DK v First-tier Tribunal (HESC) (Tribunal procedure and practice (including UT) : other) [2014] UKUT 171 (AAC) (15 April 2014)

Krebs v NHS England

[2014] UKUT 171 (AAC)

Mr Justice Charles

Attendances

For the Appellant: Simon Butler instructed by Thomas Saul & Co

For the Respondent: David Lock QC instructed by Hill Dickinson LLP

DECISION:

The appeal against the order for costs made against the Appellant (Mr Krebs) is allowed.

There is to be no order for costs in respect of the appeals to the First-tier Tribunal and from it to the Upper Tribunal

REASONS FOR DECISION

Introduction

1. This is an appeal against an award of costs made against the Appellant (Mr Krebs) by the First-tier Tribunal (FtT (HESC)).

2. Mr Krebs is a dentist. He has been qualified for over 30 years and for many years worked as a sole practitioner from a surgery in Salford doing exclusively NHS work. His view is that prior to 2006 his relationship with the relevant Primary Care Trust, and thus the Respondent or its predecessor, was good. In any event, it is common ground that the relevant history leading to these proceedings and proceedings in the Queen’s Bench Division (the QB Proceedings) between the parties started after he entered into his contract with the Salford PCT (the PCT) on 1 April 2006. That contract sets out the terms on which he was to provide NHS dental services and his remuneration for doing so

3. The QB Proceedings (Krebs v NHS Commissioning Board [2013] EWHC 3474 (Admin)) relate to a challenge by Mr Krebs to the termination by the PCT of that contract (the contract). The hearing was on 10 to 12 July 2013 and in his judgment dated 11 November 2013 Mr Justice Turner sets out a helpful account of the history. I shall not repeat it. At paragraphs 46 to 49 he mentions the issues relating to the Performers List which were the subject of the appeal to the FtT (HESC). The Performers List is a list of primary care professionals who are entitled to provide primary care services to NHS patients.

4. The hearing before the FtT (HESC) was on 8 April 2013 and so the decision of the FtT (HESC) preceded the hearing before Mr Justice Turner and his judgment in the QB proceedings. Accordingly, those proceedings and the disputed issues of fact and law in them remained “live” after the agreement between the parties that was approved by the FtT (HESC) and so concluded the appeal to them on 8 April 2013.

5. By letters dated respectively 27 September 2012 and 2 October 2012 the PCT had given notice to Mr Krebs:

i) terminating his contract on 31 October 2012, and

ii) of a hearing before the NHS Salford Lists and Contracts Panel (the Panel) to consider his removal from the Performers List.

6. The termination of his contract and his removal from the Performers List would bring an end to Mr Krebs’ ability to continue as a sole practitioner carrying out NHS work and so his existing professional life and livelihood.

7. On 29 October 2012, the PCT’s solicitors informed Mr Krebs that it did not currently intend to terminate his contract until such time as the dispute between the parties was resolved and, if the PCT’s position changed, it would give Mr Krebs reasonable notice.

8. I shall expand on this later, but at this stage I record that at the heart of that dispute in respect of both the issues relating to the contract and the Performers List was the respective position of the parties on whether Mr Krebs should be the subject of a performance assessment by the National Clinical Assessment Service (NCAS) to address concerns raised by the PCT based on the views of its officers and the authors of reports about his work and practice. The extent of those concerns and how those that he accepted existed should be identified and addressed were disputed by Mr Krebs and he had commissioned a report which supported his position. In broad terms, each side was asserting that the other was and had been acting unreasonably.

9. On 15 November 2012, the Panel decided that Mr Krebs’ name should be removed from the Performers List pursuant to Regulation 10 of the National Health Service (Performers Lists) Regulations 2004 (the 2004 Regulations) and recommended that the PCT should apply for his national disqualification. Pursuant to the 2004 Regulations his removal was stayed pending the hearing of Mr Krebs’ appeal to the FtT (HESC).

10. As a result of an agreement reached at that hearing and approved by the FtT under Rule 29 of its Rules the decision to remove Mr Krebs from the Performers List:

i) was effectively revoked by his appeal being allowed in part, and

ii) was replaced by a contingent removal on condition that he co-operated fully with a referral to NCAS in the terms drafted in March 2012 (the March 2012 referral letter), and so as sought by the PCT in the lead up to the notices served in September and October 2012.

11. This left Mr Krebs on the Performers List and meant that the dispute relating to the lawfulness and reasonableness of the respective stances of the parties concerning (a) the disputed concerns, and (b) the request or demand that Mr Krebs should undergo a performance assessment by NCAS were left undecided by the FtT(HESC) and remained live issues in the QB proceedings.

