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
		08/04/2016

Mr. Justice Edis:

1. On 12^th February 2016 I handed down a written judgment dismissing an application by the respondent for the discharge of a PFO made under Part 5 of the Proceeds of Crime Act 2002, [2016] EWHC 255 (Admin). This judgment concerns the consequences as to costs of that decision. By agreement the parties have lodged written submissions and I have decided the questions without a further hearing. This is a complex and infrequently visited area of the law. I have had to consider the proper approach to applications to vary exclusions in PFOs to meet legal expenses, both predicted and already incurred. I have done so in the absence of authority and have concluded, in essence that where dealing with future costs the court should perform an exercise similar to costs budgeting with the three things identified at paragraph 6 below firmly in mind. When dealing with costs already incurred the court should consider why no advance approval of the costs was sought or granted and should always bear in mind that costs incurred will be the subject of an assessment under Part 4 of the Proceeds of Crime Act 2002 (Legal Expenses in Civil Recovery Proceedings) Regulations 2005 if a CRO is made and, perhaps, of a different kind of assessment if such an order is not made.
2. Abbreviations

i) Property Freezing Order made under Part 5 of the 2002 Act: PFO

ii) Civil Recovery Order made under Part 5 of the 2002 Act: CRO

iii) The Proceeds of Crime Act 2002: the 2002 Act

iv) The Proceeds of Crime Act 2002 (Legal Expenses in Civil Recovery Proceedings) Regulations 2005: the 2005 Regulations.

v) The Civil Recovery Proceedings Practice Direction: the Practice Direction.

3. The costs consequences arise in two separate areas

i) The respondent made an application on 18^th January 2016 (for consideration on 20^th January 2016 which was the oral hearing at which I reserved judgment) for an order extending the amount that he could expend on his reasonable legal costs from the frozen funds from £10,000 plus VAT to £27,269.85 plus VAT. This figure was reduced in Mr. Godden's (Mr Godden is the Respondent's Solicitor) witness statement of 20^th January 2016 to £23,440.03 plus VAT. This is technically an application to vary an exclusion in the PFO under section 245C of the 2002 Act. This was the figure for "actual costs" as opposed to an estimate. By then all the costs to which this application related had been incurred. This issue also involves interpreting the order made by McGowan J on 16^th June 2015 when she dealt with the party and party costs of an exclusion application to her. These questions are dealt with in Part 1 of the Judgment.

ii) The NCA having successfully resisted the respondent's application to discharge the PFO now seeks its costs against the respondent. This is Part 2.

PART 1: THE RESPONDENT'S APPLICATION FOR A VARIATION OF THE EXCLUSION

4. Section 245C of the 2002 Act provides

245C Exclusions

(1) The power to vary a property freezing order includes (in particular) power to make exclusions as follows—

(a) power to exclude property from the order, and

(b) power, otherwise than by excluding property from the order, to make exclusions from the prohibition on dealing with the property to which the order applies.

……………

(4) An exclusion may be made subject to conditions.

(5) Where the court exercises the power to make an exclusion for the purpose of enabling a person to meet legal expenses that he has incurred, or may incur, in respect of proceedings under this Part, it must ensure that the exclusion—

(a) is limited to reasonable legal expenses that the person has reasonably incurred or that he reasonably incurs,

(b) specifies the total amount that may be released for legal expenses in pursuance of the exclusion, and

(c) is made subject to the required conditions (see section 286A) in addition to any conditions imposed under subsection (4).

(6) The court, in deciding whether to make an exclusion for the purpose of enabling a person to meet legal expenses of his in respect of proceedings under this Part—

(a) must have regard (in particular) to the desirability of the person being represented in any proceedings under this Part in which he is a participant, and

(b) must, where the person is the respondent, disregard the possibility that legal representation of the person in any such proceedings might, were an exclusion not made, be made available under arrangements made for the purposes of Part 1 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 or funded by or the Department of Justice.

(7) If excluded property is not specified in the order it must be described in the order in general terms.

(8) The power to make exclusions must, subject to subsection (6), be exercised with a view to ensuring, so far as practicable, that the satisfaction of any right of the enforcement authority to recover the property obtained through unlawful conduct is not unduly prejudiced.

