ELAN-CANE, R (ON THE APPLICATION OF) V THE SECRETARY OF STATE FOR THE HOME DEPARTMENT & ANOR (COSTS CAPPING AND THE COURT’S DISCRETION AS TO COSTS IN PUBLIC INTEREST JUDICIAL REVIEW PROCEEDINGS) : FULL CASE DETAILS / THE DECISION
The Appellant appealed a decision of Mr Justice Jeremy Baker to dismiss a claim for judicial review of the Government’s “unlawful” refusal to allow the Appellant to apply for or be issued with a passport with an “X” marker in the gender field, indicating gender “unspecified”.
The judge held that as a non-gendered person the Appellant’s Article 8 right to respect for private life was engaged. However, he determined that the Government’s policy did not amount to an unlawful breach of that right.
Following the handing down of his judgment, the judge dealt with the question of costs on the basis of written submissions. By his order dated 8 August 2018, he ordered the Appellant to pay the SSHD’s costs “limited to the sum of £2,000” at the rate of £100 per month beginning on 2 October 2018.
In the reasons for his order, he explained why, with one exception, he did not consider that any of the matters raised by the Appellant should result in any reduction in the agreed figure of costs payable under the cap pursuant to paragraph 2 of the Consent Order. He continued:
“The one exception is the determination that the claimant’s Article 8 rights do encompass the recognition of the claimant’s non-gendered identity, which was a fundamental part of the claimant’s application for judicial review. In the absence of an agreed limit on costs I consider that the claimant’s success in relation to this issue would have been likely to have resulted in a reduction in the claimant’s liability to pay the defendant’s costs, and I see no good reason why it should not be reflected in a pro-rata deduction from the agreed sum.
“In my judgment this should be reflected by a 33% reduction, resulting in an order that the claimant pay the defendant’s costs limited to £2,000, which it is not disputed will be payable at the rate of £100 per month.”
The logic of the judge’s order was SSHD’s costs had by agreement been subject to a costs capping order in the sum of £3,000 and thus, applying the 33% reduction brought these costs down to £3,000.
The Costs Appeal
The Appellant’s substantive appeal was dismissed.
However, SSHD had cross appealed the order for costs on grounds that:
“the judge erred in law in the costs order which he made, by applying a reduction of 33% to the capped rather than the much higher actual costs of the SSHD, when calculating the amount of costs to be paid by the Appellant to the SSHD on the dismissal of the Appellant’s claim for judicial review. Since the parties had agreed a mutual costs cap of £3,000, the effect of the judge’s order was to reduce the amount payable by the Appellant to the SSHD from £3,000 to £2,000. If, however, the reduction had been applied to the total amount of costs reasonably incurred by the SSHD in the proceedings, the resulting figure would still have greatly exceeded £3,000, so (the argument runs) it was wrong in law for the judge to reduce the costs recoverable from the Appellant to less than the capped sum of £3,000.”
The amount at stake was only £1,000. However the issue was of potentially wider significance in all cases where a costs capping order has been made in connection with public interest judicial review proceedings by the High Court or the Court of Appeal .
Permission to appeal was granted by Bean LJ on 20 December 2018.
LORD JUSTICE HENDERSON:
138. On behalf of the SSHD, Sir James Eadie submits that the policy aims of the costs capping provisions in the 2015 Act are:
(a) to determine whether a case is a public interest case at the outset of proceedings;
(b) to fix the parties’ respective liabilities for costs at the outset of proceedings, which must include, when the order is made, consideration of the applicant’s financial position;
(c) to allow an applicant, from the outset, to know where the applicant stands in respect of future liability to costs, so that the applicant can decide whether to proceed with the claim; and
(d) to include some measure of fairness to a defendant in requiring a reciprocal cap (although not necessarily of the same amount) to be placed on the adverse costs that may be recovered by a successful claimant.
139. Against that background, Sir James submits that any reduction to an award of costs made pursuant to CPR Part 44 must be applied to the total amount of costs claimed, and not to the capped amount. The general rule under CPR Part 44, reflected in the consent order itself, is that costs follow the event: see rule 44.2(2)(a). The court has a discretion to make a different order, and in deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including “whether a party has succeeded on part of its case, even if that party has not been wholly successful”: rule 44.2(4)(b). Rule 44.2(6) then gives examples of alternative orders that a court may make, including an order that the unsuccessful party pay a proportion of another party’s costs: see paragraph (a). It is apparent, says Sir James, from the structure of rule 44.2 that the starting point is the costs incurred by the successful party, from which deductions may be made as the court considers appropriate.