12. Albeit that I do not know the actual reasoning of the parties for reaching that settlement of the appeal to the FtT (HESC), standing back it can easily be appreciated why both of the parties could consider this to be a sensible solution and compromise in that it left Mr Krebs on the Performers List, it addressed what had been advanced as the primary concerns of the PCT before Mr Krebs refused to undergo the NCAS assessment pursuant to the letter of 12 March 2012 and it left the legal and factual issues on reasonableness and lawfulness to be decided in the QB proceedings.

13. Pursuant to this agreement and the order of the FtT (HESC) both sides changed their positions in that:

i) Mr Krebs agreed to undergo an NACS assessment, and

ii) the PCT agreed not to seek a decision from the FtT (HESC), upholding that of the Panel, that Mr Krebs should be removed for the Performers List and so also that it would not pursue the recommendation of the Panel to seek his national disqualification.

14. On 30 April 2013, and so shortly after the determination of his appeal to the FtT (HESC), the PCT’s solicitors gave notice purporting to terminate Mr Krebs’ contract on 31 May 2013. I was told and accept that Mr Krebs was told at the hearing that this is what would be done and that before the agreement was made and put before the FtT (HESC) he was aware that the PCT was going to make an application for costs.

15. In the QB proceedings the PCT was ordered to treat the contract as continuing after 31 May 2013 to maintain the status quo. The reasons given by the PCT in the letter of 30 April 2013 show the overlap between the disputes underlying the appeal to the FtT (HESC) and the issues in the QB Proceedings. The reasons were:

i) the fact that Mr Krebs had changed his position at the FTT hearing reinforced the PCT’s view that it had been reasonable for him to be required to co-operate in the first place and that the QB proceedings lacked substantial merit;

ii) the PCT continued to entertain serious concerns over the quality of treatment provided by Mr Krebs and the appropriateness of his applications for payment; and

iii) Mr Krebs had taken a deliberate decision not to comply with a lawful requirement to undergo an NCAS assessment in spite of the clear terms of the remedial notice.

16. So the PCT was praying in aid the consensual disposal of the appeal to the FtT(HESC) in respect of its decision to terminate Mr Krebs’ contract and was doing so without reference to and whether or not he was then co-operating with an assessment by NCAS pursuant to the agreement made at FtT(HESC) hearing and his contingent removal from the Performers List. My understanding is that the stance of the PCT was that it would assist Mr Krebs to find work at another practice where he would be supervised and that there was a realistic prospect that it would succeed in identifying such a placement for Mr Krebs if he was willing to take it up. So, the stance of the PCT was that at least for a time Mr Krebs would not be able to continue as a sole practitioner as he had done for over 30 years. It is not difficult to see why the PCT adopted that stance. But also it is not difficult to see why Mr Krebs would not find that satisfactory and would regard it as a continuation and confirmation of an unfair, unreasonable and so unlawful approach of the PCT.

17. Mr Krebs lost the QB proceedings and is seeking permission to appeal. The PCT point to the decision of Mr Justice Turner as a confirmation that the request or demand it made that Mr Krebs should undergo an NCAS assessment and its approach to and in respect of Mr Krebs and his practice and the concerns it had about it were throughout fair, reasonable and lawful judged on private and public law grounds.

Relevant Regulations relating to the Performers List and relevant terms of the contract

18. The 2004 Regulations provide:

Application for inclusion within a performers list

4(3) The Practitioner must provide the following undertakings

(e) to co-operate with an assessment by the NHSLA where appropriate and when requested to do so by the Board

Requirements with which a performer in a performers list must comply

9(6) a performer, who is included in a relevant performers list of a Primary Care Trust, shall act in accordance with the undertakings that a performer is required by these Regulations to provide when applying for inclusion in that relevant performers list

Removal from performers list

10(1) The Primary Care Trust must remove the performer from its performers list where it becomes aware that he--

(a) has been convicted in the United Kingdom of murder;

(b) has been convicted in the United Kingdom of a criminal offence, committed on or after the day prescribed in the relevant Part, and has been sentenced to a term of imprisonment of over six months;

(d) has died; or

(e) is no longer a member of the relevant health care profession.

(2) --------

(3) The Primary Care Trust may remove a performer from its performers list where any of the conditions set out in paragraph (4) is satisfied.

(4) The conditions mentioned in paragraph (3) are that--

(a) his continued inclusion in its performers list would be prejudicial to the efficiency of the services which

those included in the relevant performers list perform ("an efficiency case");

(b) he is involved in a fraud case in relation to any health scheme; or

Contingent removal

12(1) In an efficiency case or a fraud case the Primary Care Trust may, instead of deciding to remove a performer from its performers list, decide to remove him contingently.

(2) If it so decides, it must impose such conditions as it may decide on his inclusion in its performers list with a view to--

(a) removing any prejudice to the efficiency of the services in question (in an efficiency case); or

(b) preventing further acts or omissions (in a fraud case).

