Rayner v The Lord Chancellor

The Respondent to this appeal, Mr Nicholas Rayner, was the defendant in an action brought against him by Mrs Kumari Murphy, who became his carer after he suffered a serious stroke. Part of her claim in the action was for a share in his flat and in his investments, title to which was vested in two off-shore companies which he owned and controlled and which were accordingly also defendants in the action. Mr Rayner counterclaimed for money and other valuables misappropriated by Mrs Murphy.

Mrs Murphy’s legal representation was – subject to the hiatus referred to below – funded by the Legal Services Commission (“the Commission”) under Part I of the Access to Justice Act 1999 (“the 1999 Act”).

The claim and counterclaim were heard by Mr Jeremy Cousins QC, sitting as a Deputy High Court Judge, in the Chancery Division. The trial started on 19 July 2010, was adjourned at the end of the month and was resumed in September, with a further hearing in November. By a judgment handed down on 18 January 2011 Mrs Murphy’s claim was dismissed and an account was ordered: following the taking of that account she was ordered to pay Mr Rayner just under £1m. Mr Rayner was awarded the costs of the proceedings on the indemnity basis. There is thought to be no realistic prospect of recovery of any substantial sums from Mrs Murphy.

There are two features of the legal aid system under the 1999 Act, and the predecessor legislation at least as far back as the Legal Aid Act 1964, which are central to this appeal. In summary:

The regime established by the 1999 Act was altered by the Legal Aid Sentencing and Punishment of Offenders Act 2012, and the 2000 Regulations have been replaced with effect from 1 April 2013 by the Civil Legal Aid (Costs) Regulations 2013 (though it appears that the replacement provisions are in substantially identical terms). At the same time the Commission was abolished (see section 38 of the 2012 Act), with responsibility for civil legal aid passing to the Lord Chancellor (who discharges his functions through the Legal Aid Agency). All the Commission’s surviving liabilities have been transferred to the Lord Chancellor: see paragraph 7 of Schedule 4 to the 2012 Act.

Mr Rayner made a claim against the Commission under regulation 5 of the 2000 Regulations for the totality of the costs awarded against Mrs Murphy: the sum claimed is over £700,000. The Lord Chancellor accepts that Mr Rayner is in principle entitled to an order, but he does not accept liability for the full amount claimed. The issue arises from the fact that there was a period in the course of the proceedings during which Mrs Murphy was represented by solicitors who were not named in the funding certificate issued by the Commission. The facts can be sufficiently summarised as follows:

On 18 July 2011 Master Haworth, sitting in the Senior Courts Costs Office, ruled that Mrs Murphy did not have cost protection during the hiatus period: I refer to this as “the 2011 decision”. I need not set out the Master’s reasoning in detail, but the essential point was that “during [the hiatus] period … [Mrs Murphy] did not have the benefit of funded proceedings” because she had ceased to instruct Ismail & Co, who were the only solicitors whose work the Commission had agreed to fund.

The Commission contended, and the Lord Chancellor now contends, that it follows from the 2011 decision that no order could properly be made against it under regulation 5 in respect of the costs incurred by Mr Rayner during the hiatus period: since the proceedings were not funded during that period, such costs were not “attributable to [a] part of the proceedings which [were] funded proceedings”. Mr Rayner disputes this: his case is that the costs incurred during that period were “attributable to” the earlier stages in the proceedings, during which Mrs Murphy was funded, because they had to be incurred in response to the steps taken by her in that period. In a nutshell, the Lord Chancellor’s case is that the relevant criterion is purely temporal – costs are attributable to the period of the proceedings when they were incurred – whereas Mr Rayner’s case is that the criterion is one of causation – costs are attributable to the part of the proceedings which resulted in them being incurred.

That issue came before Master Haworth on 28 February 2013, in the context of an application by Mr Rayner for disclosure of papers held by the Commission about the work funded by it: this was said to be necessary in order to enable him to identify to what extent his own costs were “attributable” to the funded part of the proceedings. (There was also an issue about the extent to which costs claimed by him had in fact been incurred by the corporate defendants; but that is not before us.) The Master upheld the Commission’s contention. His order records his finding that:

“[Mr Rayner] is not entitled to recover any costs incurred by him during [the hiatus period] when (as has already been determined [i.e. by the 2011 decision]) [Mrs Murphy] did not have ‘costs protection’”.

Mr Rayner appealed against that decision, with the permission of the Master. The appeal was heard by Mr Nicholas Strauss QC, sitting as a Deputy High Court Judge, on 10 October 2013. At the hearing Mr Rayner was represented by Mrs Teresa Rosen Peacocke and the Lord Chancellor by Mr John Gimlette; but when, following the hearing, the Judge asked for further written submissions on the part of the case with which we are concerned the submissions on behalf of the Lord Chancellor were drafted by Mr Guy Mansfield QC. The same counsel appeared before us.

Mr Strauss handed down a reserved judgment on 2 December 2013 ([2013] EWHC 3878 (Ch)), now reported at [2014] 1 WLR 677. He allowed Mr Rayner’s appeal on the issue of principle, though he held that it remained necessary for him to show in respect of any costs incurred during the hiatus period that they “were caused by the [Commission’s] funding of the earlier stages of the proceedings” and that that issue would require to be decided by the Costs Judge as part of his detailed assessment. He summarised his decision near the start of his judgment, saying at para. 9 (p. 680 H):

“I hold that Mr. Rayner's claim is not limited to the periods in which Mrs. Murphy was in receipt of funding. The effect of para. 5(4) is that Mr. Rayner is entitled to claim all costs, including those incurred in the period of the hiatus in funding, which are attributable to (in the sense of caused by) the part of the proceedings for which the claimant received funding.”

