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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Perinpanathan, R (on the application of) v City of Westminster Magistrates Court & Anor (Rev 1)  EWCA Civ 40 (04 February 2010)
Cite as:  WLR 1508,  EWCA Civ 40,  1 WLR 1508
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
LORD JUSTICE GOLDRING and MR JUSTICE SWEENEY
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE MAURICE KAY
LORD JUSTICE STANLEY BURNTON
| THE QUEEN ON THE APPLICATION OF AMARAVATHI PERINPANATHAN
|- and -
|CITY OF WESTMINSTER MAGISTRATES COURT (1)
THE METROPOLITAN POLICE COMMISSIONER (2)
Sir Geoffrey Nice QC and Russell Fortt (instructed by Metropolitan Police Legal Services) for the Second Respondent
The First Respondent did not appear and was not represented.
Hearing date: 9 December 2009
Crown Copyright ©
Stanley Burnton LJ :
The facts in summary
4. The daughter had some £153,000 in Sterling and dollars. The claimant went to Heathrow to meet her daughter from the flight. The daughter was interviewed on the day of arrest. She made a number of what are described as "material assertions". The claimant had given her the money at the airport on 23rd April 2006 which she then took to Singapore on a flight that day. She stated that her mother, the claimant, ran a foreign exchange business. When asked whether she travelled alone to Singapore she confirmed that she had. She did not mention there had been any intention that she would be accompanied. She was asked whether she had touched the cash when it was packed and confirmed that she had not dealt with it. She said that she was going to meet her uncle in Singapore. He was going there from Sri Lanka, where she was going to stay for two days before returning to the United Kingdom. She was to give the money to her uncle for the use of a foreign exchange company called Aramex International. In the event that her uncle did not show up at the airport, she was to meet a friend of her uncle called Mr Habib. She did not know what Mr Habib looked like. When she arrived in Singapore she was refused entry because her passport was not valid for the requisite six months.
5. The claimant was also interviewed. She said, among other things, that she had been self-employed, dealing in money exchange since 1986. She had packed her daughter's bag with the money which was taken to Singapore and had placed in the bag documents showing that the money had come from three money service bureaus. She appeared to state that her daughter had collected some of the cash on the previous Saturday. She thought that her daughter's airline ticket cost £479. She stated that the money was being transferred on behalf of three different money service bureaus, namely: £27,358 on behalf of the Anglo-Asian Mini Mart UK; £46,000.14 on behalf of Abby Exchange Limited (AEL); and the remainder from a man named Manivan, who ran a bureau called Mummys. All the money had been collected from the money bureaus in Sterling. She had changed some of it into Euros and dollars due to the fact that she did not have enough cash flow.
6. The claimant said that she had originally expected her daughter to travel to Singapore with a friend named Ruben Krischner, but this arrangement did not proceed because they arrived a bit late at the airport and the ticket was too expensive. The claimant said she was unable to travel to Singapore herself. She had previously transferred funds using a company called Linkafax, but around three weeks before the money was seized that company had stopped transferring money. She had not used a bank transfer because of the charges that would be incurred in doing so. The seized cash was to be passed to a company called Aramex International in Singapore. It was to be exchanged for Indian or Sri Lankan rupees. The cash would be sent to India or Sri Lanka for transmission to the intended recipients. It was to be exchanged in Singapore because the exchange rate was better in that country.
7. In a subsequent interview, the claimant said that she charged £100 to her customers, on top of the other charges which she incurred of £250. Her profit margin, it seems, would therefore be between £100 and £200.
8. In June 2006 two of the money transfer businesses mentioned by the claimant provided records, including details of the original senders of the money and the intended recipients of the cash. Subsequently, so did the third.
9. The police obtained various statements. They included statements from the owner of Mummys, the owner of one of the other bureaus, AAMM, indeed the owners of all three money exchange bureaus. There was also a statement from the First Secretary of the Sri Lankan High Commission in London. It provided a list of authorised currency dealers in Sri Lanka. It confirmed that it is a criminal offence in Sri Lanka to act without authorisation as a foreign exchange dealer or money remitter, and that any person arriving in Sri Lanka with the equivalent of 10,000 US dollars is required to declare this fact to the authorities. Neither the claimant nor Aramex appeared on the list, although there was a company called Armex Money Changers on the list.
10. There was a statement from somebody called Durrani, the Managing Director of Link FX, who confirmed that his company had regularly transferred funds to Aramex on behalf of the claimant. He said that the claimant was a long standing customer who transferred about £10 million every year. He confirmed that he had received legal advice from his lawyers to cease transactions which were destined for Sri Lanka and had told the claimant of this in April 2006. He said that he would have charged £382.50 to change the £153,000.
11. The police also relied upon a paper which spoke, among other things, of the funding methods of the LTTE group in Sri Lanka. Those methods included intimidation of Sri Lankans living in the United Kingdom.
12. There was also a statement by a police officer to the effect that the owner of Mummys had been stopped in November 2003. He was with his brother. His brother told the police officers who had stopped them that he had fought for the Tamil Tigers but now feared them because he had left their organisation.
13. The claimant's evidence was served in advance. It consisted of a single document, namely a statement. There was also, prior to the hearing, evidence which analysed the documents provided by Mummys, the money transfer business which it was alleged provided the majority of the seized cash.
