relationship existed between P Gorlov/his firm and the company/its directors in contravention of paragraph 6.0 of Guidance Note 1.202."

13. At this stage in the narrative I must make a comment. The formal complaint does not make sense. Paragraph 7 of the Guidance Note deals with the appointment of liquidators. It seems to me likely from a reading of the contemporaneous correspondence that the reference to paragraph 7 was a clerical error. Paragraph 6 was intended. However, even if I make this assumption, the complaint still does not make sense. Paragraph 6 of the Guidance Note relates to the appointment of supervisors, not nominees.
14. This flaw in the wording of the complaint occurred to the Professional Standards Office of the Institute during January 2000. On 31 January 2000 that office sent to the claimant an entirely different complaint which read as follows:

"Between in or about March 1998 and July 1998 failed to identify and thereafter take any or any appropriate steps to manage a conflict of interest which arose or was likely to arise when he acted as both Nominee in the IVAs of Terence Laverty and Andrew Lonsdale ('the debtors') and as Liquidator of Clearway Recycling Limited (a company in which the debtors were directors and sole shareholders)."

15. In its covering letter the Professional Standards Office stated that this complaint had been preferred by the Investigation Committee. That statement was incorrect. The Investigation Committee had done no such thing.
16. On 21 March 2000, Messrs Berrymans, the claimant's solicitors, wrote to Mr Jowett, a legal adviser employed in the Professional Standards Office of the Institute, protesting about the re-formulation of the complaint. Mr Jowett replied by facsimile on the same day, stating:

"There has been no re-formulation of the complaint. The wording has been refined."

17. This is an assertion which, for my part, I am unable to accept.
18. The debate continued in correspondence. Mr Jowett made it plain that if the claimant persisted in his objection to the re-formulation of the charge, he would seek an adjournment of the hearing which was fixed for 31 March. The claimant did not want the hearing to be adjourned. The matter had been hanging over him for a long time. His health was affected. Furthermore, one of the claimant's witnesses was seriously ill, having been diagnosed as suffering from cancer. In these circumstances Berrymans sent a facsimile to Mr Jowett on 27 March, stating as follows:

".... it is not correct to say that our client concedes that the wording of the complaint as set out in the Formal Complaint is in substance the same as the complaint preferred by the Investigation Committee. The two complaints are different. Nevertheless our client is concerned that this matter should be resolved as soon as possible given the considerable period of time which has passed since the complaint was first raised. It remains both our view and that of our client that the hearing on 31 March should proceed notwithstanding the fact the substance of the original complaint and that before the Disciplinary Committee are different. We confirm that our client will not seek to challenge the jurisdiction of the Tribunal to hear the complaint on the grounds that the Institute's bye-laws have not been followed. He nonetheless reserves the right to draw attention to the point, which as you say, in your letter to him on 27 March is unfortunate."

19. On the basis of Berrymans' fax the Institute decided to proceed with the hearing on 31 March. The decision to proceed with the hearing on 31 March was a curious one. The Disciplinary Committee did not have power under the bye-laws to consider any complaint which was not referred by the Investigating Committee. Unlike a court, the Disciplinary Committee does not have any inherent jurisdiction. It only has the powers conferred upon it by the bye-laws. With the benefit of hindsight, the lawyers on both sides may be criticised for not spotting the flaw in the proceedings on 31 March. There is, however, force in Mrs Gorlov's point that greater culpability rests upon the Institute. The Council of the Institute made the bye-laws. The officials and lawyers employed by the Institute ought to understand how they work.
20. The hearing duly went ahead on 31 March on the basis of the re-formulated complaint. A Disciplinary Tribunal comprising members of the Disciplinary Committee found the complaint proved. It ordered that the claimant be reprimanded and that he pay a fine of £2,500 and costs of £5,500.
21. Although not appreciated at the time, this decision was a nullity. The claimant could not by consent confer upon the Disciplinary Tribunal powers which it did not have under the bye-laws.
22. The claimant exercised his right of appeal against the Tribunal's decision. The claimant could no longer afford independent legal representation. Instead, he was represented by his wife, Mrs Gorlov, who is a solicitor, albeit not practising in the field of litigation.
23. The appeal came on for hearing before a panel drawn from the Institute's Appeal Committee on 27 July 2000. Mrs Gorlov, on behalf of the claimant, essentially took two points: first, the Disciplinary Tribunal did not have jurisdiction to hear the complaint upon which it adjudicated; secondly, on the substantive issue, the Committee erred in finding the complaint proved.
24. The Appeal Panel dealt with the jurisdictional point first. The Panel held that the Disciplinary Tribunal did not have jurisdiction to deal with the complaint before it. Accordingly, the proceedings held on 31 March and the order made by the Tribunal were a nullity.
25. Mrs Gorlov then applied for costs. The Appeal Panel rejected that application. The debate in relation to costs is recorded in the transcript as follows:

"THE CHAIRMAN: Mrs Gorlov, the proceedings went ahead on the 31st March at the insistence and with the agreement of Mr Gorlov. Had the point which has been so ably argued by you today been taken, and it could have been, on that occasion it may very well be that the costs you are currently talking about would have been to a degree certainly reduced, at any rate dealt with by the Disciplinary Tribunal based upon its own findings on the point at that time.