Para. 2 of his order reads (so far as material):

“In relation to the … issue … whether, under regulation 5 (4) of the Community Legal Service (Costs Protection) Regulations 2000 (as amended), the costs ‘attributable to the part of the proceedings which are funded proceedings’ are limited to those costs which are incurred by the non-funded party during the period in which the funded party was in receipt of funded services:

(a)

The appeal is allowed in that it is determined that the costs are not so limited.

… .”

(The remainder of para. 2 directs the Commission to make the disclosure sought by Mr Rayner.)

The Lord Chancellor appeals against the decision of Mr Strauss with the leave of Christopher Clarke LJ given on 24 April 2014.

In addition to that appeal there is, at least potentially, an application before us from Mrs Peacocke. I explain it more fully at paras. 57-63 below; but in bare outline it arises as follows. At a very late stage in the proceedings before the Judge Mr Rayner sought permission to appeal out of time against Master Haworth’s 2011 decision. The decision on the primary appeal meant that the Judge did not have to reach a decision on that application, and he declined to do so. By an Amended Respondent’s Notice Mr Rayner belatedly applied for permission to appeal against that refusal. That application came before Christopher Clarke LJ on the papers on 6 August 2014. He refused permission. He also directed that if the application were to be renewed it should be decided at the full hearing, with the appeal to follow if permission were granted. No formal renewal application has in fact been made, but Mrs Peacocke has made it clear in her skeleton argument that she wishes to pursue the application.

The relevant provisions are distributed between the 1999 Act and the 2000 Regulations in a manner which is rather clumsy and involves a good deal of cross-reference. (The predecessor provisions were rather more straightforwardly arranged, but there is – subject to one submission which I will need to consider in due course – no reason to suppose that it was intended that the 1999 Act should substantially alter the law in the respects with which we are concerned.) Although the primary issue before us concerns the liability of the Commission, it is convenient to start with the provisions about cost protection.

Section 11 (1) of the 1999 Act reads as follows:

“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 the 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.”

At the risk of spelling out what is known to every civil practitioner, I should say a word about how that provision operates in practice. In the typical case the funded party is practically impecunious – otherwise they would not have received funding in the first place – and the Court does not normally regard it as reasonable to make any order for immediate payment of the non-funded party’s costs. But there will be cases where their financial circumstances have improved in the meantime; and in such a case an order may be made. Provision is normally also made for the possibility of their financial circumstances changing in the future – what used to be called a “football pools order”.

More detailed provision in relation to cost protection is made in regulation 3 of the 2000 Regulations. For present purposes I need only refer to paragraphs (3) and (4), which read as follows:

“(3)

Subject to paragraph (4), cost protection shall apply only to costs incurred by the receiving party in relation to proceedings which, as regards the client, are funded proceedings, and:

(a)

where work is done before the issue of a certificate, cost protection shall (subject to paragraphs (2) and (5)) apply only to costs incurred after the issue of the certificate;

(b)

where funding is withdrawn by discharging the client's certificate, cost protection shall apply only to costs incurred before the date when funded services under the certificate ceased to be provided.

(4)

Where funding is withdrawn by revoking the client's certificate, cost protection shall not apply, either in respect of work done before or after the revocation.”

The phrase “funded proceedings” which appears in paragraph (3) is defined in regulation 2 (1) of the 2000 Regulations as “proceedings … in relation to which the client receives funded services or, as the case may be, that part of proceedings during which the client receives funded services”. “Funded services” is defined as “services which are provided directly for a client and funded for that client by the Commission as part of the Community Legal Service under sections 4-11 of the [1999] Act”.

The “certificate” referred to in both paragraphs is defined in regulation 2 (1) as “a certificate issued under the Funding Code certifying a decision to fund services for the client”. The Funding Code is a code issued by the Commission under sections 8 and 9 of the 1999 Act: Part C of the Code Procedures requires the certificate to specify the essential terms of the funding, including the identity of the solicitor supplying the funded services.

The liability of the Commission for the costs of a non-funded party is not dealt with in the 1999 Act but in regulation 5 of the 2000 Regulations, which reads (so far as material) as follows:

“Costs order against Commission

(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 a 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)

as regards costs incurred in a court of first instance, the proceedings were instituted by the client, the non-funded party is an individual, and the court is satisfied that the non-funded party will suffer financial hardship unless the order is made; 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.

(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)-(7) …”

A “section 11 (1) costs order”, as referred to in paragraph (2), is defined in regulation 2 (1) as “a costs order against a client where cost protection applies”. “Cost protection” is defined as “the limit on costs awarded against a client in section 11 (1) of the [1999] Act”.

Since the issue is one of pure law, it is most convenient to begin not with the judgments below but with the rival contentions of the parties. I take the Lord Chancellor’s case first.