14. As this is not a case stated, the court does not have detailed reasons for the Magistrates' decisions. However, both parties agree that there are clear indications of their reasoning as far as costs are concerned. Mr Mullins, who was counsel for the second interested party, made a note to this effect:
"We have had a two day hearing. We have listened very carefully. Mr Durrani was very useful as a witness as he was able to give us the structure of the money changing business. We were asked by the prosecution (sic) to infer that money was destined for LTTE. We find no direct evidence of a link and so draw no such inference. Application dismissed and money to be returned forthwith with interest.
No order for costs on the basis that the application was reasonably made."
15. The legal advisor's notes, such as they are, indicate that the court had drawn to its attention the case of City of Bradford Metropolitan District Council v Booth, CO/3219/99. The note of the legal advisor stated that "18 months, police still had money. We say costs should follow the event", and the justices ruled that "No costs awarded. Case properly brought by the police".
The applicable statutory provisions
240. General purpose of this Part
(1) This Part has effect for the purposes of --
(b) enabling cash which is, or represents, property obtained through unlawful conduct, or which is intended to be used in unlawful conduct, to be forfeited in civil proceedings before a magistrates' court or (in Scotland) the sheriff.
(2) The powers conferred by this Part are exercisable in relation to any property (including cash) whether or not any proceedings have been brought for an offence in connection with the property.
241. 'Unlawful conduct'
(1) Conduct occurring in any part of the United Kingdom is unlawful conduct if it is unlawful under the criminal law of that part.
(2) Conduct which --
(a) occurs in a country outside the United Kingdom and is unlawful under the criminal law of that country, and
(b) if it occurred in a part of the United Kingdom, would be unlawful under the criminal law of that part
is also unlawful conduct.
(3) The court or sheriff must decide on a balance of probabilities whether it is proved --
(a) that any matters alleged to constitute unlawful conduct have occurred, or
(b) that any person intended to use any cash in unlawful conduct.
294. Seizure of cash
(1) A customs officer or constable may seize any cash if he has reasonable grounds for suspecting that it is --
(a) recoverable property, or
(b) intended by any person for use in unlawful conduct.
295. Detention of seized cash
(1) While the customs officer or constable continues to have reasonable grounds for his suspicion, cash seized under section 294 may be detained initially for a period of 48 hours.
(2) The period for which the cash or any part of it may be detained may be extended by an order made by a magistrates' court or (in Scotland) the sheriff; but the order may not authorise the detention of any of the cash --
(a) beyond the end of the period of three months beginning with the date of the order,
(b) in the case of any further order under this section, beyond the end of the period of two years beginning with the date of the first order.
(3) A Justice of the Peace may also exercise the power of a magistrates' court to make the first order under subsection (2) extending the period.
(4) An application for an order under subsection (2)--
(a) in relation to England and Wales and Northern Ireland, may be made by the Commissioners of Customs and Excise or a constable,
(b) in relation to Scotland, may be made by the Scottish Ministers in connection with their functions under section 298 or by a procurator fiscal
and the court, sheriff or justice may make the order if satisfied, in relation to any cash to be further detained, that either of the following conditions is met.
(5) The first condition is that there are reasonable grounds for suspecting that the cash is recoverable property and that either -
(a) its continued detention is justified while its derivation is further investigated or consideration is given to bringing (in the United Kingdom or elsewhere) proceedings against any person for an offence with which the cash is connected, or
(b) proceedings against any person for an offence with which the cash is connected have been started and have not been concluded.
(6) The second condition is that there are reasonable grounds for suspecting that the cash is intended to be used in unlawful conduct and that either -
(a) its continued detention is justified while its intended use is further investigated or consideration is given to bringing (in the United Kingdom or elsewhere) proceedings against any person for an offence with which the cash is connected, or
(b) proceedings against any person for an offence with which the cash is connected have been started and have not been concluded.
(8) An order under subsection (2) must provide for notice to be given to persons affected by it . . .
297 Release of detained cash
(1) This section applies while any cash is detained under section 295.
(2) A magistrates' court or (in Scotland) the sheriff may direct the release of the whole or any part of the cash if the following condition is met.
(3) The condition is that the court or sheriff is satisfied, on an application by the person from whom the cash was seized, that the conditions in section 295 for the detention of the cash are no longer met in relation to the cash to be released.
(4) A customs officer, constable or (in Scotland) procurator fiscal may, after notifying the magistrates' court, sheriff or justice under whose order cash is being detained, release the whole or any part of it if satisfied that the detention of the cash to be released is no longer justified.
(1) While cash is detained under section 295, an application for the forfeiture of the whole or any part of it may be made --
(a) to a Magistrates' Court by the Commissioners of Customs and Excise or a constable,
(b) (in Scotland) to the sheriff by the Scottish Ministers.
(2) The court or sheriff may order the forfeiture of the cash or any part of it if satisfied that the cash or part --
(a) is recoverable property, or
(b) is intended by any person for use in unlawful conduct.
(3) But in the case of recoverable property which belongs to joint tenants, one of whom is an excepted joint owner, the order may not apply to so much of it as the court thinks is attributable to the excepted joint owner's share.
(4) Where an application for the forfeiture of any cash is made under this section, the cash is to be detained (and may not be released under any power conferred by this Chapter) until any proceedings in pursuance of the application (including any proceedings on appeal) are concluded.
(1) If no forfeiture order is made in respect of any cash detained under this Chapter, the person to whom the cash belongs or from whom it was seized may make an application to the magistrates' court or (in Scotland) the sheriff for compensation.
(2) If, for any period beginning with the first opportunity to place the cash in an interest-bearing account after the initial detention of the cash for 48 hours, the cash was not held in an interest-bearing account while detained, the court or sheriff may order an amount of compensation to be paid to the applicant.