The 2005 Regulations

5. A person subject to a PFO has the right to fund his legal expenses from any property not covered by it. Where he has no such property he may seek to have part of the property excluded from it so that it may be available to fund those expenses. The 2005 Regulations make provision for the payment of expenses out of the property which is the subject of Civil Recovery Proceedings. I will describe the scheme rather than setting out the Regulations in full:-

i) Part 1 contains a definition of "civil recovery proceedings" which are defined as proceedings under Part 5 of the 2002 Act. An application for a PFO in advance of the issue of an application for a CRO is therefore covered.

ii) Part 2 sets out the required conditions which must apply to any such exclusion. The exclusion must specify the stage or stages in civil recovery proceedings to which it relates and the maximum amount which may be released for each stage to which it relates. A solicitor must notify the NCA where the legal expenses have exceeded or will exceed the maximum amount so specified or have exceeded or will exceed the total amount which may be released under the exclusion. A sum may only be released in respect of expenses in accordance with Part 3 and if a CRO is made the sum payable shall be determined in accordance with Part 4 "regardless of whether a sum has been released in respect of any of those expenses under Part 3".

iii) Part 3 sets out a procedure for securing the release as an interim payment of some or all of the excluded property. Only sums payable in respect of expenses which have been incurred can be released. A written request must be made which must describe the work and produce any documents which are necessary to show that the expenses have been incurred. The NCA must respond and if agreement is not reached about the interim payment requested, 65% of the requested sum may be released to the solicitor for the respondent.

iv) Part 4 provides for the assessment of expenses at the conclusion of civil recovery proceedings, where a CRO has been made which provides for the payment of expenses out of the property to which it relates. If agreement is not reached the person claiming expenses must commence assessment proceedings. The court will then assess them in accordance with Part 5. If there has been an overpayment by way of interim payment it must be refunded and if there has been an underpayment further property will be released by the trustee for civil recovery to the solicitor.

v) Part 5 identifies the basis of assessment of "reasonable legal expenses" which is the standard basis as defined in CPR rule 44.4, subject to Regulation 17 which prescribes hourly rates. Regulation 16(2) requires the court to give effect to any provision in the CRO for the purpose of enabling the person to meet his reasonable legal expenses of Civil Recovery Proceedings and, subject to any such provision in the CRO, to any exclusion (including the required conditions). It is not quite clear to me what this means, but it cannot mean that the costs must be assessed at least in the amount of the exclusion and not in any lesser amount otherwise there would be no provision for refunding any overpayment. It plainly means that the court when considering the terms of a CRO has a power to make provision in that order which would override the effect of any exclusion in any event. Regulation 17 provides that remuneration may only be allowed at the appropriate hourly rate specified in the Table it contains. This Table contains a standard rate for solicitors and junior counsel of various seniorities and a higher rate for those people which also includes a rate for Queens Counsel. There is no standard rate for Queens Counsel. The higher rate can only be paid where the case involves substantial novel or complex issues of law or fact. The Queens Counsel rate can only therefore be paid if this test is met. There is a percentage upgrade for London based legal representatives which is 10% in this case (Outer London).

6. The 2005 Regulations do not provide for payment, except by interim payment, of legal expenses at any stage before agreement or assessment after the making of a PFO. The receipt of an interim payment is subject to the duty to refund any overpayment. If no exclusion for legal expenses is made at all the legal representatives do not lose the opportunity to be paid out of the property subject to a CRO, but that payment will not be made until the CRO has been made and the amount either agreed or assessed by the court. The exclusion is a method of controlling the amount of interim payments prior to assessment. In my judgment it does not involve any assessment in the technical sense. S.245C of the 2002 Act, above, requires the court to consider the amount of the costs on which the exclusion is to be based, but does not require a detailed, or even a summary, assessment. The court is required to consider three things