The Lord Chancellor’s core submission is, as I have said, that the test of whether the costs of a non-funded party are “attributable to the part of the proceedings which are funded proceedings” is whether they were incurred during the period that the proceedings were funded – and in this case it has already been held, by the 2011 decision, that the proceedings were not funded during the hiatus period. Mr Mansfield submitted that that was the natural reading of the words as a matter of language and having regard to the scheme of the Regulations; but he also relied on a number of authorities.

So far as the language and the scheme of the Regulations are concerned, Mr Mansfield’s submissions can be summarised as follows:

I turn to the authorities on which Mr Mansfield relied. He referred us to S v S [1978] 1 WLR 11; Turner v Plasplugs Ltd [1996] 2 All ER 939; Burridge v Stafford [2000] 1 WLR 927; and Mohammadi v Shellpoint Trustees Ltd [2009] EWHC 1098 (Ch). However, he accepted that Turner did not assist him as directly as Burridge, and that Mohammadi, which is a decision of Briggs J at first instance, did not in any material respect take matters further. I will accordingly confine myself to S v S and Burridge.

S v S arose out of an application made by a wife for the custody of her children. At the material time the statute governing the provision of legal aid was the Legal Aid Act 1974. Under the 1974 Act legal aid was granted by the Law Society, out of the legal aid fund. The provisions entitling a successful non-assisted party to recover costs from the fund were contained in sections 13 (1) and 14 (5) of the Act. Section 13 (1) read:

“Where a party receives legal aid in connection with any proceedings between him and a party not receiving legal aid (in this and section 14 below referred to as ‘the unassisted party’) and those proceedings are finally decided in favour of the unassisted party, the court by which the proceedings are so decided may, subject to the provisions of this section, make an order for the payment to the unassisted party out of the legal aid fund of the whole or any part of the costs incurred by him in those proceedings.”

Section 14 (5) read:

“Where a party begins to receive legal aid in connection with any proceedings after those proceedings have been instituted, or ceases to receive legal aid before they are finally decided or otherwise receives legal aid in connection with part only of any proceedings, the reference in section 13 (1) above to the costs incurred by the unassisted party in those proceedings shall be construed as a reference to so much of those costs as is attributable to that part.”

It will be noted that as a matter of drafting section 14 (5) covers three situations – where legal aid is received after the start of proceedings; where it is discontinued before the end of proceedings; or where it is “otherwise” received “in connection with part only of any proceedings”. As regards the third situation, the drafting appears substantially identical to that of regulation 5 (4) of the 2000 Regulations. In fact, however, it seems to me that all three situations are simply variants of the same basic situation, namely where legal legal aid is received in connection with part only of proceedings – NB the word “otherwise” – and the operative provision of the section applies equally to each.

The husband was not legally aided, but the wife was granted legal aid on, literally, the eve of the hearing. The husband successfully resisted the application. It was not in dispute that he was entitled to an order under section 13 (1), but the issue was whether that order should cover counsel’s brief fees and the costs of pre-trial preparation incurred prior to the grant of legal aid. Latey J held that they should. He believed that “attributable to” must have been intended to mean something more than “during” (see p. 16H). His essential reasoning appears at p. 17 E-F, as follows:

“In this case what is at stake is the work done in preparation for what was the part of the proceedings in connection with which the mother received legal aid, namely, the hearing. To what was that work ‘attributable’? In the words of Chambers Twentieth Century Dictionary: To what was it ascribed, assigned, or considered as belonging to? To what was it inherent in or inseparable from? In the words of the Shorter Oxford English Dictionary: What was it owing to or produced by? Surely the hearing of this application. If it was attributable to anything else what was that something else? An academic exercise? A vacuum? Without that work the part of the proceedings in question could not have been properly conducted or presented (and, incidentally, children might have suffered). With it it was.”

That decision was reversed by this Court (Stamp and Ormrod LJJ). The reasoning of Stamp LJ, giving the judgment of the Court, is at pp. 20-22. It is quite lengthy, but I think I need to set it out in full (I have added paragraph numbers for ease of reference):

“[10] … With all respect to the judge, he places upon the word ‘attributable’ in the context of sections 13 (1) and 14 (5) a construction which it will not tolerate. The word is one which takes its colour by reference to the context in which you find it.

[11] As we have already indicated, section 14 (5) is designed to limit the effect of section 13 (1). For subsection (5) to bite at all – and bite it must – the case must be one in which, in the terms of the last two words of the subsection, an amount of costs is attributable to that part. So one must look at the earlier part of the section to see what is connoted by the words ‘that part’. Referring back to the introductory words of the subsection, one finds that the draftsman postulates three situations in which the subsection is to operate. He postulates a situation in which the assisted person begins to receive legal aid ‘after the proceedings have been instituted’, he postulates a situation in which the assisted person ceases to receive it ‘before the proceedings are finally determined’ and he postulates a situation in which the assisted person ‘otherwise receives legal aid in connection with part only of any proceedings’. Accordingly the words ‘that part’ at the end of the subsection can mean only that part of the proceedings ‘in connection with’ which the assisted person receives legal aid. And so one must ask the questions, (1) in connection with what part of the proceedings did the assisted person receive legal aid and (2) are the costs of the unassisted person attributable to that part?

