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	England and Wales High Court (Administrative Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Towry Law Financial Services Plc & Ors, R (on the application of) v Gorman [2002] EWHC 1603 (Admin) (25 July 2002) URL: http://www.bailii.org/ew/cases/EWHC/Admin/2002/1603.html Cite as: [2002] EWHC 1603 (Admin)

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IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
ADMINISTRATIVE COURT

		48/49 Chancery Lane London, WC2A 1JR
		25 July 2002

1. MR GEORGE BARTLETT QC: The only outstanding issue in this application for judicial review is the question of costs. The application sought judicial review of a decision of an ombudsman in the Financial Ombudsman Service. The decision was given on a complaint by the interested party, Mrs Gorman, to the Personal Investment Authority Ombudsman Bureau (whose functions are now exercised by FOS) about advice given by the claimant to Mrs Gorman’s late husband in relation to certain retirement annuity contracts. Permission was granted by Burton J on 28 May 2002. In its acknowledgment of service, filed on 1 May 2002, the defendant had said that it did not intend to contest the claim. In her acknowledgment of service, dated 5 May 2002, Mrs Gorman said that she did intend to contest the claim; but on 7 June 2002 she wrote to the court to say that she no longer intended to do so. The claimant now seeks an order that its costs should be paid by the defendant and/or by Mrs Gorman.
2. Mrs Gorman’s late husband was a barrister, Mr J P Gorman QC. Towry Law had been his pension adviser since the 1970s. He had had a series of s 226 retirement annuity contracts. Some of these were with National Provident Institution, and these were vested on 7 March 1995 on the basis of a single life annuity. Mr Gorman died on 23 August 1996. There was a 5-year guaranteed period, so that the annuity continued to be paid up to March 2000, but beyond that date Mrs Gorman received nothing. Her complaint was that Towry Law ought to have advised Mr Gorman of the option of a joint life annuity and should have set up the annuity on a joint life basis.
3. Mrs Gorman formally instigated her complaint to PIAOB in November 1999. PIAOB had been established pursuant to provisions in the Financial Services Act 1986 to provide regulation of the selling of pensions. Its council was responsible for the appointment of ombudsmen and for the promulgation of Terms of Reference governing the powers of the ombudsmen and procedural matters. On receipt of a complaint PIAOB would assign it to a case officer for investigation. The case officer could then issue an initial view and thereafter he could issue a provisional assessment. Mrs Gorman’s complaint went through both these stages, which were in essence parts of a mediation process. She did not accept the provisional assessment, which was adverse to her, so the complaint was passed to an ombudsman who, under the Terms of Reference, had the power to make an award.
4. The ombudsman received written material from both parties. At Mrs Gorman’s request, he also held a hearing. He issued his decision, with reasons extending to some 16 pages, on 10 January 2002. His award was in Mrs Gorman’s favour. Under paragraph 5.6 of the Terms of Reference, if, within one month of the award, Mrs Gorman accepted it in full, it would become binding against Towry Law. Mrs Gorman gave notice accepting the award on 17 January 2002 and thus it became binding.
5. On 22 February 2002 Towry Law’s solicitors wrote a letter before application pursuant to CPR Part 54 to FOS. The 9-page letter alleged one error of law, 10 grounds of irrationality and 3 points of procedural impropriety in the ombudsman’s decision. FOS responded by letter dated 26 February 2002 informing Towry Law that it would respond substantively to the points raised as soon as possible after taking counsel’s advice, but that it presumed the intended application would not be issued until FOS had responded. Towry Law replied on 27 February 2002 to the effect that its purpose had been to allow FOS to respond substantively before any claim was pursued under CPR Part 54:

“It follows that provided we hear from you within sufficient time to allow our client to comply with the time limit stipulated in CPR 54.5(b), our client will await your response before pursuing a claim under CPR Part 54.”

