IN THE SUPREME COURT OF THE UNITED KINGDOM
Date: 15 January 2010
MRS REGISTRAR DI MAMBRO AND MASTER O'HARE
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THE QUEEN ON THE APPLICATION OF
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THE ENVIRONMENT AGENCY
THE FIRST SECRETARY OF STATE
SECRETARY OF STATE FOR THE ENVIRONMENT
FOOD AND RURAL AFFAIRS
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CEMEX UK CEMENT LIMITED Intervener
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Mr Wolfe (instructed by Richard Buxton) for the Appellant
Mr Maurici (instructed by Environment Agency Legal Services and the Treasury Solicitors) for the Respondents
Hearing date: 4 December 2009
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Mrs Registrar di Mambro and Master O'Hare:
1. This is our decision on two preliminary issues which arose in the detailed assessment of the bills of costs lodged by the Respondents in respect of the appeal to the House of Lords in this case. The appeal arose out of a Judicial Review, which was initially brought by a Mr David Edwards. He instructed Mr Richard Buxton, whose fees were funded by the Legal Services Commission. The claim was dismissed by Lindsay J ( EWHC 657) and Mr Edwards brought an appeal to the Court of Appeal. On the third and final day of that appeal Mr Edwards withdrew his instructions from Messrs Richard Buxton, and, at that stage, Mrs Pallikaropoulos was added as an additional party in order to continue the appeal. Mrs Pallikaropoulos was not eligible for legal aid, but the Court of Appeal made a costs capping order limiting her exposure to the Respondents' costs to the sum of £2,000.
2. The appeal to the Court of Appeal was dismissed ( EWCA Civ 1138) and Mrs Pallikaropoulos successfully petitioned the House of Lords for leave to appeal to that court. Having obtained leave she then applied for a waiver of the security sum payable on such an appeal, and also applied for a protective costs order. By letter dated 22 January 2007 the Judicial Office indicated to her that, on the basis of the information then before them, the members of the Appeal Committee were not then minded to grant either application.
3. The appeal was heard in January 2008 and lasted three days. On 16 April 2008 the House of Lords dismissed the appeal, thereby affirming the Court of Appeal's decision. The matter was then adjourned for the parties to make written representations on costs. On 18 July 2008, despite her Counsel's written submissions to the contrary, Mrs Pallikaropoulos was ordered to pay the Respondents' costs of the appeal. The First Respondent has now lodged a bill totalling £55,810, and the Second Respondent has lodged a bill totalling £32,290.
4. The preliminary issues which arose in this case concern the proper application of certain articles under the Environment Impact Assessment ("EIA") Directive (85/337/EEC), and the Integrated Pollution Prevention and Control ("IPPC") Directive (96/61/EC) both of which implement provisions which first appeared in the Treaty known as the Aarhus Convention (UNECE Convention on Access to Information, Public Participation in Decision-Making and Access to Justice in Environmental Matters: 25 June 1998).
5. In proceedings to which the EIA Directive applies, Article 10a requires Member States to ensure that members of the public as there defined:
"... have access to a review procedure before a court of law or another independent and impartial body established by law to challenge the substantive or procedural legality of decisions, acts or omissions subject to the participation provisions of this directive."
and it also provides that:
"Any such procedure shall be fair, equitable, timely and not prohibitively expensive."
6. In proceedings to which the IPPC Directive applies, Article 15a makes provision identical to that set out above in respect of Article 10a of the EIA Directive.
7. These EU Directives were considered by the Court of Appeal in Morgan v Hinton Organics (Wessex) Ltd  EWCA Civ 107 from which judgment we would like to set out two quotations. The first concerns points made in a document called the 2008 Sullivan Report, which has influenced our decision in this case. The second quotation summarised the argument heard by the Court of Appeal on these directives. The Court of Appeal did not give a ruling on these arguments since, as paragraph 47(ii) indicates, the directives were not applicable in that case.
