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

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
LEEDS DISTRICT REGISTRY

		The Court House Oxford Row Leeds LS1 3BG
		4th April 2011

Judge Behrens :

1 Introduction

1. This is a dispute between two public bodies as to whether Leeds City Council ("the Council") can recover against the Legal Services Commission ("LSC") the costs it incurred in successfully defending in the House of Lords an appeal by Mr Price at a time when he had the benefit of funding from the LSC. An order for costs was made on 11^th May 2006.
2. The Council contends that it can rely on a Certificate from the Clerk and Taxing Officer of the Judicial Office of the House of Lords and an order that I made in this Court on 16^th October 2009.
3. The certificate is dated 15^th February 2007 and purports to tax the costs in the sum of £84,138.94. Under the order of 16^th October 2009 the order of 11^th May 2006 was made an order of the High Court.
4. The LSC contends that the order of 16^th October 2009 should never have been made. The Council failed to comply with the relevant procedure with the result that LSC had no notice of the application for costs against it. In the result the certificate of 15^th February 2007 is not a determination that LSC should pay the Council's costs. Accordingly by this application LSC seeks to set aside the order of 16^th October 2009.

2 The Statutory Framework

5. Before considering and analysing the detailed facts of the case it is, I think, useful to set out the statutory provisions relevant to making orders for costs against the LSC. The relevant provisions are to be found in section 11 of the Access to Justice Act 1999 as supplemented by two sets of regulations - The Community Legal Service (Costs) Regulations 2000 and The Community Legal Service (Costs Protection) Regulations 2000. The procedure for the taxation of costs incurred in the House of Lords was, at the material time governed by a Practice Direction dated 27^th November 2003.

2.1 The Access to Justice Act 1999

6. Section 11 of the 1999 Act provides:

'(1) Except in prescribed circumstances, costs ordered against an individual in relation to any proceedings or part of proceedings funded for him shall not exceed the amount (if any) which is a reasonable one for him to pay having regard to all the circumstances including--(a) the financial resources of all parties to the proceedings, and (b) their conduct in connection with the dispute to which the proceedings relate; and for this purpose proceedings, or a part of proceedings, are funded for an individual if services relating to the proceedings or part are funded for him by the Commission as part of the Community Legal Service.

(2) In assessing for the purposes of subsection (1) the financial resources of an individual for whom services are funded by the Commission as part of the Community Legal Service, his clothes and household furniture and the tools and implements of his trade shall not be taken into account, except so far as may be prescribed.

(3) Subject to subsections (1) and (2), regulations may make provision about costs in relation to proceedings in which services are funded by the Commission for any of the parties as part of the Community Legal Service.

(4) The regulations may, in particular, make provision—

(a) specifying the principles to be applied in determining the amount of any costs which may be awarded against a party for whom services are funded by the Commission as part of the Community Legal Service,

(b) limiting the circumstances in which, or extent to which, an order for costs may be enforced against such a party,

(c) as to the cases in which, and extent to which, such a party may be required to give security for costs and the manner in which it is to be given,

(d) requiring the payment by the Commission of the whole or part of any costs incurred by a party for whom services are not funded by the Commission as part of the Community Legal Service,

(e) specifying the principles to be applied in determining the amount of any costs which may be awarded to a party for whom services are so funded,

(f) requiring the payment to the Commission, or the person or body by which the services were provided, of the whole or part of any sum awarded by way of costs to such a party, and

(g) as to the court, tribunal or other person or body by whom the amount of any costs is to be determined and the extent to which any determination of that amount is to be final.'

7. Thus it can be seen that section 11 of the Act is dealing with a number of situations. Under subsections (1) and (2) it is dealing the liability of the assisted party in respect of an order for costs. Under subsection (3) and (4) it is dealing with the scope of regulations made under the Act. It is plain from subsection (4)(d) that these include the potential liability of the LSC to pay the costs of the unassisted party (such as the Council in this case).

2.2 The Community Legal Service (Costs Protection) Regulations 2000 ("the Costs Protection Regulations")

8. Regulation 5 of the cost protection regulations provides:

'(1) The following paragraphs of this regulation apply where: (a) funded services are provided to a client in relation to proceedings; (b) those proceedings are finally decided in favour of a non-funded party; and (c) cost protection applies.

