Law Reports

LIMITATION OF ACTION—WHEN TIME BEGINS TO RUN—ACTION TO RECOVER COSTS PAID OR PAYABLE UNDER LEGAL AID CERTIFICATE WHICH HAS BEEN REVOKED

Legal Services Commission v Rasool [2008] EWCA Civ 154, [2008] All ER (D) 43 (Mar)

Court of Appeal, Civil Division

Ward, Smith and Wilson LJJ

5 March 2008

The cause of action for recovery of legal aid costs in respect of a revoked legal aid certificate is complete, and time therefore begins to run for limitation purposes, from the date of revocation of the certificate, not the date on which costs are taxed.

Robert Jay QC and Jess Connors (instructed by CKFT) for the claimant.

Stuart Brown QC and Ian Pennock (instructed by Stachiw Bashir Green) for the defendant.

In March 1993, the defendant was granted a legal aid certificate to be represented as plaintiff in an action for negligence and/or breach of contract. The proceedings were defended. In March 1999, the Legal Aid Board decided that he had failed to provide information or documents when requested to do so by the board, and his certificate was revoked. In June 1999, his appeal against revocation was dismissed. In December 2001, the costs incurred under the certificate were taxed. In January 2002, the solicitors who had represented him claimed payment of those taxed costs, and they were duly paid by the board in April 2002. On the same day the board sent a letter of demand to the defendant to recover those costs. It was, however, not until March 2006 that the claimant, the board’s successor, issued its claim for “monies owed in respect of a legal aid certificate.” The judge held that the claim was time-barred, because time had begun to run for the purposes of s 9 of the Limitation Act 1980 (LA 1980) from the date of revocation of the certificate by the board in May 1999, not when the costs were taxed—as argued for by the claimant—in December 2001. The claimant appealed.

LORD JUSTICE WARD:

The time limit for actions for sums recoverable by statute under LA 1980, s 9(1) was six years from the date on which the cause of action accrued. The claimant submitted that the cause of action did not crystallise until the costs had been assessed or taxed, and that the claim was not, therefore, statute-barred.

The defendant submitted that taxation or assessment was a procedural step, not an ingredient of the cause of action. Even if the costs had not been assessed or taxed at the date the proceedings commenced, judgment could be entered for such sum as might be so assessed or taxed: at least there could be a declaration that such sum should be payable. The crucial provision was reg 86(1) of the Civil Legal Aid (General) Regulations 1989, (SI 1989/339). The question was whether the need to ascertain the precise sum which was payable a condition precedent to recovery, or whether it was merely a procedural step as opposed to an inherent element of the cause of action. Regulation 86(1) provided that “the Board shall have the right to recover” from the formerly assisted person “the costs paid or payable under regulation 84(b)” less the amount of any contribution already made. The right of recovery was given both in respect of costs paid and costs payable under reg 84(b). If the costs had been determined and if the costs had been paid, then the cause of action was complete because the right of recovery had been conferred by reg 86 and all necessary facts and all constituent elements would have been ascertained. Nothing more needed to be done. Time would start to run from the date of revocation of the certificate. If that was the rule for costs paid, then there was no reason why the rule should be any different if the costs were payable.

Cause of action

The fact that declaratory relief was available demonstrated that the process of ascertainment of the amount of costs was a mere procedural requirement, not an inherent element of the cause of action itself (see Coburn v Colledge [1897] 1 QB 702, [1895-99] All ER Rep 539). Since it was well established that a cause of action for a sum recoverable by virtue of an enactment accrued although it remained to be quantified (see Hillingdon London Borough Council v ARC Ltd [1999] Ch 139) there was no good reason for construing reg 86(1) in such a way as to make quantification a condition precedent to recovery in this case. The Legal Aid Act ought to be construed in a manner which was compatible with private practice as far as that was possible. As Coburn had made clear, time ran from the date of the completion of work not from the date of taxation. There was no reason why a similar rule should not apply by way of analogy so that the only facts to be proved to establish cause of action under reg 86(1) were that work had been done under a certificate but that the certificate had been revoked. Taxation should not be the crystallising event in either case.

The purpose of LA 1980 was to prevent delay. That would be utterly frustrated if the claimant’s submission was correct. On its working of the scheme, actual taxation or assessment could take place long after revocation. The assisted person would have no control over that taxation and tardy solicitors could delay indefinitely. A construction of reg 86(1) which left everybody knowing exactly where they stood so that the period of limitation could be ascertained with certainty was to be preferred. The appeal would be dismissed. Lady Justice Smith and Lord Justice Wilson agreed.

