Costs within the Court of Protection are generally assessed on the standard basis as per Part 44.3 1 (a) of the Civil Procedure Rules. However, this recent case has highlighted that the Courts will order costs to be assessed on the Indemnity basis, Part 44.3 1 (b) in particularly egregious situations.
The Proceedings concerned 44 individuals, whose property and financial affairs were either managed by a Court appointed Deputy or were subject to an application for such an appointment. There was an additional 8 individuals who had been subjected to these proceedings, but had unfortunately passed away during the course of the litigation. This meant the Court only retained a residual jurisdiction in respect of costs.
The Court identified that the common link between all the individuals was Matrix Deputies Limited, or a person who worked for the organisation, such as DW and OM.
The Public Guardian made a number of applications which sought the discharge of Matrix Deputies Limited and DW and OM as property and affairs Deputies, the refusal of any pending applications and the appointment of either the Local Authority or a Panel Deputy instead.
OM was discharged on 17 February 2016 and DW was discharged on 18 May 2016. However, Matrix Deputies Limited contested the applications until shortly before the final hearing upon which an agreement was reached. Issues as to the costs remained between Matrix Deputies and the London Borough of Enfield.
The history was complex and it involved an arrangement between the London Borough of Enfield and Matrix Deputies Limited for referrals to be made where there was a Statutory Duty. Relations between the two broke down and thereafter the Local Authority terminated the arrangement.
The Public Guardian raised concerns in November 2015. An Independent Auditor was instructed to investigate Matrix Deputies Limited. A report was produced and this was used as evidence by the Public Guardian on the first day of the hearing. The allegations within the report were as follows;
Excessive Fee Charging
. Fees excessively charged to individuals in excess of what the Deputyship appointment permitted or in relation to what works had actually been undertaken.
Inappropriate/inadequate arrangements for holding/recording client funds and transactions
. All client funds were held in one single account. There were unexplained discrepancies between closing and opening balances and no clear record of opening balances
Conflict of interest for, inappropriate relations with other bodies
. No evidence of tendering and best interest’s decisions being made
Failure to provide information requested/comply with order for disclosure
. Various applications had to be made to the Court
Matrix Deputies denied many allegations, however they did admit to some accounting discrepancies and the receipt of payments from an estate agent in respect of property sales of the Protected Parties. This amounted to Matrix Deputies receiving a financial benefit from the property sales themselves at the expense of someone whom they owed a fiduciary duty to.
Paragraph 8.58 of the Code of Practice states,
A fiduciary duty means that Deputies must not take advantage of their position. Nor should they put themselves in a position where their personal interests conflict with their duties. They cannot cause their personal position for a personal benefit, whether or not it is at the persons expense.
Therefore, the breach of duty had clearly been broken.
After 20 months of litigation and limited admissions, Matrix Deputies Limited conceded the applications. The Court determined that on the basis of the allegations Matrix Deputies Limited were not a suitable organisation for either continued or new appointments as property and affairs Deputies and any appointments should be discharged or refused.
The Judge stated that individual orders would be made in respect of each person named to appoint a permanent Deputy. Where a security bond was effective, directions would be given to the new Deputy to investigate and report any losses to the estate as a result of the actions of the discharged Deputy.
Costs of the Proceedings
The Public Guardian and Matrix Deputies Limited agreed to bear their own costs and no costs would be claimed from the estate of any person listed in the schedules. The Judge noted that this was a departure from the standard rule, Rule 156 of the Court of Protection Rules 2007, which states,
Where the proceedings concern P’s property and affairs the general rule is that the costs of the proceedings or of that part of the proceedings that concerns P’s property and affairs, shall be paid by P or charged to his estate
The Judge, having Regard to Rule 159 of the Court of Protection Rules 2007, was satisfied that the circumstances justified the departure as he applied the rule and looked at the following;
(a)the conduct of the parties;
(b)whether a party has succeeded on part of his case, even if he has not been wholly successful; and
(c)the role of any public body involved in the proceedings.
