Rayner v The Lord Chancellor [2013] EWHC 3878 (Ch)

[2013] EWHC 3878 (Ch)

Claim Number: HC09C01691, SCCO Reference: 11.A.4325

In the High Court of Justice

On appeal from

The Senior Courts Costs office

Master Haworth

Date 2 December 2013

Before

Mr. Nicholas Strauss Q.C.

(sitting as a deputy judge)

Between:-

Between

Nicholas Courtauld RaynerAppellant

The Lord ChancellorRespondent

Mrs. T. R. Peacocke, instructed by Penningtons Solicitors LLP, appeared for first defendant;

Mr. G. Mansfield Q.C. (on issues relating to cost protection) and Mr. J. Gimlette appeared for Lord Chancellor.

Date of hearing: 9 th- 10 th October 2013

Judgment

Introduction

[1]This is an appeal against the decisions on two issues of Master Haworth, sitting as a costs judge, in relation to a claim by the 1st defendant in the action (“Mr. Rayner”) to be indemnified in accordance with the Community Legal Service (Cost Protection) Regulations 2000 (“the regulations”) for the costs, totalling some £700,000, of defending the claim in this action. The claim was brought by a claimant who was funded by the Legal Services Commission (now the Legal Aid Agency but “the LSC”). The costs judge gave permission to appeal on both issues.

[2]The claimant in the action (“Mrs. Murphy”) was Mr. Rayner’s carer. The second and third defendants (“Aetemus” and “Courtina”) are offshore companies, incorporated respectively in Gibraltar and Panama, owned and controlled by Mr. Rayner. Mrs. Murphy claimed an interest in Mr. Rayner’s flat in Ennismore Gardens, London SW7 and in his investments, on the basis of proprietary estoppel. Aetemus and Courtina are the legal owners of, respectively, the flat and the investments which were in issue in the action. Mr. Rayner denied liability and counterclaimed for money and other property wrongfully taken by Mrs. Murphy.

[3]The hearing of the action before Mr. Jeremy Cousins Q.C., sitting as a deputy judge, began on 19th July 2010 and there were 18 hearing days ending in early November 2010. On 18th January 2011, the judge dismissed the claim, gave judgment on the counterclaim for some £43,000 and for an account, and awarded indemnity costs to the defendants. In March 2011, he gave judgment against Mrs. Murphy for a further £991,499 on the taking of the account. She has paid nothing and there seems to be no realistic prospect of her paying the judgment debts, let alone any of the costs.

[4]The first issue arises because the regulations entitle individuals, but not companies, to seek an indemnity for the costs of unsuccessful proceedings against them funded by the LSC. It follows that it is necessary to decide, in a case in which the nonfunded parties consist of an individual or individuals and a company or companies, which party or parties have “incurred” the costs, and how much of them were incurred by the individual defendant(s).

[5]In the present case, the costs judge decided that he did not have the material to decide this issue, and ordered detailed bills of costs in relation to the invoices submitted by Penningtons to each of Mr. Rayner, Aetemus and Courtina. Mr. Rayner’s appeal is based on the proposition that there is nothing to decide because, in a case in which he is the sole owner of the shares in both the other defendants, and all the substantial issues in the case were between him and the claimant, all the costs are properly to be regarded as incurred by him. While this may be the right decision to reach once all the facts are known, the costs judge was perfectly entitled to take the view that he did not yet have enough information to decide and that he should therefore order a detailed assessment. There are no grounds on which I could possibly interfere with his decision on that issue.

[6]The second issue raises a question as to the proper construction of para. 5(4) of the regulations, which arises whenever the funded party ceases to be in receipt of funding, with the result that the non-funded party’s potential claim against the LSC is restricted to the costs incurred by him which are “attributable to” the part of the proceedings in which the funded party was funded. Does this mean only the costs incurred by the non-funded party in that period, or does it include costs incurred later, which were caused by the assistance previously given to the funded party?

[7]Mr. Gimlette on behalf of the LSC contends that, in all such cases, the potential claim against the LSC is restricted to the period in which the funded party was funded. If so, in a case in which funding ceases, say, a month before trial, and the claimant then acts in person, the other party would be unable to recover substantial costs incurred shortly before and at the hearing, even if it was the earlier funding which enabled the claimant to get to trial. Mrs. Peacocke on behalf of Mr. Rayner submits that “attributable to” is not the same as “incurred in”, and means that the non-funded party can recover costs outside the funded period, provided that the causal link is established.

[8]What happened in this case was that Mrs. Murphy had a certificate of funding until the end of the trial but, on or about 19th May 2010, she changed her solicitors, who applied for an amendment of the certificate, while covering the position for the time being by a CFA. In the meantime, Mrs. Murphy’s legal costs were not covered by the certificate, which was not amended to cover her new solicitors until 31st August 2010. If, as the LSC contends, and the costs judge held, Mr. Rayner could make no claim on the LSC in respect of costs incurred in the period between 19th May and 31st August 2010, taking in the last stages of trial preparation and part of the trial, this will affect at least half his costs, even though he had no option but to defend the proceedings which Mrs. Murphy had pursued practically to the door of the court with the assistance of finance by the LSC.

[9]However, I respectfully disagree with the costs judge on this issue. 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. Causation is an important factor in claims against third party funders under section 51 of the Senior Courts Act 1979 (see para. 83 below), and it is equally so in relation to claims under para. 5(4) of the regulations.

[10]In the course of their written submissions after the hearing, both Mrs. Peacocke and Mr. Gimlette invited me to decide causation in their favour, but this is a matter for the costs judge to decide as part of his detailed assessment, as Mrs. Peacocke originally submitted. The question is whether the LSC’s financial support was a substantial cause of the litigation in the disputed period, or whether, for example, Mrs. Murphy would have been able to pursue the litigation until 19th May 2010 even without funding by the LSC, so that the later costs would have been incurred anyhow.

[11]My more detailed reasons on both points are set out below.

Detailed facts

[12]Mrs. Murphy was granted a full representation CLS funding certificate on 5th May 2009 and the proceedings were commenced on 19th May 2009 against all three defendants. Mrs. Murphy was represented by Ismail & Co., and all the defendants were represented by Penningtons.

[13]On 2nd June 2009, the funding certificate was extended to “all steps up to and including ... final hearing and any action to implement (but not enforce) the judgment or order”, but this was amended on 18th February 2010 to “all steps up to but excluding trial but including ... Counsel’s Opinion”.

[14]Mr. Rayner’s defence was served on 13th June 2009. Aetemus and Courtina served separate defences in December 2009.

[15]On 1st April 2010, Ismail & Co., provided the LSC with a case plan, setting out the proposed funded services: Mr. Rayner sought disclosure of this, but the costs judge refused his application.

[16]On or about 15th May 2010, Mrs. Murphy ceased to instruct Ismail & Co., and instructed Smithfield Partners (“Smithfield”) to represent her. Smithfield did not have a contract with the LSC to provide funded services, and therefore sought an “exceptional case” contract; in the meantime they entered into a CFA with Mrs. Murphy, and with new counsel. Smithfield notified Penningtons of the change of solicitors by letter dated 20th May 2010, and served a copy of the notice of funding, referring to the CFA, on 28th May 2010.

[17]Smithfield responded on 5th June 2010 to an enquiry by Penningtons, confirming that “our client’s LSC’s Certificate has neither been withdrawn or revoked (sic)”.

[18]At a hearing relating to disclosure before Chief Master Winegarten, Mrs. Murphy’s counsel said that the funding certificate remained effective, and that the costs order made by the Master could not be enforced against her, i.e. that she had “cost protection” under the regulations. Mr. Rayner claims that, because of this, he was unable to obtain a summary assessment of £20,000 for costs of and connected with the hearing.

[19]On 23rd June 2010, Penningtons wrote to the LSC, asking (inter alia) when Mrs. Murphy’s funding certificate was discharged. The LSC replied on 29th June 2010 to say that the certificate remained in force, but that the nominated solicitor on the certificate was Ismail & Co., and that Penningtons would be notified if the certificate was withdrawn.

[20]In the meantime, on 26th June 2010, the LSC wrote to Ismail & Co. referring to the correspondence from Smithfield, to say that Smithfield were acting without any application having been made for a transfer of the certificate: the LSC had therefore issued a notice to show cause why funding should not be withdrawn.

[21]On 14th July 2010, the LSC wrote to Penningtons, stating that the investigation had not progressed because the regional office file of papers had been mislaid.

[22]The trial started on 19th July 2010, and on the same day Smithfield sent an email to the LSC enclosing submissions for an exceptional case contract, and giving reasons why the certificate should not be discharged.

[23]On 30th July 2010, the trial was adjourned part heard until 20th September 2010.

