HIGH COURT PLANNING CHALLENGES COSTS: AARHUS, THE SULLIVAN REPORT, BUGLIFE AND HINTON ORGANICS. Nathalie Lieven QC

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1 HIGH COURT PLANNING CHALLENGES COSTS: AARHUS, THE SULLIVAN REPORT, BUGLIFE AND HINTON ORGANICS Nathalie Lieven QC

2 (A) INTRODUCTION 1. The purpose of this paper is to assess recent developments in the application of costs rules in High Court planning challenges. In particular, I examine the extent to which the Aarhus Convention has led to a new costs regime in cases that can be considered environmental litigation. The ratification of the Aarhus Convention by the UK introduced an obligation in international law to ensure genuine access to justice in matters relating to the environment. Despite the fact that the Convention is not binding in domestic law (subject to the exceptions referred to below), it is clear that it has had a significant impact on the application of the costs regime in environmental cases, most notably in the rules relating to Protective Costs Orders ( PCOs ). This paper assesses that impact and makes an attempt at summarising where we are in relation to PCOs. 2. If you represent claimants, the increasing availability of Protective Costs Orders may be welcome. But if you represent developers, you may be familiar with the serious consequences of this new regime to interested parties. 3. This paper concludes with a brief outline of the rules relating to Conditional Fee Agreements ( CFA s ) (B) THE AARHUS CONVENTION 4. The Aarhus Convention came into force in October 2001 and was ratified by the UK in February The European Union is also a signatory in its own right. 5. The Convention contains three broad themes or 'pillars': i. access to environmental information; ii. public participation in environmental decision-making; and iii. access to justice in environmental matters 6. It is the third pillar that is relevant to the costs regime in the courts of England and Wales. It gives rights to members of the public, including environmental organisations, to challenge the legality of decisions by public authorities to grant consent for a wide range of activities as well as any other acts or omissions that are contrary to the provisions of national laws relating to the environment.

3 7. In relation to costs, Article 3(8) of the Convention provides that there is no objection per se to national courts awarding reasonable costs in judicial proceedings. However, Article 9(4) provides that the procedures for rights of access to justice in environmental matters shall provide adequate and effective remedies, including injunctive relief as appropriate, and be fair, equitable, timely, and not prohibitively expensive. 8. The reference to prohibitive expense in Article 9(4) is a reference to all aspects of legal costs including potential exposure to costs awards (Case C 427/07 Commission v Ireland 17 July 2009; see also para.93 of the opinion of AG Kokott in the same case). As such, it does not apply narrowly to merely limit the amount of court fees, as originally argued by the UK government. In essence, the Convention requires that there must be genuine access to justice in environmental matters and that the cost of proceedings as a whole must not act as a de facto barrier to bringing a claim. Legal status 9. The legal status of the Aarhus Convention has recently been addressed by the Court of Appeal in Morgan v Hinton Organics [2009] EWCA Civ 107. Carnwath LJ explained (at para. 22) that: *f+or the purposes of domestic law, the convention has the status of an international treaty, not directly incorporated. Thus its provisions cannot be directly applied by domestic courts, but may be taken into account in resolving ambiguities in legislation intended to give it effect. 10. At para.42 of that judgment, he continued: The UK may be vulnerable to action by the Commission to enforce the Community s own obligations as a party to the treaty. However, from the point of view of a domestic judge, it seems to us... that the principles of the Convention are at the most something to be taken into account in resolving ambiguities or exercising discretions (along with other discretionary factors including fairness to the defendant 11. As such, the legal status of the Convention may be summarised as follows: (1) In international law, it is binding as an international treaty and enforceable by the Compliance Committee set up under the Convention to investigate complaints of non-compliance.

4 (2) In European law, as the European Union is a signatory to the Convention, its provisions may be enforceable by the European Commission against Member States through enforcement action. (3) In domestic law, the Convention cannot be directly enforced as it has not been incorporated in domestic law, but may be taken into account by judges when resolving ambiguities or exercising discretion. 12. One further factor should be noted. The provisions of Article 9 of the Convention have been inserted into two key EC environmental directives. Article 10A of the 1985 EC Directive on Environmental Impact Assessment ( EIA ) provides that Member States must ensure that members of the public have access to a review procedure before a court of law or other independent body to challenge the substantive or procedural decisions, acts or omissions subject to the public participation provisions of the Directive, and that any such procedure shall be fair, equitable, timely, and not prohibitively expensive. Directive 96/61/EC on Integrated Pollution Prevention and Control ( IPPC ), which provides for a consent system for a wide range of industrial activities, is similarly amended with a new Article 15a, which also provides that procedures for legal challenges must be fair, equitable, timely, and not prohibitively expensive. 13. These Directives have direct effect in UK law. As such, insofar as the Convention is incorporated in these Directives, it is (indirectly) enforceable in domestic law. This may have significant consequences to applications for protective costs orders where the matter in dispute relates to an issue falling within the scope of one of these Directives (see discussion at para.50 below). (C) THE PROBLEM OF NON-COMPLIANCE IN THE PLANNING FIELD 14. As planning decisions necessarily impact on the environment, High Court planning challenges are often brought by individuals, NGOs or community organisations with the stated purpose of protecting the environment. Few would dispute the importance of the right to bring such claims: as the environment has no independent rights in domestic law, environmental protection secured by regulation must be enforced in the courts by the regulators or by interested individuals.

