Larsen and Others -v- Volaw and Others [2016] JCA 139 (15 August 2016)

[2016]JCA139

15 August 2016

Before :		John Martin, QC, President; James William McNeill, QC; Nigel Pleming QC.
Between	Larsen Oil & Gas Drilling Limited		First Applicant/Appellant
	Independent Oilfields Rentals IOR Limited		Second Applicant/Appellant
	North East Oil Limited		Third Applicant/Appellant
And	Comptroller of Taxes		Respondent

Advocate A. D. Hoy for the First, Second and Third Applicant/Appellants.

Advocate H. Sharp QC for the Respondent.

judgment

martin ja:

Introduction

1. On 28 May 2012 the respondent, the Comptroller of Taxes, issued a notice under the Taxation (Exchange of Information with Third Countries) (Jersey) Regulations 2008 directed to Volaw Trust and Corporate Services Limited ("Volaw"). The notice required Volaw to provide to the Comptroller documents relating to the affairs of the appellants, as well as to the affairs of a Mr Berge Larsen. Mr Larsen is a direct or indirect minority shareholder in the first two appellant companies; the third appellant now owns a further minority shareholding in the second appellant that formerly belonged to Mr Larsen. All three appellants are administered in Jersey by Volaw.

2. On 18 June 2012 Volaw and Mr Larsen (but not the appellants) appealed against the notice, using the procedure prescribed by the Regulations in their then form. The appeal was rejected by the Royal Court in a judgment dated 16 May 2013. An appeal to this Court was dismissed on 28 November 2013. The Privy Council refused leave to appeal on 21 May 2014.

3. On 6 June 2014 the appellants, who had not previously played any part in the challenge to the notice, applied for leave to move for judicial review of the Comptroller's decision to issue it. Their application was made more than two years after the notice was issued, and shortly after the challenge to it by Volaw and Mr Larsen had finally been rejected by the domestic courts (although Mr Larsen had intimated his intention to try to take the matter to the European Court of Human Rights).

4. Rule 16/2 (2) of the Royal Court Rules 2004 provides that an application for leave must be made ex parte to the Bailiff. Paragraphs (3), (4) and (5) of the same rule provide that the Bailiff may determine the application without a hearing, unless one is requested in the notice of application; that he may direct that the application be listed for oral hearing; and that at an oral hearing he may permit any person against whom relief is sought to make representations.

5. The application did not contain a request for a hearing. Following receipt of the application, however, the then Bailiff, Sir Michael Birt, directed pursuant to rule 16/2 (4) that the matter be listed for an oral hearing and that the Comptroller be given notice of the application.

6. The hearing took place on 23 June 2014. The appellants and the Comptroller were represented. On the following day the Bailiff refused leave to apply for judicial review. His reasons were subsequently set out in a judgment dated 15 July 2014 (Larsen Oil and Others-v-Comptroller of Taxes [2014] JRC 143). In summary, they were that the application was too late. At paragraphs 44 and 45 of his judgment, he summarised the position in this way:-

"The Notice was issued as long ago as May 2012. The applicants have known since then that their documents are included in the Notice. The validity of the Notice has been the subject of detailed consideration by the Royal Court and the Court of Appeal with the Privy Council refusing leave to appeal on the basis that the application to appeal disclosed no arguable point of law. There is an important public interest in the Island assisting proper requests for assistance under a TIEA in a timely fashion subject of course to any challenge properly brought within the timescales envisaged in the legislation or Rules of Court. I consider that there would be prejudice both to the Norwegian Tax Authority and to the good administration of the Norwegian TIEA by Jersey if this matter were allowed to be reopened at such a late stage.

In my judgment, the time has come for this long outstanding request of the Norwegian Tax Authority to be complied with and I am not prepared to countenance further delay when this application should have been brought within the three month period laid down by RCR 16/3(1). I find there to be no good reason for the long delay and I therefore refuse leave to apply for judicial review. "

The costs judgment

7. The Comptroller applied for his costs of and in connection with the oral hearing. On 5 January 2015 the Bailiff ordered that the appellants pay them on the standard basis. His reasons for doing so were set out in a judgment of the same date (Larsen-v-Comptroller of Taxes [2015] JRC 001).

