Costs Orders in Contempt Proceedings – Be Aware of the Anomalies!

Costs Orders in Contempt Proceedings seem like they should be simple on the surface. However, scratch a little deeper and there are a number of anomalies and ambiguities that need to be resolved.

Following the 2019 case of All England Lawn Tennis Club Ltd and All England Lawn Tennis Ground Plc v Luke McKay [2019] EWHC 3065 (QB), it has become accepted and understood that non-means-tested ‘criminal’ legal aid is available as a matter of right for all Defendants in Contempt/Committal proceedings, even when those proceedings are taking place in the Civil Courts and in spite of those proceedings being governed by the Civil Procedure Rules, specifically the regime set out in CPR81.

CPR 81

CPR81 itself has recently gone through a considerable redraft and revamp following a public consultation that sought to deal with the “unsatisfactory wording” of CPR81 as expressed by a number of senior judges such as Mr Justice Warby in AG v Yaxley-Lennon [2019] EWHC 1791 (Admin) and Lord Justice Coulson and Mr Justice Spencer in HM Solicitor General v. Holmes [2019] EWHC 1483 (Admin). The result is that the updated CPR81 post October 2020 is far simpler, with a higher degree of emphasis being placed on ensuring procedural fairness to the Defendants/Respondents in these proceedings.

Despite these helpful clarifications and amendments, the McKay case and the redrafted and updated CPR81 do not address how the Courts should deal with costs in cases where the Defendant is in receipt of criminal legal aid. This has left a degree of ambiguity about what the correct approach ought to be.

Contempt Proceedings – Civil or Criminal?

One of the primary causes of this ambiguity is the uncertainty as to whether Contempt Proceedings should be classified as either Civil or Criminal.

As per the McKay case referenced earlier, The Legal Aid Agency now states in their guidance document that “Civil contempt (Committal proceedings) are considered criminal for the purposes of legal aid funding due to the risk of imprisonment (even though the proceedings themselves are civil proceedings)” (my emphasis added).

The matter has been further considered by Lady Justice Carr in 3 who states at Para 79 that:

“Contempts of court have traditionally been classified as being either criminal or civil. Proceedings for civil contempt are sometimes described as “quasi-criminal” because of the penal consequences that can attend the breach of an order (or undertaking to the court). They are criminal proceedings for the purpose of Article 6 of the European Convention on Human Rights (“Article 6”). The charges raised have to be clear; the criminal standard of proof applies; and the respondent has a right to silence. There must be a high standard of procedural fairness.”

However, she further points out at Para 80 that:

1. Applications for Contempt of Court are not to be equated with private prosecutions (Guildford BC v Smith (The Times 15 October 1993)) as there can also be a coercive purpose to contempt proceedings and;
2. The fact that Contempt Proceedings have been deemed to be criminal for the purposes of Article 6 of the European Convention on Human Rights, does not mean that they are not otherwise considered to be Civil Proceedings (Masri v Consolidated Contractors International Company SAL and another [2011] EWHC 1024 (Comm) at Para 157)).

It therefore seems to me that despite Contempt Proceedings being treated as criminal for the purposes of Article 6 of the ECHR and consequently Criminal Legal Aid being available to Defendants in Contempt Proceedings, notwithstanding the fact that the Courts can impose a penal sentence, Contempt Proceedings are currently being treated by the Courts as Civil Proceedings.

CPR44

The starting point for determining costs in all Civil Proceedings is the regime set out in CPR44.

CPR 44.2(2)(a) states that “the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party”.

However, the Court is also able to make a different Order and deviate from the general rule should it choose (CPR44.2(2)(b)) and any decision as to costs is subject to the Court’s discretion (CPR44.2(1)). There are also a number of exemptions set out in CPR44.2(3), the specifics of which are not relevant for present purposes, but it is worth acknowledging that it is clearly possible for specific proceedings to be explicitly excluded from the CPR44 regime. Tellingly, Contempt Proceedings are not one of the specific exemptions.

It therefore seems to follow that in Contempt Proceedings, the general rule applies, subject to any discretion the Court decides to exercise. This means that should a Defendant be found in Contempt, they will normally be liable for the Claimant’s Costs.