(2) The court may, subject to the following paragraphs of this regulation, make an order for the payment by the Commission to the non-funded party of the whole or any part of the costs incurred by him in the proceedings (other than any costs that the client is required to pay under a section 11(1) costs order).

(3) An order under paragraph (2) may only be made if all the conditions set out in sub-paragraphs (a), (b), (c) and (d) are satisfied:

(a) a section 11(1) costs order is made against the client in the proceedings, and the amount (if any) which the client is required to pay under that costs order is less than the amount of the full costs;

(b) [unless there is good reason for the delay] the non-funded party makes a request under regulation 10(2) of the Community Legal Service (Costs) Regulations 2000 within three months of the making of the section 11(1) costs order;

(c) … and

(d) in any case, the court is satisfied that it is just and equitable in the circumstances that provision for the costs should be made out of public funds º

(3A) An order under paragraph (2) may be made--(a) in relation to proceedings in the House of Lords, by the Clerk to the Parliaments; ….

(4) Where the client receives funded services in connection with part only of the proceedings, the reference in paragraph (2) to the costs incurred by the non-funded party in the relevant proceedings shall be construed as a reference to so much of those costs as is attributable to the part of the proceedings which are funded proceedings.

(5…

(6) …

(7) ….

(8) …

Regulation 7 provides:

'(1) No order to pay costs in favour of a non-funded party shall be made against the Commission in respect of funded proceedings except in accordance with these Regulations, and any costs to be paid under such an order shall be paid out of the Community Legal Service Fund.

(2) Nothing in these Regulations shall be construed, in relation to proceedings where one of more parties are receiving, or have received, funded services, as: (a) requiring a court to make a costs order where it would not otherwise have made a costs order; or (b) affecting the court's power to make a wasted costs order against a legal representative.'

2.3 The Community Legal Service (Costs) Regulations 2000 ("the Costs Regulations")

9. The procedures for ordering costs against client and the LSC are set out in regulations 9 and 10 of the costs regulations. Regulation 9 deals with the procedure for making a section 11(1) costs order against the assisted party. Regulation 10 deals with the position as against the LSC.

'9.--(1) Where the court is considering whether to make a section 11(1) costs order, it shall consider whether, but for cost protection, it would have made a costs order against the client and, if so, whether it would, on making the costs order, have specified the amount to be paid under that order.

(2) If the court considers that it would have made a costs order against the client, but that it would not have specified the amount to be paid under it, the court shall, when making the section 11(1) costs order: (a) specify the amount (if any) that the client is to pay under that order if, but only if: (i) it considers that it has sufficient information before it to decide what amount is, in that case, a reasonable amount for the client to pay, in accordance with section 11(1) of the Act; and (ii) it is satisfied that, if it were to determine the full costs at that time, they would exceed the amount referred to in sub-paragraph (i); (b) otherwise, it shall not specify the amount the client is to pay under the costs order.

(3) If the court considers that it would have made a costs order against the client, and that it would have specified the amount to be paid under it, the court shall, when making the section 11(1) costs order: (a) specify the amount (if any) that the client is to pay under that order if, but only if, it considers that it has sufficient information before it to decide what amount is, in that case, a reasonable amount for the client to pay, in accordance with section 11(1) of the Act; (b) otherwise, it shall not specify the amount the client is to pay under the costs order.

(4) Any order made under paragraph (3) shall state the amount of the full costs.

(5) The amount (if any) to be paid by the client under an order made under paragraph (2)(b) or paragraph (3)(b), and any application for a costs order against the Commission, shall be determined in accordance with regulation 10, and at any such determination following an order made under paragraph (2)(b), the amount of the full costs shall also be assessed.

(6) Where the court makes a section 11(1) costs order that does not specify the amount which the client is to pay under it, it may also make findings of fact, as to the parties' conduct in the proceedings or otherwise, relevant to the determination of that amount, and those findings shall be taken into consideration in that determination.

10.--(1) The following paragraphs of this regulation apply where the amount to be paid under a section 11(1) costs order, or an application for a costs order against the Commission, is to be determined under this regulation by virtue of regulation 9(5).

