Upper Tribunal (Administrative Appeals Chamber)

Decision of the Upper Tribunal
(Administrative Appeals Chamber)

 

The applicants are to pay to the Secretary of State the percentage of his costs in the Upper Tribunal that equals the costs that the Court of Appeal ordered him to pay to the applicants. The effect of this is that, without the need for assessment, there is a set off of this award for costs against the award of costs made by the Court of Appeal.

Reasons for Decision

 

TABLE OF CONTENTS

In electronic copies of this decision, CTRL-left click on any entry in this Table will jump to the relevant section.

 

A. What we have to decide. 2

B. The course of the proceedings. 2

C. The costs rules. 5

The Upper Tribunal rules. 5

Civil Procedure Rules (CPR) 7

D. The overriding objective and the duty to co-operate. 9

The Upper Tribunal Rules. 9

CPR.. 9

E. Costs in Tribunals. 10

F. R (LR) v First-tier Tribunal 12

G. Other caselaw relevant to the Upper Tribunal 13

H. The arguments. 14

For the Secretary of State. 15

For the applicants. 17

I. Our analysis in principle. 19

J. Our application of the principle. 21

Reasons of Charles J and Judge Lane. 21

Judge Jacobs’ dissenting view.. 26

 

A.        What we have to decide

1.         R (LR) v First-tier Tribunal (HESC) and Hertfordshire County Council [2013] UKUT 294 (AAC), [2013] AACR 27 was a case within the Upper Tribunal’s mandatory and exclusive judicial review jurisdiction. A three-judge panel of the Upper Tribunal decided that the costs regime applicable to a jurisdiction of the First-tier Tribunal applied also in judicial review proceedings brought in respect of decisions of that tribunal. We have to decide the costs regime that applies in the Upper Tribunal’s judicial review jurisdiction when the High Court has exercised its discretion to transfer proceedings to the Upper Tribunal. We have decided that the Upper Tribunal should apply the Administrative Court’s approach.

B.        The course of the proceedings

2.         MM and DM (the applicants) applied for judicial review in respect of the process of assessment for entitlement to employment and support allowance, arguing that it discriminated against claimants with mental health problems by reason of the failure of the Secretary of State to obtain further medical evidence relating to them in breach of the duty to make ‘reasonable adjustments’ pursuant to the duty to do so under section 20(3) the Equality Act 2010.

3.         The proceedings were commenced in the Administrative Court. Edwards-Stuart J gave permission to bring the proceedings and transferred the cases to the Upper Tribunal on the grounds that they were fact sensitive and involved issues that could have significant ramifications for the administration of employment and support allowance: [2012] EWHC 2106 (Admin). He considered that a tribunal consisting of a member or members who had experience of the workings of the state benefits system would be an advantage.

4.         We gave an interim decision on 22 May 2013 under reference [2013] UKUT 259 and 260 (AAC). We summarised our decision as follows:

(1) The establishment of the duty to make reasonable adjustments pursuant to s. 20(3) is based on a generic test.

(2) On that basis, the first limb of the statutory test set by s. 20(3) of the Equality Act 2010 is satisfied, because the present practice of the SSWP relating to FME, has the result that in a significant number of claims by claimants with MHPs, those claimants, and thus that class of claimants, are placed at a substantial disadvantage (and so, as defined, one that is more than minor or trivial) and/or suffer an unreasonably adverse experience.

(3) At this stage, it would not be reasonable for the SSWP to investigate or implement the introduction of a change in practice to one where FME was sought in respect of every claim because, at this stage, this would not be a reasonable step to take to avoid that substantial disadvantage.

(4) We do not have sufficient evidence to enable us to determine, on a properly informed basis and with appropriate particularity, the steps that it would be reasonable for the SSWP to take to avoid that substantial disadvantage, and thus to make an order that defines the steps to be taken by the SSWP under the second limb of the test set by s. 20(3) of the Equality Act 2010.

(5) We should direct the SSWP to take defined steps, within a defined period, to investigate and assess the implementation of significant changes in the practice relating to obtaining FME in respect of claimants with MHPs to provide the evidence referred to in (4).

(6) Those steps are in line with a recommendation concerning the obtaining of further documentary evidence made by Professor Harrington.

5.         We set out our order on remedy with our specific reasons on 24 May 2013:

 

1. It is hereby declared that persons with MHPs (as defined in paragraph 2 of our Decision promulgated on 22 May 2013 – “the judgment”) suffer substantial disadvantage in the present process of assessment for eligibility for Employment Support Allowance (“the Present Practice”) in the manner and for the reasons set out in the judgment (“the Substantial Disadvantages”)

2. The burden on the issue whether the adjustment advanced by the Applicants (the Evidence Seeking Recommendation as it is construed in paragraphs 70(i), (v) to (viii), 72, 73, 163 to 167 of the judgment “the ESR”)) or steps towards implementing it involve steps that it has been, is or will be reasonable for the Respondent (the SSWP) to take to avoid the Substantial Disadvantages (the Reasonableness Issue) has passed to and presently rests with the SSWP.

3. On the present evidence the Upper Tribunal is not in a position to make a properly informed decision on the Reasonableness Issue and with a view to providing it with evidence that will enable it to do so:

(A) By 3 July 2013 the SSWP is to carry out an investigation / assessment (that does not involve him undertaking any step that he wishes to argue it is not reasonable for him to take as a step to avoid the Substantial Disadvantages because such step is resource-intensive or for any other reason) and by reference thereto is to file such further evidence as he wishes to rely on in respect of the Reasonableness Issue that, without prejudice to the generality of the foregoing:

i. develops, particularises and supports any case he wishes to advance that it is not reasonable for him to implement in whole or in part the ESR or to take any steps in accordance with that recommendation and its purpose (as set out in paragraphs 70(i), (v) to (viii), 72, 73, 163 to 167 of the judgment) to change the Present Practice.

ii. addresses the matters identified in paragraph 169 of the judgment, and

iii. addresses with particularity what pilots or trials (if any) the SSWP proposes to carry out to assess the likely value or impact of any changes he proposes to make to the Present Practice, and in general terms the nature of pilot(s) and trial(s) that could be carried out to assess the likely value or impact of an implementation of the ESR, and why he has decided not to carry any of them out

(B) A directions hearing is to be fixed (time estimate half a day) on the first available date in July 2013 on or after 10 July 2013.

(C) Subject to further direction the Applicants and the First Three Interveners are to file and serve their evidence in answer to the evidence directed by paragraph (A) within 28 days of its service upon them.

(D) The SSWP may if he is so advised serve evidence in reply to that directed by paragraph (C) within 28 days of its service on him.

(E) A hearing date with a time estimate of 2 days is to be fixed in September 2013 to address, subject to further direction, the Reasonableness Issue and, if appropriate, all consequential issues.

(F) The parties have permission to apply on 2 working days’ notice for further directions

4. Costs reserved.

5. Permission to appeal is refused and the effect of our decision is not suspended.

6.         The Secretary of State appealed against our decision to the Court of Appeal. The Court rejected the first three grounds of appeal but allowed the fourth under reference [2013] EWCA Civ 1565.