140. Sir James goes on to submit that the only function of the cap is to set the maximum amount that a claimant for judicial review must pay if unsuccessful. The cap obviously does not preclude the successful party from incurring reasonable costs that exceed the cap, and if application of the normal principles set out in rule 44.2 would in principle entitle the successful party to recover an amount of costs that exceeds the cap, there can be no rational basis for preventing the successful party from recovering those costs up to the ceiling set by the cap. To do so would lead, in effect, to a lower cap being imposed than was agreed between the parties. Nor would this deprive the discretion conferred on the court by rule 44.2 of any practical effect, for example when a percentage reduction is ordered of the successful party’s recoverable costs. The cap in the present case was set at a very low level, but if, for example, the amount of the cap were £20,000, and the defendant had incurred costs of £20,000 or less, the claimant would still receive the full benefit of any discount applied.
141. In oral argument, Sir James referred us to the recent decision of this court in Campaign to Protect Rural England (Kent Branch) v Secretary of State for Communities and Local Government and Others  EWCA Civ 1230 (“the CPRE case”). One of the main issues in the CPRE case concerned the proper application of the so-called Aarhus cap on costs in environmental cases, in circumstances where the case failed at the first hurdle (because permission to apply for statutory review of the relevant Local Plan was refused) and where there was more than one defendant or interested party: see the judgment of Coulson LJ (with whom Hamblen and David Richards LJJ agreed) at . In the CPRE case itself, the total liability of the unsuccessful claimant to other parties was capped at £10,000. The relevant rules of court are contained in CPR Part 45, at rules 45.41 to 45.45.
142. In the section of his judgment dealing with this issue, Coulson LJ began by rejecting the basic submission that, because the claim had failed at the permission stage, rather than after a substantive hearing, the costs should be subject to a lower cap than the £10,000 stated in the CPR: see . Coulson LJ continued:
“50. The starting point must be the absence of any express sub-caps or lower limits for particular stages of environmental litigation. The CPR provides for no lower cap on the costs that a successful or interested party might to be able to recover following success at the permission stage. On the contrary, the Aarhus cap is global. It is applied to the costs that have been incurred by the successful defendant or interested party, at whatever stage the costs assessment is being done.
51. In a single defendant case, if that defendant succeeds in persuading the court… that permission should be refused, then that defendant is entitled to recover its reasonable and proportionate costs up to the amount of the cap. No different rules will apply to cases with more than one successful defendant or interested party. And there is no reason to limit the recovery (of either single defendants or multiple parties) by means of a further arbitrary cap at a lower level than the stated £10,000. Provided the costs being assessed are reasonable and proportionate then, other than in the imposition of the cap itself at the end of the exercise, it makes no difference for cost assessment purposes whether the case is one to which the cap applies or not. Putting the point another way, the cap does not justify a further reduction in the costs of successful defendants or interested parties below that which is assessed as being reasonable and proportionate.
52. Secondly, many of Mr Westaway’s submissions were based on the false premise that the £10,000 was in some way referable to the total costs of an environmental claim, assuming it failed only after a substantial hearing. That is patently not so. The £10,000 is an arbitrary cap designed to bring claimants in environmental claims the benefits noted above. It has nothing to do with the average costs of civil litigation, much less the costs incurred in the making of an environmental claim, which can be notoriously high. It is therefore wrong in principle to assume that the £10,000 Aarhus cap must be preferable to the costs of a claim that went all the way through to trial.
53. Thirdly, Mr Westaway’s submission that, if this is the correct analysis, it will have a chilling effect, is incorrect. The principle is that the costs of these claims should “not be prohibitively expensive”, not that they involve no costs risk at all. The Aarhus cap offers a major advantage to claimants which is not available to any other group of civil litigants. It allows them costs certainty from the outset, and the ability to pursue litigation in the knowledge that, if they lose, their liability will not be a penny more than the cap.”
Sir James relies in particular on the principles stated by Coulson LJ in , and submits that the practical effect of the judge’s order in the present case is to introduce a further arbitrary cap at a lower level than the £3,000 agreed between the parties.