[24]On 24th August 2010, the LSC wrote to Smithfield confirming that the certificate would be transferred to it provided that they entered into an exceptional case contract, and Smithfield replied on 26th August 2010 enclosing the signed contract. They also submitted a case plan on 1st September 2010, setting out in detail the work expected to be required leading up to and including the estimated 5 to 10 further days of hearing, and estimating overall costs of £61,155 + VAT.

[25]On 14th September 2010, the LSC wrote to Smithfield, indicating that the overall authorised costs would be £55,615. On 17th September 2010, however, the LSC said that it could not process the agreed amendments to the public funding certificate, because Smithfield did not have a legal aid account number. However, the public funding certificate would be amended with effect from 31st August 2010 to cover all the work set out in the 1st September 2010 case plan; this would be done as soon as the legal aid account had been set up. This is what then happened.

[26]On 20th September 2010, the trial resumed and continued until early November 2010. There were 18 hearing days in all. On 18th January 2011, judgment was given for Mr. Rayner on the claim and, on the counterclaim, for sums totalling approximately £43,000 and for an account of other sums due from Mrs. Murphy to him. On 11th March 2011 judgment was given against her for a further £991,499.63.

[27]Penningtons prepared a Statement of Costs (for summary assessment) for the hearing on 18th January 2010, showing costs of £300,040.40. Penningtons say that this schedule excluded the period 20th May to 31st August 2010, but the dates do not appear on the schedule. In any event, at a hearing on 3rd February 2011, the deputy judge did not summarily assess costs, but ordered that Mrs. Murphy should pay all the defendants’ costs, except for two hours trial costs, to be assessed on an indemnity basis, and that her personal liability should be determined in accordance with section 11(1) of the Access to Justice Act.

[28]The defendants’ total costs bill is for £706,949, although it appears that due to an arithmetical error this overstates the costs by £145,159.19. On any view, however, the costs for the period 20th May to 31st August 2010, now said to be some £396,000, represent over half of the defendants’ total costs.

[29]On 12th April 2011, the defendants’ applied for a hearing to determine the amount of the costs incurred by themselves, the amount payable by Mrs. Murphy personally and the amount payable by the LSC to Mr. Rayner, and on 18th April 2011 the costs judge gave directions, including directions for Points of Dispute and Mrs. Murphy’s Statement of Resources.

[30]There was a hearing before the costs judge on 18th July 2011. The LSC unsuccessfully sought to adjourn it, on the basis that consideration was being given to discharging or revoking the certificate of funding because Mrs. Murphy had misrepresented her financial position; revocation would or might result in Mr. Rayner losing his right to claim against the LSC. The LSC submitted in its skeleton argument that “if the certificate is revoked no liability can arise on the part of the LSC”.

[31]The LSC further submitted in its skeleton argument that there was no cover between 19th May and 1st September 2010, and that Mrs. Murphy was personally liable for the costs, since she had no cost protection. The note of the hearing provided by Mr. Rayner's solicitors shows that this point was argued, and it was determined by the costs judge in the LSC’s favour. He ordered that:- “[Mrs. Murphy] did not have Costs Protection (sic) under section 11 of the Administration of Justice Act (sic) 1999 and the Community Legal Service (Costs Protection) Regulations 2000 in respect of the period from 19 May 2010 to 31 August 2010 inclusive”.

[32]The note of the hearing shows that the costs judge reminded Mr. Rayner’s counsel of the need to seek permission to appeal, but it appears that no permission was sought,

[33]On 15th September 2011, the LSC decided to revoke the funding certificate; this decision was upheld by the Independent Funding Adjudicator on 17th October 2011, and on 20th October 2011 the LSC wrote to Penningtons to say that its decision was final. The only practical effect of this was to prevent Mr. Rayner from making a claim against the LSC. There was no realistic possibility of recovering funds from Mrs. Murphy. In January Mr. Rayner sought permission for judicial review of the LSC’s decision, which Lindlom J. granted on 31st May 2012. On 3rd August 2012, the LSC and Mr. Rayner agreed a consent order, the effect of which was that the decision to revoke the funding certificate was reversed, and that Mr. Rayner’s costs of the judicial review proceedings were to be paid by the LSC.

[34]In the course of the judicial review proceedings, the LSC disclosed an extension of cover for the Smithfield’s services, recorded on the funding certificate of 1st February 2011 to cover “work as detailed in the case plan dated 1/4/2010...”, which was the Case Plan provided by Ismail & Co., disclosure of which the costs judge refused as part of the decision under appeal. The LSC also disclosed in the judicial review proceedings a memorandum dated 3rd October 2011 stating that “the decision to award an exceptional funding contract to [Smithfield] was based on a continuity of [Mrs. Murphy’s] entitlement to public legal funding”, and an Agenda Note addressed to the adjudicator with regard to Mrs. Murphy’s appeal against the revocation, stating that the LSC considered that the CFA agreement was not relevant to their funding decision. However, the same Agenda Note also states that “the legal aid costs [totalling] £61,155 excluding VAT.. .do not include the costs for the period of time from when Ismail & Co terminated their retainer and until Smithfield Partnership applied for an exceptional case contract with the Commission”.

The first issue

[35]For the purposes of this issue, it is necessary to refer only to the following parts of para. 5 of the regulations:- (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 ... (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: ... as regards the costs incurred in a court of first instance, ... the non-funded party is an individual...”

[36]The word “incurred” is not defined, but the costs judge in this case held that in order for a person to have “incurred” costs, he must have had a liability to pay them. I respectfully agree, and it may be that a liability to pay is all that needs to be established, for example in a case in which the non-funded party has not paid his solicitors and cannot do so without recovering from the LSC. Such a party would have “incurred” the costs by reason of being liable for them.

[37]Where there is more than one non-funded party, including a company, and all parties are jointly and severally liable for all the costs, the obvious question arises, for which no solution or even guidance is to be found in the regulations, which of the parties has incurred the costs, and how much of them. One possible construction of the regulations is that they entitle the non-funded individual to claim an indemnity for all the costs, if he was liable for and has paid them, irrespective of the liability of any other party. The regulations do not say either that the individual non-funded party can recover only those costs for which he alone was liable, nor do they provide for any form of apportionment, where there is joint and several liability. On that construction, if the individual was liable for all the costs, and paid them, for example in circumstances in which the corporate defendant(s) had no resources, he would be able to recover in full. However, an objection to this construction of the regulations is that it might enable the individual to pay all the costs solely for the purpose of maximising the claim against the LSC.

[38]Another possible construction, in my view more likely to be the correct one, is that the party who has made the payment would be able to recover if he has paid no more than what was, on a fair apportionment, his share of the costs; if he has paid more, he should be regarded as having paid it on behalf of the corporate non-funded party or parties. In deciding what was the appropriate level of his contribution, the court would be able to look at all the circumstances, including the extent of the liability for the costs of each of the non-funded parties, individual or corporate, the work done for each, the work done for all in common and who made what payments.

[39]The costs judge referred to the decision in Bayliss v. Kelly [1997] 2 Costs L.R. 212, which concerned a legal aid taxation in a case in which the solicitor had acted for one of three defendants to a claim for wrongful interference with goods relating to a Rolls Royce, one of the others being a company controlled by the legally aided defendant.

[40]Chadwick J. refused to treat the individual defendant as more important than the others, and stated the principle applicable in that case in the following terms at 217:- “(i) Where a solicitor acts for a number of defendants to the same action on separate retainers, each client is entitled to have a separate bill and have that bill taxed as between himself and the solicitor; (ii) In taxing that bill the court should have regard to the overriding principle that the client is to be charged only with the costs properly attributable to the conduct of his defence; (iii) Any costs relating solely to the defence of one client should be charged to him, to the exclusion of the other clients; (iv) The court must have regard to the nature of the defences raised in order to determine whether there were distinct issues in relation to particular defendants; (v) The general costs of the action must be apportioned pro rata; (vi) It is irrelevant that the effect of an apportionment may be that the solicitor cannot recover some part of the apportioned costs.” He went on to analyse the facts in detail and concluded that there were no circumstances in the case justifying any departure from the normal pro rata apportionment.

[41]Some caution is needed in considering the scope of this decision. In the first place, what was in issue was, as Chadwick J. made clear at 215, in essence a solicitor and client taxation. The case did not involve a claim by a non-funded party. Secondly, on the facts, all three of the solicitor’s clients were substantial defendants to the same claim. Thirdly, as is clear from the statement of principle, it was applicable to a case in which there were separate retainers for each client which did not make each client liable for the whole of the costs. That explains the reference at (vi) to the possible inability in the solicitor to recover all his costs, if one of the clients was insolvent. It is also clear from the passages from the judgment in Re Colquhoun (1854) De G, M&G 35 and Burridge v. Bellew (1875) 32 L.T. 807 cited by Chadwick J., that the ratio of these decisions was also limited to cases with several retainers, under which each client was solely responsible for some of the costs, with all jointly liable only for part.

