Royal Courts of Justice
Strand, London, WC2A 2LL
Before :
THE HONOURABLE MRS JUSTICE COX DBE
Between :
JACQUELINE FLOYD -and- S | Appellant in Costs Appeal Claimant in original proceedings Defendant in original proceedings |
- and - | |
LEGAL SERVICES COMMISSION | Respondent in Costs Appeal |
David Giles (instructed by Brightstone Law LLP) for the Claimant
Jeremy Morgan QC (instructed by Legal Services Commission) for the Respondent
Hearing dates: 14 April 2010
Judgment
Mrs Justice Cox :
This is an appeal by Jacqueline Floyd (the Claimant) from the judgment of Costs Judge O’Hare, dated 24 November 2009, that she had shown no good reason for the delay in making a request that her costs be paid by the Legal Services Commission; and that she therefore could not proceed with her request.
The appeal concerns the Court’s power to extend time when a late application of this kind is made by the successful, unfunded opponent of a legally aided litigant. The main issue is whether the Civil Procedure Rules apply in these circumstances, enabling the Court to exercise a discretion to extend time and to grant relief from sanction; and whether the Costs Judge was wrong in deciding that they did not apply.
The Facts
The background facts are not in dispute and can be shortly stated. The Claimant brought proceedings against the Defendant for possession of the residential property at Flat 2, 3 Salisbury Road, Hove in Sussex. The proceedings were based on the Defendant’s non-payment of rent. An order for possession and for payment of the outstanding rent arrears was made by the District Judge on 9 June 2006, and the Defendant was also ordered to pay the Claimant’s costs.
On 22 June 2006 the Defendant was granted public funding to enable him to appeal against this order to the circuit judge. On 31 October 2006 the Defendant’s appeal was dismissed and the circuit judge made a Section 11(1) costs order, that is an order in favour of the Claimant, but with the protection afforded to the Defendant as set out in Section 11(1) of the Access to Justice Act 1999.
With effect from 16 November 2006, the Defendant’s public funding certificate was amended to enable him to appeal to the Court of Appeal. He filed his Notice of Appeal on 21 November 2006.
On 18 March 2008 the appeal was dismissed with costs in favour of the Claimant, and the Court of Appeal made a further Section 11(1) costs order.
On 15 August 2008 the Defendant’s public funding certificate was discharged.
Subsequently, and when he was no longer publicly funded, the Defendant filed a petition for leave to appeal to the House of Lords. The petition was refused on 5 November 2008.
The Claimant then sought to enforce the possession order and a request for warrant of possession was issued, with enforcement due to take place on 2 December 2008. The Defendant was granted a second public funding certificate on 27 November 2008, and he applied to the Court to discharge the warrant.
On 1 December 2008 this application was dismissed, although the warrant was suspended until 16 December 2008. A third Section 11(1) costs order was made. The Defendant was then evicted from the Claimant’s property.
The Costs Proceedings
On 8 April 2009 the Claimant’s solicitors wrote to the Legal Services Commission (LSC) enclosing bills of costs and associated documents in respect of the litigation in the County Court, the Court of Appeal and the House of Lords. They asked for points of dispute to be served by 30 April, failing which they would apply for default costs certificates.
In their response of 22 April the LSC drew the solicitors’ attention to the fact that they had not followed the correct procedure, merely serving upon them a notice of commencement (Form N252) with supporting documents. The LSC pointed out that no costs applications had been made to the relevant courts/officers in accordance with the relevant regulations. In addition the letter contained the following paragraphs:
“Further you had three months in which to make your applications. Regulation 5(3)(c) of the CLS (Costs Protection) Regulations 2000 (as amended) states:
‘(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:…
(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;…’
The various orders were made on 31/10/06 and 18/03/08 (there was no order for costs in the House of Lords). Hence you had until 31/01/07 and 18/06/08 to issue your respective applications. Even if your N252s can be construed as applications (which for the avoidance of any doubt I say they cannot) they were all out of time. You have not shown any good reason for the delay and were you to issue your applications properly now they will be doomed to failure for this reason alone.”
On 19 May 2009, the Claimant’s solicitors applied to the County Court for determination of the costs payable by the Defendant and by the LSC under the first and third Section 11(1) orders. On 5 June 2009 the LSC invited the Claimant’s solicitors to agree to adjourn this application pending determination of an application in the Supreme Court Costs Office (SCCO) in respect of her costs in the Court of Appeal. On 10 June 2009 the County Court adjourned the first application generally. On 11 June the Claimant applied to the SCCO for determination of the costs payable by the Defendant and by the LSC under the second Section 11(1) order.