(3) If the Primary Care Trust determines that the performer has failed to comply with a condition, it may decide to-

(a) vary the conditions imposed;

(b) impose new conditions; or

19. Clause 197 of the contract under the heading "Appraisal and assessment" provided:

197 The Contractor shall ensure that any dental practitioner performing services under the Contract

197.2 co-operate with an assessment by the NPSA when requested to do so by the PCT

20. There was common ground that the references to NHSLA and NPSA should be read as including a reference to NCAS.

The approach and decision of the Panel

21. In the exchanges leading up to the March 2012 referral letter, the approach of the PCT had been that it was appropriate for Mr Krebs to undergo an NCAS assessment as set out in that letter. This approach is consistent with a contingent removal pursuant to Regulation 12 and thus the result of the appeal before the FtT (HESC).

22. By a letter dated the 1 June 2012, Mr Krebs’ solicitors wrote to NCAS in the following terms:

Counsel has advised us that a meeting with yourself is voluntary. Please confirm that this is the case, as our client does not consent to such a meeting, which appears to be based upon a defective report from Mr A Johnson [ this is a report that was relied on by the PCT ] ----

We are also unaware as to whether you have received a copy of our earlier letter to the PCT dated 17^th February 2012 and our client's comments attached to it which pointed out the glaring errors in the Johnson report. Has this been sent to you?

Secondly we can find no reference in any of the correspondence that we have seen to a report from John Renshaw dated 22nd of April 2012. [ this is a report that was relied on by Mr Krebs ] -------- we are concerned that NCAS, should have both sides of the argument at an early stage which should prevent unnecessary meetings later on. ----------

23. The PCT replied to that letter to NCAS by a letter dated 20 June 2012 in the following terms:

This letter indicates that despite your clear agreement to undertake an NCAS assessment you are now unwilling to do so. As you are aware there have been ongoing concerns about your performance for a considerable period of time and these concerns remain unresolved. An independent assessment appeared to be the most appropriate way forward.

To be clear there is a contractual and Performers List obligation for you to co-operate with an NCAS assessment when referred by a PCT. A refusal to participate in the process will be seen as a breach of the regulations and this could lead to a termination of the contract and formal Performers List action, including removal from the List and referral to the regulator. ------

If you require any further clarification of these matters please feel free to contact me at the above address. --------

24. There was a follow-up letter from the PCT dated 23 July 2012 which noted that no reply had been received to the letter of the 20 June 2012. Mr Krebs’ solicitors replied by a letter dated 10 August 2012 in the following terms:

Mr Krebs is pleased to note in your letter that “ Mr Renshaw's recommendation that a detailed programme of further improvement and CPD requirements should be quickly generated to address perceived shortcomings --- This is exactly the purpose of the NCAS assessment”.

In the light of this, we cannot possibly see what need there is for an NCAS assessment. Mr Renshaw has indicated that there are shortcomings, which can be addressed. You accept that. You also state that this would be the terms of reference of an NCAS assessment, and in the light of this we cannot see that such an assessment would be anything other than a waste of money and time.

In terms of the NCAS assessment and the contractual obligation to co-operate, can you please point to the appropriate clause in our client's contract which refers to this, as we would like to consider. The advice we have received from counsel differs from this, and naturally we would like to consider the situation fully. Consequently we look forward to hearing from you.

25. The PCT replied by letter dated 14 August 2012 in the following terms:

The PCT remains of the view that an NCAS assessment would be appropriate and proportionate in your client's case. The methodology adopted by NCAS in undertaking assessments will provide the PCT with assurance that all aspects of your client's practice have been considered. Such issues as may be identified can then be addressed in a remedial plan.

Under the terms of clause 197 of your client’s contract, he is obliged to co-operate with an assessment by the NPSA when requested to do so by the PCT. ----- This letter should therefore be considered to be a remedial notice requiring your client to confirm his agreement to undergo an NCAS assessment. Such confirmation should be provided to the PCT within 28 days of your receipt of this notice.

In addition, your client's inclusion in the PCT’s Dental Performers List is subject to his undertaking that he will co-operate with an assessment by NICE when requested to do so (Regulation 4(3)(d) of the NHS (Performers List) Regulations 2004, as amended). Should your client fail to co-operate with an assessment the PCT may have regard to this in the event that it considers whether it would be appropriate for his name to be removed or contingently removed from the PCT’s Performers List (Regulation 11(6)(e)).

26. So, at this stage, the PCT was alerting Mr Krebs to the contractual terms and regulations it was relying on and the possibility of a removal or contingent removal from the Performers List if Mr Krebs did not undergo an NCAS assessment, which he continued to refuse to do.

