The Court of Appeal has recently confirmed that cost capping orders for Aarhus Convention claims, which includes planning and other environmental judicial reviews, are inclusive of VAT.
Cost Caps for Aarhus Convention Claims
The Aarhus Convention refers to the UNECE Convention on Access to Information, Public Participation in Decision-Making and Access to Justice in Environmental Matters done at Aarhus, Denmark on 25 June 1998 and ratified by the UK in February 2005.
A key pillar of the convention is public access to justice in environmental matters by ensuring legal challenges of public decisions are affordable to claimants. Common examples of public decisions concerning environmental matters that are challenged are judicial reviews of planning decisions by local authorities.
This requirement of the Aarhus Convention for affordable access to justice has been implemented in the UK through Rule 45.43 of the Civil Procedure Rules (CPR). It provides:
(1) Subject to rules 45.42 and 45.45, a claimant or defendant in an Aarhus Convention claim may not be ordered to pay costs exceeding the amounts in paragraph (2) or (3) or as varied in accordance with rule 45.44.
(2) For a claimant the amount is– (a) £5,000 where the claimant is claiming only as an individual and not as, or on behalf of, a business or other legal person; (b) £10,000 in all other cases.
(3) For a defendant the amount is £35,000.
(4) In an Aarhus Convention claim with multiple claimants or multiple defendants, the amount in paragraphs (2) and (3) (subject to any directions of the court under rule 45.44) apply in relation to each such claimant or defendant individually and may not be exceeded, irrespective of the number of receiving parties.
Rule 45.44 allows the court to vary at its discretion the above cost caps upon application provided such variation does not make the proceedings prohibitively expensive for the claimant. The factors the court will consider on a proposed revised cost cap are: (a) does it exceed the financial resources of the claimant; and (b) is it objectively unreasonable having regard to— (i) the situation of the parties; (ii) whether the claimant has a reasonable prospect of success; (iii) the importance of what is at stake for the claimant; (iv) the importance of what is at stake for the environment; (v) the complexity of the relevant law and procedure; and (vi) whether the claim is frivolous.
The issue for the Court of Appeal in Friends of the Earth Ltd, R (On the Application Of) v Secretary of State for Transport  EWCA Civ 13 was whether the cost caps under the Aarhus Convention included or excluded VAT. The problem for VAT registered claimants being that if the cost cap was VAT inclusive then the real costs recoverable by such claimants would be the lower VAT exclusive amount.
In considering the issue the Court of Appeal found the natural meaning of the words used in Rule 45.43 of the CPR are clear and that the cost cap figures are set out as absolute amounts without qualification. Therefore, cost caps for Aarhus Claims are inclusive of VAT.
If you have any questions in relation to this article or require assistance in the judicial review of a planning or other environmental decision the Planning and Environment Team at Hewitsons LLP will be happy to assist.