"32. The 2008 Sullivan report, to which Carnwath LJ referred in granting permission in the present case, was a report of another informal working group representing a range of interested groups, this time under Sullivan J (Ensuring Access to Environmental Justice in England and Wales - Report of the Working Group on Access to Environmental Justice May 2008). The report expressed views on the application of the Aarhus principles, in the context of domestic procedures relevant to environmental proceedings, including protective costs orders. The present case was mentioned, without further discussion, as apparently the first which has reached this court raising issues under the Convention in relation to a costs order in private law proceedings. The following points from the report are possibly relevant in the present context:
i) That the "not prohibitively expensive" obligation arising under the Convention extends to the full costs of the proceedings, not merely the court fees involved (in this respect differing from the Irish High Court in Sweetman v An Bord Pleanala and the Attorney General  IEHC 153);
ii) That the requirement for procedures not to be prohibitively expensive applies to all proceedings, including applications for injunctive relief, and not merely the overall application for final relief in the proceedings;
iii) That costs, actual or risked, should be regarded as "prohibitively expensive" if they would reasonably prevent an "ordinary" member of the public (that is, "one who is neither very rich nor very poor, and would not be entitled to legal aid") from embarking on the challenge falling within the terms of Aarhus (para 20).
iv) That there should be no general departure from the present "loser pays" principle, provided that the loser's potential liability does not make litigation prohibitively expensive in the way described above (para 38).
47. It may be helpful at this point to draw together some of the threads of the discussion, without attempting definitive conclusions:
i) The requirement of the Convention that costs should not be "prohibitively expensive" should be taken as applying to the total potential liability of claimants, including the threat of adverse costs orders.
ii) Certain EU Directives (not applicable in this case) have incorporated Aarhus principles, and thus given them direct effect in domestic law. In those cases, in the light of the Advocate-General's opinion in the Irish cases, the court's discretion may not be regarded as adequate implementation of the rule against prohibitive costs. Some more specific modification of the rules may need to be considered.
iii) With that possible exception, the rules of the CPR relating to the award of costs remain effective, including the ordinary "loser pays" rule and the principles governing the court's discretion to depart from it. The principles of the Convention are at most a matter to which the court may have regard in exercising its discretion.
iv) This court has not encouraged the development of separate principles for "environmental" cases (whether defined by reference to the Convention or otherwise). In particular the principles governing the grant of Protective Costs Orders apply alike to environmental and other public interest cases. The Corner House statement of those principles must now be regarded as settled as far as this court is concerned, but to be applied "flexibly". Further development or refinement is a matter for legislation or the Rules Committee.
v) The Jackson review provides an opportunity for considering the Aarhus principles in the context of the system for costs as a whole. Modifications of the present rules in the light of that report are likely to be matters for Parliament or the Civil Procedure Rules Committee. Even if we were otherwise attracted by Mr Wolfe's invitation (on behalf of CAJE) to provide guidelines on the operation of the Aarhus convention, this would not be the right time to do so.
vi) Apart from the issues of costs, the Convention requires remedies to be "adequate and effective" and "fair, equitable, timely". The variety and lack of coherence of jurisdictional routes currently available to potential litigants may arguably be seen as additional obstacles in the way of achieving these objectives."
8. Although the EIA Directive and the IPPC Directive were not applicable in Morgan, both of them are applicable in the case now before us. That was accepted by Counsel for the Respondents, who also accepted that the directives were therefore directly binding upon the courts. The skeleton argument for the Appellant set out the following quotation from the judgment of the ECJ in Marks & Spencer v Commissioners for Customs & Excise  ECR I-06325:
"24. In that regard it should be remembered, first that the member state's obligation under a directive is to achieve the result envisaged by the directive and their duty ... to take all appropriate measures whether general or particular, to ensure fulfilment of that obligation, are binding on all the authorities of the member state including, for matters within their jurisdiction, the courts ...
25. ... whenever the provisions of a directive appear, so far as their subject matter is concerned, to be unconditional and sufficiently precise, they may be relied upon before the national courts by individuals against the state where the latter has failed to implement the directive in domestic law ...
26. ... implementation of a directive must be such as to ensure its application in full ..."