MRS GORLOV: I have several points on that, sir. First of all as to the amount of the costs, they have been substantially incurred by the date of the hearing. Since the hearing the proportion of that overall figure is relatively low; I cannot say precisely what it is, but I suspect it is under £10,000 of the total cost.

THE CHAIRMAN: I am not wishing to cut across you too rapidly, but if the Institute had been allowed to take the course that you have urged upon us successfully they should have done the matter would have gone back to the Investigation Committee and the reformulated complaint would have been faced by Mr Gorlov with who knows what outcome thereafter.

MRS GORLOV: Absolutely so, sir. The outcome might have been all my costs, less costs or no costs at all, that is a complete unknown. What I would say is that still might happen; the Institute might still try to get that complaint up the road, and if Mr Gorlov is not awarded all his costs to date and he has to lay them out again in the future he will suffer if I can describe it as a double wammy. There is another aspect to the complaint. To some extent one is looking at fault. Well it would be the Institute who got this wrong in the first place. Had they got it right Mr Gorlov would have no complaints. On the day it is absolutely right the constitutional issue could have been thought of, could have been taken, and if it had been that might well have resulted in some saving, although dare I say it by no means all the costs incurred to date, but as you have heard me say the point was not spotted.

Now, I would submit that it would be quite wrong, the problem having originally arisen as a result of the Institute's mistake, for Mr Gorlov to suffer because his lawyers missed a point on the 31st March. It was spotted some while later, a week after the decision was received, not before. Mr Gorlov ought not to be penalised for that.

THE CHAIRMAN: As far as the Institute is concerned they were saying very close to the hearing date they wanted a postponement so that the matter could be referred to the Investigation Committee.

MRS GORLOV: Yes, but the Panel had heard why a postponement was gravely prejudicial. This issue could have been argued and it might not have been won, one can only speculate, but you have heard -- and I will not repeat -- the very real concerns that led to Mr Gorlov agreeing to going ahead on the 31st March. I am sure you will agree, sir, that the man was in a cleft stick; there was a clear disadvantage in delaying. There was possible advantage in proceeding. What was he supposed to do? I am not sure that any of us could say hand on heart what we would have done in the circumstances and I suggest that there really was no right decision. The reason for the cleft stick, the reason he got there in the first place, was because the Institute got it wrong and I submit that Mr Gorlov is not to be penalised because his regulatory body made a mistake.

THE CHAIRMAN: You cannot say any more than that, can you?

MRS GORLOV: I do not think I can.

THE CHAIRMAN: I see the point.

MRS GORLOV: I would only be repeating myself.

THE CHAIRMAN: It is a short point and it has its own power. I will just discuss it with my colleagues. (Pause) (The Committee conferred)

Mrs Gorlov, we are very sympathetic to the position which you have put before us, but we do not think it would be appropriate to make a costs order in this case in view of the points that I have raised with you during the course of your submission. The order which we will make, that the ruling in these proceedings were a nullity, is that there will be no order as to the costs. The costs order plainly that was made by the Disciplinary Tribunal falls."

26. I have set out the whole of the relevant part of the transcript, because the reasons for the decision made were stated in the course of argument rather than in the ruling at the end of the proceedings.
27. The claimant was aggrieved by the decision not to award him costs. He brings the present proceedings in order to challenge that decision.

Part 3 The Present Proceedings

28. In these proceedings the claimant contends that the costs decision made by the Appeal Panel was irrational and unfair. The claimant seeks an order that the decision be quashed. The claimant also seeks an order that he be awarded all or a large part of his costs.
29. Although many points have been canvassed in the written submissions and oral argument, most of them faded away as the hearing progressed. As Miss Carss-Frisk, counsel for the defendant, pointed out in her submissions, the real issue in this case is whether the decision of the Appeal Panel was irrational. The claimant contends that it was irrational. The defendant contends that it was not. I shall therefore deal straightaway with the rationality issue.

Part 4 -- Was the Appeal Panel's Decision on Costs Irrational?

30. Regulation 29 of the Appeal Committee Regulations provides as follows:

"A Panel on finding a complaint not proved or proved in part only may, on the Appellant's application, order that the Institute pay a specified sum in respect of the Appellant's costs. In deciding whether such an order should be made, the Panel shall have regard to all the facts and matters it considers relevant including the conduct of the Appellant and the conduct of the Institute. The sum payable by the Institute shall be in the amount determined by the Panel in its absolute discretion."

