Business Rates - Costs Order against a Local Authority on a Complaint

When a Local Authority’s application by way of complaint for a liability order for allegedly unpaid national non-domestic rates (‘Business Rates’) is dismissed, withdrawn or discontinued, or otherwise comes to an end without a liability order being made for allegedly due but unpaid[1] tax, the respondent alleged ratepayer may wish to seek an order from the Magistrates Court that the Local Authority (‘Billing Authority’) do pay the alleged ratepayer’s legal costs of the proceedings. 

Similarly, an alleged ratepayer who has successfully applied for an order from the Magistrates Court, to set aside a Business Rates liability order under the Hamdan[2a]common law jurisdiction, may wish to seek from the Magistrates Court, a costs order in respect to its costs of the application, against a Billing Authority.

This article will consider the relevant statutory provisions governing such costs applications, and whether Billing Authorities pursuing Business Rates fall into a special category of litigant, to whom the law offers an elevated measure of protection against adverse costs orders, due to the nature of the work undertaken. 

In analysing the law in this area, it will be necessary to consider cases beyond those involving Business Rates disputes. This is because the relevant statutory provisions discussed below apply to a wide field of cases. Significant cases guiding how the law applies, involve factual situations as diverse as licencing[2b], anti-social behaviour[3]and forfeiture of cash[4]. These cases are illuminating as to how the law applies generally, despite it being the case that the facts bear little relationship to Business Rates. 

General Magistrates Court Costs Order Jurisdiction 

The statutory provision empowering the Magistrates Court to make costs orders is section 64 of the Magistrates Court Act 1980[5], save for where a complaint is ‘not proceeded with’[6]. Where the complaint concludes because it is ‘not proceeded with’, then the relevant statutory provision empowering the Magistrates Court to make a costs order is section 52 of the Courts Act 1971. 

Section 64 of the Magistrates Court Act 1980 and section 52 of the Courts Act 1971 

Taking those two sections in turn. Section 64 of the Magistrates Court Act 1980 is entitled ‘Power to award costs and enforcement of costs’ and reads:

‘(1) On the hearing of a complaint, a magistrates' court shall have power in its discretion to make such order as to costs— 

(a) on making the order for which the complaint is made, to be paid by the defendant to the complainant;


(b) on dismissing the complaint, to be paid by the complainant to the defendant, 

as it thinks just and reasonable…

(2) The amount of any sum ordered to be paid under subsection 1 shall be specified in the order, or order of dismissal, as the case may be. 

(3) [Costs] ordered to be paid under this section shall be enforceable as a civil debt. 

(5) The preceding provisions of this section shall have effect subject to any other Act enabling a magistrates' court to order a successful party to pay the other party's costs.‘

Section 52 of the Courts Act 1971 is entitled 'Award of costs where information or complaint is not proceeded with', and reads (so far as not repealed):

‘(3) Where—

(b) a complaint is made to a justice of the peace acting in any local justice area but the complaint is not proceeded with, a magistrates' court acting in that area may make such order as to costs to be paid, by the complainant to the defendant as it thinks just and reasonable. 

(4) An order under subsection (3) above shall specify the amount of the costs ordered to be paid. 

(5) for the purpose of enforcement an order under subsection (3) above made in relation to a complaint which is not proceeded with shall be treated as if it were an order made under section 64 of the Magistrates' Courts Act 1980 (power to award, and enforcement of, costs in civil proceedings).’

A complaint ‘not proceeded with', will be a complaint[7]that is withdrawn, discontinued or otherwise brought to an end by the complainant (applicant), prior to final determination of the complaint by the Magistrates Court.

Restriction on Who may be Subject to a Costs Order

Parliament has placed some restrictions on the Magistrates Court in respect to the imposition of costs orders. The powers provided by sections 64 and 52 are limited, in that, the Magistrates Court can only impose costs orders under:

(1) section 64: (a) on defendants, where the complainant obtains from the Magistrates Court the order sought in the complaint; (b) on complainants, when the complaint is dismissed; and

(2) section 52: on complainants, where the complainant’s complaint is ‘not proceeded with’

The above restriction in section 64 on the general power of the Magistrates Court to impose costs orders, was confirmed by Stanley Burnton LJ in R (on the application of Perinpanathan) v the City of the Westminster Magistrates' Court [2010] 1 WLR 1508, CA (‘Perinpanathan’), where he said, at paragraphs 19 and 21:

‘The only statutory restriction on the power of the magistrates is that they cannot make an order for costs against a successful party. This restriction explains its wording.