i) The need to limit the exclusion to legal expenses which have been or will be reasonably incurred. This statutory obligation plainly requires the court to take a view about the work for which the exclusion is sought and the amount of the costs which will be incurred. Given that the rates are prescribed the issue which the court must address is the work which is proposed and to consider whether, if it is done in the way proposed, the expense of it will have been reasonably incurred. The High Court is now very familiar with this kind of exercise in respect of future costs, given the cost budgeting regime. Where the application is made in respect of work which has been done, and no exclusion covering it has been granted prospectively, the court is likely to enquire why that is. The course which will often commend itself will be to leave any questions of difficulty to the assessment. Prospective approval of costs is the real purpose of section 245C. The court will be astute to ensure that the proposed work is reasonably necessary. The fund in issue will become public property if a CRO is made and the purpose of the Act is prevent it from becoming the private property of the respondent's lawyers unless that is reasonably necessary. The phrase in the Act is "reasonably incurred" not "proportionate" in the sense used at the assessment stage. The court will not grant an exclusion based on a plan which is extravagant or designed to fund hopeless applications.

ii) The desirability of the respondent being represented. This is an important factor and it is not suggested in this case that an appropriate sum ought not to be made available for the payment of legal expenses, see Serious Organised Crime Agency v. Azam [2013] 1 WLR 3800 for a discussion of the importance of the right to representation in this context. This means that the court, when considering the first and third thing in this list must do so from the starting point that the respondent is entitled to use his property to obtain reasonable representation.

iii) The need to ensure so far as practicable, that the satisfaction of any right of the enforcement authority to recover the property obtained through unlawful conduct is not unduly prejudiced. In a money case such as the present, the court will have regard to the fact that if the costs are assessed in a sum less than the interim payments which have been made, the legal representatives will be required to refund the difference. Further, unless there is agreement for a higher sum, only 65% of a properly vouched request for payment of expenses already incurred can be made. These protections derive from the 2005 Regulations and give effect to the "statutory steer" described in this sub-paragraph, s.245C(8). Given that the 2005 Regulations have fully addressed the need to protect the property from work being paid for at an excessive rate, the focus of the court here can only be to assess whether that work is reasonably required. This is the same exercise as at (i) above, but this provision emphasises the need to take into account the need to protect property which may ultimately become public property.

The Practice Direction

7. The Practice Direction contains provisions governing the making of applications under the 2002 Act and the 2005 Regulations. In particular it provides

"5B.1

When the court makes a property freezing order or interim receiving order on an application without notice, it will normally make an initial exclusion from the order for the purpose of enabling the respondent to meet his reasonable legal costs so that he may –

(1) take advice in relation to the order;

(2) prepare a statement of assets in accordance with paragraph 7A.3; and

(3) if so advised, apply for the order to be varied or set aside.

The total amount specified in the initial exclusion will not normally exceed £3,000.

………….

Application to vary or set aside an order

"7A.5

The court will normally refer to a costs judge any question relating to the amount which an exclusion should allow for reasonable legal costs in respect of proceedings or a stage in proceedings."

8. When the first application to vary the initial exclusion was made in this case, the judge was not referred to paragraph 7A.5 or the Practice Direction and did not refer the question of amount to a costs judge. Where I discuss the role of the judge in such applications below, I do not differentiate between the role of the court and the role of the costs judge on such a referral. Whether it is the costs judge who carries out the role or the High Court judge will depend upon how the High Court judge decides to proceed. Whoever it is, the nature of the decisions to be made and the principles by which they are to be made will be the same. The statutory requirement to avoid prejudicing the prospects of enforcing any CRO as well as the overriding objective will usually result in the High Court proceeding by the most economical means.

The PFO Proceedings

9. The history of the proceedings is set out in the main judgment. The original PFO was made by Jay J on 16^th December 2014 at a hearing without notice and in private. It included this provision

"EXCEPTIONS TO THIS ORDER

7. This Order does not prevent [the respondent] from spending up to £3,000 (plus VAT) to meet his or her reasonable legal costs so that he …may

7.1 Take legal advice in relation to this Order;

7.2 prepare a statement of assets in accordance with paragraph 7A.3 of the Practice Direction –Civil Recovery Proceedings; and

7.3 if so advised, apply for this order to be set aside or varied.

8. If [the respondent] seeks the release of any sums in respect of his…legal expenses pursuant to the exclusion set out at paragraph 7 above, he…must make a written request to the NCA in accordance with Part 3 of [the 2005 Regulations]."