9. In preparation for the hearing before us both parties supplied skeleton arguments which were extremely helpful and explicit. From these we were able to identify three preliminary issues, which are as follows:
i) Where an order for costs has been made, whether, as a general rule, the court assessing those costs has any jurisdiction to implement the EU Directives.
ii) If so, whether, in the particular circumstances of this case, we should seek to implement the EU Directives.
iii) If so, whether, on the evidence presented to the court, the amount of costs payable by the Appellant should be moderated or even excluded.
10. At the hearing we decided the first two issues in favour of the Appellant, but thought it right not to hear argument as to the third issue until we had given written reasons for our decision, sight of which by the parties might enable them to agree the third issue subject of course to any appeal against our ruling on the first two issues. We also ruled that the time for appealing our decision on the first two issues should not expire until 28 days after the delivery of our written decision.
Issue 1 : Jurisdiction of Costs Officers Generally
11. On this point Mr Maurici, Counsel for the Respondents, argued that application of EU Directives falls wholly outside the jurisdiction of Costs Officers. He placed reliance upon the Supreme Court Practice Direction 13 para 16.1, which states as follows:
"The Costs Officers have discretion as to the amount to allow. In exercising this discretion they bear in mind the terms "unreasonably incurred" and "unreasonable in amount" in CPR 44.4 ... and in particular consider to what extent an item assisted the court in determining the appeal ..."
12. From this he argued that Costs Officers are limited to assessing the reasonableness of the costs awarded by another court. It is for the court awarding costs to decide how and in what way to implement the European Directives. It is not a proper function of the assessing court. Counsel also placed reliance upon the Court of Appeal decision in Lahey v Pirelli Tyres Ltd  EWCA Civ 91 which held that, where a court awards costs, the Costs Judges' duty is to assess 100% of the reasonableness of the costs awarded. The Costs Judge has no power to vary the award of costs made so as to allow less than 100% of the reasonable costs. Counsel drew our attention to paragraphs 20 and 21 of the judgment in that case, which we now set out:
"20. There is a real distinction between (a) carrying out an assessment and deciding as part of the assessment to reduce the bill by a percentage and (b) deciding in advance of the assessment that the receiving party will only receive a percentage of the assessed costs. The figure that results from (a) represents 100% of the assessed costs. In deciding as part of the assessment to reduce the bill by a percentage, the costs judge is giving effect to an order that the successful party is entitled to his costs, to be assessed if not agreed. The figure that results from (b) represents less than 100% of the assessed costs. In deciding in advance of the assessment that the receiving party will only receive a percentage of the assessed costs, the costs judge is not giving effect to an order that the successful party is entitled to his costs, to be assessed if not agreed.
21. Rule 44.3 gives a judge jurisdiction to make a type (b) order. There is no doubt that at the end of a hearing, the judge may make an order of the kind that the defendant sought from the district judge in the present case. In such a case, the judge is not purporting to vary an order if he disallows the successful party a proportion of his costs. He is making the order. He does not have the advantage accorded to the costs judge of having a detailed bill of costs. He cannot, therefore, carry out a detailed assessment. But he usually has the benefit, denied to the costs judge, of knowing a good deal about the case, and is often in a good position to form a view about the reasonableness of the parties' conduct. When carrying out a detailed assessment, the costs judge is not making an order for costs. His position is quite different from that of a judge exercising the jurisdiction given by rule 44.3."
13. We take the view that compliance with the EU Directives is a relevant factor for us to take into account on the detailed assessment of costs in cases to which the Directives apply unless, of course, the court awarding costs has already taken them into account.
14. We accept the submission of Mr Wolfe, Counsel for the Appellant, that the task naturally falls within the definition of reasonableness. Reasonableness can mean different things in different contexts. We draw an analogy here with what happens when costs are awarded against a party who was legally aided for some but not all of the proceedings covered by the order for costs. Section 11 of the Access to Justice Act 1999 provides that costs ordered against a legally aided party:
"... shall not exceed the amount (if any) which is a reasonable one for him to pay having regard to all the circumstances including -
(a) the financial resources of all the parties to the proceedings, and
(b) their conduct in connection with the dispute to which the proceedings relate ..."