…section 64 precludes an order requiring a successful party to pay the costs of an unsuccessful party[8]

Somewhat less emphatically, Lord Neuberger MR in Perinpanathan said, at paragraph 58:

‘The only limitation affecting section 64(1) appears to me to be at least arguably that the magistrates' cannot make any award for costs in favour of an unsuccessful party.’[9]

Same Criteria – ‘as it thinks just and reasonable’

As will be apparent, each of these sections involves the same central criteria/test, that is: each section empowers the Magistrates Court, subject to the restrictions set out above, to make such order for costs ‘…as it thinks just and reasonable’. This similarity of criteria for exercising discretion as to costs was commented upon by Hickinbottom J in Chief Constable of Warwickshire v MT
 (2015) 179 J.P. 454; [2015] EWHC 2303 (Admin) (‘MT’)[10], on facts unrelated to Business Rates. In MT, Hickinbottom J quoted section 64 of the Magistrates Court Act 1980 and Section 52 of the Courts Act 1971, and said, at paragraph 16:

‘Thus it can be seen that section 64 of the 1980 Act and section 52 of the 1971 Act are formulated in similar terms, but the former applies where a claim is contested and fails, whereas the latter applies where a claim is made and “not proceeded with”. They therefore provide a comprehensive scheme covering all circumstances in which a case is not successful; and, whilst having different triggers, applying materially identical criteria for exercising discretion as to costs.’[11]

Reinforcing this point, Hickinbottom J in MT said, at paragraph 18:

‘…the formulation of those sections – and the criteria upon which the discretion in the magistrates is to be exercised – is essentially the same.’

The upshot of having criteria essentially the same, is that principles and guidance applicable to section 64 cases, is equally applicable to section 52 (and seemingly vice versa):

(1) MT was a section 52 case. At paragraph 18, Hickinbottom J said that the principles fashioned in the leading section 64 case of Bradford Metropolitan District Council v Booth( 2000) 164 JP 485 (Lord Bingham CJ and Silber J) (‘Booth’)[12], discussed below, ‘are equally applicable to section 52’; and

(2) R. (on the application of Ebbnie) v Chief Constable of Surrey [2008] EWHC 166 (Admin) (‘Ebbnie’) was a section 52 case[13]. Davis J in Ebbnie noted, at paragraph 6, that both sides agreed that ‘…the decision in Booth was in point and properly fell to be considered and that the Magistrates were required to have regard to it in deciding how to exercise their discretion in this case.’ Later, Davis J held, at paragraph 7, that the Magistrates Court ‘…were correct here to have regard to the decision in the Booth case and to that extent there can be no difficulty about the approach they adopted.’  

Discretion to Impose Costs Order ‘Just and reasonable’

Furthermore, structurally, the sections are similar, in that each section provides the Magistrates’ Court with a discretion whether to impose the order they consider ‘just and reasonable’. This is clear from the use of the word ‘may’ in section 52(3) and the use of the word ‘discretion’ in section 64(1). In other words, while the Magistrates Court may hold that it would be ‘just and reasonable’ to order one party to pay the other a sum towards that other’s legal costs, the Magistrates Court still retains a separate discretion, as to whether to go ahead and actually impose that costs order. It might be a rare occurrence that the Magistrates Court decide it would be just and reasonable to impose a costs order, but decide not to make that order, in their discretion, but the discretion is there. 

Just and Reasonable

Turning to the criteria ‘just and reasonable’, this criteria applies both[14]as to whether to impose any sum at all by way of costs (liability; also referred to as a discretion), and the amount of any such costs (quantum). In Booth, Lord Bingham CJ said, at paragraph 23:

‘Section 64(1) confers a discretion upon a magistrates' court to make such order as to costs as it thinks just and reasonable. That provision applies both to the quantum of the costs (if any) to be paid, but also as to the party (if any) which should pay them.’

Naturally, what is ‘just and reasonable’ will necessarily depend on what the facts are before the Magistrates Court, as found by the Magistrates Court. In Booth, Lord Bingham CJ said, at paragraph 23:

‘What the court will think just and reasonable will depend on all the relevant facts and circumstances of the case before the court.’

This will include the history of the litigation (procedure), including any litigation misconduct, and the substantive merits (substance).

While the criteria involves an subjective assessment, the permissible result of that assessment is not unfettered. That assessment, and the decision arising from that assessment, are curtailed by the requirement that the power be exercised lawfully and in accordance with authority. Hickinbottom J in MT, at paragraph 17, said: 

‘The discretion in magistrates to award costs under these provisions is patently wide, with a subjective element (“as it thinks just and reasonable”). The magistrates must nevertheless approach the exercise of the discretion in a lawful way. The proper approach has been the subject of a series of cases, and is now well-established.’

Booth Approach/Principle is Not to be Read too Rigidly

Recognizing the need for guidance on how the Magistrates Court should apply this criteria, to give a measure of certainty, while at the same time avoiding unduly prescriptive and inflexible rules, Lord Neuberger said, in Perinpanathan, at paragraph 59

‘It is clearly desirable that there are general guidelines, but it is equally important that any such guidelines are not too rigid. There is a difficult, if not unfamiliar, balance to be struck, namely between flexibility, so a court can make the order which is most appropriate to the facts of the particular case and the circumstances and behaviour of the particular parties, and certainty, so that parties can know where they are likely to stand in advance, and inconsistency between different courts is kept to a minimum.’

