E, R (on the application of) v Governing Body of JFS & Anor [2009] UKSC 1

Our first Supreme Court report and it is a cracker. Not housing law, but legal aid funding is the issue, so those not interested in legal aid issues can look away now…

The issue is legal aid funding for an appeal of a successful claim, itself funded by legal aid. How far can the LSC set conditions on funding for an appeal by the other side?

The issue came out of the Judicial Review of the admission policies of a state faith school run by JFS, [2008] EWHC 1535 (Admin), [2008] EWHC 1536 (Admin).  On appeal, the Court of Appeal found JFS’s oversubscription policy unlawful, [2009] EWCA Civ 626. JFS sought leave to appeal to the then House of Lords, which was granted.

E had been publicly funded in JR and Court of Appeal proceedings and in initial steps in the House of Lords. On the issue of funding for the substantive hearing, the LSC refused funding unless conditions were met in the following terms (as put by Mr Reddin of the LSC):

I refer to your letter dated 15 September our telephone conversation of yesterday evening and your email of today’s date. For the avoidance of doubt it is correct to say that I am minded to refuse your application for funding [E] as a respondent in the Supreme Court unless the other side is prepared to:(a) Allow the cost [sic] order made in the Court of Appeal to stand in any event

(b) Agree an undertaking that there will be no costs order in the Supreme Court with both sides bearing their own costs.

If that is not acceptable we would expect an application to be made to the Court to seek an order along those lines failing which funding would not be provided.

Our reasoning behind this decision stems from the Funding Code which in the circumstances of this case allows the refusal of funding unless the likely costs are proportionate to the likely benefits of proceedings having regard to the prospects of success and all other circumstances.

The LSC gave their reasons as being that:
(1) that E had effectively succeeded in the primary purpose of the litigation and his situation would not change whatever the outcome of the proceedings,
(2) the likely consequences for the Community Legal Service Fund if costs were to be awarded to the other side on an inter partes basis in the Court of Appeal and in this Court,
(3) that it was not unreasonable to expect the appellants to pay for the case, as the real interest in overturning the decision of the Court of Appeal lay with them and
(4) that, although the case was of some public interest, the number of people who were likely to benefit as being in a similar position to M was relatively small.

Unsurprisingly, the other side were not prepared to agree any such arrangement. E applied to the Court for a protective costs order, that the Appellants shall not be entitled to seek the payment of any costs from the Legal Services Commission or the Respondent. This was opposed by JFS.

At hearing, E did not seek an order that each side bear their own costs, for reasons we’ll come back to below.

The LSC conceded that it would not demand that protection be obtained against a costs order for the Supreme Court hearing or costs for the Court of Appeal hearings, if JFS/United Synagogues were successful. The Supreme Court were very glad of this concession because:

Had he not made these concessions we would have had no hesitation in refusing to make orders to either effect. In both cases E’s exposure to the risk of these awards is a direct result of the fact that the Legal Services Commission provided funding to E in the Court of Appeal. Having decided to do so, it must be taken to have assumed the risk that any orders as to costs that were made in E’s favour in that court would be reversed on appeal by the Supreme Court. E had a legitimate expectation that the funding that was afforded to him in the Court of Appeal would extend to the consequences of any such order. Furthermore, as Mr Jaffey for the United Synagogue pointed out, an order protecting E and the Legal Services Commission against the payment to the United Synagogue of “any costs” would render its appeal on the costs issue pointless. It does not appear from Mr Reddin’s letter of 18 September 2009 that he had applied his mind to the issue that the United Synagogue wishes to pursue. It is entirely separate from the discrimination issues raised by JFS. The costs issue raises no question of general public interest. A protective costs order in E’s favour in regard to these costs would be entirely inappropriate.[para 9]

This left the issue of JFS costs in the Supreme Court substantive hearing. Was the LSC entitled to insist on a protective costs order? The LSC argued it was, citing R (Corner House Research) v Secretary of State for Trade and Industry [2005] EWCA Civ 192 and, of course, Weaver v London Quadrant Housing Trust [2009] EWCA Civ 235 (our report here). E no longer had a private interest, as he had been admitted to the school, the matters were of general public importance and, should there be no funding, E was likely to reasonably withdraw, so would withdraw if the protective order was not made.

