Mousa – a costly costs quirk

3 October 2013 by David Hart KC

Mousa and others, R (on the application of) v Secretary of State for Defence [2013] EWHC 2941 (Admin) – read judgment

A postscript to Rosalind English’s post of today. In the substantive judgment (see Adam Wagner’s post on the order), the Divisional Court decided two main issues, one relating to the independence of the Iraq Historic Allegations Team, and one relating to the extent to which an inquiry conducted through IHAT complied with Article 2 of the ECHR. The Secretary of State succeeded on the first issue, whereas the claimant succeeded substantially on the second issue relating to the need for a different form of inquiry. Hence there was no overall winner; the Secretary of State won on the first issue and the claimant succeeded substantially on the second issue. But more time was spent on the first issue. 

What then to do about costs? And why is that interesting – promise you, it is important.

If both parties had been paying for their representation, then there would be two straightforward ways of doing things. Either the Court would order the SoS to recover the costs of issue 1 and the Claimants the costs of issue 2, or the Court would do a rough and ready apportionment at the end of which it would order, say, the Claimants to pay 20% of the costs as a whole if 1 was much bigger than 2.

But the Claimants were legally aided. So they would be entitled to costs if they won on an open-market rate from the other side, but would only be entitled to artificially reduced rates from the legal aid authorities if they lost – not in reality enough to pay the bills.

They therefore said that the only just outcome would be that each side was entitled to the costs on the issue upon which it had won, but that the SoS should not be entitled to set off his costs (likely to be larger) against the sums to which the Claimants were entitled. From the point of view of the Claimants’ advisers, this was perfectly fair; they would get the reduced rates on the bit they lost, and a proper commercial rate on the bit they won. But from the SoS’s point of view, this gave him nothing, because he would never be able to enforce his bit of the order without a set-off.

The Court disagreed with the Claimants’ argument. The Claimants had relied on various statements in the cases including Lord Hope in the JFS case:

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. …… 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. Had such an order been asked for in this case we would have refused to make it.

But the problem came with s.22(4) of the Access to Justice Act 1999 which provides that the fact of legal aid shall not affect—

(a) the rights or liabilities of other parties to the proceedings, or

(b) the principles on which the discretion of any court or tribunal is normally exercised.

So, the Court said, it could not make the order sought by the Claimants. The upshot will be, I suspect, that the Claimants’ advisers lose much, if not all, of the extra costs which their success on issue 2 would otherwise have conferred.

Comment

This is an interesting and important problem. Legal aid lawyers in these big cases run cases for rates which are in overall terms loss-making, were it not for the benefits of winning some of the cases and getting the proper commercial rates which this brings. The overall deal is a reasonable trade-off to ensure that lawyers back (most of the time) winners. But the partial win in this case and its possible financial outcome would tend to invalidate that deal.

There is no easy answer. Legislative intervention is astonishingly unlikely; the Government is hardly a friend of judicial review at the best of times, let alone legal aid. Some discipline is needed to ensure that legally aided parties do not approach litigation with a scatter gun (not that I suggest that here for a moment, as all the points in play were strongly arguable).

Perhaps Claimants ought to start writing the sorts of letters which are commonplace in private law litigation. In the present context (and with the benefit of 20:20 hindsight about the result, and not knowing whether this would have been enough for their clients), one which might have said – “all we really want to do is to win on issue 2. If you give us that, we will not press issue 1. But if you do not give us issue 2, then we will press issue 1, and because it is strongly arguable we will invite the court to give us the costs of the whole  hearing because that is the only reason it was necessary to get to court.” It may seem a bit scheming in the context of public interest litigation, but, if it enables the survival of public interest lawyers in otherwise wintry times, so what?

Cards on the table: I was for the Legal Services Commission in the JFS case, and in an initial hearing for the LSC in Mousa.

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