UK: Protective Costs Orders Approved By The House Of Lords

Last Updated: 20 October 2009
Article by James Packer

Protective Costs Orders are something of a constitutional novelty, and the principles that govern their award, their ambit and even their very existence have been controversial. However the House of Lords have recently implicitly approved their status – and they may be available even where the applicant has a private interest in the outcome.

Public Interest v Private Interest - MO(Nigeria) Part II

It is a notorious fact that extensive litigation is generally a privilege extended to the rich or the penurious, but likely to be beyond the means of the public at large. The introduction of Conditional Fee Arrangements (CFAs) has gone some way to address this point, but glaring gaps remain. In particular, even with a CFA a litigant is at risk of an adverse costs order. Normally of course the litigant will seek the security of after the event (ATE) insurance to cover an award against him, but these are provided by the private sector and they are understandably nervous of extending cover in either novel situations, test cases or even in areas of the law in which they are unfamiliar. In judicial review cases, for example, even the very best cases almost guaranteed success can be impossible to insure.

In recent years the Courts have taken tentative steps to ensure that litigation of general importance is not shut out by prohibitive costs exposure through the introduction of Protective Costs Orders (PCOs) by the Court of Appeal. In essence these orders prevent the recovery of costs beyond a certain figure by one of the parties, allowing the other party to know in advance the maximum extent of its liability.

The House of Lords recently granted a PCO, the first such move by the House, in the case of MO (Nigeria) v Secretary of State for the Home Department [2009] UKHL 25. Duncan Lewis & Co. were the Appellant's solicitors. The details of the case are not important for this discussion1, save to note that the Appellant sought leave to remain and on any reading the Appellant had not been the author of her own misfortune in the substantive case, and came to the litigation with 'clean hands'.

She had pursued her appeal all the way to the House of Lords, acting first in person and then with the assistance of public funding. However, almost simultaneously with the House of Lords granting permission to appeal and setting the matter down for a hearing, MO's spouse obtained a job at a higher salary. The means of partners being aggregated for legal aid purposes that put MO outside of the scope of public funding, albeit only just, and as a result in theory she would have to pay the cost of the further litigation. In practice this would have been well outside of her means.

Duncan Lewis & Co. agreed to act pro bono on her behalf from that point, and we gratefully acknowledge the assistance of the two barristers in the case, Mr. Tim Buley and Mr. Richard Drabble QC, both of Landmark chambers, who also continued to act for MO on a pro bono basis. (The Secretary of State also agreed to waive the requirement that an Appellant to the House of Lords lodge security for costs to the tune of £25, 000). However that left unresolved the issue of a potential award of costs against the Appellant. The Secretary of State refused to accede to our request that both parties agree that there be no order as to costs.

The Appellant then made an application to their Lordships for a complete PCO to cover any award of costs (and also a waiver of the fee for setting the matter down for a hearing which was £3, 420) undertaking as she did so that if she were successful she would seek no costs from the Defendant.

The principles governing the grant of a PCO have been most authoritatively considered by the Court of Appeal in R (Corner House) v Trade and Industry Secretary [2005] 1 WLR 2600. In that case the court gave the following guidance:

74. We would therefore restate the governing principles in these terms:

1. A protective costs order may be made at any stage of the proceedings, on such conditions as the court thinks fit, provided that the court is satisfied that:

i) The issues raised are of general public importance;

ii) The public interest requires that those issues should be resolved;

iii) The applicant has no private interest in the outcome of the case;

iv) Having regard to the financial resources of the applicant and the respondent(s) and to the amount of costs that are likely to be involved it is fair and just to make the order;

v) If the order is not made the applicant will probably discontinue the proceedings and will be acting reasonably in so doing.

2. If those acting for the applicant are doing so pro bono this will be likely to enhance the merits of the application for a PCO.

3. It is for the court, in its discretion, to decide whether it is fair and just to make the order in the light of the considerations set out above.

As the House had already decided, in listing the appeal, that it was 'of general public importance' (a requirement for the House to list the appeal) she was able to sidestep one thorny issue regarding PCOs – the extent to which the public interest in the litigation is a factor, whatever the ambit of that condition it was clearly met in this case. There is further controversy regarding the suggestion that an applicant for a PCO should not have a 'private interest' in the outcome of the litigation – see for example R (Compton) v Wiltshire PCT EWCA Civ 749; in a report entitled "Litigating the Public Interest", a working party chaired by Maurice Kay LJ questioned the need for any limitation on the grant of a PCO based on the fact that a litigant has a private interest in the proceedings. The Courts have recently paid more attention to the 'overriding objective' of the Civil Procedure Rules 'of enabling the court to deal with cases justly' by dealing with the case in ways which are proportionate – both to the importance of the case and to the financial position of each party; considerations tending to favour the award of PCOs when the defendant is a public body or large corporation.

The Application was granted in full – that is the potential adverse costs award was not capped but set at zero. Unfortunately their Lordships did not refer to the issue of costs in its judgment, so the basis cannot be accurately descried. The sole detail that has been clearly decided (beyond the implicit approval of PCOs themselves) are that an applicant for a PCO can have some private interest in the outcome of the proceedings (in this case the Appellant, if successful, would have obtained a grant of leave to remain in the United Kingdom). One thing appears certain however; PCOs are here to stay.


See part 1 in a previous article for details of the case

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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