[12] It is common ground that a legal aid certificate cannot operate retrospectively and where, as here, the assisted person begins to receive legal aid after the proceedings have been instituted the ‘part’ of the proceedings ‘in connection with’ which he receives legal aid can be only that part of the proceedings which takes place subsequent to the time when he begins to receive it. He does not receive legal aid ‘in connection with’ that ‘part’ of the proceedings which are anterior to the time when the legal aid was received. So the inquiry in the instant case becomes an inquiry how much of the father's costs is attributable to the part of the proceedings subsequent to the time when the mother received legal aid. In any natural sense of the word ‘attributable’ the costs incurred by the unassisted party prior to the receipt of legal aid were attributable to the part of the proceedings anterior to the receipt of legal aid by the assisted person; and in our judgment in the context of a dichotomy between the periods before and after the receipt of legal aid they cannot also be ‘attributable’ to the part of the proceedings subsequent thereto.

[13] Accordingly if the matter rested there we would, as a matter of the construction of subsection (5), conclude that in the instant case (a) the part of the proceedings in connection with which the assisted person (i.e. the mother) received legal aid was the part thereof subsequent to 5 p.m. on December 2 and (b) that the costs of the unassisted father incurred prior thereto were not attributable to ‘that part’.

[14] Nor in our judgment does that construction of the legislation produce an anomalous or unfair result or one which is in any way contrary to any conception of natural justice. On the contrary, in our judgment, it is logical, fair and sensible as long as one party is being ‘maintained’ (we use this word in its ancient sense) in the litigation out of a fund provided by Parliament; it is fair, right and just that the costs to which the other party, being successful in the proceedings, is put during the period of such maintenance should be met by the fund. There can however be no good reason for making the fund liable for the expenses to which a party was put before ever the fund came on the scene. Here the father would have incurred the costs if the mother had never become legally aided but had submitted to having her application dismissed with costs on the morning of December 3, 1975.

[15] Far from being a fair or sensible construction of section 14 (5), that for which the father contends would introduce an anomaly and injustice in a case where the legal aid certificate was withdrawn on the eve of the trial instead of issued at the time: for Mr Hollis [counsel for the father] was constrained to concede – and rightly – that on the father's construction the costs incurred by the unassisted party in preparation for the trial at a time when the state was maintaining the litigation on the other side would not be recoverable from the fund. If subsection (5) was open to more than one construction, that which produces such an anomaly is to be rejected in favour of one that does not.

[16] We would only add that if any of the costs of the father incurred prior to December 3 could be regarded as attributable to the part of the proceedings on and subsequent to that date, the taxing masters would, we think, find great difficulty in distinguishing the costs so attributable from those not so attributable. Unless the line be drawn at the point of time at which the assisted party ‘begins’ or ‘ceases’ to receive legal aid, a choice of some other point of time could hardly do otherwise than produce an arbitrary result.

[17] It is not necessary for the purposes of this judgment to form a view whether the third case postulated in subsection (5) by the words ‘or otherwise receives legal aid in connection with part only of any proceedings’ is intended to do more than cover the case where the assisted person receives legal aid intermittently during the proceedings.”

Mr Mansfield acknowledged that the specific question in S v S was not the same as that in the present case, because it was concerned with costs incurred before the grant of legal aid rather than during a hiatus period. But he submitted that the Court’s reasoning was nevertheless equally applicable in such a case. The question of principle which it addressed was what was meant by “attributable” in a provision which is the predecessor to regulation 5 (4) and in which the key words are identical. The Court explicitly rejected Latey J’s broader interpretation (see para. [10]) in favour of one which depended on whether the costs had been incurred before the grant of legal aid: that is, it applied a temporal criterion (see paras. [12]-[13]). It went on to explain why such an approach was fair (paras. [14]-[15]) and made the same point as Mr Mansfield about the practical difficulties to which the alternative approach would give rise (para. [16]).

This case in fact covers two appeals – Burridge v Stafford and Khan v Ali – which were heard together because, as Lord Woolf MR put it at the start of his judgment (p. 929 C-D), they both raised the question of “when a person ceases to be a legally assisted party for the purposes of sections 17 and 18 of the Legal Aid Act 1988”. He continued:

“The question is of some considerable significance because while a party is legally assisted, his liability for costs is limited under section 17 and under section 18 an unassisted party has certain rights to recover costs from the Legal Aid Board.”

I should set out the relevant parts of those two sections of the 1988 Act. Section 17 (1) read:

“The liability of a legally assisted party under an order for costs made against him with respect to any proceedings shall not exceed the amount (if any) which is a reasonable one for him to pay having regard to all the circumstances, including the financial resources of all the parties and their conduct in connection with the dispute.”

I need not set out the parts of section 18 conferring the power on the Court to require the Board to pay the unassisted party’s costs. The only part relevant for our purposes is sub-section (6), which read (so far as material):

“… where a party begins to receive representation after the proceedings have been instituted, or ceases to receive representation before they are finally decided or otherwise receives representation in connection with part only of the proceedings, the reference in sub-section (2) above to the costs incurred by the unassisted party in the proceedings shall be construed as a reference to so much of those costs as is attributable to that part.”

It will be seen that those provisions are in materially identical terms to those with which we are concerned.