31. This provision supplements bye-law 33(6), which has been set out in Part 1 of this judgment. This regulation sets out how the Appeal Panel should exercise its discretion under bye-law 33(6)(c).
32. It is clear from bye-law 33(6) and from regulation 29 that costs in appeal proceedings do not necessarily follow the event. The Appeal Panel must have regard to the conduct of the parties and to all the circumstances of the case.
33. In the course of argument a number of authorities have been cited concerning the approach to applications for costs against a regulatory authority. In R v Totnes Licensing Justices, ex parte Chief Constable of Devon and Cornwall (1990) 156 JP 587 the police unsuccessfully objected to the renewal of a licence for the sale of alcohol. The licensing justices ordered the police to pay costs to the successful applicant. In judicial review proceedings Mr Justice Roch quashed the costs order. At pages 590-591 Mr Justice Roch said this:

"Did the justices fall into error in the present case? I think that they did. They, according to the affidavit of Mr Craven, viewed the matter as a civil matter and concluded that, having found in favour of the applicant, it would be unjust not to allow him his costs. There can be no doubt that in civil proceedings between litigants, be it in the High Court or county court, the principle is that costs follow the event. The winning party obtains an order for costs against the losing party unless there are exceptional circumstances or reasons why this should not be so.

Mr Barrie has pointed out that the basis of that principle is this: the losing litigant should not have contested the matter before the court. In my judgment it was wrong for the justices to treat this matter as civil proceedings between two private litigants and to ignore the factor urged upon them by the solicitor appearing for the police authority, namely, that the police have a function which they are required to perform. They are required to supervise the proper conduct of licensed premises and to object in those cases where there are good grounds for objecting to the renewal of the licence. That that is the police's function is clearly demonstrated by the provisions in the Licensing Act which give the police power to enter licensed premises whether at the invitation of the licensee or not.

In addition, in my view, the police authority must also bring to the attention of the licensing justices matters of which the police know and which can fairly and properly be said to amount to misconduct by the licensee or those for whom he is responsible. The link between drinking and crime -- frequently violent crime -- is well established and it is a mater of general concern. The drinking by persons who are under the permitted age for entering licensed premises and of those persons then becoming involved in offences is also well established and a matter of public concern.

Such factors emphasise the importance of the police being able to discharge their functions with regard to the licensing laws fairly and properly. Of course, if the evidence indicated that an objection by a police authority to the renewal of the justices' on-licence was misconceived, that it was without foundation or born of malice or some improper motive, then it would be just and reasonable for the police to be ordered to pay the costs of the successful licensee."

34. In Chief Constable of Derbyshire v Goodman (2 April 1998, DC, unreported) the Chief Constable revoked the firearms certificates of two individuals. Those two individuals successfully appealed to the Crown Court against that decision. The Crown Court ordered the Chief Constable to pay the costs of those proceedings. The Divisional Court quashed the order for costs which had been made. Lord Justice May, who gave the principal judgment, said this:

"27. It is of course important to say that decisions as to costs are discretionary and that any court or tribunal exercising such discretion is obliged to take into account all relevant circumstances. One such relevant circumstance was that this was indeed a police authority performing a statutory licensing function. This will not be determinative of all cases, but it is important that the tribunal takes into account that, generally speaking, a costs order adverse to such an authority would not be made unless there was some good reason for doing so, which was more than the fact that the other party to the contest had succeeded.

28. Such an order may be made in the kind of circumstances alluded to by Mr Justice Roch in the Totnes Justices case where the authority has not acted in good faith or has run a case which was without foundation or born of malice or of some improper motive.

....

34. In my view, this is a borderline case so far as costs are concerned. I can certainly see some force in Mr Hague's submissions, but exercising afresh, as in my view we are entitled to do, the discretion which Judge Morrison exercised, I consider on balance that this is not a case where costs ought to have been ordered against the Chief Constable. He acted, as the judge held, in complete good faith and, in those circumstances, the costs order ought not to have been made against him. I, for my part, would allow this appeal."

35. The most recent authority cited on this topic is City of Bradford Metropolitan District Council v Booth [2000] COD 338. In that case the Bradford Justices ordered the appellant District Council to pay the costs of the respondent's successful appeal against the council's refusal to renew his private hire vehicle licence. On an appeal by way of case stated, the Divisional Court allowed the District Council's appeal against the costs order. Lord Bingham of Cornhill CJ, giving the principal judgment, distilled the relevant principles as follows:

"I would accordingly hold that the proper approach to questions of this kind can for convenience be summarised in three propositions:

1. Section 64(1) confers a discretion upon a magistrates' court to make such order as to costs as it thinks just and reasonable. That provision applies both to the quantum of the costs (if any) to be paid, but also as to the party (if any) which should pay them.

2. What the court will think just and reasonable will depend on all the relevant facts and circumstances of the case before the court. The court may think it just and reasonable that costs should follow that event, but need not think so in all cases covered by the subsection.

3. Where a complainant has successfully challenged before justices an administrative decision made by a police or regulatory authority acting honestly, reasonably, properly and on grounds that reasonably appeared to be sound, in exercise of its public duty, the court should consider, in addition to any other relevant fact or circumstances, both (i) the financial prejudice to the particular complainant in the particular circumstances if an order for costs is not made in his favour, and (ii) the need to encourage public authorities to make and stand by honest, reasonable and apparently sound administrative decisions made in the public interest without fear of exposure to undue financial prejudice if the decision is successfully challenged."