No General Rule that Costs ‘Follow the Event’

The test of ‘just and reasonable’ is not accompanied by the Civil Procedure Rules’ ‘general rule’ that costs ‘follow the event’. Lord Neuberger made this point in Perinpanathan. After noting at paragraph 57 that the then[15]current CPR r 44.3(2)(a) stated that “the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party”, Lord Neuberger said, at paragraph 58:

‘There is no provision such as CPR r 44.3(2)(a) in the relevant provision governing costs ... section 64... The only limitation in section 64(1) appears to me to be that, at least arguably, the magistrates cannot make any award of costs in favour of an unsuccessful party. Apart from that, I consider that the section confers an ostensibly unfettered discretion, and, in particular, a discretion which contains no presumption such as that plainly contained in CPR r 44.3(2)(a)'

This does not mean that the Magistrates Court cannot hold that costs should ‘follow the event’, only that there is no presumption or general rule that costs ‘follow the event’. In Booth, Lord Bingham CJ said, at paragraph 23:

‘The court may think it just and reasonable that costs should follow the event, but need not think so in all cases covered by the subsection.’

In Perinpanathan, Stanley Burnton LJ said, at paragraph 19:

‘The only statutory restriction on the power of the magistrates is that they cannot make an order for costs against a successful party. This restriction explains its wording. It does not provide any "steer" or indication to the court that costs should follow the event, although in cases between private individuals that is likely to be the order failing good reason to deprive a successful party of some or all of his costs.’

In R (on the application of Khan) v Feltham Magistrates' Court [2017] EWHC 3042 (Admin), Cockerill J heard a judicial review against the award of costs against a taxpayer after his application to set aside a council tax liability order, was dismissed. Cockerill J dismissed the judicial review, including against the quantum of the adverse costs order. In doing so, she said, at paragraph 51:

'The Magistrates were perfectly entitled to proceed on the usual, if not formally presumed, basis that costs follow the event.'

Later, at paragraph 61, she said '...costs following the event is, even if not presumed, very much the more usual position...'

Booth Case and Costs Orders Against Billing Authorities

In both the scenarios under consideration in this article, the Magistrates Court is being asked to impose a costs order against a Billing Authority, a Local Authority. These scenarios do not involve ‘…cases between private individuals…’ and so Stanley Burnton LJ’s statement in paragraph 19 of Perinpanathan, quoted above, will not apply.

The law places certain public authorities performing public/regulatory/disciplinary functions into a special category of litigant. A category that involves the Magistrates Court considering certain factors with particular prominence, when deciding what it thinks would be ‘just and reasonable’ in the circumstances (the exact bodies falling into this category has not been fully worked out yet). A leading case on this category and the additional factors relevant to this category, is Booth, where Lord Bingham CJ formulated[16]the appropriate approach/principle (or proposition[17]) to costs against this category of litigant, at paragraph 23:

‘…Where a complainant has successfully challenged before justices an administrative decision made by a police or regulatory authority acting honestly, reasonably, properly and on grounds that reasonably appeared to be sound, in exercise of its public duty, the court should consider, in addition to any other relevant fact or circumstances, both (i) the financial prejudice to the particular complainant in the particular circumstances if an order for costs is not made in his favour; and (ii) the need to encourage public authorities to make and stand by honest, reasonable and apparently sound administrative decisions made in the public interest without fear of exposure to undue financial prejudice if the decision is successfully challenged.’

Just and Reasonable – Business Rates

Booth was a licensing case, involving an appeal against a local authority’s decision not to renew a private car hire business licence[18]. Lord Bingham stated the above to apply to '...an administrative decision made by a police or regulatory authority...'.[19] It therefore was not apparent from Booth itself, whether the Booth approach/principle was intended to apply further afield, and in particular for the purposes of this article, to billing authorities performing tax collection functions. This question came up for direct consideration in the leading case on Business Rates, Patel v Camden LBC [2013] EWHC 2459 (‘Patel’). The Court in Patel had to consider the scope of the Booth approach/principle and whether it applies also to Billing Authorities performing Business Rates tax collection functions. 

In Patel, the Billing Authority had issued complaints in the Magistrates Court against the alleged ratepayer defendant Mr Patel, seeking a liability order for about £188,000 of unpaid and allegedly due Business Rates in respect to a property. When the Billing Authority’s complaint was dismissed by the Magistrates Court, the defendant applied to the Magistrates Court for a costs order against the Billing Authority, contending that ‘costs should follow the event’ (paragraph 3) and that the Billing Authority had acted ‘irresponsibly and irrationally in pursuing their claim’ (paragraph 3) that he was responsible for Business Rates. The Billing Authority argued that no order for costs should be made. 

The defendant’s application for costs against the Billing Authority was refused, the Magistrates Court DJ applying Booth; the defendant appealed. 

The Appeal by way of Case Stated questions, posed to the High Court in Patel, were:

‘Was I correct to conclude that the case of [Booth] applied to costs in this type of case? 

When I refused to make a costs order in favour of the [alleged ratepayer] did I correctly exercise my discretion under section 64 of the Magistrates' Courts Act 1980 and in accordance with the principles set out in Booth, if it applies? 

Was there sufficient evidence for me to conclude that the [Billing Authority] had acted honestly and reasonably in pursing the application for liability orders? 