7.         The first ground was whether we had power to give the applicants a remedy, including the declaration we had given. The Court decided that we did. The applicants were entitled to bring their claim by way of judicial review. We were (at [57]) ‘therefore entitled to declare, as a step relevant to the establishment of a breach of duty, that the current policy created a substantial disadvantage to MHPs in general.’

8.         The second ground was whether the evidence permitted a finding of substantial disadvantage. The Court decided that it did.

9.         The third ground was whether an unreasonably adverse experience a relevant substantial disadvantage. The Court decided that it was.

10.      The fourth ground was whether the Upper Tribunal overstepped its powers by issuing the directions we did. The Court allowed the appeal on this ground only, deciding that we had no power to direct the Secretary of State to produce evidence.

11.      The Court awarded the costs of the appeal to the applicants.

12.      Although the Secretary of State’s first ground of appeal failed, an aspect of his argument succeeded. The Court at [50] concluded that our analysis of section 21(3) was wrong and that any relevant proceedings must involve seeking to establish a claim of discrimination against at least one disabled person to whom the duty to make reasonable adjustments is owed. This was referred to during argument as the ‘individuation point’.

13.      We gave our final decision on 9 March 2015 under reference [2015] UKUT 107 (AAC), when we dismissed the claims. We did so by applying the Court of Appeal’s conclusion on the individuation point on the assumption in the applicants’ favour that there was a duty to make the most favourable reasonable adjustments sought. On that most favourable hypothesis to the applicants, we decided that there could not be an individual breach in respect of either applicant. We did so on the basis of the evidence available in respect of the applicants. The Secretary of State had only obtained their files from storage after the conclusion of the hearing.

14.      Subsequently, both the Secretary of State and the applicants applied for their costs. In view of the general principles raised by the applications, we directed an oral hearing of the application. It took place before us on 23 September 2015. Mr Malcolm Birdling of counsel represented the Secretary of State. Ms Nathalie Lieven QC and Mr Tim Buley of counsel represented the applicants. We are grateful to all of them for their written and oral arguments.

15.      There were four interveners in the substantive proceedings: three charities (MIND, the National Autistic Society, and Rethinking Mental Illness) and the Equality and Human Rights Commission. They have not taken any part in the costs proceedings.

C.        The costs rules

The Upper Tribunal rules

16.      A tribunal only has power to award costs if authorised to do so: Jones Department of Employment [1989] 1 QB 1 at 25. For the Upper Tribunal, that authority is provided by section 29 of the Tribunals, Courts and Enforcement Act 2007:

29 Costs or expenses

(1) The costs of and incidental to-

(a) all proceedings in the First-tier Tribunal, and

(b) all proceedings in the Upper Tribunal,

shall be in the discretion of the Tribunal in which the proceedings take place.

(2) The relevant Tribunal shall have full power to determine by whom and to what extent the costs are to be paid.

(3) Subsections (1) and (2) have effect subject to Tribunal Procedure Rules.

(4) In any proceedings mentioned in subsection (1), the relevant Tribunal may-

(a) disallow, or

(b) (as the case may be) order the legal or other representative concerned to meet, the whole of any wasted costs or such part of them as may be determined in accordance with Tribunal Procedure Rules.

(5) In subsection (4) ‘wasted costs’ means any costs incurred by a party-

(a) as a result of any improper, unreasonable or negligent act or omission on the part of any legal or other representative or any employee of such a representative, or

(b) which, in the light of any such act or omission occurring after they were incurred, the relevant Tribunal considers it is unreasonable to expect that party to pay.

(6) In this section ‘legal or other representative’, in relation to a party to proceedings, means any person exercising a right of audience or right to conduct the proceedings on his behalf.

(7) In the application of this section in relation to Scotland, any reference in this section to costs is to be read as a reference to expenses.

17.      We have to apply rule 10 of the Tribunal Procedure (Upper Tribunal) Rules 2008 (SI No 2698), which is made under the authority of that provision. In so far as relevant to these cases, it provides:

10 Orders for costs

(1) The Upper Tribunal may not make an order in respect of costs (or, in Scotland, expenses) in proceedings transferred or referred by, or on appeal from, another tribunal except-

(b) to the extent and in the circumstances that the other tribunal had the power to make an order in respect of costs (or, in Scotland, expenses).

…

(3) In other proceedings, the Upper Tribunal may not make an order in respect of costs or expenses except-

(a) in judicial review proceedings; …

(4) The Upper Tribunal may make an order for costs (or, in Scotland, expenses) on an application or on its own initiative.

(5) A person making an application for an order for costs or expenses must-

(a) send or deliver a written application to the Upper Tribunal and to the person against whom it is proposed that the order be made; and

(b) send or deliver with the application a schedule of the costs or expenses claimed sufficient to allow summary assessment of such costs or expenses by the Upper Tribunal.

…

(7) The Upper Tribunal may not make an order for costs or expenses against a person (the ‘paying person’) without first-

(a) giving that person an opportunity to make representations; and

(b) if the paying person is an individual and the order is to be made under paragraph (3)(a), (b) or (d), considering that person’s financial means.

(8) The amount of costs or expenses to be paid under an order under this rule may be ascertained by-

(a) summary assessment by the Upper Tribunal;

(b) agreement of a specified sum by the paying person and the person entitled to receive the costs or expenses (‘the receiving person’); or

(c) assessment of the whole or a specified part of the costs or expenses, including the costs or expenses of the assessment, incurred by the receiving person, if not agreed.

(9) Following an order for assessment under paragraph (8)(c), the paying person or the receiving person may apply-

(a) in England and Wales, to the High Court or the Costs Office of the Supreme Court (as specified in the order) for a detailed assessment of the costs on the standard basis or, if specified in the order, on the indemnity basis; and the Civil Procedure Rules 1998 shall apply, with necessary modifications, to that application and assessment as if the proceedings in the tribunal had been proceedings in a court to which the Civil Procedure Rules 1998 apply; …

(10) Upon making an order for the assessment of costs, the Upper Tribunal may order an amount to be paid on account before the costs or expenses are assessed.

Civil Procedure Rules (CPR)

18.      If the cases had been decided in the Administrative Court, rule 44.2 would have applied. This sets out the general approach to a decision on costs:

44.2 Court’s discretion as to costs

(1) The court has discretion as to-

(a) whether costs are payable by one party to another;

(b) the amount of those costs; and

(c) when they are to be paid.

(2) If the court decides to make an order about costs-

(a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but

(b) the court may make a different order.

…

(4) In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including-

(a) the conduct of all the parties;

(b) whether a party has succeeded on part of its case, even if that party has not been wholly successful; and

(c) any admissible offer to settle made by a party which is drawn to the court’s attention, and which is not an offer to which costs consequences under Part 36 apply.

(5) The conduct of the parties includes-

(a) conduct before, as well as during, the proceedings and in particular the extent to which the parties followed the Practice Direction – Pre-Action Conduct or any relevant pre-action protocol;

(b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(c) the manner in which a party has pursued or defended its case or a particular allegation or issue; and

(d) whether a claimant who has succeeded in the claim, in whole or in part, exaggerated its claim.

