England and Wales High Court (Administrative Court) Decisions

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

		Royal Courts of Justice Strand, London, WC2A 2LL
		27 July 2007

Ouseley J :

1. This case involves a challenge by way of Judicial Review to the discharge of a legal aid certificate in educational negligence proceedings, shortly before trial was due to begin. It is contended by the Applicant that the discharge breached Article 6 ECHR and the Legal Services Commission's own guidance.
2. The Claimant is now 24. In 1998 he obtained legal aid to bring proceedings against the two local education authorities responsible for the schools at which he received primary and secondary education. The Claimant alleged negligence in the way in which they had responded to his severe dyslexia. He had left school at 16 with severe literacy problems. Proceedings were not in fact issued until 2004, when the limitation position needed to be protected.
3. The legal aid certificate was granted under the Legal Aid Act 1988, so that Act applies to the certificate along with the Civil Legal Aid (General) Regulations 1989 S.I. 339, rather than the replacement Access to Justice Act 1999.
4. The 1998 certificate covered proceedings up to the exchange of witness statements, obtaining experts' reports and counsel's opinion. The certificate was cancelled in February 2004 but was reinstated by the Funding Review Committee of the LSC in May 2004 so as to permit a review by counsel of merits and quantum. Counsel advised that there were good prospects of success against each defendant and that the quantum of damages was likely to exceed £300,000.
5. The claim form, particulars and prognosis report were not served until February 2005. The Claimant's solicitors set 25 May 2006 as the date for exchange of experts' reports and trial was fixed for 3 July 2006. After those dates had been fixed, the Claimant's solicitors applied on 20 April 2006 for a further extension of the costs cap so that the Claimant's expert could review and revise his report in the light of the documents then available and the witness statements. Legal aid to cover the trial had never been obtained. In May 2006 after giving due notice, the LSC discharged the legal aid certificate but it was reinstated by the Funding Review Committee so as to enable experts' reports to be exchanged, an experts' meeting to take place and a further opinion from counsel on merits and quantum to be obtained. This opinion dated 21 June 2006 was sent to the LSC on 26 June 2006.
6. On 27 June 2006, after considering this opinion, the LSC gave to the Claimant's solicitors Notice to Show Cause why the certificate should not be discharged and, having considered their representations, discharged it on 29 June 2006. The trial was adjourned in consequence. The Claimant appealed to the FRC, at which the Claimant was represented by counsel. It rejected the appeal in its decision letter of 16 August 2006. That is the effective decision now challenged by Judicial Review. It was accepted that the challenge to the earlier LSC decision had become academic and, subject to one point, no separate argument was addressed to it.
7. The Claimant challenges the FRC decision on many grounds, which I summarise as the timing of the discharge of the certificate, the lack of consideration given to the impact of discharge on the Claimant, errors of understanding of the facts and tests to be applied to the prospects of success and to the cost and benefit of proceeding, and breaches of Article 6 ECHR.

The statutory framework

8. Section 15(2) of the 1988 Act provides:

"(2) A person shall not be granted representation for the purposes of any proceedings unless he satisfies the Board that he has reasonable grounds for taking, defending or being a party to the proceedings.

(3) A person may be refused representation for the purposes of any proceedings if, in the particular circumstances of the case it appears to the Board-

unreasonable that he should be granted representation under this Part…"

9. These are commonly referred to as the "legal merits" test and the "reasonableness" test.
10. Discharge is governed by similar provisions in Regulation 77 of the 1989 Regulations which provides:

"The Area Director shall discharge a certificate from such date as he considers appropriate where, as a result of information which has come to his knowledge, he considers that-

(a) the assisted person no longer has reasonable grounds for taking, defending or being a party to the proceedings, or for continuing to do so; or…

(c) it is unreasonable in the particular circumstances that the assisted person should continue to receive legal aid."

