England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION)
DIVISIONAL COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		27/07/2006

Lord Justice Maurice Kay:

1. The claimant was one of several defendants to a prosecution conducted by the Serious Fraud Office. He stood trial at Southwark Crown Court but on 19 December 2003 the trial judge directed the jury to return verdicts of Not Guilty. At that stage, counsel representing the claimant applied for a defendant's costs order "both in respect of Mr Brewer's out of pocket expenses after the grant of legal aid and also to cover a period of time prior to the grant of legal aid where other expenses were incurred". The judge granted the order.
2. The background to the criminal case was complex and lengthy. Much of it occurred in the United States of America. It had involved civil litigation in the United States in which the claimant had been advised by an American attorney, Ms Mercedes Travis. Subsequently, on 28 April 2001, the claimant received a notice issued by the Serious Fraud Office. He immediately contacted Ms Travis who agreed to assist him in relation to the English prosecution and undertook to secure counsel for him in this jurisdiction. On 1 May 2001, the claimant entered into an agreement with Ms Travis whereby she undertook to act for him and he agreed to pay for her services. On the same day she contacted London solicitors, Russell Jones and Walker (RJW), and on 2 May 2001 RJW agreed to act for the claimant. On 19 September 2001 the claimant was arrested. He was not charged until 20 September 2002. On 24 September 2002 he made his first appearance at Bow St Magistrates' Court and was granted legal aid. RJW continued to act for the claimant until his acquittal. They instructed leading counsel, Mr Hodge Malek QC, and junior counsel, Mr Andrew Carnes. There is no doubt that Ms Travis remained involved in the preparation of the claimant's case both before and after the grant of legal aid. Mr Malek described her involvement in a letter dated 21 July 2005. He had first been involved in the related civil proceedings in which Ms Travis had instructed him. She approached him in relation to the SFO case and he recommended RJW. Mr Malek's letter stated:

"Throughout the SFO proceedings my instructing solicitors were RJW … Mr Brewer was naturally insistent that Ms Travis help with his case. She attended almost all the conferences with RJW and Mr Brewer. In consultation and by way of written notes to RJW, I listed the tasks which I considered needed to be done. Ms Travis was a great help in all the work she did, particularly in three areas as follows:

(1) preparing a chronological bundle with Mr Brewer of all the documents in the case. I cannot remember whose idea this was, but it was a useful exercise.

(2) drafting a very detailed proof for Mr Brewer. Although RJW had done an early draft, Ms Travis with her encyclopaedic knowledge of the papers prepared a really helpful draft.

(3) drafting comments, lists of potential topics with accompanying bundles in respect of the prosecution witnesses.

I did not consider that I was either instructed by or was giving instructions to Ms Travis. I also don't remember being told that she was being retained on a fee-paying basis by Mr Brewer for the SFO case. There would have been no reason for anyone to tell me this …

RJW acted as solicitors and did work on the case. However, to prepare the case was an enormous undertaking and Ms Travis did a great deal of work on the case at the request of Mr Brewer.

During the course of the proceedings Ms Travis married … Mr Brewer."

The marriage took place in November 2002.

3. In a letter dated 9 June 2004, RJW described the involvement of Ms Travis in this way:

"At an early stage in the proceedings Ms Travis indicated that she wished to be part of the defence team on Mr Brewer's behalf. I did not believe that it was appropriate for Ms Travis formally to be part of Mr Brewer's legal team. I therefore advised Mr Brewer that although my firm would appreciate such assistance as Ms Travis was able to offer (having previously represented Mr Brewer in related proceedings), she would not be retained by my firm. … Ms Travis did provide assistance with the preparation of aspects of Mr Brewer's case, and this was particularly so with reference to skeleton arguments and submissions prepared by counsel. However at no time was Ms Travis formally instructed by this firm to assist with the preparation of Mr Brewer's defence and we were not aware that there was any commercial arrangement between her and Mr Brewer."