6. By letters dated 1 March, 18 March and 22 March 2002 FOS told Towry Law that it was taking advice on the letter before application and that it was endeavouring to respond as soon as possible.
7. FOS’s substantive response was set out in a letter dated 27 March 2002. By that letter, FOS notified Towry Law in terms that it was prepared to re-determine the complaint by a fresh ombudsman, in the light of one particular ground of challenge which FOS conceded was arguable:

“Whilst we do not accept the entirety of the complaints you make under these grounds, we accept that it is arguable that the Ombudsman erred in relying upon this letter to ascribe knowledge of Mr Gorman’s ill health to Towry Law in 1994-1995...

In light of this, we are prepared for this complaint to be re-determined by another Ombudsman. We emphasise that it is not for us to pre-judge the outcome of that determination process.”

8. The ground that FOS conceded to be arguable was that the ombudsman had relied on correspondence from Towry Law in the 1970s indicating that Mrs Gorman had been declined health insurance on medical grounds in order to conclude that the adviser in 1995 must, or ought to have, known about Mr Gorman’s poor state of health; whereas (contended Towry Law) there was no basis for concluding that they were, or should have been, aware of it, since they had been under no obligation to retain the correspondence.
9. In the letter of 27 March 2002, FOS went on to explain that, as a matter of legal jurisdiction, the Ombudsman had no power of itself to re-open a complaint in the absence of fresh evidence not previously available. Accordingly, unless Towry Law or Mrs Gorman did have fresh evidence, the Ombudsman could not simply re-open the complaint but would require the consent of both parties. The letter invited Towry Law to consent to this to avoid the costs and expenses of unnecessary court proceedings in these terms:

“We are therefore asking you to consent to a re-determination in order to avoid the costs and expenses of unnecessary court proceedings. You will appreciate that if you are unwilling (for whatever reason) to consent to this process, and proceedings are brought, we may refer to Court to this correspondence on the issue of who should bear the costs of such proceedings.”

10. On 2 April 2002 Towry Law wrote to FOS consenting to a re-determination. They said that as the time limit for filing a claim was due to expire “in the relatively near future” they would be grateful for confirmation that Mrs Gorman had consented to the proposal once a reply from her had received. They asked what the position would be if Mrs Gorman failed to consent. In a letter of 8 April 2002 FOS said that no response had been received from Mrs Gorman and reiterated that it therefore had no power to re-open the complaint.
11. In the absence of a response from Mrs Gorman, Towry Law filed proceedings on 10 April 2002. As I have said, in its acknowledgment of service, filed on 1 May 2002, FOS said that it did not intend to contest the claim. In her acknowledgment of service, dated 5 May 2002, Mrs Gorman said that she did intend to contest the claim; but on 7 June 2002 she wrote to the court to say that she no longer intended to do so.
12. On 10 June 2002 Towry Law’s solicitors wrote to FOS stating that the judicial review proceedings could be disposed of by way of consent subject to agreement in respect of costs. They suggested that there could be no doubt that they were entitled to the costs not only of the proceedings themselves but also the costs incurred in the course of the complaint itself, including in particular those of the hearing before the ombudsman. FOS’s response, in a letter of 19 June 2002, was not entirely clear. It suggested an immediate consent order “with costs to be assessed if not agreed” and invited Towry Law to provide an estimate of their costs for consideration; but they refused to pay the costs of and occasioned by the ombudsman’s hearing, and also Towry Law’s pre-permission costs. Towry Law’s solicitors replied on 24 June 2002 stating their client’s willingness to consent to an order that FOS pay the costs of and occasioned by the Part 54 Proceedings. FOS’s response on 5 July 2002 was to assert that it was not liable for Towry Law’s costs but, without prejudice to its position, it might be prepared to pay “a small sum by contribution to cover the administrative costs incurred in the filing of the claim form including the completion of the documents.”
13. For the claimant Mr Adam Tolley submitted that Towry Law were obviously the successful party and so the general principle (CPR 44.3(2)) that they should have their costs applied. He relied on R (on the application of Boxall) v Waltham Forest LBC (21 December 2000, unreported) in which Scott Baker J had reviewed the authorities on the approach to costs where proceedings for judicial review are discontinued. The judge deduced the following principles (at paragraph 22):

“(i) the court has power to make a costs order when the substantive proceedings have been resolved without a trial but the parties have not agreed about costs.