In further correspondence the Claimant’s solicitors did not at any stage advance any reason for the delay in making these applications, despite requests by the LSC for them to do so in letters dated 29 June and 6 November 2009. No statement was ever served setting out the reasons for the delay before the matter came before the costs judge on 24 November 2009.
Cost Judge’s Decision
The costs judge:
Accepted the LCS’s submission that he had no discretion to extend time unless there was a good reason for the Claimant’s non-compliance with the three-month time limit in the rules;
Decided that the Costs Practice Direction merely described the relevant practice and that the relief from sanction provided by the CPR did not apply to assist the Claimant in this case; and
Decided that no good reason had been shown by the Claimant for extending time so that, notwithstanding the harshness of the result in the circumstances, the application should be dismissed.
The costs judge granted permission to appeal to this Court not because he considered it arguable that he had erred in law, but because of what he considered on the facts to be “an extremely harsh and seemingly unfair result” for this Claimant. It is common ground that this appeal can only succeed if the costs judge made an error of law in deciding as he did.
The Appeal
The appeal concerns only the claim for costs incurred in the Court of Appeal after the amendment to the Defendant’s funding certificate on 16 November 2006.
On behalf of the Claimant Mr Giles submits that the costs judge did err in deciding that the CPR did not apply, and that he had no discretion to consider whether to grant relief from sanction and extend time for non-compliance with the strict three-month rule.
He submits essentially as follows:
CPR 44.17, dealing with the application of the costs rules, only excludes those rules from applying to the assessment of costs in proceedings, to the extent that different provision is made in the relevant legislation (Section 11 of the 1999 Act and regulations made under the Legal Aid Act 1988). It does not have the effect of excluding the rules more generally, or of excluding the Court’s case management powers under CPR 3. The rules will therefore apply to questions such as that arising in the present case: i.e. whether the Claimant should be permitted to proceed with her application for costs to be paid by the LSC.
CPR 44.17 refers to the Costs Practice Direction, paragraphs 21-23, which “sets out the procedure to be followed” where a party was wholly or partially funded by the LSC, as here.
Paragraphs 21.16 and 21.18 refer expressly to regulation 5 of the Community Legal Service (Cost Protection) Regulations 2000, which states when and how a non-funded party’s costs can be awarded against the LSC. S. 21.18 refers to the criteria to be satisfied before the LSC can be ordered to pay any costs, the second of which is that:
“(2) Unless there is good reason for delay the non-funded party provides notice of intention to seek an order against the LSC within three months of the making of the Section 11(1) costs order;”
That appears to be a strict timetable to be followed by a non-funded party unless a good reason for delay can be shown. However, a strict timetable is also applied to the funded party in relation to applications by a receiving party under regulation 10, dealt with at paragraph 23 of the Practice Direction.
Paragraph 23.5 however provides that, on being served with a receiving party’s application,
“… the LSC funded client must respond by filing a statement of resources and serving a copy of it on the receiving party (and the Regional Director where relevant) within 21 days. The LSC funded client may also file and serve written points disputing the bill within the same time limit. (Under Rule 3.1 the Court may extend or shorten this time limit.)”
Thus the CPR, through the Costs Practice Direction para. 23.5, expressly permits the Court to exercise a discretion under CPR 3.1 and to extend time, whether or not a good reason has been shown for delay by the funded party on responding to the application.
Since the Court’s power to extend time applies unless the contrary is stated (r.3.1(ii)) it must follow that this power applies equally to applications made under regulation 5, as in this case.
Effectively both sets of the 2000 Costs Regulations are incorporated into the CPR via the costs Practice Direction. The Regulations must therefore be read subject to the Court’s wider discretion to extend time where, for example, a substantial injustice would otherwise be caused to a non-funded party. Indeed it would be remarkable if it were otherwise, and the Court’s powers to grant relief from sanction were displaced when the parties are using the Court to resolve a dispute.
The costs judge was therefore wrong to decide that he had no power to consider whether to exercise his discretion in the Claimant’s favour and extend time.