36. How do the principles set out apply to the present case? It is clear both from the wording of regulation 29 and from the authorities cited that costs do not necessarily follow the event. The fact that the claimant won his appeal before the Appeal Panel is a factor in his favour. It is not, however, decisive.
37. One then turns to wider matters. The Institute is a professional body which, acting in the public interest, brings disciplinary proceedings against accountants. That is a factor which points against any automatic award of costs in disciplinary proceedings which fail. The present case, however, has special features. The disciplinary proceedings brought by the Institute were a shambles from start to finish. The secretariat began by formulating a charge which the Chairman of the Appeal Panel has characterised as "a complete nonsense" (see page 35 of the transcript). The Investigation Committee did not stop this nonsense. Instead, it found that a prima facie case was disclosed. Two months before the disciplinary hearing a lawyer employed by the Institute spotted the problem. He sought to get round it by formulating a fresh charge and proposing to substitute that. The claimant protested. His protests were brushed aside with the assertion: "There has been no reformulation of the complaint. The wording has been refined". Thereafter, the claimant was put under pressure not to take any jurisdiction point at the hearing before the Disciplinary Tribunal on 31 March. For the reasons which I have previously stated, the claimant gave an undertaking. His lawyers took no jurisdiction point at the hearing. The Disciplinary Tribunal proceeded to make an order which was a nullity. The claimant appealed against that order. The Institute resisted that appeal. In due course the Appeal Panel set aside as a nullity the order made by the Tribunal. The conduct of the Institute throughout the disciplinary proceedings was of course honest and well intentioned. That conduct was, however, misguided. Mistake was piled upon mistake. In my view, the Institute's conduct was unreasonable.
38. It would not be right to say (and indeed the Panel do not say) that the claimant's appeal was based on a pure technicality. The jurisdictional issue had to be dealt with first. The Appeal Panel never reached a decision (one way or the other) on the substantive issues or the merits.
39. I turn next to the conduct of the claimant. His giving of the undertaking on 27 March 2000 was understandable in the circumstances previously mentioned. It seems to me harsh to criticise him for failing to take on 31 March a legal point which had not occurred either to his solicitors or to his counsel. Likewise, it is difficult to criticise the claimant for taking a good point on appeal when he was a litigant in person, assisted by his wife. If the claimant is left to bear his own costs of the disciplinary proceedings, this will be an enormous financial burden.
40. I turn now to the reasons given by the Appeal Panel for declining to make a costs order. I have set out the relevant section of the transcript in Part 2 of this judgment. The essential reasoning of the Appeal Panel was that the claimant had failed to take before the tribunal the point which succeeded on appeal. For the reasons indicated above, I do not find that a persuasive consideration. However, I am not standing in the shoes of the Appeal Panel. I cannot substitute my assessment for the Panel's assessment of the weight attaching to particular points. Nevertheless, on any view of the matter, the consideration which influenced the Appeal Panel cannot justify a decision to deprive the claimant of his costs up to 31 March 2000. Virtually all the relevant considerations in this case point in favour of making such an award of costs. No reason was identified by the Appeal Panel for not making such an order. I therefore hold that the decision of the Appeal Panel to make no order for costs in favour of the claimant was irrational. No reasonable Appeal Panel directing their minds to the relevant facts and the relevant legal principles could have come to this decision.
41. Finally on this topic, let me add one comment. The question of costs was dealt with briefly at the end of a long day. Neither Mrs Gorlov nor counsel for the Institute drew attention to any of the relevant authorities. Although these circumstances cannot clothe the Panel's decision with rationality, they do explain why that decision was reached. There can be no personal criticism of the members of the Appeal Panel or of the well-respected Queen's Counsel who served as Chairman.

