England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION )
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
(HIS HONOUR JUDGE PELLING QC)

		Royal Courts of Justice Strand, London, WC2A 2LL
		15th February 2012

Lord Justice Toulson:

1. The Home Secretary appeals, with the permission of Sir Richard Buxton, against a costs order made in favour of the respondent, Darwins College, on the settlement of a claim by the college for judicial review. It is necessary to set out the facts in detail.
2. The college was formed in 2009 as a higher education college based in Manchester. Its principal and sole shareholder comes from a family of teachers in Pakistan. It offers courses in business management and business studies. Its students are all foreign students, mostly from Pakistan, and with a small number from India, Bangladesh, China and Nigeria.
3. In order to operate in the UK it required accreditation from the Accreditation Service for International Colleges ("ASIC"), which it duly obtained. It was granted full accreditation by ASIC in February 2011 with a recommendation for 426 students. Its students of course required visas. When the college began, the system applied by the United Kingdom Border Agency ("UKBA") on behalf of the Home Office was that it maintained a register for bodies wishing to sponsor foreign students or foreign visitors for post study work. The register contained more than one tier. The relevant tier for foreign students was tier 4. Sponsors in tier 4 were sub divided into B-rated sponsors and A-rated sponsors. Within certain limits and on certain conditions tier 4 sponsors were authorised to issue confirmation of acceptance for studies or ("CAS's") to students.
4. In July 2010, following a visit by UKBA inspectors, the college was granted a tier 4 B-grade licence authorising it to issue 100 CAS's in the first six months. In February 2011 the Home Secretary announced that she was proposing to make changes to the system in order to reduce migration into the UK and to regulate colleges more stringently. Some colleges had been found to be offering courses of dubious educational value, but I should make it plain that there is no such suggestion in relation to this college, which has conducted its business with unquestioned integrity.
5. On 11 April 2011 the college was informed that its rating was to continue to be a B rating. This decision was based on an inspector's visit over four months earlier on 2 December 2010. On the same day that the college was told that it was to remain a B-rated institution, UKBA also prepared an action plan for it. The action plan required it to put certain policies in place and listed the evidence required to satisfy UKBA that the evidence was in place, which would be involve inspection by visiting officers. The date for its next review was to be 11 August 2011. Just over a week later, on 19 April, the college received a further letter announcing the introduction of a temporary limit from 21 April on the number of CAS's which tier 4 sponsors could issue. As a B-rated sponsor the college was not to be permitted to assign a CAS to any new student. If the college became A-rated, then it would be in a better position.
6. The double blow of the letter of 11 April notifying the college that it was not going to be upgraded from B grade and the 19 April letter telling it that B-rated institutions would no longer be permitted to issue a CAS had a severe effect on the college, about which it immediately complained to UKBA by a letter email dated 19 April. In the letter Mr Arif, the principal, said that after the visit by the inspecting officer on 2 December 2010 the college had taken steps to change its policies in accordance with the indications given to it by the inspectors and had emailed the inspector to notify him of the changes which they had made. The letter continued:

"We had to wait from 2^nd December 2010 to 12^th April 2011 to hear any update on our visit. We kept asking for more CAS since December as we did not [have] funds to carry on with college expenses but we were not given even one CAS. ...

I am requesting that the college would not be able to survive for another few months if we are not allowed to issue CAS. The ruling that B rated colleges cannot issue CAS is unfair for colleges like us who are already in the initial stages of the process.

...

We have fulfilled the action plan given to us on 12^th April 2011 since 22^nd December 2010. If Mr Simon [the inspector] can visit us in the next few weeks, we can be upgraded to A Rating and we will be able to survive and actually apply to become a Highly Trusted Sponsor."

There was no immediate reply to that letter so the college sought legal advice. On 21 April the Home Secretary introduced the changes to the Immigration Rules referred to in UKBA's letter of 19 April.