(2) The receiving party may, within three months after a section 11(1) costs order is made, request a hearing to determine the costs payable to him.

(3) A request under paragraph (2) shall be accompanied by: (a) if the section 11(1) costs order does not state the full costs, the receiving party's bill of costs, which shall comply with any requirements of relevant rules of court relating to the form and content of a bill of costs where the court is assessing a party's costs; (b) … a statement of resources; and (c) if the receiving party is seeking, or, subject to the determination of the amount to be paid under the section 11(1) costs order, may seek, a costs order against the Commission, written notice to that effect.

(3A) …

(4) The receiving party shall file the documents referred to in paragraph (3) with the court and at the same time serve copies of them: (a) on the client, if a determination of costs payable under section 11(1) of the Act is sought; and (b) on the Regional Director, if notice has been given under paragraph (3)(c).

(5) Where documents are served on the client under paragraph (4)(a), the client shall make a statement of resources.

(6) …

(7) …

(8) …

(9) ….

(10) The court's functions under this regulation may be exercised: (a) in relation to proceedings in the House of Lords, by the Clerk to the Parliaments; …'

10. A number of points can be made about the regulations:

1. The Court has no power to award costs against the LSC except in accordance with the Regulations. This is clear from Regulation 7 of the Costs Protection Regulations.

2. Before there can be an order against LSC each of the four conditions set out in regulation 5(3) of the Costs Protection Regulations must be satisfied. For present purposes condition (b) is relevant. Unless there is a good reason there must be a request under regulation 10(2) of the Costs Regulations within 3 months of the making of the section 11(1) costs order. The words in square brackets, (which give the court power to extend the 3 month limit where there is a good reason) were added by amendment.

3. Where the receiving party is seeking an order against the LSC the regulation 10(2) request must include written notice to that effect.

4. Under regulation 10(4) the receiving party is required to serve copies of the documents (including the written notice) on the Regional Director if a notice is given in accordance with regulation 10(3)(c)

5. The effect of the scheme (prior to the amendment to regulation 5(3)(b) of the Costs Protection Regulations) was considered in detail in the reserved judgment in the Court of Appeal in R v Secretary of State for the Home Department ex p Gunn [2001] EWCA Civ 891. A number of points emerge from that judgment:

1) The new regulatory scheme was not compatible with the old practice whereby the trial courts determined whether the costs of the unassisted party were to be paid by the LSC.

2) The new scheme involved a two stage process. The first stage involves the trial court dealing with the substance of the dispute. Its role is to decide whether to make an order for costs against a funded litigant; to decide whether it is in a position to specify the amount (if any) to be paid by the funded litigant; to make a costs order against the funded litigant which either specifies the amount to be paid by the funded litigant or does not so specify. [See paragraph 28 of the judgment and regulations 9(1) to 9(4) of the Costs Regulations]

3) Stage 2 consists of the procedure to be adopted to ascertain the amount the funded person is to pay where the trial court has made an .order which does not specify the amount. It also includes the procedure for determining whether an order for costs should be made against the LSC. [See paragraph 29 of the judgment]

4) The determination of whether to make an order against the LSC is carried out by the Clerk to Parliament in a case determined in the House of Lords. No other Court or official has jurisdiction. [see paragraph 34 of the judgment].

2.4 House of Lords – Practice Directions applicable to Judicial Taxations in the House of Lords

11. The Practice Direction sets out a comprehensive code for judicial taxations in the House of Lords. For present purposes paragraphs 4 to 6 are relevant though I was also referred to paragraph 13 and 14 during the course of the hearing:
12. Paragraph 4 of the Practice Direction is expressly concerned with orders under section 11 of the Access to Justice Act 1999. It provides:

4.1 Any costs ordered to be paid by a LSC funded party must not exceed the amount which is a reasonable one for them to pay having regard to all the circumstances including the financial resources of all the parties to the proceedings and their conduct in connection with the dispute to which the proceedings relate (Access to justice Act, section 11)

4.2 Costs which were incurred by one party during a period when another party was LSC funded and which are not recoverable from the LSC funded party only because of section 11 of the Access to Justice Act 1999may, in certain circumstances be payable by the LSC itself.