[42]In the present case, it seems from paras. 9 to 11 of the judgment of the costs judge that Aetemus’ and Courtina’s retainers provided that Mr. Rayner was to be primarily liable for all the costs, but that each of the companies would be jointly and severally liable if he did not pay: this appears to differ, in a possibly material way, from the retainers in Bayliss. in which each defendant was liable for costs incurred for him alone and one-third of the costs incurred jointly. In other words, in Bayliss. there was partial joint liability, in the present case joint and several liability, but on the basis that the solicitors would look first to Mr. Rayner. It may be arguable that, in these circumstances, all that Mr. Rayner has to do is to prove that he paid all the costs, as the party primarily liable.

[43]I was also referred to the decision of Sharp J., sitting with Master Gordon-Saker and Greg Cox as assessors, in The Legal Services Commission v. F.A. & V

[2011] EWHC 899 (QB)

. The facts of that case were not dissimilar from the present case. The main proceedings were ancillary matrimonial proceedings, in which one of the parties sought orders for transfers of properties owned by a company in which another company referred to as K had shares were beneficially owned by the other party and should be transferred to her. K intervened in the proceedings, and the LSC claimed the Master had been wrong to reject its submission that some of the costs should be attributed to K. Sharp J. said as follows “56. Third, and in any event, I consider the Master’s decision was correct on the facts for the reasons advanced by Mr. Mansfield. In short, billing was to V not to K because she was the legal owner of the shares. The question for determination in the ancillary relief proceedings was whether V was the trustee for R’s beneficial interest in the assets she held through her shareholding in K. K and V had separate retainers: and each party as billed separately. K took no active part in the proceedings after the initial billing as Ms. Watson’s evidence makes clear. Mr. Mansfield says that Ms. Watson, as a solicitor and officer of the court, answered a direct question from the Master about these costs at the hearing (a matter not challenged by Mr. Marven before me). It is a moot point Mr. Mansfield says as to whether K was a necessary party or not. The work was done to protect V’s assets, and K played no role in the proceedings other than to lodge points of defence. What mattered was the beneficial ownership of the shares. The fact that the property interests in question were held through a corporate vehicle was nothing to the point. If V had been found to have been a trustee, then the company would have vested in it beneficially, and his interest in it would have been made subject to the application for a property transfer/adjustment orders by P. As Mr. Mansfield pithily described it therefore, the company was simply the container: the court was concerned with who owned the contained. That was all.”

[44]Mrs. Peacocke submits that the situation in the present case is the same. Aetemus and Courtina were joined in the proceedings, arguably unnecessarily, because they were legal owners of the property in which Mrs. Murphy claimed to have acquired an interest by proprietary estoppel, but they had no separate interest in the proceedings and took little or no part in it; it was not suggested in the proceedings that Mr. Rayner would not have had authority to make representations binding on either of the companies. This argument may prevail in the end, but I do not think that Sharp J. decided anything more than that the Master had been entitled to reach the conclusion he did on the facts of the case, and that on an appeal, which was a review and not a rehearing, that was the end of the matter. To the extent that she expressed the view that he was right, she was speaking obiter and, if (which I doubt) she was suggesting that in all cases the fact that a corporate defendant was wholly owned by an individual defendant meant that all the costs could properly be attributed to the individual defendant, this was inconsistent with Bayliss. which does not appear to have been cited to her.

[45]It does not seem to me that the law is settled, in a case in which the retainers are in the form in which they are in the present case, and in any event that the costs judge was entirely justified in saying that he did not have the necessary factual material to reach a conclusion. In particular, there was no evidence to enable him to decide whether Mr. Rayner did pay the whole amount, what part was played by the companies in the litigation, or whether their interests were affected by it. The information available about what was invoiced to the companies calls into question the assertion that they played only a minimal part in the proceedings, and had no interest in them. I have not seen the invoices, but I am told that they showed substantial amounts charged to each of the companies. Mrs. Peacocke asserted that the companies were charged because they held funds for Mr. Rayner, out of which payment was to be made, but this has not been proved and, if that were the position, one would expect Mr. Rayner simply to instruct the companies to make the payment, rather than for invoices to be addressed to them. I was also told that the invoices to the companies did not charge VAT, by agreement with HMRC; this suggests that HMRC may have been given information, which they were prepared to accept, that a substantial part of the services had been rendered to the companies and not to Mr. Rayner, who is resident here.

[46]All this amply justifies the decision of the costs judge to go into matters in more detail, and order a detailed bill of costs relating to each of the invoices submitted to the three defendants. It seems to me that it may also be useful to have disclosure of(a) documents showing the state of account between Mr. Rayner and the companies and

(b) any correspondence, or internal notes of conversations, between Mr. Rayner or his solicitors or other advisers and HMRC, regarding VAT. If there is an application, I will consider it after handing down judgment. The second issue The relevant provisions

The second issue

[47]In order to consider this issue, it is necessary to set out section 11(1) of the Access to Justice Act 1999, and further provisions of the Regulations.

[48]Section 11(1) of the Access to Justice Act 1999 provides as follows:- “11. Costs in funded cases (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 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.” (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;

[49]The following are the relevant definitions in the Interpretation provisions of the regulations in para. 2:- “ “cost protection” means the limit on costs awarded against a client set out in section 11(1) of the Act; ... “funded proceedings” means proceedings (including prospective 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” means 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 to 11 of the Act; ...”

[50]Para. 3 of the regulations is headed “Cost protection”, and deals with certain situations in which cost protection shall or shall not apply. Sub-paras. (3) and (4) are of importance here:- “3. Cost protection (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 or after the revocation. ...” (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.

[51]Para. 5 deals with costs orders against the Commission. Sub-para. (1) sets out the basic area of application as follows:- “(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.” (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.”

[52]Sub-paras. (2) and (4) provide as follows:- “(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 part 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. ... (4) Where the client receives funded services for 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.”

[53]For present purposes, the other parts of para. 5 do not matter: they provide (inter alia) for a time limit for the non-funded party’s request, that the court must be satisfied that the non-funded party will suffer financial hardship and that it is just and equitable that provision for the costs should be made out of public funds.

The arguments before the costs judge and his decision

[54]In summary:- (a). Mrs. Peacocke’s argument on behalf of Mr. Rayner before the costs judge was that, on the proper construction of para. 5(4), the costs he incurred between 19th May and 31st August 2010 were recoverable if and to the extent that they could fairly be “attributed” to the previous period, in which Mrs. Murphy was funded, that is if he would not have had to incur these costs if the LSC had not supported her in the earlier period. (b). Mr. Gimlette submitted on behalf of the LSC(i) that the effect of para. 5(1) (c), alternatively the effect of para. 5(4) read together with the relevant definitions in para. 2, was that Mr. Rayner could not recover any costs in the disputed period if Mrs. Murphy had no costs protection in that period and

(ii) that, the costs judge having determined on 18th July 2011 that she had not, this was res judicata.

[55]The costs judge agreed with Mr. Gimlette’s argument. He said that there was “a need for certainty”, and that it was important to define when cost protection applied, and when a successful defendant could know with some certainty what he could recover. He did not accede to the argument based on para. 5(1) (c), but he held that the effect of para. 3(3) was that cost protection ceased when funded services under the certificate ceased to be provided, and that no costs incurred by Mr. Rayner between 19th May and 31st August 2010, when Mrs. Murphy was not covered by public funding and had no cost protection, could be claimed from the LSC.

The parties’ arguments on the appeal

[56]Mrs. Peacocke’s argument on appeal is a simple one and may be summarised as follows:- (a). The natural meaning of “attributable” in para. 5(4) is that it denotes a simple causal link between the services funded by the LSC and the defence costs of the non- funded party. (b). That construction accords with the purpose of the provisions, which is to protect the non-funded party from the consequences of unsuccessful proceedings funded by the LSC when it is just and equitable to do so. (c). That this is the only fair construction; to exclude costs incurred in a period when, for whatever reason, the claimant was not being funded, when such costs were the inevitable result of the claimant having been funded earlier, would have an unfair and random effect. (d). If the draftsman of the regulations had intended to exclude all costs incurred in any period in which the claimant was not in receipt of any funding, it would have been simple so to provide in terms; instead para. 5(4) provides for costs “attributable to” the period in which the claimant was in receipt of funding to be recoverable. (e). To the extent that earlier authorities, including in particular S. v. S. [1978] 1 W.L.R., supports a different view, these were authorities under different regulations applicable to a different regime; under the present regime, specific tasks are funded under case plans, as opposed to the previous overall funding of legal representation for the proceedings as a whole.