27. However, the recommendation at the end of the PCT statement of case which accompanied the notice dated 2 October 2012 of a hearing before the Panel ended with the following recommendation:

It is disappointing that the PCT has been required to issue 2 remedial notices and I regret that Mr Krebs has apparently disregarded the second notice. It is difficult to see how the PCT can now gain reassurance of Mr Krebs’s clinical competence and consideration of termination of the contract and consideration of removal from the Performers List appears to be an inevitable next step.

28. By a letter dated 6 November 2012, Mr Krebs’ solicitors wrote to the PCT’s solicitors in the following terms:

The issue in this matter turns on whether the service of the remedial notices and/or notice of termination was fair, reasonable, and proportionate.

We know that you assert that the notices were appropriate and proportionate. We disagree.

Having reviewed the legal principles and the evidence presented by the PCT we have reached the conclusion that Dr Krebs has no choice but to issue proceedings in the High Court of Justice, Queen’s Bench Division in Manchester on the grounds that the PCT has breached the GDS Contract and for declarations that the PCT has not only acted unreasonably in all the circumstances, but the service of the notices was unreasonable and disproportionate.

29. As I have already mentioned, the Panel decided that Mr Krebs' name should be removed from the Performers List and recommended that the PCT should apply for his national disqualification. If taken up and put into effect this recommendation would found a mandatory removal of Mr Krebs from the Performers List (see Regulation 10(1)(c)) but, so far as I am aware, no such application was made by the PCT pursuant to that recommendation or otherwise before the hearing before he FtT(HESC). In a letter dated 19 November 2012, the PCT informed Mr Krebs that:

The reasons for the decision are that the Panel believed that your continued inclusion on NHS Salford Dental Performers List would be prejudicial to the efficiency of the service and that you are unsuitable to remain on the List. The Panel was particularly concerned that issues of your clinical competence raised over three years ago remain unresolved and that there is clear evidence that you have failed to co-operate with an NCAS assessment. The Panel believed that your non-co-operation with the N CAS referral indicated an unwillingness on your part to deal with these issues and severely restricted the options available to the Primary Care Trust in ensuring patient safety.

30. On 14 November 2012, the day before the Panel sat, Mr Krebs' solicitors had written to the PCT seeking an adjournment so that Mr Krebs could be represented by Counsel and asserting that the Panel was inappropriately constituted. His solicitor attended before the Panel and made the same points.

31. The progression of thinking and stance shown by this exchange of correspondence and the notices give by the PCT terminating the contract and in respect of the Performers List show that:

i) the PCT decided not to ask the Panel to exercise and the Panel decided not to exercise their power or ability to make a contingent removal,

ii) as recommended by the PCT the Panel decided to remove Mr Krebs from the List, and

iii) the PCT decided to terminate the contract.

32. The Panel’s decision to remove Mr Krebs was made on the basis that as well as being an “efficiency case” his case was an “unsuitability case” in respect of which a contingent removal under Regulation 12 cannot be made. The recommendation made by the Panel was also directed to a mandatory removal of Mr Krebs from the List (see regulation 10(1)(c)).

33. So the Panel and the PCT focused on the failure or refusal to undergo an NCAS assessment rather than the reasons that had prompted the PCT to require one and rejected the possibility of a contingent removal (followed by a removal if the condition founding it was not satisfied).

34. This was a deliberate and arguably available choice for both of them but it meant that unless Mr Krebs successfully challenged the removal and the purported termination of his contract, which were based on essentially the same alleged conduct, he would not be able to continue as a sole practitioner as he had done for over 30 years. So both sets of proceedings were directed to enabling him to continue his practice and make his living in that way.

The appeal to the FtT (HESC)

35. Mr Krebs’ appeal was supported by grounds in the notice of appeal, exhibited correspondence, exhibited pleadings in the QB Proceedings and a statement from Mr Krebs. His statement was dated 14 March 2013 and was responded to by statements by two witnesses on behalf of the PCT both of which had originally been prepared for the QB proceedings. To my mind, by his statement Mr Krebs makes it clear that he is alleging that he has been the victim of unfair, unreasonable and so unlawful conduct by the PCT as a public authority and contracting party. It is equally clear that the PCT denied this. The combination of the grounds of appeal in the notice, exhibited documents and statements show that issues raised before the FtT (HESC) included, the following:

i) the Panel was wrong to conclude that Mr Krebs was “unsuitable to be included on the Performers List” and thus against the ground found by the Panel that requires a removal,

ii) the Panel was wrong to conclude that the inclusion of Mr Krebs on the Performers List would be prejudicial to the “efficiency of the service” and alternatively that, if it would be, the Panel should have decided to remove him contingently,

iii) the obligations relied on by the PCT, and it seems the Panel, in the Regulations and the contract were not absolute obligations and, as the PCT had acted unreasonably and disproportionately and so unlawfully, those obligations could not be relied on by the PCT or the Panel to found a removal or a contingent removal of Mr Krebs from the Performers List. These points are pleaded in the QB Proceedings in respect of the contract, and are based on private and public law arguments,

iv) Mr Krebs was a victim of unfair and unlawful actions by the PCT, and

v) the Panel acted unfairly and was wrongly constituted.