The Supreme Court noted that the prime mover here was the LSC, as in Weaver, but as funding was only available to individuals, Cornerhouse was of limited relevance. Meanwhile, both E and JFS argued that under the funding code, the LSC’s position was unlawful.

Held:

As in Weaver, it was vital that all parties be represented. No amicus could be arranged in time.

This case was significantly different to Weaver, in that in Weaver, no costs award would have been made against Weaver in any event for the Court of Appeal hearing had the LSC withdrawn funding. But this was a real possibility in this case if E had to withdraw. E still had a personal interest, in terms of his own views about the discriminatory behaviour, and the public interest was greater than Mr Reddin of the LSC appeared to consider.

Then there was the stage in proceedings at which the LSC had made its decision:

Leave to appeal was given on 28 July 2009. On 31 July 2009 the House of Lords refused to make a protective costs order in E’s favour. He was invited to renew his application if his financial circumstances changed so that his eligibility for public funding came into question. There has been no change in his financial position or in the circumstances that affect the merits of the discrimination issues. All that has changed is the removal of the stay and M’s admission to the school. The prospects of success remain the same as they were in the courts below. It was in these circumstances that immediately after the hearing on 31 July 2009 E’s solicitors contacted the Legal Services Commission about the funding for the appeal to this Court. Having attempted without success to obtain funding from another source, they made an application for further funding from the Legal Services Commission on 8 September 2009. Mr Reddin’s letter of 18 September 2009 was the result.[para 19]

And then the Supreme Court well and truly sticks the boot in. This is worth quoting at length:

20. Mr Reddin cannot be criticised for delay. But his refusal to provide funding to enable E to resist JFS’s appeal without a protective costs order ignores the consequences of that refusal for access to justice. As Ms Rose pointed out, it would mean that publicly funded litigants would have to be warned that they might be exposed to personal liability for the other side’s costs on appeal even if they were entirely successful in the courts below. Many litigants would be unable to face that risk, with the result that they would be shut out of court. In consequence of JFS’s appeal against the decision in his favour by the Court of Appeal, for which he was publicly funded, E would be exposed to the risk of having to pay costs incurred after public funding has been withdrawn from him even if he takes no further part in these proceedings. Conversely, the case has only reached this court because E had the benefit of public funding in the Court of Appeal. He had a legitimate expectation that, as he was provided with public funding in the Court of Appeal he would be provided with public funding to enable him to resist this appeal.

21. We take full account of the points made by Mr Reddin in his witness statement of 29 September 2009, and in particular the risk to the Legal Services Commission of an adverse costs order if JFS is successful in its appeal. We take account too of the fact that JFS would not be entitled to recover costs against an amicus were one to be appointed: see Weaver v London Quadrant Housing Trust [2009] EWCA Civ 235, para 7. But the position which Mr Reddin has adopted on the Commission’s behalf cannot be reconciled with the statutory scheme. In his letter of 18 September 2009 he said that the Funding Code in the circumstances of this case allows the refusal of funding unless the likely costs are proportionate to the likely benefits of the proceedings and all other circumstances. This takes no account of the stage in the proceedings at which the client is in need of funding. Compelling reasons would have to be shown for withdrawing public funding from a litigant who was publicly funded in the court below, was successful in that court and wished to resist an appeal to a higher court by the unsuccessful party. No such reasons have been demonstrated in this case [my emphasis].

22. It should be understood, as a principle of general application, that if the Legal Services Commission decide to fund a litigant whether by way of claim or a defence who is successful in his cause, that decision must ordinarily be seen to carry with it something close to an assurance that the Commission will continue to support him in any subsequent appeal by the unsuccessful party whilst he remains financially eligible.[my emphasis] This will particularly be so where (a) the withdrawal of support would expose the publicly funded litigant to a substantial risk for future costs, (b) he retains a significant interest, quite apart from his interest in resisting any future costs liability, in maintaining his success in the litigation and (c) the issues raised on the appeal are of general public importance which it is in the public interest to resolve and his case on these issues is unlikely to be properly argued unless he continues to be funded by the Legal Services Commission. All three of these circumstances prevail in this case. It should be noted too that in Weaver the Court of Appeal, in making the protective costs order, expressly recognised that, were funding to be withdrawn, the necessary representation would have to be provided either by the Equality and Human Rights Commission or by appointing an amicus, against whom the Trust would not be able to recover its costs: [2009] EWCA Civ 235, paras 7 and 17. Those alternatives are not available here. Although the Equality and Human Rights Commission are intervening in the appeal, they propose to advance different arguments from those which E wishes to advance. As we have said, it is too late for the effective appointment of an amicus. The decision to refuse public funding at this stage appeared to us in all the circumstances to be so unreasonable as to be unlawful.