However, in my opinion there are two primary practical and theoretical issues with this position, which have led me to the conclusion that it is inequitable for Defendants in Contempt Proceedings to be subject to the general rule pursuant to CPR44.2, at least without the Court exercising some further discretion or control over enforcement.

1. A Defendant in Contempt Proceedings Doesn’t Have the Same Bargaining Power as a Regular Litigant in Civil Proceedings

It is unlikely to be a major surprise to readers that the majority of civil disputes are resolved before trial. Litigants, be it Claimants or Defendants, are able to take a commercial view on how much the dispute is worth to them, what the costs of the dispute are likely to be, and consider the risk that they might be liable for the other party’s costs. They can seek to bargain their way out of that dispute and reach a settlement on terms that they consider to be commercially viable to them.

Defendants in Contempt Proceedings don’t have that luxury. Once an Application has been filed and served naming them as a Defendant, the wheels start turning on a process that they do not have control over. Whilst of course it is open to them to plead guilty/not oppose the Application, and this can often help to reduce costs, the parties do not have the same freedom to bargain their way out of the dispute.

This was brought into sharp focus in a case I acted in recently, where after my client decided to admit the charges of contempt, after canvassing the advocates as to their client’s views on what the sentence should be, the Judge reminded the parties that “… if I were of the view that my public duty required me to send her to prison, it would not matter what you…had agreed about that matter. It would be my duty to do so.” Consequently, it may be difficult for the parties to agree settlement terms on a private basis, especially if those terms require the Defendant to admit the allegations of Contempt.

For me, this case reinforced the position that Contempt Proceedings are not the same as regular Civil Proceedings. Contempt Proceedings are concerned with the administration of justice as opposed to just a private dispute. They are considered sufficiently serious that being found in contempt can lead to the loss of the Defendant’s liberty. There is therefore a wider public interest in the outcome. Indeed, one of issues the Court must consider when determining whether to grant permission for contempt proceedings to be brought pursuant to CPR 81.3(5) is whether it is in the public interest (TBD (Owen Holland) Ltd v Simons and others [2020] EWCA Civ 1182 at Para 232).

Bearing that in mind, once a Defendant has been served with Contempt Proceedings, there may be nothing that they can do to stop the Claimant incurring costs, as even if the Defendant was to admit the allegations, a further hearing and Judicial intervention will be required in order for the appropriate sanction to be determined.

2. The Status of the Claimant in Contempt Applications

I have set out above how Defendants in Contempt Proceedings do not have the same freedom to negotiate a settlement as Defendants in other civil proceedings. However, Claimants in Contempt Proceedings also have different considerations from Claimants in regular private disputes. These considerations, in my opinion, give further weight to the idea that it is inequitable for Defendants in Contempt Proceedings to be subject to the general rule under CPR 44.2.

The Court of Appeal’s Judgment in Navigator (as referenced above) overturned some of the more onerous findings in the High Court Proceedings in the same matter (Navigator Equities Ltd & Anor v Deripaska [2020] EWHC 1798 (Comm)), such as the need for a Claimant/Applicant to act as a dispassionate prosecutor as “guardians of the public interest” and to act as if the Claimant had “no interest in the outcome”. Whilst I of course respect the Court of Appeal’s decision, I personally tend to think that given the unique characteristics of Contempt Proceedings, they may have gone too far in the opposite direction. However, the Court of Appeal does still make clear that there are duties incumbent on a Claimant in Contempt Proceedings (at Para 132), specifically:

“There can be no doubt that the making of an application for civil contempt is a significant step which carries potentially very serious consequences for a respondent, including the loss of liberty. As already indicated and set out above, there must be a correspondingly high standard of fairness. Solicitors acting for such an applicant must, in the normal way, comply with their obligations to uphold the rule of law and the proper administration of justice, to act with integrity and not to allow their independence to be compromised. They must also act in the best interests of their clients and follow their instructions, provided that to do so would not offend their wider duties, including their duties to the court. That is not to say that solicitors do not carry personal responsibility for the tone of their correspondence and any evidence that they provide. The courts rightly deprecate undue aggression and hostility in the dealings between the parties’ lawyers.”.

Notwithstanding the above, there are still some elements to Contempt Proceedings where a Claimant/Applicant does not have the same freedom to litigate as if they were a Claimant in regular civil proceedings.