36. It is not clear whether the last point included an allegation of actual or apparent bias but as the appeal to FtT (HESC) was a rehearing it was not a free standing point.

37. The counsel who appeared before the FtT (HESC) also appeared before me and it was common ground between them that very early at the hearing and so before any evidence was heard the judge, who was the presiding member of the FtT (HESC), made it clear that his preliminary view was that Mr Krebs was bound to undergo an NCAS assessment and it was this indication that triggered the discussions that led to the agreement that was reached between the parties. The discussions had two stages. At the first stage Mr Krebs indicated that he would be willing to change his position and agree to undergo an NCAS assessment if the PCT would change its position and agree to a contingent removal. Counsel for the PCT then sought instructions in light of this change of position and agreed to a contingent removal on that basis.

38. Neither counsel before me sought to assert that the account given by the FtT (HESC) in paragraph 12 of their Determination was a full and accurate one. In particular, and unsurprisingly it was not the understanding of either counsel that as stated there by the FtT (HESC) that:

Following some discussion with counsel, Mr Butler eventually conceded that Regulation 9(6) places Mr Krebs under an obligation to undergo an NCAS assessment when requested to do so by the PCT

Given the continued existence of the QB proceedings and the premise of the agreement and respective positions of the parties that the issues in them remained live, this would have been a surprising concession and, in line with the common ground before me, it is apparent that the FtT (HESC) misunderstood Mr Butler’s position and that of his client Mr Krebs and no such concession was made. Further, if Mr Butler had made any such concession it is highly likely that it would have been mentioned in the letter from the PCT dated 30 April 2013 giving notice terminating his contract,

39. Paragraphs 15 to 21 of the Determination of the FtT (HESC) relate to their decision on costs. They are as follows:

15. Mr Locke (sic) [ counsel for the PCT ] submitted a costs application. The actual calculation of the Board/PCT’s costs was not disputed and amounts to £23,188.60. ----------------------

16. Costs are only to be awarded under the Tribunal Procedure (First-tier Tribunal) (Health, Education and Social Care Chamber) Rules 2008 Rule 10 (1)(9b) where “the Tribunal considers that a party or its representative has acted unreasonably in bringing, defending or conducting the proceedings"

17. Mr Locke’s submission was that Mr Krebs had today agreed to a referral on terms drafted and sent to him for comment more than a year ago. Mr Krebs had consistently refused to participate. The decision of the PCT to remove Mr Krebs on grounds of efficiency and suitability arose from that refusal. The PCT had no alternative. The decision from the DPL, and the appeal against that decision, would not have taken place if he had previously agreed. It was unreasonable of Mr Krebs not to agree to a referral, only to agree to it at the Tribunal hearing after significant costs had been incurred.

18. Mr Butler submitted that Mr Krebs's appeal had been successful. The decision to remove on grounds of suitability, which was one of the grounds put forward by the Board, had by definition been rejected, since contingent removal was only available on efficiency grounds. If the PCT, at any time had pointed out that Mr Krebs is under a statutory obligation to co-operate with an NCAS assessment he would no doubt have agreed earlier.

19. We reject Mr Butler's submissions. It was for those advising Mr Krebs to explain to him his duties under the Regulations. We reject the submission that because we have now not found Mr Krebs to be unsuitable, he has succeeded in his appeal against the decision that he was unsuitable.

20. The Tribunal is only able to allow the appeal, in part, because Mr Krebs has changed his mind. If he had continued to refuse and NCAS assessment, in defiance of his obligations under the Regulations, we would probably have found the argument that he was unsuitable to remain on the DPL very persuasive. His change of mind is, however, late and up until the change of mind we agree with Mr Locke that Mr Krebs's conduct was unreasonable. Before that change of mind a finding that the Board could not carry out its duty to ensure standards would have been virtually inescapable. It was Mr Krebs' decision, whether or not on the basis of advice, to refuse cooperation. It was this which the PCT was entitled to take into account in finding him unsuitable, and this refusal which has changed, enabling the appeal to succeed in part.

21. The PCT's expenditure which Mr Krebs’ unreasonable conduct has occasioned is probably not limited to the costs of these proceedings, but we can only consider costs incurred in the proceedings.

---------

25. David Krebs is to pay the NHS Commissioning Board's costs in these proceedings amounting to £23,188.60.

40. Again it was not accepted or asserted that this was a wholly accurate summary of Mr Butler’s submissions and it is clear from the correspondence I have quoted from earlier that, at the request of Mr Krebs’ solicitors, the PCT had pointed out the Regulations and contractual provisions it was relying on.