Part 5 -- Remedy

42. For the reasons set out in Part 4 of this judgment, the decision of the Appeal Panel to make no order for costs in favour of the claimant is quashed.
43. This matter must be remitted to the Appeal Panel. The Appeal Panel must consider afresh the claimant's application for costs. I can see no rational basis for depriving the claimant of his costs up to 31 March 2000. Whether or not the claimant should recover his costs after 31 March must be a matter for the Panel to determine in the exercise of their discretion. In respect of these later costs, I have indicated my assessment of the competing factors. However, that assessment exercise falls to be carried out by the Appeal Panel and not by me.
44. In the result, therefore, the claimant's claim succeeds. The order made on 27 July is quashed. The matter is remitted to the Appeal Panel for reconsideration.
45. MRS GORLOV: Thank you very much indeed, my Lord. I am so sorry if I lost track of what you said. May I ask what order you made for the costs of these proceedings?
46. MR JUSTICE JACKSON: I have not made any order as to the costs of these proceedings yet. No one has asked me to make one.
47. MRS GORLOV: I am so sorry, my Lord. I am betraying my lack of experience. I should like to apply for the costs of these proceedings, please, my Lord.
48. MISS CARSS-FRISK: My Lord, in principle we certainly would not resist that, but there are two sets of reserved costs of two interlocutory hearings in which I am instructed to ask for the Institute's costs for reasons which I will have to develop, my Lord.
49. MR JUSTICE JACKSON: Yes.
50. MISS CARSS-FRISK: I do not know how Mrs Gorlov will invite you to proceed as to the assessment of the claimant's costs, but I would have thought that that comes after your Lordship has considered the two sets of reserved costs.
51. MR JUSTICE JACKSON: Yes.
52. MISS CARSS-FRISK: I do not know if your Lordship would therefore like me to introduce our applications in relation to those reserved costs? My Lord, if I may begin with the interlocutory hearing that took place last week on 6 March -- and I will do it as quickly as I reasonably can, my Lord, but I am afraid your Lordship will have to see a separate bundle that was prepared for that hearing. May I hand that up? (Same handed)
53. MR JUSTICE JACKSON: Thank you.
54. MISS CARSS-FRISK: If your Lordship were to turn to Tab 25 of that bundle, you will see the nature of the application that was made on behalf of Mr Gorlov on 6 March. I am afraid that the clip is not paginated, but it starts off with an application notice -- first of all, a covering letter and then an application notice. If you turn over a few pages (about six I think), you get to a document headed "Draft Order". If your Lordship looks at the first order sought, you will see that that is an application for disclosure in relation to two categories of documents. All that is referred to in paragraph 9 of the witness statement of Mr Jowett.
55. My Lord, if I can just give you the background, Mrs Gorlov had prior to the hearing raised a concern that there were certain matters dealt with in Mr Jowett's statement which she felt trespassed beyond the proper bounds of what this hearing was going to be all about. She felt that it went too much into why the Institute had acted as it had in relation to the reformulation of the complaint and so forth, and she had at one stage proposed an application for cross-examination of Mr Jowett in relation to particular passages of his statement -- that is paragraphs 9 and 10 of the statement. Your Lordship may indeed have seen when you come to read his statement that there are certain gaps in it -- that is paragraphs 9 and 10 having been removed and, for completeness, also one part of paragraph 15 that was as it were linked to paragraphs 9 and 10. What happened at the hearing last week was that the major part of the debate before Mr Justice Newman was spent arguing about what should happen to Mr Jowett's statement. The position was this. Prior to the hearing on 6 March the Institute had made it very clear to Mr Gorlov that they were prepared to take out paragraphs 9 and 10 and half of paragraph 15 to accommodate the concern that had been raised. They did say that that was subject to Mr Gorlov making it clear that he was not alleging bad faith. As it happened, that was not actually made clear on his behalf until the hearing last week on 6 March, but the offer had certainly clearly been there since in particular a letter from the Institute dated 26 February, which you also have in that bundle, and perhaps you should just glance at it, my Lord. It is at Tab 26. If your Lordship would just read the first two substantive paragraphs on page 1 and then right at the top of the second page, it deals specifically with the statement.
56. MR JUSTICE JACKSON: Sorry, what on the second page?
57. MISS CARSS-FRISK: Just at the top you see the sub-heading "witness statement of Mr Benjamin Jowett". "Accordingly, we are prepared to remove paragraphs 9 and 10 subject to our receiving the written assurance" -- that is about Mr Gorlov not alleging bad faith -- "and also prepared to remove the first half of paragraph 15. We invite you to indicate your agreement to the removal of these paragraphs by return."
58. My Lord, what then happened was that, instead of giving the undertaking about not alleging bad faith, what remained was the letter from Mr Gorlov dated 24 February, which you have at Tab 24 of that bundle, which you will see in terms actually did allege bad faith. If you just glance at the second paragraph, you will see in the fourth sentence, about the middle of that paragraph, it is said: "Any and every step taken to continue the action from then on was an act of bad faith". My Lord, that is just explaining the Institute's concern about having a clear assurance that that was not being pursued, which, as I say, they then got at the hearing but not before. So when it came to the hearing, Mr Gorlov had not accepted the offer of taking out these paragraphs. Instead it was being argued on his behalf that the whole of Mr Jowett's statement should go and be declared inadmissible in effect.
59. Mr Gorlov lost on that point and Mr Justice Newman in the end held that the right thing to do was simply to remove the relevant passages that had been offered to be removed well in advance of the hearing.