VALUE ADDED TAX—SEPARATE OR SINGLE SUPPLY—SCHEMES OFFERED BY FEE-PAYING SCHOOLS FOR REFUND OF PROPORTION OF FEE DUE TO ABSENCE OF CHILD

Birkdale School Sheffield v Revenue and Customs Commissioners [2008] EWHC 409 (Ch), [2008] All ER (D) 49 (Mar)

Chancery Division

J

5 March 2008

Schemes operated by fee-paying schools, under which parents are entitled to a refund of an appropriate proportion of fees paid in advance if the child concerned is unable to attend school for a specified period, in return for a small percentage increase in the fees otherwise payable, involve a single supply to the parents of educational services by the school for VAT purposes.

Roderick Cordara QC and Jern-Fei Ng (instructed by Clifford Chance LLP) for the school.

James Puzey (instructed by HM Revenue & Customs) for the Revenue.

The proceedings constituted a test case concerning schemes offered by fee-paying schools under which parents were entitled to a refund of an appropriate proportion of fees paid in advance if the child concerned was unable to attend school for a specified period—typically a period of five days—by reason of illness or other specified circumstances. The price for participating in the scheme was usually a small percentage increase in the fees otherwise payable, often about 1.5%.

It was common ground that the scheme was not a contract of insurance, but rather a variation of the contract between the school and the parent. The financial backing for the scheme was, however, usually funded by a contract of insurance.

Until 2005, the Revenue took the view that the additional charge made to parents for participation in the schemes was exempt from VAT, given that it formed part of the consideration for the supply of exempt educational services by the school. In 2005, however, the Revenue took the view that participation in the scheme involved a separate standard rated supply by the school of the right to obtain refunds of fees in specific circumstances.

The school appealed against the consequent VAT assessments. The appeal was dismissed, the tribunal concluding that the scheme gave rise to a separate supply. The tribunal’s reasons were that: (i) participation in the scheme had no effect on the child’s education; (ii) that the terms of the scheme did not take effect as an amendment or variation of the school’s standard terms and conditions, but rather involved separate and additional consideration for the scheme; and (iii) the fact that fees for the scheme were charged separately from the fees for education. The school appealed.

MR JUSTICE HENDERSON:

The scheme conditions expressly provided that participation in the scheme “alters” the parent’s contract with the school for the provision of educational services. The tribunal had correctly noted that there was nothing to prevent the parties to a contract from effecting a variation of it by mutual agreement, and that the terms of a written instrument might be varied by a subsequent agreement, whether written or oral. However, the tribunal held that “the standard terms are not varied when parents join the Scheme by paying the fees due from them: there is a separate and additional consideration for the Scheme”.

His lordship considered that that so-called finding involved a clear error of law. There was no reason not to give effect to the stated intention of the parties that participation in the scheme should alter the contract previously entered into between a parent and the school. The mere fact that a separate and additional consideration was paid for the variation did not lead to the conclusion that there was a separate contract.

Apart from anything else, the provision of further consideration was necessary in order to make the variation contractually binding. The result of participation in the scheme was that there was then a single, but varied, contract for the provision of educational services by the school, on the standard terms and conditions as modified by the provisions of the scheme.

Reasons for separate supply

The only matters identified by the tribunal as reasons for holding that the scheme gave rise to a separate supply for VAT purposes were: (i) the fact that participation in the scheme had no effect on the child’s education; (ii) the tribunal’s

view that the terms of the scheme did not take effect as an amendment or variation of the school’s standard terms and conditions; and (iii) the fact that the fees for the scheme were charged separately from the fees for education. His lordship had already held that reason (ii) involved a clear error of law. Reasons (i) and (iii) also seemed to be of little, if any, relevance. With regard to reason (i), it was of course true that participation in the scheme had no effect on the education provided by the school to the child. The child would be educated in exactly the same way whether or not his parent participated in the scheme. That, however, focused on the wrong question.

What mattered was not the education provided by the school to the child, but the supply of educational services by the school to the parent. The parent was paying the school to educate his child. Participation in the scheme affected the price which he paid for that service, and entitled him to a refund, or to a full remission of fees, in certain specified circumstances. However, it was still the child’s education the parent was paying for. The economic reality of the matter was that the parent was provided by the school with two payment options for the same educational service.

As to reason (iii), the authorities clearly indicated that the charging of a separate price for one element of a composite supply was not of itself decisive (see

The indivisible nature of the supply was also brought out by the fact that the scheme could have no independent existence apart from the supply of education. The appeal would therefore be allowed.