Medway Soft Drinks Ltd & Ors, R (On the Application Of) v Revenue And Customs

Where judicial review proceedings are brought to obtain interim protection needed to preserve a business pending a statutory appeal or review, obtaining that protection may make the claimant the successful party for costs purposes even if the underlying issue is later resolved outside the proceedings.

The court should assess the practical purpose and effect of the interim order and ask whether the proceedings caused the protection to be obtained. A later grant of substantive approval, resulting from further investigation or an internal review, does not necessarily break that causal link. In unusual cases, the interim order may be more significant than the final consent order when applying the categories identified in M v Croydon.

HMRC refused approval and registration under the Alcoholic Wholesale Registration Scheme to three existing wholesale alcohol businesses shortly before the scheme’s criminal sanctions took effect. The businesses commenced judicial review proceedings and obtained interim injunctions enabling them to continue trading while Medway pursued a statutory appeal and Drayman and Beviqua pursued internal reviews.

The underlying refusals were later withdrawn or cancelled, approval was granted, and the judicial review claims were withdrawn under consent orders reserving costs. Deputy High Court Judges ordered HMRC to pay the respondents’ costs. HMRC appealed, arguing that the respondents had not obtained the relief sought in the judicial review proceedings and that the eventual approvals were caused by events independent of the litigation. The central issue was whether the respondents were successful parties for costs purposes.

1. Appeals dismissed. The costs orders requiring HMRC to pay the respondents’ costs were within the judges’ discretion under CPR 44.3.
2. Under M v Croydon [2012] 1 WLR 2607, a claimant who is wholly successful will ordinarily recover its costs unless there is good reason otherwise. The present cases were unusual because the claimants’ immediate and crucial objective was interim protection, rather than final determination of the underlying approval issue.
3. The judicial review proceedings were necessary to give the claimants any realistic chance of obtaining interim protection. The injunctions enabled them to continue trading until the refusals were resolved through the statutory processes or further HMRC consideration. That protection was obtained because the proceedings had been brought, satisfying the necessary causal link.
4. The fact that the eventual non-temporary approvals were granted following further investigation or an internal review did not sever that link. The court rejected the submission that the claims could not have succeeded merely because the evidence initially filed did not meet the later guidance given in the ABC case [2018] 1 WLR 1205. In a hypothetical substantive hearing after that decision, the claimants could have adduced further evidence.
5. The court also rejected HMRC’s challenge based on pre-action conduct. Although the reasoning of one first-instance judge was succinct, it was sufficient for a costs decision made under a consent order.

Per Sir Timothy Lloyd, with Lord Justice Newey and Lord Justice Gross agreeing, the appeals were dismissed.

• Court of Appeal (Civil Division): Appeals dismissed. The costs orders were held to be proper exercises of the first-instance judges’ discretion.
• Administrative Court: Deputy High Court Judges Peter Marquand and Richard Clayton QC ordered HMRC to pay the respondents’ costs after the judicial review claims were withdrawn under consent orders.