COSTS IN THE CARE STANDARDS TRIBUNAL

By Michael Curtis ¹ 
Crown Office Chambers
2 Crown Office Row
Temple
London EC4Y 7HJ

Introduction

1. 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.
   
   
2. 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

3. 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.

4. 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

5. 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.
6. 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?

7. 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.
8. 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.
9. 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.
10. 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.
11. It is suggested that the same principles should apply in the CST:
1. 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.
2. 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.
3. 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.
4. 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

12. 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").
13. 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.
14. 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.
15. 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.
16. 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.
17. 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.
18. 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.
19. 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.
20. 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

21. 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?

22. 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.
23. 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.
24. 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:
1. 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.
2. 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).
3. Regulation 24(1) is in the same terms as the equivalent provision of the Employment Tribunal Rules 2001 rule 14(1) and its predecessor.
4. 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…"
5. 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".
6. 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).
7. It appears that neither party in Fairburn drew the President’s attention to rule 14(1) or the decision in Davidson v Calder.
25. 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.
26. 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?

27. 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].
28. 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".
29. 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.
30. 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.
31. 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.
32. 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?

33. 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.
34. 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.
35. 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.
36. 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?

37. 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.
38. 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?

39. 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.
40. 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.
41. 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.
42. 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.

43. 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.
44. 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.
45. 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".
46. 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?

47. 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.

48. 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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