4. After the conclusion of the criminal case, RJW were paid out of public funds pursuant to the legal aid certificate and the defendant's costs order a sum in excess of £300,000. This sum was similar to the assessed amounts paid to the solicitors of comparable co-defendants (although there was one defendant, identified by the determining officer as "the main defendant", whose assessed costs were significantly higher). No dispute exists in relation to the fees paid to RJW and counsel. The present case concerns the entitlement of the claimant to be reimbursed under the defendant's costs order in respect of the fees and expenses of Ms Travis.
5. On 1 March 2004, the claimant wrote to the chief clerk at Southwark Crown Court, referring to the defendant's costs order and enclosing a copy of the part of the transcript from which I have quoted. The letter was in the form of an application for reimbursement of costs incurred between 29 April 2001 and 19 December 2003. Essentially, it was a parallel application to the one submitted by RJW. The total amount claimed was £366,368.78. It was made up as follows:

Legal fees and expenses (without RJW advances)	£311.471.41
Travel costs and expenses	£17, 241.86
Copying costs	£35,166.60
Telephone costs	£1,403.94
Sundry costs	£1,084.97

6. The letter stated:

"During the relevant period, Ms Travis played a vital role in my defence and prepared a substantial amount of the preparatory documentation used by my English counsel from the initial stages of the case through the trial. Ms Travis made a number of trips to and from the United States to complete this preparatory work. From approximately September 2002, Ms Travis committed to spend most of her time in the United Kingdom to complete the preparation of the case, making a few necessary trips to the United States to attend to her matters there.

In spring 2001, Ms Travis rented a flat … in London which she used as a base of operations. In addition to residential accommodation, the majority of the flat was used as an office where the documents in the case were kept and preparatory work was performed. … Ms Travis billed me for these expenses related to her use of the flat on a per diem basis when she was in London …

In November 2002 Ms Travis and I were married and we rented a new flat at 37 Clarges Street in London. This flat was used as our base of operations for case preparation."

7. The letter went on to explain the copying costs and the other listed items. Following determination and redetermination by a determining officer attached to the National Taxing Team, much reduced sums were authorised in respect of travel, copying, telephone and sundry costs. However, the determining officer rejected the claim in relation to Ms Travis in its entirety. In a letter dated 19 July 2004, the determining officer said:

"I have come to the conclusion that I cannot pay the amounts claimed in respect of Ms Travis, now your wife. In my view once solicitors … represented you, they should have conducted your defence in conjunction with your instructions. If they considered that your wife's involvement was necessary, the instructions should have come from them. I regret that I don't accept that the work undertaken can be claimed as out of pocket expenses. In addition I do not consider that I can pay for the telephone calls to the USA which were in excess of 350 nor can I pay for the two leases for the apartments you had in London."

8. Following a request for redetermination, the determining officer wrote a letter dated 18 April 2005, addressed to the claimant's new solicitors. The relevant part is in these terms:

"I have come to the firm conclusion that I cannot authorise these costs under the defendant's costs order … In the early stages Mr Brewer instructed RJW, solicitors who are well used to this type of case being on the Serious Fraud Panel, to represent him. … It is clear that Mr Brewer instructed Ms Travis without consulting his solicitors and at no time did she receive any instructions from them. In my view the defendant should have consulted his solicitors to discuss whether Ms Travis' assistance was necessary and what, if anything, she could bring to the case. It is, however, abundantly clear that Mr Brewer intended to enlist the help of Ms Travis without having any regard to his solicitors or to the cost which I feel in any event was very high. It is also clear from the solicitors' file and bills of costs that they undertook a substantial amount of preparation in the case. The costs claimed by RJW was, in my view, sufficient to conduct the defence efficiently and, bearing in mind that Mr Brewer was not the main defendant, was in line with the work done by other solicitors in the case. What Ms Travis did, therefore, was in many respects a duplication of the work carried out by his solicitors. … In all the circumstances I feel that this part of the claim cannot be called out of pocket expenses. Bearing in mind that the Act says that if the determining authority is in any doubt he should resolve that doubt against the defendant. That is the position I find myself in."

