England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		22nd May 2007

MR JUSTICE BLACKBURNE:

1. This application arises out of an appeal by Kelvin and Barbara Fosberry against the order of Master Wright, a costs judge, dated 25^th October 2006, assessing at nil the Fosberrys' bill of costs, by reason of what were said to be material failures to comply with the Conditional Fee Agreement Regulations of 2000 (which I refer to as the CFA Regulations) in respect of a Conditional Fee Agreement dated 14^th June 2002. Consequential orders were also made by Master Wright. The Fosberrys were refused permission to appeal against his decision that there had been material failures to comply with the CFA Regulations.
2. The bill of costs which the Fosberrys had submitted arose out of proceedings between themselves and the Commissioners of Customs and Excise, as they then were, in which the Fosberrys had challenged -- as I follow the story -- the Commissioners' refusal to register them for VAT in respect of their activity, which they asserted was an economic activity under the VAT legislation, as professional foster parents. After more than two years of disputing their entitlement to registration the Commissioners withdrew their opposition. Perhaps not surprisingly the Fosberrys claimed that they should have their costs which they had incurred, needlessly as in the event it turned out, in seeking to appeal to the VAT and Duties Tribunal against the Commissioners' refusal, although in the event the position will never have to be determined by the Tribunal.
3. The Commissioners did not challenge that they should have their costs, but there was initially -- again, as I follow the story -- an issue as to whether the Fosberrys' costs should be assessed on the standard or on the indemnity basis. The Fosberrys claimed that assessment should be on the indemnity basis. At a hearing before the Tribunal on 4^th July 2005, it was determined against the Fosberrys that costs should be assessed on the standard basis. It was -- as I follow it -- the assessment of those costs which was the subject of Master Wright's decision, given on 25^th October, against which the Fosberrys sought to appeal.
4. The Fosberrys issued their Appellant's notice against Master Wright's order in due time. By their notice they sought permission to appeal against his decision. On 25^th January 2007, Briggs J granted the Fosberrys permission to appeal observing:

"It is arguable that the Master was wrong to conclude that there were departures from the CFA Regulations, which had a material adverse effect within the meaning of paragraph 107 of the judgment in Hollins v. Russell."

So far so good. I understand that the appeal -- which will be heard with assessors -- is fixed to come on in two days time, that is to say this coming Thursday, 24^th May, with an estimated length of hearing of up to a day.

5. On 23^rd April 2007, HM Revenue and Customs, as Respondents to the appeal, filed a Respondent's notice, by which they invited the appeal court to uphold Master Wright's decision for reasons different from or additional to those given by him in his lengthy 78 paragraph judgment, dated 6^th October 2006, which resulted in the making of the order of 25^th October.
6. The reasons which are said to be different or additional to those given by Master Wright, which the Respondents seek to advance on the appeal by their Respondent's notice, are all said by the terms of the notice to involve material breaches of the CFA Regulations. There are four such matters. The first is that the Conditional Fee Agreement failed to specify what payment should be due if it should be terminated for any reason. The second is that the Agreement failed to specify what part of the success fee, if any, is due to the postponement of the legal representative's fees. The third is that the Agreement's effects were not properly explained to the Fosberrys. The fourth is that the Agreement was not signed by either the party or his legal representative.
7. It is perfectly fair to say that the Respondent's notice was very much out of time. In accordance with the relevant provisions of CPR Part 52, the Respondent's notice should have been filed, if it was to be in time, within 14 days after the Respondents were notified of the fact that the Fosberrys has been given permission to appeal. I am not told exactly when it was that such notification was given but it is accepted by Ms Ayling, who appears on behalf of HM Revenue and Customs as Respondents, that her clients were notified, as she put it, within days after permission by Briggs J had been given. On any view, therefore, the Respondent's notice was many weeks out of time.
8. Acknowledging that they were out of time the Respondents applied for, and on 27^th April obtained from Warren J, an extension of time to 24^th April for the filing of their notice, and an extension of time to 5^th May for service of their notice. By paragraph 3 of his order, the Fosberrys were given permission to apply to vary or discharge the extensions of time provided that their application to do so was made within seven days of the service on them of the Respondent's notice.
9. On or about 13^th April, it may have been a day or two later but according to the certificate it was on 13^th April, the Respondent's notice was served on the Fosberrys so that that part of Warren J's order was complied with and either then, or it may have been a day or two later, the Fosberrys were served with a copy of Warren J's order. At all events, on or about 6^th May -- and it is not suggested that it was not in due time, indeed, the Fosberrys made a point of their strict adherence to the various time limits set out by the Rules -- they sought by their application to take advantage of paragraph 3 of Warren J's order in order to have that order discharged.
10. Very helpfully, there is a typed statement of the reasons advanced for setting aside Warren J's order. I should say that before me today Mr Fosberry is assisted by Mr Rice of B J Rice Associates. It is fair to say that the representation of the Fosberrys by B J Rice Associates in the person of Mr Rice has been at the heart of some of the costs issues which were debated before and ruled upon by Master Wright. Mrs Fosberry has not been in front of me, but I take it that her interest has been fully represented by her husband and by Mr Rice. She has herself expressed some personal views, but what she says really does not add very much to the points that I am now going to rehearse.
11. What is said on behalf of the Fosberrys is really this; first, no good reasons have been advanced for the delay to 24^th April by the Respondents for the filing of the Respondent's notice. I will come back to that point in a moment. The second point, although it is not one which was enlarged upon in front of me today, is that they appear to understand an assertion by the Respondents in their notice that:

"The Respondents have breached no other rules or orders"

to be an admission that the Respondents are indeed in breach of one or more rules or other orders. I do not so read that assertion by the Respondents. The Respondents, of course, accept that they were in breach of the time requirement for the filing of their Respondent's notice, hence their application for an extension of time. But I am not aware that they have breached any other rules or orders, at any rate as far as this appeal is concerned, or, if they have, none has been drawn to my attention. I cannot, therefore, attach any weight to that point.

