Rayner v The Lord Chancellor
| Jurisdiction | England & Wales |
| Judge | Lord Justice Underhill,Lady Justice Gloster,Lord Justice McCombe |
| Judgment Date | 09 November 2015 |
| Neutral Citation | [2015] EWCA Civ 1124 |
| Date | 09 November 2015 |
| Docket Number | Case No: A2/2013/3736 |
| Court | Court of Appeal (Civil Division) |
[2015] EWCA Civ 1124
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM Chancery Division
Mr Nicholas Strauss QC
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice McCombe Lady Justice Gloster and Lord Justice Underhill
Case No: A2/2013/3736
Mr Guy Mansfield QC and Mr John Gimlette (instructed by Legal Aid Agency, Central Legal Team) for the Appellant
Mrs Teresa Rosen Peacocke (instructed by Penningtons Solicitors LLP) for the Respondent
Hearing date: 22 June 2015
Approved Judgment
INTRODUCTION
The Respondent to this appeal, Mr Nicholas Rayner, was the defendant in an action brought against him by Mrs Kumari Murphy, who became his carer after he suffered a serious stroke. Part of her claim in the action was for a share in his flat and in his investments, title to which was vested in two off-shore companies which he owned and controlled and which were accordingly also defendants in the action. Mr Rayner counterclaimed for money and other valuables misappropriated by Mrs Murphy.
Mrs Murphy's legal representation was — subject to the hiatus referred to below — funded by the Legal Services Commission ("the Commission") under Part I of the Access to Justice Act 1999 ("the 1999 Act").
The claim and counterclaim were heard by Mr Jeremy Cousins QC, sitting as a Deputy High Court Judge, in the Chancery Division. The trial started on 19 July 2010, was adjourned at the end of the month and was resumed in September, with a further hearing in November. By a judgment handed down on 18 January 2011 Mrs Murphy's claim was dismissed and an account was ordered: following the taking of that account she was ordered to pay Mr Rayner just under £1m. Mr Rayner was awarded the costs of the proceedings on the indemnity basis. There is thought to be no realistic prospect of recovery of any substantial sums from Mrs Murphy.
There are two features of the legal aid system under the 1999 Act, and the predecessor legislation at least as far back as the Legal Aid Act 1964, which are central to this appeal. In summary:
(1) Cost protection. A funded party against whom an order for costs is made enjoys a (qualified) protection against having to pay those costs. I set out the relevant provisions at paras. 15–18 below.
(2) Liability of the funding authority. A non-funded party in whose favour an order for costs has been made against a funded party enjoys a (qualified) right to recover costs from the funding authority — that is, under the 1999 Act, from the Commission. At the time with which we are concerned the relevant provisions appeared in regulation 5 of the Community Legal Service (Cost Protection) Regulations 2000 ("the 2000 Regulations"), which were made under powers conferred by section 11 (4) (d) of the 1999 Act. I set out the provisions in full at para. 19 below, but the most crucial for the purpose of this appeal is regulation 5 (4), which defines the costs in respect of which recovery can be sought as "so much of [the non-funded party's] costs as is attributable to the part of the proceedings which are funded proceedings [my emphasis]".
These two features are closely related in as much as the justification for allowing a non-funded party to recover against the Commission is that the funded party is (normally) impecunious and it is only because of the Commission's involvement that the non-funded party has had to incur the costs of the funded litigation. But the extent to which they can be treated as precise corollaries of one another is one of the key issues before us.
The regime established by the 1999 Act was altered by the Legal Aid Sentencing and Punishment of Offenders Act 2012, and the 2000 Regulations have been replaced with effect from 1 April 2013 by the Civil Legal Aid (Costs) Regulations 2013 (though it appears that the replacement provisions are in substantially identical terms). At the same time the Commission was abolished (see section 38 of the 2012 Act), with responsibility for civil legal aid passing to the Lord Chancellor (who discharges his functions through the Legal Aid Agency). All the Commission's surviving liabilities have been transferred to the Lord Chancellor: see paragraph 7 of Schedule 4 to the 2012 Act.