10. This order is in the form prescribed by paragraph 5B.1 of the Practice Direction which is set out above. That paragraph says that the court will normally make an "initial exclusion" in these circumstances for legal expenses and that the amount will not normally exceed £3,000 plus VAT. Although described as an "initial exclusion", the exclusion in this case included any application which may be made to vary or set aside the PFO. The making of this part of the PFO almost certainly did not involve Jay J considering the likely amount of money required to fund the work required in this particular case: he simply followed the Practice Direction. It follows from this that where lawyers are instructed and take a view about the work required on behalf of their client and consider that £3,000 is not a high enough exclusion to allow adequate interim payments they must be entitled to make an application to vary it under s.245C.
11. On 10^th April 2015 the respondent applied for an extension to the initial exclusion to £16,390 being £12,485 plus £3,905 which constituted the costs of making the application itself. These figures did not include VAT. The application was supported by a document drafted by Mr. Bowers QC who correctly identified the issues which would arise on the proposed discharge application and by a witness statement of Mr. Godden who explained how the figures had been arrived at. He drew the attention of the court to the 2005 Regulations, but did not analyse them in detail. His purpose in referring to them was to argue that this was a case which involved the higher hourly rate specified in the third paragraph of the Table in Regulation 7 because it involved substantial novel or complex issues of law or fact. He also contended that the exclusion should be based on the need to instruct Leading Counsel. This was because Mr. Bowers had taken silk after doing a considerable amount of work on the case as junior counsel. To instruct a new junior would involve duplication of work and increase rather than reduce the costs. He also said that the rates are to be increased by 10% where the solicitor's office is in outer London, as was the case here.
12. This application was disputed by the NCA who served evidence in reply. They contended, among other things, that the costs of the discharge application would not be reasonably incurred because it was "misconceived" and doomed to fail. As it happens and coincidentally, I used that word when describing the "abuse by re-litigation" submission which was the principal ground on which the application was argued. I did not use that word in relation to the non-disclosure ground of the application because I found that the respondent had established culpable non-disclosure.
13. That caused Mr. Godden to serve a "Position Statement". This asked the court to extend the exclusion to cover the entire costs of the discharge proceedings, estimated at £18,920 plus VAT to include preparation for and attendance at the hearing of the costs application and the substantive discharge application. The earlier figure had not included fees for the hearing of the discharge application. It also appeared in oral submissions that the cost of making the costs application had increased from £3,905 to £6,000. As appears from my analysis of s.245C of the 2002 Act and the 2005 Regulations, the exclusion may (and frequently will) cater for future costs, but no interim payment can be made until the expenses have actually been incurred.
14. The hearing of the exclusion application came on before McGowan J on 16^th June 2015. The transcript of the hearing is available on Casetrack and the judgment is [2015] EWHC 2345. She did not rule on the submission that the discharge application was doomed to fail. She clearly thought that it was reasonable to continue to instruct Mr. Bowers at the silk rate because otherwise new counsel would have to be instructed which would involve duplication of work. She expressly did not decide whether the higher rate should apply, in that she declined to decide whether the case involved substantial novel or complex issues of law or fact. In her judgment she said that the case was not unduly complex or difficult in factual terms but it did raise issues of law which would have to be considered. This, in my judgment, means that she was deciding that there were no substantial, novel or complex factual issues but was leaving open the question of whether the legal issues satisfied that test. She made it clear in discussion after judgment which appears at paragraph 15 of the transcript that the applicability of the test was undecided by her.
15. The Judge did not attempt to assess the likely costs in detail but varied the exclusion so that in place of £3,000 the sum of £10,000 now appeared. This was for the costs of the steps identified in paragraph 7 and did not include the costs of the application before her, once said to be £3,950, then £6,000 and now, in evidence before me, to have been £4,000.73. At one stage she was told that the constituent of the sum claimed of £18,920 for that application was £6,000 : see the transcript of the hearing at paragraph 10:-

"MR. BOWERS: The total we ask to be excluded to take the matter to conclusion – and the decision has been taken that there are grounds to discharge this order. At the higher right rates, and these were the calculations within the position statement of Mr. Godden who instructs me, so at the higher rate for solicitor and at silk's rates for counsel, £19,920 plus VAT. But one could subtract from that the costs of this application, which if successful we apply for, which are £6,000…."