(ii) it will ordinarily be irrelevant that the Claimant is legally aided;

(iii) the overriding objective is to do justice between the parties without incurring unnecessary court time and consequently additional costs;

(iv) at each end of the spectrum there will be cases where it is obvious which side would have won had the substantive issues been fought to a conclusion. In between, the position will, in differing degrees, be less clear. How far the court will be prepared to look into the previously unresolved substantive issues will depend on the circumstances of the particular case, not least the amount of costs at stake and the conduct of the parties.

(v) in the absence of a good reason to make any other order the fall back is to make no order as to costs.

(vi) the court should take care to ensure that it does not discourage parties from settling judicial review proceedings for example by a local authority making a concession at an early stage.”

14. Mr Tolley said that Towry Law had had to take proceedings because FOS considered that it could not re-open the complaint, in the absence of fresh evidence, without Mrs Gorman’s consent. FOS was wrong in its view, which was based on a misconstruction of the Ombudsman’s Terms of Reference, para 6.1 of which provided that

“The Ombudsman shall have no power to investigate or consider a complaint unless he is satisfied that:

(c) (i) the complaint contains no subject matter any part of which was comprised in any previous complaint made to any Ombudsman (provided that with the leave of the Council the Ombudsman may consider a complaint if he is satisfied that new evidence is available in relation to the complaint which was not available at the time the previous complaint was received).”

15. That provision had no relevance, said Mr Tolley, where what was involved was not a further new complaint but a proposal to re-open a complaint already before the Ombudsman. FOS had power to re-open the complaint without Mrs Gorman’s consent. It was their refusal to do so that had made it necessary for proceedings to be brought.
16. For FOS Mr James Strachan pointed out that the contention that FOS had had the power all along to re-open the complaint was a new one. It had not been raised in response to FOS’s letter of 27 March 2002 when they had first said that they needed the consent of both parties before they could re-open the complaint. It did not appear in the claimant’s grounds. Indeed it had not even appeared in Mr Tolley’s skeleton, which was dated the previous day.
17. As far as this particular point is concerned, in my view FOS had no power to re-open the complaint once Mrs Gorman had accepted the award. This is because of the provisions of para 5.6 of the Terms of Reference, which provides that:

“An award shall be in writing and shall:

(b) state that, if within one month (or such longer time as the Ombudsman shall allow) after its issue the complainant agrees to accept it in full and final settlement of the subject matter of the complaint, the award shall be binding on the firm against which it is made.”

18. I cannot see how, once an award has been made, has been accepted by the complainant and has become binding on the firm under this provision, FOS could re-open it without the consent of the parties. Para 6.1 provides for a complaint to be reconsidered where new evidence becomes available, and this provision, it seems to me, is consistent with the finality that arises under para 5.6. FOS was thus right to take the view that it had no power re-open the complaint without Mrs Gorman’s consent.
19. The principal factor that bears upon the claimant’s application for costs, however, is the fact that the defendant against whom costs are sought was the arbitral body whose decision was being impugned. Only in very limited circumstances will costs be awarded against an inferior tribunal that has not participated in appeal or judicial review proceedings. In R v Liverpool Justices, ex p Roberts [1960] 1 WLR 585, Lord Parker CJ said at 586:

“… it has been the practice not to grant costs against justices or tribunals merely because they have made a mistake in law, but only if they have acted improperly, that is to say, perversely or with some disregard for the elementary principles which every court ought to obey, and even then only if it was a flagrant instance.”

That practice prevails (see R v Newcastle-under-Lyme Justices, ex p Massey [1994] 1 WLR 1684), and the principles underlying it apply equally to appeals and to judicial review proceedings (ibid at 1691 per Rose LJ). They have been held, unsurprisingly, to apply to appeals against the Pensions Ombudsman: see Seifert v Pensions Ombudsman [1997] 4 All ER 947, per Staughton LJ at 956d-e. In the present case the decision that is challenged is a decision that makes an award on the basis of evidence and arguments from two parties in order to resolve a dispute between them, and, in my judgment, the approach to costs that applies in the case of courts and tribunals falls to be applied.