The procedural histories in both cases are a little complicated, but for present purposes the way the question identified by Lord Woolf arose can be sufficiently summarised as follows:-

At paras. 26-30 of his judgment (pp. 933-5) Lord Woolf, with whom Butler-Sloss and Robert Walker LJJ agreed, reviewed a number of possible points in time at which – to quote from the heading to this part of the judgment – “a party cease[s] to be an assisted party for the purpose of sections 17 and 18 of the Act”. He rejected (following Turner v Plasplugs) the argument that he remained legally assisted until the legal aid certificate was discharged. He was reluctant to accept the Board’s submission that the crucial date was when the solicitor named in the certificate ceased to act, partly because that would be something of which the other party was unaware. But he held that, on the facts of the two cases before the Court, the date could be no later than the date on which the previously assisted party started to act in person: “[f]rom that date onwards he loses the protection of section 17 and the board ceases to be liable for him under section 18” – see para. 30 (p. 935 B-D).

Mr Mansfield relied on Lord Woolf’s statement, quoted at para. 29 above, that “while [my emphasis] a party is legally assisted … an unassisted party has certain rights to recover costs from the Legal Aid Board” and on the fact that the entire analysis in paras. 26-31 was conducted in temporal terms, as regards section 18 just as much as section 17.

As already noted, Mrs Peacocke sought permission to challenge the 2011 decision – that is, Master Haworth’s decision that Mrs Murphy was not entitled to cost protection in respect of costs incurred during the hiatus period. I consider that application below, but at this stage I will proceed on the basis that the Master’s decision stands.

Mrs Peacocke’s primary submission in support of a causal approach is that as a matter of ordinary English the word “attributable” connotes a relationship of causation. It is not apt to a relationship based simply on things happening during the same period. If the draftsman had meant what the Lord Chancellor contended it would have been very easy for him to say so. He could for example, have referred to “so much of those costs as were incurred during the part of the proceedings which are funded proceedings”.

Mr Mansfield’s submissions to the contrary depend on the illegitimate importation of temporal language used in other provisions for different purposes. Specifically, taking the points which I have enumerated at para. 23 above, her submissions were:

More generally, and importantly, Mrs Peacocke emphasised the unfairness to which the temporal approach could lead. There is an inevitable lapse in time between the taking of a procedural step by a funded claimant – most obviously, the issue of proceedings – and the steps which the non-funded defendant is obliged to take in response. If the Commission has enabled an unfounded claim to be brought, the justice of requiring it to meet the defendant’s costs of responding to it is the same whether or not funding has ceased in the interval before those costs are incurred. The present case is not a bad example, but still starker instances can be posited. For example, where a funded claimant serves a claim form with elaborate particulars requiring an expensive and fully-pleaded defence but ceases to be funded before that work is done, it would be arbitrary and unfair for the defendant not to be able to recover his costs of drafting that defence from the Lord Chancellor – and the need for the defence is, on any natural use of words, “attributable to” the funded part of the proceedings. She submitted that the importance of ease of application relied on by the Lord Chancellor could not outweigh the interests of justice and fairness.

As regards S v S, Mrs Peacocke’s primary submission was that it was, as indeed Mr Mansfield accepted, concerned with a different situation from the present case. At the time when the costs in question had been incurred the wife had not been legally assisted: what the husband was trying to do was to treat them as “attributable to” the subsequent part of the proceedings following the grant of legal aid. It was unsurprising that the Court had held that, as she put it, “causation does not operate backwards”. The present case was the reverse. But she also submitted that the scheme of the 1999 legislation was materially different from previous versions of the legislation: see para. 36 (4) above.

As regards Burridge, Mrs Peacocke submitted that the observations of Lord Woolf relied on by Mr Mansfield were not binding. The case proceeded on the assumption that the criteria required both for cost protection and for the liability of the Commission were temporal – that is, were the costs incurred during a period when the plaintiff was legally assisted ? – and thus that the only issue was how that period was to be defined. There was no argument about the meaning of “attributable” in section 18. She submitted that in such a case the reasoning could not be regarded as authoritative. She referred to the decision of this Court (Schiemann and Buxton LJJ and Jacobs J) in R (Kadhim) v Brent London Borough Council Housing Benefit Review Board [2001] QB 955. (Footnote: ¹) The relevant part of the judgment of the Court (given by Buxton LJ) is sufficiently summarised in the headnote, as follows:

“… a court was not bound by a proposition of law which, although part of the ratio decidendi of an earlier decision, had been assumed to be correct by the earlier court and had not been the subject of argument before, or consideration by, that court; that that exception to or modification of the strict rule of precedent was to be applied only in the most obvious cases and limited with great care, and would not normally apply unless the point had not been expressly raised before the court ... .”

The Judge’s principal reasoning on this issue appears at paras. 80-103 of the judgment (pp. 703-9). But I should refer first to his review of the authorities, which is at paras. 58-79 (pp. 690-703). At paras. 67-70 (pp. 693-5) he considers whether he is bound by Lord Woolf’s observations in Burridge. He rejects a submission by Mrs Peacocke that they were distinguishable because they were concerned with the 1988 Act. He says, at para. 67 (pp. 693-4):

“What now appears in para. 5 (4) of [the 2000 Regulations] can be traced back to section 2 (5) of the Legal Aid Act 1964, which introduced protection for defendants to legally assisted claims, where there was severe financial hardship and it was just and equitable, via sections 14 (5) and 18 (6) respectively of the 1974 and 1988 Acts. The wording has been streamlined, but I can detect no change of substance.”