41. It is not difficult to see why the FtT (HESC) had formed the view that Mr Krebs was in breach of an obligation to undergo an NCAS assessment. Their reasoning is based on that premise or, as they put it, that he was acting in defiance of his obligations under the Regulations.

This appeal

42. My jurisdiction is limited to errors of law. It is clear that the FtT (HESC) identified the correct Rule but this does not mean that the grounds of appeal are limited to perversity. This is because errors of law include (a) unfairness and (b) a failure to apply the relevant Rule correctly by for example taking into account irrelevant factors or not taking into account or properly taking into account relevant factors.

43. The approach to be taken to the application of the Rule was not in dispute before me and is helpfully set out by Upper Tribunal Judge Jacobs in Buckinghamshire County Council v ST (SEN) [2013] UKUT 468 (AAC) where he set out the relevant Rule and said:

B. The First-tier Tribunal’s powers

3. The First-tier Tribunal had power to award costs in two circumstances. They are prescribed by rule 10(1) of the Tribunal Procedure (First-tier Tribunal) (Health, Education and Social Care Chamber) Rules 2008 (SI No 2699):

‘10 Orders for costs

(1) Subject to paragraph (2), the Tribunal may make an order in respect of costs only

(a) under section 29(4) of the 2007 Act (wasted costs); or

(b) if the Tribunal considers that a party or its representative has acted unreasonably in bringing, defending or conducting the proceedings.’

Paragraph (2) applies only to mental health cases.

C. The caselaw

4. The meaning of unreasonable was discussed in the context of wasted costs order by the Court of Appeal in Ridehalgh v Horsefield [1994] Ch 205 at 232-233:

‘“Unreasonable" also means what it has been understood to mean in this context for at least half a century. The expression aptly describes conduct which is vexatious, designed to harass the other side rather than advance the resolution of the case, and it makes no difference that the conduct is the product of excessive zeal and not improper motive. But conduct cannot be described as unreasonable simply because it leads in the event to an unsuccessful result or because other more cautious legal representatives would have acted differently. The acid test is whether the conduct permits of a reasonable explanation. If so, the course adopted may be regarded as optimistic and as reflecting on a practitioner's judgment, but it is not unreasonable.’

‘We were invited to give the three adjectives (improper, unreasonable and negligent) specific, self-contained meanings, so as to avoid overlap between the three. We do not read these very familiar expressions in that way. Conduct which is unreasonable may also be improper, and conduct which is negligent will very frequently be (if it is not by definition) unreasonable. We do not think any sharp differentiation between these expressions is useful or necessary or intended.’

5. The Court also dealt with the proper approach in what it called ‘a hopeless case’ (pages 233-234):

‘A legal representative is not to be held to have acted improperly, unreasonably or negligently simply because he acts for a party who pursues a claim or a defence which is plainly doomed to fail. … As is well known, barristers in independent practice are not permitted to pick and choose their clients. … As is also well known, solicitors are not subject to an equivalent cab-rank rule, but many solicitors would and do respect the public policy underlying it by affording representation to the unpopular and the unmeritorious. Legal representatives will, of course, whether barristers or solicitors, advise clients of the perceived weakness of their case and of the risk of failure. But clients are free to reject advice and insist that cases be litigated. It is rarely if ever safe for a court to assume that a hopeless case is being litigated on the advice of the lawyers involved. They are there to present the case; it is (as Samuel Johnson unforgettably pointed out) for the judge and not the lawyers to judge it.

It is, however, one thing for a legal representative to present, on instructions, a case which he regards as bound to fail; it is quite another to lend his assistance to proceedings which are an abuse of the process of the court. Whether instructed or not, a legal representative is not entitled to use litigious procedures for purposes for which they were not intended, as by issuing or pursuing proceedings for reasons unconnected with success in the litigation or pursuing a case known to be dishonest, nor is he entitled to evade rules intended to safeguard the interests of justice, as by knowingly failing to make full disclosure on ex parte application or knowingly conniving at incomplete disclosure of documents. It is not entirely easy to distinguish by definition between the hopeless case and the case which amounts to an abuse of the process, but in practice it is not hard to say which is which and if there is doubt the legal representative is entitled to the benefit of it.’

6. The Court of Appeal considered an equivalent provision to rule 10(1)(b) in McPherson v BNP Paribas (London Branch) [2004] ICR 1398. The case concerned a claim for unfair dismissal and breach of contract before an employment tribunal. Having secured a postponement of the hearing on the ground of ill health, the claimant then withdrew his claim. The tribunal ordered him to pay the whole of the employer’s costs on the ground that the claimant had acted unreasonably. Mummery LJ discussed a number of points of general relevance.