15. The Legal Aid Regulations now leave the task of making that assessment to the Costs Officers of the courts in which those costs were awarded. In this court paragraph 4 of Practice Direction 13 requires the Costs Officers to assess the sum reasonable for a legally aided party to pay as part of the detailed assessment proceedings. Since, in most cases, the reasonable sum is nil, the assessments of reasonableness vary substantially between periods when a losing litigant was legally aided and when he was not.
16. In our judgment the factors we ought to take into account in implementing the EU Directives are not wholly dissimilar from the factors we have to take into account in applying section 11 of the Access to Justice Act when it applies. It seems to us that the implementation of any relevant EU Directive is more naturally and conveniently dealt with at the detailed assessment stage rather than at the stage of awarding costs, unless of course, the court awarding costs had already made a decision on these questions.
17. We take the view that in deciding what costs it is reasonable for the Respondents to obtain we will disallow any costs which we consider to be prohibitively expensive. Therefore, in making any such disallowance, we will be acting in compliance with, and not defiance of, the principles stated in Lahey.
18. The passages from Morgan which we have quoted indicate that the EU Directives here in question have not yet been implemented by Parliament or by the Civil Procedure Rule Committee. In Morgan the Court of Appeal expressed the hope that the current Jackson Review may consider the Aarhus principles and stated that it was not appropriate to give guidance in the context of Morgan. In the absence of authority we are presently minded to adopt the test of "prohibitively expensive" which was propounded in the 2008 Sullivan Report:
"... costs, actual or risked, should be regarded as "prohibitively expensive" if they would reasonably prevent an "ordinary" member of the public (that is, "one who is neither very rich nor very poor, and would not be entitled to legal aid") from embarking on the challenge falling within the terms of Aarhus."
19. That seems to us to require us to start by making an objective assessment of what costs are reasonable costs. However, any allowance or disallowance of costs we make must be made in the light of all the circumstances. We presently take the view that we should also have regard to the following:
i) The financial resources of both parties.
ii) Their conduct in connection with the appeal.
iii) The fact that the threat of an adverse costs order did not in fact prohibit the appeal.
iv) The fact that a request to waive security money was refused and security was in fact provided.
v) The amount raised and paid for the Appellant's own costs.
Issue 2 : Issue Estoppel
20. For the Respondents, Mr Maurici submitted that the Appellants have raised Aarhus principles on two occasions in the House of Lords and those submissions were rejected on both occasions. The first occasion was in respect of the Appellant's applications for waiver of security monies and for a protective costs order. On 22 March 2007 the Appeal Committee made the following decision:
"Their Lordships do not consider it appropriate to make any order on the application made to them for a dispensation in respect of the requirement to put up security and for a protective costs order.
Their Lordships have considered the criteria in R (Cornerhouse Research) v Secretary of State for Trade & Industry  EWCA Civ 192 and the submissions made with regard to their application and potential relaxation.
Their Lordships proceed on the basis that the appeal raises an issue or issues of general importance and they are prepared to assume that absence of private interest may not always preclude the making of a special costs order in such a case. But their Lordships do not accept that information about the Applicant's means, about the identity and means of any who she represents and about the position generally in the absence of any special order, are or should be regarded as immaterial: further, they do not consider that the suggested protective orders regarding costs appear proportionate on the information which is before them and in the light of the nature of the issues involved; and they do not consider that any case has been made for saying that the proposed appeal would be "prohibitively expensive" or that Directive 2003/35/EC would be breached without a special order."
21. The second occasion upon which the Aarhus principles were considered in this case preceded the making of the costs order dated 18 July 2008. In the written submissions on costs lodged on behalf of the Appellant, much greater information about the Appellant's financial resources was given than had been given on the previous occasion. In the light of that information it was submitted that there should be no order for costs. In the alternative, the following submissions were made:
"In the event of their Lordships, notwithstanding the above, deciding to award costs in favour of the Respondents, they are requested to consider:
- Limiting them to the costs of one Respondent ...
