Introduction

The case of Durham County Council v The Durham Company Ltd ([2023] EWCA Civ 729) marks a pivotal moment in the jurisprudence surrounding subsidy control and cost management in judicial reviews within the United Kingdom. This case centers on a dispute between the Durham Company Limited (trading as Max Recycle) and Durham County Council ("the Council"), focusing on the imposition of cost caps in statutory judicial review proceedings under the newly enacted Subsidy Control Act 2022 ("the 2022 Act"). The Council's decision to cap recoverable costs at £60,000 post-case management conference (CMC) prompted Max Recycle to challenge this imposition, leading to the appeal that is now being comprehensively analyzed.

Summary of the Judgment

The Court of Appeal scrutinized the Council's appeal against the initial judge's decision to impose a cost cap on the recoverable costs of the proceedings. The appellant, Durham County Council, argued against the imposition of a cost cap, contending it was irrationally low and improperly applied. The initial judge had capped the costs at £50,000 for Max Recycle and £60,000 for the Council, aiming to prevent excessive litigation costs from deterring challenges to subsidy decisions.

Lord Justice Nugee and Lord Justice Newey upheld the appeal against the cost capping, finding that the judge had overstepped his authority by imposing a limiting cost cap not supported by statutory or regulatory provisions. They emphasized that cost capping of the nature imposed requires explicit authorization through rules or legislation, which was absent in this context. Consequently, the Court of Appeal allowed the appeal on the first ground, rendering the cost cap invalid.

Analysis

Precedents Cited

The judgment extensively referenced several key precedents to establish the limitations of cost management powers within subsidy control cases:

• Belle Lingerie v Wacoal [2022] CAT 24: This case affirmed that cost capping jurisdiction arises from Rule 53(2)(m) of the CAT Rules, analogous to CPR 3.19, and highlighted the rarity of costs capping orders (CCOs) in general.
• Corner House Research v Secretary of State for Trade and Industry [2005] 1 WLR 2600: Established criteria for imposing cost caps in judicial review, emphasizing that such measures should be exceptional and closely scrutinized.
• Flynn Pharma [2022] UKSC 14; Demonstrated the courts' awareness of the "chilling effects" that excessive cost liabilities can have on parties, particularly smaller entities challenging powerful defendants.
• Genius Sports Technologies v Soft Construct (Malta) [2022] EWHC 2308 (Ch): An example where costs budgeting was deemed more practical than imposing cost caps.
• Socrates Training Limited v The Law Society [2016] CAT 10: Illustrated the application of a limiting cost cap under Rule 58 of the CAT Rules in fast-track procedures, contrasting it with the current case's context.

Legal Reasoning

The Court of Appeal employed a meticulous legal analysis to assess whether the initial judge possessed the authority to impose a limiting cost cap:

• Jurisdiction for Cost Capping: The court determined that the Competition Appeal Tribunal (CAT) lacks inherent authority under the 2022 Act or CAT Rules to impose a limiting cost cap akin to those in the Intellectual Property Enterprise Court (IPEC) or under CPR 3.19.
• Distinction Between Cost Budgeting and Cost Capping: Emphasized that cost budgeting, a more flexible and case-specific approach, remains appropriate for controlling costs without imposing rigid financial limits.
• Assessment of Conditions for Cost Capping: Highlighted that the standard criteria for imposing cost caps—being in the interests of justice, substantial risk of disproportionate costs, and inadequacy of alternative measures—were not satisfactorily met in this case.
• Prohibited Derogation from Reasonable and Proportionate Costs: Asserted that overriding the normal entitlement to recover reasonable costs through arbitrary caps undermines the fundamental principles of cost recovery in litigation.

Impact

This judgment sets a significant precedent in the realm of subsidy control and judicial review by clarifying the limitations of cost management powers within the CAT. It underscores the necessity for explicit legislative or regulatory authorization before imposing cost caps, thereby protecting parties' rights to recover reasonable and proportionate costs. The decision also reinforces the legitimacy of cost budgeting as a preferred method for managing litigation expenses in subsidy control cases, promoting access to justice by mitigating potential financial barriers for challengers.

Complex Concepts Simplified

Subsidy Control Act 2022

The Subsidy Control Act 2022 is legislation that formalizes the UK's commitment to managing subsidies post-Brexit, ensuring that any financial aid provided by public authorities aligns with established principles to avoid market distortions and promote fair competition.

Cost Capping vs. Cost Budgeting

Cost Capping: A legal mechanism that places an upper limit on the amount of legal costs a party can recover, regardless of the actual costs incurred.

Cost Budgeting: A flexible approach where parties agree on a budget for legal costs, and the tribunal monitors adherence to this budget, allowing for adjustments as the case progresses.

Competition Appeal Tribunal (CAT)

The CAT is a specialized judicial body in the UK that deals with competition and regulatory cases, including those related to subsidies, mergers, and market practices. It provides expertise in adjudicating complex economic and legal issues.

"Chilling Effect"

A "chilling effect" refers to the discouragement of individuals or organizations from exercising their legal rights due to fear of adverse consequences, such as high litigation costs.

Conclusion

The Court of Appeal's decision in Durham County Council v The Durham Company Ltd serves as a crucial affirmation of the principles governing cost management in subsidy control litigation. By rejecting the arbitrary imposition of limiting cost caps without proper legal authority, the court has fortified the right of parties to recover reasonable and proportionate legal costs. This judgment not only ensures that subsidy challenges remain accessible and fair but also delineates the boundaries of judicial discretion in cost management within the CAT. Moving forward, parties engaging in subsidy control disputes can anticipate a jurisprudential landscape that favors nuanced cost budgeting over rigid capping, thereby fostering a more equitable environment for legal challenges.