(6) The orders which the court may make under this rule include an order that a party must pay-

(a) a proportion of another party’s costs;

(b) a stated amount in respect of another party’s costs;

(c) costs from or until a certain date only;

(d) costs incurred before proceedings have begun;

(e) costs relating to particular steps taken in the proceedings;

(f) costs relating only to a distinct part of the proceedings; and

(g) interest on costs from or until a certain date, including a date before judgment.

(7) Before the court considers making an order under paragraph (6)(f), it will consider whether it is practicable to make an order under paragraph (6)(a) or (c) instead.

(8) Where the court orders a party to pay costs subject to detailed assessment, it will order that party to pay a reasonable sum on account of costs, unless there is good reason not to do so.

D.       The overriding objective and the duty to co-operate

19.      Among the issues we identified for discussion were (i) the relevance of the different wording of the overriding objective under the Upper Tribunal’s rules of procedure and the CPR that apply to the Administrative Court and (ii) the significance of the terms of the tribunal’s overriding objective in applying rule 10. These are the relevant provisions.

The Upper Tribunal Rules

20.      The overriding objective and the duty to co-operate that apply to the Upper Tribunal are set out in rule 2 of the Upper Tribunal’s rules of procedure:

2 Overriding objective and parties’ obligation to co-operate with the Upper Tribunal

(1) The overriding objective of these Rules is to enable the Upper Tribunal to deal with cases fairly and justly.

(2) Dealing with a case fairly and justly includes-

(a) dealing with the case in ways which are proportionate to the importance of the case, the complexity of the issues, the anticipated costs and the resources of the parties;

(b) avoiding unnecessary formality and seeking flexibility in the proceedings;

(c) ensuring, so far as practicable, that the parties are able to participate fully in the proceedings;

(d) using any special expertise of the Upper Tribunal effectively; and

(e) avoiding delay, so far as compatible with proper consideration of the issues.

(3) The Upper Tribunal must seek to give effect to the overriding objective when it-

(a) exercises any power under these Rules; or

(b) interprets any rule or practice direction.

(4) Parties must-

(a) help the Upper Tribunal to further the overriding objective; and

(b) co-operate with the Upper Tribunal generally.

CPR

21.      As in force from 1 April 2013, rule 1.1 provides that the overriding objective of the CPR is:

1.1.

(1) These Rules are a new procedural code with the overriding objective of enabling the court to deal with cases justly and at proportionate cost.

(2) Dealing with a case justly and at proportionate cost includes, so far as is practicable –

(a) ensuring that the parties are on an equal footing;

(b) saving expense;

(c) dealing with the case in ways which are proportionate-

(i) to the amount of money involved;

(ii) to the importance of the case;

(iii) to the complexity of the issues; and

(iv) to the financial position of each party;

(d) ensuring that it is dealt with expeditiously and fairly;

(e) allotting to it an appropriate share of the court’s resources, while taking into account the need to allot resources to other cases; and

(f) enforcing compliance with rules, practice directions and orders.

22.      Rule 1.2 provides how the overriding objective operates:

The court must seek to give effect to the overriding objective when it-

(a)       exercises any power given to it by the Rules; or

(b)       interprets any rule,

subject to rules 76.2, 79.2 and 80.2.

23.      Finally, rule 1.3 provides for the duty of the parties:

The parties are required to help the court to further the overriding objective.

E.        Costs in Tribunals

24.      Costs in Tribunals was a report by the Costs Review Group to the Senior President of Tribunals in December 2011. This is the section on judicial review:

H Costs regime in the judicial review jurisdiction of the Upper Tribunal

137. The costs of judicial review in the UT call for separate consideration. There are two aspects. The first is whether the costs regimes for cases transferred in from the Administrative Court on a discretionary basis and for cases commenced in the UT should be the same. The second is the appropriate regime (or regimes, depending on the answer to the first point).

138. As to the first point, we can see no justification at all for different costs regimes depending on where judicial reviews are commenced. It is true that there is bound to be one difference in terms of expense in that the Administrative Court charges fees, whereas the UT generally, at present, does not. But issue fees in the Administrative Court are modest and if a case is to be transferred at all, it is likely to be at a fairly early stage. Parties in the Administrative Court in a case where there is the possibility of transfer will need to be aware of the consequent costs regime (if they are different: that depends on the answer to the second point). Having said that, we consider that it is only right that costs incurred before transfer to the UT should remain subject to the costs regime of the Administrative Court and that the UT itself should be given power to deal with those costs on that basis. And similarly where a case is transferred from the UT to the Administrative Court. We recommend that the necessary powers be given to the UT and the Administrative Court.

139. The second point is more difficult. The rules currently allow the UT to exercise its general powers under section 29 TCEA and thus to effect costs-shifting in the same way as the Administrative Court itself. This is, in effect, to carry across to the UT the approach of the Administrative Court to costs: costs are governed by the nature of the case and the treatment afforded hitherto in the Courts. A different approach is to view the judicial review as a tribunal proceeding and to apply an appropriate tribunal-oriented approach to costs. This would reflect the reality that the judicial review is in fact a proceeding in the UT and, in cases commenced in the UT, has nothing to do with the Administrative Court at all.

140. We have little doubt that the latter approach is appropriate and in accordance with principle. What then follows depends on the nature of the review. There are essentially two distinct types of case. The first is where it is sought to review the F­tT or any other lower tribunal; the second is where it is sought to review the decision maker, for instance HMRC in a tax case. In the second type of case, the decision which it is sought to review is often closely connected with a statutory appeal but this need not necessarily be the case. This happens, for instance, in tax appeals where a taxpayer contends that as a matter of tax law he is not liable for the tax claimed and wishes to assert, in the alternative, that a practice or extra-statutory concession applies which HMRC are improperly refusing to implement.

141. In the first type of case, there is something to be said for the view that the costs regime should match that of the regime for appeals from the F-tT chamber or other tribunal concerned. The judicial review has this in common with appeals namely that both are concerned with overturning the decision of the lower tribunal. But this approach is not entirely easy to apply in tax cases where the costs regime applying to the underlying tax appeal depends on the allocation of the appeal as Complex or not and on the taxpayer’s decision whether, in a Complex case, to opt out of the costs-shifting regime.

142. In the second type of case, there is less of an analogy with an appeal although the judicial review can sometimes be seen as closely related to and as raising the same or almost the same factual issues as existing proceedings in the F-tT (as happens on occasions where there is a tax appeal and a judicial review against HMRC).

143. As in the case of appeals, it important to avoid undue complexity and a multiplicity of costs regimes applicable to judicial reviews. We consider that a single approach should be adopted across all chambers of the UT for the second type of judicial review. Our present tentative view is that there should be a costs-shifting regime for all judicial reviews of the second type but with the option (as in appeals in Complex tax cases) for the applicant to elect for a no costs-shifting regime.

145.  Judicial reviews of the first type (that is to say of the F-tT and other lower tribunals) may involve more than the applicant, the decision-maker and the tribunal itself because there may be more than two parties to the proceedings before the lower tribunal; for instance, all child support cases are tri-partite. The simplest regime, and the one which is in our, again tentative, view the one to adopt (other than in judicial review of the Tax Chamber in tax appeals) is to have the same costs regime as is applicable in the F-tT chamber or other tribunal concerned. In cases of judicial review of the Tax Chamber in tax appeals, our present view is that there should be a costs-shifting regime but with the taxpayer having a right to opt out (except perhaps where the case has been allocated as Complex in the F-tT and the taxpayer has not opted out of the costs-shifting regime). This should be so whether it is the taxpayer or HMRC which brings the application for judicial review.