7. On 3 May solicitors for the college sent the first of several Pre-Action Protocol letters to UKBA threatening judicial review proceedings. On 6 May UKBA responded to the college's email of 19 April in which ASIC requested an urgent visit by inspectors with a view to the college's potential upgrading to A grade. The letter began by apologising for the delay in providing a response and pointing out that the introduction of the interim limit by the Home Secretary had produced a large volume of questions and inquiries. The letter went on to say:

"I appreciate how distressing this must be for you and I have forwarded your request to the suitable team and asked them to contact you to arrange a visit as soon as possible."

Thereafter the college expected to hear from someone from the inspection team to arrange a visit but heard nothing.

8. On 11 May the college's solicitor sent several further Pre-Action Protocol letters. One was sent by recorded delivery to the Home Office Judicial Review Management Unit. In it the solicitors wrote :

"On 11 April 2011 a new action plan was served. The College maintains the issues raised in this action plan had been answered following the December 2010 visit and specifically the policy emailed to the UKBA in December 2010 dealt with these issues.

The college's next intake is July 2011. The college cannot issue CAS to any new students. It also has a very low CAS number...because of the UKBA's delays despite the evidence and the accreditation in student places provided by the ASIC.

The college has written to the UKBA seeking an urgent inspection to consider the college's future rating and whether this should be upgraded to an 'A'. As yet it has not had a response."

The letter went on to formulate the potential grounds of judicial review.

9. In an email of the same date to UKBA's sponsor licensing unit the solicitors wrote :

"On 19 April 2011, the College received an action plan dated 11 April 2011 which was required to be completed by 11 August 2011. These points had already been addressed and completed in December 2010. An email confirming this was sent by the college on 19 April 2011.

Our client is of the view that there has been delay on the part of the UKBA in dealing with this request for upgrade. All conditions have been met. As the college was not upgraded, it is now in the position that it cannot allocate CAS to new students. This will no doubt put our client out of business. No reasonable explanation has been given by the UKBA for the delay or by any new action plan that was [thought] necessary.

We now ask that the UKBA either upgrade the college forthwith or visit the College within the next 7 days to assess its eligibility for an upgrade to A rated and convey a written decision to the College within 14 days of their visit. If the UKBA is not minded to do this, then our client will proceed to a claim for judicial review."

10. In another email to the same body, in similar vein the solicitors wrote :

"Our client is seeking for the UKBA to come and inspect their college forthwith as they were expected in December 2010 where the visiting officer just suggested revising of the policy which was implemented straight away and even email to this effect was sent to the UKBA but the policy had been implemented and further confirmed that the procedure has been adopted as recommended by UKBA.

...

As our client submitted various further emails to upgrade them as all the procedures were in place.

The UKBA failed to respond to this until the crucial time of April when they were given a new action plan to which has been implemented and confirmed in December 2010.

...

As no reason or explanation [has] been given for the delay why a new action plan was [thought] necessary. As to the best of our client knowledge we are referring you all e-mails, it seems that UKBA has acted irrationally fairness. We would be obliged if this is sought amicably and either a visit is arranged to see and inspect the college or upgrade the college as you have all the necessary policy and documents in place. Otherwise we have been instructed by the above named College to challenge the decision of the Sponsorship Unit of 19 April 2011."

11. On 17 May UKBA replied to the Pre-Action Protocol letters saying that the interim CAS limit would not be raised. There was no reference in the letter to the repeated request for an urgent visit or to the possibility of a further visit or upgrade.
12. Meanwhile, in fact UKBA had been taking steps to arrange a further inspection and an unannounced inspection took place on 19 May. Why it was unannounced, in the light of the previous indication that the college would be told when it was to take place, is unclear but perhaps immaterial. The evidence does not show what was the outcome of the inspection at that time or whether any indications were given when a decision might be expected.
13. On the following day, 20 May, the college issued its claim for judicial review. The decision challenged was :

"Decision of the Defendant dated 19 April 2011 to prohibit the Claimant College from issuing further CAS to new students."

A number of grounds were set out. The principal challenge was that it was unlawful for the Home Secretary to introduce a change to the Immigration Rules within the 40 day period after amended rules had been laid before Parliament, that being the period during which they were subject to parliamentary rejection by negative resolution. There were other grounds of complaint including an allegation of contravention of Article 1 to Protocol 1 of the European Convention, the contention being that the introduction of the policy in the circumstances in which it was introduced amounted to a disproportionate interference with the college's possessions within the meaning of Article 1 to the Protocol.

