England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		30/04/2009

Mr Justice Jack :

1. This was an appeal against an order of Master Rogers made on 5 September 2008. He thereby dismissed the application of the appellant, Habib Bank Limited, for an order that their costs of an appeal to the Court of Appeal determined on 29 July 2004 should be paid by the Legal Services Commission. The ground on which he dismissed the application was that it had not been made within 3 months of the making of the section 11 costs order by the Court of Appeal against the unsuccessful appellant who had been funded by the Commission. Following the hearing of the present appeal I stated that it would be dismissed, and, that I would give my reasons later. These are the reasons.
2. The story begins as long ago as 1990 when proceedings were brought against the Bank by three claimants. The first and second claimants were companies which had gone into liquidation and had assigned causes of action to the third claimant, Mrs Shirin Iqbal. Mrs Iqbal alleged that the Bank had wrongfully debited accounts. She quantified her claim at £2,987,720. The action was tried by HHJ Kershaw QC on dates between December 2001 and March 2002, but he did not deliver judgment until September 2003. He held that Mrs Iqbal had proved her case and directed an assessment of damages. The Bank appealed to the Court of Appeal and were successful. A re-trial was ordered. An order was made on 29 July 2004 providing for that and dealing with costs. Mrs Iqbal was unsuccessful at the retrial on 25 September 2007 and was ordered to pay the Bank's costs of the trial and re-trial on an indemnity basis with a payment of £100,000 to be made on account. It turned out ultimately that she had no assets of real substance.
3. At the stage of the Court of Appeal Mrs Iqbal had the assistance of the Legal Services Commission and had costs protection within the meaning of section 11(1) of the Access to Justice Act 1999. The order made by the Court of Appeal as to costs was as follows :

"17) Habib Bank Limited's costs of this Appeal to be paid by Mrs Shirin Iqbal such costs to be assessed if not agreed.

18) Mrs Shirin Iqbal, a party who was in receipt of services funded by the Legal Services Commission, do pay Habib Bank Limited an amount to be determined by a Costs Judge.

19) Liberty to Habib Bank Limited to apply to a High Court Judge in relation to the assessment of Mrs Iqbal's liability for costs and in the event that the assessment gives rise to a shortfall, under the Community Legal Services (Cost Protection) Regulations 2000."

4. The scheme set up in relation to costs and the Legal Services Commission is contained in regulations made under section 11 of the 1999 Act, namely the Community Legal Service (Costs) Regulations 2000, and the Community Legal Service (Cost Protection) Regulations 2000. The effect of the scheme was described in the judgment of Lord Phillips M.R. in R (Gunn) v Secretary of State for the Home Department [2001] 1 WLR 1634. Reference should also be made to the Guidance Notes on the Application of s.11 Access to Justice Act 1999 issued by the Senior Costs Judge set out in volume 1 of the White Book, at paragraph 48.14.9 and following, which were issued following Gunn.
5. It is sufficient for the purpose of this appeal to refer to the following provisions. Paragraph 10(2) of the Costs Regulations provides that the receiving party under a section 11(1) costs order may, within 3 months after the order is made, request a hearing to determine the costs payable to him. A 'section 11(1) costs order' means a costs order against a client where cost protection applies, and 'cost protection' means the limit on costs awarded against an individual who receives funded services set out in section 11(1) of the Act – paragraph 2 of the Regulations. Paragraph 10(3)(c) provides that, if the receiving party is seeking a costs order against the Commission, his request under paragraph 10(2) shall be accompanied by a notice that he is so seeking. Paragraph 5 of the Cost Protection Regulations provides for the making of orders against the Commission. By paragraph 5(3) an order may only be made if, inter alia, the non-funded party (called the receiving party in the Costs Regulations) has made a request under paragraph 10(2) of the Costs Regulations within 3 months of the making of the section 11(1) costs order. So that reinforces paragraph 10(2) and 10(3)(c) of the Costs Regulations. In Gunn Lord Phillips stated at paragraph 31 (ii) :

"We take this opportunity to emphasise a fact that we understand is not generally appreciated. The three-month time limit for seeking an order against the commission is mandatory – there is no power to extend it."

Paragraph 5(3)(b) of the Cost Protection Regulations now includes the words "unless there is a good reason for the delay". But this means of escape from the 3 month requirement only applies where the application for funded services was made on or after 3 December 2001. That was not the case here.

