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
		08/03/2012

Lord Justice Stanley Burnton:

Introduction

1. Following the judgment of the Court of Justice of the European Union in Joined Cases C-403/08 and C-429/08, on 24 February 2012 we gave judgment allowing Mrs Murphy's appeal against the dismissal by the Crown Court at Portsmouth of the Appellant's appeal against her conviction by Portsmouth Magistrates of two offences under section 297(1) of the Copyright, Design and Patents Act 1988 ("the CDPA"). We said that we should deal with questions of costs in a separate judgment.
2. This is the judgment of the Court on the questions of costs that have arisen.

The issues

3. The principal issue that falls for decision is whether the parties' costs should be determined under what we may call the civil costs regime or the criminal costs regime.
4. The second issue concerns the appellant's entitlement to costs, in particular having regard to the fact that issues other than the European law issues were determined adversely to her in the magistrates' court and the Crown Court and in the first hearing before this Court, before myself and Lord Justice Pumfrey.
5. The third issue concerns the respondent's costs: should the appellant be ordered to pay any and if so what part of its costs (if appropriate by way of set off against her entitlement to costs), should the respondent receive its costs out of central funds, or should it bear the whole of its costs?
6. The fourth issue concerns the appellant's application for an interim payment on account of her costs. It is dependent on our determination of issues two to four inclusive.

The parties' contentions

7. It is common ground that this Court has power to order costs here and below pursuant to sections 28A and 51 of the Senior Courts Act 1981. We have referred to the power under, in particular, section 51 as the civil regime. Section 28A confers power on this Court, on an appeal by way of case stated by the magistrates' court or the Crown Court to "make such … order in relation to the matter (including as to costs) as it thinks fit". Section 51(1) provides that subject to the provisions of the 1981 Act or any other enactment or to rules of court, the costs of and incidental to all proceedings in (among others) the High Court shall be in the discretion of the court. Subsection (5) provides that nothing in subsection (1) shall alter the practice in any criminal cause or matter.
8. It was not suggested by Mr Mellor QC, for the respondent, that there is any provision of the 1981 Act, or any other enactment or rule of court, or practice in criminal causes or matters, that constrains the exercise of the power or the discretion of the Court under section 51. However, he submitted that this being a criminal cause or matter, the appropriate jurisdiction for the Court to exercise is that under to section 19 of the Prosecution of Offences Act 1985 and Regulation 3 of the Costs in Criminal Cases General Regulations 1986 and/or pursuant to section 16 of the Prosecution of Offences Act 1985. We have referred to this jurisdiction as the criminal costs regime.
9. Section 16 of the Prosecution of Offences Act 1985 authorises the magistrates' court, the Crown Court and on appeal a Divisional Court of the Queen's Bench Division to make orders for the payment of the costs of a successful defendant in a criminal cause or matter out of central funds. Such an order is referred to as a defendant's costs order. Subsections (6), (7) and (9) are as follows:

"(6)     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.

(7)     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 recover the full amount mentioned in subsection (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.

(8)     . . .

(9)     Subject to subsection (7) above, the amount to be paid out of central funds in pursuance of a defendant's costs order shall—

(a)     be specified in the order, in any case where the court considers it appropriate for the amount to be so specified and the person in whose favour the order is made agrees the amount; and

(b)     in any other case, be determined in accordance with regulations made by the Lord Chancellor for the purposes of this section."

10. It would seem that if the power conferred by subsection (7) is exercised, the order for costs must specify the amount of costs to be paid to the defendant, whereas if an order is made under subsection (9) the Court may order the amount to be determined by the appropriate authority, which in the case of the Divisional Court of the Queen's Bench Division is the master of the Crown Office: see regulation 5 of the Costs in Criminal Cases (General) Regulations 1986. Where the court is required to specify the amount of costs to be paid it cannot delegate the decision, however it may require the appropriate officer of the court to make enquires to inform the court as to the costs incurred, and may adjourn the proceedings for enquiries to be made if necessary: See paragraphs 1.2.4 and 2.6.2 of the Practice Direction (Costs in Criminal Proceedings) [2010] 1 WLR 2351 [2011] 1 Cr App R 13.
11. Mr Mellor relied on paragraph 2.6.1 of that Practice Direction on the entitlement of the respondent to have its costs paid out of central funds. So far as is relevant, it provides:

"2.6 Private prosecutor's costs from central funds

2.6.1 There is no power to order the payment of costs out of central funds of any prosecutor who is a public authority, a person acting on behalf of a public authority, or acting as an official appointed by a public authority as defined in the Act. In the limited number of cases in which a prosecutor's costs may be awarded out of central funds, an application is to be made by the prosecution in each case. An order should be made save where there is good reason for not doing so, for example, where proceedings have been instituted or continued without good cause. This provision applies to proceedings in respect of an indictable offence or proceedings before the High Court in respect of a summary offence."