7. First, the proper issue was the conduct of the proceedings, not the decision to withdraw:

‘30. … The crucial question is whether, in all the circumstances of the case, the claimant withdrawing his claim has conducted the proceedings reasonably. It is not whether the withdrawal of the claim is in itself reasonable …’

8. Second, the costs that may be awarded are not limited to those that are attributable to the unreasonable conduct:

‘40. … The principle of relevance means that the tribunal must have regard to the nature, gravity and effect of the unreasonable conduct as factors relevant to the exercise of the discretion [whether to order costs], but that is not the same as requiring BNP Paribas to prove that specific unreasonable conduct by the applicant caused particular costs to be incurred.’

9. Third, costs must not be punitive:

‘41. … the indemnity principle must apply to the award of costs. It is not, however, punitive and impermissible for a tribunal to order costs without confining them to the costs attributable to the unreasonable conduct.’

10. Fourth, the unreasonable conduct is relevant at three stages:

‘41. … As I have explained, the unreasonable conduct is a precondition to order costs and it is also a relevant factor to be taken into account in deciding whether to make an order for costs and the form of the order.’

11. The decision of the Court of Appeal in Kovacs v Queen Mary and Westfield College [2002] ICR 919 is also relevant. The court decided that: (i) a party’s ability to pay is not a relevant factor; and (ii) an award should cover as a minimum the costs attributable to the unreasonable behaviour.

12. I have taken this statement from one of my previous decisions on costs. I notice that it is reproduced in the local authority’s application to the Upper Tribunal.

44. As those passages show, and is apparent from the Rule itself, unreasonable conduct by the party and further or alternatively his representative can be relevant. The passages also show that there is a distinction between the manner in which steps are taken during and in the proceedings (i.e. the conduct of steps in the proceedings) and the underlying bases upon which proceedings are launched or defended (i.e. the hopeless case).

45. The reasoning of the FtT (HESC) shows that they were not considering steps in the proceedings, but were founding themselves on their view that Mr Krebs had an obligation to undergo an NCAS assessment and so his case was hopeless. In doing so and in their application of the Rule, in my view, they erred in law in the following ways:

i) Either (i) they overlooked the point that Mr Krebs’ case was that he was not under an absolute or any enforceable obligation under the Regulation or his contract to undergo an NCAS assessment, or and in any event (ii) they decided or effectively decided that point against him without hearing argument or evidence on it. So they relied on what could only properly have been a preliminary view that Mr Krebs was acting in defiance of his obligations under the Regulations and as a result they acted unfairly. Further, they did not take into account or by proceeding on a preliminary view did not properly take into account relevant factors namely: whether the obligation under the Regulations was an absolute one as a matter of construction or by reference to the application of administrative law principles and whether in the circumstances of this case the PCT could not rely on it because it had not acted fairly, reasonably and proportionately.

ii) Point (i) would still apply if as the FtT (HESC) thought Mr Butler had conceded that there was an obligation imposed on Mr Krebs to undergo an NCAS assessment when requested to do so by the PCT because it would still have been necessary in applying Ridehalgh to examine whether the arguments to the contrary were hopeless and/or whether the pursuit of the appeal was an abuse of process by Mr Krebs or his representatives.

iii) Alternatively, the FtT (HESC) failed to give any or any adequate reasons explaining why they could found their reasoning on a preliminary view and so reach their conclusion without hearing (a) legal argument on whether the Regulation they relied on put Mr Krebs under an absolute or enforceable obligation on the facts of this case, and (b) without hearing any evidence.

iv) The approach of the FtT (HESC) to finding that Mr Krebs was unreasonable because his advisers should have explained his duties to him failed to address or to properly address the issues relating to what that advice was or could be assumed to be, and so (a) whether Mr Krebs acted unreasonably in following it or in not following it or whether his advisers acted unreasonably in giving it, (b) the alternatives in the Rule and (c) the issues that arises applying Ridehalgh in respect of the distinctions between arguable and unarguable cases and between the pursuit of a hopeless cases and an abuse of process.

v) Although they noted the continuing existence of the QB proceedings, the FtT (HESC) failed to take into account, or to adequately explain how they had taken into account, the impact on the application of the Rule relating to costs of the point that the issues whether under the Regulations and/or under the contract Mr Krebs was obliged to undergo an assessment by NCAS remained live points in the QB proceedings. Rather, they only indicated their view on them by saying that they expected that they would be rapidly resolved in the light of the outcome of the appeal and thereby indicated that they did not appreciate or properly appreciate that Mr Krebs and the PCT were “keeping their powder dry” on the arguments underlying the appeal to them on the basis that they would be advanced and determined in the QB proceedings.

