Jersey Unreported Judgments

Costs.

[2024]JCA084

Court of Appeal

11 April 2024

Before     :

Sir William Bailhache KC JA President, The Rt Hon James Wolffe KC JA Mr Paul Matthews JA

 

Advocate J. Harvey-Hills for the Appellant / Applicant

Advocate G. G. P White for the Respondent

H M Attorney General in person

judgment

BAILHACHE AND MATTHEWS JJA:

Introduction

1.        On 18 January 2024, judgment was handed down ([2024] JCA 014), the Court concluding that the provisions in Article 2 of the International Cooperation (Protection from Liability) (Jersey) Law 2018 (the "2018 Law") which prevented the court making a costs order adverse to the competent authority in particular types of case were incompatible with Article 6 of the European Convention on Human Rights (the "Convention").  A declaration of incompatibility was made pursuant to Article 5 of the Human Rights (Jersey) Law 2000.  The Court was required to consider the issue following the Appellant's success in the jurisdiction appeal and subsequently in its application for leave to appeal and the substantive appeal which applications were heard together on 24 January 2023.  This Court granted leave to appeal, allowed the appeal and gave leave to apply for judicial review - see [2022] JCA 196 and [2023] JCA 057.  As a result of that success, the Appellant submitted that the Court should order that the costs of the various appeals should be the Appellant's costs in the cause.  The Respondent resisted that on the basis that the 2018 Law protected the Respondent from liability for costs in these circumstances.

2.        The relevant part of Article 2 of the 2018 Law provides as follows:

"(1)     Subject to paragraphs (2) and (3) but despite any other provision in any other enactment to the contrary, a public authority shall not be liable -

.....

           (c)        for costs in legal proceedings,

in respect of any act done in the discharge or purported discharge of the public authority's functions under any enactment specified in Schedule 1 or Regulations or an Order made under such enactment which entitles the public authority to give assistance to a relevant authority of any country or territory outside Jersey unless it is shown that the act was done in bad faith.

.....

(3)       A public authority may rely on the good faith of the relevant authority to which it gave the assistance referred to in paragraph (1) to prove that the public authority did not act in bad faith.

(4)       The Minister may by Order exclude any type of ...costs... in respect of assistance in any legal proceedings from the application of this Law."

3.        Schedule 1 specified a number of enactments including the Taxation (Implementation) (Jersey) Law 2004, which is the legislation underpinning the granting of mutual legal assistance in tax matters relevant to this case.

4.        The Court's judgment [2024] JCA 014 set out our reasoning in some detail.  There was a review of the Jersey cases on costs involving public authorities, and a review of the more recent English cases ending with the decision of the Supreme Court in Competition and Markets Authority v Flynn Pharma Ltd [2022] 1 WLR 2972.  This Court then considered the documentary evidence that had been put before us by HM Attorney General which consisted of the report and proposition accompanying the draft of the 2018 Law which was subsequently enacted, the appendix to the report consisting of human rights notes prepared by the Law Officers' Department in Jersey, the drafter's explanatory note and the Hansard Report of the debate in the States Assembly when the draft law was adopted (the travaux préparatoires).  We also had the minutes of the States meeting.  The remaining documents put before us by HM Attorney General were the report on the 2021 Jersey Census and the underlying statistics and data tables, a summary of the annual report and accounts of the States of Jersey for 2022, showing the budget for that year to be £1,028 million with approved expenditure of £924 million and an estimated surplus after depreciation of £104 million; a summary of the financial services policy framework issued by the Government of Jersey in December 2021; a summary of the Financial Action Taskforce (the  "FATF") methodology for assessing the technical compliance with the FATF recommendations and the effectiveness of AML / CFT systems updated in June 2023; the International Monetary Fund working paper on the  Gray - Listing on Capital Flows published in May 2021, examining the impact on what happened to a country's capital flows after it is included in the FATF's list of countries or jurisdictions with strategic deficiencies in their framework for anti-money laundering / combatting the financing of terrorism; and the Global Forum on Transparency and Exchange of information for tax purposes peer review of the automatic exchange of financial account information in 2022, which in summary showed that Jersey's legal framework implementing the relevant standards was in place and consistent with the requirements of the automatic exchange of information terms of reference; and that the effectiveness of Jersey's implementation of the exchange of information standard was on track.  We also had put before us the Exchange of Information on Request Handbook for Peer Reviews 2016 - 2020; the Peer Review Report on the Exchange of Information on Request concerning Jersey in 2017; some media clippings involving a number of very wealthy individuals who, according to the media, have placed their assets offshore and who have been involved in an amount of litigation in connection therewith; and Jersey's legal aid guidelines published by the States of Jersey in December 2021.