20. The question then arises whether there has been a flagrant disregard of principle on the part of FOS. Mr Tolley contended that there had been. He relied on all 10 of the irrationality grounds of challenge in the claim, but particularly the first two. These were the ground that FOS has conceded to be arguable and ground 1, which asserted that the decision placed excessive weight on Mrs Gorman’s assertions concerning her husband’s health in circumstances where there had been no reference to this either in her complaint form or in the numerous detailed written submissions. These grounds of challenge are conventional grounds asserting Wednesbury unreasonableness. If made out – and the conceded ground, in essence a no-evidence contention, would seem to me have good prospects of success – they would fall far short of the flagrant disregard of basic principle that would be needed to justify an award of costs against FOS. The decision of the ombudsman was full and reasoned. The allegations that are made do not go beyond ordinary assertions of error within the tribunal’s jurisdiction. The claim for costs against FOS must necessarily fail, therefore.
21. I would, however, add that, even if FOS were to be regarded as an ordinary litigant, this would not in my view be a case for the award of costs. Throughout FOS has evinced its willingness to concede in order to achieve a resolution by agreement of the dispute that has arisen. It made this clear before proceedings were instituted in its letter of 27 March 2002 and it formally stated this to be its position in its acknowledgment of service on 1 May 2002. Given the correctness, or, at the very least, the reasonableness, of its view that the consent of both parties was needed before it could reopen this complaint, it could not have done more to avoid proceedings or to resolve them. In the light of this, and the public policy considerations in favour of encouraging the settlement of judicial review disputes, an award of costs would not have been appropriate.
22. I attach no importance to what the parties said to each other on costs. FOS’s letter of 19 June 2002, as I have said, was not entirely clear. It could have been read as an offer to pay the costs of the application and it appears to have been treated on this basis by Towry Law. Its later letter, however, offered to pay only a small sum by way of contribution, but even this went beyond any liability that FOS had.
23. As far as Mrs Gorman is concerned, it can fairly be said that it was her failure to agree to a reconsideration of her complaint that led to the application for judicial review and was responsible for the continuation of the proceedings until her concession on 7 June 2002. Mrs Gorman did not appear, but I am satisfied that it would not be appropriate to award any costs against her. It was apparently only in a telephone call from Towry Law’s solicitors to Mrs Gorman on 16 July 2002 that the question of costs was first raised. At the time that she was considering her response to Towry Law’s claim she was not warned that costs might be sought against her, except possibly in respect of a court fee of £120 which was payable for an extension of time. In view of this, and the public policy in encouraging settlement by agreement in judicial review, it would not be appropriate to award costs against her.
24. The application for costs accordingly fails.
- - - - - - - - -

MR GEORGE BARTLETT QC: For the reasons set out in the judgment which I now hand down the claimant's application for costs is dismissed.

MR STRACHAN: I am grateful, my Lord. Can I extend my thanks for the judgment being in written form. My Lord, I do apply for my costs of this application, that is the costs application. My Lord, I apply on the simple basis that costs do follow the event, and on this application we have been successful. My Lord, there was a summary schedule of costs, and I would be inviting your Lordship to assess costs summarily. My Lord, it has been updated to take account of the length of the hearing --

MR GEORGE BARTLETT QC: I have not seen it.

MR STRACHAN: Can I hand up a fresh copy.

MR TOLLEY: I am happy to proceed as my Lord wishes, but may I just point out I have one or two points on the substance, in relation to what my Lord decided as against Mrs Gorman. I am entirely happy to deal with that --

MR GEORGE BARTLETT QC: Perhaps you could deal with those now, Mr Tolley.

MR TOLLEY: My Lord, may I point out the following matters. It is really just my Lord's last substantive paragraph of the judgment, paragraph 23.