Firstly, as mentioned above, there is a public interest element in circumstances where permission is required pursuant to CPR 81.3(5). In the case of KJM Superbikes Ltd v Hinton (Practice Note) [2008] EWCA Civ 1280, Lord Justice Moore-Bick states at Para 17 that “There is an obvious need to guard carefully against the risk of allowing vindictive litigants to use such proceedings to harass persons against whom they have a grievance, whether justified or not.” We can therefore conclude that even if there is merit to an Application, the Court will seek to ensure the Application is not being used vindictively. Whilst of course it is true that the Court has discretion to strike out any civil claim if it deems it to be an abuse of process, the motive of the Claimant seems to be a far more important consideration in Contempt Proceedings.

Furthermore, in contrast to regular commercial proceedings, the Claimant’s interest in the final outcome is more limited. As Justice Nicklin made clear in Oliver v Shaikh [2020] EWHC 2658 (QB) at Para 16:

“The decision on sanction is entirely for the Court (Attorney General -v- Hislop [1999] 1 WLR 514, 5222). Similar to the role of the prosecution in a criminal court where the Court is considering sentence, the party seeking punishment of the contemnor does not urge the imposition of any particular penalty on the contemnor. The role is limited to making submissions as to the circumstances and the consequences of the breach and ensuring that the court’s attention is drawn to all relevant authorities.”

Lastly, traditionally in Contempt Proceedings, a Claimant could not decide to discontinue the proceedings without permission from the Court (clearly reflecting the fact, as previously discussed, that Contempt Proceedings were concerned with wider issues concerning the administration of justice, rather than just the resolution of a private dispute). However, the reference to this requirement was revoked when CPR81 was updated – and it is as yet unclear how the Courts will treat Claimants who wish to discontinue Contempt proceedings moving forwards. I would caution that until there is clarity on this point, Claimants will need to consider that there is a possibility that a Court will not allow them to discontinue, even if they have reached appropriate settlement terms.

These points matter in terms of costs, as again they restrict a Defendant’s ability to settle or resolve contempt proceedings by negotiation with the Claimant. A Defendant could be served with contempt proceedings, reach an inter-partes agreement (on whatever terms the parties choose) for proceedings to be ended, yet find the Court still wishes for the contempt proceedings to go ahead, lose, and find themselves liable for the costs of proceedings.

Legal Aid Costs Protection

It is often thought that Defendants in Contempt Proceedings are protected from adverse costs orders by way of S26 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (“LASPO”) and Civil Legal Aid (Costs) Regulations 2013, which states amongst other things, that a Defendant’s means ought to be taken into account before any adverse costs order is made.

However, this is not the case – S26 only applies to cases where Civil Legal Aid applies, and as discussed above, in Contempt Proceedings, even in Civil Courts, non-means-tested Criminal Legal Aid applies, meaning a Defendant’s means is unlikely to (officially) even be known to the Claimant and/or the Court.

Conversely, Defendant’s in Criminal Proceedings are only normally subject to an adverse costs order (pursuant to rule 45.5(3)(b) of the Criminal Procedure Rules) if the Court is satisfied that the Defendant can pay, and if so, limited to the amount of their means.

Therefore, it seems that Defendant in Contempt Proceedings in Civil Courts fall through the gap. Their means are not taken into account when costs are being determined (CPR44 makes no mention of means as being a relevant consideration) and they are treated like ordinary civil litigants. But as discussed above, they are not ordinary civil litigants – there are limits on their ability to settle or bargain their way out of the proceedings.

This apparent lacuna was identified by His Honour Judge Lewis in the case of The Chief Constable of Essex Police v Douherty (Costs) [2020] EW Misc 9 (CC) . He commented at Para 13 that:

“As section 26 of LASPO only applies to civil legal aid, it must follow that it does not apply in civil committal proceedings where the defendant is in receipt of criminal legal aid. There does not appear to be an equivalent provision for criminal legal aid, no doubt because the criminal courts already take account of an offender’s means and ability to pay before making a costs order.”

He then goes on to say that at Para 14 that:

“There appears to be a lacuna.  There are mechanisms in place to protect impecunious parties facing costs orders in the criminal courts, and legally aided parties in the civil courts.  The exception seems to be civil committal proceedings.  There is nothing to suggest such an omission is intentional, rather it appears to have come about because of the general confusion in 2012 about the type of legal aid that respondents to civil committal applications should receive… It does, however, seem unfair to those defendants who are impecunious that in certain respects they are put in a worse position by the decision that they should receive criminal, rather than civil legal aid.”