5.        It was never in question before us - and we accept - that Jersey's economy was heavily reliant upon the different pillars of the financial services industry and that the island was and is committed to playing its part in the international fight against money laundering and the financing of terrorism.

6.        As to the exercise as to whether the terms of Article 2 of the 2018 Law were, in relation to awards of costs, incompatible with the European Convention, it was agreed by all parties that there were three questions for the Court - was the rule a restriction on the right of access to a Court, did it pursue a legitimate aim, and was there a reasonable relationship between the means employed and the aim to be achieved?

7.        There was no dispute that the costs rule in principle did operate as a restriction on the right of access to the Court.  By a majority, the Court considered that the aim of the legislation was not, as contended by HM Attorney General, the avoidance of the chilling effect on the performance of the island's international obligations to give assistance in tax matters, so important to the island's economy, but simply the protection of the States' budget.  Having considered the proper construction of the statute, and the travaux préparatoires, the Court considered there was not enough to reach the conclusion that the legitimate aim of the legislation was the avoidance of the chilling effect itself.  However, the Court went on to consider whether, if that had been the aim of the legislation, the costs rule bore a reasonable relationship of proportionality between the means employed and the aim sought to be achieved.  On that issue the Court was unanimous that it did not, and hence made the declaration of incompatibility.

8.        On 14 February, HM Attorney General applied for leave to appeal to the Judicial Committee of the Privy Council.  The Court resolved to permit written contentions to be filed by the Appellant, and these were received on 1 March.  We have had regard to all that material.

9.        The question of leave to appeal has been considered by this Court on a number of occasions, including in particular Botas v Tebe [2016] 2 JLR 511.  Essentially the test is whether there is (i) an arguable point of law, (ii) of general public importance, (iii) that needs to be determined now by the Privy Council.  In applying that test, we are best placed to judge (ii) insofar as the point concerns Jersey, this Court and the Judicial Committee are equally able to judge (i), but the Judicial Committee is uniquely placed to judge (iii).  Accordingly, this Court would normally be slow to find (iii) satisfied, although it might do so where it was important for Jersey that an arguable point of law of general public importance to the island was to be resolved. 

10.     It is right to say that we have been very sensitive to the fact that this is the first occasion on which this Court has made a declaration of incompatibility in relation to any legislation adopted by the States of Jersey.  Such a decision is constitutionally significant.  If we were satisfied that there were a material and arguable point of law which arose and which needed to be decided now, this consideration of constitutional significance would lead us to the view that we should grant leave. 

11.     We have also considered carefully the drawback that we faced, namely that the question of compatibility of the 2018 Law with the Convention was raised for the first time at appellate level.  Accordingly we have not had the advantage of considering the reasoned decision of the Royal Court, nor have we had the advantage of the argument being refined on appeal as is so frequently the case.  Ultimately, that has not made any difference to our approach on this application for leave, but we think it right to mention it expressly in order that, if the application is renewed before the Judicial Committee, the point can be given such additional weight as might be appropriate.

Discussion

12.     We have set out above the material which was put before the Court to support the Attorney's submissions that the aim of the legislation was the avoidance of a chilling effect in the performance of the duties of the tax authority under the relevant international agreements.  For the most part, we did not consider these materials to be relevant to identifying what the aim of the legislation was - the Court approached that matter by construing the legislation itself, not finding, by a majority, that the travaux préparatoires were sufficient to justify a conclusion that the real aim of the legislation was the avoidance of the chilling effect and, with its avoidance, an enhanced approach to assisting requests by the island's international treaty partners. In summary, in our view, again by majority, this approach does not give rise to an argument over a point of law.  The issue turns on consideration of a mixed question of construction and of fact.  The majority concluded that the social policy which the legislation was intended to advance was the protection of the States' budget.  We have noted that, since our judgment was delivered, there has been published the decision in the recent case of Jakutavicius v Lithuania (ECHR 2nd Section, Application No. 42180/19, judgment being delivered 13 February 2024).  In that case, at [79], the Court acknowledged that public interest related financial considerations may sometimes play a part in a State's policy to decrease State expenses, and it accepted the Government's argument in that case that the financial burden to reimburse a defendant's legal costs in administrative law proceedings was such that the impugned restriction did pursue a legitimate aim.  However, in our view the circumstances of that case were quite different, not least because domestic law in that case provided for the reimbursement of legal costs incurred in administrative law proceedings only in cases in which it was established that the relevant public authorities or officials had acted unlawfully, and the Courts which had considered the applicant's case had found that the police officers had acted within their remit. Accordingly, the Court did not find that in the circumstances of that case the applicant had his right of access to a Court violated by the conclusion that he had to bear his own costs in the administrative proceedings.

