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You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> The Law Society of England and Wales, R (on the application of) v The Lord Chancellor [2010] EWHC 1406 (Admin) (15 June 2010) URL: https://www.bailii.org/ew/cases/EWHC/Admin/2010/1406.html Cite as: [2011] 1 All ER 32, [2010] 5 Costs LR 805, [2010] ACD 76, [2010] EWHC 1406 (Admin), [2011] WLR 234, [2011] 1 WLR 234 |
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QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Strand, London, WC2A 2LL |
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B e f o r e :
and
MR JUSTICE KEITH
____________________
| THE QUEEN ON THE APPLICATION OF THE LAW SOCIETY OF ENGLAND AND WALES |
Claimant |
|
| - and - |
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| THE LORD CHANCELLOR |
Defendant |
____________________
Mr James Eadie QC and Mr Samuel Grodzinski (instructed by Litigation and Employment Group, Treasury Solicitor) for the Defendant
Hearing date: 27 May 2010
____________________
Crown Copyright ©
Lord Justice Elias :
Law Society
challenges by way of judicial review the lawfulness of a scheme which has been made by the Lord Chancellor for the award of costs out of central funds to defendants who have faced, and successfully resisted, criminal proceedings ("the New Scheme").
" (1) The Lord Chancellor may make regulations for carrying this Part into effect and the regulations may, in particular, make provision as to -
(a) the scales or rates of payments of any costs payable out of central funds in pursuance of any costs order, the circumstances in which and conditions under which such costs may be allowed and paid and the expenses which may be included in such costs; and
(b) ....
and any provision made by or under this Part enabling any sum to be paid out of central funds shall have effect subject to any such regulations."
The statutory framework.
"(6) A defendant's costs order shall, subject to the following provisions of this section, be for the payment out of central funds, to the person in whose favour the order is made, of such amount as the court considers reasonably sufficient to compensate him for any expenses properly incurred by him in the proceedings."
Subsection (7) then provides for circumstances where it is not appropriate to pay the amount which would otherwise be payable under subsection (6):
"(7) Where a court makes a defendant's costs order but is of the opinion that there are circumstances which make it inappropriate that the person in whose favour the order is made should recover the full amount mentioned in subsection (6) above, the court shall –
(a) assess what amount would, in its opinion, be just and reasonable; and
(b) specify that amount in the order."
Subsection (9) provides for two separate methods by which the amount may be determined: either a summary assessment by the court, provided the defendant agrees the amount, under paragraph (a); or by what the regulations term an "appropriate officer" under paragraph (b):
"(9) Subject to subsection (7) above, the amount to be paid out of central funds in pursuance of a defendant's costs order shall –
(a) be specified in the order, in any case where the court considers it appropriate for the amount to be so specified and the person in whose favour the order is made agrees the amount; and
(b) in any other case, be determined in accordance with regulations made by the Lord Chancellor for the purposes of this section."
"order the payment out of central funds of such amount as the court considers reasonably sufficient to compensate the prosecutor for any expenses properly incurred by him in the proceedings."
It will be seen, therefore, that the principles for determining the amount reflect precisely those found in section 16(6).
"(1) The appropriate authority shall consider the claim, any further particulars, information or documents submitted by the applicant under regulation 6 and shall allow such costs in respect of –
(a) such work as appears to it to have been actually and reasonably done; and
(b) such disbursements as appear to it to have been actually and reasonably incurred,
as it considers reasonably sufficient to compensate the applicant for any expenses properly incurred by him in the proceedings.
(2) In determining costs under paragraph (1) the appropriate authority shall take into account all the relevant circumstances of the case including the nature, importance, complexity or difficulty of the work and the time involved.
(3) When determining costs for the purposes of this regulation, there shall be allowed a reasonable amount in respect of all costs reasonably incurred and any doubts which the appropriate authority may have as to whether the costs were reasonably incurred or were reasonable in amount shall be resolved against the applicant."
The New Scheme.
"7.- (1) The appropriate authority shall consider the claim, any further particulars, information or documents submitted by the applicant under regulation 6 and shall allow costs in respect of –
(a) such work as appears to it to have been actually and reasonably done; and
(b) such disbursements as appear to it to have been actually and reasonably incurred.
(2) Any doubts which the appropriate authority may have as to whether the costs were reasonably incurred or were reasonable in amount shall be resolved against the applicant.
(3) The costs awarded shall not exceed the costs actually incurred.
(4) The Lord Chancellor shall, with the consent of the Treasury and for the purposes of this regulation, determine the rates and scales of costs in respect of work and disbursements payable out of central funds."
The rationale for the New Scheme.
Law Society
relies heavily on some of the passages found in the consultation document, and linked documents, in support of its case. The executive summary contains the following passage:
"The Government…believes that those who can afford to pay towards the cost of their defence should do so…..