4.3 The Community Legal Service (Costs) Regulations 2000 and The Community Legal Service (Costs Protection) Regulations 2000 are regulations made under section 11 of the Access to Justice Act 1999and provide a code governing orders for costs against LSC funded parties an against the LSC.

4.4 A party who seeks costs against the LSC under section 11 of the Access to Justice Act 1999, or who may do so, depending on the amount of costs payable by the LSC funded party must lodge with his bill of costs copies of any documents (including a statement of resources and any notice served by him on the LSC) which he has served upon others in compliance with the regulations

4.5 Within 21 days of being served with a bill of costs to which section 11 of the Access to Justice Act 1999 applies, a party who is or was LSC funded during the period covered by the bill must respond by lodging in the Judicial Office a statement of resources and serving a copy of it on the receiving party and where relevant, on the Regional Director of the LSC.

4.6 The Regional Director of the LSC may appear at any hearing at which a costs order may be made against the LSC.

13. Paragraph 5 provides for the Bill of costs to be lodged within 3 months of the date on which the final judgment in the appeal is delivered.
14. Paragraph 6 deals with extensions of time whether made before or after the 3 month period for filing the Bill of costs. Paragraph 6.2 provides:

In deciding whether to grant applications [for extensions of time] the Taxing Officer will take into account all the circumstances, including:

(a) the interests of the administration of justice;

(b) whether the failure to lodge in time was intentional;

(c) whether there is a good explanation for the failure to lodge in time;

(d) the effect which the delay has on each party; and

(e) the effect which the granting of an extension of time would have on each party.

15. Paragraph 13 of the Practice Direction refers to a provisional taxation procedure for cases involving public funding. In paragraph 13.2 it makes clear that bills to be taxed between the parties are not usually dealt with by provisional taxation.
16. Paragraph 14 of the Practice Direction sets out the procedure for the taxation. It provides for the lodging of points of dispute, and for the attendance at taxation hearings.
17. It will thus be seen that the criteria for extending time for the taxation of a bill under paragraph 6 are not the same as condition (b) of regulation 5(3). Under paragraph 6 the clerk is required to take all circumstances into account in deciding whether to extend time. Under regulation 5(3) the only matter relevant to extending the 3 month limit is whether there is a good reason for not making the request under regulation 10(2) within the 3 month period.

3 The Facts and Analysis

3.1 The Order of 11^th May 2006

18. There is little if any dispute as to the relevant facts. On 11^th May 2006 the House of Lords made an order which included:

That the appellants do pay or cause to be paid to the Respondents their costs in this House, the amount thereof, if any, to be paid by the appellants and to be paid out of the Community Legal Service Fund to be certified by the Clerk to Parliament in accordance with section 11 of the Access to Justice Act 1999

19. In the light of the decision in Gunn it is plain that this is an order by the trial court under stage 1. It is an order under regulation 9(3) of the Costs Protection Regulations which does not specify the amount that the funded person is required to pay. It is not and does not purport to be an order that the Council's costs in the House are to be paid by the LSC. As it points out such costs (if any) are to be certified by the Clerk to Parliament. In accordance with regulation 5(2) of the Costs Protection Regulations such an order would be "an order for payment by the LSC to the Council of the whole or any part of the costs incurred by the Council in the House of Lords".

3.2 The Submission of the Bill of Costs

20. The 3 month period specified in the regulations and in paragraph 5 of the Practice Direction expired on 11^th August 2006. No bill of costs was submitted by that date. On 15^th September 2006 the costs draftsman instructed by the Council wrote to the Judicial Taxing Officer informing him he was arranging for the bill of costs to be sent to him. It noted that that the 3 month period had been exceeded "slightly" and stated that he would provide a formal request for an extension of time for the submission of the bill.
21. To my mind this request would only be for an extension under paragraph 6(2) of the Practice Direction. It does not contain any explanation for the delay.
22. The precise date on which the costs draftsman submitted the Bill of Costs to the Judicial Taxing Office is not clear. It was received on 3^rd October 2006 and it may be assumed to have been sent shortly before that date. In the undated covering letter the costs draftsman requested an extension of time for lodging the bill without penalty. The letter gives no explanation for the delay.
23. A copy of the Bill was served on the solicitors for the assisted party. However no copy was served on the Regional Director in accordance with regulation 10(4)(b) of the Costs Regulations.
24. There was no separate notice under regulation 10(3)(c) of the Costs Regulations that the Council were seeking a costs order against the LSC. However my attention has been drawn to the front of the Bill of Costs which contains the following:

Respondent's bill of costs to be Certified by the Clerk of the Parliaments in Accordance with section 11 of the Access to Justice Act 1999 to be paid by the Appellants out of the Community Legal Service Fund.