16. Mr. Bowers appears to have been wrong in this, because when further pressed at paragraph 67, he explained that the increase of £6,000 in the sum claimed between the original application and the June hearing was on the basis that the higher figure reflected the estimated figure for the costs of the hearing of the discharge application itself. As I have explained above, this was the correct reason.
17. The Judge did not specify in the judgment whether the exclusion as varied covered the making of the application to discharge in its entirety or some lesser part of the proceedings, but it is quite clear from the way in which the application was put and the terms of paragraph 7.3 of the order as varied that it did cover and include the making of the discharge application of the PFO. The Judge did not rule on a submission by the NCA that the only order which could be made was one which related to the original application and not the new application made in the Position Statement for the costs of the hearing of the substantive application as well as those in the application. She discouraged further applications in view of the relatively modest size of the restrained funds.
18. It is regrettable that McGowan J was not assisted with an analysis of s.245C and the 2005 Regulations, neither of which was referred to by anyone during the hearing in terms. Mr. Fletcher did submit that the higher rate can only be paid if the statutory test is met at paragraph 120-122 of the hearing transcript. Mr. Bowers responded at paragraph 172 without addressing the consequence for his rate if no decision in his favour on the statutory test was made. The three things identified from s.245C at paragraph 6 above were not drawn to her attention. I consider that the view which McGowan J expressed at paragraph 9 of her judgment should not be read as a decision as to Mr. Bowers' entitlement to that rate. It may well be reasonable that he should be instructed and paid at the silk rate, but that rate can only be paid if allowed by the 2005 Regulations. It cannot be paid simply because it is reasonable. It is necessary to decide whether an expense is reasonable, because s.245C and the 2005 Regulations only apply to reasonable legal expenses. Regulation 17(2) means that a silk can only appear at the silk rate where the test for the higher rate is met. Since McGowan J expressly did not decide that question, she could not validly decide that Mr. Bowers was entitled to be remunerated at that rate. She said at paragraph 8 that the case raised issues above and beyond the normal threshold, but clarified at paragraph 15 that this was not a decision that the statutory test for the higher rate was met. It does not appear to have been pointed out to her that there is no standard rate for a QC and therefore a decision that a QC could be remunerated at the higher rate involves a decision which she had declined to make. In these circumstances I read her judgment as a decision that it was reasonable to instruct Mr. Bowers but that whether he could be paid at silk rates would have to await determination of the statutory test. Any other reading would mean that she had made an unlawful order and the court should seek to avoid that conclusion if her decision can be given a lawful interpretation.
19. The matter does not rest there, because in correspondence after the ruling, the claimant said this, in a letter of 30^th November 2015.

"With regards to Mr. Bowers QC, we acknowledge the remarks of Mrs. Justice McGowan that it is preferable that he should remain instructed at 'a' higher rate, if not the higher rate. In the circumstances, we are prepared to adopt a pragmatic approach and accept that he is entitled to claim £302.50 per hour as requested."

20. The effect of the exclusion was to establish the maximum sum which could be paid under Part 3 of the Regulations. It is now submitted that I should allow a different maximum sum for the same work.
21. Between June 2015 and January 2016 the defendant's estimated costs of conducting the substantive application to discharge the PFO and all related matters increased from £18,920 (the sum placed before McGowan J) to £27,269.85 (the sum placed before me on 18^th January 2016). This is an increase in round figures of 50%. Either the June 2015 estimate was hopelessly inaccurate or the 18^th January 2016 bill is far too high. On 20^th January 2016 the actual costs were said to be £23,440.03 as I have said, including the costs before McGowan J. This is an unimpressive state of affairs when the effect of the exclusion may be (if a CRO is made) that money which would otherwise go to the public benefit will instead be paid to the respondent's lawyers. In this context the court is entitled to expect the lawyers to be accurate and consistent and also to conduct their work with diligence and, where appropriate, economy. They are entitled to be paid proper fees for work which was reasonably undertaken in their client's interest, but cannot expect to be allowed generous exclusions if there is a wide variation in the costs figures at different stages. Where there is a doubt about matters of that kind where the application relates to future costs, the prudent course will usually be to base an exclusion on a conservative figure in order to comply with s.245C(5)(a) and (c) of the 2002 Act. Where the application is in respect of costs which have already been incurred the sensible course will simply be to leave the matter to assessment under Part 4 of the Regulations.