6. It was also made clear in Gunn that the power to make an order is to be exercised in relation to proceedings in the Court of Appeal, High Court and County Court by a costs judge or a district judge. That is the effect of paragraph 10(10) of the Costs Regulations and paragraph 5(3A) of the Cost Protection Regulations.
7. It was not until 18 December 2007 that an application was issued on behalf of the Bank for (1) a hearing to determine the costs payable by Mrs Iqbal to the Bank in respect of the proceedings in the Court of Appeal, and (2) an order that those costs be paid by the Commission. The level of judge specified on the application was costs judge. The application followed the Bank's success at the re-trial, and it is likely that the costs question had been held in abeyance in the meanwhile. On the following day, 19 December 2007, an application was issued on behalf of the Bank for a High Court Judge to assess Mrs Iqbal's liability for the costs of the appeal at nil or such figure as the court thought fit. These applications appear to reflect paragraphs 18 and 19 of the Court of Appeal's order. On 9 April 2008 Sullivan J. made an order on the application of 19 December 2007 that all matters arising under paragraph 19 of the order should be referred to Master Rogers, he being the costs judge to whom the application of 18 December 2007 had been assigned.
8. On 28 January 2008 the Commission had issued an application for the determination of a preliminary issue whether the Bank's application of 18 December 2007 was out of time because the 3 month period was to be measured from the date of the Court of Appeal's order. It was this issue that Master Rogers determined on 5 September 2008 against the Bank. He also determined that the application of 19 December 2007 was likewise out of time. Master Rogers held that because Mrs Iqbal's original funding certificate was granted on 21 August 1996 and so the application for funding must have been prior to 3 December 2001 the court's discretion to extend the 3 months period brought in by an amendment to paragraph 5(3)(b) of the Cost Protection Regulations was not available. The Master held that paragraph 19 did not extend the period, or defer its commencement.
9. We have been referred to the transcript of the hearing in the Court of Appeal on 29 July 2004. The judgment of the court was first handed down. There was then a discussion of the draft order which had been prepared by counsel for the Bank. It appears from pages 6 and 7 of the transcript that counsel was unaware of the designation of a costs judge under the Regulation and may have used an out-of-date precedent. But because of the poor quality of the recording and an incomplete transcript that cannot be certain. Lord Phillips (who is not identified, but was presiding) referred to the designation of a costs judge. On page 10 the discussion moved to what became paragraph 19 of the Order. Lord Phillips said :

"I am not sure about [19]. Again, I think this is something for the costs judge."

Counsel replied :

"The Community Legal Services Costs Protection Regulations provide that if there is a shortfall arising from the assessment under section 11, you can, within a period (I think it is a month – three months) you can then apply for that shortfall to be met by the Legal Services Commission and all that 23 is doing is seeking to preserve that."

Lord Phillips :

"I see. Very well, (inaudible)."

I note that counsel evidently intended that the 3 month limitation should apply to paragraph 19, but may have thought it might run from the determination that there was a shortfall.

10. Mr Martin Farber (who did not appear in the Court of Appeal) submitted on behalf of the Bank that the intention of paragraph 19 was to provide an alternative route to that provided by paragraph 18 by enabling the Bank to apply to a High Court Judge instead of a costs judge. I am very doubtful if that was the intention of the Court of Appeal. Lord Phillips stated that it should be a costs judge. Counsel's remark which followed did not deal with that. However, I have to deal with the order as it stands. Mr Farber submitted that in the circumstances that there was going to be a re-trial the intention was to give the Bank the option of applying to a High Court Judge, and that the 3 month period would only begin to run when he had made an assessment of what was recoverable from Mrs Iqbal and found a shortfall. I do not consider that it is possible to construe the paragraph in that way. It does not say that. If it had been sought to secure such an unusual provision, it would have been necessary to spell out fully what was intended in the draft and to persuade the Court of Appeal there was power to make such an order and that it was appropriate. On the contrary, counsel suggested to the Court of Appeal that paragraph 19 simply sought to preserve the position under the Regulations. What is clear is that paragraph 19 does nothing, either expressly or by necessary implication, to somehow extend the 3 month period or to defer its commencement. Mr Farber rightly accepted that paragraph 18 was a section 11(1) order. The making of such an order was a pre-condition of the Bank's right to apply for an order against the Commission. This right was provided by the Regulations and could only be exercised in accordance with the Regulations. That included the 3 month window in which to apply which runs from the section 11(1) order. Mr Farber also sought to rely on the wide discretion as to costs provided by 51(1) of the Supreme Court Act 1981. That cannot affect the provisions of the Regulations. The section begins "Subject to the provisions of this or any other enactment and to rules of court".
11. The decision of Master Rogers was correct.