CASES NO: BB11Z00478/ LA00A00034/33
Neutral Citation Number: [2013] EWHC 851 (Fam)
IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION

Date: 17 April 2013 

Before :
THE HONOURABLE MR JUSTICE PETER JACKSON
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Between :

A and S (Children)
and 
Lancashire County Council
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Anthony Hayden QC and Lorraine Cavanagh (instructed by Farleys Solicitors) for A and (instructed by the Official Solicitor) for S

Malcolm Sharpe (instructed by LCC Legal Services) for LCC

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JUDGMENT
Mr Justice Peter Jackson:

1.	This is an application for costs made on behalf of A and S, who were subject to freeing orders in favour of Lancashire County Council (LCC), but were never adopted.  On 21 June 2012, the freeing orders were discharged and declarations were made under section 7(1)(b) of the Human Rights Act 1998 (the HRA) that LCC and the Independent Reviewing Officer (IRO) had breached the boys’ rights under Articles 8, 6 and 3 of the European Convention on Human Rights.  The decision appears at [2012] EWHC 1689 (Fam), where paragraph 15 contains an overview of the history.   

2.	The proceedings were, chronologically:
(1)	an application to revoke A’s Freeing order, issued by A.
(2)	an application to revoke S’s Freeing order, issued by LCC.
(3)	an application for a Special Guardianship order in respect of A.
(4)	a claim under the HRA by A.
(5)	a claim under the HRA by the Official Solicitor on S’s behalf.
3.	A consulted his solicitor in May 2011, the proceedings began in June 2011, the hearing took place in March 2012, written submissions were delivered in May 2012 and judgment was given in June 2012.  The proceedings in the Family Division therefore ran for a year, excluding the present costs issue and the assessment of damages, which was transferred to the Queens Bench Division.   
4.	Comprehensive written submissions on costs, running collectively to over 50 pages, have been presented, with each party making an initial submission and a submission in response.  An oral hearing has accordingly not been necessary.   No order is sought against the IRO, who has therefore not been involved in this application.

5.	A costs statement in the sum of £210,734.57 (£176,195.83 + VAT) has been served on behalf of A and S.  

Costs principles

6.	Section 51(1) of Senior Courts Act 1981 provides that subject to rules of court, costs shall be in the discretion of the court.  

7.	The parties have referred to the rules governing both civil and family proceedings.

8.	Rule 44.3 of the Civil Procedure Rules 1998 (‘the CPR’) governs the exercise of the discretion in civil proceedings.

44.3	Court’s discretion and circumstances to be taken into account when exercising its discretion as to costs

(1) 	The court has discretion as to –

(a) 	whether costs are payable by one party to another; 
(b)	the amount of those costs; and 
(c) 	when they are to be paid. 

(2) If the court decides to make an order about costs –

(a) 	the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but 
(b) 	the court may make a different order. 

(3) …

(4)	In deciding what order (if any) to make about costs, the court must have regard to all the circumstances, including –

(a) 	the conduct of all the parties; 	
(b) 	whether a party has succeeded on part of his case, even if he has not been wholly successful; and 
(c) 	any payment into court or admissible offer to settle made by a party which is drawn to the court’s attention, and which is not an offer to which costs consequences under Part 36 apply. 

(5) 	The conduct of the parties includes –

(a) 	conduct before, as well as during, the proceedings and in particular the extent to which the parties followed the Practice Direction (Pre-Action Conduct) or any relevant pre-action protocol; 
(b) 	whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue; 
(c) 	the manner in which a party has pursued or defended his case or a particular allegation or issue; and 
(d) 	whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim. 

(6)-(9) … 

9.	Turning to family proceedings, Part 28.1 of the Family Procedure Rules 2010 (‘the FPR’) states:

“The court may at any time make such order as to costs as it thinks just.”

10.	Rule 28.2 applies the CPR to family proceedings except that it disapplies certain parts of CPR Rule 44, and in particular the general rule under Rule 44.3(2) that the unsuccessful party will be ordered to pay the costs of the successful party.  The only practical difference between the two regimes is that under the FPR there is no general rule that costs follow the event.  In each case, the court must consider the matters under 44.3(4)(a) and (5) before deciding whether to make a costs order. 
   
11.	The case law (and in particular Re T (Children) (Care Proceedings: Costs) [2012] UKSC 36) makes clear that orders for costs in family cases are unusual but can be made where the behaviour of a party has been reprehensible or outside the band of reasonableness.  But the analogous position in the Court of Protection (where there is a general rule that there will be no order for costs in welfare proceedings), shows that 'bad faith' or 'flagrant misconduct' is not a condition for a departure from the norm: see, for instance, WBC v CP & LPM [2012] EWHC 1944 (Ryder J).