13.     The first ground of appeal which the Attorney General advances is that the majority ought to have held that the aims of the 2018 Law were to protect public authorities in dealing with requests for assistance from other jurisdictions from the chilling effect which would flow from a potential liability for costs and the need to maintain the reputation of Jersey as a reliable partner in law enforcement activity internationally.  The decision on the aim of the legislation is made by having regard to the construction of the law and, where appropriate, the other materials put before the Court to give context to the legislation. It Is a mixed question of construction and fact. In the judgment of the majority, it was concluded that there was nothing, as a matter of construction, to support the Attorney General's submissions; and it would have been easy to include language that pointed in that direction. In the view of the majority the travaux préparatoires also did not provide enough to support the Attorney's submissions. In the round, in our view this ground of appeal does not raise an arguable point of law.

14.     It is further contended on the application for leave that the Court erred in failing to hold that the protection of public finances concerning requests for assistance from other jurisdictions was a legitimate aim.  That misconstrues what the Court actually said, which was at [186] that the real purpose of the legislation was to protect the States' budget which might be a legitimate aim but, where there would be interference with Convention Rights more was needed to point to the particular social or economic problem which explains why the legislation was enacted.  The conclusion of the majority was that there was insufficient evidence that the avoidance of the chilling effect was the aim of the legislation.  That was the basis upon which the argument was run before us.  The majority found it was not the legitimate aim of the legislation, but nonetheless and then went on to consider whether, on the basis that the legitimate aim was the avoidance of the chilling effect or the protection of the States' budget, the legislation was rationally connected to the aim, and struck a fair balance.

15.     Insofar as our conclusions on the aim of the legislation are concerned, in our view, this was a judgment call on the materials put before us, and there is no particular point of law which arises as a result of that call. In our judgment, the Re Abortion Services case, to which Wolffe JA refers, is relevant to the point that a decision on proportionality can raise an issue of law, but does not go to the question of what the aim of the legislation was, which is a mixed question of construction (which in the present case is not challenged) and fact.

16.     Ground 2 asserts that the Court erred in focussing on the 2018 Law as a whole.  This is difficult to follow in the light of the subsequently pleaded detailed ground at [11] that the majority erred in not considering the 2018 Law as a whole.  At all events, in our view the exercise of considering the compatibility of the provision with the Convention inevitably requires us to look at the law as a whole.  In the course of doing so, we considered whether there had been any violation of rights in the case before and at [169] noted that the rule in the 2018 Law systematically treated the two parties differently as regards costs.  Indeed the costs rule in the 2018 Law did not admit of any judicial discretion to modify that rule in the light of particular circumstances, thereby, it might be said, trespassing on the jurisdiction of the Court to ensure a fair hearing in any case before it.

17.     We take Ground 1d, which asserts that the Court erred in failing to recognise and / or apply an appropriately wide margin of appreciation, and Ground 3 together. As to the former, the complaint is not that the Court failed to recognise that there was a margin of appreciation, but it is that the Court failed to afford a wide enough margin by considering that this provision went too far.

18.     Ground 3, which deals with the question of proportionality by reference to the predicted impact on a class of litigants not before the Court, ignores the Court's conclusion at [78] and [200] that the provision under attack created an inequality of arms. Although this would be obvious in the case of litigants without substantial means at their disposal, the inequality was apparent in every case - thus in the present case the submission was made, and accepted, that "every pound the Appellant spends is dead money". In our judgment, this complaint does not raise any significant issue of law. The general restriction involved in the provision under attack would always result in an inequality of arms even if it did not always impact upon the right of access to a court.