Discussion and conclusion on respondent's application

22. The first issue I have to resolve is jurisdiction. An application was made to McGowan J in June 2015 for an exclusion to cover the same stages of the proceedings as the present application involves. It failed to secure the exclusion then sought which was somewhat less than the current figure. The issue has been judicially determined. This means that the three things which have to be considered, see paragraph 6 above, must be taken to have been considered and determined. In pursuance of her duty to ensure that the exclusion was limited to expenses reasonably incurred, McGowan J has selected the appropriate amount for the exclusion. She must have done so on the basis that it was reasonable to make the proposed application to discharge. Nothing has changed except that it has emerged that the figure which was then proposed which she rejected as excessive is now said to have been an underestimate. There was no appeal against her decision. Therefore Mr. Bowers' submission that her order "cannot be considered in any way an assessment of reasonable costs" is right up to a point. McGowan J was not conducting an assessment, and neither am I. However, she has made an order which required her to consider what level of exclusion would ensure that only reasonable legal expenses were payable, which had regard to the desirability of the respondent being represented, and to the need to protect the frozen funds to ensure enforcement so far as reasonably practicable. This exercise, as I have pointed out above, requires the court to take a view of the reasonable level of costs even though no assessment is required. The exercise, as I have pointed out, is not unlike costs budgeting.
23. It follows from the above that I do not accept Mr. Bowers' submission that a court on an application under s.245C of the 2002 Act should "first consider whether the total sum claimed is proportionate, and then conduct an item by item assessment" to determine whether the item was reasonably incurred for a reasonable amount. That is the exercise of assessment to be carried out after a CRO is made under Part 4 of the 2005 Regulations. What is required for s.245C is a decision on the three things identified at paragraph 6 above. This includes a decision that it is reasonable for the respondent to be represented. That decision was taken in favour of the respondent (otherwise the application would have simply failed) and therefore the legal representatives are entitled to be paid their reasonable costs out of the property covered by the CRO if one is made. In default of agreement, and unless the CRO provides otherwise, those costs will be assessed after that time.
24. Mr. Bowers submits that the figures which McGowan J was given were actually very similar to the figures before me. This is because the new figure of £23,440.03 should have the figure for the costs of the application to McGowan J deducted which is another new figure of £4,000.73, leaving a claim for the costs covered by the paragraph 7.3 exclusion claimed at £19,439.03 which, says Mr. Bowers, is "almost identical to the original estimate". This was £18,920 and the application costs were additional, see paragraphs 15 and 16 above. This means that the respondent is simply repeating substantially the same application made to McGowan J. In my judgment there is no power to determine an application which has already been determined and not appealed. This is not to say that no further application for a variation can ever be made: it simply means that the same application cannot be made twice. I therefore refuse the respondent's application on this basis.
25. In case that is wrong, I shall consider whether the court should entertain an application which it has already determined, even if technically it is possible to do so. The only reason for it is that the first application was made on the basis of estimated costs and the present application is made on the basis of actual costs. Mr. Bowers points to an observation to McGowan J by Mr. Fletcher who said, after the Judge had given judgment

"Is your Lady making any judgment at all as to the level of fees as to whether, for example, should there be further exclusions sought, as there undoubtedly will, whether this is a case in which the higher rate should apply or not or would your Lady prefer to leave that undecided."