14. Simultaneously with issuing the application for judicial review the college applied on paper for urgent interim relief. The application was served on the Home Secretary, as indeed the rules required, on the same day. The application was considered on paper on 24 May by HHJ Waksman QC sitting as a High Court judge in Manchester. He ordered that there should be an urgent half-day hearing to consider the application and directed that it should take place on 22 May. The judge was not informed that there had been an inspection on the day before the judicial review application was made and that the college was awaiting a decision from the UKBA in the light of that inspection. Although it was not a without notice application, the court ought to have been informed of that fact.
15. On the afternoon of 26 May, ie the day before interim application was due to be heard, T Sol sent a letter to the college's solicitors in the following terms:

"I have this afternoon been instructed by my client that, pursuant to a UKBA visit to Darwins College on 19 May 2011, a decision has been made to award the college A-rated status. Darwins College should receive notification of this decision from UKBA within the next few days.

Please note that the decision to upgrade the Darwin College's sponsor rating has not been made in response to the judicial review application of the Claimant's without prejudice offer dated 25 May 2011, but solely on the basis of the assessment carried out on 19 May.

In the light of the above, it is submitted that the grounds of challenge are now academic and I am instructed to invite the Claimant to withdraw this application. I therefore enclose a draft consent order for your consideration."

16. The application for judicial review was indeed academic from that moment and was resolved by a consent order giving leave to the claimant to withdraw his application subject to determination of the respective parties' liability for costs. As to that, directions were given for the filing of written submissions.
17. They were filed and, having considered the matter on paper, HHJ Pelling QC made the order against which the Home Secretary now appeals.
18. His decision was that the defendant should pay the claimant's costs of the proceedings to be assessed on the standard basis. His reasons were as follows :

"The challenge was the subject of a properly particularised letter before action sent by the Claimant to the Defendant dated 11^th May 2011. The Defendant replied but did not concede -- see the letter of 17 May 2011. Proceedings were then issued. It was only nine days after the issue of proceedings, and after the court had fixed an interim relief hearing, that the Defendant conceded. In those circumstances, the Claimant is entitled to recover his costs of these proceedings following Bahta [2011] EWCA Civ 895 -- see in particular paragraphs 59 to 61. The Claimant had set out its case in a PAP letter and had been driven to issue and, therefore, to incur costs by the intransigence of the Defendant. That is a good enough reason for exercising my discretion to award costs to the Claimant. Although the Defendant asserts that the claim was brought prematurely, that such was the case is not apparent from the letter of 17^th May or from any other material that was supplied by the Defendant to the Claimant prior to the commencement of proceedings. I do not accept that the position in law is as asserted by the Defendant in paragraph 34 of her submissions. The position faced by the Claimant was a stark one which caused the Judge to direct an urgent hearing. I do not consider that it is open to the Defendant to claim the Claimant acted prematurely in such circumstances at any rate by reference to material to which the claimant was not privy at the time. "

19. Paragraph 34 of the submissions to which the judge referred had read as follows:

"The normal position in relation to judicial review permission proceedings is that there is no order for , unless there is good reason to award one party their costs. A Claimant is only entitled to reasonable costs from the Defendant pre-permission where his or her case is 'plain and obvious'. This is a higher test than the threshold for granting permission for judicial review (i.e whether the claim is 'arguable'). This is by no means a case in which it is plain and obvious that the claimant would have succeeded from the outset when this judicial application was lodged "

20. Bahta, to which the judge referred in his reasons, is the latest in a line of cases where the court has given guidance about the exercise of its discretion in the matter of costs where an application for judicial review has been settled without a contested hearing. In Boxall v LB Waltham Forest [2001] 4 CCL Rep 258 Scott Baker J summarised the principles to be deduced from the authorities as follows :

"(i) the court has power to make a costs order when the substantive proceedings have been resolved without a trial but the parties have not agreed about costs.