19.     It is said that the Court wrongly took into account the accuracy or adequacy of what was said in the States Assembly in the course of debate on the 2018 Law. Both as to the assessment of the aim of the legislation and as to its proportionality, we consider we followed the guidance of Lord Reed in R(SC) to which Wolffe JA refers below. If it is said that the Court ought to allow a fair margin of appreciation to the legislature in adopting legislation which breached Convention Rights in order to meet a particular social policy or legitimate aim, then, as is implicit at [186] of the judgment of the majority, it seems to us to be necessary that the legislature can be seen to have considered the various points in question.  Here, there was little or no evidence that the legislature had done so. Indeed the note from the Law Officers signalled that there was no issue of Convention rights which needed to be considered.  The legislature was not told that the existing rules, prior to the legislation, would only have resulted in a costs award against the competent authority if it acted unlawfully, nor was the legislature told that the effect therefore of the 2018 Law was to protect the competent authority from costs orders in circumstances where it had acted unlawfully.  Put in those bald terms, one would have expected any debate in the legislature to have reflected at least a recognition of different ethical positions which might have been taken on the draft law. In this case there was nothing. It is hard to assert that therefore the margin of appreciation to the legislature carried much weight in this particular case. 

20.     In our view, Ground 4, which avers that the Court erred by not considering whether the Appellant's Article 6 rights were actually traversed by this legislation, is not fundamental to the essential issue of compatibility with the Convention because of our conclusions over the inequality of arms which this provision necessarily introduces into proceedings commenced under this Law; but this is a question upon which the Judicial Committee can pronounce if it thinks right to do so, and we should not require it to be addressed by granting leave.

21.     In Ground 5, H M Attorney General submits that the Court erred by disregarding the reasoning in Ferrazzini v Italy (2002) 34 EHRR 45, which could support the view that the determination of civil rights and obligations, when the relevant notice is served with a view to ascertaining a tax liability, was excluded from the civil aspect of Article 6 of the Convention.  Although we have disagreed with this submission, we recognise that it does raise a genuine point of law which is both significant and arguable.  There are conflicting strands of authority before the European Court, as demonstrated in our judgment.  However, the arguable point of law is not peculiar to Jersey, and in our judgment, it is not therefore for us to give leave.  It falls firmly in that category where the Judicial Committee should decide whether this is the case and now is the time for that issue to be considered.

22.     For these reasons, we refuse leave to appeal.

WOLFFE JA

23.     I agree with the President and Matthews JA that proposed Ground of Appeal 5 raises an arguable and significant point of law, but that it would be for the Judicial Committee to decide whether it is an issue which requires to be considered by the Committee at this time.  For my own part, I consider that proposed Grounds of Appeal 1 to 4 also raise arguable points of law.  Those Grounds are directed to an issue, which, in my view, is of general public importance - namely whether we were correct to conclude, and to declare, that the immunity from costs granted to certain public authorities by the 2018 Law is incompatible with Article 6 of the European Convention on Human Rights. Nevertheless, although we disagreed in relation to the aim of the measure, we were unanimous that it would be incompatible with Article 6, both on the basis that it is a disproportionate restriction on access to the court and also (as the President and Matthews JA have emphasised) by reference to the principle of equality of arms. In these circumstances, I am content that we should leave it to the Judicial Committee to decide whether the issues which arise are ones which the Committee should consider at this time.

24.     In deference to the views of the President and Matthews JA, I should explain briefly why I consider that Grounds of Appeal 1 to 4 raise arguable points of law.

25.     I recognise that the exercise (to which proposed Grounds of Appeal 1a and 1b are directed) of identifying the aim of an enactment which interferes with Convention rights may be regarded as concerned with the question of why, as a matter of history, the legislation was made.  But in R(SC) v Secretary of State for Work and Pensions [2021] UKSC 26, paragraph 172 (in a judgment with which the other judges of the Supreme Court agreed), Lord Reed characterised the determination of the question as "an essentially legal construct".  It is not a question of primary fact; nor is it an evaluative exercise in relation to which a first instance tribunal has any particular advantage. It is more akin to the exercise of attributing legislative purpose to an enactment for the purpose of statutory interpretation, or of attributing contractual purpose to an agreement for the purposes of contractual interpretation. It may (as it is in this case on the characterisation of the aim preferred by the majority) be determinative of the enactment's compatibility with Convention rights. I accordingly consider that a question of law arises.  Not least because the Court divided on this question, it is, in my view arguable.

26.     The recent Strasbourg case of Jakutavicius, to which the President has referred, adds weight to the Attorney General's contention in his application for leave to appeal that reducing the burden on the public purse may, at least "sometimes", be a legitimate aim.  The questions of when it may do so, and whether in the circumstances of this case this aim is an available justification for the costs rule in the 2018 Law (the essential issues raised by proposed Ground of Appeal 1c) are, it seems to me, questions of law, and in light of Jakutavicius (where preservation of public funds was the only aim said to justify the measure in question), I accept that they are arguable.

