Cost controls

A recent High Court judgement on costs orders in licensing cases should be welcome news to local licensing authorities. Stephen Walsh QC and Rachel Kapila explain why.

The High Court has recently confirmed that magistrates in licensing appeals have a wide discretion as to costs. Costs need not follow the event, and can even in appropriate circumstances be awarded against a successful party to an appeal.

Prasannan v. Royal Borough of Kensington and Chelsea [2010] EWHC 319 (Admin) was an appeal by way of case stated against the decision of a district judge to award costs against the appellant, following her successful appeal against the decision of the respondent council to revoke her premises licence.

The background was as follows. The appellant’s premises, an off-licence in Kensington, had failed three test purchase operations in as many years. Following review proceedings, the appellant’s premises licence was revoked. At the appeal against that revocation, the district judge took a very unfavourable view of the appellant. He concluded that the appellant’s evidence, including her evidence that she had trained her staff properly and supervised them robustly, was not to be believed on any point except one, namely that the premises would not be commercially viable if alcohol could not be sold. He formed the view that the appellant regarded the conditions of her licence as unimportant and an unfair restriction of her ability to trade. He was also critical of the manner in which the appellant had conducted the appeal proceedings, having breached case management directions by producing a bundle of documents very shortly before the hearing.

The decision of the district judge was that, although he would be justified in rejecting the appeal in its entirety, he would nevertheless give the appellant “one last chance”. The appeal was therefore allowed and the premises licence was reinstated, with the addition of a stringent new condition that only the appellant and one other member of staff were permitted to sell alcohol. As the High Court judge later observed, the appellant “can be said to have succeeded on her appeal, but it was hardly a resounding victory”.

The issue of costs was addressed immediately after judgment was handed down. The council applied for an award of costs, and produced a schedule of costs totalling a little over £23,000. The district judge took the view that the appellant, through her conduct, had brought the revocation of the licence entirely upon herself. He also took into account his criticisms of her evidence, and her very late production of documents without explanation. An order for costs was made in favour of the council, in the sum of £20,000.

The appellant initiated proceedings in the High Court, asking that the costs order be set aside in its entirety on the basis that: (1) the judge had no power to order a successful appellant to pay the respondent’s costs; and (2) (relying on R v. Highgate Justices ex p Petrou [1954] 1 All ER 406) the order was so wholly unjust and unreasonable as to be akin to the imposition of an unlawful financial penalty.

Giving the judgment of the court, Belinda Bucknall QC (sitting as a Deputy High Court Judge) rejected both arguments.

Regarding the first ground of appeal, the judge held that, in licensing appeals, the powers of the court in relation to costs are governed by section 181(2) of the Licensing Act 2003, and not by section 64 of the Magistrates’ Courts Act 1980. These two provisions are entirely separate and independent of each other. Section 181(2) provides a general discretion as to costs, and does not require that costs follow the event. This general discretion is subject only to the usual requirement that, in deciding what order is just, the court must take into account all relevant matters and must not take into account irrelevant matters. In the instant case, there was no error of law; the district judge had a discretion to make a costs order in favour of the council, and he exercised it on proper grounds. In particular, he was entitled to take into account the appellant’s failure to comply timeously with case management directions and her late production of certain documents. The fact that the appellant had been allowed by the district judge to adduce those documents in evidence was wholly irrelevant.

Secondly, unlike the case of Petrou on which the appellant sought to rely, there were no facts in the present case which would justify the conclusion that the order of the district judge was a penalty dressed up as costs. The costs were summarily assessed on the basis of a written schedule provided by the respondent, and the order was for a lesser sum than that claimed. The amount was substantial, but in all the circumstances it was not obviously unjust.

Prasannan is therefore a decision which should be welcomed by local licensing authorities who, as sole respondents to licensing appeals, may find themselves with little alternative but to defend an appeal, which is then subsequently allowed when the appellant improves its practices or offers suitable licence conditions during the course of the appeal proceedings. Prasannan reinforces the principle in City of Bradford Metropolitan District Council v. Booth [2000] EWHC Admin 444 that in administrative matters costs need not necessarily follow the event, but are instead subject to a general discretion in the court to make such order as is just and reasonable in all the circumstances.

Stephen Walsh, QC and Rachel Kapila are barristers at 3 Raymond Buildings (www.3raymondbuildings.com), specialising in licensing and regulatory law.