MR GEORGE BARTLETT QC: Yes.

MR TOLLEY: My Lord, what I wanted to point out, with respect, is what I submit to be a factual error on the face of my Lord's judgment, not simply a typographical one but a substantive one. In paragraph 23 what my Lord says is, five lines down:

"It was apparently only in a telephone call from Towry Law's solicitors to Mrs Gorman on 16th July 2002 that the question of costs was first raised. At the time that she was considering her response to Towry Law's claim she was not warned that costs might be sought against her, except possibly in respect of a court fee of £120 which was payable for an extension of time. In view of this, and the public policy in encouraging settlement be agreement ^^ in judicial review, it would not be appropriate to award costs against her."

My Lord, there are two factual points there. One is a point of chronology. Mrs Gorman was told, of course, by the FOS on 27th March 2002 that if she did not consent to the redetermination of the complaint then that would be relevant to the question of costs (the reference for my Lord is Mr Pickworth's first exhibit, internal pagination 275-276). The second point is, my Lord, that Squire & Co told Mrs Gorman herself by letter dated 6th June 2002 (the reference is the second exhibit of Mr Pickworth, page 23) that, as it were, the question of the court fee would also be sought from her by way of costs, the obvious premise being there would be other costs in addition to the £120 court fee that would be sought from Mrs Gorman in relation to the application if she continued to defend it.

MR GEORGE BARTLETT QC: I had that letter in mind. It did not seem to me that that was giving any clear indication to her that costs, apart from the £120, would be sought. Nevertheless, that was 6th June 2002 and not before. It seems to me that the relevant matter is not any indication that the FOS might have given to her, but any indication emanating from the claimant. I am grateful to you for drawing those matters to my attention. It makes no difference to my decision on that, and the claim for costs against her is refused.

MR TOLLEY: My Lord, in those circumstances I ask my Lord for permission to appeal, but only insofar as the order against Towry Law insofar as its application made against Mrs Gorman is concerned. I make two points, my Lord. One, as a matter of principle, in my submission, it should not make any difference whether a specific warning is given or not because costs in general will follow the event in litigation, and litigants in person ought not to be in a more privileged position, in my submission, in this respect than anyone else. Could it be said that a litigant in person who brings a claim against a represented party will not be liable for the costs unless the represented party says at the very beginning "If you lose you will have to pay our costs". I submit, my Lord, that there is no such rule. The second point is that there is nothing to suggest that in fact Mrs Gorman was unaware of the costs position. She put in no evidence. She wrote letters to the court, but at no stage did she actually say "I never realised that costs would be sought from me". She disputed the question of the £120 court fee and alleged that Mr Dennison had not made it clear in a telephone conversation that the £120 court fee was in issue, but Mr Dennison had obviously written his attendance note and had written a letter to Mrs Gorman about that on 6th June.

So what I say, my Lord, is that taking together there is no general principle that a litigant in person should only pay costs where there has been specific notice to her, and, secondly, there is nothing to suggest that Mrs Gorman actually was not aware that she would be liable to costs, there are real prospects of success.

I said there were two points, my Lord, I should have said there were three. The third and last point is this. My Lord referred not only to this factual background but also to the public policy of encouraging settlement by agreement on judicial review. Of course, my Lord, I do not seek to step away from that public policy in any sense at all. What I ask my Lord to consider is this: in what sense did Mrs Gorman contribute to that policy? At every stage of the litigation until and after permission had been granted she sought to dispute the relief that Towry Law sought. When the FOS offered a redetermination she refused or was unwilling to consent before the deadline, so the claim had to be brought. The acknowledgement of service disputed the claim in every respect, and it was only after permission were granted and her personal circumstances, she said, that led her to consent to the claim. In other words, it was not through any recognition, conciliation or concession that led her to consent to the claim, but rather what she said were her personal difficulties in continuing to involve herself in this litigation, she had family matters pressing on her. All I say, my Lord, is that in fact public policy was not forwarded in any sense by Mrs Gorman in this case and ought not to be a factor in her favour.

