COSTS
IN THE CARE STANDARDS TRIBUNAL By
Michael Curtis 1
Crown Office Chambers
2 Crown Office Row
Temple
London EC4Y 7HJ
Introduction
- The
Care Standards Tribunal (CST), unlike its predecessor the
Registered Homes Tribunal, has the power to make costs orders in
limited circumstances. The power is an important one.
Cancellation appeals can last two weeks or more and cost as much
as a High Court action of similar length.
- This
article considers and criticises the decisions of the CST to
date and seeks comprehensively to formulate the principles the
CST should apply when exercising its power to make an order for
costs.
The
Regulations
- Regulations
24(1), (2) and (3) provide:
(1)
Subject to Regulation 31 and paragraph 2 below, if in the opinion
of the Tribunal a party has acted unreasonably in bringing or
conducting the proceedings, it may make an order (a "costs
order") requiring that party ("the paying party")
to make a payment to the other party ("the receiving
party").
(2)
Before making a costs order against a party, the Tribunal must-
(a)
invite the receiving party to provide to the Tribunal a schedule
of costs incurred by him in respect of the proceedings; and
(b)
invite representations from the paying party and consider any
representations he makes, consider whether he is able to comply
with such an order and consider any written information which he
has provided.
(3)
When making a costs order, the Tribunal must-
(a)
order the payment of any sum which the parties have agreed should
be paid;
(b)
order the payment of any sum which it considers appropriate having
considered any representations the parties may make; or
(c)
order the payment of the whole or part of the costs incurred by
the receiving party in connection with the proceedings as
assessed.
(4)
Any costs required by an order under this regulation to be
assessed may be assessed in a county court according to such rules
applicable to proceedings in a county court as shall be directed
in the order.
- Regulation
33(1) states:
If
the Applicant at any time notifies the secretary in writing, or
states at a hearing, that he no longer wishes to pursue the
proceedings, the president or nominated chairman (or at the
hearing The Tribunal) must dismiss the proceedings, and may,
subject to regulation 24(2) and (3) make a costs Order.
Rules
applicable to the assessment of costs in a county court
- CPR
44.4 provides that where the court is to assess the amounts of
costs it will assess those costs on the standard basis or the
indemnity basis.
- CPR
44.5 lists the factors the court is to have regard to when
assessing costs.
Summary
assessment by the CST or assessment in a county court?
- The
CST has yet to consider the principles to be applied when
deciding whether to assess the costs itself or whether to order
them to be assessed in a county court.
- In
the High Court and the County Court, a judge who hears an
interlocutory application will typically assess the costs
himself at the end of the hearing. To allow him to do so, both
parties are required to provide costs schedules to each other
and to the court before the hearing. The costs schedule will set
out the costs incurred by each side in preparing for and
conducting the application. The task of assessing what costs the
losing party should pay will be a comparatively simple exercise.
The schedule will be comparatively short. The judge will have
before him not only the winning party’s schedule but also the
losing party’s. A losing party whose schedule is for almost
the same amount as the winning party will face an uphill task to
persuade the judge that the amount sought by the winning party
is unreasonably high. The judge, having heard the contested
application himself, will be in a position to judge whether the
time and money the winning party spent on preparing and
conducting the application was reasonable given the complexity
of the application and the amount at stake.
- It
is relatively unusual for a trial judge to attempt to assess the
costs summarily at the end of a complex trial lasting a number
of days.
- In
the High Court and the County Court, it is well-established that
only the judge who hears a case is in a position to make a
summary assessment of the costs, otherwise the issue of costs
should be sent to a costs judge for consideration: Mahmood v
Penrose [2002] EWCA Civ 457, CA.
- It
is suggested that the same principles should apply in the CST:
- A
tribunal should assess the costs itself only where the
application for costs is made after a contested hearing on the
merits (whether a hearing of a contested interlocutory
application or a hearing of the appeal itself) and where the
tribunal was the tribunal that dealt with the contested
hearing on the merits.