[57]Mr. Gimlette’s argument may be summarised as follows:- (a). The effect of the regulations is that the non-funded party can only recover costs incurred in those parts of the proceedings in which costs protection applies, which means the period in which the claimant was in receipt of funded services (see Burridge v.Stafford. Khan v. Ali [2000] 1 W.L.R. 927 (C.A.). There is a simple test, referable to time. (b). Para.

(c) of the regulations is in plain terms:

“Regulations 6 to 13.. .apply only where cost protection applies”

. This excludes any claim for costs incurred by the non- funded party at a time where the other party had no cost protection. (c). Alternatively, para. 5(4) of the regulations has this effect. The construction of para. 5(4) contended for on behalf of Mr. Rayner is untenable as a matter of language because it provides in this situation that the reference to the costs incurred by the non- funded party is to be construed as a reference to so much of those costs as is attributable to the part of the proceedings which are funded proceedings; the definition of “funded proceedings (“... that part of proceedings during which the client receives funded services”) demonstrates that the test for what is covered is one of time. (d). For Mr. Rayner’s claim to succeed, the draftsman of the regulations would have had to provide in para. 5(4) for “...so much of those costs as is attributable to the fundedservices”. (e). Para. 3(3)(a) and (b) of the regulations make it clear that whether “cost protection” applies to a claimant depends on when his costs were incurred, and not any other test such as whether they relate to steps authorised under a case plan; the same applies to the protection afforded to non-funded party. (f). In principle, the non-funded party’s claim does not depend on causation; he either fulfils the qualifying conditions, or he does not. (g). As well as being irreconcilable with the wording of the regulations, the argument on behalf of Mr. Rayner is entirely novel and unprecedented, finds no support in the authorities and is inconsistent with Turner v. Plasplues [1996] 2 All E.R. 939 and Burridge (above). (h). The construction contended for on behalf of Mr. Rayner would also be “extremely impracticable and difficult to implement, and would introduce uncertainty ...” whereas his construction offers certainty and finality at a time when the parties are making important decisions about litigation”. (i). The statutory scheme created under the regulations is one in which cost protection and the LSC’s potential liability are simultaneous:- “Essentially, the two questions are considered in tandem. Wherever an assisted party has cost protection, he can only be pursued for costs to a very limited extent (section 11) but, during exactly the same period, the [LSC] is potentially liable. Conversely, if there is no ‘cost protection’ in a given period, the assisted party is fully liable for the costs (in the same way as any other litigant), and the LSC cannot be liable”, (j). Therefore, the liability of the assisted party and of the LSC are both defined by reference to the same test, namely whether, at the relevant time, the proceedings are “funded proceedings”: see paras. 3(3) and 5(4); the regulations cannot be construed as producing conflicting results, in which the assisted party has the benefit of cost protection, yet the LSC is not regarded as providing funded services, and so is not potentially liable, or (as is contended on behalf of Mr. Rayner) vice versa.

The authorities

[58]The earliest case to which I was referred by Mr. Gimlette is the decision of the Court of Appeal in Turner v. Plasplugs. above, in which the issue was whether the plaintiff was a “legally assisted person” within the meaning of section 2(11) of the Legal Aid Act 1988, so as to entitle him to the costs protection, as then provided for in section 17(1). The Court of Appeal held that the plaintiff, whose legal aid certificate was limited to obtaining further evidence and thereafter counsel’s opinion as to merits and quantum, to include settling of proceedings if counsel so advised, was no longer a legally assisted person when he issued the proceedings and obtained advice on the defence, because the certificate did not cover issuing the proceedings, as opposed to having them settled by counsel, and was not extended to cover these steps.

[59]As Mr. Gimlette submits, this case is authority for the proposition that, where the steps for which a certificate has been granted have been accomplished, the certificate is spent without the need for a formal discharge of the certificate, and the claimant cannot be regarded as an assisted person with cost protection. The same conclusion had been reached in Littaur v. Steggles Palmer [1986] 1 All E.R. 780, in which it was decided that the client’s solicitor was entitled to his normal fees, for all his work, when the client had been a legally assisted person only in respect of one discrete issue, contempt of court proceedings.

[60]There was no consideration in Turner, or in any of the previous authorities referred to in it, of what the position would be as between a successful non-funded party and the Legal Aid Board or, in particular, whether the non-funded party’s claim was strictly limited to costs incurred in the period in which the plaintiff was an assisted person. Therefore, Mrs. Peacocke’s construction is not, as Mr. Gimlette submits, inconsistent with this decision.

[61]Mr. Gimlette next referred me to Burridge and Khan, above, and Khan at least is in point. In Burridge. the issue was whether the defendant, who had been granted legal aid but whose solicitors had ceased to act for her, remained a legally assisted person. In Khan, the issue was whether the non-funded party could recover against the Legal Aid Board in respect of an unsuccessful appeal pursued by the funded party after his solicitors had ceased to act for him. So in Khan the issue was the same as, or similar to, the issue in the present case.

[62]It is clear from the opening paragraph of the judgment of Lord Woolf M.R. (with whom Butler-Sloss and Robert Walker L.J. agreed) that he considered that the issues went in tandem, as Mr. Gimlette has submitted: - “1. This judgment relates to two separate sets of proceedings. The principal questior that has to be determined is when a person ceases to be a legally assisted party for the purposes of sections 17 and 18 of the Legal Aid Act 1988. 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 tc recover costs from the Legal Aid Board.”

[63]Lord Woolf and M.R. then set out the statutory background as follows:- “Section 17 so far as relevant, provides: (1) 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.... Section 18 provides: (1). This section applies to proceedings to which a legally assisted person is a party and which are finally decided in favour of an unassisted party. (2). In any proceedings to which this section applies the court by which the proceedings were so decided may, subject to subsections (3) and (4) below, make an order for the payment by the board to be unassisted party of the whole or any part of the costs incurred by him in the proceedings. (3). Before making an order under this section, the court shall consider what order for costs should be made against the assisted party and for determining his liability in respect of such costs. (4). An order under this section in respect of any costs may only be made if - (a) an order for costs would be made in the proceedings apart from this Act; (b) as respects the costs incurred in a court of first instance, those proceedings were instituted by the assisted party and the court is satisfied that the unassisted party will suffer severe financial hardship unless the order is made; and (c) in any case, the court is satisfied that it is just and equitable in all the circumstances of the case that provision for the costs should be made out of public funds ... (6). In this section ‘costs’ means costs as between party and party, and includes the costs of applying for an order under this section; and 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 subsection (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.... (my emphasis) 86. Section 2 of the Act provides help as to the interpretation of the Act. Section 2(11), as amended by section 66(1) of, and paragraph 44 of Schedule 8 to, the Family Law Act 1996, provides:

“In this Act ‘legally assisted person’ means any person who receives, under this Act, advice, assistance, mediation or representation and, in relation to proceedings, any reference to an assisted party or an unassisted party is to be construed accordingly.”

Advice, assistance and mediation are all given meanings by section The meaning given to “assistance” is wide, it includes assistance in taking any of the steps in respect to proceedings “whether by taking such steps on his behalf (including assistance by way of representation) or by assisting him in taking them on his own behalf.”.

[64]The Court of Appeal held in the Burridge case that the defendant ceased to be legally assisted on 17th October, when her solicitors ceased to act for her and informed the plaintiff’s solicitors of this (see at paras. 14 and 30), and in Khan that this position was reached on 31st January when, again, the solicitors for the non-funded party were told that Mr. Khan had decided to act in person (see paras. 24 and 33).

[65]Lord Woolf started his consideration of the issue by setting out five possible dates :- “26. It is now possible to turn to the first of the legal aid issues, as to the operative date on which a person ceases to be an assisted party for the purposes of sections 17 and 18. There are at least five possible candidates for that date on the facts of the two sets of proceedings we are considering. The first date is the date upon which the nominated solicitor ceases to act for the legally assisted party. The second candidate is the date on which the court and/or the other parties are notified that this is the position. The third candidate is the date on which that solicitor comes off the court record. The fourth date is the date upon which the other party is notified that the assisted party is acting in person and the fifth date is the date upon which the legal aid certificate is discharged or the date on which notice of discharge is given to the other party. Mr. Wadsley on behalf of Mrs. Stafford, relying on the Regulations, contends the correct date is the date that the legal aid certificate is discharged. If this is the correct date, then Mrs. Stafford was entitled to the benefit of the protection of a legal aid certificate throughout the hearing before the deputy judge. The Legal Aid Board contends that it is the first date which is the appropriate one. It is the date on which the person ceases to receive advice, assistance etc. and therefore is no longer within the meaning provided by section 2(11) of the Act.”