23. It was suggested that, if the Legal Services Commission adhered to this position despite a finding to that effect, the matter could be taken to judicial review. But time is short. No advantage is to be gained by going through that procedure, and the delay and expense of doing so is best avoided. We concluded that E is entitled to an immediate declaration in these proceedings that the only reasonable decision open to the Legal Services Commission is to continue to provide him with public funding for this appeal.

That was the LSC told clearly that its position was both unlawful and in the circustances unreasonable. But there was more.

The LSC had put forward as an alternative that an order that each side bear their own costs be sought as a condition of continued funding. Now, as any legal aid solicitor will know, the cases where one obtains an inter partes costs order – at roughly double the LSC hourly rate – are what keeps a practice viable. What is lovely to see is that the the Supreme Court recognises this and the utter ridiculousness of requiring a legal aid practice to conduct a Supreme Court case at a substantially reduced rate. Again, quoting in full, because it is worth it:

24. As has already been noted, Ms Rose declined to seek an order that each side should be liable for its own costs in any event on the ground that to do so would be wrong in principle. As Scott Baker J observed in R (Boxall) v Waltham Forest London Borough Council (2001) 4 CCLR 258, para 12, the failure of a legally aided litigant to obtain a costs order against another party may have serious consequences. This is because, among other things, the level of remuneration for the lawyers is different between a legal aid and an inter partes determination of costs. This disadvantage is all the greater in a case such as this. It is a high costs case, for which lawyers representing publicly funded parties are required to enter a high costs case plan with the Legal Services Commission. It is a common feature of these plans that they limit the number of hours to an artificially low level and the rates at which solicitors and counsel are paid to rates that are markedly lower than those that are usual in the public sector. Mr Reddin has indicated that, as they are defending a win, E’s solicitors would not be expected to be paid at risk rates. Nevertheless the rate of remuneration that is likely to be agreed for this appeal will be considerably lower than that which would be reasonable if costs were to be determined inter partes.

25. It is one thing for solicitors who do a substantial amount of publicly funded work, and who have to fund the substantial overheads that sustaining a legal practice involves, to take the risk of being paid at lower rates if a publicly funded case turns out to be unsuccessful. It is quite another for them to be unable to recover remuneration at inter partes rates in the event that their case is successful. If that were to become the practice, their businesses would very soon become financially unsustainable. The system of public funding would be gravely disadvantaged in its turn, as it depends upon there being a pool of reputable solicitors who are willing to undertake this work. In R (Boxall) v Waltham Forest London Borough Council Scott Baker J said that the fact that the claimants were legally aided was immaterial when deciding what, if any, costs order to make between the parties in a case where they were successful and he declined to order that each side should bear its own costs. It is, of course, true that legally aided litigants should not be treated differently from those who are not. But the consequences for solicitors who do publicly funded work is a factor which must be taken into account. A court should be very slow to impose an order that each side must be liable for its own costs in a high costs case where either or both sides are publicly funded.[my emphasis] Had such an order been asked for in this case we would have refused to make it.

So, the order was that the LSC was to fund E for the substantive hearing. The LSC to pay the costs of the application to all the other parties.

Now the question is how the LSC will respond. Will they face up to their responsibilities for access to justice and the public interest? Or will they seek to refuse funding to trickier/public interest cases at the very start to avoid the ‘continuing funding’ presumption set out here – after all, funding a successful JR could mean, oh horror, having to fund to the Supreme Court. We’ll see, but if I had any ‘public interest’ cases at an early stage right now, I would be worried…

Congratulations and thanks to Paul Ridge at Bindmans, for E, for the tip off and also to Dinah Rose QC for E and Lord Pannick QC for JFS for the arguments on continuing funding.