60. MR JUSTICE JACKSON: But Mr Justice Newman did not then proceed to award you your costs, did he?
61. MISS CARSS-FRISK: My Lord, no. He specifically reserved the costs. It was his intention, I believe, that a transcript of his ruling should be available to your Lordship. Unfortunately, I understand that it simply is not. We have enquired about the transcript. I gather it is not available.
62. MR JUSTICE JACKSON: What was Mr Justice Newman's reason for not giving you the costs there and then?
63. MISS CARSS-FRISK: What I have noted, my Lord, is that he said on the one hand that it could be said that the costs of today (ie 6 March) would by reason of the differences between the parties inevitably have been incurred when it came to the substantive hearing. He said with the claimant as a litigant in person, ably assisted by his wife, it is quite inevitable that there will be troublesome and detailed matters. Then he said -- and I am afraid that this is my abbreviated, rather poor note -- he takes the defendant's points (the ones I had made) which can be repeated before the judge. The best person to deal with the costs of this application would be the judge at the substantive hearing. He will be in a better position to decide what has been added (I think he meant) to the costs. So I reserve the costs to the judge hearing the case.
64. MR JUSTICE JACKSON: The fact that you achieved a result consistent with your offer was pointed out to Mr Justice Newman and did not induce him to award costs there and then. What subsequent argument or event is there that you can rely upon in relation to costs?
65. MISS CARSS-FRISK: My Lord, given that he reserved costs to your Lordship, then in our submission he did just that. The whole issue is as it were up for grabs.
66. MR JUSTICE JACKSON: The costs are always reserved because one has to have regard to what happens later, otherwise one does not reserve costs.
67. MISS CARSS-FRISK: Yes, I can see that that was certainly Mr Justice Newman's thinking. In our submission, what has certainly turned out to be a factor in our favour is that the bundle -- one of the issues before the court was that the bundle should be reduced. This was one of Mrs Gorlov's applications, that there was too much for the court to read and it should all be narrowed down and there should be imposed an agreed reading list. We were saying that we have put forward a reading list which we think contains the important documents, but Mrs Gorlov was not content with that. So as a result of that, your Lordship ended up with the bundles about which you were not too flattering --
68. MR JUSTICE JACKSON: Well, the bundle unfortunately omitted a series of absolutely crucial documents. Are you saying that that was Mrs Gorlov's fault?
69. MISS CARSS-FRISK: I am saying that they were in the previously agreed hearing bundles, my Lord.
70. MR JUSTICE JACKSON: Who prepared the list of the bundle that was inflicted upon me yesterday?
71. MISS CARSS-FRISK: My Lord, that was after each side had referred to various documents that they thought were crucial.
72. MR JUSTICE JACKSON: In other words, what I had yesterday was the joint effort of both sides?
73. MISS CARSS-FRISK: That is true, my Lord.
74. MR JUSTICE JACKSON: So I cannot hold it against that Mrs Gorlov that all the key documents were omitted?
75. MISS CARSS-FRISK: Well, save for this, my Lord. It has always been our position that there could well be other documents that would be relevant and that they should be in the main bundle for the court -- and had been previously. But, my Lord, as I say, the main part of the hearing was spent arguing about Mr Jowett's statement. There were further applications. If you look at the draft order that I pointed you to before at Tab 25, you will see the first application was for disclosure. One of the documents sought -- the one at 1B -- had been disclosed prior to the hearing. The first category of disclosure was not pursued by Mrs Gorlov. The second paragraph of the draft order which sought full particulars of a certain conversation between Mr Jowett and a Mrs Owen to be provided, as well as any possible written record of that discussion, that was not pursued. The application to amend the statement of grounds, the Institute had said prior to the hearing it would not resist, subject to the confirmation about bad faith not being alleged. Again, that confirmation was only given at the hearing. Then in paragraph 4 of the draft order, there was an application for leave for Mr Gorlov to refer to additional documents. Subject to some of those documents which the Institute had said prior to the hearing it would not object to, that application also was dismissed by Mr Justice Newman. So all in all, my Lord, we do say that that hearing unfortunately was a wasted hearing which really should not have taken place, given the reasonable offers that the Institute had made prior to the hearing.
76. MR JUSTICE JACKSON: The idea to limit the bundle to relevant documents from the vast mass was an extremely sensible one. It is only what happened afterwards which rather spoilt it.
77. MISS CARSS-FRISK: Save, my Lord, that it is always difficult to predict exactly what is going to be relevant at the end of the day and it would, in our submission, been more sensible to keep the broader selection of documents that had the very documents that we searched for yesterday. In any event, my Lord, it would have been perfectly open to each side simply to say: these are the documents (as one did) that we think are relevant in the various skeleton arguments, and it was not necessary to have a hearing before the court to prune the bundle in that way. But, as I say, that was one aspect of the hearing. The main aspect was one where it certainly was not necessary, in our submission to come to court.
78. MR JUSTICE JACKSON: That was the Jowett statement?
79. MISS CARSS-FRISK: Yes, and unfortunately each side had to prepare for all the various other applications too that were not pursued in the end about disclosure.
80. MR JUSTICE JACKSON: Yes.
81. MISS CARSS-FRISK: My Lord, I wonder if it would be convenient -- I am entirely in your hands of course -- for me to introduce the second reserved costs application while I am on my feet? Is that convenient?
82. MR JUSTICE JACKSON: Yes.