[66]He then said that Mr. Wadsley’s candidate, the date that the legal aid certificate was discharged, “would at least have the benefit of certainty”, but he rejected it and, relying on Turner, held that the date on which the other party was notified that the assisted party was acting in person was the relevant date:- “29. I can also reject the suggestion that the court record can control this question. There is the date on which a solicitor ceases to act. It seems to me there are two problems with this candidate. The first is that the date may be very difficult to identify. Secondly, it will be unknown to the other parties whose position can be adversely affected (as these cases show) by the date upon which a party ceases to be legally assisted. It does not seem to me necessary to adjudicate finally upon that date. This is because I am satisfied that at least from the date that a previously legally assisted party starts to act in person, he ceases to be, within the meaning of section 2, a legally assisted person for the purposes of sections 17 and 18 of the Act. If the nominated solicitor ceases to act for him and he commences acting in person, he is no longer receiving the benefit of legal aid. From that date onwards he loses the protection of section 17 and the board ceases to be liable for him under section 18. In the case of Mrs. Stafford, she can be regarded as acting in person from 17 October 1997. In the case of Mr. Khan the relevant date can be taken to be 31 January 1997. The facts of Mr. Khan’s case illustrate the problem if one merely looks at a solicitor ceasing to act. If the second firm of solicitors had not been advised by counsel that the appeal had no merit, the legal aid certificate would no doubt have been amended to make them the nominated solicitors. That Mr. Khan should not if that had happened be regarded as being a legally assisted person throughout seems highly inappropriate.”

[67]As I have said above, it is clear from the opening paragraph of Burridge and Khan, and from the decision in Khan, that the Court decided that the unassisted party’s right to recover costs from the Legal Aid Board was limited to costs incurred in the period in which the other party was assisted. If that decision is binding on me, as of course it normally would be, that would conclude the issue decisively in favour of the LSC, unless there were a material difference between the provisions of the Legal Aid Act 1988 and the corresponding provisions of the regulations, which there is not. What now appears in para.(4) of the 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 aid 1988 Acts. The wording has been streamlined, but I can detect no change of substance.

[68]In my view, however, this case 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. Such was the conclusion of the Court of Appeal in R. fKhadiml v. Brent LBC Housing Benefit Review Board [2001] Q.B. 955:- “The rule as to issues assumed without argument33. We therefore conclude, not without some hesitation, that there is a principle stated in general terms that a subsequent court is not bound by proposition of law assumed by an earlier court that was not the subject of argument before or consideration by that court. Since there is no direct Court of Appeal authority to that general effect we should indicate why we think the principle to be justified.

34. First, even though it is assumed, on the basis of some observations in the House of Lords in Davis v. Johnson

[1979] Ac 264

, that the categories of exemption stated in stated in Young v. Bristol Aeroplane Co Ltd

[1944] KB 728

are closed, National Enterprises Ltd v. Racal Communications Ltd

[1975] Ch 397

establishes that that is not so in respect of the present line of authority: see paragraph 31 above. That consideration is reinforced by the fact that Lord Diplock, in expressing his view in Baker v The Queen

[1975] AC 774

, 788 , did not think that it involved any departure from the orthodox rules of precedent.

35. Second, in each of the authorities cited the rule is in fact stated in general terms, even though the facts addressed may be in a narrower compass. Those statements were, in our respectful view, properly synthesized by Sir Nicholas Browne-Wilkinson V-C in In re Hetherington, deed

[1990] Ch 1

36. Third, we have to remember that it is the reasons that bind, and not the decision. Any formulation of a rule of precedent must be flexible enough to respect that basic truth. That is what led Lord Diplock to say in Baker v. The Queen

[1975] AC 774

, 788C, ...., that whilst an assumed proposition may be part of the ratio, it does not have precedential value. To hold otherwise would be to come close to permitting the outcome of the case, rather than its reasoning, to dictate its status.

37. Fourth, it is very well recognised that a court can identify a part of the ration that has not been the subject of argument, and deny it precedential value: see paragraph 22 above. But if it were the case that all parts of the ratio, as defined for instance in paragraph 16 above, bind, then it would seem that the judge would not be free to indicate that one of the assumptions necessary to his decision did not have precedential value. It was recognition of the need to leave judges that freedom, and in an appropriate case to enable a subsequent court equally to conclude that a proposition that was part of the ratio none the less had not been the subject of decision, that led Russell LJ to speak as he did in National Enterprises Ltd v. Racal Communications Ltd

[1975] Ch 397

,406. The ambit of the rule, and the present case

38. Like all exceptions to, and modifications of, the strict rule of precedent, this rule must only be applied in the most obvious of cases, and limited with great care. The basis of it is that the proposition in question must have been assumed, and not have been the subject of decision. That condition will almost always only be fulfilled when the point has not been expressly raised before the court and there has been no argument upon it: as Russell LJ went to some lengths in National Enterprises Ltd v. Racal Communications Ltd to demonstrate had occurred in the previous case Davies Middleton & Davies Ltd v. Cardiff Corpn 62 LGT 134. And there may of course be cases, perhaps many cases, where a point has not been the subject of argument, but scrutiny of the judgment indicates that the court’s acceptance of the point went beyond mere assumption. Very little is likely to be required to draw that latter conclusion: because a later court will start from the position, encouraged by judicial comity, that its predecessor did indeed address all the matters essential for its decision. 39. In Goonery’s case the appellant appeared in person. That in itself is no ground at all for assuming that the present rule is likely to be applicable. The only report of the Court of Appeal’s judgment that is available is in transcript form. The case acutely illustrates the difficulty of dealing with cases not reported in the official Law Reports, where there is a report of the argument. However, the fairly full account given by Leggatt LJ of what Mr. Goonery said to the court contains no indication that he raised the point now in issue, and there is no suggestion that anyone else did so. Reading the judgment as carefully as we can, we are driven to the conclusion that the court in Goonery’s case assumed that it had to decide the relevance of Mr. Goonery’s payment for use of the kitchen on the basis that regulation 3(4) provided a complete test of residence for the purpose of the Regulations. That assumption was not the subject of argument or consideration, and thus falls within the principle stated by Sir Nicholas Browne- Wilkinson V-C in In re. Hetherington, deed

[1990] Ch 1

. Disposal of the appeal 40. For that reason, the judge was not constrained by the judgment in Goonery’s case, and neither are we, from giving the Regulations their natural and obvious meaning .... . We would for that reason allow the appeal, and make the declaration sought by the applicant, with the effect that the board must determine the remitted case according to the law so declared.” The ambit of the rule, and the present case

Disposal of the appeal

[69]In the present case, while it is true that the case is only reported in the Weekly Law reports, without the arguments being set out, it is in my view quite clear that the only issue was when the claimant ceased to be an assisted person. The judgment does not refer to any argument as to whether costs could be recovered against the Board even if incurred after that time. If the argument advanced by Mrs. Peacocke in this case had been made in Khan, it is inconceivable that it would not have been dealt with expressly. The position is, as the costs judge said in giving permission to appeal in this case, and as Mr. Gimlette submits, that this is a novel argument, which nobody has ever raised and no court has ever considered.

[70]Having considered the need to be very cautious, as indicated in para. 38 of the judgment in Kadhim. I am nevertheless sure that the Court in Burridge and Khan assumed that the non-funded party’s claim for costs did not cover costs incurred after the other party ceased to be an assisted person, and that I should not regard myself as bound by it on this issue.