In all the circumstances, when exercising my discretion, was I entitled to refuse to make a costs order in favour of the [alleged ratepayer]?’

In the High Court, Patel came before Silber J, who had sat with Lord Bingham CJ in Booth. In order to establish whether the Booth approach/principle applied to billing authorities in Business Rates cases, Silber J in Patel turned to the Court of Appeal decision and reasoning in Perinpanathan. 

In Perinpanathan, the Court of Appeal had applied Booth to a situation where the  Police, a public body performing public functions, had applied unsuccessfully for an order for forfeiture of some cash under the Proceeds of Crime Act 2002. 

After endorsing the Booth approach/principle with respect to licensing cases, and saying it was ‘…applicable to disciplinary proceedings before tribunals at first instance brought by public authorities acting in the public interest…’, Stanley Burnton LJ in Perinpanathan stated that he derived the following propositions (amongst others) from the authorities, at paragraphs 40 (3) and (4):

‘Whether the principle should be applied in other contexts will depend on the substantive legislative framework and the applicable procedural provisions. 

The principle does not apply in proceedings to which the CPR apply;’

Booth Approach/Principle applies to Business Rates Cases

On the basis of this, Silber J in Patel noted, at paragraph 35, that the answer to the question whether the Booth approach/principle applied to a billing authority exercising its revenue collection functions (including acting in Business Rates cases) ‘…will depend on "the substantive legislative framework and the applicable procedural provisions"…’, namely the Local Government Finance Act 1988 and the various regulations made under it (paragraph 41). 

In determining this issue, after noting the basic structure of Business Rates law, from paragraphs 41 to 44, Silber J turned to Slade LJ’s review in Ratford v Northhaven District Council [1986] RA 137 (‘Ratford’) of the principles applicable to billing authorities commencing and pursuing Business Rate cases, and the burden of proof on aspects of establishing liability where liability for Business Rates is in dispute[20].

It was from the observations made, and balance struck in Ratford, that Silber J concluded in Patel, at paragraph 47, that:

‘…the billing authority are public authorities charged with the statutory duty of recovered rates on behalf of community. That was explained clearly in the Ratford decision. There are, of course, difficulties for billing authorities in recovering rates where the identity of the occupier is unknown and it is likely to produce many cases each year in which the authority has little knowledge. 

To my mind it is clear that [the Billing Authority] as a public authority was charged with recovering the rates in this particular case and its role would fall within the category of bodies which were entitled to the protection within the Booth regime as they were performing the exercise of public duty which would appear to have fallen within the words of Lord Bingham in the Booth case at paragraph 26 where he sets out the factors that would have to be taken into account.’

Drawing this together, Silber J in Patel concluded, at paragraph 55:

‘…as matter of principle,… [the Billing Authority] was performing a public function by collecting rates. For those reasons I consider that the Booth principle applied.’

Booth Approach/Principle as Developed by Perinpanathan

In light of the fact that the Booth approach/principle applies to Business Rates cases, it is necessary to consider it in a little more detail. Firstly, it is observed that the Booth case did not set down a test per se, but rather it identified a series of additional factors which the Magistrates Court should take into account when considering an application for costs against a Billing Authority. Stanley Burnton LJ in Perinpanathan at paragraph 45, agreed with Goldring LJ in the Divisional Court below, where Goldring LJ had said, at paragraph 32:

‘“It is necessary too to emphasise the limits of what is said in the [Booth] case. It is not, as Davis J said in R (Ebbnie) v Chief Constable of Surrey Police [2008] EWHC 166 (Admin) (a decision with which it follows I agree) setting out any sort of a test. The [Booth] case merely sets out a series of factors which the court should take into account in the application of section 64 of the 1960 Act. The court, as Lord Bingham CJ said, may think it just and reasonable that costs should follow the event. It is worth too emphasising the words ‘in addition’ which precede sub-paragraphs (i) and (ii) of Lord Bingham's third proposition.’ 

Secondly, it is noted that the nature of the Booth approach/principle was developed in Perinpanathan, or, as George Leggart QC sitting as a deputy High Court Judge put it, in R. (on the application of Newham LBC) v Stratford Magistrates' Court [2012] EWHC 325 (Admin) ('Newham'), at paragraph 31, 'somewhat strengthened in their formulation​'. This is apparent from what Stanley Burnton LJ said in Perinpanathan, where he stated, at paragraphs 40(5), (6) and (7):

‘Where the principle applies, and the party opposing the order sought by the public authority has been successful, in relation to costs the starting point and default position is that no order should be made. 

A successful private party to proceedings to which the principle applies may none the less be awarded all or part of his costs if the conduct of the public authority in question justifies it.

Other facts relevant to the exercise of the discretion conferred by the applicable procedural rules may also justify an order for costs. It would not be sensible to try exhaustively to define such matters, and I do not propose to do so.’ 

This is a refashioning of the Booth approach/principle, fashioning it so that, where the Booth approach/principle applies, ‘no order as to costs’ is the starting point and default position, though costs may be awarded in whole or in part, where, for instance, the Billing Authority’s (mis)conduct justifies it.