12.	In assessing conduct under CPR Part 44.3(5), there is authority on whether the conduct that gave rise to the proceedings can properly be taken into account, or whether the focus should be on litigation conduct only.  The latter proposition was articulated in Hall v Rover Financial Services (GB) Ltd [2002] EWCA Civ 1514, the former in Groupama Insurance Co Ltd v Overseas Partners Re Ltd (Costs) [2003] EWCA Civ 1846: see the Supreme Court Practice 2013 at 44.3.13.

13.	As stated by Baker J in G v E & Manchester City Council & F [2011] 1 FLR 1566, the fact that both parties are publicly funded makes no difference:
     
“[39]   … The rules about costs must be applied fairly to all litigants, regardless of who they are. In this case, all the costs of litigation will be borne by the public purse.  The Legal Services Commission is an equally hard-pressed public agency and the Commission – and the taxpayers who fund it – are entitled to look to the court to apply the costs rules impartially and ensure that there is a level playing field.   Gone are the days when it is appropriate for a court to dismiss applications for costs on the basis that it all comes out of the same pot. …” 

The parties’ submissions summarised

Submissions of A and S

14.	Mr Hayden QC and Ms Cavanagh submit that:

(1)	These were in effect civil proceedings, to which the CPR should apply.  While the boys’ claims were for revocation of the freeing orders, with ancillary claims brought under the HRA, in reality the revocation case was overwhelming and unopposed by any party and the focus of the litigation was on the human rights violations.  This was reflected in the way the court directed Particulars of Claim and Defences, a procedure that would not ordinarily be required under s.7(1)(b) of the HRA or indeed under the FPR.  LCC should not be able to escape the civil costs rules merely because the HRA claim was litigated in the course of family proceedings rather than as a free-standing application. 

(2)	Having said that, the same result is reached, whatever the route.  LCC should pay the boys’ costs.  It blatantly disregarded guidance, advice, the fundamental principles of the Children Act 1989 and its Convention obligations. 

(3)	When challenged, the response of LCC was at first defensive, then passive, making concessions late and only when unavoidable, in contrast to the active engagement of the IRO.  For example, it initially denied the core allegations that the boys had suffered the loss of a permanent adoptive placement, a settled family life and family relationships.  “The consequence… was that the Claimants were, in effect, put to strict proof of their allegations until the overwhelming weight of them was finally absorbed by the Local Authority, in effect at the doors of the court.”  

(4)	Costs should be awarded on the indemnity basis.  The test articulated by Simon Brown LJ in Kiam v MGN Ltd (No 2) [2002] 2 All ER 242 is met:

“[12]… such conduct would need to be unreasonable to a high degree; unreasonable in this context certainly does not mean merely wrong or misguided in hindsight.  An indemnity costs order made under Pt 44 (unlike one made under Pt 36) does, I think, carry at least some stigma.  It is of its nature penal rather than exhortatory.”

Submissions of LCC

15.	For LCC, Mr Sharpe submits that

(1)	All applications and claims were dealt with as family proceedings and the appropriate rules as to costs are the FPR.  The HRA claims were, as a matter of good practice, brought within the family proceedings.  Pleadings were for the purpose of issue identification, and did not amount to an adoption of the CPR.  

(2)	No order for costs is the appropriate order.  The welfare orders and plans for the children’s future were the primary focus of the court’s attention.  The care plans presented by LCC were duly approved by the court.  

(3)	There being no presumption that costs follow the event, the key criterion is that of the conduct of the parties. LCC acted cooperatively, as the court acknowledged at paragraph 16 of its judgment.  For example it:
 
•		gave copious voluntary disclosure, providing a copy of the ‘master bundle’ (containing the full social services records, education records, medical records and previous legal proceedings of each child, all of which it obtained, collated and distributed) and assisting the applicants to find their way though the data; as a result the factual basis for the applications and claims was clear and obvious in each case.

•		adopted a policy of seeking to make appropriate admissions at the earliest opportunity.  The entire process took less than two months, a far quicker timetable than a normal civil proceeding.  

•		agreed to the appointment of an independent social worker

•		promised that S’s children’s home should not be closed without proper consultation

•		funded leading and junior counsel for the IRO 

•		funded the Special Guardianship application in relation to A. 

