Publicly funded costs set-off

R (Burkett) v Hammersmith and Fulham LBC (No 2), Law Society and Legal Services Commission intervening CA TLR 20 October, LSG 4 November

The claimant, who was publicly funded with a nil contribution, was awarded her costs of interim proceedings in the Court of Appeal and the House of Lords, but failed at the final hearing of the action when the costs were awarded against her. During the currency of the Legal Aid Act 1988, it was held in Lockley v National Blood Transfusion Service [1992] 1 WLR 492 that costs awarded against a publicly funded party could be set off against costs awarded to it. That Act was repealed and replaced by the Community Legal Service (Cost Protection) Regulations 2000 (SI 2000 No 824) but there was no material alteration in the wording of the scheme. Accordingly, Lockley is to be applied to the new regime. At issue was a lack of mutuality between the respective costs being considered. The costs recoverable by the assisted party in respect of the Court of Appeal and House of Lords hearings were to be at full commercial rates pursuant to regulation 107B(3) of the Legal Aid Regulations 1989 and, if the defendant’s costs of the High Court action were to be set off against these costs, it would result in a substantial loss to the lawyers, who would be paid only at legal aid rates, which have been frozen at a very low level since April 1996. The Law Society submitted that such a finding would work harshly and in a manner contrary to the financial interests of the lawyers who acted for clients in receipt of public funding, and that it might deter those solicitors and barristers who would otherwise be willing to act for such clients. For example, specialist counsel might be instructed in the House of Lords and, after they had won an appeal at that level, might find their fees slashed as a result of a subsequent adverse decision in a case when they were no longer instructed. The Court held that such considerations could not affect its interpretation of the Access to Justice Act 1999. The remuneration of the lawyers was a consideration that did not directly affect the issue before the Court, although the Court shared the concerns of the Law Society on the potential economic effects of the decision on the lawyers engaged in publicly funded work. There should be a broader study of this difficult issue, with the support of the relevant Government departments, the professions and the Legal Services Commission. It was important that such a study should be conducted in the real world, and should look at the issue not only from the point of the view of the lawyers involved, but also taking account of the likely practical benefits to their clients and the public. An unprotected claimant, if unsuccessful in a public interest challenge, may have to pay very heavy legal costs to the successful defendant, and this may be a potent factor in deterring litigation directed towards protecting the environment from harm.