(3) The amount of compensation to be paid under subsection (2) is the amount the court or sheriff thinks would have been earned in interest in the period in question if the cash had been held in an interest-bearing account.
(4) If the court or sheriff is satisfied that, taking account of any interest to be paid under section 296 or any amount to be paid under subsection (2), the applicant has suffered loss as a result of the detention of the cash and that the circumstances are exceptional, the court or sheriff may order compensation (or additional compensation) to be paid to him.
(5) The amount of compensation to be paid under subsection (4) is the amount the court or sheriff thinks reasonable, having regard to the loss suffered and any other relevant circumstances.
The italics in subsection (4) are mine.
Subject to the foregoing provisions of these Rules, proceedings on such an application shall be regulated in the same manner as proceedings on a complaint, and accordingly for the purposes of these Rules, the application shall be deemed to be a complaint, the applicant the complainant, the respondents to be defendants ….
Power to award costs and enforcement of costs
(1) On the hearing of a complaint, a Magistrates' Court shall have power in its discretion to make such order as to costs --
(a) on making the order for which the complaint is made, to be paid by the defendant to the complainant;
(b) on dismissing the complaint, to be paid by the complainant to the defendant,
as it thinks just and reasonable . . .
(2) The amount of any sum ordered to be paid under subsection (1) above shall be specified in the order, or order of dismissal, as the case may be.
(5) The preceding provisions of this section shall have effect subject to any other Act enabling a magistrates' court to order a successful party to pay the other party's costs.
The principle in City of Bradford v Booth
1. The issue in this appeal by case stated is whether justices erred in the exercise of their discretion by awarding costs against a local authority on a successful complaint against a vehicle licensing decision of the local authority when the local authority had not, in making the decision appealed against, acted unreasonably or in bad faith.
22. It seems to me that the justices in this case misdirected themselves, first, in relying on a principle that costs should follow the event, that misdirection being compounded by their view that the reference in section 64 to the order being just and reasonable applied to quantum only. On the other hand, in my judgment the submissions made by Mr Blair-Gould on behalf of the local authority go too far the other way since to give effect to the principle for which he contends would deprive the justices of any discretion to view the case in the round which is in my judgment what section 64 intends.
23. I would accordingly hold that the proper approach to questions of this kind can for convenience be summarised is three propositions:
1. Section 64(1) confers a discretion upon a magistrates' court to make such order as to costs as it thinks just and reasonable. That provision applies both to the quantum of the costs (if any) to be paid, but also as to the party (if any) which should pay them.
2. What the court will think just and reasonable will depend on all the relevant facts and circumstances of the case before the court. The court may think it just and reasonable that costs should follow the event, but need not think so in all cases covered by the subsection.
3. Where a complainant has successfully challenged before justices an administrative decision made by a police or regulatory authority acting honestly, reasonably, properly and on grounds that reasonably appeared to be sound, in exercise of its public duty, the court should consider, in addition to any other relevant fact or circumstances, both (i) the financial prejudice to the particular complainant in the particular circumstances if an order for costs is not made in his favour; and (ii) the need to encourage public authorities to make and stand by honest, reasonable and apparently sound administrative decisions made in the public interest without fear of exposure to undue financial prejudice if the decision is successfully challenged.
The principal contentions of the parties
(1) The propositions set out by Lord Bingham LCJ in paragraph 23 of his judgment do not and should not represent the correct approach to orders for costs in proceedings such as those that were the subject of that case.
(2) Section 64 is concerned with the quantum of costs, if any, to be paid to a party, not the allocation of liability for costs.
(3) Alternatively, on its true construction, section 64 gives a "steer" to the court, indicating that the normal order for costs is one in favour of the successful party.
(4) In his judgment in the City of Bradford case Lord Bingham LCJ referred only to authorities in alcohol licensing cases. In those cases, the court had applied differently worded, and in Mr Keith's submission wider, statutory provisions than section 64. Lord Bingham had failed to take the legislative difference into account.
(5) It is irrational for a different costs principle to apply in civil proceedings in the magistrates' court in proceedings involving public authorities from the rule applied in the County Court and the High Court. In those courts, the fact that a public authority acted reasonably does not justify a refusal to make an order for costs against it.
(6) In the present case, the police were not acting in a neutral capacity, as they do in licensing cases, seeking to put relevant facts before the magistrates. They were themselves a full party to the proceedings. They had the burden of proving that the cash had been intended to be used for an unlawful purpose; they had failed to establish that. As the successful party to the litigation, absent a sufficient reason why the innocent Appellant should be deprived of her costs, she was entitled to an order for costs against the police.
On the hearing of any application under this Act relating to licensed premises or a seamen's canteen, the licensing justices may make such order as they think just and reasonable for the payment of costs to the applicant by any person opposing the application or by the applicant to any such person.
In my judgment it was wrong for the justices to treat this matter as civil proceedings between two private litigants and to ignore the factor urged upon them by the solicitor appearing for the police authority, namely, that the police have a function which they are required to perform. They are required to supervise the proper conduct of the licensed premises and to object in those cases where there are good grounds for objecting to the renewal of the licence. That that is the police's function is clearly demonstrated by the provisions in the Licensing Act which give the police power to enter licensed premises whether at the invitation of the licensee or not.
In addition, in my view, the police authority must also bring to the attention of the licensing justices matters of which the police know and which can fairly and properly be said to amount to misconduct by the licensee or those for whom he is responsible ....