vi) The FtT (HESC) were wrong to say that the PCT had no alternative but to remove Mr Krebs from the Performers List on grounds of efficiency and unsuitability because of his refusal to undergo an NCAS assessment. Rather, and although it did not have to, the PCT could always have sought what they agreed to at the hearing namely a contingent removal, and not serve notice terminating Mr Krebs’ contract, rather than take the course they did under the Regulations and the contract. As a result the FtT (HESC) failed to take into account a relevant factor namely the changes in the positions of both sides.

vii) Even from their premise that Mr Krebs was acting in defiance of an obligation under the Regulations to undergo an NCAS assessment the reasoning in paragraph 20 of the Determination is flawed because it (correctly) recognises that the views of the FtT (HESC) were necessarily preliminary on the “unsuitability ground” by saying that they would “probably” have found the PCT’s argument persuasive, but fails to take that into account.

46. So, in my judgment, the decision of the FtT (HESC) involves a number of errors of law that render it fatally flawed and mean that it should be set aside.

Remission or determination by me of the costs issue

47. It was common ground that I should not remit this case but should determine the Respondent’s application for costs myself. I agree that that is the correct course.

48. In my view, counsel for the Respondent, Mr Lock, correctly accepted that as a matter of construction the obligation under the Regulations was not an absolute one because the co-operation has to be given with an NCAS assessment “where appropriate”.

49. However he argued, and in support of his submissions he prayed in aid the decision of Mr Justice Turner, that:

i) Mr Krebs’ arguments that were developed before Mr Justice Turner based on private and public law that to be enforceable and so effective the power of the PCT to make a request under the contract and further or alternatively the Regulations that he undergo an NCAS assessment must be exercised fairly, reasonably and proportionately are so obviously bad that without allowing Mr Butler (on behalf of Mr Krebs) to develop them before the FtT and now the Upper Tribunal

a) those arguments can be rejected, or categorised as arguments that were doomed to fail, or

b) I can conclude that either the request for an NCAS assessment was appropriate or it was not open to Mr Krebs to assert that it was inappropriate

and further or alternatively

ii) the documents in this case make it blindingly obvious or sufficiently obvious that the PCT acted fairly, reasonably and proportionately and therefore the issue on costs can be decided without hearing any oral evidence.

50. I do not accept these arguments.

51. I acknowledge that there is force in the legal and factual points advanced by the Respondent and that their strength is supported by the decision of Mr Justice Turner and thus that on the face of the documents the Respondent had a strong case before the FtT(HESC). But, in my view, the legal arguments advanced on behalf of Mr Krebs cannot be classified as unarguable or doomed to fail.

52. In my view, this would remain the case even if the Court of Appeal refuses permission to appeal. A loss before a judge followed by a refusal of permission to appeal does not mean that the arguments advanced were unarguable and most certainly does not mean that they were unreasonably advanced. Further, and in any event and notwithstanding the judgment of Mr Justice Turner, on what I have read and heard I have concluded that they were properly arguable and it would be wrong to assume that Mr Kerbs had been advised that the arguments were doomed to fail or that they had no realistic chance of success.

53. So, in my view the route to founding a conclusion that Mr Krebs’ legal arguments were so obviously wrong that he and/or his advisers acted unreasonably is not open and so it is not necessary to go on and examine whether it was Mr Krebs or his advisers or both of them who acted unreasonably by identifying, and/or advising on, and/or pursuing these legal arguments.

54. In my view, it would be unfair and so wrong to decide the factual disputes on the appropriateness of the request and the fairness, reasonableness and proportionality of the steps taken by the PCT on a paper exercise without an examination with the benefit of submissions of the views expressed in the relevant reports, statements and correspondence and, unless that examination warranted it, without hearing any oral evidence.

55. To my mind, by entering into the agreement that settled the proceedings before FtT (HESC) both sides changed their respective positions and in so doing got something from the result. In that respect it was a classic and sensible settlement and so absent an appropriately detailed consideration of the rival contentions of law and fact any classification of the conduct of either side as unreasonable is unwarranted. Neither I nor the FtT(HESC) were invited to carry out such a consideration by hearing argument on the points of law or by carrying out an examination of the evidence with the benefit of submissions or by hearing oral evidence.

56. The appropriate order for costs is that sought on behalf of Mr Krebs, namely that there be no order for costs on the application to FtT (HESC) and this appeal.

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	Upper Tribunal (Administrative Appeals Chamber)
You are here: BAILII >> Databases >> Upper Tribunal (Administrative Appeals Chamber) >> DK v First-tier Tribunal (HESC) (Tribunal procedure and practice (including UT) : other) [2014] UKUT 171 (AAC) (15 April 2014) URL: http://www.bailii.org/uk/cases/UKUT/AAC/2014/171.html Cite as: [2014] UKUT 171 (AAC)

Upper Tribunal (Administrative Appeals Chamber)