143. On behalf of the Appellant, Mr Mountford submits that there is nothing in the Consent Order which removes or modifies the broad discretion on costs conferred on the judge by CPR rule 44.2. He emphasises the breadth of that discretion, including the power of the court to order a percentage reduction in the costs recovered by a successful party. This much is not disputed by the SSHD, although I note in passing that the parties’ express agreement in paragraph 2 of the Consent Order that “[c]osts will follow the event” must at least reinforce the general rule contained in CPR 44.2(2)(a). Mr Mountford then submits that the statutory regime of costs capping orders reflects a clear policy of promoting access to justice in public interest proceedings, and self-evidently envisages that parties to such proceedings will often not be fully compensated for their reasonable legal costs in bringing or defending them. In cases of the present type, the public policy limitation on recoverable costs is built into the statutory regime, and must apply likewise to an order agreed between the parties in lieu of a costs capping order under the 2015 Act. The wide discretion on costs under CPR rule 44.2 must therefore be applied in the context of those public policy considerations, and the SSHD is wrong to submit that the first stage must always be to apply the normal Part 44 costs regime without reference to the cap.
144. Mr Mountford next submits that the ability of the court to reduce the capped amount by reference to partial success or unreasonable conduct (or for any other relevant reason) is entirely consistent with the imposition of a maximum limit on the liability. If the argument for the SSHD were correct, a respondent could in practice be assured of receiving the full amount of the costs cap if it succeeded, even if the other party were successful on a number of issues in dispute. In practical terms, the court’s discretion would nearly always be rendered nugatory, and the example given by the SSHD, which envisages costs incurred being less than the cap, is unrealistic.
145. Furthermore, says Mr Mountford, there are strong policy reasons against the SSHD’s approach. First, it would remove the incentive for a respondent to conduct litigation in a reasonable and proportionate manner, including by making appropriate concessions. Secondly, where a costs cap has been ordered or agreed, the applicant for judicial review (who is likely to have limited financial resources to meet any liabilities) would never in practice see the benefit of a reduction in the respondent’s costs, even if successful on part of the case. Thirdly, application of the normal Part 44 machinery, in order to ascertain the full amount of recoverable costs to which a percentage reduction should be applied, would often involve a disproportionate burden on the court and the parties (who may well, as in the present case, have pro bono representation).
146. As for the CPRE case, Mr Mountford submits that, while any cap on costs is in a sense arbitrary, that case specifically concerns environmental claims and the Aarhus cap, and it has no more general application to public interest cases of the present type. If all these principles are borne in mind, says Mr Mountford, it can be seen that the judge was fully entitled to exercise his discretion as he did, and there is no error of law or principle which would entitle this court to interfere.
147. I have not found this an easy question, but on balance I prefer the submissions of Mr Mountford. In my view, he is right to emphasise the underlying public policy which underpins the costs capping regime in the 2015 Act of promoting access to justice in judicial review proceedings which satisfy the test of being “public interest proceedings” within the meaning of section 88. If that test is satisfied, both sides will know from an early stage what their maximum exposure to costs will be, but they will also know that the costs which they actually incur in pursuing or defending the litigation are likely, to a greater or lesser extent, to prove irrecoverable. That is the price which has to be paid, in the wider public interest, so that justice can be obtained in important cases of this character.
148. It does not follow, however, that the court must approach the making of its order for costs at the conclusion of such proceedings as though the cap did not exist, until it is applied at the end of the process to whatever resulting figure is yielded by application of the normal principles set out in Rule 44.2. A mechanical approach of that nature would not in my judgment sit well with the underlying public policy which is engaged, and it may also lead to one or more of the undesirable consequences to which Mr Mountford has drawn attention. In my view, he is right to submit that the relevant considerations of public policy should inform the whole of the exercise of judicial discretion on costs at the conclusion of such cases, and there is no reason of law or principle why the judge should not, in an appropriate case, apply a percentage reduction to the amount of the capped costs rather than the uncapped costs.
149. Naturally, a judge should think carefully before adopting such a course, bearing in mind that the party in question will usually have incurred substantial irrecoverable costs in excess of the cap. But the question arises in a context where both sides have known, from an early stage, that their costs will be capped, and it could be an invitation to lax practice or unreasonable litigation conduct if the successful party were free to proceed in the knowledge that, in practice, it could always count on receiving the full amount of the capped costs even if there were factors which would justify a substantial reduction of its uncapped costs.
150. I also agree with Mr Mountford that the issues under consideration in the CPRE case are too far removed from the present context to provide any helpful guidance.
151. The judge below dealt with the matter very shortly, which is hardly surprising since only £1,000 was at stake. But he was, in my view, entitled to adopt the approach which he did, and more importantly he made no error of law (which is the only ground upon which his decision is challenged).
152. For these reasons, I would dismiss Ground 2 of the cross-appeal.