However, at paras. 68-70 (pp. 694-6) he holds that Burridge “falls within the narrow class of cases in which a decision is not binding because it has been reached on a basis which the court assumed to be correct without any argument to that effect”, citing Khadim. At paras. 76-79 he quotes extensively from the judgments of Latey J and this Court in S v S: he does not at that point enter on any analysis, but see para. 46 below.

Turning to the Judge’s principal reasoning, his starting-point, after some preliminary observations about the principles of statutory construction, is to conclude that the phrase “attributable to” is, as a matter of language, capable of bearing either of the meanings contended for by the parties: para. 83 (p. 703 F-H). At para. 84 (p. 704 A-B) he describes as “telling” Mrs. Peacocke’s point that it would have been easy for the draftsman to use language explicitly adopting a temporal criterion.

At para. 85 (p. 704 B-E) the Judge identifies the rationale behind regulation 5 (4) and its predecessors as being that “if the [Commission] funds proceedings by an impecunious person, from whom it is unlikely that the other party could recover costs, it is only fair that the other party should have a remedy against [it]”, supporting that proposition by reference to the judgment of Lord Phillips MR in R (Gunn) v Secretary for State for the Home Department [2002] 1 WLR 1634 (see at para. 50) (Footnote: ²). At paras. 85-87 (pp. 704-5) he draws an analogy with the policy behind the jurisdiction to make orders against third party funders of litigation under section 51 of the Senior Courts Act 1981 and points out that in the case of such orders it is recognised that “a causal link is an essential or at least important ingredient”. (It is convenient to note at this stage that I do not regard this as a pertinent point. It is hard to see how a court exercising the general discretion conferred by section 51 could hold a third party liable for a party’s costs unless he had caused or contributed to those costs being incurred. (Footnote: ³) But on both parties’ approaches in the present case the Commission will, by its funding, have caused the non-funded party to incur the costs in question: the issue is whether that is only the criterion for liability.) (Footnote: ⁴)

At paras. 88-90 (p. 705 A-F) the Judge rejects the Lord Chancellor’s argument that the criteria for identifying the costs in respect of which an assisted party enjoys cost protection and those in respect of which the Commission is potentially liable must be the same. He describes the argument as “at first sight persuasive” and as being supported by Lord Woolf’s observations in Burridge, but he had already held that those observations were not authoritative: see para. 40 above. He continues:

“… [I]f one considers what is likely to be the position in most cases, it does not make much practical sense despite its logical symmetry. In most cases, including the present one, where the funded party loses funding by changing solicitors, or decides to act in person, this will not be because his financial circumstances have dramatically improved, and (assuming the causal link is proved) the non-funded party will be no less financially affected in consequence of the earlier funding; the right to proceed against the other party in respect of the period for which there is no cost protection is likely to be of little or no value, as in the present case. Mr. Gimlette has referred to the exceptional case, giving the inevitable example of the litigant who, having lost the litigation, wins the lottery. But in such a case the non-funded party could not recover against the [Commission], because he would be able to recover from his adversary, who has no cost protection and, anyhow, is now solvent; therefore he could not satisfy the conditions in para. 3 of the regulations, which require him to show financial hardship (which there would no longer be), and that an order is just and equitable.”

At paras. 90-95 (pp. 705-6) the Judge considers what he describes as “the question of uncertainty”, which he analyses as covering two points –

“… first, the uncertainty which may be felt by the non-funded party at the time and, secondly, the uncertainty involved in deciding after the event what part of the costs are attributable to the funded part of the proceedings or, to put it another way, does Mrs. Peacocke's construction lead to unduly complex and difficult issues after the event, when costs fall to be assessed?”

I need not trouble with the first of those points, which was not relied on by Mr Mansfield. As to the second, the Judge says, at para. 94 (p. 706 B-G):

“As to the point made by Mr. Gimlette that "a task-for-task analysis would be extremely impractical and difficult to implement, and would introduce uncertainty", hence the preferable time-related test, offering "certainty and finality at a time when the parties are making important decisions about litigation", there are in my view a number of answers:-

(a)

Any assessment of costs is likely to involve detailed and intricate issues; in the present case the costs judge said that a bill of this size would take "between one and two weeks" to assess; investigating the extent to which the non-funded party's costs were the result of the funding of the other party is unlikely to be beyond the scope of the expertise of the costs judge, or to impose on him an unduly burdensome additional issue.

(b)

The undertaking of such a task appears to be what has to be done, at least in some cases, by a court considering a section 51 application, without the benefit of the expertise of a costs judge; if it is appropriate on a section 51 application, it is difficult to see why it should be inappropriate here.

(c)

The exercise would not normally be a task-for-task analysis, although it might in some cases be so e.g. if the funding was limited to particular issues such as the contempt of court proceedings in Littaur [1986] 1 WLR 287. Usually, it would be more likely to be a question of how long the funding had a continuing effect.

(d)

It is difficult to see what important decisions would depend on whether the other party is funded; the non-funded defendant cannot escape from the proceedings either way.

(e)

Even on Mr. Gimlette's argument, there could be difficult assessments to make e.g. what parts of the costs of continuous preparation fall within or outside a particular period; and there might have to be more than one assessment.