5 15. However, the cost of civil litigation (especially in the planning field) can be significant. In addition to the costs of funding a claim, claimants face the risk of paying the defendant s and interested party s costs if they lose. The ordinary rule in judicial review in England & Wales, as in other civil proceedings, is that the loser pays the costs of the winning party, but the Court retains a discretion (see CPR r. 44.3). In planning matters, the developer is often separately represented as an interested party. While the normal rule is that a losing claimant will not be required to pay the costs of the interested party, these costs may be payable where the interested party has been required to provide submissions or evidence on a separate issue not covered (or not effectively covered) by the defendant As legal aid is available to only the very poor, many individuals, community organisations or NGOs find it difficult to raise funds to launch and pursue a judicial review of a planning decision. Even if funding can be secured to cover the claimant s own legal costs, the risk of a costs order against them on losing a claim acts as a further barrier to those considering bringing a judicial review. 17. In R (Burkett) v LB Hammersmith and Fulham [2004] EWCA Civ 1342, the Court of Appeal acknowledged the chilling effect of the normal costs follow the event rule, noting that: an unprotected claimant in such a case, if unsuccessful in a public interest challenge, may have to pay very heavy legal costs to the successful defendant, and... this may be a potent factor in deterring litigation directed towards protecting the environment from harm. 18. This case was the first in which a UK Court considered the application of the Aarhus Convention to the law and procedure in England in Wales. Carnwath LJ considered that the costs of that case raised very serious questions of whether the legal system in England and Wales was compliant with the Convention. Since then, a number of studies have concluded that the UK is not compliant with the requirement in the Aarhus Convention that access to environmental justice not be prohibitively expensive. Most significantly a comparative 1 Bolton Metropolitan District Council v. Secretary of State for the Environment [1995] 1 WLR 1176, where the House of Lords noted: "Although costs are in the court's discretion, in planning appeals, where the Secretary of State succeeds in defending his decision he will normally be entitled to the whole of his costs and should not be required to share them by apportionment. The developer will not normally be entitled to his costs unless he demonstrates a separate issue, not covered by the Secretary of State, on which he was entitled to be heard, or has an interest requiring separate representation. A second set of costs is more likely to be awarded at first instance than in the Court of Appeal or the House of Lords, and an award of a third set of costs will rarely be justified.

6 study of EC Member States and access to environmental justice, published in 2007, concluded that the UK was ranked in the bottom five EU countries for compliance with Aarhus 2. The report noted in respect of the UK that: the main obstacle to access to justice for members of the public or NGOs is the issue of costs in judicial review cases. The problem is one of exposure and of uncertainty. At the beginning of a case it is impossible for the member of the public or the NGO to know how much money they will have to find if they lose. The possibility of having to pay a large (and uncertain) bill means that people are unwilling to risk bringing legal proceedings to hold a public body to account for breaking the law. Studies have indicated that a substantial number of potential applicants for judicial review in environmental matters have not proceeded because of the risk of costs involved In conclusion, it can be said that the potential costs of bringing an application for judicial review to challenge the acts or omissions of public authorities is a significant obstacle to access to justice in the United Kingdom. Arguments for compliance 19. In its Aarhus Convention Implementation Report for DEFRA rely on three features of the UK s judicial process to assert compliance with paragraph 9(4) of the Convention, namely: (1) The availability of legal aid and amended guidance on legal aid in public interest cases; (2) The existence of judicial discretion as to whether to award costs (and at what level); (3) Recent legal developments in relation to Protective Costs Orders. 20. Interestingly, DEFRA makes no mention of the use of Conditional Fee Agreements as a factor contributing to compliance with Aarhus. Perhaps this is recognition of the fact that the current PCO regime is, to some extent, in conflict with CFAs (see para.54 below). 21. It can be seriously doubted that the three features relied on by DEFRA do, in fact, cumulatively achieve compliance with Aarhus. Although the LSC has issued revised guidance in respect of funding public interest cases, it remains the case that such funding will only (generally) be available to the very poor, and will not be available to charities or NGOs. 2 Measures on Access to Justice in Environmental Matters (Article 9(3); European Commission ( 3