12. The third point is that they challenge the assertion by the Respondents that the Fosberrys are not, or will not be, prejudiced by the late submission of the Respondent's notice. What they say is this:

"The Respondents make the claim that the Appellants are not prejudiced by the late submission of the Respondent's notice. The very fact that the Respondents now wish to widen the issues to be considered by the court can hardly be said not to cause prejudice. If the late application is admitted the hearing scheduled for 24^th May will have to be postponed, because the bundles and skeleton arguments submitted to the court and the Respondents in accordance with the directions of the court do not anticipate anything other than the two issues, in respect of which permission to appeal was granted by Briggs J."

Having heard from Mr Rice I have a feeling that to some extent there may have been an element of misunderstanding underlying that assertion, in that he understood that the Respondents were seeking to call into question the Fosberrys' right to non-legal representation, through him and his organisation, before the VAT and Duties Tribunal and with it, their right or his right to payment for such representation. If that had indeed been a point that the Respondents were raising I would have considerable sympathy with this particular objection, but as Miss Ayling has pointed out in the skeleton argument, a copy of which was made available to the Fosberrys a fortnight or so ago, it is made clear that:

"The Appellants have not appealed the finding of Master Wright that Mr Rice, or BJR [that is a reference to B J Rice & Associates] were providing legal services pursuant to ss.27 and 28 of the Courts and Legal Services Act of 1990 as amended, nor do the Respondents cross-appeal that finding."

The skeleton goes on:

"It is the Respondent's view that the appeal against the finding that the CFA is enforceable is without merit, and that there are strong additional reasons for the Appeal Court to uphold the Master's decision that the CFA is unenforceable, so that to pursue the cross-appeal, which involves highly complex questions of law, would serve only fruitlessly to increase the costs."

In other words, that wider question is emphatically not one which is going to be before the Appeal Court, at any rate, at the invitation of the Respondents at the forthcoming appeal hearing. So it may well be that in raising the concern as to the hearing in two days time consequent upon the Respondent's notice, the Fosberrys may have misunderstood the width of the points which the Respondents wish to raise.

13. As I have pointed out to Mr Fosberry and Mr Rice, and as has been confirmed by Ms Ayling, the four points which are raised by the Respondent's notice are all very discrete points, three of which involve no more than a consideration of the Conditional Fee Agreement itself and determining whether its terms for one or other of the three reasons raised constitute a material breach of one of the Regulations referred to.
14. I cannot think that that is going to add greatly to the length of the hearing or, and this is the central point, that having to deal with those points is one which is going to cause relevant prejudice to the Fosberrys. Prejudice in this context means an inability or difficulty to prepare to deal with the additional points, in circumstances where there would have been no such inability or difficulty had the points been raised in due time. I do not detect that there is any such difficulty from the points. This is evident not least from the response that the Fosberrys made in the typed-up document in which they seek to deal in fairly short order with the points raised.
15. I have referred thus far to three of the four points. The fourth point goes, I think, a little wider than simply a consideration of the Conditional Fee Agreement and the Regulations. This is the allegation that the CFAs' effect was not properly explained to the Appellants. I understand from Ms Ayling, she has made this clear and has drawn my attention to the relevant references in the skeleton argument, that what is involved there is a consideration of five documents. Firstly, a letter of 13^th June 2002; secondly, the CFA itself dated 14^th June 2002; thirdly, an attendance note of discussions between Mr Rice and the Fosberrys at or about the date of the CFA; fourthly, a letter dated 28^th December 2004 and fifthly, a fee account which I understand to be referred to in that letter.
16. I do not consider that having to consider those documents in the light of the relevant Regulation, which is Regulation 4.3, is one which is going to cause the Fosberrys prejudice in having to deal with it at the hearing in two days time. I am not, therefore, persuaded that the late service of the Respondent's notice, coupled with the supply of the skeleton argument provides a ground for setting aside Warren J's order on the grounds of prejudice.
17. I come back then to the first of the three matters, which is that of delay. Both Mr Fosberry and Mr Rice have urged upon me the absence of any explanation for the delay. Ms Ayling has accepted that, at any rate, for most of the period of delay there is no satisfactory explanation. She has to take that, as I put it to her and as she accepted, 'on the chin'. But, as I pointed out to Mr Fosberry and Mr Rice and as Ms Ayling reminded me, what is in issue here is CPR 3.9, and in particular various factors, of which delay is only one. Although it is regrettable that there has been such delay, at the end of the day, in a matter of this kind I have to decide whether there really is prejudice if I allow the Respondent's notice to be relied upon given the lapse of time. I am not persuaded that there is any prejudice. Although it is very regrettable that there has been delay, it would not be a proper exercise of the court's discretion to refuse the Respondents the opportunity to advance the matters raised by their Respondent's notice on the grounds that there has been this considerable period of unexplained delay.
18. I am very conscious of what Mr Fosberry himself submitted, namely that from his perspective as layman it looks as if, although he has adhered strictly to the various procedural rules with regard to time, we have a Respondent, which when all is said and done, is a big and well resourced organisation coming along late in the day, and apparently, getting away with it. He says that that does not convey the right impression. It is one which he finds distasteful. I fully understand that, but I have, at the end of the day, to exercise a discretion without fear or favour, and do so whether the person seeking the exercise of discretion is a big and well resourced organisation like the Revenue & Customs, or whether it is the little man. In all the circumstances and for the reasons I have explained, I am not persuaded that it would be right to set aside Warren J's order. Therefore I shall dismiss this application.
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