F.        R (LR) v First-tier Tribunal

25.      The judicial review proceedings in this case were lodged in the Administrative Court. As they related to proceedings within the First-tier Tribunal, they fell within the Upper Tribunal’s mandatory and exclusive judicial review jurisdiction and were, accordingly, transferred to this tribunal. The tribunal set out the issues it had to decide in paragraph 24:

(1). What principles should apply to the power to award costs in a case such as this? As part of this, do those principles apply only in relation to the category of case with which we are concerned, namely where judicial review is sought of the decision of the First-tier Tribunal and (under section 18 of the 2007 Act and section 31A of the 1981 Act) only the Upper Tribunal has jurisdiction in respect of it, or is the relevant principle of wider application?

(2). If the answer on issue (1) is that the Upper Tribunal should apply the same principles as the High Court would (i.e. under CPR 44.2) (which we term ‘costs-shifting’), how should those principles be applied in the circumstances of this case?

(3). If the decision on issue (1) is that other principles apply, how do they fall to be applied in this case?

26.      On the first issue, the tribunal decided:

34. Thus, in conclusion on this aspect, our view is that the failure of the UT Rules to include express provision restricting the ability of a party in judicial review proceedings to claim costs to where they could have been claimed in the tribunal below should not be taken as indicative of a positive view that costs-shifting was to be applied. We acknowledge that the relevant principles may be different in categories of judicial review which are not before us, but as regards those where it is the First-tier Tribunal whose decision is being challenged, rather than an initial decision-maker, and where the case is of a category where the Upper Tribunal has exclusive jurisdiction, we conclude that, as a general rule, and subject to [36] below, the appropriate basis for applying the Upper Tribunal’s discretion under section 29 is that it should not do so to make an award of costs where the tribunal below would have had no power to do so.

…

36. The proviso to which we referred in [34] is that we are aware of the proposal to transfer immigration judicial review cases from the Administrative Court to the Immigration and Asylum Chamber of the Upper Tribunal and we leave the costs principles to be applied in those cases for that Chamber to determine in an appropriate case.

27.      As paragraph 34 shows, the tribunal expressly left open the approach to costs in other cases. As the decision records in paragraph 26:

Our view is that the framers of the UT Rules were trying to keep options open and to avoid being over-prescriptive in the light of diversity of judicial reviews which could reach the Upper Tribunal, as indeed is increasingly coming to pass.

G.       Other caselaw relevant to the Upper Tribunal

28.      In H v First-tier Tribunal and CICA [2014] UKUT 338 (AAC), Upper Tribunal Judge Levenson applied the same approach as in LR to a judicial review of the First-tier Tribunal in its criminal injuries compensation jurisdiction. The nature of that jurisdiction is so different from the discretionary transfer jurisdiction that the reasoning does not assist.

29.      Mr Birdling cited four decisions in which he said there had been detailed consideration of the Upper Tribunal’s costs jurisdiction in judicial review cases. That is correct, but none of the discussions assist us in these cases, as our brief comments show.

30.      R (TH (Iran)) v East Sussex County Council [2013] EWCA Civ 1027 was an appeal to the Court of Appeal against a costs order made by the Upper Tribunal in an age assessment case. The case was transferred from the Administrative Court to the Upper Tribunal, where it was settled. The Upper Tribunal ordered the local authority to pay the applicant’s costs up to the date when it made its offer of settlement, but not thereafter. This was a discretionary transfer, but the Court dismissed the appeal without any discussion of principles on which costs should be awarded in such cases.

31.         R (Kumar) v Secretary of State for the Home Department (acknowledgement of service; Tribunal arrangements) [2014] UKUT 104 (IAC) was a decision of the Immigration and Asylum Chamber of the Upper Tribunal. It concerned the Secretary of State’s failure to file acknowledgements of services within the time allowed by the rules of procedure. This did not involve discussion of the general principles on which costs should be awarded on discretionary transfers.

32.      R (Okondu) v Secretary of State for the Home Department (wasted costs; SRA referrals; Hamid) [2014] UKUT 377 (IAC) was another decision of the Immigration and Asylum Chamber. It concerned wasted costs, which are defined in the same way for courts (section 51(7) of the Senior Courts Act 1981) and tribunals (section 29(5) of the 2007 Act).

33.          R (Muwonge) v Secretary of State for the Home Department (consent orders: costs: guidance) [2014] UKUT 514 (IAC) was also a decision of the Immigration and Asylum Chamber. It concerned the application for costs associated with a concession, and possibly a draft consent order, submitted by the Secretary of State along with the acknowledgement of service. As with Kumar, this did not require discussion of the general principles on which costs should be awarded on discretionary transfers.

34.         R (Sultana) v Secretary of State for the Home Department (mandatory order – basic principles) [2015] UKUT 226 (IAC) is the final case from the Immigration and Asylum Chamber. McCloskey J dismissed an application for judicial review without awarding costs to the Secretary of State on account of the Secretary of State’ conduct during the proceedings. This is consistent with the freedom allowed under Rule 44.2, but the judge did not discuss whether that Rule should apply by analogy as a matter of principle.

35.         For the record, although we were not referred to it, we considered the decision of the Court of Appeal in AEI Rediffusion Music Ltd v Phonographic Performance Ltd [1999] 1 WLR 1507. The case concerned an award of costs by the Copyright Tribunal. The Court of Appeal decided (at pages 1512-1513) that the approach to costs in that tribunal should not be dictated by the normal approach that costs followed the event in view of two features. First and unlike the courts, there was no statement of a general principle to that effect in the governing legislation or the rules of procedure. Second, the tribunal had a broad power to make such order was reasonable in the circumstances, which could result in cases in which there was no clear winner and loser. The second feature is not comparable to these cases. As to the first, it appears similar but there is the difference that the proceedings in these cases began in the Administrative Court. That case was decided before the CPR came into force but Lord Woolf MR commented on the effect of those rules (at 1522-1523):

From 26 April 1999 the ‘follow the event principle’ will play a significant role, but it will be a starting point from which a court can readily depart. … The most significant change of emphasis in the new Rules is to require courts to be more ready to make separate orders which reflect the outcome of different issues.

H.       The arguments

36.      There was common ground between the parties that the CPR approach should be applied. We agree. However, as there was not complete overlap between their arguments, we set them out before giving the reasons for our agreement.

For the Secretary of State

37.      Mr Birdling argued that:

·                The claim did not come to the Upper Tribunal in the same way as LR which was judicial review of a decision of the FTT.

·                This claim was an ordinary judicial review commenced in the Administrative Court to which it is clear the CPR would have applied if it had not been transferred to the Upper Tribunal.

·                The transfer was not made so that different costs rules to the CPR should be applied. Rather it was because of the fact sensitive nature of the case and its ramifications for the administration of employment and support allowance that led the High Court to transfer the case so that it would be heard by an Upper Tribunal judge or judges with experience of the state benefits system.