MR GEORGE BARTLETT QC: Yes. Permission is refused. I do not see those grounds individually or in combination creating a reasonable prospect of success on appeal.

MR TOLLEY: Very well. My Lord, it may be sensible then to move to the question of costs. I interrupted my learned friend --

MR GEORGE BARTLETT QC: Well, he has made his application. If you want to resist his application for costs --

MR TOLLEY: My Lord, I do resist his application for costs. I make five points. The order I invite the court to make is that there should be no order for costs, alternatively that only a limited proportion of the FOS's costs should be ordered to be recoverable.

The five points I make as are follows. The first is this. The ultimate decision of the ombudsman, although my Lord has decided that wrong decisions of the ombudsman do not attract orders for costs, nevertheless was, in my submission, wrong or at least, as my Lord put it, there were good prospects of success in establishing that it was wrong so far as judicial review proceedings were concerned. To that extent its conduct is relevant to the question of its costs, albeit I appreciate my Lord says it is not relevant to the costs against it, but it must be relevant to the question of whether it can recover its costs in the first place.

The second point I make, my Lord, is that I would suggest that Towry Law was not in any way at fault in relation to the way in which the judicial review proceedings had to be brought, because in the light of Mrs Gorman's refusal to consent it had no option but to press the matter on.

The third point, my Lord, is this. As my Lord put it in his judgment, there was, to say the least, confusing correspondence from the FOS about the question of costs, and I would submit that both the letter of 10th June, to which my Lord referred in his judgment, and another letter, which I will deal with in a moment, gave suggestion or encouragement that the FOS was willing to pay costs, albeit to a limited extent. The other letter I rely on, my Lord, is this, the without prejudice save as to costs letter that the FOS wrote on 27th March of course was written on the premise that otherwise they might be liable for costs. There was not any suggestion at that stage that even if proceedings were resolved against them there would be no question of them being responsible for costs. Those letters, and the 10th June letter in particular, my Lord, as it were, indicated a confusion of position on the part of the FOS as to whether or not it would pay any costs.

That brings one to the fourth point, which is the judicial or arbitral body point, which my Lord found determined in the respondent's favour. The only suggestion I make about that is that it was raised very late in the day. It was not raised in the acknowledgement of service. On the contrary, the points in the acknowledgement of service were, we have done what we can, plus the point about reference to the without prejudice correspondence in the application for permission to apply for judicial review. That point about without prejudice correspondence seems to have fallen away entirely so far as costs are concerned. Those are the reasons the FOS gave for resisting any liability in respect of costs, my Lord. That point about the without prejudice correspondence has certainly fallen away.

The point I make about that so far as causation of costs is concerned, my Lord, is that while of course my Lord found in the FOS' favour on a general point as well as that specific point, nevertheless had that specific point been raised at a much earlier stage, as one might have thought it could have been, it could have led to a different outcome --

MR GEORGE BARTLETT QC: Well, once you had the opportunity to consider the point you did not concede it, did you?

MR TOLLEY: No, my Lord, but the point only came, as it were, the day before the hearing. My Lord, I only raise it in that sense. I appreciate it was not conceded, but a deal of the costs were already incurred by that stage. Of course the hearing went ahead, but it is difficult to take on board points such as that, I would submit, at the last minute in that way.

MR GEORGE BARTLETT QC: You not only did not concede it, you sought to refer to advance arguments and refer to authorities in an effort to resist it.

MR TOLLEY: I understand that, my Lord. I cannot gainsay that in any sense at all.

The last point I make is this. As a general point, I appreciate it is a general point, Towry Law is substantially out of pocket on costs anyway, in any event, in the sense that it has incurred the costs thrown away in relation to the original hearing, which in no sense are recoverable from anybody, and obviously the costs of bringing these judicial review proceedings in the first place, which in the light of my Lord's judgment will not be recoverable from anyone either. If you like, my Lord, the consequences of this necessary exercise in seeking to set aside the ombudsman's decision has led to the claimant incurring very significant costs which it will not be able to recover.