7 22. Further, it seems clear from the recent judgment of the ECJ in Case C 427/07 Commission v Ireland that the existence of judicial discretion as to whether to award costs does not amount to compliance with the Convention. In those proceedings it was alleged, inter alia, that Ireland had failed to transpose requirements in Article 10a of the EIA Directive and Article 15a of the IPPC Directive by ensuring that procedures for access to justice in respect of decisions made under those Directives were not prohibitively expensive. In response to the argument that judicial discretion as to whether to award costs achieved such compliance, the ECJ noted: 93 Although it is common ground that the Irish courts may decline to order an unsuccessful party to pay the costs and can, in addition, order expenditure incurred by the unsuccessful party to be borne by the other party, that is merely a discretionary practice on the part of the courts. 94 That mere practice which cannot, by definition, be certain, in the light of the requirements laid down by the settled case-law of the Court, cannot be regarded as valid implementation of the obligations arising from *the EIA and IPPC Directives As such, the UK is left, essentially, with only one feature that may secure compliance with the Convention, namely, the availability of Protective Costs Orders. D. PROTECTIVE COSTS ORDERS What are they? 24. A Protective Costs Order is an order of the court which specifies or constrains at an early stage of proceedings what the costs outcome of the case will be 4. There is currently no statutory guidance on PCOs, nor any mention of them in the CPR. Instead the mechanism has evolved through caselaw. Corner House 25. The recent history of PCOs in the public law context begins with R (Corner House Research) v. Secretary of State for Trade and Industry [2005] EWCA Civ 192; [2005] 1 WLR In Corner House the Court of Appeal indicated that a PCO should be granted only in exceptional circumstances (see para. 72) but that a PCO may be made at any stage of the 4 For an in-depth discussion of PCOs and their workings, see the Liberty Report chaired by Maurice Kay LJ, Litigating the Public Interest ( the Kay Report ) at pp ;

8 proceedings, on such conditions as the court thinks fit if the Court is satisfied that (see para. 74): i. the issues raised are of general public importance; ii. the public interest requires that those issues should be resolved; iii. the applicant has no private interest in the outcome of the case; iv. having regard to the financial resources of the applicant and the respondent(s) and to the amount of costs that are likely to be involved, it is fair and just to make the order; and v. if the order is not made the applicant will probably discontinue the proceedings and will be acting reasonably in so doing. 27. The Court of Appeal also indicated: i. if those acting for the applicant are doing so pro bono this will be likely to enhance the merits of the application for a PCO (para. 74); ii. that there was a quid pro quo to obtaining a PCO and that was that it was likely that a cost capping order for the applicants' costs will be required (para. 76) The increasing flexibility of the rules 28. Immediately following the decision in Corner House the most controversial and problematic criterion proved to be the apparent requirement for no private interest in the outcome of the proceedings. In the planning field, it is clear that most potential claimants would have some private interest in the matter they were seeking to review. As such, the Corner House criteria would preclude those claimants from securing a PCO in advance of proceedings. 29. However, since Corner House, the courts have essentially rejected the no private interest requirement 5. In R (England) v LB of Tower Hamlets [2006] EWCA Civ 1742, a planning case, the Court of Appeal in a permission judgment endorsed the view that the private interest test was not decisive. Carnwath LJ said that in any event different considerations may apply to a case where "interest is not a private law interest but simply one he shares with the 5 See the criticism of this test in the Kay Report (footnote 4 above) and the increasing judicial flexibility in respect of it in R (Goodson) v Bedfordshire & Luton Coroner [2006] C.P. Rep. 6; Wilkinson v Kitzinger [2006] EWHC 835 (Fam); R (Compton) v Wiltshire Primary Care Trust [2008] EWCA Civ 749 (see below)

9 other members of his group in the protection of the environment and referred to Aarhus Convention. The Sullivan Report 30. In May 2008, the report of the Working Group on Access to Environmental Justice Ensuring access to environmental justice in England and Wales was published under the Chairmanship of Sullivan J (as he then was). Although the Working Group had no official status, the report was widely read and considered. 31. Sullivan J. as the Report s lead author summed up the UK position in his foreword: For the ordinary citizen, neither wealthy nor impecunious, there can be no doubt that the Court s procedures are prohibitively expensive. If the problems identified in this report are not addressed it will not be long before the UK is taken to task for failing to live up to its obligations under the Aarhus Convention. 32. The Report concluded that Protective Costs Orders were the most important mechanism for ensuring compliance with Aarhus and meeting requirements on access to justice. It suggested that not only should the no private interest test be inapplicable (as being particularly ill-suited to environmental cases) but also in cases falling within the scope of Aarhus the requirement to show that the issues raised are of general public importance should be disapplied. Rather it is to be assumed that upholding environmental law is always of general public importance. 33. The Sullivan Report suggested the only criteria for a PCO in an environmental judicial review were: i. the case is one that falls within Aarhus; ii. permission is granted; iii. the costs and risk of exposure to costs would be prohibitively expensive to the claimant. 34. In other words if the individual Aarhus claimant, acting reasonably in the circumstances, would be prohibited by the level of costs or cost risks from bringing the case, then the court must make some form of PCO. Compton: increasing flexibility, but no separate rules for environmental cases