·                The governing principle should be that costs follow the event in a case such as this particularly as the applicants were not self-representing but have representatives in receipt of legal aid funding.

·                It was irrelevant that the case came before the Upper Tribunal on discretionary transfer. Edwards-Stuart J ordered the transfer for the reasons he gave, not in order that different costs regime might apply.

·                There is nothing in the Upper Tribunal’s overriding objective to require a different operation of the principles that apply under CPR.

·                Although issues relating to legal aid funding may be relevant in determining whether the CPR should be applied, it is not a relevant issue in the application of the CPR and so in determining the order for costs that should be made.

38.      On the costs awarded by the Court of Appeal, the principles were set out by Scott LJ in Lockley v National Blood Transfusion Service [1992] 1 WLR 492 at 496-497:

(1) A direction for the set-off of costs against damages or costs to which a legally aided person has become or becomes entitled in the action may be permissible.

(2) The set-off is no different from and no more extensive than the set-off available to or against parties who are not legally aided.

(3) The broad criterion for the application of set-off is that the plaintiff's claim and the defendant's claim are so closely connected that it would be inequitable to allow the plaintiff's claim without taking into account the defendant's claim. As it has sometimes been put, the defendant's claim must, in equity, impeach the plaintiff's claim.

(4) Set-off of costs or damages to which one party is entitled against costs or damages to which another party is entitled depends upon the application of the equitable criterion I have endeavoured to express. It was treated by May J. in Currie & Co. v. The Law Society [1977] Q.B. 990, 1000, as a ‘question for the court's discretion.’ It is possible to regard all questions regarding costs as being subject to the statutory discretion conferred on the court by section 51 of the Supreme Court Act 1981 . But I would not have thought that a set-off of damages against damages could properly be described as a discretionary matter, nor that a set-off of costs against damages could be so described.

(5) If and to the extent that a set-off of costs awarded against a legally aided party against costs or damages to which the legally aided party is entitled, cannot be justified as a set off (i) the liability of the legally aided party to pay the costs awarded against him will be subject to section 17(1) of the Act of 1988 and regulation 124(1) of the Regulations of 1989; and (ii) the section 16(6) charge will apply to the costs or damages to which the legally aided party is entitled.

39.      The Court of Appeal applied these principles in R (Burkett) Hammersmith and Fulham London Borough Council [2004] EWCA Civ 1342. That case involved a successful appeal to the hold by a party who was ultimately unsuccessful in the rehearing first instance. That is similar to what has occurred in these cases.

40.      In appropriate cases, the courts award costs according to the outcome on particular issues rather than on the case as a whole. This is called an issue-based approach. Mr Birdling argued that the principles that applied were these:

i) ‘In considering how to exercise its discretion the court should take as its starting point the general rule that the successful party is entitled to an order for costs’ Multiplex Constructions (UK) Limited v Cleveland Bridge UK Ltd (No 7) [2008] EWHC 2280 at §72(ii) per Jackson J (as he then was);

ii) ‘Where the circumstances of the case require an issue-based costs order, that is what the judge should make. However, the judge should hesitate before doing so, because of the practical difficulties which this causes.’ (Multiplex Constructions (UK) Limited v Cleveland Bridge UK Ltd (No 7) [2008] EWHC 2280 at §72(iii) per Jackson J (as he then was);

iii) ‘Issue based costs orders can be an effective and appropriate instrument where the relevant issues are distinct from other issues on which the party has succeeded. Where, as in the present case, the relevant issues overlap substantially, the cases indicate that the court should hesitate before making such an order.’ Grupo Hotelero Urvasco SA v Carey Value Added SL [2013] EWHC 1732 at §41 per Blair J;

iv) The mere fact that the successful party was not successful on every last issue cannot, by itself, justify an issue based costs order J Murphy & Sons v Johnson Precast Ltd (No 2) [2008] EWHC 3104 at §10 per Coulson J;

v) This may be ‘to be expected’ in complex litigation Budgen v Andrew Garner Partnership [2002] EWCA Civ 1125 at §35 per Simon Brown LJ.

41.      Mr Birdling argued that the Secretary of State should be awarded the full costs, as the applicants had failed to establish a breach of duty and been unsuccessful in their claim for relief. The costs awarded to the applicant by the Court of Appeal should be offset against this award.

42.      On the possible application of an issue-based approach, he argued that the issues in the case were complex and had overlapped. On a detailed analysis of successful and failure, the Secretary of State should be awarded a substantial proportion of the costs incurred.

For the applicants

43.      Ms Lieven and Mr Buley argued that the proper approach was for costs to follow the event, subject to two possible qualifications. One was the suggestion in Costs in Tribunals that an applicant should be able to opt for a no-costs regime at the outset. This does not arise in these cases, as no option was made or sought. The other option is one way costs shifting, as recommended for judicial review by Jackson LJ in his Review of Civil Litigation Costs: Final Report of December 2009. This prevents an applicant having to pay money in costs, but an order against the applicant can be ‘recovered’ by way of offset against costs and damages awarded. This does not arise in these cases, because the applicants are legally aided. As Jackson LJ noted:

4.3 … A claimant who is legally aided is protected by section 11(1) of the Access to Justice Act 1999 (the ‘1999 Act’). I have set that provision out in chapter 19 above and explained how it operates in practice. The practical effect is that legally aided claimants in judicial review cases have the benefit of one way costs shifting.

44.      The proposed approach is consistent with this tribunal’s overriding objective and promotes access to justice. Litigants before this tribunal will often be unable to afford lawyers and so have to rely on pro bono representation, legal aid or conditional fee agreements. The system of remuneration for legal aid assumes that a successful applicant will receive costs. As Lord Hope explained in In re appeals by Governing Body of JFS [2009] 1 WLR 2353:

No costs orders

24 As has already been noted, Ms Rose declined to seek an order that each side should be liable for its own costs in any event on the ground that to do so would be wrong in principle. As Scott Baker J observed in R (Boxall) v Waltham Forest London Borough Council (2000) 4 CCLR 258, para 12, the failure of a legally aided litigant to obtain a costs order against another party may have serious consequences. This is because, among other things, the level of remuneration for the lawyers is different between a legal aid and an inter partes determination of costs. This disadvantage is all the greater in a case such as this. It is a high costs case, for which lawyers representing publicly funded parties are required to enter a high costs case plan with the Legal Services Commission. It is a common feature of these plans that they limit the number of hours to an artificially low level and the rates at which solicitors and counsel are paid to rates that are markedly lower than those that are usual in the public sector. Mr Reddin has indicated that, as they are defending a win, E's solicitors would not be expected to be paid at risk rates. Nevertheless the rate of remuneration that is likely to be agreed for this appeal will be considerably lower than that which would be reasonable if costs were to be determined inter partes.

