England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE CCFMI 97/0908/F

IN THE COURT OF APPEAL (CIVIL DIVISION )

(HIS HONOUR JUDGE SLOT )

Royal Courts of Justice

Strand

London W2A 2LL

Friday, 19th December 1997

B e f o r e

LORD JUSTICE SIMON BROWN

MRS JUSTICE HALE

AGER

v.

AGER

(Transcript of the Handed-Down Judgment of

Smith Bernal Reporting Limited, 180 Fleet Street

London EC4A 2HD

Tel: 0171 421 4040

Official Shorthand Writers to the Court)

MR SIMON OLIVER (instructed by Messrs Dzimitrowicz York, Croydon CR0 1DM) appeared on behalf of the Appellant.

MR MATTHEW RUDD (instructed by Messrs Dollman & Pritchard, Caterham CR3 6XS) appeared on behalf of the Respondent.

J U D G M E N T

(As approved by the Court )

©Crown Copyright

LORD JUSTICE SIMON BROWN: When an order is made by the Court of Appeal for the costs of party A to be paid by a legally aided party B, such order "not to be enforced without leave of the court", to which court must A later apply

for leave? Is it the Court of Appeal or is it the court from whose order the appeal lay? That is the issue now before us.

The precise circumstances in which it arises are frankly immaterial: the point is one of general application. Nevertheless it is conventional to sketch in the basic facts and I shall accordingly do so, although only in outline.

The parties were husband and wife and I shall so describe them. In ancillary relief proceedings arising out of their divorce suit, the wife successfully appealed to this Court against an order made by Judge Main QC on 2nd June 1992 in the Reigate County Court that upon the sale of the former matrimonial home the husband should receive £36,500 and the wife the balance. By order made on 18th February 1993 this Court (Russell LJ and Hollis J) reduced the husband's entitlement to £25,000 and gave clarificatory directions as to certain life policies. More pertinently for present purposes, the Court made the following orders as to costs:

"4. That the order for costs below be set aside and there be no order for the costs below save that there be legal aid taxation of the [wife's] costs.

5. That the [wife's] costs of the appeal be paid by the [husband], such costs, from the granting of a legal aid certificate, not to be enforced without the leave of the court.

6. That the costs of the [husband] and of the [wife] be taxed in accordance with regulation 107 of the Civil Legal Aid (General) Regulations 1989."

In short, each party was required to bear its own costs of the proceedings in the County Court and the husband was to pay the wife's costs in the Court of Appeal subject to the qualification that her costs incurred after the date when the husband became legally aided should not be enforced without the leave of the court.

The wife's costs were taxed on 11th October 1994. Those enforceable without leave (i.e. those incurred before the husband obtained a legal aid certificate) amounted to £3,134.20 and were paid on 30th January 1995. Those enforceable only with leave amounted to £8,866.45.

It appears that in February 1996 the husband received £30,000 from his father's estate and steps were then taken by the wife and more particularly by the Legal Aid Board with a view to enforcing the outstanding order for costs against him. The Legal Aid Board has, one should note, a statutory charge registered against the wife's present home in respect of the unrecovered costs. In March 1997 the wife's solicitors (instructed for the purpose by the Legal Aid Board) were in touch with the Civil Appeals office seeking advice as to how to proceed. The office advised them that no procedure exists in the Court of Appeal for making application for leave to enforce such orders for costs and that accordingly they should apply to the County Court where the original ancillary proceedings had been heard.

In the result an application was made to the Reigate County Court, an application which was then for convenience transferred on 13th May 1997 to the Guildford County Court. At that Court the matter was listed for directions before Judge Slot on 13th June 1997. Judge Slot, having heard argument from the wife's solicitor and counsel for the husband, decided that he had no jurisdiction to entertain the application and in the result made no order upon it save that the wife should have leave to appeal, the costs of the hearing before him being reserved to the Court of Appeal. Thus it is that the matter now comes before us.

It is plain from Judge Slot's helpful judgment that he thought Regulation 124 of the Civil Legal Aid (General) Regulations 1989 decisive of the issue. So far as relevant this provides:

"124(1) Where proceedings have been concluded in which an assisted person (including, for the purpose of this Regulation, a person who was an assisted person in respect of those proceedings) is liable or would have been liable for costs if he had not been an assisted person, no costs attributable to the period during which his certificate was in force shall be recoverable from him until the court has determined the amount of his liability in accordance with s.17(1) of the Act.

...

(3) The amount of an assisted person's liability for costs shall be determined by the court which tried or heard the proceedings."