It is of course important to say that decisions as to costs are discretionary and that any court or tribunal exercising such discretion is obliged to take into account all relevant circumstances. One such relevant circumstance was that this was indeed a police authority performing a statutory licensing function. This will not be determinative of all cases, but it is important that the tribunal takes into account that, generally speaking, a cost order adverse to such an authority would not be made unless there was some good reason for doing so, which was more than the fact that the other party to the contest had succeeded.
In my view, this is a borderline case so far as costs are concerned. I can certainly see some force in [counsel's] submissions, but exercising afresh, as in my view we are entitled to do, the discretion which Judge Morrison exercised, I consider on balance that this is not a case where costs ought to have been ordered against the Chief Constable. He acted, as the judge held, in complete good faith and, in those circumstances, the costs order ought not to have been made against him.
I must say that I am most surprised by the order of the justices. The police had done nothing wrong at all. They had taken possession of these currency notes - absolutely properly - because they were reasonably suspected by them to have been stolen. They retained them pending trial equally properly. They were absolutely right not to deliver them without a court order. If they had given them up to Mr. Prasad and the true owners had turned up afterwards, the police would have been liable in damages to the true owners. Only by a court order would they be protected. Viewed in the eyes of the civil law, the police were bailees of the goods. Their custody was like that of a sheriff - custodia legis. Faced with a claimant, the sheriff is entitled to inter-plead and to get his costs as a first charge so long as he acts properly, but he is never bound to pay any costs. So also when the police have goods in custodia legis, and act perfectly properly in regard to them, they should not be ordered to pay costs.
Lord Denning would have held that the justices had no jurisdiction to award costs, but Sir George Baker and Sir Stanley Rees disagreed. However, both commented on the award of costs by the justices. Sir Stanley Rees said:
The proceedings before us do not include any issue or argument as to the propriety of the exercise of the discretion of the justices to make the order for costs which they did in favour of the complainant. Nevertheless, I share the considerable degree of unease in regard to the order for costs which is evident in the judgments delivered by Lord Denning M.R. in this court and in the judgments delivered in the Divisional Court by Donaldson L.J. and Kilner Brown J.  1 W.L.R. 112. If, as I am satisfied is the case, the justices are empowered to make an order for costs in proceedings by complaint and summons under the Police (Property) Act 1897 where there is a complainant and a defendant, their discretion must be exercised having regard to the exceptional and perhaps unique nature of the order sought and to the respective roles of the parties concerned. In a case in which the police have clearly indicated that they do not oppose the making of the order sought and are merely attending before the justices to confirm their attitude and to ensure that an appropriate order is made before the property is delivered to the complainant, it would indeed be difficult to justify any order for costs against the police. Even in a case in which the police do not consent to the order sought by the claimant or claimants but attend the hearing and the justices are satisfied that it was reasonable for them to do so in order to assist the court to assess the validity of the claim or claims made to the ownership of the property, it would be proper for no order for costs to be made against the police, even if the order for delivery of the property sought by a claimant were made. In short, in my judgment, the proper approach to an application for costs in such proceedings should most certainly not be on the basis that costs should simply follow the event, but rather that the discretion to award them should be sparingly exercised, having regard to the exceptional nature of the role of the police as custodians of the property in issue, who require an order of the court to protect them before the delivery up of the property to a claimant.
Sir George Baker said, at 844:
I have had the advantage of reading the judgment about to be delivered by Sir Stanley Rees and wish to say that I entirely agree with him about the undesirability of justices making orders for costs in cases like the present.
In matters of this kind, it was of the utmost assistance to the justices that the police should be present at court, both to indicate whether or not they objected to the order being made, and to test the evidence of a claimant. In such circumstances, the justices would normally make no order for costs. But they did have a discretion, and if they considered that the police had gone beyond the usual rule merely assisting the justices, and actively opposed the order, then there was no reason why the justices should not, in the exercise of their discretion, order the police to pay costs. That was clearly what happened in the present case.
29 The tribunal's decision was based on the conclusion that the first allegation made against the solicitor by the Law Society was not established, and that a greater proportion of his own costs arose from his defence to this allegation. The order was not made on the basis that the Law Society had abused the process or proceeded against the solicitor for improper motives. These grounds of complaint made by the solicitor were rejected by the tribunal. The tribunal's reasoning was not detailed. It merely acknowledged that the solicitor:
"had been successful in his defence of the first allegation and in such circumstances it would not be right that [Mr Baxendale-Walker] pay the Law Society's costs. It would be right that the Law Society pay a proportion of Mr Baxendale-Walker's costs."
This was fixed at 30%. The Divisional Court concluded that the costs order was unjustified. Moses LJ approached the problem on the basis that it was not in dispute that in bringing the proceedings against the solicitor the Law Society was acting as a disciplinary body, or regulator, taking proceedings in the public interest in the exercise of its public function. Accordingly, he concluded that the principles relating to costs differed from those which applied in ordinary civil litigation. He continued  3 All ER 675, para 43:
"Absent dishonesty or a lack of good faith, a costs order should not be made against such a regulator unless there is good reason to do so. That reason must be more than that the other party had succeeded. In considering an award of costs against a public regulator the court must consider on the one hand the financial prejudice to the particular complainant, weighed against the need to encourage public bodies to exercise their public function of making reasonable and sound decisions without fear of exposure to undue financial prejudice, if the decision is successfully challenged."
30 These principles were said to derive from a number of decisions summarised by Jackson J in R (Gorlov) v Institute of Chartered Accountants in England and Wales  ACD 393, paras 30-35, and three principles distilled by Lord Bingham of Cornhill CJ in City of Bradford Metropolitan District Council v Booth  COD 338.
