Begg v HM Treasury

A protective costs order may be made where closed material prevents an individual accused of terrorism from assessing the merits of a challenge. The applicant must satisfy strict conditions concerning personal benefit, inability to assess prospects, financial fairness and probable reasonable discontinuance without protection.

Where the open material presents a case which a reasonable person would litigate, but closed material prevents competent legal representatives from advising whether the prospects are good, the court should address costs protection before the litigant incurs the costs of disclosure and gisting. Deferring the decision perpetuates the very unfairness which the order is intended to mitigate.

Following his arrest and designation under section 2 of the Terrorism Asset-Freezing etc Act 2010, the appellant became subject to an asset-freezing regime. The criminal prosecution was later discontinued, and the Treasury revoked but refused to quash the designation. The appellant appealed against that refusal under section 26 of the Act.

The Treasury intended to defend the designation appeal using closed material. Because the appellant could not assess his prospects and risked substantial adverse costs, he sought a protective costs order. Cranston J held that such an order was available in principle but that the application was premature until the Treasury had served its evidence and any gist of the closed material.

The central issue was whether the judge should have determined the relevant condition for costs protection before the appellant incurred the costs and risks associated with disclosure.

1. Appeal allowed. A protective costs order may in principle be made where an individual accused of terrorism cannot determine the merits of a challenge because the state relies on closed evidence. Such protection is not confined to public interest litigation of the kind considered in R (Corner House Research) v Secretary of State for Trade and Industry [2005] 1 WLR 2600.

2. Closed material procedures seriously interfere with the natural justice principle that a party is entitled to know and answer the opposing case. Their use requires compelling justification. Where justified, the resulting unfairness should be mitigated so far as possible to preserve equality of arms. Courts should ensure that those procedures create no greater disadvantage than is necessary, consistently with Al Rawi v Security Service [2011] UKSC 34, [2012] 1 AC 531.

3. The applicable conditions require that: the case is of real benefit to the individual; the open material presents a case which a reasonable person would litigate, but closed material prevents competent representatives from advising whether the prospects are good; the applicant's resources and the likely costs make protection fair and just; and, without protection, the applicant will probably discontinue and act reasonably in doing so. The applicant should not benefit if later found to have acted unreasonably or abusively.

4. The second condition was satisfied. On the open material, the appellant appeared to have good prospects, while the Treasury's proposed reliance on closed material made an overall assessment impossible. It was therefore erroneous to postpone the decision until the Treasury had served its evidence and any gist. Requiring the appellant meanwhile to incur the associated costs risk produced the very unfairness which costs protection was intended to prevent. The possibility that the trial court might ultimately decline to award costs did not remove that present risk.

5. The Court of Appeal declined to determine the remaining conditions because Cranston J had not considered their substance and the Treasury had not addressed the appellant's latest evidence. The question whether conditions one, three and four were satisfied was remitted to the High Court for reconsideration.

1. Court of Appeal (Civil Division): The appeal was allowed. The finding that consideration of costs protection was premature was set aside, and the outstanding conditions were remitted to the High Court.
2. High Court, Administrative Court: Cranston J held that a protective costs order could be available in principle but declined to make one at that stage because the application was premature and further evidence was required.