Applying Sayers v Clarke Walker [2002] 1WLR 3095, the Claimant’s inability in this case to pursue her claim against the LSC, because the Court would not extend time, amounted to the imposition of a sanction and the provisions of CPR 3.9 therefore apply in relation to granting relief from sanction. Since this matter was not considered by the costs judge the appeal should be allowed and the matter remitted to be properly considered on the evidence.
In his able submissions on behalf of the Claimant, Mr Giles carefully lay before me this series of building blocks in order to arrive at what he submits is a fair and just result for this Claimant, who was legally obliged to bring these proceedings for possession and who now finds herself unable to enforce the costs orders made in her favour.
Ultimately, however, the submissions founder at the first block. In my judgment the CPR and the Practice Direction can have no relevance to the correct construction of the regulations.
As is common ground, the relevant regulations in this case are the Community Legal Service (Cost Protection) Regulations 2000. Jurisdiction to make an order for costs against the LSC is governed by regulation 5.
So far as is relevant, regulation 5 provides as follows:-
“5 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 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.
(3A) An order under paragraph (2) may be made- …
(b) in relation to proceedings in the Court of Appeal, High Court or a county court, by a costs judge or a district judge; …
(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) Where a court decides any proceedings in favour of the non-funded party and an appeal lies (with or without permission) against that decision, any order made under this regulation shall not take effect;
(a) where permission to appeal is required, unless the time limit for applications for permission to appeal expires without permission being granted;
(b) where permission to appeal is granted or is not required, unless the time limit for appeal expires without an appeal being brought.
…”
The procedure for such an application is governed by regulations 9-12 of the Community Legal Service (Costs) Regulations 2000, which it is unnecessary to set out here. The regulatory scheme was described by the Court of Appeal (Lord Phillips MR) in Gunn and Others v Secretary of State for the Home Department [2001] 1WLR 1634 at paragraphs 27-35.
The stark contrast between the particular provisions which appear in regulation 5 and the more general provisions of the CPR is immediately apparent. However, quite apart from the general principle that, where statute makes both general and particular provision the particular will prevail, there is another, more fundamental objection to Mr Giles’s submission. A practice direction simply cannot achieve what he suggests it can.
Before the changes to the statutory provisions dealing with the making of practice directions, brought about by the Constitutional Reform Act 2005, CPR practice directions, issued by the Heads of Division in the exercise of their inherent power, were examined by the Courts on a number of occasions. In Godwin v Swindon B C [2002] 1 WLR 999, May LJ described them as “subordinate to the rules” and as “at best a weak aid to the interpretation of the rules themselves …”
In Re C (Legal Aid: Preparation of Bill of Costs) [2001] 1FLR 602, the appellant sought to argue that the Costs Practice Direction, supplementing Parts 43-48 of the CPR, had the same force in law as the Legal Aid in Family Proceedings (Remuneration) Regulations 1991; and that they impliedly amended or repealed them in so far as they were inconsistent. Rejecting this argument, the Court of Appeal (Hale LJ) said at paragraphs 608-9:
“Unlike the Lord Chancellor’s orders under his ‘Henry VIII’ powers, the Civil Procedure Rules 1998 themselves and the 1991 Remuneration Regulations, the Practice Directions are not made by Statutory Instrument. They are not laid before Parliament or subject to either the negative or positive resolution procedures in Parliament. They go though no democratic process at all, although if approved by the Lord Chancellor he will bear ministerial responsibility for them to Parliament. But there is a difference in principle between delegated legislation which may be scrutinised by Parliament and ministerial executive action. There is no ministerial responsibility for Practice Directions made for the Supreme Court by the Heads of Division. As Professor Jolowicz says … ‘It is right that the court should retain its power to regulate its own procedure within the limits set by statutory rules, and to fill in gaps left by those rules; it is wrong that it should have power actually to legislate’.”
Paragraphs 21.16-21.20 of the Practice Direction are merely endeavouring to repeat or to summarise regulation 5, but they cannot amend or vary it.
Regulation 10 of the Community Legal Service (Costs) Regulations sets out the procedure which applies where the party in whose favour the costs order has been made (the receiving party) seeks a costs order against the LSC. At paragraph 31(ii) in Gunn, Lord Phillips MR said this in relation to the three month time limit for seeking a costs order against the LSC under Regulation 10(ii):
“We wish to 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.”