[71]Mr. Gimlette also referred me to the decision of Neuberger J. in Stein v. Blake (No. 3), transcript 24th October 2000, concerning an application for a wasted costs order against the LSC based on its alleged failure to inform the non-funded party of what was happening in relation to legal assistance. Neuberger J. said the following (pages 6-7 of the transcript), which Mr. Gimlette relies on in relation to Mr. Rayner’s allegation that the LSC (if right now) was wrong to say that the certificate remained in force and that Mrs. Murphy’s solicitors gave incorrect information:- “In this connection, Mr. Gimlette contends that, in order to succeed in an application for wasted costs against a third party if the applicant is alleging fault on the part of a third party, he must show that that fault caused, indeed was the proximate cause of, the expenditure of the costs which he or she claims against the third party. That appears to me to be right as a matter of principle. It is also consistent with the decision and reasoning of Thomas J in Kelly: see particularly at 252F-G and what follows. In effect, Thomas J decided that the cause of the wasted costs which the plaintiff in that case had to incur lay partly with the LSC and partly with the plaintiff’s solicitors; he then apportioned liability for the wasted costs by reference to which of the costs were caused by the LSC’s fault and which the plaintiffs solicitor’s fault. In the present case, Mr. Gimlette contends that, if anyone had a duty to inform the defendant’s solicitors that the LSC had effectively embargoed any further expenditure on the claimant’s case, it was the claimant or the claimant’s solicitors, and not the LSC. The LSC were not to know precisely what was happening in the litigation, whether it was being processed pro bono by the claimant’s solicitors, whether the claimant, being in receipt of funds, was able to fund the work, or whether the claimant was doing it himself. To use Mr Gimlette’s analogy, the LSC provided the petrol not the driver, and it was for the driver not the petrol pump attendant to inform the defendant’s solicitors of what the motorcar was doing. It is the claimant’s solicitors who have conduct of the proceedings for the claimant. It is the claimant and this solicitors who are under a duty under is the provisions of CPR rule 1.3 to help the court to further the overriding objective. This must involve them in communicating well ahead of trial to make sure that the case is ready for the trial, and the trial date is capable of being held, and with a view to keeping down costs and complying with the other aims embodied in the overriding objective. It is not for the LSC to perform this function. In this connection, it seems to me that some support for this view can be found in the provisions of the Civil Legal Aid (General) Regulations 1989. Rules 54 and 82 deal with, respectively, an amendment to a legal aid certificate and revocation or discharge of a legal aid certificate. The duty of the LSC in each case is to serve notice on the legally assisted person and his solicitors. The duty to inform the other side is on the legally assisted person’s solicitors. While I accept that an embargo on further expenditure is not covered by the Regulations, it appears to me that the attitude of the legislature embodied in those rules is consistent with Mr. Gimlette’s submission and that it is for the legally assisted person and/or his solicitors to inform the other party of an embargo. It is they who will know whether or not they will be ready for trial. It is not for the LSC. Miss Lake draws attention to two specific factors. First, the LSC was very slow in dealing with matters, apparently not requiring the claimant to stick to deadlines and not pressing the claimant and, indeed, only withdrawing legal aid, one now learns, in August 2000, knowing of the trial window since as long ago as the end of 1999. She says that the LSC failed to act promptly and failed to tell the defendant’s solicitors what was going on. Secondly, unusually, the LSC was in constant communication, albeit spasmodic communication, with the defendant’s representative and was informing the defendant’s representative of certain things. In those circumstances, Miss Lake says an unanswerable case for saying that the LSC should have informed the defendant and his solicitors what was going on. I appreciate the force of those points, but, at any rate on the current state of the evidence, if it is appropriate to decide the matter now, I would accept Mr Gimlette’s submission....”

[72]I do not think that there is any substance in Mrs. Peacock’e submissions about what Mr. Rayner and his advisers were told. They were told that Mrs. Murphy was no longer represented by Ismail, but that the certificate remained in force and, if as a matter of law the result of that is(a) that the certificate remained in force, but that she ceased to enjoy costs protection and

(b) that Mr. Rayner therefore also lost his potential claim, then both Smithfield and Penningtons, while possibly mistaken as to the legal position, knew the relevant facts. Anyhow, the LSC had no relevant duty, other than not to make an inaccurate statement.

[73]I was also referred to the decision of Briggs J., sitting with Master O’Hare and Mr. David Harris, in Mohammadi v. Shellpoint Trustees Limited and Ansten InvestmentsLimited

[2009] EWHC 1098

(Ch.), which concerned proceedings brought in 1993 which were governed by the statutory scheme laid down by the 1988 Act, not by the present regulations: see para. 23. The issue in the case was whether Mrs. Mohammadi was a legally assisted person, with protection as to her costs, in periods in between successive discharges and reinstatements of her legal aid certificates. Her case was that she had been a legally assisted party within the meaning of section 17 of the 1988 Act for the whole of these periods. The case did not concern an application by the non-funded party against the legal aid authorities.

[74]Having cited Burridge at some length, Briggs J. rejected Mrs. Mohammadi’s case for the following reasons:- “24. In my judgment the legal issues thrown up by this part of Mrs Mohammadi’s appeal should be resolved as follows. First, during any period when she was in fact acting in person, Mrs Mohammadi was not a legally assisted person, even though she was actively seeking to reinstate for her benefit the provision to her of legal advice, assistance and representation under the Act in connection with her pending proceedings. Further, it makes no difference in my judgment that, on two occasions after she had acted briefly as a litigant in person, Mrs Mohammadi later obtained the services of a new firm of solicitors under her reinstated certificates.25. Secondly, (and to the extent that it matters) Mrs Mohammadi was not a legally assisted person for the purposes of section 17 during any period after a firm of solicitors which had ceased to act for her had communicated that fact to the Respondents’ solicitors, even if a period of time then elapsed before she took any active steps as a litigant in person. Thus, if and to the extent that the Respondents incurred costs during such a period (for example in preparing and issuing an application after being notified that Mrs Mohammadi’s then solicitors had ceased to act, but before she took an active step by appearing in court in response to it), those costs would have been incurred at a time when Mrs Mohammadi was not a legally assisted person.

26. Thirdly, whatever may have been the view of the writer of the Legal Services Commission’s letter of 6th July 2007, the reinstatement of a legal aid certificate for the purposes of enabling new solicitors to act after the discharge of that certificate when previous solicitors ceased to act, does not have the effect retrospectively, that the litigant is deemed to have been a legally assisted person for the purposes of section 17 during the period between the discharge and the reinstatement of the certificates or, more importantly, during any period between the termination of the old firm’s retainer, and the commencement of the new firm’s retainer. In that respect, I say nothing about the possible effect as between the Legal Services Commission and any particular litigant of the reinstatement of a certificate (coupled with such a statement as appears in the July 2007 letter), so far as concerns, for example, the ability of the litigant to obtain payment of her solicitors’ costs from the Legal Services Commission. The question with which I am concerned is whether any such retrospective deeming effect operates so as adversely to affect the position of third parties and, in particular, opposing parties in the litigation in question.

27. My reasons for those conclusions are as follows. First, the conclusion that, for as long as Mrs Mohammadi was in fact acting in person she was not a legally assisted person inevitably follows from the analysis of the Court of Appeal in Burridge. and from the plain meaning of the definition in section 2(11) of the 1988 Act. The definition requires inquiry as to whether a person is in receipt of advice (etc) under the Act. A litigant acting in person cannot be in receipt of legal advice in that sense. The phrase “acting in person” as used by the Court of Appeal in Burridge means taking some active step in the proceedings, rather than merely the converse of not being legally represented. Otherwise there would have been no difference between Categories (i) and (iv) in the list which I have summarised above.

28. Secondly, it would in my judgment be wrong to treat the state of mind of the litigant acting in person as determinative of the question whether she had at that stage ceased to be a legally assisted person, so as to distinguish between litigants like Mrs. Stafford who decide to act in person permanently and litigants like Mrs Mohammadi who act in person only while seeking to obtain alternative legal representation. It would be wrong because an investigation of the litigant’s motivation would be altogether too subjective and uncertain, and would have, on its face, nothing to do with the objective question stated in section 2(11) of the Act, namely, whether the litigant was in receipt, under the Act, of legal advice etc.

29. Thirdly, as Lord Woolf observed in Burridge. the question whether at any particular time a litigant is a legally assisted person is of real importance for the other litigants in the case. They need to be able to know whether their opponent is or is not, at any particular time, a legally assisted person, for consequences arising under both sections 17 and 18. It cannot therefore be right that the other litigants, once informed that the previously legally assisted person has ceased to be in receipt of legal advice and representation, is nonetheless kept in suspense until the outcome of any investigation as to his opponent’s motivation, or the outcome of any subsequent application to reinstate the legal aid certificate in question.

30. That conclusion may go slightly further in resolving the issue in Burridge beyond that which, on the facts, the Court of Appeal considered strictly necessary. But I go further only in concluding that when a legally assisted person’s solicitors have ceased to act, without another firm being retained under a legal aid certificate, and that fact has been communicated to the opposing party, then from the moment of that communication the litigant ceases to be a legally assisted person.

31. In fairness to the writer of the Legal Service Commission’s letter of 6th July 2007, the final paragraph only purported to assure Mrs Mohammadi that her certificate was, upon reinstatement, deemed never to have been discharged, for the purposes of her being “covered” for work done within the scope of the certificates from their original issue dates”. The letter contained no express observation about the effect of reinstatement of a discharged certificate upon the costs protection afforded by section 17. Even if it had, I would not, with respect, have been bound by it, and for the reasons given, I would have disagreed with it.

