Legal Services Commission –v- F, A & V [2011] EWHC 899 (QB)

Posted on Friday, April 8th, 2011

The LSC appealed against a decision that it should pay the costs of the first, second and fourth interveners in family proceedings which had been agreed at £495,000 subject to liability. The wife sought, within the context of ancillary relief proceedings, orders that properties legally owned by the interveners be transferred to her because the beneficial interests of interveners were held on trust for her husband. The wife was publicly funded throughout, the interveners were not. Despite protests to the LSC, the wife’s public funding continued and the beneficial ownership issue was decided against her after a 23 day trial because her case was based on “lies, speculation, errors and pure self-serving invention”. Master Simons found that the removal of the word “severe” from the regulations must have been intended to have an impact. The relevant test of financial hardship was whether a party’s “financial equilibrium” had been disturbed. A party did not have to be reduced to penury or anything like it to show financial hardship. Despite the interveners being relatively well off, they had had to find large sums of money in respect of costs and would have to sell assets to recover their pre litigation levels of income and capital. The interveners had had no option but to defend their assets against a dishonest claim conducted in an extravagant manner. It was therefore just and equitable to make an order for costs against the LSC. The parties had advanced no basis for awarding only a proportion of the costs to him and it would be a purely arbitrary exercise for him to do so. The LSC appealed on the grounds that the Master applied the wrong test of financial hardship, had not considered whether a figure less than the full amount of costs would alleviate any hardship and had erred in his determination that it would be just and equitable to make the order that he did. Dismissing the LSC’s appeal, Mrs Justice Sharp held that there was no absolute standard for financial hardship, it had to be looked at in all the circumstances, the fact that a party was comfortably off, even after paying his or her costs was no bar to an order being made; there was no presumption that once hardship was established that a party should have all of its costs, however, the master had not erred in reaching the conclusion he did in the absence of any rational basis for a reduction; normally it would be just and equitable for a non-funded party to recover costs from public funds where he or she would suffer financial hardship, unless there are facts which render that result unjust or inequitable but even if that were not correct, the Master did not overlook the interveners’ financial position when deciding it was just and equitable to make an order against the LSC and he was fully justified in his conclusions.

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