(2) The conduct of the parties includes–
(a)conduct before, as well as during, the proceedings;
(b)whether it was reasonable for a party to raise, pursue or contest a particular issue;
(c)the manner in which a party has made or responded to an application or a particular issue; and
(d)whether a party who has succeeded in his application or response to an application, in whole or in part, exaggerated any matter contained in his application or response.
The position as to costs between the London Borough of Enfield and Matrix Deputies Limited was not agreed. The Local Authority sought an order that Matrix Deputies Limited should pay its costs including the costs incurred in the investigations and on an indemnity basis. Matrix Deputies contented that London Borough of Enfield should bear its own costs.
Local Authority Arguments
London Borough of Enfield’s costs were said to amount to approximately £250,000.00. The bulk of the costs were made up of the independent auditor’s reports. The Local Authority identified that the reports were necessary and the Court had requested the same. Two reports and subsequent applications were required because of Matrix Deputies Limited’s failure to supply full documentation as directed in a timely manner.
The Judge was referred to the case of JS v KB & MP (2014) and R (Boxall) v Waltham Forest LBC (2001) where it was determined that the Court had the power to make a costs order when substantive proceedings had been resolved at trial, but when parties had not agreed costs, specifically in relation to compromised cases. It was observed that there would be different degrees of success and how far the Court will be prepared to look into the previously unresolved substantive issues will depend on the circumstances of a particular case, not least the amount of costs at stake and the conduct of parties.
The Judge in this case, contended that it was not reasonable for Matrix Deputies Limited to resist the applications due to the investigations and the conduct of Matrix Deputies Limited afterwards which elongated the Proceedings and led to an increase in the costs.
The Judge also looked at the conduct of Matrix Deputies Limited before Proceedings had been issued.
Matrix Deputies Response
The position of Matrix Deputies Limited was that it should not bear any responsibility for the Local Authority’s costs. They argued that the costs of the independent auditor were excessive. They also sought to rely on correspondences from the Local Authority marked as “without prejudice save as to costs.” The Judge was unimpressed by these arguments. The proceedings themselves were brought by the Public Guardian, not the London Borough of Enfield and full disclosure was only obtained following an application for an enforcement type order.
The Judge stated that having regard to Rule 159 of the Court of Protection Rules, he was satisfied that the circumstances of the case justified the departure from Rule 156. The conduct of Matrix Deputies before and after proceedings had fallen below the standard of what was expected of a Court appointed Deputy. Matrix had admitted to a breach of their fiduciary duties and had failed to comply with the Court Orders. Therefore, it was determined that Matrix Deputies Limited should bear the costs of the London Borough of Enfield to be assessed by the Senior Courts Costs Office.
Standard or Indemnity Basis Costs
The effect of an indemnity based costs order as stated in Siegel v Pummell (2015)
” To disapply the requirement that, in addition to costs being reasonably incurred, they should also be proportionate to the sums and issues at stake in the litigation and that, in the event of the assessment Judge having a doubt as to whether or not an item of cost has been incurred reasonably, the benefit of such doubt should go to the receiving rather than the paying party. “.
The purpose of indemnity costs is not to punish the paying party, but to provide the receiving party with a more generous measure of recoverable costs. They should only be awarded where a case it outside of the normal realms.
The Judge stated that he was satisfied that this case was wholly “outside of the norm” of proceedings before the Court of Protection. This was based on the number of Protected Parties involved in the litigation, the scope of the allegations, the investigative steps required and the nature of the admitted breach of duty by a paid Deputy. All in accordance with Part 44.4 of the Civil Procedure Rules.
The London Borough of Enfield were advised to recover their costs on the indemnity basis.
This case demonstrates that the Courts have the ultimate discretion as to the assessment of costs and that they will look at all factors throughout the duration of the litigation to determine the basis of assessment.