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Cost cap to be inclusive of VAT in ‘Third Heathrow Runway’ case

Published:

Re: R (Friends of the Earth Ltd) v Secretary of State for Transport [2021] EWCA Civ 13

This issue arose from the costs given in the ‘Third Heathrow Runway’ proceedings. The issue in the present case arises from para. 4 of this Court’s order of 27 February 2020, after judgment had been handed down in the substantive appeal:

“The Defendant is to pay the costs of the Claimant in the Divisional Court and in this Court, subject to detailed assessment and a cap of £35,000 in respect of the costs in the Divisional Court, and a cap of £35,000 in respect of the costs in this Court.”

The question that remains is whether the Secretary of State must pay FoE £70,000 without more or whether VAT is payable on top of that sum.

 

Held: the application by FoE is refused. The sums specified in the costs order made by this Court on 27 February 2020, in respect of the costs as between FoE and the Secretary of State in this Court and in the Divisional Court, include VAT and are not exclusive of it.

The court have reached the conclusion that the caps which are set out in CPR 45.43, are inclusive of VAT. That is the natural meaning of the words used in those provisions. The figures are set out as absolute amounts, without qualification. This construction is supported by the history of the consultation exercise and the response to it by the Government in the process which led up to the enactment of CPR 45.43.

No costs orders to be given as the dispute about VAT arose from the terms of the costs orders made by the Divisional Court and this Court. There was a genuine uncertainty about the effect of the costs orders, which needed to be resolved by the Court. It was reasonable for the parties to bring that to the Court’s attention and, at the Court’s request, to make written submissions about it.

There was no authoritative decision at the level of this Court on the legal issue which we have had to determine. There were a number of first instance decisions, which each side cited in support of its position. It has been important for this Court to resolve that issue of principle. This serves the wider public interest and not only the parties to this dispute.

David Wolfe QC was involved in this case.