83. MISS CARSS-FRISK: My Lord, that arose out of an adjournment of the hearing that had originally been fixed for 15 February.
84. MR JUSTICE JACKSON: I have read some documents about that. If I can intervene, Miss Carss-Frisk, is not the right course there for me to treat the adjournment of 15 February as part of the costs of these proceedings? There is no basis for saying that Mr Gorlov should pay those costs.
85. MISS CARSS-FRISK: My Lord, the basis that we would say is there for him to pay the costs is that the adjournment had of course been granted on 13 February by Mr Justice Collins, and at that time he had before him letters from both the Institute and indeed from my clerk and from Mr Gorlov. You may have seen, I am not sure, but there was a regrettable error in the letter from my clerk, which was then corrected. Your Lordship has perhaps seen the correspondence in relation to that. Mr Justice Collins indicated that that would have made no difference to his decision. But at the end of the day that adjournment had been granted. Mr Gorlov had had a chance to put forward his position in relation to that. One then has a situation where he applies on 15 February for that decision to adjourn to be set side.
86. MR JUSTICE JACKSON: Who was present when the decision was made on 13 February?
87. MISS CARSS-FRISK: That was made on the papers, my Lord. So of course he was, under the rules, entitled to apply to have that decision set aside, but the main reason, we say, that that should not have happened and that it was a wasted hearing was that at that point, that being the very day of the hearing that had been fixed for the hearing that was adjourned, it simply was not reasonable to expect that the decision to adjourn would have been set aside and the Institute would have been as it were bull-dozed into pursuing, or rather dealing with the substantive application there and then, my Lord. As Mr Justice Collins noted -- I do not know if you have seen the transcript, but it is in the little bundle before you -- it simply could not have happened at that point when the application came on. My Lord, we say it really was not reasonable, but was rather misconceived to pursue that and make everyone turn up at court to have adjourned the hearing.
88. MR JUSTICE JACKSON: The claimant was aggrieved by an adjournment in circumstances which, at first blush, were somewhat surprising -- I emphasise at first blush.
89. MISS CARSS-FRISK: Yes. My Lord, I entirely appreciate that, but if one looks at the reality of the situation, it could not have gone ahead on that day and the Institute were reasonably allowed to rely on the decision that had previously been made in the sense of not briefing alternative counsel.
90. MR JUSTICE JACKSON: Mrs Gorlov, would it assist you if I indicated the provisional view which I have formed having heard Miss Carss- Frisk's submissions? You can then either try to dissuade me from that provisional view or you can accept it as you see fit.
91. MRS GORLOV: It would be very helpful, my Lord.
92. MR JUSTICE JACKSON: My provisional view is that I should order each party to bear its own costs of the hearing on 6 March this year. However, subject to that, I should order the Institute to pay to Mr Gorlov his costs of these proceedings. Do you wish to urge upon me any difference course?
93. MRS GORLOV: My Lord, thank you for that very helpful indication. Mr Gorlov is more than content with it -- I am not saying that he would necessarily share your Lordship's view, but on the basis of his paying only the costs of 6 March, he would be content with an order to that effect.
94. MR JUSTICE JACKSON: Thank you very much. Very well, you do not have a right of reply in those circumstances.
95. MISS CARSS-FRISK: No.
96. MR JUSTICE JACKSON: Very briefly, my reasons for the costs order are as follows. It seems to me that the hearing of 6 March was a useful hearing. However, the Institute did have a number of submissions as to why the Institute should recover its costs of that hearing. The principal one was that the main issue concerned Mr Jowett's statement and before the hearing the Institute had made an offer in respect of Mr Jowett's statement which was along the lines of the court's decision.
97. Nevertheless, on 6 March Mr Justice Newman was not persuaded that there should be an immediate order for costs in favour of the Institute. On the contrary, he considered that the question of costs should be reserved. He made the point that the claimant is a litigant in person; troublesome matters are bound to crop up; it was not inevitable that the Institute would recover its costs of that hearing at the end of the day.
98. I can now have regard to the course of the whole proceedings, including events after 6 March. In my view, having regard to what Miss Carss-Frisk says about 6 March, and having regard to the reasons given by Mr Justice Newman on that occasion, as narrated by Miss Carss-Frisk, the proper order is that each party bear its own costs of that hearing.
99. So far as the hearing on 15 February is concerned, that was originally the date set for the hearing of these proceedings. There was an order made on paper for the adjournment of that hearing in circumstances which at first blush were surprising. I consider that it was reasonable for the claimant (being a litigant in person) to seek to be heard upon the adjournment, which had been ordered at short notice in circumstances that were not the claimant's fault. Certainly, in the event, no blame attaches to the lawyers for the Institute in respect of the adjournment in February. However, I do consider that the costs flowing from that adjournment should form part of the costs of the proceedings.
100. Mrs Gorlov, do you want me to assess costs now?
101. MRS GORLOV: My Lord, can I pass you up this sheet? I think your Lordship has a small bundle with costings declared by my husband?
102. MR JUSTICE JACKSON: Yes.
103. MRS GORLOV: My Lord, yesterday in discussion with Miss Carss-Frisk a casting error was spotted. It has been corrected. Miss Carss-Frisk has not seen it until a few moments ago. These figures are the same. There was an error of addition, my Lord.
104. MR JUSTICE JACKSON: What do we need to take off as representing the costs of 6 March?
105. MRS GORLOV: I think about £150, my Lord.
