INDEMNITY COSTS IN PUBLIC LAW PROCEEDINGS: FAILURE BY THE EXECUTIVE TO COMPLY WITH CONSENT ORDER TAKES THE CASE OUT OF THE NORM

In Butt, R (on the application of) v Secretary of State for the Home Department (Indemnity costs) [2022] UKUT 69 (IAC) the Upper Tribunal found that it had power to order indemnity costs, further, on the facts of this case indemnity costs were awarded. The failure by the Secretary of State to comply with a consent order took the case outside the norm.

“The failure by the Executive to comply with the agreed time frame resulted in the applicant being required to initiate further judicial review proceedings. Such conduct takes this case out of the norm, and we find in the circumstances that the applicant should be awarded his costs in these proceedings on an indemnity basis.”

THE CASE

The applicant sought leave to enter the country on the basis he was to run a business.  This led to six applications for judicial review of decisions made by the Secretary of State. The fifth application led to a consent order with the Secretary of State agreeing to carry out certain acts. The Secretary of State did not comply and a sixth set of proceedings were issued, the Secretary of State then complied. The issue before the tribunal was whether costs could, and should, be ordered on the indemnity basis.

THE DECISION ON COSTS

The tribunal decided that it did have discretion to order indemnity costs. On the facts of this case it was appropriate to do so. The major factor being the respondent’s failure to comply with the clear terms of the consent order which had not been complied wiht.

