The Queen (on the application of Friends of the Earth Ltd) v Secretary of State for Transport
| Jurisdiction | England & Wales |
| Judge | Lord Justice Singh,Lord Justice Haddon-Cave |
| Judgment Date | 13 January 2021 |
| Neutral Citation | [2021] EWCA Civ 13 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: C1/2019/1056 |
| Date | 13 January 2021 |
[2021] EWCA Civ 13
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
DIVISIONAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
THE SENIOR PRESIDENT OF TRIBUNALS
Lord Justice Singh
and
Lord Justice Haddon-Cave
Case No: C1/2019/1056
Mr David Wolfe QC, Mr Peter Lockley and Mr Andrew Parkinson (instructed by Leigh Day) for the Appellant
Mr James Strachan QC, Mr David Blundell QC, Mr Andrew Byass and Mr Admas Habteslasie (instructed by The Government Legal Department) for the Respondent
On the basis of written submissions
APPROVED JUDGMENT ON A COSTS ISSUE
The Court:
Introduction
The issue in the present case arises from para. 4 of this Court's order of 27 February 2020, after judgment had been handed down in the substantive appeal:
“The Defendant is to pay the costs of the Claimant in the Divisional Court and in this Court, subject to detailed assessment and a cap of £35,000 in respect of the costs in the Divisional Court, and a cap of £35,000 in respect of the costs in this Court.”
This part of this Court's order is unaffected by the fact that the Supreme Court has allowed the appeal by Heathrow Airport Limited. The Secretary of State did not appeal against this Court's decision and the order made by the Supreme Court on 16 December 2020 does not alter the costs order made by this Court as between Friends of the Earth (“FoE”) and the Secretary of State.
The only question for this Court now is whether the Secretary of State must pay FoE £70,000 without more or whether VAT is payable on top of that sum.
In view of the potential importance of the issue for other cases, we thought it right to give a reasoned judgment, having had the benefit of written submissions from the parties.
The Civil Procedure Rules
The caps imposed by the order were made, in the Divisional Court, pursuant to CPR 45.43(3) and, in this Court, CPR 52.19A(2)(b), on the basis that the claim falls within the Aarhus Convention, as defined in CPR 45.41.
It is important to set out the terms of the relevant provision in the Civil Procedure Rules. CPR 45.43 states as follows:
“(1) Subject to rules 45.42 and 45.45, a claimant or defendant in an Aarhus Convention claim may not be ordered to pay costs exceeding the amounts in paragraph ( 2) or (3) or as varied in accordance with rule 45.44.
(2) For a claimant the amount is–
(a) £5,000 where the claimant is claiming only as an individual and not as, or on behalf of, a business or other legal person;
(b) £10,000 in all other cases.
(3) For a defendant the amount is £35,000.
(4) In an Aarhus Convention claim with multiple claimants or multiple defendants, the amount in paragraphs (2) and (3) (subject to any directions of the court under rule 45.44) apply in relation to each such claimant or defendant individually and may not be exceeded, irrespective of the number of receiving parties.”
Submissions on behalf of Friends of the Earth
On behalf of FoE it is submitted that the sums should be exclusive of VAT for three main reasons:
(1) The purposes of the Aarhus Convention would be better served if the cap on costs under CPR 45.43(3) is exclusive of VAT and would be undermined if it is inclusive of it.
(2) Domestic authority supports the proposition that a cost capping order is exclusive of VAT unless the contrary is stated.
(3) An analogy with (i) the position in Northern Ireland and (ii) other parts of the CPR providing for costs limits and fixed costs indicates that costs limits in Aarhus claims should be regarded as exclusive of VAT.
It is submitted that the terms of the Aarhus Convention support this interpretation of the Civil Procedure Rules. The relevant provision in the CPR was clearly enacted in order to give effect to that Convention. It is well-established that in that context it is appropriate and relevant to refer to an international convention in the interpretation of domestic legislation. It is submitted that, as the recitals to the Convention make clear, access to justice in environmental matters is of paramount importance, so that the public's legitimate interests may be protected. Article 9(4) of the Convention states that parties must provide for review by the courts of environmental decisions in a manner that is “not prohibitively expensive”.