He submitted that no good reason had been shown for depriving the respondent of an order for the payment of its costs out of central funds.

12. Mr Howe QC submitted that the appellant, having succeeded in this litigation, was entitled to have her costs paid by the respondent under the civil costs regime. He put before us a transcript of the judgment of District Judge (Magistrates' Court) N P M Sanders, sitting in Liverpool Magistrates' Court, in Media Protection Services v Gilligan and Media Protection Services v Parker, given on 15 September 2011. The District Judge held that the respondent brought the prosecutions in those cases, which like the present were for alleged contraventions of section 297(1) of the CDPA, in breach of the Legal Services Act 2007, in that it was carrying on a "reserved legal activity" when it was neither authorised nor exempt in relation to that activity. We were told that a different conclusion had been reached in the Crown Court, and that an appeal to the High Court in relation to this issue is pending. Mr Howe did not rely on District Judge Sanders' conclusion, but did rely on his findings of primary fact.
13. In relation to the appellant's costs, Mr Mellor submitted that if the Court decided that the civil costs regime should apply, she should not be awarded all or any of her costs in the magistrates' court or the Crown Court, where she had not raised any issue of European law, or in relation to the first hearing in this Court, which led to the judgment reported at [2007] EWHC 3091 (Admin). In addition, he submitted that there was good reason to doubt whether the appellant was entitled to any costs to be paid by the respondent, on the ground that there was reason to believe that she was not under any personal liability for costs. He contended that in these proceedings she has been supported by a group of publicans, who must have a legal liability for her costs. Furthermore, one of her after the event insurance policies has a limit on cover of £245,000, applicable to both her potential liability for the respondent's costs and for her solicitors' disbursements, the principal of which would have been her counsels' fees. It may well be, therefore, that the appellant's solicitors had an agreement with her which limited or excluded her liability for their fees.

Discussion

Issue 1: Civil or Criminal costs?

14. Neither Mr Howe QC nor Mr Mellor QC was able to make any submission as to the criteria to be applied by this Court for the purpose of deciding whether to apply the civil costs regime or the criminal costs regime. Nor did they refer to any authority that might guide us.
15. Clearly, save in exceptional cases, prosecutions and appeals in criminal cases should be and will be subject to the criminal costs regime. However, the present case is unusual. The prosecution was brought by the respondent in order to protect a very substantial profit stream for the Football Association Premier League Ltd ("the FAPL"). It was treated by both parties as a test case, involving substantial legal resources, including two silks for the appellant and two silks and three junior counsel for the respondent for the hearing on 29 and 30 November 2007, and two silks and a junior for the appellant and two silks and two junior counsel for the respondent on 25 and 26 June 2008. Both hearings were conducted in a manner indistinguishable from a hearing in the Chancery Division or before the Civil Division of the Court of Appeal in which substantial sums are in issue. This was very far from being a typical appeal against a conviction for a summary offence, which is what section 297(1) creates.
16. In our judgment of 16 July 2008 [2008] EWHC 1666 (Admin) we said, at paragraph 60:

"We … voice our unease about the bringing of a prosecution under s. 297(1) in circumstances where the establishment of an essential element in the offence, namely "intent to avoid payment of any charge applicable to the reception of the programme", depends upon the compatibility with EC law of an export ban imposed in a licence agreement between two companies who are legally strangers to the purchaser and user of the decoder card in question who is the defendant to the criminal charge. Our unease at this use of s. 297(1) exists notwithstanding the additional requirement of dishonesty, and regardless of whether the export restriction and resultant absolute territorial protection are ultimately held to be enforceable. It seems to us unlikely that the legislature would have envisaged that the applicability of the avoided charge to the programme received by a defendant would be dependent upon something so remote from that defendant's own knowledge."