25. To my mind this is not a notice under regulation 10(3)(c). First it does not purport to be a notice. More importantly it does not purport to state that the costs are to be paid by the LSC. It states that the costs are to be paid by "the Appellants" – that is to say the assisted persons. Whilst it also says that the Appellants are to pay the costs out of the Community Legal Service Fund it does not explain how they are going to do it. They have not control over the fund.
26. In my view therefore there was no valid notice under regulation 10(3)(c). Furthermore, as already noted, there was no service on the Regional Director in accordance with regulation 10(4)(b). Thus the LSC took no part in the assessment.

3.3 Assessment of the Bill

27. On 25^th January 2007 the Judicial Taxing Officer returned the Bill of Costs which had been provisionally taxed – presumably in accordance with paragraph 13 of the Practice Direction. It is to be inferred that the Taxing Clerk had granted any necessary extension of time under paragraph 6. There was no hearing before the Taxing Clerk.
28. The Council accepted the figures in the provisional taxation and thus on 15^th February 2007 the Taxing Clerk issued a certificate in the following form:

Leeds City Council (Respondents) v Price and others and others (FC)(Appellants)

I hereby certify that having examined and taxed the Bill of Costs, Charges and Expenses incurred by the respondents in respect of the said appeal, I have taxed the same in accordance with the Access to Justice Act 1999 at the following:

... £84,138.94

29. It is to be noted that there is nothing in the heading to suggest that the LSC are parties to the application. There is equally nothing in the order to suggest that the sum of £84,138.94 is payable by the LSC. It does not follow the wording of regulation 5(2) of the Costs Protection Regulations and provide specifically for payment of that sum by the LSC. It simply refers to the taxation being in accordance with the Access to Justice Act 1999. For reasons already explained that description is of little assistance.
30. Notwithstanding the wording Mr Friston invites me to construe the order as if it were an order against the LSC. He seeks to pray in aid the front of the Bill as an aid to construction. I have considerable doubts as to whether the front of the Bill can be so used. For reasons I have given however I do not think that the front of the Bill is of any assistance. It seeks an order that the moneys are payable by the Appellants rather than the LSC.
31. To my mind it is more relevant that no notice was given under regulation 10(3)(c) and the LSC was not served in accordance with regulation 10(4) of the Costs Regulations. They were never parties to the taxation. In those circumstances it seems to me that there is no reason to construe the order as if it were an order under regulation 5(2) of the Costs Protection Regulations requiring the LSC to pay the whole or any part of the Council's costs.

3.4 Correspondence between February 2007 and September 2009

32. It is not necessary to set out the whole of the correspondence between the parties following the Certificate of 15^th February 2007. It may be summarised:

1. On 2^nd April 2007 the Council sent a copy of the Certificate to the LSC and asked for payment of the £84,138.94 "as a matter of urgency". On 27^th April 2007 the LSC responded by pointing out that this was the first communication it had received. It alleged that the Council had not followed the required formalities.

2. On 4^th December 2008 the LSC repeated that the Council had not complied with the correct or any formalities and asserted that the Bill of Costs was not valid against the LSC.

3. On 30^th January 2009 the Council threatened to apply through the High Court to enforce the order. On 18^th March 2009 the LSC asserted that as the Council had not complied with the formalities set out in the Costs Regulations and the Costs Protection Regulations the order was a nullity.

4. On 16^th September 2009 the LSC set out the formalities which had not been complied with. The letter made three points:

•    A failure to serve the LSC at the same time as making a request to the Clerk to the Parliaments. Reference was made to the Costs Regulations.

•    The Order of 11^th May 2006 did not require the LSC to pay.