The Court referred to the contentions advanced on behalf of the solicitor, and continued:
39 In our judgment Jackson J was right to equate the responsibilities of the institute in Gorlov's case  ACD 393 with the regulatory actions of the licensing authority in Booth's case  COD 338. As Bolton's case  1 WLR 512 demonstrates, identical, or virtually identical, considerations apply when the Law Society is advancing the public interest and ensuring that cases of possible professional misconduct are properly investigated and, if appropriate, made the subject of formal complaint before the tribunal. Unless the complaint is improperly brought, or, for example, proceeds as it did in Gorlov's case  ACD 393, as a "shambles from start to finish", when the Law Society is discharging its responsibilities as a regulator of the profession, an order for costs should not ordinarily be made against it on the basis that costs follow the event. The "event" is simply one factor for consideration. It is not a starting point. There is no assumption that an order for costs in favour of a solicitor who has successfully defeated an allegation of professional misconduct will automatically follow. One crucial feature which should inform the tribunal's costs decision is that the proceedings were brought by the Law Society in exercise of its regulatory responsibility, in the public interest and the maintenance of proper professional standards. For the Law Society to be exposed to the risk of an adverse costs order simply because properly brought proceedings were unsuccessful might have a chilling effect on the exercise of its regulatory obligations, to the public disadvantage. Accordingly, Moses LJ's approach to this issue did not go further than the principles described in this judgment.
40 In our judgment, in agreement with Moses LJ, the tribunal misdirected itself when it ordered the Law Society to pay part of the solicitor's costs on the basis that the first allegation against him had failed and that costs should follow the event. This overlooked not only the public obligation of the Law Society, as we have analysed it, but the additional fact that the solicitor brought the proceedings in relation to both allegations on himself. At the same time the order ignored the costs incurred by the Law Society in relation to the successful pursuit and eventual admission of professional misconduct in relation to the second allegation.
51. We note that this appeal was the first appeal brought under appellate regime established by the 2003 Act, and that formerly the procedure for appealing this type of dispute was a statutory appeal under the Telecommunications Act 1984 to which the costs provisions of the CPR applied. However, CPR Part 44.3(2), which provides that the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party but the court may make a different order, is not replicated in the Tribunal's Rules and consequently does not apply to the Tribunal. Parliament has not created any presumption that in proceedings before the Tribunal costs should "follow the event". The Tribunal's jurisdiction as to costs is mentioned in the White Book under the heading "Part 48 – Costs Special Cases" at Part 48.12.10 without any further elaboration.
52. In our view, the flexible approach that the Tribunal has taken to the question of costs in appeals under the 1998 [Competition] Act is also appropriate in relation to appeals under the 2003 [Communications] Act. As the Tribunal's judgments in appeals under the 1998 Act make clear, there is no presumption under rule 55 that costs should necessarily be borne by the losing party. In this case we take into account the following factors.
53. The present case arose under the 1997 Regulations which implemented in the United Kingdom Directive 97/33/EC, known as the Interconnection Directive. Under Regulation 6(6) of the 1997 Regulations, the Director, OFCOM's predecessor, was required, at the request of either party, to resolve "a dispute concerning interconnection between organisations" within six months of the date of a request to do so. The direction made by the Director to resolve the dispute was required by Regulation 6(6) "to represent a fair balance between the legitimate interests of both parties". In exercising his duty under Regulation 6(6) the Director was further required to take into account the wide range of considerations set out at Regulation 6(8), including the interests of users, the relative market position of the parties, the public interest, the promotion of competition, and many other matters: see paragraph 35 of the Tribunal's judgment.
54. The "dispute concerning interconnection" which the Director purported to resolve by the contested Direction of 23 June 2003 was prompted by a complaint by Vodafone as to the terms on which partial private circuits (PPC's) should be supplied by BT to Vodafone for use as radio base station (RBS) backhaul circuits connecting Vodafone's RBS to Vodafone's MTX. One main issue in the Direction, and the only issue argued on the appeal, was whether that involved "interconnection" within the meaning of the 1997 Regulations and the Interconnection Directive.
55. The dispute in this case was, therefore, one which the Director resolved pursuant to the then-applicable statutory procedure. Having resolved the matter against BT, in our view OFCOM (which by then had inherited the Director's function) was bound to appear before the Tribunal to defend BT's appeal, against the contested Direction. OFCOM, in our view, would have been in the same position had the Director reached the opposite view and OFCOM had been facing an appeal by Vodafone.
57. It is unrealistic, in our view, to suggest that OFCOM should have withdrawn the contested Direction following the lodging of BT's appeal. Apart from the fact that that might well have provoked an appeal by Vodafone, the issues in the present case were, in our view, extremely complicated, involving technical issues, and a complex body of European legislation, as the Tribunal's judgment shows. There was, as far as we know, no previous judicial authority on the issue we were asked to decide. OFCOM's submissions were ably and forcefully presented, and the arguments OFCOM put forward were, in our view, entirely reasonable ones notwithstanding that, in the end, we held that BT's arguments should prevail. However, there is no unreasonable conduct on OFCOM's part or other respect in which OFCOM's position is open to criticism.
58. We also bear in mind that in making the Direction the Director took into account what he believed to be wider benefits to the public interest such as greater network efficiency, facilitating innovation and investment in voice and data services, and ultimately benefits to end-users of mobile telephony services in terms of prices and quality (see e.g. S8 of the Direction). This was a case in which wider public interests, and not just the private interests of BT, were at stake.