Summarizing the developed approach in Perinpanathan, Silber J said, at paragraphs 22 and 23: 

‘The reasoning of the Court of Appeal was that the approach to awards of costs under section 64(1) of the 1980 Act was not to start from the proposition of costs following the event, but instead to start from the different presumption that no order for costs should be made. 

Nevertheless, the magistrates had a duty to make such order for costs as were just and reasonable within the constraints of section 64(1) taking into account all the circumstances. So an order for costs in a successful client's favour might be justified by other factors relevant to the decision of the magistrates….’ 

In Leeds City Council v Leeds District Magistrates [2013] EWHC 1346 (Admin) ('Leeds City'), involving a successful appeal in the Magistrates Court against a local authority's sub-committee ruling, Supperstone J confirmed the default position: 

'The default position is that no costs should be awarded upon an appeal being successful'

The statutory provision empowering the Magistrates Court to order costs in Leeds City was Section 181(2) of the Licencing Act 2003, but that provision provides that the Magistrates Court may make such order as to costs as it thinks fit, and Supperstone J said, at paragraph 10:

'The costs power under section 181(2) of the 2003 Act is, for all intents and purposes, no different to the costs power pursuant to section 64(1) of the 1980 Act.' 

(see also Scott Baker LJ in Crawley BC v Attenborough [2006] EWHC 1278 (Admin) ('Crawley'), an alcohol licensing case, paragraph 8)

Two Factors which May Justify an Adverse Costs Order against a Billing Authority

While no exhaustive list of possible factors justifying an adverse costs order has been established, two factors have been identified. Silber J in Patel summarized these, at paragraphs 22 and 23: 

‘…factors could include first the financial hardship of the particular claimant, if no costs order were made in his favour, and second the fact that the conduct of the local authority had been unreasonable.’

Financial Prejudice to Alleged Ratepayer

To potentially warrant a costs order against the Billing Authority, the financial hardship that the alleged ratepayer would otherwise suffer must be (both) exceptional and substantial. It was said in Newham, at paragraph 31, that:

'...what is required is evidence that that party would suffer exceptional and substantial financial hardship.'

The financial prejudice from having to bear one's own legal costs of the litigation will not be sufficient. In Newham, the Deputy High Court Judge said, at paragraph 43 that there is '...the need to demonstrate hardship over and above that which every private party suffers who incurs legal costs.'

Stanley Burnton LJ in Perinpanathan stated, at paragraph 41:

‘Lord Bingham CJ stated that financial prejudice to the private party may justify an order for costs in his favour. I think it clear that the financial prejudice necessarily involved in litigation would not normally justify an order. If that were not so, an order would be made in every case in which the successful private party incurred legal costs. Lord Bingham CJ had in mind a case in which the successful private party would suffer substantial hardship if no order for costs was made in his favour.’

Stanley Burnton LJ further agreed, at paragraph 41, with R (Cambridge City Council) v Alex Nestling Ltd (2006) 170 JP 539, where Toulson J said, at paragraph 12: 

‘As to the financial loss suffered by the successful appellant, a successful appellant who has to bear his own costs will necessarily be out of pocket, and that is the reason in ordinary civil litigation for the principle that costs follow the event. But that principle does not apply in this type of case. When Lord Bingham CJ referred to the need to consider the financial prejudice to a particular complainant in the particular circumstances, he was not ... implying that an award for costs should routinely follow in favour of a successful appellant; quite to the contrary.’

Conduct of the Billing Authority

It was expressly recognized in Booth, that the public authority’s conduct may justify an adverse costs order being made against it. Such conduct must be more than simply a Billing Authority having pursued a complaint/resisted a complaint, and lost. In Newham, the Deputy High Court Judge said, at paragraph 40:

'The [Booth] case clearly contemplates that there can be a range of judgments which a local authority can properly make without its decision being capable of being characterised as unreasonable...'

The Magistrates Court will need to assess the Billing Authority’s litigation conduct, to judge whether a costs order is justified. The level of scrutiny expected of the Magistrates Court, can be gleaned from the following passage of Lord Neuberger in Perinpanathan, at paragraph 77 (substituting ‘Billing Authority’ for ‘police’, and Business Rates for the subject matter of the case, as appropriate)

‘The effect of our decision is that a person in the position of the claimant, who has done nothing wrong, may normally not be able to recover the costs of vindicating her rights against the police in proceedings under section 298 of the 2002 Act, where the police have behaved reasonably. In my view, this means that magistrates should exercise particular care when considering whether the police have acted reasonably in a case where there is an application for costs against them under section 64. It would be wrong to invoke the wisdom of hindsight or to set too exacting a standard, but, particularly given the understandable resentment felt by a person in the position of the claimant if no order for costs is made, and the general standards of behaviour that can properly be expected from the police, it must be right to scrutinise their behaviour in relation to the seizure, the detention, and the confiscation proceedings, with some care when deciding whether they acted reasonably and properly.’