We believe that it is now the time to consider whether it is counter-intuitive to pay privately funded rates in criminal cases when the legal aid system pays both sustainable fee levels for practitioners and ensures a sufficient level of quality for clients. We believe that there is a strong case for reforming the current payment of legal costs from Central Funds to ensure that we are balancing effectively the need to pay fair rates in criminal cases to practitioners whilst using taxpayers' money effectively and responsibly."
"The Government believes that the rates paid under legal aid for criminal cases are fair and proportionate for the complexity and expertise required for the full range of criminal cases conducted within the Criminal Justice System … We would suggest that it is not an efficient use of public funds, particular in the current financial climate, to subsidise those individuals wishing a 'gold plated' legal service …
… we are of the view that the taxpayer should not be required to subsidise private fees when legal aid rates we pay are both fair and allow for a quality service to be provided. This should mean that there is no particular reason why competitive pressures would not make them available on the private market."
"66 respondents disagreed with this suggestion. Only six agreed. This proposal was attacked as being very unfair to those who were deemed to need representation by reason of passing the interests of justice test, but having failed the means test would have no option but to obtain legal services in the open market. Respondents said that the level at which the means test was set excluded many workers on average incomes from legal aid. Solicitors would not be able to provide the same level of service if working to legal aid rates, which are able to be as low as they are due to volume of work and guaranteed payment. Defendants would either have to pay higher than legal aid rates and forfeit the difference if acquitted, or try to persuade lawyers to conduct work at legal aid rates, when they were in no position to negotiate lower rates."
"The Government believes that public funding should be prioritised on those who canot afford to pay for their own representation and those who can afford to pay towards the cost of their defence should do so. The Government has introduced means testing in both the magistrates' court and the Crown Court with this principle in mind. The Government believes that the award of costs from Central Funds must complement means testing policy in both the magistrates' and Crown Courts."
"Do you agree that it is appropriate to cap payments from Central Funds to the relevant legal aid rates for individuals who have failed the means test in the magistrates' court or on appeal to the Crown Court?" was as follows:
"Because private rates vary enormously on a case by case basis, this makes the Government's ability to predict and control spend from Central Funds difficult. Paying private rates from public funds also creates a two-tiered system. It remains entirely at the discretion of individuallaw
firms as to the rates they charge to their private clients. However, individuals who can afford to pay private rates are relying on the taxpayer to refund these costs where they are acquitted. The Government believes therefore that awarding costs from Central Funds at legal aid rates is fair, reasonable and proportionate."
"21. Under this option, individual defendants and defendant companies would be liable for any difference between the refund of costs at legal aid rates and their actual expenditure on their case at the private rate they had negotiated with their solicitor and/or barrister. We estimate that in the magistrates' court this could average in the region of £1,000, being the difference between the estimated average privately funded case (£1,500) and the average legally aided case (£500). In the Crown Court, we estimate that this could average in the region of £16,700, being the difference between the estimated average privately funded case (£19,500) and the average legally aided case (£2,800). In very high cost cases, this sum could be much higher. As illustrated by the example above, the difference could be as much as £11 million. While companies do not have access to legal aid and so have no choice but to pay privately for their defence, the impact may be mitigated if they have taken out insurance to protect them against such an action.
22. The impact on individual defendants may also be mitigated if implementation of the proposal resulted in downward pressure on private rates. Competition between providers for private clients and individual negotiations over rates could see private rates moving more closely into line with those available under legal aid, but we are unable to quantify the effect. This would result in a reduction in income for solicitors, barristers and firms. We cannot quantify the impact since we have no reliable data on private rates, although from research conducted in the magistrates' court, based on a sample of bills paid from Central Funds we understand that they are in the region of three times more expensive than legal aid rates."
The Grounds.
(i) The scheme fails to give effect to the principles underpinning section 16(6). Instead of using his powers to provide reasonably sufficient compensation to successful defendants, the Lord Chancellor has acted for a number of improper purposes. He has exercised his powers for extraneous purposes such as seeking to effect savings in public funds in part by aiming to change the market for the relevant legal service, and placing some of the burden of defence costs on the successful defendants themselves. He has thereby subverted the clear compensation principle found in section 16(6).
(ii) The New Scheme is irrational and internally inconsistent because it applies only to detailed assessments and not to summary assessments by the courts. The Lord Chancellor was originally under the misapprehension that the New Scheme applied to both. The result is that defendants in the same position will be subject to different assessment principles depending upon how their claim for costs is dealt with. Such discrimination is unjustified.
(iii) The New Scheme discriminates between private prosecutors and defendants, notwithstanding that the underlying costs principles set out in sections 16 and 17 of the 1985 Act are virtually the same. There is no rational basis for compensating prosecutors and defendants differently, and no sensible justification has been advanced.