59. It is also apparent from the Direction that BT is the major supplier of RBS backhaul circuit links across the industry (paragraph 4.9). Indeed, the Direction is based on the Director's finding that BT has market power in that respect. Although that aspect of the Direction is not necessarily accepted by BT, it was not contested in the present appeal. BT's success in this appeal in defending its market position, on the legitimate but nonetheless narrow legal ground that what was involved was not "interconnection", has brought BT commercial benefits. BT's submissions referred to "many millions of pounds" having been at stake.
60. It is also relevant in our view that in a regulated industry such as this, BT and the other principal parties to these proceedings will be in a constant regulatory dialogue with OFCOM on a wide range of matters. The costs of maintaining specialised regulatory and compliance departments, and taking specialised advice, will not ordinarily be recoverable prior to proceedings. We accept that the situation changes once proceedings before the Tribunal are on foot, by virtue of Rule 55 of the Tribunal's Rules. However, the question whether costs orders should be made in any particular case, or whether the costs should lie where they fall, arises against a background in which BT and the interveners are, in their own interests, routinely incurring regulatory costs which are not recoverable.
61. Furthermore, none of the parties have submitted that, if the Tribunal does not to make a costs order in their favour, they will have suffered a financial hardship by having brought the matter before the Tribunal.
62. In our view, we have to strike a balance between, on the one hand, the fact that BT has been successful, and on the other hand, the various considerations mentioned above. Rule 55 gives the Tribunal a wide discretion. Our judgment is that where OFCOM has determined a dispute in accordance with the procedure in the 1997 Regulations, and could have been appealed against by either side, it would not be right to order OFCOM to pay BT's costs in circumstances where OFCOM defended the appeal entirely reasonably and wider public interests were involved. BT has benefited commercially from the stance which it legitimately took. We do not consider that BT will suffer material financial hardship if the costs of this case are treated as part of the general regulatory costs which BT incurs by virtue of the fact that it has significant market power.
63. We do not accept that, in those circumstances, our view as to costs would have a "chilling effect" on the bringing of appeals by companies in the position of BT. On the contrary, we have some concern at this early stage of the Tribunal's jurisdiction under the 2003 Act that an order against OFCOM would have a "chilling effect" in the opposite direction by making OFCOM less resolved to defend its decisions, or more ready to compromise, when faced with appellants with market power and large financial resources. Any such pressure on OFCOM would not be in the public interest.
My recollection is that we refused the respondent's costs because he had done little or nothing to rebut the appellant's case in confiscation proceedings, which were essentially a civil/balance of probability proceedings tried in the criminal courts.
Not surprisingly, the Divisional Court considered this explanation as insufficient. It quashed the order of the Crown Court, and remitted the matter to that Court for it to determine whether Mr. Orton was entitled to his costs in accordance with the judgement of the Divisional Court. In the course of his judgment, Simon J (with whom Maurice Kay LJ agreed) said:
There was no finding of conduct which might otherwise disentitle the claimant to his costs. Although we have not heard arguments on the point, it seems to me that, on an appeal to the Crown Court by the police, the powers of that court include power to review the decision of the Magistrates' Court on the question of costs in accordance with the wide powers set out in section 229. Having succeeded in both courts, I would have expected the claimant to have been awarded his costs in each case unless cogent reasons were advanced why he should not.
(i) Costs are in the discretion of the court. (ii) They should follow the event, except when it appears to the court that in the circumstances of the case some other order should be made. (iii) The general rule does not cease to apply simply because the successful party raises issues or makes allegations on which he fails, but where that has caused a significant increase in the length or cost of the proceedings he may be deprived of the whole or a part of his costs.
How then can it be said that the ordinary rule ought not to apply? Mr. Heslop's principal submission was that applications of this kind, being brought in the public interest, are outside the ordinary rule. I accept the premise of that submission, but reject the conclusion. Applications under the Act of 1986 are civil proceedings. It is clear from rule 2 of the Insolvent Companies (Disqualification of Unfit Directors) Proceedings Rules 1987 (S.I. 1987 No. 2023), confirmed by the decision of Sir Donald Nicholls V.-C. in Dobson v. Hastings  Ch. 394, that the Rules of the Supreme Court, including Order 62 relating to costs, apply to applications under the Act of 1986. Many civil proceedings are brought by the Crown or by local authorities in the public interest. Except for those on which the supposed practice has been based, we have been referred to no decision which supports Mr. Heslop's submission. In seeking to draw an analogy with an instance of special treatment being given to the Crown or local authorities, he referred us to In re Highfield Commodities Ltd.  1 W.L.R. 149 and the recent decision of the House of Lords in Kirklees Metropolitan Borough Council v. Wickes Building Supplies Ltd.  3 W.L.R. 170. Those were both cases where it was held that the cross-undertaking as to damages habitually required as the quid pro quo for the grant of an interlocutory injunction need not be given. Such analogies are of no assistance on a question of costs. Mr. Heslop has failed to make out any case for the application of a special rule as to costs in proceedings brought in the public interest. The Crown or a local authority must take its chance on costs, just like any other litigant in these courts.
McCowan LJ put the matter pithily:
In the end Mr. Heslop was driven to argue that this type of case, being "public interest proceedings," is quite different from criminal or civil proceedings when it comes to costs. I am unable to agree. I see no justification for a special costs rule in this type of litigation. The Secretary of State must take his chance in it just like any other litigant. After all, the director in question in such proceedings is also a member of the public and his interests deserve consideration like any other member. If the allegations against him are rejected and he has done nothing to bring the proceedings upon his head, I see no reason why he should not have his costs.