(f)

More generally, if there is a choice between fairness and the avoidance of awkward issues as a factor in deciding what the legislative intent was, a court should unhesitatingly opt for the former; the legislature would assume that it was the function of the court to decide difficult issues, and to do so in a way that achieved a fair result.”

There follows a long passage (pp. 706-8) in which the Judge explains why he regards Mr Rayner’s approach as producing a fairer result than the Lord Chancellor’s. I think I should reproduce it in full:

“96.

Given that the object of para. 5 of the [2000 Regulations], and of the provisions of earlier Legal Aid Acts, is to provide fair protection for the other parties to funded litigation, subject to satisfying the financial hardship and just and equitable criteria, it seems to me that the construction of para. 5(4) contended for by Mr.  Rayner makes far better sense than the [Commission's] construction. The facts of the present case illustrate this. The probability is that there will have been a causal link between the finance provided by the [Commission] from the drafting of the proceedings down to a few weeks before trial and the costs incurred by Mr.  Rayner in the period in question, notwithstanding the intervention of a temporary CFA. It seems unlikely (although it is not for me to decide this) that Mrs. Murphy would have got as far as she did without the [Commission’s] assistance. The fact that, as from 19^th May 2010 Mrs. Murphy was not legally assisted because she decided to change her solicitors, was completely outside Mr.  Rayner's control, and (assuming the causal link) is unlikely to have affected the amount of the costs that he had to incur as a result of the [Commission's] prior funding.

97.

Further, the [Commission]'s construction would apply in many other situations. Changes of solicitors are common, arising as they do from client dissatisfaction, individual solicitors moving firms and other reasons, and amendments to certificates to cover the new solicitors are not retrospective (see Funding Code Procedures C38). In some cases, the new solicitors will do nothing until the certificate is amended, yet the other party may be forced by existing court orders, or the imminence of trial, to incur costs. In other cases, the claimant may represent himself for a time, or even for the rest of the case, having launched and formulated the case with funded legal help. If the [Commission] is right, the non-funded party would be unable to recover any costs incurred in any of these intervals, short or long.

98.

The automatic effect of the [Commission’s] construction would to my mind often work unfairly in circumstances such as these, and would also be random and arbitrary, in that the amount of costs rendered irrecoverable by the non-funded party is made to depend upon the stage of the proceedings at which the funded party decides to change solicitors, or act in person, whether the new solicitors have a contract with the Commission, the efficiency with which the new solicitors and the Commission go about reinstating … and other matters which are unlikely to affect the fundamental points that the non-funded party's costs will have been caused by the Commission having funded the proceedings, and that this will often not have ceased to be true merely because the funding has ceased, often for a limited time. In all cases, the extent to which the non-funded party was affected would be determined by what happened to be the steps which he had to take in the non-funded period. The Commission's construction will often result in the non-funded party losing out for no good reason, even if not always to the extent that Mr.  Rayner would in this case.

99.

By contrast, the construction contended for on behalf of Mr.  Rayner works sensibly, not only on facts such as those in this case, but also in other situations. Essentially, as in section 51 cases, where the party is funded for part of the proceedings, and the non-funded party has incurred costs outside that period, attributability depends on a causation test. In the present case, it may well be that the costs judge will conclude that Mrs. Murphy would not have reached trial without the [Commission’s] funding over most of the period of the case. In another case, in which the proceedings are funded over only a short period, and the claimant then manages to proceed to trial, either acting in person or with some form of private legal assistance, a costs judge might well reach a different conclusion. In all para. 5(4) cases, it is reasonable and fair that the [Commission] should be liable for the cost it has caused the other party, but for no more. To revert briefly to the example given earlier, it would be verging on the absurd for the defendant to be unable to recover the costs of preparing the Defence merely because, in the period in which it fell to be served, the claimant happened to be in the process of changing his solicitors.”

At paras. 100-102 (p. 708 A-H) the Judge considers how the issue might arise in other factual situations. In that context he considers S v S. He observes (para. 100) that

“… Mrs. Peacocke's construction works, and is entirely consistent with the decision in that case: the non-funded party could not possibly say that any costs incurred before funding was provided were "attributable to" the funded part of the proceedings in the sense contended for; clearly, there could be no causal link between the funding and costs previously incurred by the non-funding party … .”

But he acknowledges that it is less easy to reconcile with the reasoning adopted by this Court, including its rejection of the reasoning of Latey J. He rejects Mrs Peacocke’s argument that S v S could be disregarded because of the differences between the regime introduced by the 1999 Act and that under the predecessor legislation (see paras. 36 (4) and 38 above), saying, at para. 101 (p. 708D):

“While doubtless the new regime is different in some ways, the essential point, that proceedings may be partly funded by reference to issues, or funded only for a particular period or periods, has not changed; as can be seen from the judgment in Turner, precisely the same considerations arose at that time. Nor, as I have said [the reference is evidently to the passage quoted at para. 40 above], is there any significant difference between the wording of the relevant provisions of the Legal Aid Acts and the wording of the present regulations.”

It is convenient to say at this stage that I agree with all of that. But he holds that the ratio of S v S is limited to the particular context in which the issue arose, i.e. where the costs in issue were incurred before the grant of legal aid. While the actual language used by Stamp LJ goes further and appears to espouse a temporal criterion in every case – that is, “that the non-funded party cannot make any claim for costs incurred outside the period(s) of cost protection” – that was to be treated as no more than an “assumption”, on a point which did not arise on the facts of the case. He refers back to his reasoning in relation to Burridge: para. 102 (p. 708H).