Mr Rayner made a claim against the Commission under regulation 5 of the 2000 Regulations for the totality of the costs awarded against Mrs Murphy: the sum claimed is over £700,000. The Lord Chancellor accepts that Mr Rayner is in principle entitled to an order, but he does not accept liability for the full amount claimed. The issue arises from the fact that there was a period in the course of the proceedings during which Mrs Murphy was represented by solicitors who were not named in the funding certificate issued by the Commission. The facts can be sufficiently summarised as follows:
(1) Mrs Murphy initially instructed a firm called Ismail & Co., and a funding certificate naming them as the "current supplier" was issued prior to the commencement of proceedings.
(2) In May 2010 Ms Murphy decided that she wished to be represented by a different firm, Smithfield & Partners. Smithfield did not have a legal aid contract. They and Mrs Murphy evidently hoped nevertheless to be awarded an "exceptional case" contract, but she was not prepared to continue with Ismail & Co. while the appropriate application was made. On 18 May notice was served that Smithfield had been instructed under a conditional fee agreement, and on 19 May a formal notice of change of solicitors was filed. From that point Ismail & Co ceased to provide any services to Mrs Murphy. Smithfield proceeded under a CFA pending the determination of the application.
(3) The funding certificate in favour of Ismail & Co was not at any stage withdrawn. It was in due course amended to identify Smithfield as the supplier, but that was specified to be only with effect from 1 September 2010.
The period between 19 May and 31 August 2010 has been referred to before us as the "hiatus period". It will be noted that it covers the two months immediately before the trial and the first two weeks of the hearing, which were inevitably the period of most intensive pre-trial preparation and during which liability for brief fees would be incurred. It is estimated that about half of Mr Rayner's costs were incurred during that period.
On 18 July 2011 Master Haworth, sitting in the Senior Courts Costs Office, ruled that Mrs Murphy did not have cost protection during the hiatus period: I refer to this as "the 2011 decision". I need not set out the Master's reasoning in detail, but the essential point was that "during [the hiatus] period … [Mrs Murphy] did not have the benefit of funded proceedings" because she had ceased to instruct Ismail & Co, who were the only solicitors whose work the Commission had agreed to fund.
The Commission contended, and the Lord Chancellor now contends, that it follows from the 2011 decision that no order could properly be made against it under regulation 5 in respect of the costs incurred by Mr Rayner during the hiatus period: since the proceedings were not funded during that period, such costs were not "attributable to [a] part of the proceedings which [were] funded proceedings". Mr Rayner disputes this: his case is that the costs incurred during that period were "attributable to" the earlier stages in the proceedings, during which Mrs Murphy was funded, because they had to be incurred in response to the steps taken by her in that period. In a nutshell, the Lord Chancellor's case is that the relevant criterion is purely temporal — costs are attributable to the period of the proceedings when they were incurred — whereas Mr Rayner's case is that the criterion is one of causation — costs are attributable to the part of the proceedings which resulted in them being incurred.
That issue came before Master Haworth on 28 February 2013, in the context of an application by Mr Rayner for disclosure of papers held by the Commission about the work funded by it: this was said to be necessary in order to enable him to identify to what extent his own costs were "attributable" to the funded part of the proceedings. (There was also an issue about the extent to which costs claimed by him had in fact been incurred by the corporate defendants; but that is not before us.) The Master upheld the Commission's contention. His order records his finding that:
"[Mr Rayner] is not entitled to recover any costs incurred by him during [the hiatus period] when (as has already been determined [i.e. by the 2011 decision]) [Mrs Murphy] did not have 'costs protection'".
Mr Rayner appealed against that decision, with the permission of the Master. The appeal was heard by Mr Nicholas Strauss QC, sitting as a Deputy High Court Judge, on 10 October 2013. At the hearing Mr Rayner was represented by Mrs Teresa Rosen Peacocke and the Lord Chancellor by Mr John Gimlette; but when, following the hearing, the Judge asked for further written submissions on the part of the case with which we are concerned the submissions on behalf of the Lord Chancellor were drafted by Mr Guy Mansfield QC. The same counsel appeared before us.
Mr Strauss handed down a reserved judgment on 2 December 2013 ([ 2013] EWHC 3878 (Ch)), now reported at [2014] 1 WLR 677. He allowed Mr Rayner's appeal on the issue of principle, though he held that it remained necessary for him to show in respect of any costs incurred during the hiatus period that they "were caused by the [Commission's] funding of the earlier stages of the proceedings" and that that issue would require to be...
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