Capping Of Defendant’s Costs Orders Overturned

In implementing the 2009 Regulations, the Lord Chancellor had for the first time exercised the discretionary power given to him under the Prosecution of Offences Act 1985 s.20 to set the rates and scales in relation to defendants’ costs orders, which had not been set in the regulations themselves, but in a separate document. The rationale behind the new scheme was to control rising costs and to bring central funds within the available budget.

The effect of the new scheme was that defendants’ costs orders would allow successful defendants to recover their costs only at legal aid rates. It was common ground that that scheme would result in considerably smaller payments than those made under the 1986 Regulations and that the payments would necessarily fall short of the costs actually incurred by the successful defendant.

The main issue was whether the 2009 Regulations, when read with the accompanying rates and scale document, were consistent with the principles of compensation reflected in s.16 of the 1985 Act. The Law Society submitted that the scheme was unlawful because it failed to give effect to the principles underpinning s.16(6). It contended that instead of using his powers to provide reasonably sufficient compensation to successful defendants, the Lord Chancellor had acted for a number of improper purposes. He had exercised his powers for extraneous purposes such as seeking to effect savings in public funds and placing some of the burden of defence costs on the successful defendants and had thereby subverted the clear compensation principle in s.16(6).

HELD: The only issue was whether the objectives of the new policy could be properly achieved by the Lord Chancellor exercising the particular rule-making powers conferred on him. The s.20 power had to be exercised “to carry into effect” the principles enunciated in Pt II of the Act, which included the principles set out in s.16(6). The Regulations could not undermine or subvert the principles of compensation set out in that subsection.

That provision required that the compensation must be “reasonably sufficient” and should be such amount as was reasonably incurred for work properly undertaken. The Lord Chancellor could not stipulate what sums he deemed to be a reasonable reward for the services of a lawyer. Similarly, he could not fix reasonable rates by reference to resources available. That involved determining what he thought the Government could reasonably be expected to pay rather than focussing on the costs which the successful defendant had reasonably incurred. Giving weight to the statutory language of s.16(6), it was clear that the obligation was to provide a sum of money which was reasonably sufficient to compensate the successful defendant.

If the Lord Chancellor simply gave what he thought was reasonable, having regard to the available resources and other objectives which he considered desirable, then no significance was attached to the concept of compensation at all, and it would become impossible to say in any meaningful way whether what was recompensed was sufficient or not. The new regulations involved a decisive departure from past principles and jettisoned the notion that a defendant ought not to have to pay towards the cost of defending himself against what might in some cases be wholly false accusations, provided that he incurred no greater expenditure than was reasonable and proper to secure his defence.

Any change in that principle was one of constitutional moment. It meant that a defendant falsely accused by the state would have to pay from his own pocket to establish his innocence. Whatever the merits of that principle, it would be surprising if Parliament had intended that it could properly be achieved by sub-delegated legislation which was not even the subject of Parliamentary scrutiny. The Lord Chancellor was seeking to achieve objectives which were inconsistent with the purpose for which he could pass the 2009 Regulations. The appropriate remedy was to declare the scheme to be unlawful and quash the rates and scales.

Application granted