On 15 November the Ministry of Justice published its consultation on Lord Justice Jackson's recommendations for the reform of civil litigation funding and costs. See our e-bulletin of 9 February 2010 for a summary of Jackson LJ's recommendations relating to costs in judicial review.

Key points

  • The MOJ appears to support (with some reservations) the proposal that there should generally be qualified one-way costs shifting in judicial review cases, including environmental claims. Under this arrangement, in most cases unsuccessful defendants would continue to be liable for claimants' costs, but unsuccessful claimants would only be liable for defendants' costs if and to the extent that it would be reasonable.
  • The MOJ is seeking views on whether qualified one-way costs shifting should only be available in judicial review cases where the claimant is an individual, or whether it should extend to cases brought by non-commercial organisations in the public interest. It considers (as Jackson LJ did) that the existing "loser pays" rule will continue to apply to commercial claimants.
  • The main point of difference between the MOJ proposals and Lord Justice Jackson's recommendations is that the MOJ is now seeking views on whether there should be a default position, whereby the claimant would start off with a capped potential liability for adverse costs unless or until the court makes a declaration that this default position should not apply. This was an idea which Lord Justice Jackson had previously considered and rejected.

The MOJ proposals

Qualified one-way costs shifting in principle

The rationale behind the proposal to introduce qualified one-way costs shifting for judicial review claims is that this is a category of litigation in which there is typically an unequal relationship between the parties. There is therefore a public policy reason for ensuring that potential claimants are not deterred from bringing meritorious claims by the fear of an adverse costs order. Although claimants have the option of applying for a Protective Costs Order, these are in practice difficult and expensive to obtain and the associated lack of certainty means that they do not represent a satisfactory solution to the problem.

The MOJ recognises, as Lord Justice Jackson did, the risk that removing claimants' potential liability for adverse costs entirely could lead to a flood of frivolous and unmeritorious claims. Although the permission stage provides an opportunity for such claims to be weeded out, the threshold is quite low. In addition, public authorities do incur a certain level of costs up to the decision on permission and an increase in those costs caused by an exponential increase in the number of frivolous claims would clearly be undesirable. The proposed general rule is intended to promote access to justice for reasonable claimants of modest means, whilst preserving the court's discretion to make alternative orders in appropriate cases, taking into account the parties' means and conduct.

Capping a claimant's potential liability at the outset?

One difficulty with the proposed general rule outlined above is that because of the discretion retained by the court, a potential claimant faced with taking the decision on whether or not to proceed would still face uncertainty. The MOJ's proposed solution to this problem in judicial review cases is to have a default position, whereby there is an initial presumption that a claimant will pay some costs, with the level of potential liability being capped at the outset of proceedings. This would mean that when deciding whether or not to bring proceedings, a claimant could be confident that its liability for adverse costs would not exceed a certain level. If the court (of its own volition or in response to an application by one of the parties) considered that this default position should not apply, it would make a declaration to that effect at an early stage.

In his review, Lord Justice Jackson considered the possibility of a default position whereby the claimants' costs liability would be capped at £3000 up to the grant of permission and £5000 to the end of proceedings. However in his final report this option was rejected, primarily on the basis that it would not assist a great deal given the huge range of circumstances of different cases and claimants.

To address this point, the MOJ is seeking views on the possibility of having a range of different caps applicable in different types of judicial review case, the cap in each case being based on a proportion of the general level of defendant costs associated with different types of claim. However the consultation does not provide any detailed proposals as to what those different types of claim might be or the amount of the caps.

Should one way costs shifting be limited to individual claimants?

The MOJ envisages (as Lord Justice Jackson did) that the adoption of the proposed new rule on one-way costs shifting will mean that in practice commercial claimants remain subject to the "loser pays" principle. This is because the rule, as currently proposed, will provide that claimants may have to pay costs to the extent that is reasonable having regard to all the circumstances including the parties' financial resources. In practice where a claimant is a commercial organisation it will be reasonable for it to pay its opponent's costs if the claim fails.

The MOJ is now seeking views on whether, if introduced for judicial review proceedings, qualified one-way costs shifting should apply to non-commercial organisations bringing claims in the public interest (for example, pressure groups). Its preliminary view appears to be that one-way costs shifting should only be available for individual claimants and that access to justice for non-commercial organisations could be achieved through the continued availability of Protective Costs Orders. It notes that work is underway on amendments to the Civil Procedure Rules to codify the current case law on Protective Costs Orders in environmental judicial review cases, with any changes being expected to come into effect by April 2011.

Comment

The issue of costs in judicial review proceedings continues to be a hot topic, particularly in light of the suggestion that the current costs regime as it applies to environmental proceedings is not compliant with the UK's obligations under the Aarhus Convention. It is generally acknowledged that the current position is unsatisfactory, principally because of the large degree of uncertainty faced by parties to judicial review as to their costs liability which in some cases does impede access to justice. Under the MOJ's proposals, this uncertainty would be set to continue for commercial claimants, who would continue to be subject to the "loser pays" rule. Non-commercial organisations would continue to have the option of applying for a Protective Costs Order, with the associated expense and uncertainty. Based on the current proposals, only individual claimants would see a real difference in the costs regime applicable to them.

It will be interesting to see the responses to this consultation and how they are developed, particularly given that the devil is likely to be in the detail, in terms of the proposal to introduce a default cap on claimants' adverse costs depending on the type of claim involved.

An additional issue, which is not expressly addressed in the consultation, is the position of interested third parties in judicial review claims. Such parties already often have difficulty in recovering their costs from an unsuccessful claimant because of the rule in Bolton Metropolitan District Council v Secretary of State for the Environment [1995] 1 WLR 1176 HL whereby the court will not usually order a losing party to pay more than one set of costs. One of the practical effects of the MOJ's proposals is likely to be that where a judicial review claim is brought by an individual, it will be even more unlikely that a successful interested party will recover any costs.

The MOJ's consultation runs until 14 February 2011.