- Limiting the costs to 70% of the Respondent's costs. At the High Court and Court of Appeal stages only 70% of costs were awarded ...
- Reducing the burden on the Appellant by ordering any costs in excess of the £25,000 security monies already lodged with the House of Lords to be payable by instalments of at most £5,000 per annum and without interest (other than in the event of late payment).
- In any event staying the effect of the order until the issues relating to "prohibitive expense" and Directive 2003/35/EC are resolved between the Commission and the UK Authorities."
22. In response to those submissions the House made a standard order for costs:
"That the Appellant do pay or cause to be paid to the Respondents their costs of the appeal to this House, the amount of such costs to be certified by the Clerk of the Parliaments if not agreed between the parties."
23. We neither have nor assert any right to set aside or vary any decision already made by the Law Lords or by the Justices in this case. If, in advance of the hearing before us, the Law Lords or the Justices had made any decision on the implementation of the EU Directives in this case we would of course act in compliance with that decision. However, we take the view that the pronouncements which the Law Lords have made in this case do not prevent us from applying the Aarhus principles in the course of our assessment.
24. The decision made in March 2007 was made without a hearing and was made on the basis of the "information about the Appellant's means, about the identity and means of any who she represents and about the position generally". This being so the order states that their Lordships did "not consider that any case had been made for saying that the proposed appeal would be "prohibitively expensive"". In the circumstances, we do not think that that was a final ruling upon these principles in this case. On the contrary, we think the wording their Lordships there adopted invited the Appellant to provide the court with the information it would need to decide such principles.
25. In our view no part of the decision made in March 2007 rules out our discretion to decide that the reasonable costs in this case should be nil or should be no more than a nominal amount. Whilst it is difficult to imagine circumstances in which it would be appropriate for us to allow less than £25,000 if the Respondents' costs would otherwise reasonably exceed that sum, it is not in theory impossible that we should do so. In requiring the Appellant to raise such a sum as security monies their Lordships could not know, for example, what terms and conditions the Appellant might be required to agree to in order to borrow such a sum. It may be appropriate for us to take any such terms and conditions into account when assessing whether the costs of this appeal would have been prohibitively expensive.
26. At the hearing before us we made reference to a Court of Appeal decision on security for costs raised for an appeal: R v The Common Professional Examination Board, ex p. Mealing-McLeod  EWCA Civ 138. In that case the Court of Appeal overturned an earlier order which permitted monies paid as security for an appeal to be used in part satisfaction of costs orders made in earlier proceedings. The Court of Appeal made its decision on the basis of the terms of the loan agreement by which the security monies had been raised: they had been raised solely for the purpose of providing security and not for any other purpose. In fact, on examination of the decision in that case, we now appreciate that it is not directly relevant to the issues which arise in this case.
27. In our view, the costs order dated 18 July 2008 gives the Respondents stronger ground for saying that the Appellant has raised the Aarhus principles already in this case and has lost them. However, on this point also, we find in favour of the Appellant. The order dated 18 July 2008 does not expressly deal with the Aarhus principles. As such, it is consistent with our finding that these matters are better dealt with at the stage at which costs are assessed rather than at the stage at which costs are awarded. The order expressly leaves the amount of costs to be determined. In our view we should determine that amount taking into account the Aarhus principles.
28. In a draft of this judgment which was sent to the parties some time ago we foresaw the possibility that the parties may agree what sums should reasonably be allowed as costs in this case and may make such agreement subject to the decision upon any appeal the Respondents may bring against our rulings on Issues 1 and 2.
Alternatively, the parties may agree to defer any decision as to the amount of reasonable costs pending a decision on such an appeal. The draft stated that the parties are neither required nor expected to attend the hearing at which we shall formally deliver this judgment, although they may do so if they wish.
29. Accordingly, we will now consider any submissions any party wishes to make. If appropriate, we will adjourn this matter to a further hearing and, perhaps, fix a date for that hearing.