Supreme Court upholds appeal over award of costs to council in cuts case

The Supreme Court has unanimously overturned a Court of Appeal ruling that a council was the successful party in relation to costs in a legal battle over funding cuts to youth services.

However, in Hunt v North Somerset Council [2015] UKSC 51 the Supreme Court also unanimously dismissed an appeal from the appellant, Aaron Hunt, over the Court of Appeal’s approach to declaratory relief.

Hunt, who was born on 17 April 1991, suffers from ADHD, learning difficulties and behavioural problems. As a result, North Somerset Council is statutorily required, so far as reasonably practicable, to secure access for him to sufficient educational and recreational leisure-time activities for the improvement of his well-being.

On 21 February 2012, North Somerset made a decision to approve a reduction of £364,793 from its youth services budget for 2012/2013.

Hunt, concerned about the impact this would have on the provision of services for young persons with disabilities, brought judicial review proceedings of that decision.

He argued that the decision was unlawful on two grounds:

1. the council had failed its duty under section 507B of the Education Act 1996 to take properly into account the views of young persons with difficulties such as his; and

2. it failed to fulfil its public sector equality duty under section 149 of the Equality Act 2010 to have due regard to the statutory equality needs of disabled individuals.

Hunt sought a declaration that North Somerset’s decision was unlawful and an order that the decision be quashed.

At the end of the High Court hearing, but before giving judgment, Wyn Williams J asked the parties’ barristers for written submissions on relief in the event that he found in favour of Hunt. The note provided by the claimant’s barristers stated that he sought a quashing order but made no reference to a declaration.

Ultimately, Wyn Williams J rejected the claimant’s challenges to the legality of the decision. Hunt was ordered to pay the council’s costs, subject to a proviso against enforcement of the costs order without further permission of the Court.

The Court of Appeal allowed Hunt’s appeal on both grounds. However, it refused to make a quashing order, considering that it was too late to unwind the entire revenue budget for the financial year. The Court of Appeal ordered the claimant/appellant to pay half of North Somerset’s costs.

Hunt’s barristers did not make alternative submissions about declaratory relief so no mention was made of this in the Court of Appeal’s judgment. The barristers did not raise this omission on receiving the judgment in draft and did not make suggestions as to the appropriate form of the order in light of the judgment.

North Somerset’s barristers prepared a draft order stating that the appeal was dismissed. Hunt’s barristers stated in written submissions that the parties were agreed on the order except in relation to costs.

Hunt appealed to the Supreme Court on the basis that the Court of Appeal should have made:

1. a declaration that the council had failed in its statutory obligations; and

2. an order for costs in his favour.

A five-judge panel – comprising Lady Hale, Lord Wilson, Lord Reed, Lord  Hughes and Lord Toulson – heard the case on 29 April. Lord Toulson delivered the judgment of the court.

In relation to declaratory relief, Lord Toulson rejected the appellant’s argument that the Court of Appeal should have made a declaration of its own initiative, which the judge said was “redolent with hindsight”.

“The judgment of the Court of Appeal itself ruled that the respondent acted unlawfully, and the authority of the judgment would be no greater or less by making or not making a declaration in the form of the order to the same effect,” Lord Toulson said.

“However, in circumstances where a public body has acted unlawfully but where it is not appropriate to make a mandatory, prohibitory or quashing order, it will usually be appropriate to make some form of declaratory order to reflect the court’s finding. In some cases it may be sufficient to make no order except as to costs; but simply to dismiss the claim when there has been a finding of illegality is likely to convey a misleading impression and to leave the claimant with an understandable sense of injustice.”

That said, the Supreme Court judge added, there was “no ‘must’ about making a declaratory order, and if a party who has the benefit of experienced legal representation does not seek a declaratory order, the court is under no obligation to make or suggest it”.

On the issue of costs, Lord Toulson noted that courts had a wide discretion in the matter. However, he nevertheless found that the Court of Appeal had fallen into error by treating the council as the "successful party".

“The rejection of the respondent’s case on the two issues on which the appellant was given leave to appeal was of greater significance than merely that the respondent had increased the costs of the appeal by its unsuccessful resistance,” the judge said.

“The respondent was ‘successful’ only in the limited sense that the findings of failure came too late to do anything about what had happened in the past, not because the appellant had been slow to raise them but because the respondent had resisted them successfully until the Court of Appeal gave its judgment. The respondent was unsuccessful on the substantive issues regarding its statutory responsibilities.”

Lord Toulson said there were also wider public factors to consider. He noted that the Court of Appeal ruling, particularly under s. 149, contained a lesson of general application for local authorities regarding the discharge by committee members of the council’s equality duty.

“If a party who has been given leave to bring a judicial review claim succeeds in establishing after fully contested proceedings that the defendant acted unlawfully, some good reason would have to be shown why he should not recover his reasonable costs,” the judge said.

Lord Toulson said he could not see that the fact that in this case the determination of illegality came after it was too late to consider reopening the 2012/13 budget provided a principled reason for making the appellant pay any part of the respondent’s costs.

“On the contrary, for the reasons stated the appellant was in principle entitled to some form of costs order in his favour,” he continued. “The issues raised by the appellant at first instance were considerably wider than the issues on which he was given permission to appeal. They included, for example, a far-reaching challenge to the adequacy of the respondent’s EIAs. This challenge required detailed rebuttal by the respondent. The appellant also persisted in seeking an order to quash the decision approving the budget when that was unrealistic. Those are reasons for limiting the order for costs in his favour.”

Lord Toulson added that “logically it might be said that a distinction should be drawn between the costs at first instance and in the Court of Appeal to reflect the different issues, but each hearing occupied the court for one day and the assessment can only be broad brush”.

The judge said he would set aside the Court of Appeal’s order and substitute an order that the appellant should recover two thirds of his costs both at first instance and in the Court of Appeal.

As to costs in the Supreme Court, Lord Toulson said although Hunt was entitled to his reasonable costs, having succeeded in reversing the costs orders made by the courts below, a significant proportion of his argument was directed to the question of a declaration.

This argument had no merit, the judge said. He ordered that the appellant should recover two thirds of his costs subject to either party making written submissions as to why a different order should be made.