This unease was particularly relevant in connection with the present prosecution, in which the appellant's case was always that she relied on the legal advice given to her by her solicitor. The appropriate procedure to challenge that advice was a claim in the civil courts.

17. The reality is that these proceedings were part of a broader campaign to protect a private interest of the FAPL. Of course, private prosecutors may prosecute cases that affect their private interest. Shoplifting prosecutions are an obvious example. But those cases involve general dishonesty rather than the question whether the defendant genuinely relied on a solicitor's legal advice. Indeed, the finding of the Crown Court that the appellant "hid behind the legal advice as a convenient shield behind which to hide her dishonesty" is questionably adequate. The factual findings made by District Judge Sanders in the judgment to which we have referred fortify us in this conclusion, in particular his finding that FAPL retain overall control of the prosecutions brought by MPS and that FAPL has given MPS an indemnity against any award of damages and any order for costs made against it. It is finally difficult to believe that a public prosecutor, concerned that a defendant should not be wrongly convicted, would have resisted the application for a reference to the Court of Justice, and would have submitted, as the respondent did in its skeleton argument for the 2007 hearing in this Court, that "There is no matter of EU law for the Court justifying a reference under Article 234 EC. …. this court can reject the Appellant's case on EU law with complete confidence …"
18. It is noteworthy that before us the respondent conceded, in the course of the hearing on 25 to 26 June 2008, that the finding of dishonesty against Mrs Murphy could not stand if the geographical restriction imposed on the use of her Nova decoder card were held to be unlawful and unenforceable as a matter of EU law (see paragraph 67 of our judgment of 16 July 2008 [2008] EWHC 1666 (Admin)).
19. In our judgment, these circumstances justify the application of the civil costs regime.

Issue 2: appellant's entitlement to costs?

20. In deciding whether the appellant should have any costs below, and if so what costs, we bear in mind, in addition to the matters to which we have already referred, that she failed on all issues other than the European law issues raised for the first time before this Court (although Mr Howe argued that in the light of the judgment of the ECJ Mrs Murphy ought to have succeeded below on a point on which she lost). However, we also bear in mind that she is the ultimate winner in this litigation; that it is now established that she should not have been convicted; and that in prosecuting Mrs Murphy the respondent was in effect seeking to enforce an unlawful geographical restriction. So far as the costs in this Court are concerned, we take into account that it was expected that argument on the European law issues would take place during the original hearing in 2007, in tandem with the argument on the domestic law points, rather than at a separate hearing. We consider that the orders for her costs to be paid by the respondent should be the following:

i) In the magistrates' court: 75 per cent of her costs.

ii) In the Crown Court, 75 per cent of her costs.

iii) In the Divisional Court, all her costs, including the costs of the reference to the ECJ.

These costs are to go to detailed assessment, in default of agreement, on the standard basis. We see no reason why the premiums payable for after the event insurance should not be recoverable in principle, but whether and to what extent they are will be a matter for the Costs Judge.

Issue 3: respondent's costs?

21. For the reasons we have set out in paragraphs 15 to 19 above, we consider that this is not a case for payment of prosecution costs out of central funds.

Issue 4: interim payment on account of costs?

22. We do not consider that the matters raised by the respondent, which are largely suspicions that the appellant has no liability to her solicitors for costs, or no liability beyond the amount insured, justify the refusal of an interim payment. It is trite law that the fact that a party has an agreement with others to contribute to her liability to her solicitors for costs, or even to indemnify her against her liability for costs payable to her solicitors, does not mean that she is not entitled to payment of her costs by an unsuccessful opponent. What must be shown, to avoid the opponent's liability, is that the successful party had no liability herself to her solicitors. It is insufficient to show that she has an indemnity (or right of contribution) from a third party against that liability.
23. The appellant's costs schedules total approaches £700,000. The majority of that sum relates to costs claimed in respect of the proceedings in this court rather than in the courts below. From that total must be deducted the insurance premiums totalling about £125,000, in respect of which Mr Howe does not seek an interim costs payment order. Having regard to all the circumstances of the case the interim payment order we consider appropriate is £100,000, to be paid within 28 days.

Miscellaneous

24. The order of the Court will include the provisions sought by the appellant in paragraphs 5 and 6 of the draft order submitted by Mr Howe.