Aarhus costs cap challenge succeeds

RSPB, Friends of the Earth & Client Earth v. Secretary of State for Justice [2017] EWHC 2309 (Admin), 15 September 2017, Dove J – judgment here

In my March 2017 post here, I explained that amendments to the costs rules for public law environmental claims threatened to undo much of the certainty that those rules had achieved since 2013. Between 2013 and February 2017, if you, an individual, had an environmental judicial review, then you could pretty much guarantee that your liability to the other side’s costs would be capped at £5,000 (£10,000 for companies) if you lost, and your recovery of your own costs would be limited to £35,000 if you won. In this way, the rules sought to avoid the cost of such claims becoming prohibitively expensive and thus in breach of Art.9(4) of the Aarhus Convention.

The most worrying element in the February 2017 amendments was a new CPR 45.44  giving the courts a broad discretion to vary those amounts, apparently at any time. This seemed like an open invitation to the defendants to try to do this, aided by the financial information which claimants are now obliged to provide. It was truly regressive, taking us back to the days when you spent many thousands of pounds arguing about a protective costs order which was intended to save money.

In my March post, I explained that the new rules were being challenged by NGOs, and Friday’s judgment is the upshot of this challenge.

It is essentially a success for the NGOs.

The NGOs took three points. They said that

  • the variation provisions in CPR 45.44 offended the predictability required for compliance with EU law
  • the rules should have provided mandatory private hearings in respect of inquiries into the financial resources of the claimant or supporters
  • the assessment of what it was reasonable for a claimant to bear should include the claimant’s own legal costs, not simply his liabilities in respect of the other side’s costs.
  1. Variation provisions

On the first point, the judge was satisfied that the rules did not offend EU law – we are in the territory of EU law because the Aarhus Convention is only directly enforceable law to the extent that it is made so by specific provisions of EU law.

But the grounds upon which MoJ defended the case, and as accepted by the judge, significantly constrain the ability of a party to apply to vary the cap – despite the apparently open-ended terms of CPR 45.44. This was the only way in which the system could achieve sufficient predictability at an early stage – and without that predictability, a claimant may well be prohibited from launching an environmental claim.

In all judicial reviews, the claimant needs permission from the court to proceed. If he does not get it, then the sums recoverable from him are modest – basically the defendant’s costs of preparing its grounds of resistance. The claimant can then walk away without further costs. But if he gets permission, and the defendant wants to vary the £5,000 cap, the court will then set the cap in the light of the financial information available – and it will do that on paper (or, if the claimant needs to renew his application for permission orally, at that hearing).

MoJ’s point was that other procedural rules would ordinarily prevent a defendant from making a later application to vary a costs cap. Tucked away in a Practice Direction to CPR 23.5 (about court applications generally)  is a rule (2.7) which says that

every application should be made as soon as it becomes apparent that it is necessary and desirable to make it

This means that a defendant cannot simply turn up later and say he had forgotten or omitted to apply to vary the cap, but that it is just to do so now. Indeed MoJ ([33]) was constrained to accept that

it would also be in breach of EU law to grant such an application in circumstances where the defendant had failed without good reason to request a variation of costs caps in the acknowledgement of service, since to permit such an application without good reason at that stage would be in breach of the general principles….in particular in relation to reasonable predictability.

When then could a later application properly be made? MoJ proposed only two bases, the first was where the claimant had provided false or misleading information at the outset, and the second when his means had changed after the making of the cap (he’d come into some money), which it would be his duty to disclose: [34].

On this basis, the judge decided that the variation provision was consistent with EU law, but only when read with other procedural rules and practices. He observed at [38] that it would have beneficial for the rules in CPR 45 to have stated that a defendant should apply to vary the default cost caps within the acknowledgement of service.

Thus the apparent width of CPR 45.44 was constrained by the rest of the procedural code, and because it was so constrained, it was consistent with EU law.

It is rather a pity that those responsible for drafting these rules did not engage with the concerns consistently expressed by NGOs (for a more recent example see this April 2017 letter to the Aarhus Compliance committee here) that CPR 45.44, as drafted, would significantly damage the predictability of the previous system – which had generally worked well.

The narrow basis and timing of a variation application as put before the court contrasts rather pointedly with the Government’s consultation response (quoted at [21], sub-paras.22-23) envisaging that variations may be made at any stage of the proceedings.

2. Mandatory private hearings

A claimant must set out in his schedule of financial resources (attached to his claim) those resources and any financial support which others have or are likely to provide him, and such third party support is to be taken account of when the court considers what is or is not prohibitively expensive.

The NGOs’ concern was that airing all these issues in public would tend to deter both claimants and their supporters from coming forward, and the rules did not require any argument about resources to be conducted in private. This would affect individuals as well as NGOs, who were concerned about the confidentiality attaching to their donations.

The schedule of resources is not itself a public document, but its contents would be readily opened up if disputes about costs caps were aired in open court. In the typical case, this would not occur, because it would be determined on paper, but that is not necessarily so.

MoJ plainly saw the force of this argument and in their defence and pre-court correspondence contemplated some sort of proposed amendments to ensure that initial hearings were in private, at least in the cases of claims involving private individuals. But in court it took the line that these changes were not required by the law.

The judge disagreed. A hearing involving confidential information (including personal financial information) could be in private (see CPR 39.2(3)(c)) and should be so: [52] – citing Garner v. Elmbridge BC [2010] where Sullivan LJ pointed out the chilling effect if contributors thought that their financial affairs might be aired in open court.

There was also an argument about whether the rules required the identification of third party donors, with MoJ asserting that they did not. Again the judge disagreed – the rules were open-ended in this respect, and as he pointed out, they would allow defendants to ask about crowd-funding or indeed the financial support of high-net worth individuals. The fact that the specified form required a statement of the aggregate amount of funding was a defect in the form, rather than a constraint on the meaning of the underlying rule.

The judge therefore concluded that the rules should provide that any cost cap hearing should be in private, not simply to prevent the airing of confidential information, but also to avoid the chilling effect upon the claimant and financial supporters. He also considered that the rules needed to say rather more about the nature and content of the financial information required in CPR 45.42(1)(b).

3. Claimant’s own costs

This point went by concession. The NGOs sought a declaration that claimant’s own costs should be included in the assessment of what was prohibitive expense. MoJ agreed that this was the case. The judge agreed, and because of his agreement ([59]) and the consensus between the parties, was unwilling to grant a declaration because it would achieve nothing more.

In practice, this is going to be important. Assume a claimant is privately paying and has a likely costs liability to his own lawyers of, say £35,000 (the default recovery cap) to the end of the case. His total costs are therefore £40,000 if his £5,000 cap remains, and if he then loses. Defendants have a bit more of a hill to climb to show than any greater sum is not prohibitively expensive.

Conclusion

The complexity of, and uncertainty engendered by, the new rules have been significantly tempered by this ruling. The most important element is the firm constraint placed upon applications to vary the cap – in the ordinary case, in the acknowledgement of service or not at all. This should mean that a claimant can get permission and at the same time know what the worst outcome might be, even assuming that his cap is upped on the defendant’s application. He can then proceed or duck out if the potential bill is too great.

More generally, the court interpreted the costs rules firmly against the background of domestic and EU rulings which have consistently sought to temper the severities of the UK costs rules.

That all said, it is dispiriting that it takes a judicial review for Government seriously to engage with the costs problems and practicalities facing environmental claimants – despite these having been spelt out time and time again by NGOs and judges here and in Europe.

Save for opining that a declaration was unnecessary on ground 3, the judge left over the question of what formal relief he should grant to further argument in due course.

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