(ii) it will ordinarily be irrelevant that the Claimant is legally aided;

(iii) the overriding objective is to do justice between the parties without incurring unnecessary court time and consequently additional cost;

(iv) at each end of the spectrum there will be cases where it is obvious which side would have won had the substantive issues been fought to a conclusion. In between, the position will, in differing degrees, be less clear. How far the court will be prepared to look into the previously unresolved substantive issues will depend on the circumstances of the particular case, not least the amount of costs at stake and the conduct of the parties.

(v) in the absence of a good reason to make any other order the fall back is to make no order as to costs.

(vi) the court should take care to ensure that it does not discourage parties from settling judicial review proceedings for example by a local authority making a concession at an early stage."

21. That passage was cited with approval by this court in R(Scott) v LB Hackney [2009] EWCA Civ 217. Jackson LJ, in his report on costs, noted that a significant number of judicial review claims are settled in the claimant's favour but that the practical effect of Boxall was to make costs orders very rare in such cases. He suggested that, where a claimant has complied with the Pre-Action Protocol and the defendant concedes a material part of the claim only after the issue of proceedings, the claimant should normally recover his costs. In Bahta this court was invited to reconsider the Boxall guidelines in the light of the Jackson report. It declined to formulate an amendment to the Boxall guidelines for fear of such a formulation being applied mechanistically. However, Pill LJ said in the course of his judgment, with which the other members of the court agreed:

58. In my judgment, it is the date at which the application for costs is determined that is the relevant date for assessment. However, a consideration of what order should be made requires consideration of the whole sequence of events and the conduct of the parties throughout. That includes the conduct of the parties after the defendant has told the claimant that relief is being offered and what the relief is.

59. What is not acceptable is a state of mind in which the issues are not addressed by a defendant once an adequately formulated letter of claim is received by the defendant. In the absence of an adequate response, a claimant is entitled to proceed to institute proceedings. If the claimant then obtains the relief sought, or substantially similar relief, the claimant can expect to be awarded costs against the defendant. Inherent in that approach, is the need for a defendant to follow the Practice Direction (Pre-Action Conduct) or any relevant Pre-Action Protocol, an aspect of the conduct of the parties specifically identified in CPR r.44.3(5). The procedure is not inflexible; an extension of time may be sought, if supported by reasons.

22. In giving permission to appeal Sir Richard Buxton said :

"I am driven to think that the judge may have misunderstood the reason why the case settled and the extent to which the Secretary of State conceded the correctness of the applicant's arguments. If he did err in those respects, that may undermine the basis of his discretionary decision on costs to the extent that it is appropriate for this court to intervene."