Conclusions
  1.  Section 29 of the 2007 Act confirms that the costs of and incidental to all proceedings are at the discretion of the tribunal in which the proceedings take place. This is a general provision. Section 29(3) makes it clear that power to award costs has effect subject to Tribunal Procedure Rules, which in relation to the Immigration and Asylum Chamber of the Upper Tribunal are to be found at rule 10 of the 2008 Rules. Whilst rule 10(3) cuts down on the Tribunal’s power to award costs in appellate proceedings, the general provision is applicable in identified proceedings and circumstances, including judicial review proceedings: rule 10(3)(a).
  1.  Section 29(2) of the 2007 Act provides that this Tribunal has full power to determine the extent costs are to be paid. The 2008 Rules are silent as to the bases upon which the Tribunal may assess the amount of costs recoverable in judicial review proceedings. The CPR offers a valuable source of assistance in respect of costs and their assessment. CPR 44.3(1) provides that where a court is to assess the amount of costs (whether by summary or detailed assessment) it will assess those costs (a) on the standard basis; or (b) on the indemnity basis, explaining what is meant by each. Whilst no mention of these (or any other) bases of assessment is made in the 2007 Act or the 2008 Rules, the distinction drawn by the CPR between the standard and indemnity bases can properly inform the exercise of discretion by this Chamber when exercising its power under section 29 of the 2007 Act. The distinction is well-known and well-understood across the civil justice system and applied in judicial review proceedings that take place in the High Court and beyond. There is no reason not to employ it in this Chamber of the Upper Tribunal. Albeit in the context of sanctions and not costs, Lord Neuberger confirmed in BPP Holdings Ltd v Revenue and Customs Commissioners [2017] UKSC 55[2017] 1 WLR 2945, at [25]-[26] that it is legitimate for tribunals to follow a well-established approach established under the CPR.
  1.  It remains the position that in any dispute about the appropriate basis for the assessment of costs, the Upper Tribunal must consider each case on its own facts. Neither the standard basis nor the indemnity basis permits the recovery of costs which have been unreasonably incurred or which are unreasonable in amount. Where costs are to be assessed on the indemnity basis, the Upper Tribunal will give the receiving party the benefit of the doubt as to whether the costs were reasonably incurred or were reasonable in amount.
  1.  An award of indemnity costs is valuable to a receiving party for two separate reasons. Firstly, the burden of persuasion as to reasonableness is shifted to the paying party. Secondly, the paying party does not have the benefit of the limitation that only costs which were proportionate to the matters in issue are recoverable. These differences result in an award of indemnity costs being “considerably more favourable” to the receiving party than an award on the standard basis: Lownds v. Home Office [2002] EWCA Civ 365[2002] 1 WLR 2450, at [6], per Lord Chief Justice.
  1.  In practice, the indemnity basis is awarded only in exceptional cases. For the Tribunal to exercise its discretion to order a party to pay costs on the indemnity basis, the conduct of the paying party must be shown to have been unreasonable to a high degree to take the case outside the norm. Such conduct must relate to the conduct of the litigation.
  1.  Indemnity costs are not limited to cases where a court or tribunal wishes to express disapproval of the way in which litigation has been conducted. An order for indemnity costs can be made even when the conduct could not properly be regarded as lacking in moral probity or deserving of moral condemnation: Reid Minty (A Firm) v. Taylor [2001] EWCA Civ 1723[2002] 1 WLR 2800, at [27].
  1.  May LJ said at [30]-[31],
’30. … But it cannot be right that every defendant in every case can put themselves in the way of claiming costs on an indemnity basis simply by inviting the claimant at an early stage to give up, discontinue and pay the defendant’s costs on a standard basis. It might be different if a defendant offers to move some way towards a claimant’s position and the result is more favourable to the defendant than that…
  1. There will be many cases in which, although the defendant asserts a strong case throughout and eventually wins, the court will not regard the claimant’s conduct of the litigation as unreasonable and will not be persuaded to award the defendant indemnity costs. There may be others where the conduct of a losing claimant will be regarded in all the circumstances as meriting an order in favour of the defendant of indemnity costs. Offers to settle and their terms will be relevant …
  1.  These paragraphs were considered by the Court of Appeal in Kiam v. MGN Ltd (No 2) [2002] EWCA Civ 66[2002] 1 WLR 2810, at [12]-[13]. Simon Brown LJ stated at [12] that he understood the Court in Reid Minty to “have been deciding no more than that conduct, albeit falling short of misconduct deserving of moral condemnation, can be so unreasonable as to justify an order for indemnity costs. With that I respectfully agree. To my mind, however, such conduct would need to be unreasonable to a high degree; unreasonable in this context certainly does not mean merely wrong or misguided in hindsight.”
  1.  Simon Brown LJ continued in the same paragraph that, “[a]n indemnity costs order … does, I think, carry at least some stigma. It is of its nature penal rather than exhortatory.”
  1.  Both judgments were considered in Excelsior Commercial & Industrial Holdings Limited v. Salisbury Hammer Aspden & Johnson (A Firm) [2002] EWCA Civ 879 where the Court of Appeal reiterated at [31] and [39] that an order for indemnity costs could only be made where there was “some conduct or some circumstance which takes the case out of the norm.”
  1.  At [31]-[32] of the judgment, the Lord Chief Justice noted the width of judicial discretion and confirmed that an “indemnity order may be justified not only because of the conduct of the parties, but also because of other particular circumstances of the litigation.”
  1.  As to what constitutes the ‘norm’, Waller LJ stated in Esure Services Ltd v. Quarcoo [2009] EWCA Civ 595, at [25]:
’25. The Recorder seems to have construed the word “norm” as indicating that if the situation facing the court was one that quite often occurred that would mean that the situation was within the norm. In my view the word “norm” was not intended to reflect whether what occurred was something that happened often so that in one sense it might be seen as “normal” but was intended to reflect something outside the ordinary and reasonable conduct of proceedings. To bring a dishonest claim and to support a claim by dishonesty cannot be said to be the ordinary and reasonable conduct of proceedings.’