9. Following an application, the determining officer then provided formal written reasons. They amounted to a reiteration and expansion of the earlier letter. They included this passage:

"…it is clear that Ms Travis prepared a proof of evidence. It is also clear that RJW also spent considerable time in also preparing a proof of evidence. They spent nearly 150 hours in conferences with Mr Brewer and over 56 hours preparing and amending his proof of evidence … I consider that the hours allowed [to RJW] provide more than sufficient time to conduct the defence efficiently and effectively … These claims were not reasonable out of office expenses and I came to the firm conclusion that they should not be allowed."

10. The claimant next appealed to a Costs Judge at the Supreme Court Costs Office. The Costs Judge referred to the amounts paid to RJW under the legal aid certificate and by reference to the defendant's costs order. He continued:

"Against that background it was always going to be an uphill task … to convince me that Mr Brewer should be entitled to a further sum, in excess of what the solicitors had been paid in respect of out of pocket expenses under the Prosecution of Offences Act 1985 and the relevant regulations … There is clear authority for saying a beneficiary under a Central Funds Costs Order is entitled to costs prior to his actual indictment in a case brought by the SFO, but equally it is clear that RJW came into this case at a pretty early stage … "

11. The Costs Judge then quoted extensively from the letter from Mr Malek before concluding:

"My initial reaction on reading the papers was that this was a hopeless appeal, but, … having considered the matter carefully in the light of the RJW bills, I have come to the conclusion that a small sum should be allowed to Mr Brewer in respect of, essentially, pre-prosecution work in which Mr Brewer's case with RJW was materially assisted by the encyclopaedic knowledge of the case which Ms Travis was able to provide to them. Doing the best I can on the materials before me, I have come to the conclusion that the appropriate allowance here should be £25,000 and to that limited extent therefore I allow this appeal."

12. It is next necessary to set out the statutory framework and to explain the jurisdiction of this Court.

The Statutory Framework

13. Section 16 of the Prosecution of Offences Act 1985 provides for the award of costs out of central funds. By section 16(2) it is provided:

"Where - …

(b) any person is tried on indictment and acquitted on any count in the indictment

the Crown Court may make a defendant's cost order in favour of the accused."

14. Section 16(6) provides:

"A defendant's costs order shall, subject to the following provisions of this section, be for the payment out of central funds, to the person in whose favour the order is made, of such amount as the Court considers reasonably sufficient to compensate him for any expenses properly incurred by him in the proceedings."

15. Section 16(7) states:

"Where a Court makes a defendant's costs order but is of the opinion that there are circumstances which make it inappropriate that the person in whose favour the order is made should receive the full amount mentioned in sub-section (6) above, the Court shall

(a) assess what amount would, in its opinion, be just and reasonable; and

(b) specify that amount in the order."

16. Where there is an order for costs out of central funds the situation is further governed by the Costs in Criminal Cases (General) Regulations 1986. The following regulations are relevant to this case:

"5(1) Costs shall be determined by the appropriate authority in accordance with these Regulations …

6(1) … no claim for costs shall be entertained unless it is submitted within three months of the date on which the costs order was made …

6(3) A claim shall –

(a) summarise the items of work done by a solicitor;

(b) state, where appropriate, the dates on which items of work were done, the time taken and the sums claimed …

(c) specify any disbursements claimed, including counsel's fees, the circumstances in which they were incurred and the amounts claimed in respect of them …

(4) Where there are any special circumstances which should be drawn to the attention of the appropriate authority, the applicant shall specify them. …

7(1) The appropriate authority shall consider the claim, any further particulars, information or documents submitted by the applicant … and shall allow such costs in respect of –

(a) such work as it appears to it to have been actually and reasonably done; and

(b) such disbursements as appear to it to have been actually and reasonably incurred,

as it considers reasonably sufficient to compensate the applicant for any expenses properly incurred by him in the proceedings. …

9(1) An applicant who is dissatisfied with the costs determined under these Regulations by an appropriate authority in respect of proceedings … may apply to the appropriate authority to redetermine them …

(5) The appropriate authority shall redetermine the costs, whether by way of increase, decrease or at the level previously determined, in the light of the objections made by the applicant or on his behalf and shall notify the applicant of its decision. …

10(1) Where the appropriate authority has given its reasons for its decision on a redetermination under Regulation 9, an applicant who is dissatisfied with that decision may appeal to a Costs Judge …

(12) The Costs Judge shall have the same powers as the appropriate authority under these Regulations and, in the exercise of such powers, may alter the redetermination of the appropriate authority in respect of any sum allowed, whether by increase or decrease, as he thinks fit. …

11(1) An applicant who is dissatisfied with the decision of a Costs Judge on an appeal under Regulation 10 may apply to a Taxing Master to certify a point of principle of general importance."