8. In that judgment, he stated that the application for costs raised an issue as to the principles that the court should apply when deciding whether to award costs against an unsuccessful applicant for leave to apply for judicial review where an ex parte hearing on notice had taken place. He considered the old practice in England and Wales under the Rules of the Supreme Court and the new practice there under the Civil Procedure Rules. In relation to the old practice, he cited first the following passage from R (on the application of Leach) v Commissioners for Local Administration [2001] EWHC Admin 445:-

"The application is, as far as I am aware, a novel one in the sense that the old practice of the Crown Office was that there had to be an ex parte application for leave to move for judicial review. That was normally dealt with on the papers although it could be dealt with by means of an oral hearing, and it being an ex parte application, normally no costs were awarded in favour of the potential respondent, even if he chose either to make representations before the matter was considered on the papers or to attend at an oral hearing. There was power to award costs if the respondent attended at an oral hearing but it was a power that was very sparingly exercised. Accordingly, the assumption generally made by those who decided that they should seek permission to move for judicial review was that the application to the court would cost them nothing over and above whatever they had to pay for their own lawyer or in respect of the court fees".

9. He then quoted from the English Court of Appeal decision in R (on the application of Mount Cook Land Limited) v Mount Eden Land Ltd and Westminster City Council [2004] CP Rep 12 at [48]:-

"The issue arises under the relatively new procedure for the grant of permission for claiming judicial review introduced by CPR Part 54. ... This procedure replaced the practice under RSC, Order 53 of an ex parte application for leave to move for judicial review, normally made on paper, but which could also be made orally at an ex parte hearing. A respondent, if notified of the application ("ex parte on notice"), could make representations on paper and/or, if he chose to attend and was allowed by the court to participate in a permission hearing, orally. If a respondent successfully resisted the grant of permission at an oral hearing, the court had power to award him costs against the applicant, but it was sparing in its exercise of it. Given that practice, renewed oral applications for permission were normally heard ex parte and were, in any event, short. Applicants, on the whole, were able to seek relief without fear, if permission was refused, of being saddled with the respondent's costs at that stage."

10. The Bailiff then cited from the relevant Practice Direction, including the statement (in paragraph 8.6) "Where the defendant or any party does attend the hearing, the court will not generally make an order for costs against the claimant", and concluded as follows:-

"26. The practice as to the award of costs at the leave stage under the new procedure was considered in Mount Cook and was summarised as follows at para 76 of the judgment:-

"76. Accordingly, I would hold the following to be the proper approach to the award of costs against an unsuccessful claimant, and to the relationship of the obligation in CPR 54.8 on a defendant 'who wishes to take part in the judicial review' to file an acknowledgement of service with the general rule in paragraph 8.6 of the Practice Direction that a successful defendant in an oral permission hearing should not generally be awarded costs against the claimant:-

1. The effect of Leach, certainly in a case to which the Pre-Action Protocol applies and where a defendant or other interested party has complied with it, is that a successful defendant or other party at the permission stage who has filed an acknowledgment of service pursuant to CPR 54.8 should generally recover the costs of doing so from the claimant, whether or not he attends any permission hearing.

2. The effect of paragraph 8.6, when read with paragraph 8.5, of the Practice Direction, in conformity with the long-established practice of the courts in judicial review and the thinking of the Bowman Report giving rise to the CPR 54 procedure, is that a defendant who attends and successfully resists the grant of permission at a renewal hearing should not generally recover from the claimant his costs of and occasioned by doing so.

3. A court, in considering an award against an unsuccessful claimant of the defendant's and/or any other interested party's costs at a permission hearing, should only depart from the general guidance in the Practice Direction if he considers there are exceptional circumstances for doing so.

4. A court considering costs at the permission stage should be allowed a broad discretion as to whether, on the facts of the case, there are exceptional circumstances justifying the award of costs against an unsuccessful claimant.

5. Exceptional circumstances may consist in the presence of one or more of the features in the following non-exhaustive list:-

(a) the hopelessness of the claim;

(b) the persistence in it by the claimant after having been alerted to facts and/ or of the law demonstrating its hopelessness;

c) the extent to which the court considers that the claimant, in the pursuit of his application, has sought to abuse the process of judicial review for collateral ends - a relevant consideration as to costs at the permission stage, as well as when considering discretionary refusal of relief at the stage of substantive hearing, if there is one; and

(d) whether, as a result of the deployment of full argument and documentary evidence by both sides at the hearing of a contested application, the unsuccessful claimant has had, in effect, the advantage of an early substantive hearing of the claim.

6. A relevant factor for a court, when considering the exercise of its discretion on the grounds of exceptional circumstances, may be the extent to which the unsuccessful claimant has substantial resources which it has used to pursue the unfounded claim and which are available to meet an order for costs.

7. The Court of Appeal should be slow to interfere with the broad discretion of the court below in its identification of factors constituting exceptional circumstances and in the exercise of its discretion whether to award costs against an unsuccessful claimant.

