Costs law

By Jeremy Morgan, barrister, 39 Essex Court, London

Costs applications against the Legal Services CommissionDefinitive guidance on the new rules for applications for costs against the Legal Services Commission was given by the Court of Appeal in The Queen, on the application of Gunn v Secretary of State for the Home Department [2001] The Times, 20 June The judgment concerned three cases which had been listed together to hear the Legal Services Commission show cause why orders for costs should not be made against it.

In essence, the court held that the procedure for costs against the commission was entirely different to the old procedure for costs against the Legal Aid Board, but the substantive law on when such an order should be made had not changed.The origins of each of the three cases were similar.

Each had been an application for permission to apply for judicial review, refused at first instance and renewed to a single Lord Justice, where each had been turned down.

In each case the judge had indicated that the commission should pay the costs of the renewal to the Court of Appeal, subject to the commission having the opportunity traditionally afforded to the Legal Aid Board to show cause why such an order should not be made.

Despite the similarity of these three cases on their facts, the court held that the issues raised were of general importance at all levels of civil litigation.The procedure for applications for costs against the commission is the same in both old legal aid cases and new Community Legal Service (CLS) cases.

It is governed by the Community Legal Service (Costs) Regulations 2000, as amended.

These regulations lay down functions for the court hearing the substantive dispute ('the trial court' in the language of the Court of Appeal in Gunn) and for the costs or district judge.

The judges in the Court of Appeal said that while it is arguable that the trial court had jurisdiction to exercise the functions of the costs/district judge, they thought it plain that the scheme did not envisage that they should do so.

The Court of Appeal identified two stages, the first involving the trial court and the second the costs/district judge.The functions of the trial court are: l To decide whether to make an order for costs against the funded litigant ('the client'); if not no further consideration is required and no order can be made against the commission;l If an order is made against the client, to decide whether to carry out a summary assessment of costs, to do so if appropriate or otherwise to order detailed assessment; l To decide whether it is in a position to specify the amount if any to be paid by the client and whether or not to do so.It will be apparent that if the trial court carries out a summary assessment of costs and determines the amount the client has to pay, there is no role for the costs/district judge in the process of determining the client's liability for costs.

However, if the trial court does not specify the amount to be paid by the client it can, if it sees fit, make findings of fact as to the parties' conduct in the proceedings or otherwise, relevant to the determination of that amount.

These will then be taken into account by the costs/district judge when he makes his decision.

Nor does the trial court have any function in the decision whether or not to order costs against the commission, as that function is entirely confined to stage 2.Stage 2 is carried out by the costs/district judge, and the party seeking the order must make a separate application for this purpose.

There is a strict time-limit for such applications, which is three months from the date of the inter partes order of the trial court.

There is no power to extend this time limit.

However, a late application against the client can be accepted where good reason for the delay can be shown - late applications against the commission cannot be accepted.

The applicant must, when making the request, file and serve a statement of his resources and, if his costs have not been summarily assessed, a bill of costs.

The client must file and serve a statement of his resources.

A date is then fixed for the costs/district judge to complete the determination of the client's liability and to consider any application for costs against the commission.The substantive law governing the decision whether or not to make an order against the commission is contained, in legal aid cases; section 18 of the Legal Aid Act 1988; and, in CLS cases, in the Community Legal Service (Cost Protection) Regulations 2000 as amended.

In cases at first instance it is necessary to show: l That the proceedings were instituted by the client and that the non-funded party will suffer severe financial hardship unless the commission is ordered to pay its costs; and, l That it is just and equitable for such an order to be made.

At the appellate stage the first criteria no longer apply and it is only necessary to show that it is just and equitable to make the order.In Gunn, which was an appellate case, the commission argued on a construction of the relevant regulations that there was no jurisdiction to make an order against it in favour of a body that was wholly funded from public money, but the court rejected this argument and held 'that it will normally be just and equitable that when a costs order is made against a party who has been supported by public funds, the costs covered by the order should, insofar as they cannot be recovered from the funded party, be defrayed out of public funds.'However, it emphasised that it was not encouraging government departments to make applications against the commission, and saw force in the argument that it would not usually be sensible to do so.The argument to which the Court of Appeal was referring was the argument that to order the commission to pay costs to a government department was simply transferring public money from one pocket to another, and in the process increasing total public expenditure.