1. A common form of order against the impecunious and/or a funded party was "not to be enforced without leave of the court." This is the widely referred to 'costs protection' for publicly funded parties . This form of order does not discriminate between an impecunious, non-funded person, who does not enjoy the protection of section 11 of the Access to Justice Act 1999 and a funded person, who does. In the case of the latter, this was an unsatisfactory form of order, as has been pointed out by the Court of Appeal (see Parr -v –Smith [1995] 2 All ER 1031, CA; see also Chagger -v - Chagger [1997] 1 All ER 104, CA; Re R (A Minor)(Legal Aid: Costs) [1997] 1 FCR 613, CA; and Wraith -v- Wraith [1997] All ER 526, CA; see also Burridge and Another -v- Stafford and Another [2000] 1 WLR 927, CA.) because it is neither a determination of the funded person's liability, nor a reference for such determination. The better order is an order for costs under section 11 of the Access to Justice Act 1999.
2. However Section 11 Access to Justice Act 1999 ("costs in funded cases") limits the power to award costs against a publicly funded litigant. Except in prescribed circumstances, costs ordered against an individual who is so funded shall not exceed the amount (if any) which is a reasonable one for him to pay having regard to all the circumstances including:
a) the financial resources of all the parties to the proceedings and
b) their conduct in connection with the dispute to which the proceedings relate.
3. However Section 11(3) provides for regulations to be made about costs in relation to proceedings in which services are funded by the LSC as part of the Community Legal Service. Regulation 3 Community Legal Service (Cost Protection) Regulations 2000 sets out the prescribed circumstances in which costs protections does or does not apply. Regulation 3(1)(e) states:
Cost protection shall not apply in relation to such parts of proceedings or prospective proceedings as are funded for the clients by way of:-
Legal Representation in family proceedings. .
Therefore costs can always be ordered against a publicly funded party (if appropriate).
4. There are exceptions . Where funding is withdrawn by revoking the client's certificate, cost protection shall not apply, either in respect of work done before or after the revocation .
5. The Administration of Justice Act 1999, section 11(4)(d) enables regulations to be made to deal with orders for costs against the Legal services Commission where one of the parties to the litigation is legally aided. Regulation 5(2) of the Community Legal Service (Cost Protection) Regulations 2000 enables the courts to make such orders (subject as set out in the remainder of the regulation), but only where costs protection applies {reg 5(1)(c)). Because costs protection is disapplied by reg 3(1) then a successful paying defendant or respondent to family proceedings commenced by legally aided party cannot obtain an order for costs against the Legal Services Commission. His only remedy is against the legally aided defendant personally.
6. In ancillary relief cases new rules introduced by The Family Proceedings (Amendment) Rules 2006 (S.I. 2006. No. 352) came into force on 3rd April 2006. The new rules apply to all applications for ancillary relief made in a petition or answer as from 3rd April 2006.
7. The rules changed because in the majority of ancillary relief cases it is a difficult exercise to achieve a fair and just financial settlement. Often an order which had been carefully constructed by the court could be destabilised because one party had not beaten a "Calderbank" offer. The general view was that the "Calderbank" offers created as many problems as they solved and had introduced an element of "gamesmanship". The FPR rules on costs were widely regarded as too complex. Rule 2.69 which allowed parties to make offers "without prejudice save as to costs" and to rely on such offers in connection with a costs application following the final hearing of the application for ancillary relief has now gone.
8. Rule 2.71(4)(a) – The general rule in ancillary relief court proceedings is that the court will not make an order requiring one party to pay the costs of another party. but the court may make such an order at any stage of the proceedings where it considers it appropriate to do so because of the conduct of a party in relation to the proceedings (whether before or during them).
9. Rule 2.71(5) states in deciding what order (if any) to make under paragraph (4)(b), the court must have regard to -
(a) any failure by a party to comply with these Rules, any order of the court or any
practice direction which the court considers relevant;
(b) any open offer to settle made by a party;
(c) whether it was reasonable for the party to raise, pursue or contest a particular
allegation or issue:
(d) the manner in which a party has pursued or responded to the application or a
particular allegation or issue;
(e) any other aspect of a party's conduct in relation to the proceedings which the
court considers relevant; and
(f) the financial effect on the parties of any costs order.
10. 2.71(6) No offer to settle which is not an open offer to settle shall be admissible at any stage of the proceedings except as provided by rule 2.61E.
11. Rule 2.61E (3) provides "Not later than 7 days before the FDR appointment, the applicant 'must file with the court details of all offers and proposals, and responses to them." Paragraph (4) provides "Paragraph (3) includes any offers, proposals or responses made wholly or partly without prejudice, but paragraph (3) does not make any material admissible as evidence if, but for that paragraph, it would not be admissible".
12. Therefore 'without prejudice save as to costs' offers are not admissible at the final hearing when costs orders are being considered even under Rule 2.71(5). It is also abundantly clear that the ancillary relief rules apply to both non funded and funded litigants and if a publicly funded litigant falls foul of rule 2.71(5) there may well be costs implications.
13. A final word of caution in respect of rule 2.71. The narrow interpretation of the applicability of this rule has not resulted in the re emergence of the general rule that costs follow the event. Please note the following:
a. In unsuccessful proceedings to set aside an ancillary relief order made in 2001 the Court of Appeal rejected the argument that rule 2.71(4)(a) applied because this was not 'ancillary relief proceedings' as defined by rule 1.2(1) although ultimately it was the objective had the application to set aside had been successful. Clearly being in 'connection with' is not the same as being the defined proceedings. However FPR 1991 rule 10.27(1)(b) provides that CPR 1998 rule 44.3(2) shall not apply to 'family proceedings' and that whilst these were not 'ancillary relief proceedings' they were 'family proceedings' within rule 1.2(1) and therefore the general rule that costs are met by the unsuccessful party was equally not applicable. The trial judge therefore had a clean sheet from which to consider the issue of costs. In addition to the merits of the case in my view the efforts which a party has made to settle the dispute through correspondence will carry considerable weight .
b. An order for MPS which includes an element to allow a party to deal with legal fees is an order made pursuant to section 22 MCA 1973 and is not a costs order within the meaning of rule 2.71.
c. Proceedings brought by intervenors under TOLATA were not 'ancillary relief proceedings' within the general rule of FPR rule 2.71(4)(a) as rival declarations were sought and that the issue of costs as between the intervenors, whilst the proceedings were family proceedings, did not follow the event and had to looked at from afresh from a 'clean sheet' . Notwithstanding that Mr Baker was publicly funded he was ordered to pay Miss Rowe's costs. Intervening in ancillary relief matters can be an expensive endeavour, even where the individuals bear their own legal costs. This case is a timely reminder of the additional risks, and expense, that any potential intervenor should be aware of before becoming involved in any proceedings
N Moss 11th October 2010
3 Dr Johnson Buildings
Temple