10 35. The Sullivan Report, and the application of the Corner House criteria to cases concerning environmental matters have been considered in a number of recent cases. 36. R (Compton) v Wiltshire Primary Care Trust [2008] EWCA Civ 749 was not a planning case, nor a case concerning the environment, but it was the first case in which the proposals set out in the Sullivan Report were considered by a court. Waller LJ, giving the leading judgment of the Court, said that the criteria for granting a PCO as set out in Corner House were not to be read as statutory provisions, nor to be read in an over-restrictive way. He considered that: i. the "no private interest" condition might be dispensed with if the other conditions were met; ii. "exceptionality" was not an additional criterion to be met over and above the criteria in para. 74 of Corner House, but a prediction about the likely effect of the application of those criteria; and iii. "general" public importance did not mean it must be of interest to the public nationally, but a local group might be so small that issues in which they alone were interested might not be issues of general public importance. 37. The Court also addressed the observations made in the Sullivan Report. Having set out the main concerns identified by that report, Waller LJ noted: In *the Corner House case+, the Court of Appeal accepted that PCOs should only be granted in exceptional cases. But it now seems this exceptionality test is being applied so as to set too high a threshold for deciding (for example) general public importance, thus overly restricting the availability of PCOs in environmental cases. For example, in a recent case, the implicit approach taken in the High Court and confirmed in the Court of Appeal was that there really should only be a handful of PCO cases in total every year. Such an approach if generally adopted would ensure that the PCO jurisdiction made no significant contribution to remedying the access to justice deficit it was intended to deal with, including in the environmental field. Unless the exceptionality criterion is eased, PCOs cannot be used in any significant way to assist compliance with *the Aarhus Convention However, the Court considered that it would be less than satisfactory to carve out different rules where environmental issues are involved as compared with other serious issues and insisted that the rules relating to PCOs were of general application. Buglife: reciprocal cost caps

11 39. In Corner House, the court anticipated that reciprocal costs caps would ordinarily be applied to limit the costs that a winning claimant could recover from a defendant as a quid pro quo for the grant of a PCO. In R (Buglife) v Thurrock Thames Gateway Development Corporation [2008] EWCA Civ 1209, the Court of Appeal reconsidered whether this approach was correct. 40. In this case, a charity had applied for judicial review of the decision of the local authority to grant planning permission for the development of a site which contained endangered invertebrate species. The charity, Buglife, applied for a PCO capping its liability in costs in a dispute with the respondent local planning authority. Sullivan J. granted a PCO with an upper limit of 10,000 on the total amount of costs recoverable from Buglife, and set a reciprocal costs cap at the same limit. Buglife appealed against the failure to give reasons for limiting the amount payable to it if it won. 41. The Court of Appeal held that following Corner House and Compton that the beneficiary of a PCO should generally have the recoverability of its costs limited to a reasonably modest amount and should also expect the costs to be capped, but the Court rejected the notion that generally the defendant s liability for costs should be capped in the same amount as the claimant. It would depend on the circumstances. The Court of Appeal also affirmed that the fact that a claimant s lawyers were acting on a CFA with the possibility of a success fee was relevant to the setting of any caps on liability and that the uplift would thus have to be disclosed. The Court indicated that not all the uplift might be allowed to be recovered if a PCO were sought. 42. The PCO in Buglife was granted despite the parties not acting on a pro bono basis. Indeed this factor emphasised in Corner House seems to have lost importance. There are other examples of PCOs being granted where the claimants lawyers were not acting pro bono. Indeed in Corner House itself the claimant s lawyers were on a CFA. Morgan v Hinton Organics: application of Aarhus to private law disputes 43. Morgan v Hinton Organics (Wessex) Ltd [2009] EWCA Civ 107 was not a planning challenge, but an action in private law nuisance. An interim order for costs was made by the High Court against the claimants following the discharge of an interim injunction and the claimants

12 appealed in respect of those costs. As part of that appeal, the claimants raised the issue of compliance with Aarhus. 44. Despite the fact that this was a private law matter in which no application was made for a PCO, Carnwath LJ undertook a details analysis of the Aarhus Convention, including the caselaw on PCOs. 45. In essence, Carnwath LJ endorsed the flexible approach adopted by the Court of Appeal in Compton and Buglife and considered that, in principle, there would be no barrier to a PCO in a private law dispute. He also confirmed that the Court of Appeal did not endorse the development of separate principles for environmental cases. He noted: "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. 46. He did however expressly acknowledge that there would be a category of case where the Aarhus principles had been adopted into EU Directives. Carnwath LJ continued by noting that the current Jackson Review of civil litigation costs provided an opportunity for considering Aarhus principles in the context of the system for costs as a whole 6. E. WHERE ARE WE NOW? 47. It is difficult to assess the extent to which the approach of the courts has changed in relation to PCOs in the last few years. As most applications for PCOs are made at the permission stage, the applications and decisions often go unreported. However, anecdotally, and on the basis of the recent Court of Appeal judgments, it appears that it is getting to secure a PCO in the planning/environmental context. 48. Although, in general, there are no separate rules applicable to environmental cases, an application for a PCO may more readily demonstrate a concern of general public importance 6 See below, para.