I invite my Lord to make no order as to costs, or at least only to order a proportion of the FOS's costs be recovered.

MR GEORGE BARTLETT QC: Thank you, Mr Tolley. Taking account of those points that you raise, I am not satisfied that it would be right to deprive the defendant of its costs. I am concerned of course solely with the costs of the application for costs, and it seems to me clear that the basic rule that the successful party should have its costs should apply.

MR STRACHAN: I am grateful, my Lord. Could I then turn to the issue of quantum.

MR GEORGE BARTLETT QC: I now have the schedule. Is it up-to-date?

MR STRACHAN: My Lord, it is. The total costs is £2,761.

MR GEORGE BARTLETT QC: Is that resisted, Mr Tolley?

MR TOLLEY: My Lord, I am afraid so. I have two main points about it.

MR STRACHAN: Before the points are made, perhaps I can anticipate one or two of them, because I think it would be helpful, on the issue of proportionality, if I hand up the costs schedule from the claimant in relation to the same application. My Lord, you will see immediately that the costs from the claimant totals £5,679 for the hearing for Friday. My Lord, that of course does not take into account, it will not have been updated, the extra time spent on Friday, or indeed attendance today, my Lord, so it would have been quite significantly higher in light of the extra hours. On a simple, very simple, rough and ready basis, my Lord can see immediately that the costs claimed comparatively are modest compared to those of my learned friend.

Dealing with any particular points, you will see that the itemised list is provided. I understand my learned friend may be taking some issue with the hourly rate charged by my instructing solicitor. I would suggest that that is perhaps one of the lowest hourly rates for a London solicitor your Lordship is likely to encounter, but if your Lordship is in any doubt about that then of course you can see from the claimant's hourly rates that those were the ones we were facing to pay, had they been successful, ranging from £100 for the lowest grade up to £160 per hour. So insofar as there is any point of criticism made about that --

MR GEORGE BARTLETT QC: £100 for a paralegal?

MR STRACHAN: Indeed, my Lord. Compared to £50 for my instructing solicitor.

MR GEORGE BARTLETT QC: I see that point.

MR STRACHAN: I understand it was going to be taken. My Lord, as regards the general amount of hours, I have just done a rough quantum totting up the hours. Broadly my instructing solicitor has spent, I think, somewhere in the region of 12 hours in total between the period of June to July, and your Lordship has seen the correspondence that has gone between the parties in efforts to settle the matter, and of course those costs have all been incurred throughout that period. My Lord, that compares with, I think, something in the region of 16 or 17 hours incurred by the claimant in the same period. So, my Lord, insofar as any point is taken on the quantum of hours, there is little substance on that.

My Lord, I do not say anything about my own fees at this stage in anticipation of any point raised, but of course your Lordship will be able to compare and contrast equally. My Lord, I will not trouble you further until I know which points are being pursued.

MR TOLLEY: My Lord, there are two points, one about the hourly rate and one about the number of hours spent. My Lord, the difference between the hourly rate in the case of Miss Surry and a solicitor employed in private practice is of course that her hourly rate is a notional one, in the sense that it is an overhead and not a profit. It is not actually an out of pocket disbursement. I am not suggesting that in principle therefore it is irrecoverable, but nevertheless the approach that the court will take to the calculation of the appropriate hourly rate is very different because there is no profit element involved. What one is talking about essentially is the cost to the FOS of employing a person such as Miss Surry as it must do, but all that involves is, as it were, the salary cost plus the general share of overheads that would be attributable to a solicitor. There is a further distinction from a solicitor's firm in private practice, my Lord, which is this. In a private practice solicitors firm all the overheads are referrable to the legal business that has been conducted at that firm, whereas at the FOS I simply do not know the position because there is no evidence about this, but one would naturally be inclined to the conclusion that a great deal of overheads are spent in general business of the FOS which has nothing to do, as it were, with its in-house legal department. Its premises are not solely devoted to the conduct of legal business, they are contributing to all the other matters that it deals with. My Lord, there is no law so far as I can find on this, but the best I could come up with is a reference to a book called Cook on Costs, which my Lord may have come across, written by HHJ Michael Cook. He indicates that in a solicitor's firm in private practice the sort of ratio between salary and overall cost to a firm of a solicitor is between two and two and a half times. In other words, you work out what the solicitor's salary is and then you multiply it by between two and two and a half depending on the level of overheads of the particular firm. What I suggest is that in a case such as this, where you have an in-house solicitor, that ratio must be lower because you do not have the whole of the overheads being attributable to the legal business that is operated by the firm, and the sort of ratio I venture to suggest is perhaps one and a half to take account, as it were, of costs beyond merely salary that would be incurred by the FOS in employing somebody such as Miss Surry.

