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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> DEG-Deutsche Investitions Und Entwicklungsgellschaft MBH v Koshy & Ors [2001] EWCA Civ 489 (3 April 2001) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2001/489.html Cite as: [2001] EWCA Civ 489

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IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(Mr Justice Harman and Mr Justice Rimer)
and
THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
(Mr Justice Turner)

		Royal Courts of Justice Strand London WC2
		Tuesday 3rd April 2001

1. LORD JUSTICE ALDOUS: I invite Lord Justice Robert Walker to give the first judgment.
2. LORD JUSTICE ROBERT WALKER: There are two applications before the court, one of which has been made at very short notice. The more long-standing application is for the court to resolve a difference as to the form of order to be made following a judgment given by this court on 30th January 2001 after hearing two appeals, one from an order of Rimer J made on 17th February 2000 and the other from an order of Harman J made as long ago as 20th March 1998. The appellant was Mr Thomas Koshy and the respondent was a company called DEG-Deutsche Investitions und Entwicklungsgellschaft ("DEG").
3. On 30th January 2001 this court gave permission to the Legal Services Commission to intervene on the question of the form of order if it wished to do so, and it has taken advantage of that opportunity. I shall refer to the Legal Services Commission as "the Commission" so as to include the Legal Aid Board, which was replaced by the Commission on the coming into force of section 1 of the Access to Justice Act 1999. Similarly, I shall refer to the Funding Review Committee of the Commission as the "the Committee", so as to include Area Committees which were replaced.
4. The last minute application is by Mr Koshy for permission to appeal against an order made only yesterday, that is on 2nd April 2001, by Turner J refusing Mr Koshy's renewed application for permission to apply for judicial review of two decisions taken by organs or officers of the Commission, that is (first) a decision of the Committee made on 17th December 2000 not to refer back to the Area Director the assessment of Mr Koshy's disposable income and (second) a decision of the Commission's Means Assessment Policy Coordinator made on or about 1st December 2000 and communicated in a letter of that date not to reopen the question of the assessment of Mr Koshy's disposable income.
5. That application for judicial review was first made on 15th January 2001. Silber J refused the application on the papers and yesterday Turner J refused Mr Koshy's renewed application. That hearing had been advanced by eight days since it is common ground that if Mr Koshy has now reached the end of the road so far as judicial review is concerned, the appropriate order for this court to make following the appeal in January is no longer open to dispute. It is therefore sensible to consider first the application for permission to appeal and that is the course which has been taken this afternoon.
6. This matter has a long and complex history which I must summarise as briefly as I can. Mr Koshy was the managing director of a Zambian company called Gwembe Valley Development Company ("GVDC"). That company was engaged in agricultural development in Zambia. DEG, a German company financed by the German government, was a major investor in this third-world development project. Mr Koshy was also connected with another company called Lummus Agricultural Services Company Ltd ("Lasco"). Lasco was also a defendant in the original proceedings taken by DEG against Mr Koshy and various companies alleged to have been controlled by him or to have been concerned with the receipt or transmission of funds alleged to have been misappropriated by him or by Lasco.
7. Mr Koshy was, in short, accused of very serious breaches of fiduciary duty involving dishonesty. Those matters have still not finally been resolved. DEG started its proceedings on 8th November 1996 and on the same day it obtained a freezing order against Mr Koshy and Lasco. They contested this freezing order in protracted interlocutory proceedings which were finally decided (against Mr Koshy and Lasco) by Harman J on 6th February 1998. The formal order was made on 20th March 1998.
8. The whole of the proceedings before this court last January and today and all the previous judicial review proceedings are really satellite litigation arising from Mr Koshy's attempts to obtain legal aid in order to defend the proceedings brought by DEG, and other proceedings brought by the receiver of GVDC (for those see Gwembe Valley Development Co v Koshy (No 2) [2000] BCLC 705).
9. In relation to the legal aid issues the salient dates are as follows.
10. On 25th February 1997 Mr Koshy applied for legal aid in relation to both sets of proceedings. On 27th or 28th February 1997 he was granted an emergency legal aid certificate. On 17th September 1998 the Commission revoked the legal aid certificate. Revocation of a certificate has (at least to some extent) a retroactive effect and that was the point with which this court was mainly concerned in the appeals which I have mentioned. The revocation of the certificate gave rise to issues as to whether the costs order made by Harman J on 20th March 1998 (in the belief that Mr Koshy was legally aided) could and should be varied, either under the statutory scheme of the Legal Aid Act 1988 and regulations made under it, or under the court's inherent jurisdiction, or by way of an appeal from Harman J. On 30th January 2001 this court took the first of those courses and accordingly allowed an appeal from Rimer J who had declined (on the grounds of lack of jurisdiction) to vary the order of Harman J by making an unqualified order for costs against Mr Koshy.
11. That is the order which this court proposed to make (with the costs to be assessed at once and to be paid as soon as they had been assessed) subject only to Mr Koshy's continuing attempts to get his legal aid restored by means of judicial review proceedings.
12. I turn to the history of the judicial review proceedings. After his emergency legal aid certificate had been revoked Mr Koshy sought to take his case on appeal to the Committee. On 20th August 1999 the Committee notified Mr Koshy that it could hear an appeal only on the costs estimate (which was relevant in relation to Mr Koshy's disposable capital) and that such an appeal would be academic and pointless since Mr Koshy had in any event been ruled ineligible for legal aid on income grounds.
13. Mr Alan Maclean, who has appeared today together with Mr Tom Weisselberg on behalf of the Commission, has prepared a very helpful skeleton argument in order to guide the court through the maze of the Civil Legal Aid (General) Regulations 1989 ("the General Regulations") and the Civil Legal Aid (Assessment of Resources) Regulations 1989 ("the Assessment Regulations"). The skeleton argument explains that an emergency legal aid certificate is normally of short duration and (if the applicant is successful in his substantive application) it merges under regulation 23 of the General Regulations in the substantive legal aid certificate. A substantive certificate requires an assessment (under regulation 18) of the applicant's resources. In that assessment disposable income acts as us first filter and disposable capital acts as a second filter: for the detail of that see regulation 4 of the Assessment Regulations.
14. As the skeleton argument observes, Mr Koshy's affairs were considerably more complicated than those of most applicants for civil legal aid. There was an extensive correspondence with Mr Koshy's former solicitors and then with his present solicitors, some of which I shall have to refer to. When the emergency legal aid certificate was revoked a decision was taken, simultaneously, to refuse his application for a substantive legal aid certificate. The two decisions were taken together. The emergency certificate was revoked under regulation 75 of the General Regulations on the ground that "following a determination of means, the assisted person's disposable income has been assessed at an amount which makes him ineligible for legal aid." So Mr Koshy was regarded as having been caught by the first income filter.
15. Mr Hugo Page (who has appeared today, as he has in the past, for Mr Koshy) says that that decision was clearly wrong as a result of a mistake in not making a deduction for tax on benefits in kind (which amount, in Mr Koshy's case, to a very considerable figure).
16. In the skeleton argument Mr Maclean submitted that under regulation 81 of the General Regulations the Commission was not required, in the case of a revocation under regulation 75, to give notice asking Mr Koshy to show cause why his emergency certificate should not be revoked. That seems to be correct, although Mr Page in his skeleton argument did not accept that.
17. As to the other decision taken on 16th September 1998, that is not to grant a substantive legal aid certificate, an appeal procedure is laid down in regulations 34 and 35 of the General Regulations. But regulation 35(2) provides as follows:

"(2) No appeal shall lie to an area committee from-

(a) an assessment of the assessment officer, or

(b) any decision by an Area Director as to the sums payable on account of the applicant's contribution or the method by which they shall be paid [with an immaterial exception], or

(c) the refusal of an application for an emergency certificate."

18. That was the basis of the notification given to Mr Koshy's solicitors on 20th August 1999, that the appeal procedure was available only for the estimated amount of the costs relevant in relation to Mr Koshy's disposable capital (see regulation 4(2) of the Assessment Regulations). Mr Koshy challenged that decision in his first judicial review proceedings. On 21st February 2000 Jackson J granted permission, but only on one ground, that is the refusal to convene a Committee to hear an appeal on the ground that it would be academic. Jackson J did not give permission in respect of the refusal to reinstate the emergency certificate. That application came before Harrison J on 14th July 2000.
19. There is a difference of view (which may be said to have led or at least contributed to the second judicial review proceedings) in relation to what exactly Harrison J decided. I shall come back to that. What is not in dispute is that on 14th November 2000 the Committee heard Mr Koshy's appeal as directed by Harrison J. His order had been that the Commission should "convene an appeal for [Mr Koshy] before the Legal Aid Area Committee over the issue of [Mr Koshy's] costs." The last words are important. They plainly refer, in my view, to regulation 4(2) of the Assessment Regulations and indicate the limited scope of the appeal which was in mind.
20. The Committee met on 14th November 2000. Its decision was as follows:

"The Committee's decision was:

Having listened to counsel's oral submissions and having read and considered the various documents, including the appellant's letter dated 13th September with its various attachments, the committee decided that:

Capital:

The appeal should be allowed solely on capital. The matter should be referred back to the Regional Director for his determination or report. The legal costs, even from today's date, would appear to be in excess of the appellant's disposable capital.

Income:

The committee, notwithstanding counsel's submissions, took the view that no normal appeal against an assessment of disposable income was possible. The terms of Regulation 39 of the Civil Legal Aid (General) Regulations 1989 were not broad enough to empower it to make a decision. Indeed to do so, in its view, would be ultra vires.

The committee's decision is final; there is no further stage in the appeal process."

21. So the practical outcome was that although the appeal was partially successful, there was a decision to take no action to reinstate Mr Koshy's legal aid in any form. That decision, communicated by a letter dated 17th November 2000, was the first decision attacked in Mr Koshy's second judicial review proceedings. The other decision attacked was that of Mr Neil Tyson, the Means Assessment Policy Coordinator, a decision communicated by a letter dated 1st December 2000, not to reconsider the issue of the assessment of Mr Koshy's disposable income. At this stage I will read only the last paragraph of that letter. I shall return to other parts of it later. The last paragraph is material in relation to what may be just and equitable. It read:

"On a separate point I note from correspondence that you have indicated that during the period which would have been covered by any legal aid certificate costs have been incurred amounting to £200,054. I would be grateful to receive advice as to the basis of how these costs were incurred and on what basis the work was carried out given that it was clear that this work was not covered by any legal aid certificate. What arrangements were in place with Mr Koshy for payment of these sums given that he was instructing his representatives on a private client basis?"

22. Mr Koshy's case on his second judicial review application was that these decisions involved a plain error of law and a failure to comply with what is said to have been implicit in the judgment of Harrison J. Harrison J had in his judgment referred to regulations 34, 35, 37 and 39 of the General Regulations. Regulation 39 provides as follows:

"(1) The area committee shall determine the appeal in such manner as seems to it to be just and, without prejudice to the generality of the foregoing, may-

(a) dismiss the appeal; or

(b) direct the Area Director to offer a certificate subject to such terms and conditions as the area committee thinks fit;

(c) direct the Area Director to settle terms and conditions on which a certificate may be offered; or

(d) refer the matter, or any part of it, back to the Area Director for his determination or report.

(2) Any decision of an area committee with regard to an appeal shall be final, and it shall give notice of its decision, and the reasons for it, to the appellant and to any solicitor acting for him on a form approved by the Board."

23. Mr Page has argued that Harrison J must have accepted that regulation 39(1)(d) is wide enough to permit an Area Director, after a successful appeal, to take any appropriate action, even reopening questions on which there is not and cannot be an appeal.
24. Turner J did not accept that. He pointed out that each of the relevant regulations was not to be read in isolation, but must be read as part of a coherent whole. The General Regulations permit an appeal in respect of some specified matters but do not permit an appeal in respect of other matters. The only challenge to those matters on which no appeal is provided for would have to be by way of judicial review and with an application made within appropriate time limits. In this case the challenge would have had to be to the original decision as to Mr Koshy's disposable income. Plainly, as Mr Page accepts, he was long out of time for that.
25. As to the restricted rights of appeal under the General Regulations, regulation 35(2) of the General Regulations is in point and could hardly be clearer. Regulation 37 provides that an appeal is to be "by way of reconsideration of the application". However, that cannot in my view involve extending the consideration to matters on which there is simply no right of appeal. In my view Turner J was plainly right on this point and there would be no reasonable prospect of a successful appeal against that part of his decision.
26. Mr Page's other argument before Turner J was based on regulation 14 of the Assessment Regulations. That seems to have been a late addition to the submissions which Mr Page was making. Regulation 14 provides as follows:

"Where-

(a) it appears to the assessment officer that there has been some error or mistake in the assessment of a person's disposable income, disposable capital or contribution or in any computation or estimate upon which such assessment was based, and that it would be just and equitable to correct the error or mistake, or

(b) new information which is relevant to the assessment has come to light,

the assessment officer shall make an amended assessment which shall, for all purposes, be substituted for the original assessment and shall have effect in all respects as if it were the original assessment."