13 where an environmental issue is in dispute. As such, in the planning field, it is necessary to show: i. Genuine local concern and interest ii. On a matter that is of public importance (ie that has an impact beyond a small number of householders) iii. Some impecuniosity iv. A reasonably arguable case 49. An exception to the observation that there are no separate rules applicable to environmental cases may arise where an application is made for a PCO in a case which relates falls under the EIA Directive and therefore reliance can be placed on Article 10a, or Article 15a of the IPPC Directive. As noted above, these Directives incorporate elements of the Aarhus Convention and are directly effective in domestic law. As such, it is likely that applications for PCOs in these cases will be viewed more favourably by judges. 50. Currently, it is hard to assess the level of any reciprocal cost cap that will applied on a successful application for a PCO. In Buglife, although the Court of Appeal decided that there should be no automatic setting of a costs cap at the same level as the PCO, it decided, on the facts, that it was appropriate to do so in that case (despite the fact the claimant lawyers were working on a CFA basis and would not, therefore, be able to recover the total success fee from the defendant if successful). It is safe to say that some form of reciprocal costs cap is very likely to be applied. 51. I should also mention the possibility of applying for an interim PCO to cover potential cost liability up to the decision whether to grant permission for JR. These Mount Cook costs can in practice be very high, and for some local groups and individuals such potential exposure can in itself be a complete barrier to justice. It is possible to apply on the papers for such an interim PCO, although the Court has not yet devised a procedure for such consideration. Practical consequences 52. For claimants, the increasing availability of PCOs is welcome. It is undeniable that PCOs allow some individuals, community organisations and NGOs, to bring claims they would otherwise have been unable to bring. However, there are two practical difficulties with PCOs that are worth bearing in mind.

14 53. Firstly, the increasing tendency of the court to order rolled-up hearings essentially deprives claimants of the ability to argue for a PCO without incurring more than Mount Cook costs. Claimants are well advised to make an application for a PCO before any rolled up hearing. 54. Secondly, those representatives acting on a CFA basis may be reluctant to apply for PCOs. As a consequence of reciprocal cost caps, those on CFAs may not be able to recover the entire success fee from the defendant. This difficulty was considered in Buglife (and also addressed in the Sullivan Report) but no effective solution has been suggested. Although Buglife suggests that courts should take into account whether the claimant is represented on a CFA, and that the success fee should be disclosed by claimants when applying for a PCO, there is no guarantee that any reciprocal costs cap will be set at a level sufficient to allow recovery of the success fee. As such, there is, to some extent, a conflict between the interest of a claimant (who wants to apply for a PCO) and the claimant s representative (who may be wary of applying for a PCO on the grounds that it may come with a reciprocal costs cap). 55. The consequences of the increasing availability of PCOs are less favourable for developers. The general loser pays principle of civil litigation ensures that claimants give very serious consideration to the merits of a claim before issuing. The availability of PCOs may have an unintended consequence of encouraging claimants to pursue claims where the merits may not be so strong. Although it must be remembered that a PCO does not remove the agreeability threshold for JR proceedings. 56. Additional costs associated with a delay in development and potential opportunity costs can be very high. In Buglife, the litigation caused significant financial prejudice to the developer: not only did it incur holding costs of around 20,000 per week, but it also lost an agreed sale of the property for 28.5m. When weighed against a total 20,000 cap on the costs risk to the claimant and defendant in that case, it is clear that PCOs can be seriously prejudicial to developers. 57. Developers can argue at PCO applications that the PCO should not be granted on the grounds of fairness and prejudice. In the Court of Appeal in Buglife, the developer argued that the

15 consequences of extending the PCO for the Court of Appeal stage of proceedings would cause substantial financial prejudice to the interested party and that it would not, accordingly, be fair or just to grant the application. The Court of Appeal did not accept the argument. 58. It is not necessarily the case that such arguments should be so easily dismissed. The fourth criterion for the grant of a PCO, as set out in Corner House, is that having regard to the financial resources of the applicant and the respondent(s) and to the amount of costs that are likely to be involved, it is fair and just to make the order. The reference to the plural respondent(s) makes it clear that the financial position of the developer is relevant to an application for a PCO, and so developers should pursue such arguments in the future. F. THE JACKSON REVIEW 59. Amendments to the Civil Procedure Rules currently under review may result in new rules applicable to PCOs. Lord Justice Jackson is currently carrying out an independent review for the Ministry of Justice of the rules and principles governing the costs of civil litigation. He is expected to report and to make recommendations for promoting access to justice at proportionate cost in early 2010, and these recommendations are expected to include additions to the CPR to provide specific rules on PCOs. 60. In May of this year, a preliminary report was published entitled Civil Litigation Costs Review: Preliminary Report 7. Chapter 35 of the preliminary report discusses judicial review costs generally and addresses the issue of PCOs. Chapter 37 of the preliminary report deals with the costs of environmental claims. Having considered the obligations imposed by the Aarhus Convention, the report notes (in chapter 37) that *a+s our costs rules now stand, on one view England and Wales are not complying with the provisions of the Aarhus Convention, to which the UK has voluntarily signed up. 61. The Report proposes three potential options for reforming the costs regime to ensure compliance with Aarhus: 7