25 It is one thing for solicitors who do a substantial amount of publicly funded work, and who have to fund the substantial overheads that sustaining a legal practice involves, to take the risk of being paid at lower rates if a publicly funded case turns out to be unsuccessful. It is quite another for them to be unable to recover remuneration at inter partes rates in the event that their case is successful. If that were to become the practice, their businesses would very soon become financially unsustainable. The system of public funding would be gravely disadvantaged in its turn, as it depends upon there being a pool of reputable solicitors who are willing to undertake this work. In R (Boxall) v Waltham Forest London Borough Council Scott Baker J said that the fact that the claimants were legally aided was immaterial when deciding what, if any, costs order to make between the parties in a case where they were successful and he declined to order that each side should bear its own costs. It is, of course, true that legally aided litigants should not be treated differently from those who are not. But the consequences for solicitors who do publicly funded work is a factor which must be taken into account. A court should be very slow to impose an order that each side must be liable for its own costs in a high costs case where either or both sides are publicly funded. Had such an order been asked for in this case we would have refused to make it.

JFS was a high costs case, but Lord Hope’s same is of general application: R (Bahta) v Secretary of State for the Home Department [2011] EWCA Civ 895 at [49].

45.      In support of these arguments:

·                The only significant difference between the overriding objectives applied by the Upper Tribunal and the Administrative Court is the emphasis on expertise in the former.

·                It is not in the interests of justice for different rules to apply.

·                The structure of the tribunal’s rules of procedure indicate that the normal approach is the most likely one to be adopted for judicial review.

·                Costs in Tribunals recommended that costs should normally follow the event.

·                The Immigration and Asylum Chamber has followed the Administrative Court practice, although it has never rules on the issue as a matter of principle.

·                This approach should be adopted despite the risk of deterring access to justice. These risks can be minimised by the costs protection afforded to legally aided parties, protective costs orders, and adopting the costs opt out recommended by Costs in Tribunals.

46.      With particular regard to cases transferred from the Administrative Court:

·                LR shows that the provenance of the case is important.

·                There is no definition of ‘tribunal’ for the purposes of rule 10(1)(b), so it could include a court.

·                If the Upper Tribunal were to take a different approach to costs from the Administrative Court, that court would take that into account as a factor when deciding whether or not to transfer the proceedings, thereby diverting attention from the issue of which forum would be best suited to decide the substantive proceedings.

47.      Ms Lieven and Mr Buley agreed with the approach set out by Mr Birdling on set off and an issue-based approach.

48.      They argued for three possible orders:

·                Preferably, an order that the Secretary of State pay the applicants’ costs until the Upper Tribunal issued its interim decision, but no order thereafter.

·                Or an order that the Secretary of State pay the applicants’ costs until the Upper Tribunal issued its interim decision, but with the right to set those off against costs in the Upper Tribunal thereafter.

·                Or no order as to costs.

49.      They preferred an approach based on an award of a proportion of the costs rather than an issue-based approach, in order to avoid the complexities that this would involve.

I.         Our analysis in principle

50.      We have decided that the proper approach in the Upper Tribunal’s discretionary transfer judicial review jurisdiction is to apply the principles followed by the Administrative Court. Broadly, we accept the parties’ arguments for taking that approach.

51.      Our jurisdiction is founded on rule 10(3)(a) of our rules of procedure, not rule 10(1)(b). Whilst we accept that there is no definition of ‘tribunal’ for the purpose of the latter, we consider that it is neither necessary nor appropriate to interpret it to include a court. It is not necessary, because the reference to cases transferred or referred in rule 10(1) is adequately explained as covering the Upper Tribunal’s power to receive cases under section 9(5)(b) of the 2007 Act following a review and from the First-tier Tribunal in such cases as information rights cases. Nor is it appropriate to interpret tribunal to include a court. Rule 10(3) applies, as its opening words provide, ‘In other proceedings’. That means in proceedings other than those set out in previous paragraphs. If the discretionary transfer jurisdiction were included in rule 10(1), rule 10(3)(a) would be redundant.

52.      There is no authority in which the issue we have to decide has been considered as a matter of principle. The issue was left open in LR. The practice of the Immigration and Asylum Chamber is consistent with the approach we have adopted, but we were not shown any decision where the matter was decided on principle.

53.      The general rule is that costs follow the event. However, CPR rule 44.2(2)(b) allows for different orders to be made and rule 44.2(4) and (5) set out factors to be taken into account in deciding what order to make. Lord Woolf in AEI Rediffusion envisaged that a more nuanced approach to costs orders was likely to be appropriate under CPR than had hitherto applied.

54.      Rule 44.2(6)(f) authorises an issue-based approach to an award, but rule 44.2(7) provides that the court to consider whether an order under rule 44.2(6)(a) or (c) would be practicable. In other words, such an approach should be avoided if possible in order to avoid the practical difficulties, identified by both sides in these cases, of attributing individual costs to particular issues. This does not mean that the tribunal may not take account in a more general way of how particular issues were decided when making a decision on the appropriate form of order.

55.      It is significant that the cases within this jurisdiction will have been lodged in the Administrative Court. Costs in Tribunals (at paragraph 138) saw no reason to distinguish between cases depending on where they began. Applicants may hope, but have no legitimate expectation, that their case will be transferred. They must accept that they have undertaken litigation in a costs regime.

56.      Leaving on one side the applicants’ ‘access to justice’ point, it seems to us that the legislation envisages that the factors to be taken into account when the Administrative Court is determining a transfer of a judicial review that could not be issued in the Upper Tribunal to be heard and determined in the Upper Tribunal:

·                should relate to which is the most appropriate forum having regard in particular to the specialist knowledge and expertise of the tribunal’s judiciary and the availability of judges who have the jurisdiction to hear and determine proceedings correctly issued in the Administrative Court and

·                should not include the impact of a different costs regime.

If a transfer would introduce a different costs regime, it could lead to a form of forum shopping for costs, which we do not think could have been intended.

57.      This reflects what we regard as decisive common ground between the parties on the point of principle.

58.      In our view, it is also confirmed by the ‘access to justice’ arguments advanced by the applicants. They relate to the way is which public funding is provided for judicial review cases, as explained by Lord Hope in JFS. We are entitled to take the method of funding into account at this stage when we are considering the matter of principle, although it must not influence the application of the principle in an individual case. If protection is appropriate, a protective costs order can be made.

59.      We accept that a case such as this could not have been effectively brought by the applicants without legal assistance and that generally in such cases the only available source of funding for applicants would be legal aid. We also accept that if the legal representatives cannot decide on whether to take on a case that can only be properly issued in the Administrative Court, this would be likely to act as a deterrent to them acting and so would undermine access to justice.

60.      Here the issues relate to legal aid funding for high cost cases. We acknowledge that the decision-makers on legal aid need to be independent from government and to be guided only by the relevant regulations. When, as here, the applicants are in receipt of legal aid and the respondent is a government department, two factors arise. The first is set off. This comes down to which of two budgets funded by the Crown should bear the costs that could be set off. The second factor is whether the Government (and so the taxpayers) should pay out less to legal representatives. The reduction relates to the payment rates for high cost cases if an order for costs is not obtained that enables the legal representatives to recover from the legal aid fund their costs at the party and party rates (which are based on reasonable rates for the work done). If such an order for costs is not made, the default legal aid rates are significantly lower and so act as a deterrent to the pursuit of poor cases.