"The court which tried or heard the proceedings" here, Judge Slot concluded, was the Court of Appeal. It was in respect of the costs incurred in that court's proceedings that the costs order was made. More particularly, the order was made by the Court of Appeal, and they alone, therefore, could determine the amount of the husband's liability.

It is convenient at this stage to read also s.17(1) of the Legal Aid Act 1988 (the provision referred to in Regulation 124(1)) and s.17(2) as well:

"17(1) The liability of a legally assisted party under an order of costs made against it 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.

(2) Regulations shall make provision as to the court, tribunal or person by whom that amount is to be determined and the extent to which any determination of that amount is to be final."

The basic argument put before us by Mr Oliver for the appellant wife is that "the court which tried or heard the proceedings" here was not, after all, the Court of Appeal but rather was the Reigate County Court which dealt with the ancillary proceedings at first instance. He emphasises in particular the words "tried" and "heard" which are, he suggests, words apt to describe proceedings in which live evidence is adduced but not the more rarefied processes of the Court of Appeal. This seems to me an impossible argument: when this Court disposes of an appeal, it has in my judgment at the very least "heard" that appeal and, for that matter, heard appeal "proceedings".

Whilst, however, that argument must fail, a different route by which this appeal arguably may succeed arises by way of s.15(4) of the Supreme Court Act 1981, a route suggested to us by the Civil Appeals Office and by us in turn to Mr Oliver.

First, however, before considering how s.15(4) applies in this context, it is helpful to notice an argument which Mr Rudd for the respondent husband advances in reliance upon certain observations made by this Court in Parr v Smith [1996] 1FLR 490. To understand these observations and the competing arguments upon them it is necessary to set out certain of the other General Regulations to be found (like Regulation 124) in Part XIII under the heading ´Costs Awarded Against an Assisted Person':

"Determination of liability of costs

126. In determining the amount of the assisted person's liability for costs -

(a) his dwelling-house, clothes, household furniture, and the tools and implements of his trade shall be left out of the account to the like extent as they are left out of account by the assessment officer in determining his disposable income and disposable capital ... " (This provision implements s 17(2) of the Act which requires that such provision be made).

"Postponement, adjournment or referral of determination

127. The court may, if it thinks fit -

(a) postpone or adjourn the determination for such time and to such place (including chambers) as the court thinks fit; or

(b) refer to a master, district judge ... or (in the case of an appeal from a decision of the Crown Court or a court of summary jurisdiction) to the chief clerk or clerk to the justices of the court from which the appeal is brought, for investigation (in chambers or elsewhere) any question of fact relevant to the determination, and require him to report his findings on that question to the court."

(Regulation 128 deals with "Oral examination of parties." I need not set it out.)

"Order for costs

129. The court may direct -

(a) That payment under the order for costs shall be limited to such amount, payable in instalments or otherwise ... as the court thinks reasonable having regard to all the circumstances; or

(b) where the court thinks it reasonable that no payment should be made immediately or that the assisted person should have no liability for payment, that payment under the order for costs be suspended either until such date as the court may determine or indefinitely."

"Variation of order for costs

130. The party in whose favour an order for costs is made may, within six years from the date on which it was made, apply to the court for the order to be varied on the ground that -

(a) material additional information as to the assisted person's means, being information which could not have been obtained by that party with reasonable diligence at the time the order was made, is available; or

(b) there has been a change in the assisted person's circumstances since the date of the order;

and on any such application the order may be varied as the court thinks fit; but save as aforesaid the determination of the court shall be final."

Parr v Smith was concerned with the propriety of a charging order made following a County Court judge's order for costs against legally aided defendants "such costs not to be enforced without the leave of the court". The defendants had become legally aided (in fact at different times) during the course of the proceedings but the costs order made no distinction between those periods. In the course of his judgment quashing the charging order as made and substituting for it one limited to the costs incurred before the defendants became legally aided, Sir Thomas Bingham MR at page 497 said this:

"In relation to the costs incurred by the Parrs after each of the Smiths respectively became legally aided (which I shall describe as ´the Parrs' post-legal aid costs') the judge could:

(1) determine what sum it was reasonable for the Smiths to pay under s 17(1) and regs 126 and 129(a);

(2) postpone or adjourn the determination under reg 127(a);

(3) refer the matter to a district judge for investigation and report under reg 127(b);

(4) order that payment under the order for costs be suspended either until such date as the court might determine or indefinitely under reg 129(b).