26. The answer was that the point was left open. The parties were contemplating that there would probably be Civil Recovery Proceedings and no doubt exclusions may be sought when those are issued in order to deal with them. Given the conviction of the respondent the court will scrutinise any proposed defence to the CRO proceedings with some care for the purpose of performing its duty under s. 245C(5)(a) and (c). I do not consider that Mr. Fletcher was inviting further applications for exclusions in respect of the same steps in the proceedings which were covered by the decision which had just been given. Even if he was, his invitation would not clothe me with power to consider an application which had already been decided by McGowan J. The judge almost immediately afterwards went out of her way to discourage further applications and it is certainly not in accordance with the overriding objective for applications to be decided twice by judges at the same level. I would therefore refuse this application as a matter of discretion even if technically I had power to grant it.
27. This approach to the decision of McGowan J is adverse to the grant of the present application, but not in every respect adverse to the interests of the respondent's lawyers. McGowan J did not expressly rule on the submission that the exclusion application should fail because the PFO discharge application was without merit. However, she did so implicitly because if she had upheld that submission she could not have varied the exclusion as she did. I do not therefore feel able to decide that the costs relating to it should be treated as unreasonably incurred. I have declined to review her judgment or to adjudicate again on things which she decided. If I were free to decide whether it was reasonable to incur the costs of the discharge application at all, my decision would be that it was not. I acknowledge that I am in a better position than she was to address this question because I determined the application. I have also spent some time considering and deciding the costs consequences. I am far from saying that she was wrong on the material which she had. I am, however, saying that if I were to decide the question of whether an exclusion to facilitate the making of a discharge application of this kind and in this case afresh, I would refuse it on the ground that it had no realistic prospect of success, or to put it another way, was "misconceived". Mr. Bowers accepts in his written submissions on the costs issues that it was the abuse by re-litigation argument which was the one on which the application would either stand or fall. I used the word "misconceived" to describe that argument. I have held that McGowan J decided that it was reasonable to bring that application and that decision, not appealed, stands both for present purposes and for the purposes of the assessment.
28. Further, given the shifting figures between 18^th January 2016 and 20^th January 2016 when the bill was reduced very substantially I do not have sufficient confidence in the accuracy of the figures presented to be satisfied that granting the application would ensure that only reasonably incurred legal expenses were paid. This is a statutory condition under s.245C, see paragraph 6 above. As I have indicated, the consequence of my order is that the legal representatives must wait for any further payment of their costs of the discharge application for assessment following the conclusion of the CRO proceedings. I have no information about how long that will take. That will no doubt depend upon the attitude of the respondent to those proceedings.
29. It may assist the judge carrying out that assessment if I record my view that the discharge application did not involve any substantial, novel or complex issue of law or fact which could satisfy the test in Regulation 17(2) of the 2005 Regulations. This is a decision which McGowan J expressly left open and my views cannot therefore conflict with hers. I am also able to express a view with confidence because I was the trial judge. My judgment was quite long because an attack was mounted in two other cases which I heard at the same time as the present on the practice of the Administrative Court in this area. This case also involved consideration of part of that attack. The facts barely arose for consideration at all, because the challenge was to the propriety of the claim for the PFO and not the merits of it. That was already clear by the time of the April application which set out the nature of the proposed application to vary. The principle of abuse by re-litigation in civil proceedings is not novel or complex. In the present context it is not difficult to apply either (which is not quite the same thing). The submission made to McGowan J by Mr. Fletcher at paragraphs 120-122 of the hearing transcript was plainly right. What the effect of my view will be, given the agreement of the claimant that Mr. Bowers is entitled to be remunerated at £302.50 per hour (see paragraph 19 above) will be for the judge conducting the assessment under Part 4 of the 2005 Regulations to decide.

The costs before McGowan J

30. The Judge said "I am not going to make an order for costs today. I am going to leave it as costs in the case" and later said that they were "to be resolved at the end of the substantive….." At that point Mr. Bowers said "very well" and the transcript does not show whether she had in mind the substantive application to discharge the PFO or any CRO application which may be made. It is argued that I should construe these words in one or other of the following ways:-

i) That the costs in the case order means that they should follow the event of the CRO application and not the discharge application.

ii) That she in fact made no order for costs, having said that that is what she was doing.

iii) That she in fact reserved the costs so that they could be resolved at the end of the substantive hearing either of the discharge application or the CRO application, if any.

iv) That she meant to order that the costs of the application should be costs in the case, the case being the substantive discharge application.