61.      The expenditure of more costs on set off seems to be a waste of taxpayer’s money. We accept that it is only the tribunal who can resolve the issue on what costs orders should be made. But in all the circumstances of this case we think it unfortunate that further taxpayers’ money has been spent on determining the rate for the legal representatives in a case in which the applicants established the existence of a substantial disadvantage and the relevance and effect of that declaration. However, we have not forgotten and will not forget that when we come to determine what order for costs should be made we must not take into account the fact that the applicants were in receipt of legal aid and so the consequences that flow from it in respect of the payment the legal representatives will receive.

62.      We agree that the differences between the overriding objectives in the CPR and our rules of procedure do not suggest that we should not apply the CPR. It is therefore unnecessary for us to consider whether they are so similar as both sides argued. We do, however, mention that the unspoken theme that permeates our objective is the importance of access to justice. It might seem that this requires a costs free regime for applicants. This is too simple a view. The objective requires that we endeavour to deal with cases fairly and justly, and that means for both sides. For the reasons we have given, when a case could only be and has been issued in the Administrative Court imposing a no order for costs regime would not be fair or just.

63.      Correctly, we were not asked to go behind or to alter the order for costs made. It was correctly common ground that the award of costs by that Court should operate by way of set off.

J.        Our application of the principle

64.      So far our reasoning has been unanimous. On the application of the principle, we are not agreed and have made a decision by majority.

Reasons of Charles J and Judge Lane

65.      The Court of Appeal awarded the applicants the costs of the appeal to that Court. They are entitled to those costs under that order, either by way of payment or by way of set off against an award that we may make in the Secretary of State’s favour.

66.      The general rule is that costs follow the event. But what is the event?

67.      If for the purposes of determining who should pay the costs of the proceedings, ‘the event’ is categorised solely by reference to whether the applicants personally have suffered discrimination, it would follow that the Secretary of State won the ‘event’ and should have his costs. That victory was based on the Secretary of State’s success in the Court of Appeal on the individuation point and such an order for costs would enable him to set off the costs of the appeal that he was ordered to pay and recognise his success on the individuation point in that way.

68.      If that is the correct categorisation it can be said with force that the declaration we made on substantial disadvantage was but an incidental step in the case rather than a separate issue and that it had little, or now has little or only historical, importance.

69.      However, it has been clear from the start, and the intervention of the charities confirmed, that in these proceedings the applicants have been pursuing relief on behalf of themselves individually and as members of the class that we found were suffering a substantial disadvantage. This is confirmed by the point that the proceedings were brought by way of judicial review and the time spent on both the substantial disadvantage point and the reasonable adjustment point.

70.      Albeit that the Court of Appeal decided that any proceedings (whether brought by an individual or by a charity on behalf of claimants with mental health problems) must establish an individual breach, the fact that the Secretary of State did not produce the relevant evidence about these applicants until after the end of our second substantive hearing is clear confirmation that both sides used these proceedings as the vehicle for deciding another essential element of the existence of a breach of the duty – namely the substantial disadvantage point.

71.      This is understandable both in the context of (a) the approach to be taken to establishing the existence and breach of the duty under the Equality Act 2010 to the applicants as individuals, and (b) the administration by the Secretary of State of the statutory scheme that governs employment and support allowance.

72.      It was always clear that the issue whether there was a substantial disadvantage to the class of claimants with mental health problems was relevant to the consideration of how, as a matter of public law, that statutory scheme should be administered, both:

a.    in the context of claimants with mental health problems who would be able to establish an individual breach of duty if there was such a substantial disadvantage and a duty to make reasonable adjustments, and more generally

b.    as a matter of good administration what adjustments (if any) could and should be made to the administration of employment and support allowance to address any such substantial disadvantage.

The latter is relevant to whether there is a duty to make reasonable adjustments and the Catch 22 situation referred to in our second decision.

73.      So the existence or non-existence of a substantial disadvantage to persons with mental health problems is and was clearly of importance to both parties and we can appreciate why the Secretary of State was keen to seek to establish that there was no such substantial disadvantage in his ongoing consideration of the administration of employment and support allowance and his discussions with, for example, the charity interveners. That keenness and the importance of the substantial disadvantage issue are confirmed by his appeal on the point and the costs award of the Court of Appeal. We understand that this was made after argument and so indicates that the Court of Appeal was of the view that although our declaration was only a step in the discrimination claim, the Secretary of State had lost on this issue and the costs of the appeal should not await the outcome of the proceedings.

74.      Throughout a relevant issue in respect of the reasonable adjustment point was whether there should be a pilot of any possible adjustments. This is because good administration founds the view that proposed adjustments should be tested as to their impact on members of the class of claimants with mental health problems and other claimants and as to their practicality and cost. The position of the Secretary of State on whether there should be a pilot and the impact of issues relating to good administration changed during the hearing. At the start, he took the position that this stage in the establishment of the duty to these applicants or to other claimants within the class under consideration did not arise because he maintained that there was no substantial disadvantage. This was an understandable starting position.

75.      However, the unsuccessful challenge to our conclusion and declaration that there was a substantial disadvantage removed the basis for that starting position and by the end of our second substantive hearing the Secretary of State was promising that he would conduct a pilot. It has always seemed to us that this was inevitable once we had found that there was a substantial disadvantage to claimants with mental health problems in the administration of the scheme as a whole. This would particularly be so if the Secretary of State were to rely on factors relating to that administration as a whole to show that either reasonable adjustments could not be made or that those suggested by the applicants were not reasonable.

76.       We were told that this pilot was due to start in October 2015.

77.      The promise during the proceedings was not based on any acceptance that the Secretary of State was under an Equality Act duty to make reasonable adjustments. Accordingly, it must have been made either as an aspect of his duty to administer employment and support allowance fairly or to show what if any adjustment would be reasonable in the context of that administration.

78.      The history of this litigation shows clearly that absent our declaration on substantial disadvantage no such pilot would have been promised and that the applicants always recognised that piloted or other changes might lead them to conclude that the substantial disadvantages of claimants with mental health problems had been reasonably addressed.

79.      Accordingly we agree with the applicants that the declaration obtained in these proceedings was a significant and potentially far reaching victory for the class of claimants with mental health problems and it should not be categorised as an incidental step in the case or as an issue that has little, or now has little but historical, significance.

80.      So in our view a fair categorisation of these proceedings and the issues in them needs to take account of the impact of the declaration on the Secretary of State’s action plan thereafter. On that categorisation a fair analysis of the overall result of these proceedings is that:

a.    the applicants individually lost this campaign on the individuation point, but

b.    the applicants as members of a class established the need for a pilot as a matter of good administration of the scheme, and as the Secretary of State ultimately accepted as evidence in the discrimination claim,

c.     they established a foothold for the next campaign if the promised pilot does not lead to adjustments that individual claimants within that class (and the charity interveners) regard as being satisfactory, and

d.    the reasonableness point was left undecided but should be informed by the promised pilot.

81.      So it is easy to see why both sides have argued that they have won important issues or events in these proceedings.