Beldam LJ, at 254, said:
The Insolvent Companies (Disqualification of Unfit Directors) Proceedings Rules 1987 make it clear that an application made under them shall be made in the High Court by originating summons and that the Rules of the Supreme Court 1965 shall apply, except where those rules are inconsistent with the provisions of the Rules of 1987. Section 51(1) of the Supreme Court Act 1981 provides that, subject to rules of the court, costs of and incidental to proceedings in the High Court shall be in the discretion of the court. R.S.C., Ord. 62, r. 3(2) derives from the principle stated by the House of Lords in Donald Campbell & Co. Ltd. v. Pollak  A.C. 732 that no party has a right to costs, but that if an order is made the court shall order that they follow the event unless in the circumstances of the case some other order should be made. As the House of Lords made clear in that case, it is only conduct connected with or leading up to the litigation proved before the judge or observed by him during the progress of the case which can provide a proper basis for the exercise of his discretion. Viscount Cave L.C., in his opinion, made it clear that it was not permissible for a court to put upon a statute giving unfettered discretion a gloss which would lead to frustration of its obvious purpose and made it clear that the discretion must be exercised judicially and therefore must be based on some grounds, for a discretion exercised on no grounds cannot be judicial.
In In re Highfield Commodities Ltd.  1 W.L.R. 149, a case to which Nourse L.J. has referred, Sir Robert Megarry V.-C. drew a distinction valid in that case between the position of the Crown pursuing litigation for a proprietary claim and litigation pursued in the performance of a statutory duty to bring proceedings in the public interest. The distinction was valid in that case, but it appears unfortunately to have given rise to the convenient phrase "public interest litigation" which has then been uncritically extended to provide an entirely unwarranted public interest immunity for the consequences of unjustified initiation of such proceedings which, it must be assumed, is also to be regarded as in the public interest. I can think of no practice less in the public interest or more calculated to encourage indiscriminate initiation of proceedings at the unjustifiable expense of an individual.
14. Mr Pawlak urges that the CPS is not insulated from the general rule about costs orders just because it is a public body, and that the judge's approach was wholly wrong. He drew our attention to some well-known cases, either when judicial review proceedings are brought in the public interest and there is no order as to costs, or when the police have to act for parties to a licensing appeal, when it may very well not be proper for them to be ordered to pay costs when they are performing a public function of providing the court with information. He said that their cases raised different issues.
18. In my judgment there is great force in Mr Pawlak's submission that the judge set about the exercise of his discretion in the wrong way. This is the second occasion within two weeks when a division of this court of which I have been a member has been concerned with an appeal in which complaint is made about an order for costs made by the judge when it was not apparent that the judge had set about his duties in the structured way set out in CPR 44.3. Of course, there is no need for judges to refer to that rule explicitly, provided that they follow its philosophy. Its philosophy required Wilson J to start with the proposition that the general rule was that the CPS, as the unsuccessful party, should have to pay the costs of the successful party. It would then follow from that that the judge should consider carefully whether there were any of the specific matters listed in CPR 44.3(4) which would take this case out of the ordinary rule and then consider all the circumstances.
19. It appears to me that the judge embarked on his task from the wrong end, focusing first on the position of the CPS, as a public body, and then seeking to find reasons why Mrs Grimes should displace a general rule that the public body should not have to pay the costs of a successful party in circumstances like these.
20. In these circumstances, it appears to be one of those cases in which, the judge having set about his task from the wrong end, this court has to exercise its discretion afresh on the materials before it.
21. One starts with the general rule. Mrs Grimes had to come to court. There had been no offer made to her to which the court's attention was drawn which made it unnecessary for her to come to court. When she came to court what she had said on paper in her affidavit was believed by the judge. I entirely understand the contention that it would have been unreasonable for the CPS to concede the totality of her claim in advance: they had their public duties to perform in relation to the need to enforce the confiscation order, and there were oddities about Mrs Grimes' statement, particularly in relation to the reasons why the property was put in her husband's sole name. But that does not, in my judgment, mean that the CPS were entitled to behave, as litigants far too often behaved before the CPR came in, by simply standing back and saying, "We will make no offer at all for the court to consider when it decides what order as to costs is a reasonable one to make. We will simply see you in court."
Sedley LJ said:
30. The reason why the judge did not approach the case in this way, as it seems to me, is that he regarded the CPS as having a special litigation position or status. As my Lord has made clear, it does not. What it will have in many cases is an argument on the reasonableness of its stance which derives from the nature of its legal functions and the purpose of confiscation orders. For the rest, and I think contrary to the approach taken by the judge, this proceeding was no different from an interpleader in a judgment creditor's action. The Crown when it comes before the courts of this country does so as a litigant like any other.
32. I do not therefore think it necessary for the CPS to have laid itself open to criticism if it is to be made liable for a successful opponent's costs in a case like the present; and for my part I am willing to accept Miss Barber's doughty defence of the CPS's conduct of the case. But that leaves a simple situation in which two parties, each behaving reasonably, have met in court, where one has lost and ought therefore to expect, other things being equal, to pay the other's costs.
2. The Royal College takes three points in relation to this application. First, it submits that it conflicts with a principle to be derived from cases such as City of Bradford Metropolitan District Council v. Booth .., Gorlov v. Institute of Chartered Accountants … and, most recently, Baxendale-Walker v. The Law Society ...