23. Those words have formed the kernel of the Home Secretary's appeal. Mr Hall, on behalf of the Home Secretary, submits that the judge did indeed misunderstand the reason why the case settled and misapplied the comments in Bahta on the facts. He submits that this is not a case where the settlement resulted from a concession made after proceedings had been instituted which could reasonably have been made after receipt of a Pre-Action Protocol letter and before the application for judicial review was issued. In this case the offer of settlement was the product of a process which was simultaneous with, but independent of, the legal challenge advanced in the judicial review application. Besides its challenge to the legality of the decision dated 19 April, the college had been requesting a re-inspection that took place before the judicial review application was issued, albeit only on the previous day. The visit was not devised for the ulterior purpose of enabling the Home Secretary to make a tactical retreat from the impugned decision. It was a genuinely new development in response to the college's request for a reinspection. The outcome was that the inspectors recommended the upgrading of the college's status and UKBA acted on the recommendation, but that involved no concession in the proper sense of the word. The judge therefore erred in his summary of the facts, and that vitiates the basis on which he exercised his discretion.
24. Mr McKendrick, on behalf of the college, submitted that the judge cannot have failed to understand the facts. He had plainly taken on board the Home Secretary's submissions, because he referred specifically to paragraph 34 and to the argument that the application had been premature. It was wrong to read the judge's reasons as if he was understanding the Home Secretary to have conceded that her policy was unlawful. Of course she had made no such concession, but that was a rather over-narrow approach. The judge had to look at the facts more widely. Here there had been a failure properly to comply with the Pre-Action Protocol. The response of UKBA dated 17 May had not addressed the complaint of undue delay or the request that there should be an assurance of an immediate or urgent inspection and an assurance that this would be followed by an urgent decision. There had then been in substance a retreat by the Home Secretary, because in place of the decision that the college was prohibited from issuing any new CAS's came now an approval of its upgrade to A status. The college had therefore achieved by that route its object of being able lawfully to continue to issue a CAS. It was in that sense that the judge must have been referring to a concession and in that sense the word was an apt description. It was true that there had been some movement on the part of the UKBA in that an inspection had taken place on 19 May, ie on the day before the issue of judicial review application, but that was not only very late in the day, at a time when the judicial review application was fully prepared, but also came without any assurance that there would be an urgent decision, against a background in which the UKBA had previously taken over four months to give a decision following an inspection. Without any assurance that a fresh decision would be taken speedily, it was reasonable for the college to press ahead with its judicial review application in the way that it did, and that must have been what the judge had in mind when he spoke of the college being faced with a stark position in which it had been driven to issue its application.
25. That is a nuanced analysis of the facts but I do not think that it is possible to spell it out of the judge's reasons. I have some sympathy with the judge. He was having to deal with the matter on paper without the benefit of oral advocacy, which is sensible in itself because the last thing the court wants is for there to be further time and expense on applications of this kind. Nevertheless it means that clarity in the presentation of submissions is extremely important. The story was quite a complex one, as the narration of the history shows. The Home Secretary's submissions on costs went at length into matters of doubtful relevance, in particular the argument as to the underlying merits of the judicial review claim, but they did not provide the judge with a clear analysis of the complex factual history that the college had set out in its chronology. Indeed the judge seems not have been shown the letter of the 30 May, although there was reference to it and he must have been able to glean what its contents were.
26. In short, the facts were more complex than a straightforward reading of the judge's reasons gives any ground to suppose that he apprehended. I consider that he was wrong to describe the conduct of UKBA as intransigent. His reasons took no account of the fact that there had been a reinspection before the issue of proceedings. If his reasoning had been that which Mr McKendrick seeks to attribute to him, it is really inconceivable that he would not have added if only a single sentence to his reasons to explain it. His reasoning is really altogether more straightforward, namely that this was a late concession of something which ought to have been conceded in response to the Pre-Action Protocol letter. If so, and that is how I think it has to be read, it was a flawed understanding of the facts. The UKBA had arranged a fresh inspection, which had taken place before the issue of proceedings and it was not in a position to make a decision on upgrading until it had received the result.
27. I conclude therefore that the ground on which Sir Richard Buxton gave permission to appeal is made out. I accept also that the basis of the exercise of the judge's discretion was therefore undermined and it is therefore for this court to decide what order should be made. I think that there is some criticism which can be properly be made of each side. Mr McKendrick has justification in saying that the letter of 17 May omitted altogether to deal with the complaint of delay or the request for urgent re-inspection. It was shutting the door in the face of the claimant by saying that there would be no increase in the college's CAS, but that was not the end of the story because a fresh inspection did take place before the application was issued. It would have been only sensible for the college in that situation to ask UKBA for a firm indication when they could expect a decision. After all, in one of the letters of 11 May, they had said that they would issue judicial review proceedings if there was no inspection within seven days to be followed by a decision within 14 days. They had now had an inspection within eight days and there was no necessity to issue proceedings without asking to know when they could expect a decision.
28. In all the circumstances I think that a fair disposal is that there should be no order as to the costs below. Costs of this appeal are another matter.

Sir Andrew Morritt:

29. I agree. Although we are differing from the judge below, this is one of those very unusual cases in which we are probably better placed in this court than was the judge to reach a conclusion as to the appropriate order. That is because, as my Lord has already mentioned, we have had the benefit of oral argument, which was denied to the judge, and furthermore I am quite confident that the time allocated to the hearing of this matter in this court has been very considerably longer than is likely to have been allocated to the judge below for his consideration of the matter on the papers. I agree that the appeal should be allowed and an order substituted as my Lord as proposed.

The Chancellor:

30. I also agree with both judgments for the reasons given by my Lords.

Order: Appeal allowed