The negative impact that the Legal Aid, Sentencing and Punishment of Offenders Act 2012 is likely to have on the socio-economically disadvantaged has been well-documented. The effect it will have on those undertaking publicly-funded work will be stark. The importance of costs recovery on a party and party (inter partes) basis will assume even greater importance, especially in cases that can involve large amounts, such as claims for judicial review. The most recent Court of Appeal decision on costs and judicial review provides detailed guidance as to the proper approach when a claim settles before a substantive hearing.
The Administrative Court has a discretion to award costs at the permission stage of a claim for judicial review.Where the claimant is granted permission, the costs will be costs in the case unless the judge granting permission makes a different order (see the 2004 Practice Direction at  1 WLR 1760). Insofar as the substantive hearing is concerned, costs will usually follow the event, with the loser paying. But there is nothing in the Civil Procedure Rules which sets out the costs principles to be applied where a claim is settled following the issuing of proceedings, with the claimant having obtained the remedy sought by him or her.
Lord Justice Jackson specifically dealt with this issue in his wide-ranging costs review. He made the following specific recommendations.
1. That qualified one way costs shifting should be introduced for judicial review claims.
2. That if the defendant settles a judicial review claim after issue and the claimant has complied with the protocol, the normal order should be that the defendant do pay the claimant’s costs.
Despite the attractive simplicity of this proposal, it has not found its way into the 2012 Act, nor is there any indication that the government will adopt it. The courts will therefore continue to grapple with the costs issue on a case by case basis, which is arguably a highly unsatisfactory way of dealing with such potentially expensive and resource intensive litigation.
In M, the Court of Appeal has attempted to rationalise the position. Lord Neuberger MR explained that a degree of consistency was self-evidently desirable, although the determination of costs would continue to be highly fact-sensitive and very much a matter for the discretion of the first instance court or tribunal. In the case itself the defendant local authority had conceded a claim made by an asylum seeker in relation to his age. The first instance judge, Mr Justice Lindblom, made no order as to costs, despite this being the remedy having been sought by the claimant. The main basis for doing so appeared to be his view that the defendant was justified in defending the claim, particularly given that the law was in a state of flux at the time.
The Court of Appeal held that the judge was wrong to have made no order as to costs. The only issue was whether the claimant had been born in 1994 or 1996. The local authority had had more than enough time to deal with this issue prior to the commencement of proceedings and before permission had been granted. Furthermore, the claimant’s case had been clearly spelled out in pre-action letters whilst the local authority had failed to acknowledge service until well out of time. Although there was something to be said about the argument that the law had changed, the appropriate order was that the defendant pay 50% of the claimant’s costs prior to the grant of permission and 100 per cent in respect of the period thereafter.
Importantly, as a matter of principle, the Court of Appeal stated that the rules on costs in the Administrative Court should be no different from that in general civil litigation; in other words, costs should follow the event. In particular, when a claimant obtained all the relief sought, whether by consent or after a contested hearing, she or he was to be regarded as the successful party who was entitled to costs, unless there was a good reason to the contrary. The position would be more nuanced where a claimant obtained only some of the relief originally sought. In such cases there could be an argument as to which party was more successful in light of the relief which was sought and not obtained, or, even if the claimant was accepted to be the successful party, there might be an argument as to the importance of the issue, or costs relating to the issue, on which they had failed.
The Court of Appeal went on to explain that, in the case of a claimant’s partial success, a court would typically have to consider issues such as the reasonableness of a claimant pursuing the unsuccessful grounds of claim or heads of relief, the relative importance of the successful and unsuccessful issues and the extent by which costs had been increased as a result of pursuing the unsuccessful matters.
The Court additionally dealt with the case where there had been some compromise or settlement which did not actually reflect the claimant’s claims. Here, it pointed out that a court would often be unable to gauge whether there was a successful party in any respect and so there was a powerful argument that the default position should be no order for costs. On the other hand, in some cases it might be reasonable to consider the underlying claims and to determine whether it was “tolerably clear” who would have won if the matter had not settled.
There are perhaps two crucial lessons for those advising claimants to learn from this decision
1. The pre-action protocol letter should be as precise as possible and should seek remedies which are realistic and achievable (see R v Kensington and Chelsea RBC ex p Ghebregiogis (1994) 27 HLR 602).
2. Claimants should not be dissuaded from pursing an application for costs on the compromise of any claim for judicial review including, when appropriate, a claim for costs on an indemnity basis.
Given the impending restrictions on public funding, and even on conditional fee agreements, the importance of maximising the recovery of costs in judicial review claims will only increase. It will be both an essential aspect of holding government and public authorities to account and key to ensuring the survival of a vital service for vulnerable clients.