16 (i) (ii) (iii) to introduce one way costs shifting (where the default position is that a claimant would not be liable for the costs of the defendant public authority (win or lose) but where the claim succeeds the defendant pays the costs of the claimant. for protective costs orders to become the norm in environmental judicial review cases (where the claimant is of limited means), applicable only to the claimant s costs liability; for protective costs orders to become the norm in environmental judicial review cases (where the claimant is of limited means), with a substantially higher cap upon the defendant s costs liability than the cap upon the claimant s costs liability. 62. The report acknowledges that none of the above options may be palatable to public authorities, but suggests that the burden upon those authorities could be lessened if success fees (under the terms of CFA agreements) cease to be recoverable. A final report is expected later this year. G. Conditional Fee Agreements 63. The use of conditional fee agreements in judicial reviews is not particularly common and planning JRs are no exception. Prospective litigants entering into a CFA will generally take out after-the-event insurance to cover their potential liability for their opponents costs. There are several companies that offer such insurance, but it seems that premiums for judicial review claims can be very high. Nonetheless, some planning JRs are brought by claimants on a CFA basis and it is a potential avenue for impecunious claimants if they can also secure a PCO. 64. CFAs must be properly structured in accordance with the relevant rules. They are permitted by sections 58 and 58A of the Courts and Legal Services Act By subsection 3 they must be in writing and by subsection 4, if there is to be a success fee, they must state the percentage by which the fees which would normally be chargeable are to be increased. The Conditional Fees Agreements Regulations 2000 revised the provision relating to CFAs. The material parts of the Regulations provide that:

17 2. (1) A conditional fee agreement must specify - (a) the particular proceedings or parts of them to which it relates (including whether it relates to any appeal, counterclaim or proceedings to enforce a judgement or order), (b) the circumstances in which the legal representative's fees and expenses, or part of them, are payable, (c) what payment, if any, is due - (i) if those circumstances only partly occur, (ii) irrespective of whether those circumstances occur, and (iii) on the termination of the agreement for any reason, and (d) the amounts which are payable in all the circumstances and cases specified or the method to be used to calculate them and, in particular, whether the amounts are limited by reference to the damages which may be recovered on behalf of the client. (2) A conditional fee agreement to which regulation 4 applies must contain a statement that the requirements of that regulation which apply in the case of that agreement have been complied with 3. - (1) A conditional fee agreement which provides for a success fee - (a) must briefly specify the reasons for setting the percentage increase at the level stated in the agreement, and (b) must specify how much of the percentage increase, if any, relates to the cost to the legal representative of the postponement of the payment of his fees and expenses. 65. Solicitors entering such agreement must comply with the Solicitors Costs Information and Client Care Code NATHALIE LIEVEN QC LANDMARK CHAMBERS 18 October 2009 HIGH COURT PLANNING CHALLENGES

18 COSTS: AARHUS, THE SULLIVAN REPORT, BUGLIFE AND HINTON ORGANICS Nathalie Lieven QC

19 (D) INTRODUCTION 66. The purpose of this paper is to assess recent developments in the application of costs rules in High Court planning challenges. In particular, I examine the extent to which the Aarhus Convention has led to a new costs regime in cases that can be considered environmental litigation. The ratification of the Aarhus Convention by the UK introduced an obligation in international law to ensure genuine access to justice in matters relating to the environment. Despite the fact that the Convention is not binding in domestic law (subject to the exceptions referred to below), it is clear that it has had a significant impact on the application of the costs regime in environmental cases, most notably in the rules relating to Protective Costs Orders ( PCOs ). This paper assesses that impact and makes an attempt at summarising where we are in relation to PCOs. 67. If you represent claimants, the increasing availability of Protective Costs Orders may be welcome. But if you represent developers, you may be familiar with the serious consequences of this new regime to interested parties. 68. This paper concludes with a brief outline of the rules relating to Conditional Fee Agreements ( CFA s ) (E) THE AARHUS CONVENTION 69. The Aarhus Convention came into force in October 2001 and was ratified by the UK in February The European Union is also a signatory in its own right. 70. The Convention contains three broad themes or 'pillars': iv. access to environmental information; v. public participation in environmental decision-making; and vi. access to justice in environmental matters 71. It is the third pillar that is relevant to the costs regime in the courts of England and Wales. It gives rights to members of the public, including environmental organisations, to challenge the legality of decisions by public authorities to grant consent for a wide range of activities as well as any other acts or omissions that are contrary to the provisions of national laws relating to the environment.