  1.  The applicant contends that the respondent’s failure to abide by two consent orders (JR/1436/2020 and JR/652/2021) amounts to unreasonable conduct to a high degree and so indemnity costs should be awarded. Reliance is placed upon the collective delay approaching three years in issuing entry clearance, the filing of six judicial review claims, three challenged decisions being withdrawn or reconsidered, and a grant of permission to apply for judicial review (JR/1436/2020). The circumstances are said to establish that the matter falls outside the norm.
  1.  We are not satisfied that the respondent’s behaviour in separate, discrete proceedings is relevant to our consideration of indemnity costs in this matter. Save for one occasion, the applicant secured his reasonable costs on the standard basis. No order for costs was made in the third proceedings: (JR/1202/2020). It is implicit from each order that the applicant did not consider the respondent to have acted unreasonably to a high degree in each of the previous matters. The mere accumulation of successful challenges in relation to the entry clearance application, without more, does not establish on the facts of this case the just exercise of discretion in respect of indemnity costs.
  1.  Nor was the respondent in breach of an order or orders of the Tribunal. The consent order sealed on 9 November 2020 (JR/1436/2020) did not contain an undertaking by the respondent to issue a new decision in respect of the applicant’s entry clearance application within six months of the sealing of the order. Rather, the indication as to a fresh decision being made subject to a time limit was detailed in the recital. The commitment was expressed in relatively clear terms but was conditional on there being no special circumstances. Default did not entail a breach of the consent order as the operative part of the order solely related to the withdrawal of the claim and that the respondent pay the applicant’s reasonable costs. The operative part of the consent order sealed on 4 June 2021 was in similar terms.
  1.  Turning to the question of unreasonableness in these proceedings, we conclude that the applicant is unable to satisfy the burden placed upon him. We are concerned that the respondent consented to the establishment of a time frame within which the applicant’s passport would be returned to him which was unachievable from the outset. Reliability as to the factual basis of the operative provisions of the order provided by the recital is important in enabling the Upper Tribunal to act as the arbiter of what every consent order contains. However, as to the conduct of the proceedings, the respondent made no attempt substantively to defend the decision, and instead by her acknowledgment of service drew attention to the fact that, in essence, the applicant had succeeded having collected his passport containing confirmation of entry clearance. Further, at paragraph 4 of her acknowledgement of service, the respondent provided a detailed account as to why ultimately it had not been possible to comply with the original consent order. We are satisfied that on the facts arising in these proceedings it cannot properly be said that the respondent’s conduct in these proceedings was unreasonable to a high degree.
  1.  However, that neither party acted unreasonably does not restrict the Upper Tribunal’s wide discretion in respect of indemnity costs. The Lord Chief Justice said in Excelsior, at [31]:
’31. … An indemnity order may be justified not only because of the conduct of the parties, but also because of other particular circumstances of the litigation. I give as an example a situation where a party is involved in proceedings as a test case although, so far as that party is concerned, he has no other interest than the issue that arises in that case, but is drawn into expensive litigation. If he is successful, a court may well say that an indemnity order was appropriate, although it could not be suggested that anyone’s conduct in the case had been unreasonable. Equally there may be situations where the nature of the litigation means that the parties could not be expected to conduct the litigation in a proportionate manner. Again the conduct would not be unreasonable and it seems to me that the court would be entitled to take into account that sort of situation in deciding that an indemnity order was appropriate.’
  1.  The Upper Tribunal confirmed in R (MMK) v. Secretary of State for the Home Department (consent orders – legal effect – enforcement) [2017] UKUT 198, at [34], that it will exercise discretion as to indemnity costs when circumstances require.
  1.  We conclude that what makes this matter exceptionally meritorious is that the consent order of 4 June 2021 clearly established a substantive right to have identified steps undertaken by the Executive.
  1.  The Court of Appeal noted in respect of public law litigation in R (Tesfay) v. Secretary of State for the Home Department [2016] EWCA Civ 415[2016] 1 WLR 4853, at [57], that while proceedings for judicial review are brought by persons dissatisfied with decisions of public bodies “the courts are not the decision makers and often in public law the most that can be achieved is an order that the decision maker reconsider on a correct legal basis.”
  1.  In the fifth judicial review proceedings (JR/652/2021) the applicant sought a mandatory order requiring the respondent to decide upon his entry clearance application. He did not enjoy a reasonable expectation that the Tribunal would order the respondent to make a favourable decision upon the application for the reason explained by the Court in Tesfay. By means of the consent order the applicant secured more than he had sought, with the recital detailing that “the applicant will be granted entry clearance and his passport returned with 7 days of the sealing of the consent order”. We consider the terms of the compromise to be detailed in exceptionally firm terms, namely that the executive act would be exercised in favour of the applicant, and his right to the benefit of the executive act was made absolutely clear. This constituted more than the usual compromise arising in public law proceedings. The respondent did not pursue her assertion before us that special circumstances arose justifying delay. It was accepted, without reservation, that there was a failure to comply with the consent order. The failure by the Executive to comply with the agreed time frame resulted in the applicant being required to initiate further judicial review proceedings. Such conduct takes this case out of the norm, and we find in the circumstances that the applicant should be awarded his costs in these proceedings on an indemnity basis.
  1.  On behalf of the respondent, Mr. Joseph advanced a discrete complaint that the applicant had failed when making an application for an order for costs to send or deliver with the written application to the Tribunal and to the respondent a schedule of costs sufficient to allow summary assessment of such costs or expenses by the Upper Tribunal: rule 10(5)(b) of the 2008 Rules. We are satisfied that our consideration of costs in this matter flows from the consent order filed by the parties, and so was not initiated by a written application for an order for costs. Rule 10(5)(b) has no application in such circumstances.
  1.  We invite the parties to submit a draft order that gives effect to the above.