(4)	The costs sum sought represents a very significant sum and the payment of which would require extensive budgetary re-organisation possibly affecting overlapping financial years and impacting upon presently costed services.

(5)	The sums sought are excessive, a number of detailed comments being made.  

(6)	The determination of the costs issue can be adjourned to await the outcome of the QBD proceedings.  In the meantime, a full costs schedule can be presented so that the claim can be properly scrutinised.

Response of A and S

16.	(1)	LCC only arrived at a full acceptance on the first day of the hearing.  While there were good professional working relationships, many initiatives claimed by LCC were imposed upon them by necessity and accepted without demur.  While the timetable set by the court was tight, the process of agreement took about twice as long as LCC suggests.  LCC’s response also overlooks, it is said, the court’s criticism of its incuriosity (my word) about how and why the boys had been so badly let down.

(2)	Reference is made to the findings which led Ryder J to make a costs order in WBC v CP & LPM (above):
	
“a) 	the local authority's actions are tainted with illegality
b) 	the local authority's decision making was impoverished and disorganised
c) 	the local authority is responsible for the delay in referring CP's circumstances to the Court of Protection and/or the High Court in its children and inherent jurisdictions
d) 	the local authority could have arrived at the position concluded by the court many months earlier.”
(3)	There is no reason to postpone a decision.  The issues of liability and quantification are separate, and this court is in the best position to assess the merits.  

Response of LCC

17.	(1)	It is not open to the Applicants to seek to import the CPR into these proceedings.  The claims were not claims to which the CPR applied, beyond the limited application permitted by the FPR, which specifically excludes the application of the rule that costs follow the event.

(2)	The conduct to which attention should be directed is litigation conduct, and not conduct in a broad or general sense: Hall v Rover (above).  

(3)	A detailed account of the chronology demonstrates genuine cooperation by LCC: the account of events given by the Applicants is exaggerated.  Nothing in LCC’s litigation conduct could properly be considered as reprehensible.  The action was a model of co-operation, disclosure and issue identification which, despite the constraints placed upon the parties by the short timetable enabled complex matters to be dealt with in an efficient and effective manner.

(4)	A fortiori, the same applies to the application for indemnity costs.

Decision

18.	I accept the submission of LCC that these are family proceedings to which the FPR apply.  I therefore approach the matter without applying any general rule that costs follow the event, but seeking to make an order that is just, as required by FPR 28.1.

19.	I do not accept the submission of LCC that the only conduct to which the court can have regard under 44.5(4)(a) is litigation conduct.  If this were the case, a party to family proceedings who had behaved reprehensibly for years could escape a costs award by being sure to behave impeccably once the litigation for which they were responsible had begun. 

20.	While I accept the submission that the ongoing welfare orders for the boys were the court’s most immediate concern, the litigation efforts (and hence the costs) were overwhelmingly focussed on the history of their time in care.   

21.	There is no reason to defer a decision. 

22.	Although the parties have devoted considerable effort to arguing about costs, this reflects the sums involved and not the complexity of the argument.  In fact, the matter is quite simple.  In normal circumstances, an application by a local authority to discharge a freeing order or a placement order will not lead to any consideration of a costs order against it.  However, in this case LCC’s conduct in relation to these boys over many years was blatantly unlawful and unreasonable (as both it and the IRO have accepted) and led inexorably to substantial litigation.  The extensive period of the default meant that the amount of material to be analysed was itself extensive, and the time necessary to analyse it was correspondingly long.  LCC having handed over its archive, it fell to those representing the boys to make sense of it, with little if any original insight coming from LCC itself, as opposed to from the IRO. 

23.	I therefore have no hesitation in finding that LCC’s conduct in this case has been unreasonable to the extent that it should pay the boys’ costs.  I include in this the costs of this costs argument, where the applicants have succeeded in the result, even if not in every legal submission.  The impact on LCC’s budget is extremely regrettable, but there is no good reason why the Legal Services Commission should subsidise substandard behaviour of this kind by another public body.                 

24.	I do not, however, consider that the facts of this case merit the additional penalty or stigma of an award on the indemnity basis.  That conclusion would almost certainly have been different had LCC not cooperated in the litigation process to the extent that it did.

25.	LCC’s understandable concern at the high level of the costs will be met by an order that the costs will be subject to a detailed assessment on the standard basis. 

26.	I invite the parties to lodge an order providing for LCC to pay A and S’s costs of the proceedings in the Family Division (including the costs of the costs argument) on the standard basis, such costs to be subject to a detailed assessment.  Liability for costs arising from the assessment of damages in the Queens Bench Division will be determined by that court.