Begg v HM Treasury

A protective costs order may in principle be available in a challenge to a terrorism-related designation where the defendant relies on closed material and the claimant cannot properly assess the merits. The jurisdiction remains exceptional and requires strict conditions. The case must provide real benefit to the claimant; the open material must justify litigation while the closed material prevents competent lawyers from advising on the overall prospects; the claimant’s means and likely costs must make protection fair and just; and refusal must probably cause a reasonable discontinuance. Protection should not benefit unreasonable or abusive conduct.

The claimant appealed under section 26 of the Terrorist Asset-Freezing etc. Act 2010 after HM Treasury revoked, but did not quash from the outset, his designation under section 2. He sought a protective costs order because he lacked legal aid, had limited means, and could not assess the case against him where HM Treasury relied on closed material. The application raised whether the existing protective-costs principles extended to this type of statutory appeal and, if so, whether the conditions were presently satisfied.

1. Principle. The court had power under section 51 of the Senior Courts Act 1981, the Civil Procedure Rules and the overriding objective to make a protective costs order in an appropriate closed-material case. The ordinary disclosure rules do not operate in such proceedings. That procedural disadvantage may make costs protection the fair and just means of preserving access to justice.
2. Conditions. Such an order should be made only subject to strict conditions:
   • the proceedings must provide real benefit to the individual;
   • the open material must make litigation reasonable, while the closed material prevents reputable and competent lawyers from advising on the overall prospects;
   • the claimant’s financial resources and likely costs must make protection fair and just;
   • without protection, the claimant would probably discontinue reasonably; and
   • the claimant must not benefit if later found to have acted unreasonably or abusively.
3. The principles in R (Corner House Research) v Secretary of State for Trade and Industry [2005] EWCA Civ 192 remained relevant, but “exceptionality” was not an additional criterion. The criteria were to be applied flexibly, consistently with R (Compton) v Wiltshire Primary Care Trust [2008] EWCA Civ 749.
4. The application was premature. The first condition was not established by sufficient evidence about the effect on reputation or banking. The second could properly be assessed after HM Treasury served its evidence, including any gisting of the closed material. Evidence directly from the claimant, supported by a statement of truth, was also required on means and the likely consequences of an adverse costs order.
5. A protective costs order might therefore be appropriate, but none was made at that stage.

This was a first-instance application in an appeal under section 26 of the Terrorist Asset-Freezing etc. Act 2010. The judgment does not state a prior appellate decision.