Moreover, Goldring LJ in the Divisional Court in Perinpanathan, emphasized that this Booth approach/principle special protection ought not to lead to public authorities adopting a ‘carte blanche’ approach to such litigation; inappropriate applications (and presumably inappropriate resistance to applications) should be met with adverse costs orders. Goldring LJ said, at paragraph 33 (approved by Stanley Burnton at paragraph 45), that:

‘…it should not be thought that those who bring these applications have carte blanche to make applications…without any risk of costs being awarded against them. Such applications can result in grave injustice if not made honestly, reasonably, properly and on grounds that are sound. If applications are made inappropriately, the court should not hesitate to make an order for costs against the applicant.’ 

The Magistrates Court do not have to make a finding that the Billing Authority acted unreasonably, in order to impose an adverse costs order on the Billing Authority. Such a submission was rejected by Scott Baker LJ in Crawley, an analogous section 181(2) case, at paragraph 13:

'In my judgment, [counsel for the local authority] is seeking to import into the magistrates' discretion something that the statute does not specifically say.' 

An example of a case where the Magistrates Court did impose a costs order against a public body, is Ebbnie. The costs order was imposed after a finding that the public body had acted unreasonably. It was found that the public body (the police) should have withdrawn the complaint sooner[21]. 

Not Determinative that Billing Authority acted honestly, reasonably, properly and on sound grounds 

A finding that the Billing Authority has acted honestly, reasonably, properly and on grounds that are sound, does not automatically rule out an adverse costs order against a Billing Authority. The test is not so clear cut[22], though such a finding will be a most important factor. As Toulson J said in R (Cambridge City Council) v Alex Nesting Ltd [2006] EWHC 1374 (Admin), (2006) 170 JP 539, at paragraph 11:

'Although as a matter of strict law the power of the court in such circumstances to award costs is not confined to cases where the Local Authority acted unreasonably and in bad faith, the fact that the Local Authority has acted reasonably and in good faith in the discharge of its public function is plainly a most important factor.'

Quantum of Costs 

On quantum of recoverable costs, after quoting s.64, Langstaff J said in Thaker v Tameside MBC [2011] EWHC 2354 (Admin); [2012] R.V.R. 36 ('Thaker'), at paragraph 21 that 'that gives a wide discretion to the court.’

In Tower Hamlets LBC v Thames Magistrates Court [2012] EWHC 961 (Admin) ('Thames'), a challenge in the Magistrates Court to an alcohol licencing subcommittee decision, Burnett J said, at paragraph 47:

'The general principles when considering the question of costs applications as regards quantum are well known. This judgment is not the place to seek to summarise them but a number of points bear some emphasis:

1. The indemnity principle means that the sum claimed cannot be more than the client is liable to pay his solicitor.

2. Guideline rates for solicitors practising in different locations are published in the White Book for the purposes of assisting summary assessments in civil proceedings (see CPR 48.49). Whilst not directly applicable to complex matters in the Magistrates' Court, it would be rare for a higher hourly rate to be allowed. It might also assist magistrates and District Judges if their attention were drawn to those guideline rates.

3. When deciding the amount of costs to be awarded, the court will take account of all of the circumstances of the case but they include the following:

(a) What was at stake in the proceedings?

(b) What was the importance of the issue to the parties before the court?

(c) What was the complexity of the appeal?

(d) What skill, specialist knowledge and responsibility did the lawyers concerned require or assume?

(e) How much time was actually spent?

In the round, the court will be concerned to check that the expenditure actually incurred was reasonable, and ensure that any award of costs is proportionate.'

Cost Schedules 

The High Court in Thaker held that, while there is no statutory requirement that a party seeking costs must produce a costs schedule for the justices (the author interjects, for instance, on CPR Form N260), it is, Langstaff J said, as a matter of practice, to be commended, and that it would normally be expected. 

In Thames, Burnett J considered the matter in more detail, at paragraphs 44 to 49.

At paragraph 44 in Thames, Burnett J noted the Billing Authority's submission that 'the costs claimed should have been particularised in writing', and said:

'By contrast with the provisions of the CPR , there are no formalities prescribed in connection with summary costs applications in the Magistrates' Court. That is for good reason. The Magistrates' Court deals for the most part with short cases. Applications for costs are generally made for relatively small amounts, the reasonableness of which magistrates and District Judges are well able to determine by using their experience and knowledge of local charges and the nature of the cases they regularly deal with. Even then the paying party is entitled as a matter of fairness to have an explanation of the claim, with a breakdown of rates, time spent and the nature of the work done, to enable a challenge to be made to any aspect of the claim. Routinely, such applications are made orally.'

Burnett J said, at paragraph 46:

'When a regulatory body is concerned with a matter in the Crown Court and wishes to recover its costs, it routinely produces a detailed breakdown to assist the court and the other party. So too, in my judgment, should parties in complex matters in the Magistrates' Court who might be seeking substantial costs orders. A failure to do so might found a reason why an application for costs should fail in whole or in part, if the court concluded that it could not satisfactorily explore the detail or the paying party were disadvantaged in challenging the quantum. The production, and indeed exchange, of such short statements of costs would be likely substantially to shorten summary costs assessments in Magistrates' Courts. They are often likely to lead to agreements on quantum, even if the principle of recoverability is in issue. Solicitors are well used to producing such statements of costs for summary assessment in all civil proceedings, as indeed both parties have in connection with this appeal by way of case stated. The form of such statements can be adapted readily to fit the circumstances of any case in the Magistrates' Court.'