Although the regulations were subsequently amended, to provide an escape route if non-compliance with the time limit was shown to be “for good reason”, Mr Giles accepts that these observations in Gunn do not support his arguments in this case. I reject entirely his suggestion that they were made per incuriam, and that the argument he advances now was not advanced before the Court of Appeal. There was, as I find, good reason for that, namely the merits of the argument or rather the lack of them.
Nor is Mr Giles assisted by the Court of Appeal’s decision in Wyatt v Portsmouth Hospital NHS [2006] EWCA Civ 529 which, as Mr Morgan QC points out, addresses a different point in an entirely different factual context and which it is therefore unnecessary for me to refer to here.
Mr Giles having failed to persuade me that the regulations are incorporated into the CPR via the Practice Direction, his submission that the costs judge should have considered the exercise of his discretion under CPR 3.9 to grant relief from sanction also fails.
The costs judge was therefore not wrong to conclude that the CPR do not assist this Claimant. Regulation 5 is clear. Further, I consider that the suggestion made in paragraph 23.5 of the Costs Practice Direction, to the effect that the Court can extend time under rule 3.1 is simply wrong. It is a matter of some concern that the assessors sitting with me in this appeal both have experience of increasing numbers of late requests of this kind, and of a general lack of awareness of the effect of regulation 5 and the harsh consequences that may follow from non-compliance, as demonstrated in the present case. This clearly needs to be addressed.
The request made by the non-funded party must be made within three months of the making of the Section 11(1) costs order “unless there is good reason for the delay”. An order against the LSC “may only be made” if that condition and the other conditions in regulation 5(3) are satisfied. I agree with Mr Morgan that, as a matter of construction, good reason for the delay is a precondition which must be satisfied before the exercise of discretion can be considered.
I add only this. Even if Mr Giles were right and the costs judge did have power to consider exercising his discretion to extend time and allow this request to proceed, notwithstanding that no good reason had been shown, I would not have remitted it for the matter to be reconsidered. Mr Giles fairly accepts that the costs judge found as a fact that no good reason for the delay had been advanced, and that he could not challenge that finding.
As he also accepts, no application had in fact been made by the Claimant’s solicitors for an extension of time or for relief from sanction at any stage, and no evidence was ever filed explaining the reasons for the delay in making the request. This remained the position despite the LSC pointing this out in correspondence in both April and June 2009. No evidence has been placed before me at this hearing. It would not have been just, in my view, to allow the Claimant a further opportunity to remedy the defects below by remitting it for the matter to be dealt with properly on the service of evidence. It appears that the Claimant’s solicitors simply adopted an interpretation of the relevant regulations and rules which was erroneous, and that they then stuck to their guns, not even taking steps to protect the Claimant’s position should that interpretation subsequently be held to be incorrect.
In view of the decision I have reached on this point, it is unnecessary for me to determine the other point raised in the grounds as to when time started to run for the purposes of the three-month time limit.
Mr Giles no longer pursues the suggestion made in the grounds, that the proceedings were only finally determined in December 2008 and that the three-month time limit runs from that date. He realistically accepts that he would face considerable difficulty in making that submission.
He contends that there is a tension between regulation 5(1) and the following paragraphs, and that it is unclear whether time runs from the date of the Section 11(1) order made by the Court of Appeal on 18 March 2008, as Mr Morgan submits, or from 5 November 2008 when the House of Lords refused the petition to appeal and the Claimant finally had an enforceable possession order, as Mr Giles submits.
However, whichever is the correct date, Mr Giles accepts both that the primary time limit had long expired by the time that the Claimant’s request was made in May 2009; and that no good reason was advanced for the delay.
This point would arise only if good reason for delay had already been shown and it then fell to be considered as part of the exercise of discretion, when I accept that the length of the delay would be a relevant matter for the costs judge to have regard to. As it is the point is now academic in light of my conclusion on the first ground, and it is therefore unnecessary for me to decide it. For the reasons I have already given however this appeal must be dismissed.
It was agreed at the end of the hearing that, after judgment is handed down, it would be sensible for the parties to make written representations as to the costs of this appeal, so that I could deal with that matter on the papers. If that remains the position, written submissions as to costs should be filed within 14 days from the date of the sealed order, the terms of which are no doubt capable of agreement. If, on reflection, the parties wish to make oral submissions as to costs, the matter will have to be re-listed for determination at a hearing. The parties should indicate to the Court their intentions in this respect as soon as possible after judgment is handed down.