Costs and the funded litigant

District Judge John Frenkel examines just how far the publicly funded party is now protected on costs

The costs orderGenerally under the Civil Procedure Rules 1998 (CPR) the unsuccessful party will be ordered to pay the opponent's costs on a standard basis.

The Family Proceedings (Amendment No.

2) Rules 2000 introduced similar provisions in family proceedings.An order for costs on a more or less generous basis than standard costs, such as indemnity costs or a proportion of the costs, must state the enlargement or limitation of the order.

The court must assess the costs at the end of some hearings (such as a fast track trial).

The new statutory protectionThe new provisions are found in s.11 of the Access to Justice Act 1999 (the new Act), pt II of the Community Legal Service (Costs) Regulations 2000 SI 2000/441 (the Costs Regulations) and the Community Legal Service (Cost Protection) Regulations 2000 SI 2000/824.

It is wrong to think that the new Act, any more than the old, gives the 'client' (the new term for 'assisted person') almost complete protection from costs orders.

The client can only be ordered on a determination to pay what is reasonable having regard to all of the circumstances including (a) the financial resources of all of the parties to the proceedings, and (b) their conduct in connection with the dispute.

The client's clothes, household furniture, tools and implements of trade continue to be exempt, up to a limit (see below).

Some, but not all, of the value of the client's interest in his home is automatically exempt from the determination.

S.11(3) enables the court to order the Legal Services Commission to pay a successful unfunded party the costs that the client cannot pay.

Practice pointsThe protection applies only to work done within the scope and during the validity of the Legal Representation or Approved Family Help Certificate (certificate).

This is easier to say than sometimes, it is to define (see Turner v Plasplugs Ltd (1996) The Times, 1 February and reg 3 of the Cost Protection Regulations).l Tools of trade can include taxis and vans.l As the new Act does not exempt the whole value of the client's interest in his home, is it possible to insure the client against an adverse s.11 order? Can the premium be recovered from the unsuccessful party if the client succeeds? Moot points.

Costs against the client - the procedureThe court must decide first whether, but for the cost protection, it would have ordered the client to pay costs.

If the answer is yes, what happens next depends on whether the court decides on a summary assessment (and the power to settle the client's liability there and then is completely new) or detailed costs assessment.

Take the following examples:

The fast-track trialFirst, the successful unfunded party's costs are summarily assessed.

The court next decides whether it has enough information about financial circumstances of all of the parties to carry out the s.11 exercise to determine what is a reasonable amount for the client to pay.

The order will read: 'The costs of D (the receiving party) are assessed at x.

C (the client) will pay D y.' y can be nil, the full sum of x, but no more, or any sum between x and nil.

If the court cannot carry out the s.11 exercise, the order must state the receiving party's full, summarily assessed costs: 'The costs of D (the receiving party) are assessed at x.

The application for costs against C (the client) (and the Commission) shall be determined under reg 10 of the Community Legal Service (Costs) Regulations 2000.'

The multi-track trialIf the court has enough information to carry out the s.11 exercise it will decide the client's liability but the assessment must be less than the receiving party's likely, full costs - an estimate will be filed with the listing questionnaire.

If the court cannot carry out an immediate determination, the order will read: 'The application for a costs order against the client (and the Commission) shall be determined in accordance with reg 10...' The order must include findings of fact about the parties' conduct if the court wants them to be considered at the determination.

Interim applicationsThe court must summarily assess the costs of any other hearing that lasts less than one day (CPR PD 44 para 4.4).

The costs can be assessed against a client with a certificate subject to a s.11 determination later but not in favour of the funded client whose costs will have to be assessed in detail.

If your unfunded client succeeds, ask for a Lockley order (Lockley v National Blood Transfusion Service [1992] 2 All ER 589) which will read: 'C (the client) will pay D (the receiving party) his assessed costs of x.

Unless the costs are set off against any damages or costs to which C becomes entitled in this claim they shall be assessed under s.11(1)...'

Costs against the CommissionReg 10 of the costs regulations contains provisions for filing and service of the notice of application and the bill of costs on the client and the Commission, together with provisions for the service of objections to the bill and the statements of the resources of relevant parties.

To obtain costs against the Commission the unfunded party must meet these conditions:l Watch the trap! If the client's liability was determined summarily at the end of the trial, the request against the Commission must issue within three months.l The client must have commenced the proceedings.l The unfunded party must prove that he will suffer severe financial hardship if an order is not made.

Hanning v Maitland (No.

2) [1970] 1 QB 580 shows that the threshold might not be particularly high.

The applicant was a barrister.l It must be just and equitable for costs to be paid from public funds.

Shirts, sheets and screwdrivers - assessment of resourcesThere are three significant changes made by reg 7 of the costs regulations to the assessment of the client's resources for s.11 purposes, which are:l Any partner's resources are aggregated unless the partner has a contrary interest in the dispute in respect of which the funded services are provided.l The first 100,000 of the value of the client's interest in his home is not be taken into account.l Clothes, household furniture, tools and implements of trade can be brought into the s.11 account if they are exceptional in quantity or value.There is an exception where a party has acted in a representative capacity and similar.

The usual order - established since 1949Under the old Act, the effect of the order 'The assisted party shall pay the unassisted party's costs, not to be enforced without leave of the court' operated as a determination of a nil liability against the assisted person.

If in the following six years, the assisted person's means changed, the successful party could apply to vary the order.

Procure a similar order under the new Act and you will postpone the application for a determination of costs against the Commission.

Coming shortlyThe consultation paper 'Financial conditions for funding by the Legal Services Commission' was published in July 2000.

The paper sought views on proposals to put funded clients in an equivalent position to an unfunded opponent who might be only slightly better off.

These proposals were included among others:l To allow the court to take account of the value of an unsuccessful client's home in deciding whether to order costs against him, while retaining the rule that prevents a forced sale of the property.l To relax the test under which the non-funded party can recover costs against the Commission.

District Judge John Frenkel sits at the Bristol Civil Trial Centre