- Where
an application for costs is made other than after a contested
hearing on the merits (for example, where an appeal is
withdrawn or struck out), the tribunal should not attempt to
assess the costs itself. If the tribunal decides that an order
for costs is appropriate in respect of part or all of the
receiving party’s costs, it should make an order for the
costs to be subject to a detailed assessment in the county
court. The assessment should be carried out by a costs officer
on the standard basis taking into account the factors in CPR
44.5.
- Where
an application for costs is made at the conclusion of a
contested hearing to the tribunal that dealt with the hearing,
the tribunal should only attempt to assess the costs itself if
it is satisfied that it has the information and expertise
necessary to enable it to do so. In this regard, the Tribunal
should bear in mind that, unlike a judge who carries out an
assessment at the end of a contested interlocutory application
in the High Court or the County Court, the tribunal will not
be able to compare the costs being sought by the receiving
party with the costs the paying party would have sought had he
been successful. The tribunal must also ensure that the paying
party receives a fair hearing. That right will include the
right to have sufficient information about the costs being
sought by the receiving party to enable the paying party to be
able to answer the application.
- Where
a tribunal decides to assess the costs itself, the tribunal
should do so on the standard basis and should take into
account the factors set out in CPR 44.5.
The
test to be applied when considering whether to make a costs order
- The
position under Regulation 24 is clear from the terms of the
regulation itself: if in the opinion of the Tribunal a party has
acted unreasonably in bringing or conducting the proceedings, it
may make an order (a "costs order") requiring that
party ("the paying party") to make a payment to the
other party ("the receiving party").
- Although
regulation 33(1) does not expressly refer to regulation 24(1),
when exercising his discretion under regulation 33(1) the
president or nominated chairman must have regard to the
reasonableness of the conduct of the proceedings, including the
decision to commence proceedings. The president or nominated
chairman may make a costs order only where he concludes that the
applicant acted unreasonably in bringing or conducting the
proceedings: Funcamps v OFSTED [2003] 124 EY; Coventry Homes v
NCSC 2002. 17. NC.
- The
CST’s interpretation of regulation 33(1) in these two cases
may be contrasted with the approach taken by the EAT to somewhat
similar provisions in the Employment Tribunals Regulations 2001
and the earlier versions of the same regulations. The ET
Regulations rule 14(1) contains a similar provision permitting
the Employment Tribunal to make an order for costs where a party
has behaved unreasonably. This power is discussed in more detail
below. The ET Regulations rules 14(4) and (5) confer on the ET a
discrete power to make an order for costs where a party has
applied for and been granted a postponement or adjournment. It
has been held that the ET’s discretion to award costs under
rule 14(4), being separate and distinct from its discretion
under rule 14(1) in relation to the costs of the substantive
hearing, is not linked to vexatious or unreasonable conduct:
Ladbroke Racing Ltd v Hickey [1979] ICR 525, EAT.
- In
Funcamps Ltd the Respondent conceded that regulation 24(1)
applied to an application under regulation 33(1). Although the
point was argued in Coventry Homes the CST appears not to have
been referred to the approach taken by the EAT to the somewhat
similar provisions in the ET Regulations.
- Nonetheless,
it is suggested that there are clearly differences between the
two sets of rules, which when properly analysed support rather
than detract from the decisions in Funcamps and Coventry Homes.
- Under
the ET rules, it appears clearly to have been the intention of
the draftsman of the rules that an order for costs was the
"price" the party applying for an adjournment would
have to pay to get his adjournment. An adjournment does not
resolve the proceedings, it simply delays the resolution of
them.
- Under
the CST rules, however, the power in question is a power to make
an award of costs where the proceedings are resolved by being
abandoned before there is a determination on the merits. It
would be a strange result if a party who faces facts and
abandons the proceedings were to be in a worse position than a
party who soldiers on regardless to the bitter end.
- Furthermore,
although the parties in Coventry Homes appear not to have drawn
the attention of CST to it, Regulation 1(2) says that the term
"costs order" shall be construed in accordance with
Regulation 24. This would seem to make it clear that the
expression "costs order" in Regulation 31 must be
construed in accordance with the whole of Regulation 24, not
just those parts of Regulation 24 which are expressly referred
to in Regulation 31 itself.
- It
therefore appears beyond doubt that the Tribunal is only
empowered to make a costs order against a party where that party
has acted unreasonably in bringing or conducting the
proceedings.
The
burden and standard of proof when considering an application for
costs
- The
test in regulation 24(1) (viz. acting unreasonably in bringing
or conducting the proceedings) is a high one and the burden is
on the receiving party to satisfy the
president/chairman/Tribunal to that standard that the paying
party has acted unreasonably: Dr R A Fairburn (The Old Rectory
Nursing Home) v NCSC [2002] 76 NC; Funcamps v OFSTED [2003] 124
EY.
What
conduct is relevant?
- Regulation
24(1) states that the Tribunal may make a costs order if it is
of the opinion that a party has acted unreasonably in bringing
or conducting the proceedings.
- In
Dr R A Fairburn (The Old Rectory Nursing Home) v NCSC [2002] 76
NC the President, having regard to the provisions of CPR
44.3.5(a) stated that the tribunal is entitled to take into
account the conduct of the parties before as well as during the
proceedings.
- If
the President meant that the conduct of a party before the
institution of proceedings could be treated as an act of
unreasonableness upon which an award of costs could be founded,
it is suggested that this part of the decision was incorrect.
The reasons are as follows:
- Regulation
24(1) expressly states that the tribunal may make a costs
order where in the opinion of the Tribunal a party has acted
unreasonably in bringing or conducting the proceedings.
- The
wording of Regulation 24(1) is far narrower than the wording
of CPR 44.3.5(a), which unlike Regulation 24(1) expressly
states "(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 any
relevant pre-action protocol…" It is suggested that CPR
44.3.5(a) is of no assistance when construing Regulation
24(1).
- Regulation
24(1) is in the same terms as the equivalent provision of the
Employment Tribunal Rules 2001 rule 14(1) and its predecessor.
- Rule
14(1) provides that an Employment Tribunal may make a costs
order where "(i) a party has in bringing the proceedings,
or a party or a party’s representative has in conducting the
proceedings, acted vexatiously, abusively, disruptively or
otherwise unreasonably…"
- Both
in the case of Regulation 24(1) of the CST rules and in the
case of rule 14(1) of the Employment Tribunal rules, the
tribunal is to have regard to the conduct of the party in
"bringing or conducting the proceedings".
- In
the context of rule 14(1) of the ET rules and its predecessor,
it has long been established that in considering whether costs
should be awarded on the ground of unreasonable conduct, it is
the conduct of a party in bringing or defending a claim, or
continuing to pursue the claim or defence, that can give rise
to an award and not conduct occurring before the institution
of proceedings: Davidson v John Calder (Publishers) Ltd and
Calder Educational Trust Ltd [1985] ICR 143, EAT. This was the
position for more than 15 years before the enactment of
regulation 24(1). It is to be presumed that Parliament
intended that regulation 24(1) should be construed in the same
way as rule 14(1).
- It
appears that neither party in Fairburn drew the President’s
attention to rule 14(1) or the decision in Davidson v Calder.
- Therefore
if in Fairburn the President meant to suggest that the conduct
of a party before the institution of proceedings could be
treated as an act of unreasonableness upon which an award of
costs could be founded, the suggestion was wrong.
- However,
prior conduct may, of course, be relevant to an assessment of
whether it was reasonable to bring or defend the claim.
What
can amount to unreasonable conduct?
- The
question of what may rank as unreasonable conduct has received
considerable attention in the Employment Appeal Tribunal when
considering the equivalent provisions in the Employment Tribunal
regulations. The principles are summarised in Harvey on
Industrial Relations and Employment Law paras T [1033] to
[1039.01].
- It
is submitted that those principles are of equal application in
the case of the Care Standards Tribunal rules. It is evident
that the EAT has interpreted the employment tribunal rules
narrowly. It would appear that the CST intends to take a similar
approach to its own rules: see Funcamps Ltd where the President
said "it is a high test and rightly so".
- If
an applicant does not intend to progress an appeal to a hearing
but continues with the appeal nonetheless, he may be found to
have acted unreasonably from the date when he formed the
intention: Coventry Homes para 14. On the other hand, where a
party withdraws at the earliest available opportunity subsequent
to the bulk of the evidential material being served, it is
unlikely that he will be found to have acted unreasonably:
Funcamps Ltd.
- Both
decisions concentrate, correctly it is suggested, on the
applicant’s actual state of mind, rather on what the applicant
ought to have known or ought to have thought. This approach is
consistent with the approach outlined in Harvey. The Tribunal
should eschew invitations respondents may extend to it to judge
the applicant’s conduct with the benefit of 20/20 hindsight.
To echo the cautionary sentiments expressed by Sir Hugh
Griffiths in Marler’s case (see Harvey T[1036]) "that
which is plain for all to see once the dust of battle has
subsided was far from clear to the combatants when they took up
arms". Such caution is all the more appropriate where, as
will be the case where an application for a costs order is made
following the abandonment or striking out of an appeal, there
has not been a full hearing and where no findings have been
made.
- Where
the tribunal is faced with an application for costs by a
respondent under regulation 33(1) against an applicant who has
withdrawn his appeal on the grounds that the applicant acted
unreasonably in pursuing the appeal at all or in not withdrawing
it earlier, the tribunal should bear in mind, it is suggested,
that the decision by a litigant to abandon a case is a difficult
decision for a litigant to take. It is particularly difficult
where the decision results from an applicant’s inability to
fund a lengthy appeal. The applicant is deprived of the
opportunity of a hearing on the merits. It is not a decision an
applicant can reasonably be expected to take other than as a
last resort and after making every attempt to secure the
necessary funding.
- The
decision is all the more difficult in the case of a cancellation
appeal. The cancellation of a registration usually involves
financial ruin and personal stigma for the registered person.
The decision is made more invidious by the fact that the
applicant’s inability to fund the appeal is usually caused or
contributed to by the effect on his or her business of the
cancellation procedure itself.
Can
a party seek a costs order in respect of costs incurred by him
before the commencement of proceedings?
- The
CST cannot make a costs order in respect of costs incurred by
the receiving party before the commencement of proceedings. The
CST may only make an award of costs in respect of costs incurred
by the receiving party after the date the proceedings were
commenced. This may be the date of service of the B1 form or the
date the Tribunal is informed of the intention to appeal or the
date when the parties inter into discussion as to the
appropriate procedure to adopt in relation to the appeal
process: Funcamps Ltd.
- In
reaching his conclusion in Funcamps Ltd the President noted that
the CPR specifically allow a judge to make an award of costs in
respect costs incurred before the institution of proceedings,
whereas the Regulations do not.
- The
conclusion may also be supported by reference to the Regulations
themselves. The CST may make a costs order only where a party
has acted unreasonably in bringing or conducting the
proceedings. Where a party has so acted, the only costs that the
other party can have incurred as a result are costs incurred
after the proceedings were brought. Any costs the other party
incurred before the proceedings were brought cannot have been
incurred as a result of the "guilty" party’s act in
bringing or conducting the proceedings unreasonably. The
"wide approach" urged on the President in Funcamps by
the NCSC was clearly wrong and inconsistent with the terms of
the Regulations themselves.
- By
analogy, where the act of unreasonableness relied on is
date-specific (e.g. the act of continuing proceedings beyond a
certain date) it inevitably follows that the CST cannot order
the guilty party to pay any part of the other party’s costs
that were incurred before that date.
Can
a party seek a costs order in respect of his costs of attending a
costs hearing?
- This
question does not appear to have received the attention of the
Tribunal to date. In Coventry Homes the Tribunal appears to have
assumed that it could make an order for costs in respect of the
costs hearing itself but declined to do so.
- It
is suggested that the answer to the question is no, unless the
very act of taking the opportunity to oppose a costs order so
leading to a hearing can be characterised as an act of
unreasonableness. It is suggested that rarely, if ever, will it
be possible to conclude that it was unreasonable for a party to
take the opportunity to contest an application for costs against
him.
Against
whom can an order for costs be made?
- The
answer would appear to be obvious: Regulation 24(1) states that
the Tribunal’s power is to make an order against "a
party". Regulation 1(2) states that "party" means
the applicant or the respondent.
- In
Funcamps Ltd the NCSC tried to persuade the President to
"pierce the corporate veil" of the appellant company
and to make an order for costs against the directors. The
President declined on the basis that no findings of fact had
been made which would permit him to do so. However, the more
fundamental objection to the NCSC’s application is that the
CST is a statutory body with no inherent jurisdiction and no
power to make an order for costs against a non-party.
- One
can contrast the position of a court considering a similar
application. Section 51 of the Supreme Court Act 1981 and CPR
48.2 confer on the court an express power to make an order for
costs against a non-party including a director of a company that
was a party to the litigation.
- Section
51 provides:
(1)
Subject to the provisions of this or any other enactment and to
rules of court, the costs of and incidental to all proceedings in-
(a)
the civil division of the Court of Appeal;
(b)
the High Court, and
(c)
any county court,
shall
be in the discretion of the court.
(2)
Without prejudice to any general power to make rules of court,
such rules may make provision for regulating matters relating to
the costs of those proceedings including, in particular,
prescribing scales of costs to be paid to legal or other
representatives.
(3)
The court shall have full power to determine by whom and to what
extent the costs are to be paid.
- CPR
48.2 provides that where a court is considering the exercise of
its discretion under section 51 against a non-party, the
non-party must be added as a party and given a reasonable
opportunity to attend a hearing where the court will consider
the matter.
- There
is a considerable and complex body of case law concerning the
circumstances in which it will be appropriate for a court to
make an order under section 51 against a non-party. The cases
make it clear that an order for the payment of costs by a
non-party will always be exceptional.
- Neither
the Regulations nor any other statutory provision confers on the
CST a power to award costs against a non-party. Even if such a
power existed, the principles relevant to the exercise of the
power would be found in the case law referred to above, not in
the authorities concerning the "piercing of the corporate
veil".
- It
is unclear whether the parties in Funcamps drew the President’s
attention to section 51 or to the relevant case law under it or
to the fact that the CST is a statutory body with no power to
make an order for costs against a non-party.
What
should a costs schedule contain?
- In
Coventry Homes the Tribunal observed:
15.
The difficulty I have is that the Schedule produced by the NCSC is
very short of details. It gives global figures broken down by
Partner and Assistant solicitor times and counsels fees. It is not
broken down in any greater detail. I allowed Mr. Grant a short
adjournment to contact his office to see if they were able to
break the figures down more. He was not able to give detail but
estimated these costs as being in the region of £2000 or up to
£4000 to include the costs hearing.
16.
It is hard to be critical where no guidance has been given as to
what a costs schedule should contain but it may be that if the
schedule had been broken down in greater detail and by activity
that some discussion could have taken place between the parties to
see if agreement could be reached to avoid the need for a hearing.
AS it stood the applicants were faced with a costs claim running
into 5 figures they had no choice but to contest this and have
been successful, at least in part. I do not feel it appropriate
therefore to award the costs of this hearing.
17.
In future cases Chairmen will be greatly assisted by a Schedule
showing what activities have been undertaken by which personnel,
broken down into the various stages of the proceedings for
example; interlocutory preparation, attendance at directions
hearing, preparation for final hearing etc. In this way those
challenging an order can do so by reference to specific sums at
different stages of the proceedings.
- In
order for a potential paying party to know the case he has to
meet and in order for the Tribunal to make an informed decision,
it is suggested that the schedule must identify the work on
which the time claimed for was expended. Assistance may be
obtained from paragraph 4.6 of the CPR Costs Practice Direction.
1
Since appearing in the landmark decision of Lyons v East
Sussex County Council (1988) 86 LGR 369 CA, the author has acted for
and advised care and health service providers and regulators in
numerous cases including many lengthy cancellation appeals,
representations hearings, judicial review applications and
prosecutions for regulatory offences.
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