32. It follows that in my judgment Master Campbell resolved the issue of law as to Mrs Mohammadi’s status or otherwise as a legally assisted person entirely correctly, by saying, in paragraph 8 of his judgment that:

“Applying Burridge, for any dates upon which she was acting for herself, as opposed tc having or being given legal advice, Mrs Mohammadi did not have costs protection and those periods must be identified, and for those periods she will remain liable for costs subject to any set-off for the costs of the defendants.” “Applying Burridge, for any dates upon which she was acting for herself, as opposed tc having or being given legal advice, Mrs Mohammadi did not have costs protection and those periods must be identified, and for those periods she will remain liable for costs subject to any set-off for the costs of the defendants.”

[75]This case again concerns the position of the assisted party, but that is said at para. 29 again appears to assume that the non-funded party’s claim could not extend to costs incurred after the funded party ceases to be an assisted person. However, the issue did not arise, and there was no discussion of it.

[76]Finally, I was referred by Mrs. Peacocke to the decision of the Court of Appeal in S v. S. above, a case decided under the Legal Aid Act 1974, in which the non-funded party sought costs against the legal aid fund. Section 14(5) of the 1974 Act was in the similar terms to section 18(6) the 1988 Act. A non-funded party sought an order in respect of costs incurred before the date of the legal aid certificate; that is, the case was in effect the converse of the present case, in that the legal aid certificate was granted, as opposed to withdrawn, just before trial.

[77]Latey J. cited an earlier judgment he had given, in which he had indicated his provisional views, and in which he had cited the dictionary meaning of “attribute”, and he confirmed his provisional view in the following passage:- “Mr. Hollis bases his argument firmly on what he calls the simple, plain English of the wording of that section. In my judgment he is right. If all Parliament wanted to do was to limit the right of recovery to costs incurred during the part of the proceedings when there was a legal aid certificate in force what possible reason was there for not saying so? But it did not. Instead it went out of its way to say “shall be construed as a reference to so much of those costs as is attributable to that part”. Well, what does that mean if it does not mean “attributable”? Does “attributable” mean “during that period”, or “during the part of the proceedings when the certificate was in force”? Why should one put a strained or unnatural meaning on the words? Of course, there are contexts from time to time when one should do so because to do otherwise will plainly defeat the whole object and tenor of an Act or series of Acts. But there is nothing like that here. On the contrary. Parliament surely must have intended a deliberate departure from the commonly used “costs incurred during...” and indeed has been at pains to do so in this section. Of course, one can envisage cases in which costs can be incurred before the grant of a legal aid certificate or after its discharge in the proceedings, but not attributable to the part of those proceedings for which a certificate has been in force. In a civil action, for example, there might be an application for some kind of an injunction which is connected with the action but not in any real sense of the term attributable to the part of it for which a certificate has been issued. In compendious matrimonial proceedings there might be a certificate issued and order for payment of cases out of the fund for a custody application, but it would be unreal and therefore incorrect to say that they were attributable to a property adjustment application. Mr. Matheson said that Parliament might have contemplated a part of the proceedings with a legal aid certificate in force, the certificate discharged and the unassisted person then having to do something more, such as take a judgment in default. He advanced this in course of his duty to help the court and not as part of his argument. It would of course be fatal to his argument because one surely cannot accept that some small and inexpensive step is “attributable” but another is not “attributable” because it is expensive. 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 his 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.”

[78]In the Court of Appeal, Stamp LJ. giving the judgment of the Court (Stamp and Ormord L.JJ.), which reversed Latey J.’s decision, said that if section 13(1) of the Act stood alone, it would enable the court to make an order for the payments to the unassisted person out of the legal aid fund of the whole of his costs, even if the assisted person had only received assistance for a very small part of the proceedings, but that this was prevented by section 14(5). He then referred to provisions demonstrating that, at least on some occasions, when the draftsmen of the legal aid regulations intended to limit costs to those “incurred” during a specified period, and more particularly during a period when the assisted party was in receipt of legal aid, he had said so in unequivocal terms. He then referred to Latey J.’s discussion of “attribute” and said that he had placed on the word “attributable” in the context of the relevant sections a construction which it would not tolerate; it was a word which took its colour by reference to the context in which he found it. He then continued as follows “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 introduction 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 question,(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? It is common ground that a legal aid certificate cannot operate retrospectively and where, as here, the assisted person beings 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 m 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 material 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 subsequently thereto. 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 hereof subsequent to 5p.m. on December 2 and (b) that the costs of the unassisted father incurred prior thereto were not attributable to “that part”. 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 4, 1975.”

[79]That passage represents the decision in S v. S. but Stamp L.J. added the following:- “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 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. 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. 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. We allow the appeal.”

Discussion

[80]In Cusack v. London Borough of Harrow [2013] 1 W.L.R. 2022, Lord Neuberger said of the interpretation of documents, whether contractual or legislative:- “Interpretation of any document ultimately involves identifying the intention of Parliament, the drafter, or the parties. That intention must be determined by reference to the precise words used, their particular documentary and factual context, and, where identifiable, their aim or purpose”.

[81]Starting with the precise words used, where they admit of only one meaning in the relevant context, that is the end of the matter. If not, a court is entitled to prefer the construction which makes the better sense, even if less consistent with the language: see per Lord Clarke in Rainy Sky SA v. Kookmin Bank [2011] 1 W.L.R. 2900 at paras. 21 and 40; a contract case, but equally applicable to the construction of any other kind of document, including these regulations. It is of course necessary to arrive at a construction which is sensible not only on the facts of the instant case, but also in other foreseeable situations which might arise and, if they did, would be governed by the same provision.

[82]Mr. Gimlette relies first on para. 5(l)(c), but this does no more than make it clear that cost protection for the funded party is an essential prerequisite of any claim by the non-funded party; it does not define the extent of the potential claim where there is cost protection. The issue before me turns on the proper construction of para. 5(4), or of section 2(5) of the 1964 Act.

[83]I do not agree with Mr. Gimlette’s submission that this is a case in which para. 5(4) has only one possible meaning. One can, I think, test the point by supposing that Mrs. Murphy had served her Particulars of Claim, but had then lost cost protection by changing her solicitors before the date on which the Defence was due. Would the costs of preparing the Defence be attributable to the “part of [the] proceedings during which [Mrs. Murphy] receive[d] funded services”? One could equally well say yes, because the obligation to serve the Defence arose in the relevant period by reason of the RSC, or specific directions given by the Master, or no, because the costs were incurred outside the relevant period. There is an ambiguity. It is true, as Mr. Gimlette submits, that Mrs. Peacock’s construction would clearly be correct if para. 5(4) had referred to “so much of those costs as is attributable to the funded services”, rather than to “the part of the proceedings which are funded proceedings”, defined as “that part of proceedings during which the client receives funded services”, but that does not make what para. 5(4) does provide any the less ambiguous.

[84]Further, as Mrs. Peacocke says, if the draftsman of the regulations (or of the 1964 Act) had intended to exclude all costs incurred outside the period in which the proceedings were funded, it would have been easy for him to do so directly by providing “so much of those costs as was incurred in..instead of “so much of those costs as is attributable to”. This is a telling point, in circumstances in which the term “costs incurred” is used a few words earlier in the same provision; it is not unnatural to think that the draftsman may have intended “costs...attributable...” to mean something different from “costs incurred”, to be found in the very same sentence.

[85]Turning next to the aim or purpose of the provisions enabling costs orders to be made against the LSC, clearly the underlying rationale is that, if the LSC 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 the LSC, In R. fGunn) v. Secretary for State for the Home Department [2002] 1 W.L.R. 1634, Lord Phillips M.R. said at para. 50, in relation to the practice in the Court of Appeal of making orders for costs in favour of publicly financed bodies: - “We consider that the practice laid down in In Re O should be followed by costs judges when applications are made to them for costs against the commission following a Court of Appeal decision in favour of non-funded parties, even if they are government departments. Costs judges should proceed on the premise that it is just and equitable that the commission should stand behind their “client”, by definition under the Regulations the individual who receives funded services, unless they are aware of facts rendered that result unjust or inequitable”.

[86]In my view, the rationale is very similar, where the court makes an order under section 51 of the Senior Courts Act 1979 against third party funders of litigation; such orders can be made against the LSC in respect of proceedings funded under the provisions of the 1988 Act, but, by virtue of para. 7 of the regulations, this is no longer possible where proceedings are funded under the present regime: see Gunn at para. 18.

