On Friday, a High Court decision ruled on the legality of recent changes to cost-capping in environmental and planning cases.  Jenny Wigley considers the main points:

Changes to the environmental cost-capping regime brought in earlier this year were challenged by RSPB, Friends of the Earth and ClientEarth on the basis that they breached the Aarhus Convention and related European legislation that incorporates aspects of Aarhus into domestic law.  Under CPR Part 45, individual claimants in environmental judicial and statutory review cases (a definition which includes many, if not most, planning cases), benefit from a cap on their costs liability of £5,000 (£10,000 for organisations), with a reciprocal cap on their ability to claim costs from the other parties of £35,000.  The recent changes introduced in February allow defendants to examine claimants’ finances and to seek variations to the cap, apparently at any stage in the proceedings.  Environmental groups were concerned that the changes would unlawfully deter potential claimants from bringing legitimate claims.  This was for two main reasons:  First, the ability to vary the cap introduces uncertainty as to a claimant’s potential costs liability.  Second, there was concern over the fact that the claimant’s finances could be made public.

The decision of Dove J handed down on 15 September, has made clear that, to be Aarhus compatible and to allow sufficient certainty at an early stage, any challenge to the cap must be brought in the acknowledgement of service and, ordinarily, be determined on the papers at the permission stage.  The only exceptions to this being where the claimant’s financial information is shown to be untrue or misleading or where there is a significant material change in the claimant’s finances affecting whether or not the proceedings would be ‘prohibitively expensive’.  Any hearing into the claimant’s finances must be in private and the question of whether a claim is ‘prohibitively expensive’ for a claimant has to be considered taking into account the claimant’s own costs liability in addition to any adverse costs liability.   It is not yet entirely clear exactly how all this is to be implemented in the context of the current rules as the Court is currently awaiting submissions on remedy[1].  It is one to watch.

[1] Having said this, the Court was satisfied that Part 45, properly read alongside other provisions in the CPR does currently have the effect of requiring any application to vary the cap to be made at the earliest stage.