77. Such an approach seems to me to accord with public policy in providing ready access to the courts by individuals or bodies seeking relief from and/or to draw attention to actual or threatened transgressions of the law by public bodies, whilst, in exceptional cases, protecting those bodies and the public that funds them from unnecessary, burdensome and costly substantive litigation. If properly and consistently applied by the courts, I can see nothing about it that would, as Mr Steel suggested, undermine the fairness and probity of judicial review as a means of control of the administration or run contrary to Article 6.1 of the European Convention on Human Rights, Lord Woof's civil justice reforms or the adoption of them in this context in the Bowman Report."

27. It seems to me therefore that, in relation to whether to award costs in favour of a successful putative respondent following an oral hearing for leave, the practice in England and Wales has not really changed as between the old procedure under Order 53 and the new procedure under CPR 54. Under the old procedure, such costs were awarded 'sparingly' whereas, under the new procedure, they should only be awarded in 'exceptional circumstances', although the judge is given a broad discretion as to what constitutes such exceptional circumstances.

28. The reason for this approach is clearly one of public policy as articulated by Auld LJ in the passage quoted above. The importance of ready access to the courts for judicial review requires that applicants should not routinely face the risk of an adverse costs order at the leave stage. Clearly very different considerations apply once leave has been granted and the matter is then contested in the usual way. Advocate Hoy [for the appellants] argues, in accordance with this approach, that it is unreasonable to expect an applicant to pay the costs of an oral hearing when it is not within his control as to whether there is such a hearing. The applicant may wish the matter simply to be considered on the papers (in which event there can be no award of costs as the putative respondent will not have incurred any), but the Bailiff may of his own volition decide that an oral hearing is required. This is outside the control of the applicant.

29. In my judgment, the policy considerations which underlie both the old and new practice in England in relation to oral hearings for leave - the position in England is of course now different in relation to the costs of filing an acknowledgment of service - are much the same as in Jersey. I find them persuasive. Accordingly, I hold that the general approach should be that a putative respondent should not be awarded his costs in relation to such a hearing unless the judge hearing the application considers in his discretion that there are grounds for departing from this normal practice. I would prefer to put it this way rather than referring to 'exceptional circumstances' as the use of such an expression immediately invites dispute as to whether the circumstances are sufficiently different or unusual to become 'exceptional'. As Auld LJ emphasised in the passage referred to above, the matter is ultimately one for the discretion of the judge but having regard to the general approach."

11. The Bailiff then went on to determine the application on the basis of that approach, saying this (in paragraph 30):-

"Applying this approach to the facts of this case, I consider that there should be a departure from the normal rule. This was a case where the application was brought over two years after the expiry of the time limit laid down in RCR 16/2 for challenging the notice issued by the Comptroller in circumstances where the applicants were closely connected to the parties who had already pursued a lengthy appeal process (all the way up to the Privy Council) against the issue of the very same notice which the applicants were seeking now to challenge by judicial review. In my judgment, it was a hopeless application which was doomed to failure and the fact that I asked for an oral hearing ex parte on notice did not alter the hopelessness of the application. Furthermore, the Comptroller made it clear in advance that he would be attending the oral hearing and would be taking the point about delay. The applicants were therefore on notice of the point, yet they chose to persist in it."

12. The appellants now appeal the costs order with the leave of the Bailiff.

The appellants' contentions

13. The appellants contend that either the application was hopeless on the papers (in which case there was no necessity for the Bailiff to order a hearing) or it was not possible on the papers to tell whether or not there was an arguable case (in which case there was nothing objectionable in the appellants attending a hearing they had not asked for whose purpose could only have been to determine whether or not there was an arguable case). Nor had there been any undue persistence: the appellants had done no more than make their application and attend the hearing directed by the Bailiff. As they put it in paragraph 29 of the skeleton argument:-

"It is therefore intrinsically unfair and irrational for the appellants to have been the subject of an adverse costs order. Such costs are only awarded in exceptional circumstances and hopelessness and persistence may be factors relevant in deciding whether exceptional circumstances exist to attract costs. But there can be no hopelessness or persistence in this case because:

(1) If the application was hopeless no hearing should have been ordered. If there had been no hearing there would have been no costs associated with it to pay. The appellants did not request a hearing.

(2) That a hearing was ordered suggests no hopelessness in the application. The persistence found against the appellant was attendance at the hearing that the Bailiff ordered. Attending a hearing ordered by the Bailiff cannot be persistence sufficient to constitute a factor in finding the exceptional circumstances necessary to attract an adverse costs order".