In R. (on the application of Preservation and Promotion of the Arts Ltd) v Greater Manchester Magistrates' Court Preservation and Promotion of the Arts Ltd v Birmingham City Council [2020] EWHC 2435 (Admin); [2021] R.A. 91 ('Preservation'), in the Birmingham Case part, the billing authority obtained liability orders against the ratepayer, and claimed the billing authority's costs (a role reversal from the scenario under consideration in this article, but which is not relevant for the point being made), relying on a costs schedule in N260 form '...which had been filed by analogy to the procedure in the Civil Procedure Rules'. On the appeal/judicial review, the ratepayer said, amongst other things, that - in effect (paragraph 138) - therefore the 1st instance district judge should have given proper consideration to the matters in CPR Part 44.4(3) on costs. Jefford J rejected this, agreeing with the submission, at paragraph 139, that:

'...the fact that a costs schedule was provided on Form N260, as it would have been for a summary assessment, was the product of using a convenient form and is irrelevant.'

Jefford J added, at paragraph 139 'The use of this form does not bring the CPR into play by analogy or otherwise.'

Applications to set aside Liability Orders

Where a public/regulatory authority is opposing the grant of relief, the Booth approach/principles will apply. In Perinpanathan, Lord Neuberger MR said, at paragraph 76:

'In a case where regulatory or disciplinary bodies, or the police, carrying out regulatory functions, have acted reasonably in opposing the grant of relief, or in pursuing a claim, it seems appropriate that there should not be a presumption that they should pay the other party's costs. It is not as if the other party would have no right to recover costs in such a case: as Lord Bingham CJ made clear, at paras 25 and 26, one must take into account “all the relevant facts and circumstances of the case”, and in particular “the financial prejudice to the particular complainant … if an order for costs is not made in his favour”.' [bold added]

An application for an order setting aside a existing business rates liability order is an interim application. Seemingly, where a Billing Authority decides to resist that application, opposing the grant of relief (the setting aside of the business rates liability order), that administrative decision (to oppose) will be part of its wider tax collection functions and, coupled with its inclusion within the special category of litigant, the Billing Authority will be protected by the Booth approach/principle, should the application be successful, and the alleged ratepayer seek a costs order against the Billing Authority, in relation to that set aside application.  

Appealing the Magistrates Court’s decision on Costs 

A decision of a Magistrates Court on costs is itself appealable, whether the Magistrates Court to impose a costs order, or not, and the quantum of the costs order imposed. However, as stated in Ebbnie by Davis J, at paragraph 10, the High Court ‘…should be slow to interfere with a decision of the [Magistrates Court] on a question of costs, when by statute the [Magistrates Court is] given the powers of deciding what is just and reasonable.’ Further, Davis J said that the High Court ‘…can only interfere …if the exercise of the discretion and the conclusion of the [Magistrates Court] was outside a range reasonably open to [it]. It is not a matter of considering whether or not other courts might have taken a different view.‘

Appeals

The Booth approach/principle do not apply beyond 1^st instance (i.e. the Magistrates Court). On appeal by way of Case Stated, the CPR will apply to the High Court proceedings[23]. The Booth approach/principle does not apply to CPR cases.

UPDATE

In Competition and Markets Authority v Flynn Pharma Ltd [2022] UKSC 14; [2022] 1 WLR 2972 ('Flynn'), a decision handed down on 25.5.22, the Supreme Court considered the approach the Competition Appeal Tribunal was entitled to take as to costs awards against public bodies. Lady Rose gave the only judgment, with whom Lord Hodge, Lord Sales, Lord Leggatt and Lord Stephens agreed.

At paragraph 94, Lady Rose agreed with Lord Neuberger in Perinpanathan, that:

'...even where a statutory power conferred on a court or tribunal to award costs appears to be unfettered, it is appropriate for an appellate court to lay down guidance or even rules which should apply in the absence of special circumstances.'

And went on to frame the issue before the Supreme Court as follows, at paragraph 95:

'The main issue raised by this appeal is...whether the Court of Appeal was right to hold that there is a general principle or rule that a court or tribunal exercising such a discretion should adopt as its starting point that it will not make an order for costs where the unsuccessful respondent is a public body defending a decision it has taken in the exercise of its functions in the public interest unless there is some good reason to do so; the lack of success not being of itself a good reason to depart from that starting point.'

Addressing this issue, Lady Rose said, at paragraphs 97-98:

'In my judgment, there is no generally applicable principle that all public bodies should enjoy a protected status as parties to litigation where they lose a case which they have brought or defended in the exercise of their public functions in the public interest. The principle supported by the Booth line of cases is, rather, that where a public body is unsuccessful in proceedings, an important factor that a court or tribunal exercising an apparently unfettered discretion should take into account is the risk that there will be a chilling effect on the conduct of the public body, if costs orders are routinely made against it in those kinds of proceedings, even where the body has acted reasonably in bringing or defending the application. This does not mean that a court has to consider the point afresh each time it exercises its discretion in, for example, a case where a local authority loses a licensing appeal or every time the magistrates dismiss an application brought by the police. The assessment that, in the kinds of proceedings dealt with directly in Booth, Baxendale-Walker and Perinpanathan, there is a general risk of a chilling effect clearly applies to the kinds of proceedings in which those cases were decided and to analogous proceedings.

Where I depart ...from the decision of the Court of Appeal in this case is in making the jump from a conclusion that in some circumstances the potential chilling effect on the public body indicates that a no order as to costs starting point is appropriate, to a principle that in every situation and for every public body it must be assumed that there might be such a chilling effect and hence that the body should be shielded from the costs consequences of the decisions it takes. An appeal is not sufficiently analogous to the Booth line of cases merely because the respondent is a public body and the power to award costs is expressed in unfettered terms. Whether there is a real risk of such a chilling effect depends on the facts and circumstances of the public body in question and the nature of the decision which it is defending - it cannot be assumed to exist. Further in my judgment, the assessment as to whether a chilling effect is sufficiently plausible to justify a starting point of no order as to costs in a particular jurisdiction is an assessment best made by the court or tribunal in question, subject to the supervisory jurisdiction of the appellate courts.' [bold added]

Tentatively, it therefore seems that the Magistrates Court can affirm that the Booth/Patel approach applies to Business Rates cases in the Magistrates Court, but to do so, it would need to: (i) determine that Business Rates cases are analogous to Booth, Baxendale-Walker and Perinpanathan cases (as meant by Lady Rose in paragraph 94 of Flynn); or (ii) find a authority, handed down following and in accordance with Flynn, in which the Court has determined that, in this kind of case (i.e. Business Rates cases), there is a sufficiently plausible chilling effect, to justify a starting point of no order as to costs; or (iii) determine the issue itself.

A real risk of such a chilling effect is not to be assumed; whether it exists depends on the facts and circumstances of the public body in question and the nature of the decision which it is defending.

The need to avoid a 'chilling effect' is an important factor in weighing up, when the Magistrates Court determines what costs order to impose on an unsuccessful billing authority.

Conclusion

When a Billing Authority issues a Business Rates complaint in the Magistrates Court and later that complaint is dismissed by the Magistrates Court, withdrawn or discontinued, or otherwise comes to an end without the sought liability order being made, and the alleged ratepayer seeks a costs order from the Magistrates Court against the Billing Authority, Patel has determined that the Booth approach/principle will apply to the Magistrates Court’s exercise of its powers under Section 64 of the Magistrates Court Act 1980 and section 52 of the Courts Act 1971. The starting point and default position will be ‘no order as to costs’. Only where countervailing factors justify a different result, an adverse costs order against the Billing Authority, should this 'presumption' be found to be rebutted, and an adverse costs order be imposed.

Similarly, it appears that the Booth approach/principle applies where an alleged ratepayer successfully applies for an order from the Magistrates Court, to set aside a Business Rates liability order under the Hamdan common law jurisdiction, and seeks a costs order against the Billing Authority. 

The underlying rational is that billing authorities are public authorities, undertaking revenue collection functions, and when acting ‘…honestly, reasonably, properly and on grounds that reasonably appeared to be sound, in exercise of its public duty’, they should not be discouraged from making and standing by administrative decisions on behalf of the community, because of fear of exposure to adverse costs orders if that decision later proves to have been misguided/wrong. The level of special protection granted to this category of litigant is not absolute. Factors can militate in favour of a costs order, and so the Magistrates Court should scrutinizes all the circumstances of the case, before reaching a decision on costs; two such factors are where the conduct of the Billing Authority’s warrants one; and where the alleged ratepayer would otherwise suffer substantial financial prejudice, arising not simply from not receiving a costs order, if no costs order is made. 

Summarizing Perinpanathan, Hickinbottom J in MT, concluded, at paragraph 21, that:

‘The court … confirmed and emphasised that, in contradistinction to a normal civil case in which there is a strong presumption that the discontinuing party will pay the other party's costs (see CPR rule 38.6), when a regulatory function is being exercised a costs order will generally only be made on a withdrawal if the regulator's conduct justifies it, e.g. if no order for costs would result in substantial hardship for the other party, or if the regulatory function was exercised in bad faith or unreasonably.’[24]

This will apply not only to withdrawn or discontinued Billing Authority complaints, but also where a Billing Authority is unsuccessful at trial. Pithily, Stanley Burnton LJ in Perinpanathan said, at paragraph 42: 

‘Ultimately, the duty of the magistrates' court is to make such order as to costs as is just and reasonable, subject to the constraint imposed by section 64.’  

SIMON HILL © 2019-2022

BARRISTER

33 BEDFORD ROW

NOTICE: This article is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of Chambers or by Chambers as a whole.