The Judge summarised his decision at para. 103 (pp. 708-9) as follows:

“… For all the reasons I have set out above I consider that Mrs. Peacocke's construction of the regulations is correct. It is at least as consistent with the language of the relevant provisions as the rival construction, and accords much better with their purpose. Therefore, Mr.  Rayner is entitled to recover such of his costs incurred in the period of the hiatus as were caused by the [Commission’s] funding of the earlier stages of the proceedings, to be decided by the costs judge in part of his detailed assessment. I allow the appeal on this issue and direct that the issue as to whether there was a causal link between the funding of Mrs. Murphy's case up to 19^th May 2010 and all or any of Mr. Rayner's costs between then and 31^st August 2010 be referred to the costs judge. I also allow the appeal against the refusal of disclosure of the case plans and bills of costs, which are relevant to this issue.”

I have had the advantage of reading the judgments of both Underhill LJ and McCombe LJ in draft. I agree with them that the appeal should be allowed and that the decision of Master Haworth should be restored. I would also refuse permission to the Respondent to appeal against the Judge's refusal to entertain an appeal out of time against the 2011 decision. In so far as there is a difference in approach between that of Underhill LJ and McCombe LJ, I prefer the analysis of Underhill LJ.

I am most grateful to Underhill LJ for his comprehensive recitation of the factual background to this case, the statutory provisions and the competing arguments on this appeal. I entirely agree with him that this appeal should be allowed and that it was right to refuse permission to the Respondent to appeal against the Judge’s refusal to entertain an appeal out of time against the 2011 decision. However, my reasons for agreeing with the conclusion that the appeal should be allowed are, in part, rather different from those expressed by Underhill LJ.

It seems to me that the present case turns upon the construction of a statutory phrase, which, while not entirely happily drafted, has been considered more than once by the courts over the years in the context of a number of different incarnations of the statutory code governing legal aid and in slightly differing factual scenarios. In the provision with which we are concerned in this case the phrase is, “…so much of those costs as is attributable to the part of the proceedings which are funded proceedings”: reg. 5(4) of the 2000 Regs. By reg. 2(1) “funded proceedings” are…

“…proceedings…in relation to which the client receives funded services or, as the case may be, that part of the proceedings during which the client receives funded services”.

While I accept that we are clearly not bound by the decision in Burridge to adopt the construction of these provisions advanced by Mr Mansfield (because the point now in issue was assumed rather than decided in Burridge’s case) I am not confident that the same can be said of S v S. In my judgment, the reasoning of Stamp LJ in that case is as applicable to our problem as it was to that before the court in S v S. As Baroness Hale of Richmond put it in R (Smith) Secretary of State for Defence [2011] 1 AC at [135],

“In the words of Sir Frederick Pollock, cited by Lord Denning in Close v Steel Co. of Wales [1962] AC 367 at 388-389, “Judicial authority belongs not to the exact words used in this or that judgment, not even to all the reasons given, but only to the principles accepted and applied as necessary grounds of the decision””

It seems to me that the reasoning of the court as to the meaning of the word “attributable” in this series of enactments applies as well to our facts as to those of S v S. To that extent, I consider that we are bound by that case to allow this appeal.

Even if I am wrong about that, it seems to me that the reasoning of Stamp LJ in S v S, as to the meaning of the word “attributable” in the context of this legislation (set out in my Lord’s judgment at paragraph 27), should be followed here unless it can be shown that either the word needs to be interpreted in an obviously different sense with regard to the different facts of our case or because that reasoning is manifestly inapplicable in our case. I do not think that that is shown. I also find the argument advanced on behalf of Mr Rayner, to the effect that the relevant test is a causative one, difficult to square with the rejection by this court in S v S of the approach of Latey J in that case: see paragraphs 26 and 27 above.

As a matter of construction of the language of reg. 5(4), I find the meaning of the word “attributable” decided upon by Stamp LJ to be applicable mutatis mutandis to the facts of that case and to those of the present case. There are differences of fact but, in my judgment, construction of the word in question must be the same in each case.

I am also persuaded that the submissions advanced by Mr Mansfield, as recited in paragraph 23 of Underhill LJ’s judgment, are correct. I agree with Underhill LJ in his endorsement of those submissions in paragraph 51 above for the reasons there set out.

It seems to me that the alternative arguments, attractively presented as they were by Mrs Peacocke, do not undermine the logic underlying the construction of the statutory language adopted by Stamp LJ. Further, Mrs Peacocke’s arguments appear to me, with respect, not to be primarily directed to the construction of the statutory language, but rather to potential anomalies of adopting a strictly temporal test to the question of whether the relevant party’s costs are attributable to funded proceedings. The temporal test has, however, long been understood to be the applicable one in this context and I am not persuaded that we should differ from it now on the basis of perceived anomaly in some circumstances.

So far as application for leave to appeal out of time against the 2011 decision of Master Haworth is concerned, I am quite satisfied that the application had to be refused. I agree with Underhill LJ that the Judge was entitled to refuse the application simply on the basis of the delay in bringing it. I am inclined also to think that the decision was correct in any event.