The respondent's contentions

14. In response to these contentions, the Comptroller submitted that the two-year delay between the issue of the notice and the making of the application required explanation that was not adequately provided in the affidavit supporting the application. The Bailiff's language - "All that Mr Healey, on behalf of the applicants, has to say about the delay in bringing this application ..." - indicated his dissatisfaction with the information provided. The Bailiff was entitled to require an oral hearing so that he could exercise his discretion on the basis of full information, the appellants having failed to provide that information at the paper stage. Further submissions relating to delay were made by the applicants' advocate at the oral hearing. It was only once full information was available that it became clear that the application was indeed hopeless. The Bailiff applied the correct test in relation to costs, and was entitled to hold that grounds existed for the making of an adverse order: the case was doomed to failure and the application was persisted in despite its hopelessness. The Bailiff was also entitled to make the order on the basis that the application was an abuse of the court's process.

Discussion

15. As the Bailiff recognised, the practice in this jurisdiction and in England is that an applicant for judicial review should not ordinarily be made to pay the costs of a failed application for leave. That practice applies whether the application is dealt with on paper or disposed of after an oral hearing - even if the oral hearing is requested by the applicant, and even if it follows a refusal of leave on paper. As the Bailiff again recognised, the court nevertheless has a broad discretion to depart from the ordinary practice if the circumstances so require. For my part, I think it desirable to retain the concept of exceptional circumstances being needed to justify a departure, since it indicates the strength of the ordinary practice in a way that the Bailiff's formulation - "unless the judge hearing the application considers in his discretion that there are grounds for departing from the normal practice" - perhaps does not. Whichever formulation is adopted, however, the list of potential relevant factors in Mount Cook is a useful guide to the circumstances that may justify a departure from the practice. Also useful is the reminder, in para 79 of Mount Cook, that "[w]hat amounts to exceptional circumstances or not following the general rule may vary considerably according to the circumstances of the case, including the strength or weakness of the application and the respective conduct and circumstances of the parties."

16. The circumstances of the present case were on any footing unusual. The application was plainly long out of time. It represented a further challenge to a notice whose validity had been upheld by the domestic court system at all levels. Although the prior challenge had failed, it had raised questions of substance and difficulty. Whilst it was very unlikely that the new application could raise any new point or could survive the long delay in bringing it, the Bailiff was entitled to take the view that the interests of justice required a hearing at which the merits of allowing the application to proceed could be properly investigated. What the hearing made clear, however, was that there was no basis for a further judicial review. The timing of the new application was material not only for its own sake, being over two years after the issue of the notice, but also because it gave rise to the inference that it was a last-ditch attempt to keep alive a challenge that had been rejected by the domestic courts. The Bailiff's remarks at the conclusion of the hearing, set out in paragraph 6 above, demonstrate an awareness of both these factors. They amply justify his view not only that the delay could not be overcome but also that the notice was not susceptible of a further challenge immediately after the failure of the prior judicial review. But they also justify his decision to make an adverse costs order: the application was hopeless, had been persisted in despite the appellants knowing that the Comptroller was taking the point about delay, and amounted to an abuse of process. These are three of the factors identified in paragraph 76.5 of the judgment in Mount Cook as capable of amounting to exceptional circumstances justifying a departure from the ordinary practice.

17. Paragraph 77 of that judgment identified the public policy interest in attaining a balance between on the one hand providing ready access to the courts by individuals or bodies seeking relief from and/or to draw attention to actual or threatened transgressions of the law by public bodies, and on the other protecting those bodies and the public that funds them from unnecessary, burdensome and costly substantive litigation. In this case, there had been ample opportunity to draw attention to any transgression of the law affecting the notice: the question of its validity had already been exhaustively litigated by the time the appellants issued their application. The appellants' application amounted in the circumstances to unnecessary and burdensome litigation; and in this exceptional case the Comptroller was entitled to protection against the costs of it.

Disposition

18. For these reasons, I would dismiss the appeal.

MCNEILL JA: I agree.

PLEMING JA: I also agree.

Authorities

Taxation (Exchange of Information with Third Countries) (Jersey) Regulations 2008.

Royal Court Rules 2004.

Larsen Oil and Others-v-Comptroller of Taxes [2014] JRC 143.

Larsen-v-Comptroller of Taxes [2015] JRC 001.

R (on the application of Leach) v Commissioners for Local Administration [2001] EWHC Admin 445.

R (on the application of Mount Cook Land Limited) v Mount Eden Land Ltd and Westminster City Council [2004] CP Rep 12.