27.     Proposed Ground of Appeal 3 is directed to our conclusions on proportionality.  Applying the approach taken by the UK Supreme Court in In re Abortion Services (Safe Access Zones) (Northern Ireland) Bill [2023] AC 505, paragraphs 28ff, the proportionality of a general rule of law which restricts Convention rights does not fall to be treated as a question of fact. In such a case (by contrast with a case-specific decision), an appellate court should not, the UK Supreme Court tells us, limit its consideration to a review of the rationality of the lower court's decision but will make its own assessment. There are, it seems to me, good constitutional reasons for that approach.  That being so, it seems to me that Ground of Appeal 3 raises an arguable point of law. If it is necessary for the Applicant to identify a specific alleged legal error of approach in relation to proportionality, the proposed Ground of Appeal challenges the approach which, under reference to Animal Defenders International Ltd, we took when considering the margin of appreciation and, under reference to R (SC) v Secretary of State for Work and Pensions [2021] UKSC 26, I consider that point to be arguable.

28.     Proposed Grounds of Appeal 2 and 4 challenge the general approach which we took to this case. That approach reflected the way in which the case was presented to us at the hearing.  Advocate Harvey-Hills did not seek to argue that there were specific features of this case which would justify concluding that the Appellant's Article 6 rights would be infringed by the application to it of the costs rule in the 2018 Law.  Rather, by attacking the legitimacy of the aim of the measure (as he characterised it), he sought a finding that the costs rule was necessarily incompatible with Article 6. It is, in my view, open to a party which has standing to challenge the compatibility of a general measure with Convention rights. That is vouched, at Strasbourg level, by Animal Defenders International Ltd v United Kingdom, and illustrated, in the UK jurisprudence, by cases such as Christian Institute v Lord Advocate [2017] SC (UKSC) 29.  In the present case, the Attorney General did not contend that the Appellant did not have standing and, in response to a specific question from the bench during the hearing, affirmed that he was not advancing a submission on victim status.  He, further, accepted that the costs rule was in principle a restriction on the right of access to the Court. The Respondent accepted that, were it not for the 2018 Law, a costs order in favour of the Appellant would be appropriate; and the Appellant sought a "reading down" of the Law in order to allow such an order to be made. None of these are features of an actio popularis. The passage in R (Chester) v Secretary of State for Justice [2013] UKSC 63, para 102, on which the Attorney General relies, recognises that there may be occasions where a declarator of incompatibility is appropriate even though the Court has not found that the provision in question is incompatible with the rights of the individual litigant.  Nevertheless, I recognise that ordinarily the focus in a Convention rights case is on whether a measure has breached the Convention rights of a particular litigant, and that, as the UK Supreme Court observed in R (Chester) the court should be very slow to grant a declaration of incompatibility at the instance of a litigant with whose own rights the provision is not incompatible. Against that background, it seems to me that the essential contention which the Attorney General wishes to advance in proposed Grounds of Appeal 2 and 4 - that we erred in not addressing squarely whether the Appellant's Convention rights would be infringed by the application to it of the costs rule - does raise an arguable point of law.

Authorities

Imperium Trustees (Jersey) Limited v Jersey Competent Authority [2024] JCA 014. 

International Cooperation (Protection from Liability) (Jersey) Law 2018.  

Human Rights (Jersey) Law 2000. 

Imperium Trustees (Jersey) Limited v Jersey Competent Authority [2022] JCA 196.  

Imperium Trustees (Jersey) Limited v Jersey Competent Authority [2023] JCA 057. 

Taxation (Implementation) (Jersey) Law 2004. 

Imperium Trustees (Jersey) Limited v Jersey Competent Authority [2024] JCA 014.  

Competition and Markets Authority v Flynn Pharma Ltd [2022] 1 WLR 2972. 

Botas v Tebe [2016] 2 JLR 511. 

Jakutavicius v Lithuania ECHR 2nd Section, Application No. 42180/19.  

Ferrazzini v Italy [2002] 34 EHRR 45. 

European Convention on Human Rights. 

R(SC) v Secretary of State for Work and Pensions [2021] UKSC 26. 

Abortion Services (Safe Access Zones) (Northern Ireland) Bill [2023] AC 505. 

Christian Institute v Lord Advocate [2017] SC (UKSC) 29. 

R (Chester) v Secretary of State for Justice [2013] UKSC 63.