I just say this in relation to the £50 an hour. On the basis of an 8 hour day that is £400 a day, £2,000 a week. If one says -- I do not know how many weeks holiday one gets, but say 6 weeks holiday and there are 46 working weeks in the year, that is about £92,000 direct value that is being set at the rate of £50 an hour to the FOS. Of course, there should not be any profit involved in employing an in-house solicitor. What I say, my Lord, is if Miss Surry's salary is £60,000 a year, then one could rest satisfied that £50 an hour was about right, because on the ratio of one and a half times salary that would produce the figure of £90,000, whereas if her salary were half that then the hourly rate ought to be correspondingly half that. It should not ultimately be a very difficult arithmetical calculation to perform.

The second point, my Lord, concerns the amount of hours spent. My learned friend is right, save for half an hour, the total time spent pre the hearings is 12 and a half hours. I make several points, my Lord. Firstly, obviously there is no witness statement drafted on or on behalf of the FOS, so there is a clear difference there between time spent and work done. Some of the correspondence was plainly drafted by my learned friend, as appears on the face of the costs schedule. There is an oddity about 4 hours of attendance on and communications with the client. That seems to make no sense where the FOS was in effect the client, maybe there is somebody else who needed to be discussed with, but it did not appear to make sense at first blush.

Lastly, my Lord, the question of court time. My learned friend has indicated to me that what comprises the additional costs to the original schedule is partly his fees for attendance today, about which I make no observation, and partly 11 hours of attendance on his instructing solicitors, 8 hours on Friday and 3 hours today, as I understand it. The query I have about that is that on Friday we were actually in court before my Lord for 4 hours, 3 and a half hours actually in total, I appreciate there was another matter on before us and there was nothing we could do but wait for it, but there appears to be an element of counting time that, as it were, would be counted in any event in relation to the application. Similarly today, well, I imagine we will be finished in about half an hour, 3 hours total seems to me unnecessary in the circumstances and excessive.

I would invite my Lord to reduce the bill both on the question of the hourly rate and the question of the amount of hours spent. My Lord, the right approach is this. The Court of Appeal has recently indicated that if my Lord is satisfied that the overall bill is proportionate, then one can simply do a quick check item by item to make sure that nothing in particular is disproportionate, whereas one would adopt a much higher degree of scrutiny if the overall bill appeared to be disproportionate. Of course, I do not suggest that the overall bill is disproportionate. I simply invite my Lord to cast his eye down on those few points and to make the appropriate reductions.

MR GEORGE BARTLETT QC: I am satisfied that not only is the overall bill not disproportionate, but the individual items in respect of which Mr Tolley has addressed me are not excessive. I therefore make an order for costs in the amount of £2,761.25.

MR TOLLEY: My Lord, the only other matter that needs to be dealt with is the finality of the quashing order, it does go by consent.

MR GEORGE BARTLETT QC: Yes.

MR STRACHAN: Yes, my Lord. I am quite prepared for that matter to be dealt with as an order that the ombudsman's decision be quashed by consent, and the following matters in relation to costs be dealt with as an order from the court, and of course those matters were not by consent.

MR GEORGE BARTLETT QC: Very well. It is ordered by consent that the decision of the ombudsman be quashed.