The issue of protective expenses orders (PEOs) and the recent moves that have been made by both the Courts and the Scottish Government to provide more clarity in this area have been flagged by us in previous articles (Protective costs orders and judicial reviews – the Uprichard effect) and Protective expenses orders - a Scottish Government Consultation).  PEOs are orders of the Court made in certain circumstances to limit the financial liability of a party who petitions the court to challenge a decision of a public authority in the public interest.  Earlier this month, the Scottish Government published the findings of, and its response to, its consultation on PEOs. 

A Reminder of the Consultation Proposals

The key elements of the Scottish Government’s proposals were:

  • A PEO will only be available in cases of common law or statutory judicial review of decisions made by public authorities under the Public Participation Directive.  This effectively would limit the availability of a PEO principally to those large scale planning matters where an environmental impact assessment was required;
  • The public authority will not be able to require the challenger to disclose their financial circumstances; and
  • A PEO will limit the liability of a challenger to pay the public authority’s legal expenses to a maximum of £5,000 should the challenge fail.  A PEO will also limit the liability of the public authority to pay the challenger’s costs to a maximum of £30,000 should the challenge be successful.

Comments were received on these key elements and more, the results of which have now been published.

The Results and Summary of the Scottish Government Proposals

Having reviewed the responses to the consultation, The Scottish Government has now settled on which proposals to take forward.  The key elements noted above remain, although the rules around the level of cap have been expanded somewhat.  In addition to these key elements, the most eye-catching proposals are:

  • That the PEO rules will apply where the challenger is either an individual or a non-governmental organisation promoting environmental protection (e.g. RSPB).
  • That the Court should have discretion to decline to make a PEO if it considers that the challenge is without merit and has no reasonable prospect of success.
  • Although the PEO proposals outlined in the Scottish Government’s consultation apply only to challenges to large scale environmental projects, this does not preclude PEOs being granted by the Court in other cases.

In respect of the level of cap, as noted above, where the challenger is an individual or an environmental NGO, the PEO will limit their liability to pay the public authority’s costs to £5,000 should the public authority be successful.  The liability of the public authority to pay a successful challenger’s costs will also be limited, up to £30,000.  New, however, is that the Scottish Government considers that challengers should be able to apply on cause shown for the £5,000 cap to be lowered and the £30,000 cross-cap to be raised.

What are the implications of these proposals?

"Standing"

It is worth noting that these limitations on costs come at the same time as the Courts are expanding the category of persons who may bring challenges against public authorities.  In Axa General Insurance and others v The Lord Advocate and others ([2011] UKSC 46) the class of person that can competently bring an action of judicial review was broadened to those with “standing” as opposed to century old doctrine of “title and interest”.  Lord Hope indicated that those who are “directly affected” by a decision are the persons that he considers most likely to have standing.  With these changes to judicial review Lords Hope and Reed, who gave the leading judgements in Axa, explicitly leave open the door for e.g. single issue pressure groups to raise court challenges.  The recent Supreme Court case of Walton v Scottish Ministers ([2012] UKSC 44), which related to the Aberdeen Western Peripheral Route, appears to continue this theme of making judicial review more accessible (Lords Hope and Reed again giving the leading judgements).

Leave to appeal

By giving to the Court discretion to decline to make a PEO where a challenge is without merit and has no reasonable prospect of success, the Scottish Government is almost introducing the principle of “leave to appeal” into judicial review proceedings in Scotland.  Although only applicable in cases to which the PEO regime applies, this is certainly a bold step in Scottish court proceedings.  No such rule currently exists.

The introduction of this rule should act as a counter balance to those who will inevitably be encouraged to raise challenges to major projects because their cost exposure is limited.  Clearly, it will not impact on well financed objectors for whom legal expense is no object!

Level of expenses

The maximum expenses of a successful public authority for which a challenger will be liable under the proposed regime is £5,000.  This level of expense may initially seem quite high, but looking pragmatically at the sorts of projects which are likely to be the subject of this PEO regime, we consider that £5,000 is actually quite reasonable.  If one considers Mr Walton’s case, for example, it was acknowledged by the Court that Road Sense had fundraised in the order of £75,000 for the legal expenses of a court challenge.  Penelope Uprichard, another example of an application for a PEO, with her challenge to the Fife Structure Plan, had fundraised around £30,000.  PEOs were granted in both of these cases (although only for the Supreme Court element of Miss Uprichard’s challenge).  In both examples the “fighting funds” were well in excess of £5,000.

A final thought (and perhaps word of warning) on the levels of expenses is that, although the expenses of an unsuccessful challenger or public authority are capped at £5,000 and £30,000 respectively, the proposed caps do not mean that the costs of the challenge will not exceed these levels.  Legal fees for a successful petitioner may exceed £30,000, for example, and it will be at the Court’s discretion whether or not to raise the £30,000 cap which the Scottish Government now proposes.

An environmental court for the future?

It is certainly clear that the Scottish Government is taking very seriously the potential for large scale environmental projects to be challenged.  This is in part out of necessity to meet its European law responsibilities.  But, all too often, large scale environmental projects which have received a considerable degree public scrutiny are delayed by lengthy periods of time due to court challenges which ultimately are shown to have little foundation.  The proposals which have been brought forward by the Scottish Government appear likely to encourage more environmental litigation whilst, at the same time, weeding out at an early stage the number of weak challenges resulting from cost protection which end up at a full hearing.

One key issue which this Consultation does not address, however, is the speed with which the Courts handle such challenges.  The Scottish Government suggests as a next step an options paper looking at the establishment of an environmental court as part of wider work to implement civil courts reform.  Although in certain jurisdictions such a specialist court has worked well, it remains to be seen whether such an approach would be equally as successful in Scotland.  A dedicated environmental court would certainly provide a focus for environmental challenges, meaning specialist judges hearing cases on subject matter with which they are familiar, and hopefully ensuring proactive case management.  It will be important for everyone interested in environmental litigation to engage in that consultation when it comes to ensure that the increased access to justice which the PEO system offers operates within a system that meets the expectations of all of those likely to be involved.

To read the Scottish Government's reaction to the consultation responses click here.