[87]Because of the common or at least similar rationale of para. 5 of the regulations and of the power of the court under section 51, it is of some importance to note that a causal link is an essential or at least important ingredient in an award of costs against a third party funder under section 51. See Cook on Costs, 2013 para. 34.13. The authorities, including Hamilton v. A1 Faved (no. 2) [2003] Q.B. 1175 (C.A.), DvmocksFranchise Systems HSfSW) Ptv. Ltd. v. Todd [2004] Todd [2004 1 W.L.R. 2807 and Koninklinje Philips Electronics NY v. Aventi Ltd

[2003] EWHC 2589 (Pty)

, were reviewed in Jackson v. Thakrar [2008] 1 All E.R. 601, in which it was said that the causal link was essential. Other authorities suggest that such an order can be made even if the causal link is not established, although it is always at least a very important or “vital” consideration; see Total Spares and Supplies Ltd. Antarest Ltd. v. Antares SRL

[2006] EWHC 1537

, paras. 51-5 not cited in Jackson, and P.R. Records Ltd. v. Vinyl

[2008] EWHC 192 (Ch)

, paras. 20, 47. On any view, it is clear that in a section 51 case, the court will consider as a decisive or at least very important issue whether, if the funding had not been provided, there would have been no litigation so that the non-funded party’s costs would have been avoided, or whether the litigation would have gone ahead anyhow, so that the funding caused the other party no costs that he would not have incurred in any event

[88]I must consider Mr. Gimlette’s submission, in effect, that it is axiomatic that the periods in which an assisted party has costs protection, and the periods in which the LSC is potentially liable for the costs, must run in tandem: if the winning party cannot recover against the losing party, then and then only, he has a potential remedy against the LSC. Or, to put it another way, there cannot be a situation in which the winning party has a remedy against both the losing party and the LSC for the same costs.

[89]This is at first sight a persuasive point and, as indicated earlier, the decision in Khan and para. 29 of Mohammadi suggests that it may so far have been assumed that this is the position. But I do not think that there is a binding decision to that effect and, if 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 LSC, 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.

[90]I must next consider the question of uncertainty, which comes in two forms: 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?

[91]As to the first of these points, Mr. Gimlette submits that the construction contended for by Mrs. Peacocke is unacceptable, because it is unfair to the non-funded party, who needs to know where he stands and who has to be able to take decisions if he no longer has a potential claim against the LSC. I do not accept this, for two reasons.

[92]First, it begs the question, which is precisely whether he does lose his potential claim against the LSC.

[93]Secondly, certainty is important where people are likely to base their actions on a known position, such as where parties enter into a contract on the basis of an established meaning of certain terms. Here, although it may be of some importance for the non- funded party to know if funding, and therefore cost protection, has been lost, for example because it may be a good time to negotiate, it is unlikely in this context to be of great importance whichever construction is correct. That is because in most cases the funded party is the claimant, and the non-funded party will have no option but to defend the proceedings whether or not he has a potential claim for future costs incurred against the LSC. For example, in the present case, whether or not Mrs. Murphy succeeded in reinstating her funding, Mr. Rayner had no option but to continue to prepare for trial and appear at it to defend the proceedings. Therefore, this does not seem to me to be a point of much substance in construing the meaning of the regulations on this issue.

[94]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. 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.

[95]For these reasons, I do not think that either the uncertainty that might be felt by the non-funded party or the added difficulty on an assessment of costs militates against Mrs. Peacocke’s construction. A construction giving rise to some uncertainty is preferable to one which will, frequently, result in unfairness.

[96]Given that the object of para. 5 of the 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 LSC’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 LSC 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 LSC’s assistance. The fact that, as from 19th 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 LSC’s prior funding.

[97]Further, the LSC’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 LSC 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 LSC’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 LSC, the efficiency with which the new solicitors and the LSC go about reinstating (for example, how much does Mr. Rayner lose in this case because of the delay caused by the LSC’s inability to find the file?), and other matters which are unlikely to affect the fundamental points that the non-funded party’s costs will have been caused by the LSC 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 LSC’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 LSC’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 LSC 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.

[100]As indicated above, it is necessary to consider whether Mrs. Peacocke’s construction works in other situations which may arise. I can see no reason why it should not work, for example, if only part of the proceedings (in the sense of certain issues) were funded, or if only certain parts of the proceedings, such as injunction or contempt proceedings, were covered; in such cases there would have to be an inquiry into what costs were caused by the assistance given to the funded party on these particular issues. More pertinently, perhaps, what of a case such as S. v. S. ? 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, as indeed the court in S. v. S. said.

[101]Mrs. Peacocke also submitted that, if necessary, the decision in S.v.S. could be disregarded because the rules should be construed differently under the new legal aid regime. I would not accept this. 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, is there any significant difference between the wording of the relevant provisions of the Legal Aid Acts and the wording of the present regulations.

[102]However, the essence of the decision in S. v. S. is stated at page 21D-F, and it is that Latey J.’s construction of “ attributable” cannot be right in this context because costs already incurred by the non-assisted person cannot sensibly be attributed to a subsequently funded part of the proceedings. Mrs. Peacocke’s construction is entirely consistent with that, if funding only started just before trial, previously incurred costs would not have been caused by the funded part of the proceedings and would not be attributable to it. It is true that, at 21H, Stamp L.J. refers to “the costs to which the other party, being successful in the proceedings is put during the period of such maintenance” and at 22B to “the costs incurred by the unassisted party in preparation for the trial at atime when the state was maintaining the litigation but there was no issue before the Court as to the extent of the potential claim where the legal aid certificate was withdrawn on the eve of trial, and no decision on any such issue; I think that these passages again reflect, as does the decision in Khan, an assumption sometimes made, but one which has never been tested in any decided case, that the non-funded party cannot make any claim for costs incurred outside the period(s) of cost protection.

Conclusion on issue 2

[103]In summary, therefore, I think that what I have to decide is indeed a novel issue, which has not been tested before, possibly because the amount involved will not usually have been so great, or because litigants have not had the means to test it. 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 LSC’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 19th May 2010 and all or any of Mr. Rayner’s costs between then and 31st 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.

Permission to appeal the order of 18th July 2011

[104]In order to provide for the eventuality that it might be held that Mr. Rayner’s claim in respect of the period of the hiatus must fail because of the decision of the costs judge on the issue of cost protection, Mrs. Peacocke’s skeleton argument indicated that, if Mr. Rayner lost because of the finding that Mrs. Murphy had no cost protection between 19th May and 31st August 2010, he would seek permission to appeal the decision of the costs judge on 18th July 2011, and that application has now been made.

[105]In the event, if my decision on the second issue is correct, there is no need for this application to be pursued. However, since there may be an appeal, I should deal with it in case my decision is wrong.

[106]Mr. Gimlette’s position, nor surprisingly, is that he strongly resists the application, both because he contends that the decision was correct and because the application is made so long out of time, and he has indicated that, if I were minded to allow the application, he would wish to be heard at a further hearing.

[107]In these circumstances, I think it best to do no more than indicate a provisional view, as follows (a). Although at one time I took a different view, I consider that the costs judge reached the right view on the material before him. Although para. 3(3)(b) refers only to funding being withdrawn by discharging the client’s certificate, the position is governed by the opening words in para. 3(3), which provide that costs protection applies only to costs incurred in relation to proceedings which are funded proceedings i.e. where part of the proceedings are funded, only to that part of the proceedings “during which the client received the funded services”. This wording is intended to replicate the decision in Burridge. and the relevant date is the date when the other party is notified of a change of solicitors. See also Mohammadi. Therefore, in the present case, on the basis of the evidence before the costs judge, 19th May 2010 was the correct date. Anyhow, his decision was reached over 2 years ago. For both reasons, I would refuse permission to appeal. (b). However, the material referred to at para. 34 above, about which so far as I am aware Mr. Rayner and his advisers did not know, and could not have known, until much later, does seem to indicate a possibility that the finance actually provided to Smithfield on behalf of Mrs. Murphy included steps provided for in the Ismail case plan of April 2010 and carried out by Smithfield in the period of the hiatus, even though the extension issued with effect from 1st September 2010 did not provide for such a payment to be made. If this is what happened, it would be arguable that, the question being one of fact, Mrs. Murphy was in receipt of funding in the relevant period, even if only retrospectively. (c). If I had decided the second issue differently, what I would have been inclined to do is to order sufficient disclosure of documents or information to provide a conclusive answer as to whether any of the costs incurred by Mrs. Murphy in the period of the hiatus were in fact funded by the LSC, before reaching a decision on the application. If not, I would have refused permission to appeal without going any further into the matter. If so, I would have heard further argument. It may be that, so as to ascertain whether there is anything left in this issue, voluntary disclosure might be given before judgment is handed down.

Conclusion

[108]For the reasons set out above, I allow Mr. Rayner’s appeal on the second issue, but not on the first. I am indebted to counsel for their very helpful arguments, oral and written. If counsel can agree an order in advance of the hearing, there will be no need to attend at the handing down of the judgment. Since this is a second hearing, I do not think that I have jurisdiction to consider any application for permission to appeal.

Cited in 1 later judgment

Rayner v The Lord Chancellor 2015