82.       Further we regret to say that the Secretary of State has not shown the openness and willingness to engage with the applicants and the tribunal that is expected in judicial review proceedings and required in all cases by rule 2(4)(b) of our rules of procedure. We are not criticising the Secretary of State for changing position during the proceedings. That was a feature of the cases presented by both sides and we regard it as right and proper to conduct litigation in that way rather than to adhere rigidly to the positions taken at the outset without regard to the developing arguments. But some of the evidence on the current practice of the Secretary of State’s decision-makers and ATOS (then the provider of medical advice to the Secretary of State) was far from clear. The Secretary of State seemed reluctant to engage with the tribunal in dealing with its concerns about the administration of the employment and support allowance scheme and its on-going review by the Secretary of State. In particular in that context the Secretary of State seemed to be taking a reactive and essentially adversarial approach in the proceedings whilst pointing to his regular reviews without giving clear answers on what he proposed in light of the recommendations (e.g. the evidence seeking recommendation) or the options or range of options he was pro-actively considering as part of those reviews. Although, as we recognised there is force in the point that the Secretary of State needed to take account of the views of the Upper Tribunal before running a pilot this did not justify the apparent reluctance of the Secretary of State to provide evidence of the range of options he was pro-actively considering to address the substantial disadvantage we had found to exist, related issues on his review of the scheme and the obvious points that good administration would found the need for such a pro-active approach and a pilot of any proposed changes. The irony we refer to in our second decision is a demonstration of this reluctance; namely that ultimately he provided the evidence that he argued successfully before the Court of Appeal we could not order him to provide. It was always obvious that this evidence was going to be needed if he was going to argue, which as we expected he ultimately did, that the adjustments sought were not reasonable and/or that they were not reasonable for reasons based on good administration or the need for a pilot. The evidence that ultimately led to the Secretary of State’s success was not provided until after the final hearing was concluded. We have not attempted to undertake a precise calculation of the extent to which this prolonged the proceedings, but have proceeded by way of impression.

83.      Both sides encouraged us not to take an issues based approach. We agree that this would not be appropriate because it would lead to further detailed analysis and so a waste of public money.

84.      We repeat that we disregard the point that the applicants were in receipt of legal aid and so proceed on the hypothesis that they were funding these proceedings and would not be embarrassed by an award of costs made against them. So we disregard any difference in the financial strengths of the parties.

85.      Absent issues based on conduct whenever a full costs award is not made or the costs order is ‘no order for costs’ the unspoken reasoning for this will often include points that might found an issue-based award. So ‘no order’ can be seen to express the view that each side should pay half of the other’s costs.

86.      In our view the following factors need to be taken into account in determining the order for costs that should be made:

a.    The victory of the Secretary of State on the individuation point in establishing that there was no breach of duty and the claims must be dismissed.

b.    The point that the individuation point was always a live one; indeed it was argued at the permission stage.

c.     The individuation point, and the points that had the relevant evidence been presented at an earlier stage, it would have given the Secretary of State a knock-out win if we had been invited to and agreed to address it at the first hearing on assumptions.

d.    The fact that for understandable reasons relating to the importance of the substantial disadvantage point to all the parties we were not provided with the evidence that established the win on the individuation point at the first hearing (or indeed until after the second hearing).

e.    The relevance of the success in the Court of Appeal on the individuation point in the overall success of the Secretary of State in having the claims dismissed.

f.     The set off of the Court of Appeal’s order for costs against any award of costs made in favour of the Secretary of State by us.

g.    The victory of the applicants on the substantial disadvantage point.

h.    The relevance of that victory to the reasonable adjustment point, that was left undecided.

i.     The relevance of that point to the factors that the Secretary of State should take into account in his fair administration of employment and support allowance having regard to claimants with mental health problems who would or might win on the individuation point and generally as a matter of good administration.

j.     The fact that the pilot was not only relevant to the reasonable adjustment point but was clearly a sensible if not an essential part of the on-going reviews of the administration of employment and support allowance by the Secretary of State.

k.    Absent these proceedings the pilot still promised by the Secretary of State and which will address the substantial disadvantage we found to exist would not have been promised and so we assume in accordance with that promise carried out.

l.     The time spent on the various issues.

m.  The lateness of the evidence on the individuation point.

n.    The conduct of the Secretary of State.

87.      Weighing those we have concluded that looked at overall (and so including the visit to the Court of Appeal) this is a no order for costs case and so we should make an order that the applicants pay to the Secretary of State the percentage of his costs in the Upper Tribunal that equals the costs that the Court of Appeal ordered him to pay to the applicants. The effect of this is that, without the need for assessment, there is a set off of this award for costs against the award of costs made by the Court of Appeal.

88.      In terms of orders for costs both ways on the basis that the costs of both sides were the same and the costs of the appeal were, say, £40,000 (£20,000 each) and of the remainder of the proceedings were £320,000 (£160,000 each) the applicants would pay £20,000 to the Secretary of State. So of the total the Secretary of State pays £140,000 plus £40,000 (both sides’ costs as ordered by the Court of Appeal) and the applicants pay £160,000 plus £20,000 (the balancing payment).

Judge Jacobs’ dissenting view

89.      Judge Jacobs agrees that the applicants are entitled to the costs of the appeal to the Court of Appeal under its order, either by payment or set off.

90.      He does not agree that it is permissible or appropriate to draw inferences from that order, for which we have no reasons. Nor to attach significance to an order made in the middle of proceedings without knowledge of the eventual outcome.

91.      The Court of Appeal defined the legal event that the costs should follow: the applicants were only entitled to succeed on their claim if there had been individual breaches of the Equality Act 2010 in respect of them. We decided that there were not. In that sense, the Secretary of State won. But that is just the starting point.

92.      The issue then arises whether a different order is appropriate. Judge Jacobs considers that it is for two reasons: the degree of success that the applicants achieved and the Secretary of State’s conduct of the proceedings.

93.      As to the applicants’ degree of success, they secured a declaration in their favour in our interim decision and the Court of Appeal held that we were entitled to make that declaration. It was clear from the outset that these proceedings were in a sense representative of persons with mental health problems. That said, this was but an incidental step in the case rather than a separate issue. The practical value of that declaration is also doubtful. As Judge Lane put it at the costs hearing, the applicants were given an empty envelope. The significance of the declaration has to be considered in the context of the Secretary of State’s willingness to review and amend the conditions of entitlement to employment and support allowance and the procedures followed when assessing capability for work and for work-related activity. Openness to argument and a willingness to change have been, outside the context of these proceedings, a notable and distinctive feature of this benefit. Given the breadth of the definition of persons with mental health problems that was used in these proceedings, the range of difficulties that they may encounter is considerable and the possibilities of finding a useful adjustment that could be made correspondingly difficult, witness the various attempts made by the applicants to refine the case they put. Despite these qualifications, Judge Jacobs would have made allowance for the measure of the applicants’ success by way of reduction in the Secretary of State’s award.

94.      As to the Secretary of State’s conduct of the proceedings, Judge Jacobs agrees with what the majority say in [82].

95.      As Judge Jacobs is dissenting, it is not necessary to fix a precise reduction. This is a matter of impression rather than an issue-based approach, which neither side really wanted in view of the complexities it would create in the actual assessment of costs. Judge Jacobs’ initial impression was that a reduction of about 10% was appropriate, but following discussion would have been prepared to raise that to somewhere around 25% or 30%.

 

Signed on original on 20 October 2015

Charles J, Chamber President Edward Jacobs and Shelley Lane, Upper Tribunal Judges