Friends of the Earth Ltd, R (On the Application Of) v Secretary of State for Transport

The treatment of a costs cap depends on the true construction of the applicable rule, not on decisions construing bespoke costs orders or different costs regimes. The unqualified monetary limits in CPR 45.43(2) and (3) of the Civil Procedure Rules are absolute sums and include VAT. The Aarhus Convention requires environmental review procedures not to be prohibitively expensive, but it does not prescribe either a particular cap or whether VAT must be additional to it. A court may make no order for the costs of a failed costs application where a genuine uncertainty in a costs order raises an important issue of principle.

This was a post-judgment costs application in substantive judicial review proceedings brought by Friends of the Earth against the Secretary of State for Transport. The Court of Appeal had previously ordered the Secretary of State to pay the claimant’s costs, subject to separate caps of £35,000 for the Divisional Court and the Court of Appeal.

The parties disagreed whether VAT was payable in addition to those caps. The caps had been made under the Aarhus costs-protection regime. Although the Supreme Court had allowed Heathrow Airport Limited’s appeal in the substantive proceedings, that order did not alter the costs order between these parties.

The central issue was whether the caps under CPR 45.43 were inclusive or exclusive of VAT, and what order should be made for the costs of the application.

1. The application was refused. The £35,000 caps in the Court of Appeal’s earlier costs order included VAT. VAT was not payable in addition to either cap.

2. The issue was one of construction of CPR 45.43. Decisions construing individual protective costs orders did not decide the meaning of that rule. R (Warley) v Wealden District Council [2011] EWHC 2083 (Admin) concerned a discretionary variation of a bespoke order, in the light of correspondence between the parties, and pre-dated CPR 45.43. It did not establish a general principle. The same applied to Abbotskerswell Parish Council v Secretary of State for Housing, Communities and Local Government and Others [2020] EWHC 2870 (Admin). Nor did the earlier decision in R (Garner) v Elmbridge Borough Council [2010] EWCA Civ 1006 authoritatively decide the point, since no reasoning was recorded and it also pre-dated the rule.

3. The natural meaning of the unqualified amounts in CPR 45.43(2) and (3) was that they were inclusive of VAT. The consultation history supported that conclusion. Article 9(4) of the Aarhus Convention required costs not to be prohibitive, but did not require a contracting state to set a particular ceiling or to specify that VAT was additional. The express exclusion of VAT in the Northern Ireland regulations reinforced, rather than weakened, that construction. Decisions from non-environmental costs regimes and Practice Direction 44 did not assist.

4. There was no order as to the costs of this application. The issue arose from genuine uncertainty about the earlier costs orders. It had not previously been authoritatively determined by this Court and its resolution served the wider public interest.

• Supreme Court: allowed Heathrow Airport Limited’s appeal in the substantive proceedings. Its order of 16 December 2020 did not alter the costs order between Friends of the Earth and the Secretary of State.
• Court of Appeal (Civil Division): in this post-judgment application, held in [2021] EWCA Civ 13 that the costs caps included VAT and refused the application.
• High Court, Divisional Court: the court below in the substantive appeal. Its citation and disposition are not stated in the judgment.