(iv) The effect of the New Scheme is to interfere with the right of access to the courts under Article 6 of the European Convention.
(v) The New Scheme was based on a defective understanding of its likely consequences. The real savings would be unlikely to reflect the amounts identified by the Lord Chancellor.
I will deal with these in turn.
Ground 1: The new scheme is for improper purposes.
Law Society
, contends that the consultation statement and the impact statement make it abundantly clear that the Lord Chancellor was seeking to effect savings, and potentially very significant savings, by adopting this scheme. Furthermore, he is attempting to influence the market for privately funded legal services in criminal cases and he considers that over time the costs of legal representation in criminal cases for privately funded clients will be driven down as a result of these regulations. He also considers that it is desirable and just that successful defendants should bear a greater share of the cost of their defence than they have done hitherto. Privately funded rates ought not to exceed legal aid rates, and the change complements, and is consistent with, the new means test policy introduced into the magistrates' and Crown courts. It leads to a fair, affordable and proportionate use of central funds. Mr Eadie QC, counsel for the Lord Chancellor, does not dispute that these were indeed the objectives of the New Scheme.
Law Society
has provided witness statements from Mr Stobbs, its Director of Policy, designed to question some of the assumptions which the Lord Chancellor has made. For example, he suggests that the evidence relied on by the Lord Chancellor in predicting that the market for privately funded services will be forced down, perhaps eventually to legal aid levels, is inappropriate and unconvincing; and it challenges the premise that it is right that a defendant should personally have to bear some of the costs even though he is found to be innocent. The Lord Chancellor has through Ms Sarah Albon, a senior civil servant at the Ministry of Justice, responded by engaging in that debate to justify the approach he has adopted.
"The taxing officer's task, as Robert Goff J put it in R v Wilkinson [1980] 1 All ER 597 at 604, [1980] 1 WLR 396 at 404, is to determine 'the broad average direct costs of work done' by a partner and assistant solicitor ' in the relevant area at the relevant time' …
In my view, Master Ellis was wrong to regard as unreasonable, 'the broad average direct costs' of City of London solicitors for such a case. His approach was contrary to authority … If, as I find, it was reasonable for the plaintiffs to have instructed Travers Smith Braithwaite in the litigation, then the firm's costs on taxation should be taxed by reference to the broad average direct costs for such a firm in that area. The fact that the plaintiffs could have obtained the same services at a much lower price than that average elsewhere is irrelevant (cf R v Dudley Magistrates' Court, ex p Power City Stores Ltd)."
The taxing officer, when drawing on his own experience, must thus have regard to the general levels of costs actually incurred in the relevant area at the relevant time, not merely those which he has customarily allowed in similar cases. The latter, whilst a useful guide to consistency in the short term, will not reflect the actual general levels of costs unless constantly measured against the reality of what was happening outside the taxing officer's room during the relevant period … The process of taxation must reflect, not set, the reasonableness of costs incurred in litigation." (Emphasis supplied)
Law Society
is wrong to say that the central concept in section 16(6) is compensation. He submits that Ms Rose's emphasis on the compensation principle is misconceived; taken to its logical conclusion that would warrant an indemnity principle which is plainly not what section 16(6) envisages.
law
claims is of no assistance when seeking to determine the appropriate level of Government subsidy for costs.
Law Society
as being of no assistance. They all depend on their particular facts and in any event they were decided before the 2009 Regulations had introduced the amendments under consideration. They do not identify what considerations may be considered relevant when determining what is a reasonable and appropriate level of expenditure; and they certainly do not support the proposition that it is irrelevant to ask whether other lawyers might have been able to conduct the case more cheaply.
Discussion.
law
that he cannot exercise that power for a purpose or objective which is not permitted by the primary legislation conferring the power: see the well known passage from the judgment of Lord Reid in Padfield v Minister of Agriculture, Fisheries and Foods [1968] AC 997, 1030. The question is whether the objectives which the Lord Chancellor is avowedly seeking to achieve by adopting the New Scheme are lawful.
Ground 2: Irrational distinction depending on who fixes the costs.
Ground 3: Irrational distinction between defence and prosecution.
Law Society
, that the pressure is not felt to the same extent on individual defendants since they are generally involved in a one off event.
Ground 4: Depriving defendants of a fair trial.
Law Society
, particularly in the magistrates' court because there legal aid is only available subject to the interests of justice test and the means test. A defendant may pass the interests of justice test but fail the means test and therefore be unable to pay for representation.
Ground 5: Flawed understanding of the effects of the policy.
law. There is no reason to assume that there will be any increase in successful applications, and in any event even if there were a modest number of additional successful claims, the costs involved would be miniscule compared with the anticipated savings.
Conclusion.
Mr Justice Keith: