When public authorities must pay legal costs: Two important cases
3 August 2011
Bahta & Ors, R (on the application of) v Secretary of State for the Home Department & Ors  EWCA Civ 895 – Read judgment
The general rule in civil law cases is that the loser pays the winner’s legal costs, even if the case settles before trial. As with all general rules, there are plenty of exceptions, and many relate to public authorities. Two of those exceptions have just been chipped away at by the Court of Appeal.
Two important judgments increasing the likelihood that local authorities will have to pay out costs emerged the usual last-minute glut before the court term ended on Friday. The first concerned costs in the Court of Protection when an authority has unlawfully deprived a person of their liberty. The second was about costs in immigration judicial review claims which had settled following consent orders.
Starting with the Court of Protection, G v E & Ors is a long-running case in which a 20-year-old man with severe learning disabilities was unlawfully removed from his long-term foster carer. In April, Mr Justice Baker in the Court of Protection held that Manchester City Council had shown a “blatant disregard” for mental health law and therefore should pay the claimant’s full legal costs, departing from the usual rule in Court of Protection cases that costs should not be awarded. For the full background, see my last post on the case.
Manchester City Council appealed the costs order, arguing that Mr Justice Baker (‘Baker J’) had made an error of law. The Court of Appeal rejected the appeal and gave Appellant’s arguments short shrift.
The first argument was that the this was a typical case and therefore there should have been no order for costs. Lord Justice Hooper adopted Mr Justice Baker’s reasoning as to why this was a special case. It is worth revisiting Baker J’s reasoning as quoted by the Court of Appeal, as it gives a flavour for the kind of case this was:
the local authority’s blatant disregard of the processes of the MCA and their obligation to respect E’s rights under the ECHR amount to misconduct which justifies departing from the general rule.
Moreover, Baker J continued:
the local authority’s conduct, certainly up to the moment when the issue of deprivation of liberty was conceded at the start of the hearing in January, amounted to “a significant degree of unreasonableness” so as to give rise to a liability for costs on an indemnity basis.
The complexity of the law was also no excuse:
Given the enormous responsibilities put upon local authorities under the MCA, it was surely incumbent on the management team to ensure that their staff were fully trained and properly informed about the new provisions.
So, this was a very bad case indeed for the council, and therefore Mr Justice Baker “was right not to treat this as a typical case”.
The council’s alternative argument was that the costs in relation to the deprivation of liberty issue should have been separated off, meaning they would only have to pay for costs relating to that issue. The court rejected this, adopting the Respondent’s argument that a costs order relating only to a distinct part of the proceedings should not normally be made because of the complications that follow. Furthermore:
the judge… in paragraph 24 made findings that the costs of preparing for the issue of whether E should be permitted to return to F’s care were considerably enhanced by the appellant’s conduct both in removing E unlawfully and not conceding the unlawfulness until the last moment. Mr McGuire sought to attack that finding. In my view the judge was not only entitled to make that finding but driven to it.
In summary, whereas the usual rule in Court of Protection cases is that there is no order for costs (that is, neither side pays the other’s costs irrespective of who has “won”), in particularly grievous cases of council misconduct – in this instance, relating to unlawful deprivation of liberty under Article 5 of the European Convention on Human Rights – the rule will not apply and the council will have to pay.
The second case – immigration judicial review
In Bahta, the Court of Appeal heard five joint appeals to costs orders. All were immigration judicial review cases which had settled before trial, with the Secretary of State granting all or substantially all of the relief sought by the claimants. In summary, the court ruled that
59. What is not acceptable is a state of mind in which the issues are not addressed by a defendant once an adequately formulated letter of claim is received by the defendant. In the absence of an adequate response, a claimant is entitled to proceed to institute proceedings. If the claimant then obtains the relief sought, or substantially similar relief, the claimant can expect to be awarded costs against the defendant. Inherent in that approach, is the need for a defendant to follow the Practice Direction (Pre-Action Conduct) or any relevant Pre-Action Protocol, an aspect of the conduct of the parties specifically identified in CPR r.44.3(5). The procedure is not inflexible; an extension of time may be sought, if supported by reasons.
And government departments get no special treatment, despite the strain on the public purse:
Notwithstanding the heavy workload of UKBA, and the constraints upon its resources, there can be no special rule for government departments in this respect.
a culture in which an order that there be no order as to costs in a case involving a public body as defendant, because a costs order would only transfer funds from one public body to another is in my judgment no longer acceptable.
Lord Justice Pill also had “serious misgivings” about the UK Border Agency’s claim to avoid costs when a claim is settled for “purely pragmatic reasons“:
The expression “purely pragmatic” covers a multitude of possibilities. A clear explanation is required, and can expect to be analysed, so that the expression is not used as a device for avoiding an order for costs that ought to be made.
The case has been well summarised by the Free Movement and Nearly Legal blogs. Both point out that the case probably represents a significant departure from the long-standing principle arising from R (Boxall) v Waltham Forest LBC 21 December 2000 (2001) 4 CCL Rep 258, by which courts are discouraged to award costs where cases have been settled before trial unless it is “obvious” which side would have won had the substantive issues been fought to a conclusion.
The Court of Appeal has now clawed back the position to something resembling the usual rules on costs (that the loser pays the winner’s costs), and held that it would now be for the Defendant to justify whether there should be a departure from that rule (para 65). Compliance with the pre-action protocol would also be an important consideration, and it will be more difficult for the Defendant to justify a departure from the usual rule.
Public purse a bit more open
The result of these two cases is that public authorities will find it more difficult to avoid paying litigation costs in the Court of Protection and Administrative court. Both, and particularly Bahta, are likely to have wider implications than in their particular contexts. In short, when public authorities have failed to act responsibly towards claimants, the general rule that the loser pays will apply.
Sign up to free human rights updates by email, Facebook, Twitter or RSS