31. I think it far more likely that the Judge meant the discharge application, not least because the civil recovery proceedings had not been issued at the time of her order. They might never have been issued at all, although this was no doubt not likely. They were issued in December 2015. In my judgment this is the proper way of reading that decision. No application to discharge the PFO had been issued at that date either, but the exclusion for which the application was then made included the costs of preparing and arguing it. It was essential to the success of the application that a discharge application was going to be made and Mr. Bowers had told the Judge in in the passage cited at paragraph 15 above that the decision to make the application had been taken. She did not amend the original exclusion except by varying the sum, and by paragraph 7.3 that included the costs, if so advised, of applying to vary or discharge that order. By the time of that hearing it was clear that an application had been advised. Mr. Bowers' document of 3^rd April 2015 sets out its grounds and asserts that they are good. I therefore reject argument (i) above.
32. Arguments (ii)-(iv) above have to be viewed together. In my judgment the key factor is that the Judge used the term "costs in the case" which is clear in its meaning. It is defined in 44PD 4.2 as meaning "The party in whose favour the court makes an order for costs at the end of the proceedings is entitled to that party's costs of the part of the proceedings to which the order relates". This accords with the common understanding of the term which the Judge used.
33. I consider that when she said she was not going to make a costs order, she meant that she was not going to decide who should pay the costs of those proceedings. This was all ex tempore and the words used have to be given a sensible effect. She immediately said that the order would be costs in the case, and reading the two phrases together the meaning of the sentence becomes clear.
34. I do not consider that her use of the expression "So I will leave this matter to be resolved at the end of the case" means that she intended to order that these costs should be reserved, which is a different order for costs. I think she simply meant that the outcome of the discharge application will resolve the costs of the application to her without any further judicial adjudication. This is a very common way of dealing with necessary procedural steps which occur before a substantive issue is determined.
35. I have therefore interpreted the decision of McGowan J as to costs as meaning that the costs were in the case and the case concerned was the substantive discharge application. This means that the NCA is entitled to them, subject to my ruling on the second main issue below. I am asked to assess them summarily in the sum of £3,168 inclusive of VAT and I do. This is a reasonable sum and significantly less than the sum of £4,000.73 excluding VAT sought by the respondent.

PART 2: THE COSTS OF THE APPLICATION BEFORE ME

36. The respondent's application before me failed. The general rule is that the unsuccessful party pays the successful party's costs. That rule may be departed from where there is good reason.
37. The factor which requires particular consideration is my finding that the NCA was guilty of non-disclosure in the ex parte application for the PFO before Jay J. The agreed basis on which the respondent fell to be sentenced had been resolved in the Crown Court before that application, but Jay J was not told of it. I held that this was significant non-disclosure but not so grave that it required the discharge of the order. I referred to the availability of costs sanctions to mark the seriousness of this failure which would adequately meet the justice of the case.
38. I am quite certain that there should be a costs sanction. Mr. Bowers submits that there should be no order for costs. Mr. Fletcher submits that there should be a deduction in the costs order made in favour of the NCA. This may be academic because the respondent has no funds except those which are subject to the CRO application and the NCA could not discharge its costs out of those funds. However, I accept the submission of Mr. Fletcher that difficulties of enforcement are irrelevant to the costs order which should be made.
39. I consider that the principal argument in the discharge application was the abuse of process argument. That was an argument which was rightly resisted. In my judgment there should be a costs order related to the result of the application itself, but that costs order should be substantially discounted to reflect the NCA's failure to give proper disclosure. I made no finding of bad faith but I found that the failure would not have occurred if those responsible had properly attended to their duties. Because of the high degree of trust the court places in a party making an application in private and without notice any failure of this kind is a serious matter.
40. The NCA's bill of costs for the hearing of 20^th January 2016 is in the sum of £3,751.97 which I assess summarily as a reasonable sum, without hesitation. To that sum is to be added the sum assessed at paragraph 26 above namely £3,168. I suspect that these bills are underestimates of the total costs of this stage of the proceedings but it may be that costs attributable to the CRO application have been stripped out. At all events, the total is £6,919.70. I apply a 50% discount from that figure to reflect the non-disclosure. This gives an assessed figure for the NCA's costs of and occasioned by the application to discharge the PFO of £3,460 and I order the respondent to pay that sum to the NCA. That symbolic penalty is of no practical consequence in this case, but it is a public order which reflects judicial disapproval of the performance of an important public function by the NCA and I trust that it will be regarded as a matter of concern by it. It needs hardly to be said that the more instances of non-disclosure appear in decisions of the court, the more likely it becomes that PFO's may be discharged or refused in the future.