Which of these courses did the judge adopt? For the Smiths it was argued that he adopted course (4). For the Parrs it was contended that he adopted course (2): he could not, it was said, have made a determination of the Smiths' reasonable liability under (1) since he had no materials on which to consider and did not purport to consider what they could reasonably be expected to pay.

The difficulty with this argument is that the judge did not by his order postpone or adjourn determination of the Smiths' liability. He made a very common order in a form apparently final unless the Smiths' circumstances changed (as, in the stock example, by winning the pools). It is, I think, true that the judge did not go through the process envisaged by s 17(1) and regs 126(a) and 129(a). But it seems to me clear that the order which he made was in the form expressly contemplated by reg 129(b)."

The Master of the Rolls further expressed himself to be in full agreement with the judgement of Staughton LJ who at pages 500 - 501 said this:

"The judge in this case ordered that the unsuccessful defendants, who were legally aided for part of the time, should pay the plaintiffs' costs, ´such costs not to be enforced without leave of the court'.

An order in those terms is very frequently made, both at first instance and in the civil division of the Court of Appeal. I cannot speak for other courts, but in this court there is in the ordinary way little if any inquiry into the means of the unsuccessful party before such an order is made. Perhaps it is thought that the successful party would press for an inquiry if there was any prospect of discovering assets.

The problem is whether such an order is within either or both of regs 129 and 130. Regulation 129(b) provides that the court may direct:

´... where the court thinks it reasonable that no payment should be made immediately or that the assisted person should have no liability for payment, that payment under the order for costs be suspended either until such date as the court may determine or indefinitely.'

Like Sir Thomas Bingham MR, I consider that the court is exercising (or purporting to exercise) this power when it makes an order for costs which is not to be enforced without leave of the court.

However, I also consider that reg 130 applies to such an order. It follows that leave to enforce the order cannot be given (i) after 6 years have elapsed, or (ii) unless there is either new information which could not have been obtained by reasonable diligence at the time when the order was made, or a change in the assisted person's circumstances since that date.

There are thus significant limitations on the usual form of order, that the assisted person shall pay the costs not to be enforced without leave of the court. Those limitations may not be fully appreciated by those who apply for such orders or those who make them. As I have said, little or no diligence is commonly used to assess the assisted person's financial situation when the order is made. It is assumed that his means are negligible, or small.

There may be a method of avoiding that result. Regulation 127 provides that the court may postpone the determination of the amount of an assisted person's liability for costs, for such time as the court thinks fit. There would not then have been a ´determination', which reg 130 treats as final after 6 years or unless one of the conditions for review is satisfied.

If that be right, successful litigants may prefer an order for costs in their favour with the determination of the assisted person's liability postponed, to an order for costs not to be enforced without leave of the court."

Peter Gibson LJ agreed with both judgments.

That case was followed by another decision of the Court of Appeal in Wraith v Wraith [1997] 2FLR 415, a decision concerned, like Parr v Smith , with a costs order made in the County Court against a legally aided party (there the plaintiff) in terms "not to be enforced without further leave of the court." The particular question arising there was whether that party's subsequent recovery of damages in other proceedings provided the basis for his earlier opponent to seek a variation order under regulation 130. In the course of the court's judgment holding that it did, Butler Sloss LJ at page 417 said this:

"There is no issue that in this case the costs order was, or must be taken to have been, made under regulation 129(b): cf the observations of Sir Thomas Bingham MR in Parr v Smith ... regulation 130 provides the mechanism by which the party, in whose favour an order for costs has been made, may apply to the court for a variation of that order on either of two grounds."

It is Mr Rudd's submission that, given (as Parr v Smith and Wraith v Wraith hold) that the Court of Appeal's order here must be regarded as one made under regulation 129(b), then only the Court of Appeal can have jurisdiction to vary it under regulation 130. The County Court could not conceivably have jurisdiction to vary an order of the Court of Appeal.

Mr Oliver's response to this argument is a bold one: the Court of Appeal was wrong, he submits, in Parr v Smith to hold that these orders are made under regulation 129(b); rather, he contends, they are made under regulation 127(a). As to the Master of the Rolls' observation that "the difficulty with this argument is that the judge did not by his order postpone or adjourn determination of the Smiths' liability", Mr Oliver submits that these orders by their very nature do precisely that: it is impermissible to make an order for recoverable costs (as opposed to an order for costs in principle) against a legally aided party unless and until there has been a proper determination of the amount of his liability under s 17(1). In reality it is that determination which is being postponed by an order such as was made here. The court is not limiting or suspending payment under an order for costs as provided for by Regulation 129. The directions contemplated by that Regulation are in respect of orders for costs which are by then recoverable following the process of determination (of the amount of the assisted person's liability) under the preceding Regulations.