11. Much of the argument related to the way in which the FRC had applied those tests and had interpreted or applied its published guidance to the Claimant's prospect of success and the likely quantum of damages. It is necessary therefore to set out parts of that guidance. The relevant "Notes for Guidance" introduced the "private client" test.

"The Board therefore applies what is known as the private client test, namely that in general legal aid will only be granted in circumstances where a client of moderate means paying privately would be advised to litigate.

…..

The notional private client being advised must be taken to be a person with adequate means to meet the probable costs of the proceedings, but not with over-abundant means, so that paying the costs would be possible, although something of a sacrifice. The private client approach is well established in practice and case law.

…..

Where a case does not satisfy the private client test, legal aid will usually be refused either on the legal merits test or the reasonableness test or both." 7-01.4-6.

12. Legal aid would not be granted unless there were a "reasonable prospect of success", in deciding which all questions of fact and law had to be considered; and experience, good sense and judgement had to be applied. The opinion of counsel did not have to be accepted; 7.02.3-4. The "legal merits" test would be satisfied if a claim had a better than 50 percent prospect of success; a "reasonable prospect" was 50-60 percent; "good prospects" were a 60-80 percent prospect of success; 7.02.5-6. The "reasonableness" test was an additional test and its application could lead to the refusal of legal aid for a claim which passed the "legal merits" test. It was a wide and general test encompassing all those factors which would influence a private client in his decision whether to take proceedings.
13. A very important component was "cost benefit" as it would be for a private client, although it was neither the sole nor necessarily the decisive test. The question was whether "the game is worth the candle". One approach according to the guidance would be to estimate costs to the conclusion of trial, estimate the damages recoverable and the prospects of successfully enforcing the order for costs; if the likely recovery was greater than the likely costs, legal aid would not be refused on cost benefit grounds alone.
14. 7.03.7 continued:

"Sometimes costs will have been incurred before legal aid is applied for. The starting point will be to add together costs already incurred to the likely future costs of taking the action to trial for the purposes of the costs benefit assessment. However, the additional incentive of seeking to recover costs already expended might be an important consideration for the private client and therefore might justify the grant of legal aid especially if the merits are strong and the costs already incurred are substantial compared to the cost of proceeding to trial. By contrast, if the merits are not strong, it is unlikely that a grant of legal aid will be justified merely in the hope of recovering costs already expended.

…..

The Board will adopt a similar approach when considering the discharge of a certificate and will take into account costs already incurred and the prospects of recovering them, whether the costs were incurred privately or under the certificate.

…..

Solicitors and counsel should report to the Board if the cost benefit position deteriorates after the grant of legal aid. See also Iverson v. Iverson [1966] 1 All E.R. 258. The fact that substantial costs have been incurred will not, by itself, be a sufficient reason to justify the continuation of the certificate – see also NFG 12, para. 12-02.

15. The importance of the case to the client for example in leading to a real enhancement of the quality of life was also relevant.
16. The FRC before me relied on later guidance which appears to have been issued in 1999, the precise status of which was unclear. This guidance elaborated the cost benefit part of the "reasonableness" test with a matrix showing that for a case with "only reasonable prospects" (50-60 percent), the recoverable damages had to be at least twice the costs and for cases with "good" prospects (60-80 percent), at least 1.5 times costs. If those ratios were not satisfied, the assisted party would have to show that it was still reasonable to continue with the claim. The guidance recognised that a private client might continue in such circumstances e.g. if home or livelihood were at serious risk, or if another important remedy such as an injunction were sought in the action.
17. The Claimant contested the relevance of that later guidance because it post-dated the 1988 Act and the 1989 Regulations, and its status was unclear. I found that unpersuasive. Although the issue as to its relevance was trailed before the FRC and in a skeleton argument for an earlier stage of these proceedings as a point to be added to the grounds for Judicial Review, it was not a clear issue in the Judicial Review proceedings until it was raised in Mr Engelman's oral submissions for the Claimant. That accounts for some lack of certainty in answers as to the origin, date and status of the guidance.
18. But in any event the guidance is only an elaboration of the "cost benefit" test. The LSC and FRC are entitled at any stage to devise or use a matrix to assist in a cost benefit analysis and, for the better performance of their duties under the 1989 Regulations, to apply it to transitional cases such as this one, as well as to new cases. There is no provision in the 1988 Act or 1989 Regulations which precludes the promulgation of guidance of such a nature, or the application to transitional cases of guidance issued for the purposes of the 1999 Act. What matters is that the Claimant knew of the guidance framework within which the various powers, duties and judgments were to be exercised. The Claimant was well aware of the test and it was applied by counsel and solicitors in advice and argument to the LSC and FRC.