In Douherty the Judge decided that the most equitable thing to do was to make an Order pursuant to CPR44 that the Defendant pay the Claimant’s Costs (as the Claimant had been the ‘successful party’), but exercise his discretion pursuant to CPR 3.1(2)(f) that enforcement of those Costs should be stayed for three months (Para 20).

The Way Forward

I have acted in a number of cases recently where the issue of costs has arisen and the Court’s attention has been drawn to Douherty and the apparent lacuna. Unfortunately, in the absence of any clear guidance, the Court has taken a differing approach each time:

1. In Solicitors Regulation Authority Ltd v Khan & Ors (Rev1) [2022] EWHC 45 (Ch) and the subsequent appeal ([2022] EWCA Civ 287), the Court decided to make a costs order against Ms Khan (having been found in contempt and having also been unsuccessful in her appeal), but ordered that this would not be enforceable without a further order of the High Court. The costs element of both of these Judgments is unreported.
2. In Aviareps PLC v Kiani [2022] EWHC 700 (QB) (unreported), Mr Justice Martin Spencer decided that the normal costs provisions under CPR 44 applied (Para 44) and that “enforcement would have to follow the usual course”.
3. In an interlocutory application for an adjournment of a Contempt trial by a Defendant due to the unavailability of Counsel, Mr Justice Trower reserved costs, as he was not satisfied it was proper for him to make a Costs Order against a legally aided party;
4. In Business Mortgage Finance 4 Plc & Ors v Hussain [2022] EWHC 661 (Ch), after making an Order against the Defendant on an indemnity basis, Mr Justice Miles considered the possible qualification to that Order as a result of the Defendant being legally aided. However, he determined that when acting under CPR44, in the absence of any specific information about the Defendant’s means, he should not make any special order in relation to costs (Paras 62-71).

In the absence of any clear guidance, Judges dealing with Contempt Cases will have a wide discretion under CPR 44 to make whatever order they believe to be appropriate in the circumstances.

However, bearing in mind the points raised above, and assuming that there are no plans afoot to change how legal aid is awarded in contempt proceedings or to amend LASPO to cover contempt, it seems to me that the fairest approach would be for Judges to not treat Defendants as ordinary civil litigants but to utilise their discretion and order that any costs order made pursuant to CPR44 not be enforced without further order of the Court. I say this for the following reasons:

1. The Claimant still has a costs order in its favour that it can apply to enforce – the prejudice (if any) to them is therefore minimal;
2. The Defendant has some level of costs protection in proceedings knowing that the Court will only make an Order for enforcement, if in the circumstances, they consider it appropriate;
3. The extra step of having to apply to Court for a further order before they can enforce their costs order should ensure Claimants do not bring Contempt Proceedings as a costs generating exercise;
4. The Court, on determining the Application to allow enforcement, can take into consideration a number of further matters. The Court will have a wide discretion, but the type of thing I would expect the Court to consider is (and this list is by no means exhaustive):
   1. The means of the Defendant;
   2. The means of the Claimant;
   3. The impact enforcement would have on the Defendant;
   4. The overall circumstances of the case;
   5. Where the contempt fits in with the overall circumstances of the contempt;
   6. The punishment already handed down to the Defendant (particularly if the Defendant is imprisoned – under CPR44 this is not explicitly taken into account!)

In the meantime, it is open to Claimants to avail themselves of these potential difficulties they might encounter in enforcing a costs order in their favour, even if successful, when deciding whether to initiate Contempt Proceedings.

Conclusion

In conclusion, the ambiguity surrounding costs in Contempt Proceeding in the Civil Courts and the apparent lacuna in the legal aid regime, has seen a situation whereby Defendants are treated like ordinary Civil litigants when costs come to be determined under CPR44. I do not consider this to be a fair reflection of the status of Contempt Defendants.

It is therefore my view that the Courts should seriously consider utilising their discretion to ensure that any costs awarded against a Defendant cannot be enforced without further order of the Court so as to allow for a more holistic approach to costs in these niche proceedings.