It is submitted that, where the receiving party will be liable to pay VAT on its cost and disbursements, and its costs without VAT exceed the amount that the court has ordered the paying party to pay, then the protection afforded by CPR 45.43 would be eroded if VAT were not payable on top. The successful claimant would be required to bear an additional cost burden because it would not recover the VAT it was required to pay on the costs which it did recover. It is submitted that that result would be contrary to the purposes of the Aarhus Convention.
The main foundation in domestic law for the submission on behalf of FoE is the decision of Mr Rabinder Singh QC (sitting as a Deputy Judge of the High Court, as he then was) in R (Warley) v Wealden District Council [2011] EWHC 2083 (Admin), in particular at paras. 164–165.
In that case, a claim for judicial review of the grant of a planning permission was granted. The challenge had been brought by a local resident. The relevant site lay within an Area of Outstanding Natural Beauty. The main legal issue in the case concerned the Town and Country (Environmental Impact Assessment) (England and Wales) Regulations 1999 (SI 1999/293).
When granting permission to bring the claim for judicial review, on 14 February 2011, Lindblom J (as he then was) had made a Protective Costs Order (“PCO”), which capped the costs which would be recoverable depending on which party was successful in the claim. In the case of the claimant, the cap was £15,000. It was silent on the question whether that included VAT.
After judgment had been given orally by the Deputy Judge, counsel made submissions on various consequential matters, including the question of VAT. The submission for the claimant was that the figure of £15,000 should be read as not including VAT. In the alternative, the claimant submitted that the Deputy Judge should exercise his discretion under CPR Part 3 to vary the order of Lindblom J to make that clear. Reliance was placed on correspondence which had taken place between the parties in the period leading up to the making of the PCO and subsequently, which it was submitted made it clear that the parties had envisaged that the caps for each side would be exclusive of VAT. The submission was made (para. 122) that this was “entirely just and fair, because in that way it would simply be reflecting the position which the defendant said it wished to be in.”
Counsel for the defendant made very brief submissions, to the effect that the order of Lindblom J was clear on its terms and should be interpreted as being a total of the cap imposed, inclusive of VAT: see paras. 128, 130 and 132.
The Deputy Judge then said the following, at paras. 164–165:
“164. First of all, I will exercise my discretion to vary the order of Lindblom J to make it clear that the costs ceiling is to be £15,000 plus VAT. Indeed, in so far as it may be necessary for the basis of reciprocity, on the other side the ceiling of the PCO is £2,500 plus VAT. It seems to me that that is the just order to make in this case, because even if it was not necessarily what Lindblom J had in mind, which it may well have been given the nature of the submissions that were put before him by both sides, but leaving that out of account and taking the decision afresh myself, it seems to me that that is reflective of the justice of the case.
165. There are two essential reasons for that: one is that, as I understand it, the way in which the VAT scheme works in this country is the that the registered VAT payer is simply acting as a sort of tax collector on behalf of the Treasury, and as a conduit through which publicly required taxation is collected. The second is that it could well be, as indeed by coincidence has happened in this case, that while a case is proceeding from start to finish the rate of VAT may be increased or indeed decreased. The loss, it seems to me, in that sort of situation should not in principle fall upon the legal representatives or the lay client concerned. Whatever VAT is in fact due ought in principle, it seems to me, to be recoverable from the losing party when an inter partes costs order is made. So that is what I decide on the VAT question.”
The decision in Warley was recently followed by Dove J in Abbotskerswell Parish Council v Secretary of State for Housing, Communities and Local Government and Others [2020] EWHC 2870 (Admin), where he said, at para. 24:
“In my view, the closest authority to provide guidance in respect of the...
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