17. In the present case the determining officer was the appropriate authority under Regulation 5 and Master Rogers was the Costs Judge who considered the matter under Regulation 10 but declined to certify a point of principle of general importance under Regulation 11.

The jurisdiction of this Court

18. Plainly this Court has no jurisdiction under the specific provisions of the Act or the Regulations because the jurisdiction of the High Court to hear an appeal from the Costs Judge is dependent upon the certification by the Costs Judge of a point of principle of general importance. As that certificate has been refused, an appeal to the High Court under Regulation 11 cannot arise. Equally obviously, this Court has no jurisdiction to consider a judicial review of the substantive decision of the Costs Judge or his refusal to grant a certificate because the Costs Judge is an officer of the High Court and the High Court does not judicially review its own decisions. Nevertheless, and this is common ground, this Court does have an inherent jurisdiction which was recognised by the Court of Appeal in R v Supreme Court Taxing Office ex parte John Singh & Co [1997] 1 Costs LR 49. Henry LJ said (at page 51):

"Counsel for the Taxing Master conceded that such a jurisdiction existed but submitted that it should be restricted to cases where there had been a real injustice. I agree with both that concession and, in general terms, with the limitation on it. In his refusal to certify, the Taxing Master was exercising a 'strong' discretion entrusted under the statutory scheme to him. The cases where the supervisory court could reverse a failure to certify would, in the circumstances, be very rare indeed. In those circumstances, in my judgment, we should treat the complaints made in the judicial review as a deemed application under the inherent jurisdiction of the court and I, for my part, would do so."

19. In short, therefore, the jurisdiction is one to be exercised sparingly, only to be used to cure "a real injustice".
20. Mr Buley suggests that the approach of this court should replicate the jurisprudence in respect of second appeals under the Civil Procedure Rules as illustrated by Iftakhar Ahmed v Stanley A Colman and Hill [2002] EWCA Civ 935 or the approach relevant to appeals from specialist tribunals as set out in Cooke v Secretary of State for Work and Pensions [2001] EWCA Civ 734. Whilst I acknowledge that there is some similarity between the present jurisdiction and that exercised in those circumstances, this jurisdiction has no statutory basis and I would prefer to place no gloss on the "real injustice" test and the "very rare indeed" limitation.

The case for the claimant

21. The claim for reimbursement in relation to the fees and expenses of Ms Travis is put by reference to section 16(6) on the grounds that the claimant was obliged to pay and has paid the sums in question to Ms Travis and that they were "expenses properly incurred by him in the proceedings". It is common ground that an acquitted defendant in possession of a defendant's costs order may be reimbursed for expenses which include items that would normally be claimed by a solicitor as disbursements. Thus, in The Queen v Bedlington Magistrates' Court, ex parte Wilkinson (unreported, CO/0900/99, 21 October 1999), in addition to assessment of the solicitor's bill of costs, the acquitted defendant claimed £3,971.50 as "the costs of a specialist graphics contractor" who had been instructed and paid directly by the defendant. Moses J, with whom Tuckey LJ agreed, stated:

"It does not follow that, because a solicitor has claimed costs and disbursements, that will necessarily rule out other expenses and disbursements having been incurred by the litigant himself."

22. The matter was therefore remitted for reconsideration of whether the item had been "properly incurred" in the particular circumstances of the case. On the basis of this authority, both counsel in the present case agree that the fact that the claimant was represented by solicitors and counsel whose bills have been separately assessed does not necessarily prevent a further claim by the claimant in respect of "expenses properly incurred" which could, in a suitable case, extend to the fees of a foreign lawyer.
23. On this basis, when a determining officer or a Costs Judge is faced with an application of this sort under a defendant's costs order, his first task is to ascertain whether the expenditure was "properly incurred … in the proceedings" (section 16(6)) and whether it is work that has been "reasonably done" (Regulation 7(1A)). In addition, Regulation 7(2) requires the appropriate authority to take into account all the relevant circumstances of the case "including the nature, importance, complexity or difficulty of the work and the time involved". Thus, submits Mr Wormald, the emphasis is on what work was done and whether it was reasonably done rather than the identity of the person by whom it has been done.