Mr Oliver further submits that the views expressed in Parr v Smith were obiter and that, the point not having been argued in Wraith v Wraith , it remains open to this Court to reach the contrary view which he propounds.

I admit to finding very considerable force in these submissions. What, however, I have difficulty in following is how, even if correct, they ultimately avail him. Parr v Smith and Wraith v Wraith simply did not touch upon the particular point now arising. Let it be supposed that the Court of Appeal order here was made - as Staughton LJ in Parr v Smith thought that this type of order should more satisfactorily be made - under Regulation 127(a). How is the wife's position on the present appeal improved? True, this Court could in those circumstances refer to the district judge at Reigate (or Guildford) County Court most of the factual questions relevant to the determination of the amount of the husband's liability. (The Regulation 127(b) discretion is not conferred as an alternative to the exercise of the 127(a) power - "or" here clearly means "and/or".) But under Regulation 127(b) the court cannot delegate or devolve to the district judge (or whoever else) the actual determination itself: that is made plain by the closing words of the Regulation which require the body to whom the question is referred to report back their findings to the court.

Everything, therefore, turns on s.15(4) of the Supreme Court Act 1981 and I come now to that provision to see whether after all it vindicates the Civil Appeals office's past approach to this difficulty (on the apparently rare occasions it has arisen). S.15(4) provides:

"It is hereby declared that any provision in this or any other Act which authorises or requires the taking of steps for the execution or enforcement of a judgment or order of the High Court applies in relation to a judgment or order of the civil division of the Court of Appeal as it applies in relation to a judgment or order of the High Court."

(S.76 of the County Courts Act 1984, as is well known, applies such High Court provisions equally to the County Court where the situation is not otherwise provided for.)

The question arising is therefore this: Is the seeking of the court's further order -- which necessarily involves the determination of the amount of the assisted person's liability for costs in accordance with s.17(1) of the Act (without which no costs are recoverable from him) -- the taking of a step for the enforcement of the present Court of Appeal order? If it is, then it follows that the machinery available in the County Court for arriving at such a determination can be invoked to transform the present order into a recoverable order for costs.

Although I have not found the point an easy one, I have finally reached the conclusion that it is. True, the existing order for costs is in a sense inchoate, an order made in principle and only capable of crystallising into an enforceable order after the determination of the recoverable amount. (And that, indeed, is so irrespective of whether the existing order is to be regarded as made under Regulation 127(a) or under Regulation 129(b).) But if one asks: Is the necessary next step - the obtaining of the court's leave - a step for the enforcement of an order of the Court of Appeal? the answer is surely to be found in the language of the order itself: "not to be enforced without leave of the court" (emphasis added). The costs order as made is (insofar as costs orders ever are) appealable; and undoubtedly it enables the party in whose favour it is made to tax his costs (as was done here). All that remains is to enforce it, a process which here includes the determination of the assisted person's actual liability under s.17.

Does such an approach square with Regulation 124(3) (and, indeed, Regulation 127(b))? Again, not without difficulty, I conclude that it does. It is, of course, open to the Court of Appeal (if the necessary material is already before them) themselves to determine the assisted person's liability and thus make a final order for costs against him: Regulation 124(3) clearly authorises such a course. But I do not think it necessary to regard Regulation 124(3) as applying in all cases, even therefore to the extent of narrowing down the apparent width of s.15(4). And Regulation 127(b) on one view may be thought actually to support my conclusion: after all, whilst Regulation 127(b) expressly provides for a reference (to the chief clerk) in the case of an appeal from the Crown Court - presumably a civil appeal by case stated to the Divisional Court given that these Regulations govern civil legal aid - no corresponding provision is made for an appeal from the County Court. To suggest that this distinction is explained by reference to s.15(4) is perhaps to read too much into the overall legislative scheme. The solution is, however, a workable one and I would adopt it.

In the result I would allow this appeal and remit the matter to the County Court for a further directions hearing with a view to making a final determination there of the husband's liability for costs pursuant to this Court's order of 18th February 1993. I need hardly add, given the regrettable delays for which neither side are to blame, that the matter should henceforth be dealt with expeditiously.

The costs of the present appeal (including those reserved to this Court by Judge Slot below) were discussed at the conclusion of the argument before us on 10th December. In my judgment they now fall to be paid by the husband and I would so order.

MRS JUSTICE HALE: I agree.

ORDER: Appeal allowed as per judgment.