The decision letter of the Funding Review Committee

19. The extension of legal aid by the FRC in May 2006 had required a further opinion from counsel on the merits of the claim. It was this opinion which led to the second LSC Notice to Show Cause, to the discharge of the certificate and to the appeal to the FRC. It is important.
20. In August 2004, counsel, Mr Bowen, had advised that damages against both Defendants would exceed £300,000 on a multiplier approach or £150,000 on a lump sum approach. The prospects of success against both Defendants was said to fall within the 60-80 percent range. In April 2006 counsel advised that either approach would be likely to lead to an award considerably greater than £100,000.
21. In his advice of 21 June 2006 Mr Bowen concluded that the claim against the First Defendant in respect of education at the primary school stage would probably fail. This claim was shortly afterwards discontinued on a "drop hands" basis. Mr Bowen advised that the prospects of success, in establishing a breach of duty in respect of secondary education by the Second Defendant were in the 60-80 percent bracket and that the prospects of success in establishing overall liability exceeded 60 percent. Total costs to the end of trial were estimated at £80,000 and so applying the ratio of 1 to 1.5, he advised that an award greater than £120,000 would be necessary for legal aid to be continued. He thought that there were reasonable prospects of achieving an award greater than that although that would be "significantly more" than courts had awarded in the past and would require a different approach to quantum than had been seen to date. This different approach would require a personal injury action type multiplier – multiplicand approach to the lost years. He concluded "if the court is prepared to change its approach to quantum, [quantum] should exceed £120,000".
22. The FRC comprised practitioners of considerable and relevant experience. It accepted that the Claimant's prospect of success at trial "on breach of the duty of care" were likely to be 60-65 percent ("good"). The FRC pointed to the difficulties on causation now faced by the Claimant as a result of his discontinuance against the First Defendant; this substantially reduced the period during which the causative breach could have occurred, and the extent of the Claimant's educational problems which could be shown to have been caused by the negligence of the Second Defendant, if that were proved. Other general problems of causation in education negligence cases were referred to. The FRC concluded that £50,000 would be the "absolute maximum" damages recovered, a figure in line with the Claimant's own Part 36 offer of £50,000.
23. Mr Chamberlain for the LSC accepted that, for all the reservations expressed on causation by the FRC, it had not expressed any conclusion that the prospects of success on liability as a whole as opposed to prospects of success on breach of duty alone, fell below the 60-65 percent bracket. He accepted that the FRC decision letter should be approached on the basis that it concluded that there were good prospects for the recovery of £50,000, though expressed as "the absolute maximum" which the Claimant might expect to recover.
24. The FRC, in its decision letter, rejected the Claimant's Article 6 ECHR arguments and the contention that withdrawal of legal aid was arbitrary, disproportionate or a breach of any legitimate expectation. It applied the cost benefit matrix which I have concluded it was entitled to apply, as follows. Some £60,000 in costs had already been spent and a further £20,000 would be necessary up to the conclusion of trial. As damages would be unlikely to exceed £50,000, the cost benefit ratio, requiring £120,000 damages, could not be satisfied. This point was not decisive against the Claimant, and the FRC considered further whether it was reasonable for funding to continue. Even if the Claimant succeeded against the Second Defendant, the costs incurred against but not recoverable from the First Defendant would be £20,000-£30,000. That sum would reduce the maximum sum which the Claimant might receive from £50,000 in damages to £20,000-£30,000. No private client would pay £20,000 for a 60-65 percent chance of recovering £20,000-£30,000. The FRC concluded that a private client would also not spend £20,000 in a case worth £50,000, given a 35-40 percent chance of failure, even though a substantial investment in costs had already been made.

The Grounds of Challenge

25. The Claimant's first ground was that the decision to discharge the certificate should not have been made so shortly before trial because the Claimant had a legitimate expectation that funding would not be withdrawn at that stage. In reality, this ground challenges the LSC decision of 29 June 2006, because by the time of the FRC decision the trial had been adjourned by consent pending that appeal.
26. It is a very important feature of this case that although the certificate was discharged, there was no withdrawal of funding for a trial because no certificate had ever been issued which covered the trial. The only certificate issued before the Claimant's solicitors fixed the trial date covered proceedings up to the exchange of witness statements, obtaining an expert's report and counsel's opinion. It was the Claimant's solicitors who created the very tight timetable for the exchange of experts' reports with the trial date they chose. The extensions of legal aid in April and May 2006 were expressly limited so that merits and prospects could be reviewed before any further major costs were incurred.
27. The Claimant had no expectation, legitimate or otherwise, other than that legal aid would be withdrawn at any time if the duty in Regulation 78 required it. In truth, his submission through Mr Engelman is the untenable one that the Claimant had a legitimate expectation that legal aid would be extended to cover trial and that the LSC would be obliged to fund the trial, if the certificate had not been discharged at an earlier unspecified period. No statutory provision permits such an expectation; no promises had been made at all that that was how the LSC would deal with the Claimant; and that is not the LSC's practice at all. Consideration of extensions of legal aid by stages is instead envisaged, is commonplace in practice and is what occurred here. There is no promise of funding for a further stage implicit in the grant of funding for a prior stage if the tests for the subsequent stage are not satisfied.
28. In reality the Claimant was in difficulties because the trial date and timetable had been fixed at a time when the Claimant did not have funding for trial and a number of substantial hurdles remained to be overcome before an extension of legal aid for trial would be granted.
29. The LSC and FRC were also faced with material changes as a result of the proper operation of this staged process. The prospects of recovery of the larger sums referred to in earlier advices had been diminished by the discontinuance against the First Defendant with significant costs incurred but not now recoverable. The problems with causation and quantum were much clearer following the exchange of experts and their joint statement.
30. In support of his submissions, Mr Engelman relied on R (Alliss) v LSC 2002 EWHC 2079 Admin, Jackson J. But this case is very different on its facts. There the LSC had granted legal aid for an action, known to be of great difficulty, awkward prospects and problematic financial recovery, because of exceptional circumstances. Jackson J expressed surprise that the action had been funded at all, let alone at the level at which it had been funded. Shortly before trial the LSC itself took the initiative to review funding and it was this action which led to the discharge of the certificate, with no significant change of circumstances. This was held to be irrational. Those facts are significantly different from the facts of this case. I reject this first ground of challenge.
31. It is convenient here to consider Mr Engelman's allied submissions that the withdrawal of legal aid, or in reality the refusal to extend it to trial, was in breach of Article 6 ECHR because it denied the Claimant any effective access to justice, was disproportionate and unfair. The material fact that the late withdrawal had also given the Claimant the unenviable choice between carrying on the action without legal aid or ceasing to pursue his claim had been ignored. Mr Engelman submitted that the Claimant could not carry on without legal aid because he was dyslexic, he could not cope with the voluminous documentation, he would find cross-examining his former teachers emotionally taxing, and the case was factually and legally complex. The LEA would be represented by experienced counsel which would lead to an inequality of arms. Whether this was a denial of effective access to justice was to be considered separately from the costs or value of the claim or its prospects of success, he submitted, because everyone was entitled to access to justice.
32. ECtHR jurisprudence on Article 6 and legal aid is reasonably clear in my view, although its application to individual situations may be less so. First, and often cited in subsequent cases, Airey v Ireland 1979 2 EHRR 305 held:

"Article 6 para. 1 may sometimes compel the State to provide for the assistance of a lawyer when such assistance proves indispensable for an effective access to court either because legal representation is rendered compulsory, as is done by the domestic law of certain contracting states for various types of litigation, or by reason of the complexity of the procedure or of the case."

33. Airey concerned the breach of Article 6 by a failure to provide legal assistance for judicial separation proceedings from a husband who was abusive to the claimant wife and children.
34. Second, as Airey held, there is no obligation in Article 6 on a State to provide legal aid for every dispute concerning a civil right before the courts. Where legal aid is provided by a State, the selection of cases to benefit is a recognised necessity whether selected by a means test or by reference to prospects of success. A refusal of legal aid on the grounds that a case lacked reasonable prospects of success, through a fair and non arbitrary decision making process, would not be a denial of access to the courts, even though that would mean that a claimant would have to bring proceedings himself or seek other assistance which might not be available; X v UK 21 (1980) DR 95.
35. This was applied in the Commission decision in Munro v UK 1987 52 DR 158; the Claimant would be unable in reality to bring defamation proceedings in the UK without legal aid, which was not available. Nonetheless, the nature of that action was regarded as significantly different from the judicial separation proceedings in Airey, as inherently risky and unpredictable; so there was no breach of Article 6 in the absence of legal aid for such proceedings. So even if a case cannot adequately be presented without legal aid, there is no necessary requirement for it to be provided.
36. The Commission was clear in Stewart-Brady v UK (1997) 90-A DR45 that a disproportion between costs and benefit was also relevant to fair and non-arbitrary decision making on the grant of legal aid.
37. A breach of Article 6 in relation to legal aid by the UK was found in P,C and S v UK (2002) 35 EHRR 31, in respect of both substantive fairness and fairness in the legal aid decision-making process. Legal aid was withdrawn during the hearing of a highly contentious and complex care case because of unreasonable instructions given by the claimant to counsel. She had no opportunity to explain her position before legal aid was withdrawn or to appeal against the decision. The breach of Article 6 occurred because the claimant was emotionally involved in the proceedings which were very complex and important. Fairness therefore meant that she had to have the assistance of a lawyer. The withdrawal of legal assistance was unfair even though the claimant had managed to conduct her case in the teeth of all the difficulties.
38. Steel and Morris v UK APP 68416/01 2005, in which the claimants were denied legal aid for their defence in the "McLibel" case in breach of Article 6, involved both a very long and complex case in which they were defendants not claimants, and the aim of the defence was to protect or justify their exercise of their right to freedom of expression. Both those cases are rather different from this one.
39. Mr Chamberlain for the LSC points out that no case was cited in which a breach of Article 6 had been found by the Strasbourg Court through the denial of legal aid to a claimant to bring a civil action in which damages alone were sought. That observation is true, perhaps indicative, but scarcely conclusive. In Alliss above, the decision of the LSC to withdraw legal aid in a damages only claim was held to breach the claimant's Article 6 rights, but that judgment very much related to the timing of the LSC decision and to the fact that the basis for the withdrawal of legal aid was not any change of circumstances, but a late change of mind about circumstances known of all along.
40. I reject Mr Engelman's submission that Article 6 requires those factors to be considered without regard to the prospects of success and the costs and benefit of the proceedings. ECtHR jurisprudence is quite clear that those are all aspects of whether the refusal to fund the case further through to the conclusion of trial would constitute a denial of access to justice in breach of Article 6; see e.g. Ivison v UK (2002) 35 EHRR CP 29 pp 7-8. The refusal of or restriction on legal aid does not amount to a denial of justice or of effective access where there are no reasonable prospects of success, nor where the "game is not worth the candle", costs being disproportionate to the benefits.
41. No challenge could be or was made to the legal aid decision making framework, whether statutory or in guidance, as being in some way arbitrary in substance or process. The Claimant knew what the relevant tests and limits were. There was no withdrawal of legal aid for a step already embarked on or permitted with the benefit of legal aid. The review stage took place as envisaged and on a basis, namely counsel's opinion and experts' reports, clearly understood throughout the proceedings as a basis for review. There was no unfairness in the way the decision was taken.
42. Turning to its substance, I accept that the decision not to fund the trial makes it very difficult for the Claimant to continue the proceedings, but I do not accept that it makes it impossible. The Claimant would have the advantage that the case had been refined and advanced through the conclusion of pleadings, the obtaining of witness statements and the obtaining and exchange of experts' reports. So stages have been concluded and material preparation undertaken which focus on the issues and prepare the evidence. It is a case of some factual complexity, there are issues of expert evidence and there are legal difficulties. It would be a complex case for a young, poorly educated man of even above average intelligence, as the Claimant is. I am unclear that his dyslexia is now a serious problem; the opinion of 21 June 2006 says that with the help of an adult literacy course, the Claimant has reached "near adult levels of literacy". I am prepared to accept some degree of problem remains but this was not a point taken beyond a simple assertion of the problems of dyslexia in Mr Engelman's submissions. I accept that cross examination would be daunting and the fact that the Claimant would be cross examining his former teachers may make it the more so for a young man. I accept that the proceedings are of importance to the Claimant because of what damages would help him to achieve.
43. The proceedings, however, lack the intensity associated with cases brought, for example to protect a home or livelihood, or to defend proceedings in a complex area of law. They do not have the emotional and other difficulties associated with care, custody or divorce proceedings. They lack the level of intensity or complexity which could of itself require state funding in order to achieve effective access to justice. But in any event the difficulties faced by the Claimant have to be considered with the prospects of success and whether the costs are disproportionate to the benefits.
44. The Claimant raises the question of whether the FRC has correctly applied the relevant guidance to its decision and made other public law errors, which I shall consider later, but taking the FRC's approach at face value, a further £20,000 is required by way of costs for a 60-65 percent chance of an effective damages recovery by the Claimant of £20,000-£30,000. The answer to the question of whether any private client would commit that money is obvious, as Mr Engelman accepted. Given that the claim, though with good prospects of success, would obviously not be worth pursuing further, the refusal of legal aid for trial was not disproportionate nor a denial of effective access to justice. The FRC would obviously have been aware that its decision would create real difficulties for the Claimant in pursuing the action, and might very well lead him to abandon it. They had considered the claim, the experts' reports and counsel's opinion. They did not need to say that they had considered the choices which the Claimant would face because they are obvious. It was not necessary and would probably have been wrong for the FRC to try and conclude which course he might follow in order to factor that prospect into its decision.
45. I accept that the Claimant would face very real difficulties in continuing proceedings but these are those he would face if he were a private client who could not risk the expense of lawyers and had to proceed on his own or with such other assistance as he could find if he were to proceed at all. This is not a case in which Article 6 would require state funding for a lawyer for all who could not risk the costs.
46. If he carried on, the FRC would have anticipated that the LEA would be represented but that inequality involves no necessary breach of Article 6, nor does it make the FRC decision or any trial unfair within ECHR jurisprudence. I do not think that the FRC's reference in the decision letter to the Claimant having already "enjoyed the opportunity to state his case through the use of a fair part of the limited funds available" evidences any breach of Article 6. It is a small part of its conclusion that the refusal of funding would not breach Article 6. The import of its comment is not entirely clear but I take it to mean that the Claimant has already had significant help in the preparation of his case were he to decide to take it further himself, and assistance to advance what he could, so that the case could be fully assessed on its funding merits. Either way the comment is quite unobjectionable in law.
47. I turn to the challenge to the FRC's approach to the "private client" test. The FRC looked at the total costs of £80,000 to the conclusion of trial and to the likely maximum award of damages of £50,000. It concluded that the cost benefit ratio 1:1.5 was not satisfied, as indeed it was not. (I should add here that I am quite satisfied that the FRC was entitled to take £50,000 as the likely maximum award on the basis of the current approach to awards in cases of this type; see DN v London Borough of Greenwich [2004] EWCA Civ 1659, 2005 2 FLR 747, paras 74-79.)
48. The FRC did not treat the cost benefit conclusion as decisive and looked at whether additional funding should nonetheless be recommended. The shortfall in recovery of costs against the First Defendant, would manifest itself as a deduction of £20,000 - £30,000 from the maximum damages of £50,000; so it concluded, again obviously rightly, that the extra costs could not be justified against the total damages likely to be recovered. It concluded by saying that a private client of modest means would not be advised to spend a further £20,000 on a case valued at £50,000 with a 35-45 percent chance of failure "notwithstanding the substantial investment already made in the proceedings". This would include contributions made by the Claimant.
49. Mr Engelman submitted that the FRC had ignored the fact that the further £20,000 costs to the conclusion of trial would create a 60-65 percent chance of recovering £50,000 damages (less the £20,000-£30,000 shortfall in costs from discontinuance) plus the costs expended to date of £60,000, together with the further £20,000 to be spent. This he expressed as spending £20,000 for a 60-65 percent chance of recovering some £25,000 damages net, plus £80,000 costs. Mr Engelman also submitted that the FRC had ignored the approximately £6,000 in contributions already made by the Claimant, a substantial sum for a young man, not in well paid employment. The loss of the effective use of the Claimant's contribution in Alliss had been a factor behind Jackson J's conclusion that the FRC decision was irrational, so it is said to be a material consideration.
50. In effect Mr Engelman's contention is that neither of the FRC's exercises really looked at how a private client of modest means would analyse the decision to be made. The first analysis for cost benefit ratio purposes comparing £80,000 with £50,000 would be only sound if no substantial costs had yet been incurred. The second exercise simply compared the extra costs of £20,000 against damages alone, net of the costs shortfall of £20,000-£30,000. What had not been done was to compare the sum actually at risk or actually recoverable with the extra cost and chances of recovery: £20,000 extra costs against a 60-65 percent chance of £20,000-£30,000 "net" damages plus £60,000 costs (or £80,000 if the £20,000 costs "stake money" is added in).
51. Substantial costs already incurred do not form any explicit part of the cost benefit ratio matrix, and certainly not when they represent the greater part of the costs at stake. The text of the later guidance offers no real help.
52. The relevant guidance on how those such costs are to be considered is paragraph 703.7 of the 1988 Guidance which I have set out earlier. The fact that substantial costs have already been incurred is not of itself a sufficient reason to justify the continuation of the certificate, but the costs incurred and the prospects of their recovery will be taken into account. If the merits are not "strong", legal aid would not be continued merely in the hope of recovering them.
53. There is no clue as to how "strong" or "not strong" measures against other descriptors of prospects of success used in the guidance. However as the issue could normally only arise if the legal merits test were satisfied in the first place and the issue arises under the "reasonableness" head, even "not strong" cases must at least be those which already have "reasonable prospects of success".
54. In deciding whether to continue, the approach to costs already incurred can obviously be very different from a cost benefit ratio which compares total prospective costs with total prospective damages. The notion of throwing good money after bad comes in, but so too can it be said that the total potential benefit of incurring the extra costs is that much greater. Such costs already incurred are ignored if the future costs are compared against damages alone, rather than against damages plus costs already incurred.
55. A private client, faced with the real world problem of having incurred £60,000 costs and facing a 60-65 percent chance of recovering those £60,000 costs plus £25,000 damages net for a further £20,000, might well be advised to carry on. That would readily meet the cost benefit ratio viewed as a total sum recoverable against the costs to be incurred from then on. To a private client the apparent wasting of £60,000 if the case were discontinued, especially in relation to the extra costs of £20,000, could well be the critical factor.
56. Indeed it is striking that, by the time of the FRC decision, the costs already incurred somewhat exceeded the maximum recoverable damages and greatly exceeded the damages recoverable after allowance for the cost shortfall against the First Defendant. So the costs incurred represented the greater component of any financial benefit to the proceedings whether on a mathematical or judgement based cost benefit analysis. This cost issue does not appear to have featured as a significant part of the Claimant's written argument before the FRC but I accept that it was raised in writing and orally.
57. This issue too is bound up with the question of the recovery of the Claimant's own contribution. I have some difficulty in seeing why consideration should be given to that as a separate factor which could warrant continued public funding if, on a proper overall consideration of costs and benefits, funding should cease. The past contribution can create no entitlement to more favourable consideration for further funding, and it is but an aspect of how the past costs, public or private, are dealt with in the judgement of whether continued funding is reasonable. The contributions can be said to add to the importance of the consideration of the effect of such costs on whether continuing the game is worth the candle. The impact of the costs already incurred on the decision to discontinue funding is plainly a material consideration. The contribution of the Claimant is really part of that material consideration.
58. It is clear from the decision letter that the costs already incurred here were known to the FRC and that it expressed the view that those costs would not justify a private client being advised to proceed with a further costs expenditure of £20,000. But there is no explanation for how or why that view was reached or of how it fitted into the guidance, or whether this case was viewed as "strong" or "not strong" and if the latter, how that squared with the 60-65 percent prospect from which the FRC did not resile notwithstanding its comments on the causation difficulties. The FRC reasoning does not explain why a private client would not be advised to continue or how it would answer the private client's key question: what about the £60,000 I have already spent?
59. I conclude that in reality the brief reference at the end of the decision letter is a mere reference to costs already incurred, added on for the sake of completeness. It cannot show that the real point was in substance considered. Just as the mere absence of a reference to a particular material consideration may not suffice to show that it was ignored, so too a mere passing reference to an important perhaps even critical particular consideration may not suffice to show that the true substance of the point was in fact considered. Taking something into account requires that its true import be considered and grappled with as part of the decision. There was no mention of the relevant guidance which provides the framework for the consideration of that point, which is not covered by the cost benefit matrix or guidance. There is no reasoning behind this far from obvious conclusion about this key point. The FRC's reasoning on other aspects of the legal merits or reasonableness test cannot be treated as applicable to this aspect so as to show that the substance of the point was considered. The guidance itself on this issue appears to have been ignored in substance.
60. In any event the FRC has properly given reasons for its decision. The question of whether costs already incurred warranted further expenditure is obviously important here, especially given that the further costs to trial are only 30 percent of the costs already incurred and are themselves equivalent to the net recoverable damages. There are no legally adequate reasons explaining the FRC's conclusion on this issue. The legal inadequacy of such voluntary reasons also warrants quashing the decision. The reasoning or rather the absence of it on this point, in an otherwise clearly and carefully reasoned decision letter, is persuasive evidence also that the true impact of the costs already incurred, whether in cost-benefit or private client terms or by reference to the guidance, was not considered.
61. I do not conclude that it was or would necessarily be irrational to refuse funding on this basis. It would be possible for the FRC, taking costs incurred into account against the background of the guidance and explaining its conclusion, to reach the rational conclusion that there should be no further funding. It might conclude that with all its reservations about causation and uncertainty over quantum, that this was not a "strong" case for the recovery of damages of £50,000. It might also take the view that, underlying the approach of the guidance to costs already incurred, is an unarticulated policy that public money by way of legal aid should not be spent in pursuing litigation in which the major benefit would be the recovery of money already spent in legal aid. This could be seen as substituting the claim of the LSC for that of the litigant. The decision is however to be quashed and it will have to be reconsidered for the reasons which I have given. It would be wrong for the Claimant to raise his hopes that his claim would proceed with legal help as a result of any decision in this case.