20 72. In relation to costs, Article 3(8) of the Convention provides that there is no objection per se to national courts awarding reasonable costs in judicial proceedings. However, Article 9(4) provides that the procedures for rights of access to justice in environmental matters shall provide adequate and effective remedies, including injunctive relief as appropriate, and be fair, equitable, timely, and not prohibitively expensive. 73. The reference to prohibitive expense in Article 9(4) is a reference to all aspects of legal costs including potential exposure to costs awards (Case C 427/07 Commission v Ireland 17 July 2009; see also para.93 of the opinion of AG Kokott in the same case). As such, it does not apply narrowly to merely limit the amount of court fees, as originally argued by the UK government. In essence, the Convention requires that there must be genuine access to justice in environmental matters and that the cost of proceedings as a whole must not act as a de facto barrier to bringing a claim. Legal status 74. The legal status of the Aarhus Convention has recently been addressed by the Court of Appeal in Morgan v Hinton Organics [2009] EWCA Civ 107. Carnwath LJ explained (at para. 22) that: *f+or the purposes of domestic law, the convention has the status of an international treaty, not directly incorporated. Thus its provisions cannot be directly applied by domestic courts, but may be taken into account in resolving ambiguities in legislation intended to give it effect. 75. At para.42 of that judgment, he continued: The UK may be vulnerable to action by the Commission to enforce the Community s own obligations as a party to the treaty. However, from the point of view of a domestic judge, it seems to us... that the principles of the Convention are at the most something to be taken into account in resolving ambiguities or exercising discretions (along with other discretionary factors including fairness to the defendant 76. As such, the legal status of the Convention may be summarised as follows: (1) In international law, it is binding as an international treaty and enforceable by the Compliance Committee set up under the Convention to investigate complaints of non-compliance.

21 (2) In European law, as the European Union is a signatory to the Convention, its provisions may be enforceable by the European Commission against Member States through enforcement action. (3) In domestic law, the Convention cannot be directly enforced as it has not been incorporated in domestic law, but may be taken into account by judges when resolving ambiguities or exercising discretion. 77. One further factor should be noted. The provisions of Article 9 of the Convention have been inserted into two key EC environmental directives. Article 10A of the 1985 EC Directive on Environmental Impact Assessment ( EIA ) provides that Member States must ensure that members of the public have access to a review procedure before a court of law or other independent body to challenge the substantive or procedural decisions, acts or omissions subject to the public participation provisions of the Directive, and that any such procedure shall be fair, equitable, timely, and not prohibitively expensive. Directive 96/61/EC on Integrated Pollution Prevention and Control ( IPPC ), which provides for a consent system for a wide range of industrial activities, is similarly amended with a new Article 15a, which also provides that procedures for legal challenges must be fair, equitable, timely, and not prohibitively expensive. 78. These Directives have direct effect in UK law. As such, insofar as the Convention is incorporated in these Directives, it is (indirectly) enforceable in domestic law. This may have significant consequences to applications for protective costs orders where the matter in dispute relates to an issue falling within the scope of one of these Directives (see discussion at para.50 below). (F) THE PROBLEM OF NON-COMPLIANCE IN THE PLANNING FIELD 79. As planning decisions necessarily impact on the environment, High Court planning challenges are often brought by individuals, NGOs or community organisations with the stated purpose of protecting the environment. Few would dispute the importance of the right to bring such claims: as the environment has no independent rights in domestic law, environmental protection secured by regulation must be enforced in the courts by the regulators or by interested individuals.