Discussion

24. Unlike the first determining officer, the Costs Judge did not reject the claim in respect of Ms Travis as a matter of principle. It seems that, on the authority of ex parte Wilkinson (which is accepted by Mr Buley as a correct statement of the law), there is no principle which would require or permit such a rejection. It seems to me that once the Costs Judge had accepted that the claimant should receive some reimbursement in respect of the cost of engaging Ms Travis, it became necessary to carry out a detailed investigation so as to ascertain what she had done and whether particular aspects of her endeavours had been reasonably done in all the circumstances of the case. As I understand it, the Costs Judge was invited to review a large amount of documentation but declined to do so. It seems from his reasoning that he considered the matter "in the light of the RJW bills" and, as a result, came up with a round figure of £25,000 "in respect of, essentially, pre-prosecution work". I assume that by "pre-prosecution" the Costs Judge was referring to the period between 28 April 2001 and 20 September 2002, the date of charge. There are two difficulties arising out of this approach. The first is that the "great help" referred to by Mr Malek in his letter was not limited to the period before charge, nor was the "assistance" referred to by RJW in their letter. The second is that, by taking the RJW bills as a starting point, the Costs Judge may have taken too narrow a view of Ms Travis' involvement. Whilst it seems to me to be virtually inevitable that there was some duplication in the work of Ms Travis and RJW, it is not possible to assess the extent of it or the significance of one person's work in comparison with another's, without a detailed investigation. The proofs of evidence are perhaps the best illustration of this.
25. I have come to the conclusion that, having admitted the claim in principle, the Costs Judge did not then carry out the task in the way that was required by the Act and the Regulations. To this extent, I consider that there is a "real injustice" in awarding a figure –described by the Costs Judge as "a small sum" – which is not based upon the task which ought to have been undertaken. I express no view whatsoever on what a proper reassessment may yield. I am certainly not suggesting that it is likely to yield a sum approaching the one claimed. Nevertheless, it is necessary for the assessment to be revisited.
26. The problem that has arisen in this case has arisen because the claims separately submitted by RJW and by the claimant himself were allowed to remain separate. This should not have happened. It is not the fault of the claimant that it did. As regards duplication, it is difficult to see how a decision fair to both parties could be achieved without the two claims being assessed together. Only then would it be possible to see precisely what work had been "actually and reasonably done" and by whom. Again, this is nowhere better illustrated than by reference to the proofs of evidence which both RJW and Ms Travis proffer as work "actually and reasonably done". The mere fact that the RJW bill was assessed first cannot fairly give rise to any presumptions against the claim submitted by the claimant. Moreover, I have the impression, which could only be confirmed or displaced by a proper assessment, that the documents which the Costs Judge was invited but declined to review include evidence that Ms Travis was on occasions asked by both RJW and counsel to undertake specific tasks which she duly did.
27. It follows from what I have said that, in my judgment, there was a "real injustice" in proceeding to assess the sum reflecting the input of Ms Travis without undertaking a detailed assessment of the work she had done.
28. As I have indicated, the problem in this case would not have arisen if the two claims had been assessed by reference to each other rather than sequentially. Practitioners should ensure that, where separate and to some extent conflicting claims are to be presented, they should be presented together in a manner which makes clear the relationship between them. For their part, determining officers and Costs Judges should ensure that assessments do not take place in a totally separated way as occurred with RJW's bill in the present case. It seems to me that the best solution would be for the Regulations to be amended so as to require both claims to be submitted contemporaneously, preferably via the solicitor. Failing such an amendment, consideration should be given to a practice direction to this effect. For the time being, practitioners and others, including determining officers and Costs Judges, should treat the present case as appropriate guidance.

Mr Justice Mitting:

29. I agree for the reasons given.