27. Turner J observed that in September 2000 (to be precise by a letter dated the 13th of that month) Mr Koshy's solicitors had furnished the Commission with a clear statement of the error which Mr Koshy asserted had been made in computing his disposable income (that is, a failure by the assessment officer to make a sufficient deduction for tax on Mr Koshy's substantial benefits in kind). But, Turner J said, it had nowhere been accepted by or on behalf of the assessment officer that he was in error. Therefore Mr Koshy could not use regulation 14 so as in effect to extend (by a period of years rather than months) the time limit for judicial review of an assessment originally made in 1998.
28. Mr Weisselberg was asked to address the court on this part of the appeal. He showed us some relevant correspondence which I will mention below. He submitted that the second judicial review application amounted to no more than an improper collateral attack on the decision properly made earlier by Jackson J to refuse permission to apply for judicial review in respect of the revocation of the emergency certificate. Mr Weisselberg also submitted that the acknowledgement of service put in by the Commission (on which Mr Page had relied) must be read in context.
29. The judge has, it seems to me, to some extent misstated or at least put the wrong emphasis on the Commission's position as it has been explained by Mr Weisselberg today. Regulation 14 can apply only if some error or mistake is acknowledged by the assessment officer, either as a result of his reviewing his own previous workings and decision or by his acknowledging the significance of some new information. However, plainly an assessment officer will be under a duty in appropriate circumstances to consider whether he should form such a view, and he cannot shut his mind to the obvious (whether it is an error that he has previously made or some new and significant information). However, that is not, as I understand it, the Commission's position at all. The Commission's position is that no single simple error has been established such as has been contended for by Mr Page. That clearly emerges from Mr Tyson's letter of 21st December 2000 from which I have already quoted. The letter refers in its second paragraph to voluminous correspondence which had taken place in the past between the Commission and Ritchie Samuel, a firm of solicitors previously acting for Mr Koshy. Mr Weisselberg has shown us in particular letters dated 21st November 1997 and 19th February 1998 in which the topic of tax liabilities was clearly raised and discussed. Indeed, at one point it was suggested that the discrepancy in tax was due to a typographical error of £10,000. The subject was revisited again in some detail in correspondence which took place during the spring of 1999.
30. After referring to the previous correspondence, Mr Tyson said in the third paragraph of his letter:

"Mr Koshy has never satisfactorily supplied that information during the whole period of the correspondence. Full details of the outstanding information was also set out in my letter to Ritchie Samuel [and then various letters are referred to]. You will see from my response of February 1999 that the conclusion was that there was still a number of queries which the Board had relating to the details supplied by Mr Koshy. However given that Mr Koshy would not qualify for legal aid even on the basis of the most generous interpretation of the facts the Board saw little point in pursuing these matters further at that stage. Those further queries related to the provision of accounts for Hi-Pro Limited and issues relating to assistance provided to Mr Koshy by Irene de Cruz.

It is therefore simply not open to your client to state that he is satisfied with the other elements of the income and deduction calculations. It is particularly so given that your client and his previous representatives have spent much of the time since the revocation of the legal aid certificate questioning that income assessment on a number of fronts. I therefore find it strange that your client should now some time after the event suddenly change his view and be quite happy to accept the Commission's calculations in all other respects. Your client has also had ample opportunity in the past to query the calculation of tax in this particular case but has failed to do so. For all these reasons I do not propose to re-open the income assessment."

31. In short, the Commission's position is that it has not asserted that the assessment made in 1998 is either correct or incorrect. Its position is that the tax on benefits in kind is not the only matter in which the assessment is still uncertain and may be incorrect. In this connection it is important to bear in mind the requirement in regulation 14(a) of the Assessment Regulations that the assessment officer must be satisfied that it would be just and equitable to correct a particular error or mistake.
32. On that ground, which may not be quite the same way as the matter was expressed by Turner J (although he covered the point quite shortly) I think that he was plainly right to come to the conclusion that the decision embodied in Mr Tyson's letter of 1st December 2000 was not open to review, either as being based on an error of law or as being wholly unreasonable.
33. For those reasons, I would refuse permission to appeal from the order of Turner J and that would, as I understand it, conclude the issue of what should happen as to the form of order following on the appeal which we decided in January.
34. LORD JUSTICE ALDOUS: I agree.
ORDER: Application for permission to appeal the order of Turner J refused; Respondent's costs of permission application to be paid by the applicant; detailed assessment; as far as Mr Koshy is concerned, there will be no order as to costs after 13th January; as to the Commission, the costs of preparing the skeleton will be borne by DEG; counsel to lodge a draft minute of order. (Order not part of approved judgment)