•    The Certificate of 15^th February 2007 does not order the LSC to pay. In those circumstances the LSC did not understand how enforcement procedures could be contemplated.

3.5 Enforcement

33. On 24^th September 2009 the Council wrote to the Court pursuant to paragraph 13(3) of Practice Direction 40B of the CPR enclosing a draft order. The application was made without notice and enclosed only the Orders of 11^th May 2006 and 15^th February 2007.
34. The application was placed before me as part of my box-work. It may be that I should have looked at it more closely before approving the order as drafted. However the documents placed before me gave no indication of the dispute between the parties. In particular I was not given the correspondence or even a summary of the correspondence that had taken place between the parties between 2007 and 2009. If, for example, I had been shown the letter from the LSC dated 16^th September 2009 (only 8 days before the application) I have little doubt that I would have refused to deal with the application on a "without notice" basis and would have listed it for a hearing.
35. The order is in two parts. Under paragraph 1 the Order of 11^th May 2006 was made an order of the High Court. Under paragraph 2:

The costs of this application are summarily assessed in the sum of £84,139.84 and to be paid by the [LSC] …

36. Having now had the benefit of full argument including a consideration of the orders that have been made and the relevant statutory provisions I would make the following comments on the order I made on 16^th October 2009:

1. In my view it was a serious dereliction of the Council's duty of disclosure not to inform me of the dispute as to the enforceability of the order. This was a "without notice" application. In those circumstances the Council, as applicant, came under a duty of full and frank disclosure. It is, to my mind, obvious that that duty meant that the dispute between the parties should have been drawn to my attention when making the application.

2. For the reasons set out above the order of 11^th May 2006 was not an order requiring the LSC to pay the costs of the Council. It follows that paragraph 1 of the order of 16^th October 2009 did not have that effect either. Thus paragraph 1 imposed no enforceable liability on the LSC.

3. Paragraph 2 of the order, however, did impose an enforceable liability on the LSC. However that liability was in respect of the costs of the application of 24^th September 2009. It was common ground at the hearing that such costs should have been assessed in a modest sum – probably less than £200. There could be no possible basis in assessing them at the sum in the 15^th February 2007 Certificate.

4. If the Council had wanted an enforceable order in respect of the £84,139.93 they might have sought to make the Certificate of 15^th February 2007 enforceable as a High Court order. For reasons set out above I do not think that would have succeeded because I do not think that order was an order under regulation 5(2) of the Costs Protection Regulations. If, contrary to my view, the Certificate was an order under regulation 5(2) the question would have arisen as to whether it should have been made an order of the High Court. I have not heard argument on the extent of any discretion in making such an order. If there was such a discretion I would unhesitatingly have refused to make such an order in a case where, as here, the order was irregularly obtained for the fundamental reason that the LSC had not been served with the application and knew nothing about it.

3.6 Subsequent events

37. It is not necessary to set out the events following the making of order of 16^th October 2009. There was a significant delay on both sides. Eventually on 9^th February 2011 the LSC made an application to set aside the order of 16^th October 2009. The application was supported by a witness statement from Mr Rimer and opposed by a witness statement from Ms Blackmore.
38. It came before me on 24^th March at a hearing lasting some 2 hours following which I reserved judgment.

4 Conclusions

39. I have set out my conclusions in the preceding section. In summary:

1. The 11^th May 2006 was not an order under regulation 5(2) requiring the LSC to pay the Council's costs.

2. The 15^th February 2007 Certificate was also not an order under regulation 5(2) requiring the LSC to pay the Council's costs.

3. Paragraph 1 of the order of 16^th October 2009 does not impose any liability on the LSC because, as already noted, the order of 11^th May 2006 imposed no such liability.

4. Paragraph 2 of the order of 16^th October 2009 is plainly wrong. As the order of 11^th May 2006 imposed no liability on the LSC there was no basis for any order for costs against the LSC.

5. The order of 16^th October 2009 was obtained as a result of a without notice application which did not contain full and frank disclosure by the Council of the dispute between the Council and the LSC. Even though there has clearly been some delay since October 2009 in my view the appropriate order is to set aside the order in its entirety. It follows that the application succeeds. In my provisional view (and subject to any argument that may be raised) the Council should pay the LSC's costs of the application.