3. As to the first point, the Board, without commenting upon or going into the principle advanced, considers that it cannot bear on the present situation. The authorities relied on concern the different position of costs before disciplinary tribunals or before a court upon a first appeal against an administrative decision by a body such as a police or regulatory authority. In the present case, the Disciplinary Committee made no order for costs in respect of the proceedings before it (in which Dr Walker was represented by counsel), and no-one has challenged that.
4. The present appeal came before the Board under s.17 of the Veterinary Surgeons Act 1966, subs. (2) of which provides that
"The Council of the College may appear as respondent on any such appeal and, for the purpose of enabling directions to be given as to the costs of any such appeal, shall be deemed to be a party thereto whether they appeared on the hearing of the appeal or not."
5. The Board has in practice made costs orders against the Royal College when an appeal succeeded … and in the College's favour in cases of unsuccessful appeals … A similar position has applied with appeals from other similar disciplinary committees … No order for costs was made in two cases where the appeal failed on liability, but succeeded on penalty …
6. The Board sees no reason to depart from its previous practice. Here, there was no appeal on liability and it was at all times accepted and submitted on Dr Walker's behalf that the appropriate disposal would have been and was suspension for a period such as that which the Board in the event advised should be imposed. The present appeal was at all times also fully and firmly opposed by the Royal College. If Dr Walker has lost, there would been good reason for a costs order against him. As he succeeded, a costs order in his favour seems to the Board in principle fair.
The effect of the authorities
(1) As a result of the decision of the Court of Appeal in Baxendale-Walker, the principle in the City of Bradford case is binding on this Court. Quite apart from authority, however, for the reasons given by Lord Bingham LCJ I would respectfully endorse its application in licensing proceedings in the magistrates' court and the Crown Court.
(2) For the same reasons, the principle is applicable to disciplinary proceedings before tribunals at first instance brought by public authorities acting in the public interest: Baxendale-Walker.
(3) Whether the principle should be applied in other contexts will depend on the substantive legislative framework and the applicable procedural provisions.
(4) The principle does not apply in proceedings to which the CPR apply.
(5) Where the principle applies, and the party opposing the order sought by the public authority has been successful, in relation to costs the starting point and default position is that no order should be made.
(6) A successful private party to proceedings to which the principle applies may nonetheless be awarded all or part of his costs if the conduct of the public authority in question justifies it.
(7) Other facts relevant to the exercise of the discretion conferred by the applicable procedural rules may also justify an order for costs. It would not be sensible to try exhaustively to define such matters, and I do not propose to do so.
12. As to the financial loss suffered by the successful appellant, a successful appellant who has to bear his own costs will necessarily be out of pocket, and that is the reason in ordinary civil litigation for the principle that costs follow the event. But that principle does not apply in this type of case. When Lord Bingham referred to the need to consider the financial prejudice to a particular complainant in the particular circumstances, he was not in implying that an award for costs should routinely follow in favour of a successful appellant; quite to the contrary.
The application of these propositions to the present case
29. In spite of the attractiveness of Mr Yeo's submissions, I have come to the conclusion that the Magistrates were correct in applying the factors set out by Lord Bingham in Bradford when exercising their discretion under section 64 of the Magistrates' Courts Act 1980. I accept that there is a difference between administrative decisions such as those referred to in Bradford and the present case. The distinction is limited, however. In one case a police officer (at possible risk to someone's livelihood) is saying that the person will not have an on-licence, for example. In the other, he is saying the person will not have his (or in this case her) money returned. In taking both decisions, it is crucial that the police act honestly, reasonably, properly, and on grounds that reasonably appear to be sound. In both cases there is a need to make and stand by honest, reasonable and apparently sound decisions in the public interest without fear of exposure to undue financial prejudice, in one case if the decision is successfully challenged, in the other if the application fails. There is a real public interest that the police seek an order for forfeiture if they consider that on the evidence it is more probable than not that the money was intended for an unlawful purpose. It would be quite contrary to the public interest if, due to fear of financial consequences, it was decided not to seek its forfeiture, but simply return the money. The public duty requires the police to make an application in such circumstances.
30. In short, I have come to the conclusion that while the police's obligation is not on all fours to that which they have in licensing or firearms cases, those situations are sufficiently analogous to suggest that a similar approach should be followed. The rationale lying behind cases such as Bradford, in other words, applies equally to cases such as the present.
31. It seems to me, moreover, that there is a distinction between an award to a successful defendant in criminal prosecutions of his costs from central funds, and an order against the police should an application for forfeiture fail, albeit properly made. In a criminal prosecution no question arises, absent bad faith, of the successful defendant's costs being ordered against the Crown Prosecution Service or the police; the body or bodies which decide whether or not to bring the proceedings.
32. It is necessary too to emphasise the limits of what is said in Bradford. It is not, as Davis J said in Ebbnie  EWHC 166 (Admin) (a decision with which it follows I agree) setting out any sort of a test. Bradford merely sets out a series of factors which the court should take into account in the application of section 64 of the 1960 Act. The court, as Lord Bingham said, may think it just and reasonable that costs should follow the event. It is worth too emphasising the words "in addition" which precede subparagraphs (i) and (ii) of Lord Bingham's third proposition.
33. It follows that it should not be thought that those who bring these applications have carte blanche to make applications for forfeiture without any risk of costs being awarded against them. Such applications can result in grave injustice if not made honestly, reasonably, properly and on grounds that are sound. If applications are made inappropriately, the court should not hesitate to make an order for costs against the applicant.
Maurice Kay LJ:
The Master of the Rolls: