Stacy v Player

A breach of the prohibition on receiving non-fund payments under the Civil Legal Aid (General) Regulations 1989 does not conclusively prevent a legally aided party from obtaining an inter partes costs order. The breach must be considered within the statutory and regulatory scheme. Where the certificate covers the proceedings, recovered inter partes costs are payable to the Legal Aid Board rather than a third-party funder. The breach may be relevant, but does not ordinarily displace the discretion to order costs to follow the event. Where the lower court exercised its discretion on erroneous considerations, the appellate court must exercise the discretion afresh. Refusal of the successful party’s costs was unjust and disproportionate.

Mr Stacy brought proceedings against Dr Player concerning the dissolution of their partnership and the sale of the partnership property. A preliminary issue concerning the authority of solicitors to enter into a sale contract was decided substantially in Mr Stacy’s favour.

The Deputy High Court Judge nevertheless refused to award Mr Stacy the costs of that issue. He considered that third-party funding and a breach of regulation 64 of the Civil Legal Aid (General) Regulations 1989 prevented the usual costs order. The appeal concerned whether those matters justified withholding costs and whether any costs ordered would be payable to the funder rather than under the legal aid scheme.

May LJ delivered the judgment, with the Master of the Rolls and Jonathan Parker LJ agreeing. The appeal was allowed and the Deputy High Court Judge’s costs order was set aside.

1. The legal aid certificate covered the preliminary issue. Under sections 15(6) and 15(7) of the Legal Aid Act 1988, together with regulations 90, 92, 107, 107A and 107B of the Civil Legal Aid (General) Regulations 1989, an assisted person’s solicitor must account for inter partes costs to the Legal Aid Board. Any costs order would therefore benefit the Board’s scheme, not Mr Mauger as third-party funder.
2. Regulation 64 prohibited the solicitors and counsel from receiving payment for work done during the currency of the certificate except from the fund. Regulation 107B(3)(b) made clear that regulation 64 did not prevent recovery from the paying party, but did not make every other breach of regulation 64 irrelevant. The breach was therefore a relevant consideration, but it was not conclusive against awarding costs.
3. Costs decisions are discretionary, and appellate courts should intervene cautiously. However, where the discretion has been exercised on erroneous considerations, the decision cannot stand and the appellate court must exercise the discretion afresh. The breach was inadvertent, arose from the judge’s later conclusion that the certificate covered the issue, and scarcely concerned Dr Player. Refusing Mr Stacy the costs was not just or proportionate. The appropriate order was the normal order that costs follow the event, subject to legal aid taxation.
4. The court also noted that the cost of leading counsel could be sought on taxation under regulations 59 and 63(3), notwithstanding the absence of prior authority, if the costs were allowed on an inter partes taxation.

The court observed that lawyers who had unwittingly received money contrary to regulation 64 would have a professional obligation to return it once the breach was discovered.

1. Court of Appeal (Civil Division): Appeal allowed. The costs order was set aside and replaced with an order that Dr Player pay Mr Stacy’s costs of the preliminary issue, subject to legal aid taxation.
2. High Court of Justice, Chancery Division: The preliminary issue was decided substantially in Mr Stacy’s favour, but on 24 January 2001 the Deputy High Court Judge refused to award him the costs of that issue.