106. MR JUSTICE JACKSON: So the total you are claiming is £3,981?
107. MRS GORLOV: Yes, my Lord, that is right. I beg your pardon, my Lord. No, my Lord, I think not. Yes, my Lord, I think your arithmetic is better than mine. (Pause) I did pass O-level maths once when I was told that I would not. My husband is a chartered accountant and he also puts his noughts in the wrong place. We are very much indebted to the Institute. It should have another nought on the end. I am so sorry. It should be £26,100.
108. MR JUSTICE JACKSON: So what are the costs you are claiming of the judicial review proceedings?
109. MRS GORLOV: £26,100, my Lord, plus disbursements.
110. MR JUSTICE JACKSON: £26,100, less £150. Is that right?
111. MRS GORLOV: My Lord, yes, less £150, that is right.
112. MR JUSTICE JACKSON: So you are claiming £25,950 on the basis of this piece of paper today and yesterday's schedule?
113. MRS GORLOV: Yes, indeed, my Lord.
114. MR JUSTICE JACKSON: Miss Carss-Frisk?
115. MISS CARSS-FRISK: My Lord, there is this issue -- and I do not know if this may mean in fact that this will have to go off for detailed assessment, but apart from the arithmetic and various other detailed points that could be made, there is this position that Mr Gorlov has made his claim at an hourly rate of £150, which if he were able to prove that this was loss of earnings, he would no doubt be allowed to do under the relevant rules that deal with litigants in person (CPR Part 48, rule 6). But if it is not loss of earnings, then he is confined to the litigant in person hourly rate, which is £9.25, which of course will mean, if that is right, that the claim is in the region of £2,000 something rather than £20,000 something. So it is a rather big difference. I had certainly assumed that the right approach would be to look at the litigant in person rate because of course we have been told that Mr Gorlov is, unfortunately, not well. I am aware that in the past Mrs Gorlov has made the point to the Institute that he has had to dispose of his one-person practice. My Lord, it may be that Mrs Gorlov would still seek to argue now that actually these are properly loss of earnings but, if so, we would say that that should properly be established. They are quite large sums of money and it will probably have to go off for detailed assessment.
116. MR JUSTICE JACKSON: Mrs Gorlov?
117. MRS GORLOV: My Lord, Miss Carss-Frisk's supposition is incorrect. Indeed, if those instructing her from the Institute care to consult the Institute's own records they would be able to confirm that. It is indeed the case that I said that Mr Gorlov had to dispose of his practice. I should elaborate on that. His one-man practice was a substantial one. A large part of it -- a major part of it -- consisted of regulated insolvency work, and it is that that he has had to dispose of (if you will pardon the grammar). That is the major part of his practice, and without it he is deprived of the means of earning his living, which I think is what I have said to you, my Lord, and on previous occasions. It would be wrong to say that he has no work of his own -- and a little of it is regulated -- because the court would not agree to certain matters being transferred to the firm to whom the major part of his practice went. And so, as will be known to the Institute, because every insolvency practitioner has to make returns to the Institute, he remains a liquidator trustee or whatever in relation to a small number of insolvency matters.
118. Now, my Lord, because he has disposed of virtually all of his practice, to all intents and purposes it has gone. It cannot be assumed that he is not working. He may no longer have his substantial practice, but he has to pay run-off if nothing else, and the Institute know that too. They will know, because their records will show, that he has got an insurance policy because otherwise he would not be able to make the returns that he has. He is working. He is earning. Largely he is sub-contracting his services to other firms. He has also succeeded in attracting a certain amount of accountancy work which is unregulated. It is essentially quite different work from the practice of which he has disposed, but the point for this morning's purposes, my Lord, is that it is income and he is earning it. While he is attending to other matters -- while he has spent a vast amount of time in these proceedings, evidently he could not be earning. That is why we say, my Lord, that there were substantial costs and that they should be assessed on the rate of loss of earnings, not at the notional rate of a litigant in person.
119. MR JUSTICE JACKSON: Mrs Gorlov asks me to assess the claimant's costs here and now in the sum of £25,950. A large part of those costs consist of charges for Mr Gorlov's time at the rate of £150 per hour. Miss Carss-Frisk, on behalf of the Institute, submits that Mr Gorlov should only be paid for his time at the rate of £9.25 per hour, being a litigant in person. She submits that Mr Gorlov cannot recover for his loss of earnings in view of the fact that he has disposed of his accountancy practice in the circumstances outlined by Mrs Gorlov during the course of the hearing yesterday.
120. Miss Carss-Frisk submits that, since a large sum of money turns on this issue, it would not be right for me to determine the issue summarily now and accordingly there should be a detailed assessment of costs.
121. I would certainly like to assist both parties by deciding here and now everything which I properly can decide. It seems to me, however, that there is a serious issue upon which a large sum of money turns, which cannot satisfactorily be dealt with this morning. Accordingly, I decline to assess costs now. Instead I order that there be a detailed assessment of the claimant's costs, unless an appropriate costs figure is agreed between the parties.
122. MISS CARSS-FRISK: My Lord, that then lastly leaves it to me to ask, as I am instructed to do, for permission to appeal against your Lordship's decision. It raises an important issue as to the degree of scrutiny that is appropriate by the judicial review court when looking at a decision on costs by a regulatory body.
123. MR JUSTICE JACKSON: I refuse permission to appeal because in my view the prospects of success are insufficient.
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