22 80. However, the cost of civil litigation (especially in the planning field) can be significant. In addition to the costs of funding a claim, claimants face the risk of paying the defendant s and interested party s costs if they lose. The ordinary rule in judicial review in England & Wales, as in other civil proceedings, is that the loser pays the costs of the winning party, but the Court retains a discretion (see CPR r. 44.3). In planning matters, the developer is often separately represented as an interested party. While the normal rule is that a losing claimant will not be required to pay the costs of the interested party, these costs may be payable where the interested party has been required to provide submissions or evidence on a separate issue not covered (or not effectively covered) by the defendant As legal aid is available to only the very poor, many individuals, community organisations or NGOs find it difficult to raise funds to launch and pursue a judicial review of a planning decision. Even if funding can be secured to cover the claimant s own legal costs, the risk of a costs order against them on losing a claim acts as a further barrier to those considering bringing a judicial review. 82. In R (Burkett) v LB Hammersmith and Fulham [2004] EWCA Civ 1342, the Court of Appeal acknowledged the chilling effect of the normal costs follow the event rule, noting that: an unprotected claimant in such a case, if unsuccessful in a public interest challenge, may have to pay very heavy legal costs to the successful defendant, and... this may be a potent factor in deterring litigation directed towards protecting the environment from harm. 83. This case was the first in which a UK Court considered the application of the Aarhus Convention to the law and procedure in England in Wales. Carnwath LJ considered that the costs of that case raised very serious questions of whether the legal system in England and Wales was compliant with the Convention. Since then, a number of studies have concluded that the UK is not compliant with the requirement in the Aarhus Convention that access to environmental justice not be prohibitively expensive. Most significantly a comparative 8 Bolton Metropolitan District Council v. Secretary of State for the Environment [1995] 1 WLR 1176, where the House of Lords noted: "Although costs are in the court's discretion, in planning appeals, where the Secretary of State succeeds in defending his decision he will normally be entitled to the whole of his costs and should not be required to share them by apportionment. The developer will not normally be entitled to his costs unless he demonstrates a separate issue, not covered by the Secretary of State, on which he was entitled to be heard, or has an interest requiring separate representation. A second set of costs is more likely to be awarded at first instance than in the Court of Appeal or the House of Lords, and an award of a third set of costs will rarely be justified.

23 study of EC Member States and access to environmental justice, published in 2007, concluded that the UK was ranked in the bottom five EU countries for compliance with Aarhus 9. The report noted in respect of the UK that: the main obstacle to access to justice for members of the public or NGOs is the issue of costs in judicial review cases. The problem is one of exposure and of uncertainty. At the beginning of a case it is impossible for the member of the public or the NGO to know how much money they will have to find if they lose. The possibility of having to pay a large (and uncertain) bill means that people are unwilling to risk bringing legal proceedings to hold a public body to account for breaking the law. Studies have indicated that a substantial number of potential applicants for judicial review in environmental matters have not proceeded because of the risk of costs involved In conclusion, it can be said that the potential costs of bringing an application for judicial review to challenge the acts or omissions of public authorities is a significant obstacle to access to justice in the United Kingdom. Arguments for compliance 84. In its Aarhus Convention Implementation Report for DEFRA rely on three features of the UK s judicial process to assert compliance with paragraph 9(4) of the Convention, namely: (1) The availability of legal aid and amended guidance on legal aid in public interest cases; (2) The existence of judicial discretion as to whether to award costs (and at what level); (3) Recent legal developments in relation to Protective Costs Orders. 85. Interestingly, DEFRA makes no mention of the use of Conditional Fee Agreements as a factor contributing to compliance with Aarhus. Perhaps this is recognition of the fact that the current PCO regime is, to some extent, in conflict with CFAs (see para.54 below). 86. It can be seriously doubted that the three features relied on by DEFRA do, in fact, cumulatively achieve compliance with Aarhus. Although the LSC has issued revised guidance in respect of funding public interest cases, it remains the case that such funding will only (generally) be available to the very poor, and will not be available to charities or NGOs. 9 Measures on Access to Justice in Environmental Matters (Article 9(3); European Commission ( 10

24 87. Further, it seems clear from the recent judgment of the ECJ in Case C 427/07 Commission v Ireland that the existence of judicial discretion as to whether to award costs does not amount to compliance with the Convention. In those proceedings it was alleged, inter alia, that Ireland had failed to transpose requirements in Article 10a of the EIA Directive and Article 15a of the IPPC Directive by ensuring that procedures for access to justice in respect of decisions made under those Directives were not prohibitively expensive. In response to the argument that judicial discretion as to whether to award costs achieved such compliance, the ECJ noted: 93 Although it is common ground that the Irish courts may decline to order an unsuccessful party to pay the costs and can, in addition, order expenditure incurred by the unsuccessful party to be borne by the other party, that is merely a discretionary practice on the part of the courts. 94 That mere practice which cannot, by definition, be certain, in the light of the requirements laid down by the settled case-law of the Court, cannot be regarded as valid implementation of the obligations arising from *the EIA and IPPC Directives As such, the UK is left, essentially, with only one feature that may secure compliance with the Convention, namely, the availability of Protective Costs Orders. D. PROTECTIVE COSTS ORDERS What are they? 89. A Protective Costs Order is an order of the court which specifies or constrains at an early stage of proceedings what the costs outcome of the case will be 11. There is currently no statutory guidance on PCOs, nor any mention of them in the CPR. Instead the mechanism has evolved through caselaw. Corner House 90. The recent history of PCOs in the public law context begins with R (Corner House Research) v. Secretary of State for Trade and Industry [2005] EWCA Civ 192; [2005] 1 WLR In Corner House the Court of Appeal indicated that a PCO should be granted only in exceptional circumstances (see para. 72) but that a PCO may be made at any stage of the 11 For an in-depth discussion of PCOs and their workings, see the Liberty Report chaired by Maurice Kay LJ, Litigating the Public Interest ( the Kay Report ) at pp ;