CMA v Flynn  UKSC 14 – a costly opportunity missed?
In a line of authorities starting with Bradford Metropolitan District Council v Booth  164 JP 485, the Court of Appeal developed a rule that a successful party acting against a public authority will not recover its costs as a starting point, but rather the starting point is that no order for costs should be made. That rule has since been applied before a number of regulators where costs can in principle be awarded against the unsuccessful regulator, but as a result of Booth such awards are rare. The result is that solicitors, accountants or taxi drivers who have in fact done nothing wrong can face costly regulatory proceedings, have their right to practise suspended, and when they are eventually successful have little prospect of recovering the legal fees they have expended. If they are unsuccessful on the other hand, they can expect to pay the regulators’ full fees as well as facing whatever regulatory sanction the tribunal imposes.
Is that fair? On one view it goes against basic first principles. We are all equal before the law. The government does not enjoy some special advantage in its own courts. Why does the rule apply when resisting a cash forfeiture by the police, or when a regulated professional’s fitness to practise is called into question, but not when suing the NHS for negligence, where the general rule is that costs follow the event? Why does the rule apply to a regulator before the tribunal of first instance, but not on appeal (see Walker v Royal College of Veterinary Surgeons  UKPC 20)?
The Appellants in Flynn were partly successful in appealing against the Competition and Market Authority’s decisions to fine them for infringements of competition law. The Competition Appeal Tribunal awarded them a portion of their costs. The CMA appealed to the Court of Appeal, arguing the principle in Booth applied. The Court of Appeal agreed, albeit it clarified that no “exceptional circumstances” are required to overcome the starting point that no costs are awarded. There need only be a “good reason”, which may include unreasonable conduct on the part of the regulator, or substantial financial hardship if no costs order were made. No good reason existed in Flynn, so an order for no costs was substituted.
The Appellants appealed to the Supreme Court and, having heard from a number of interveners including the Solicitors Regulation Authority, the Supreme Court reinstated the decision of the CAT.
Lady Rose, with whom the rest of the court agreed, said there is no generally applicable principle that all public bodies enjoy a protected status where they lose a case which they have brought or defended in the exercise of their public functions in the public interest. The principle is rather that, where a public body is unsuccessful in proceedings, an important factor to take into account is the risk that there will be a chilling effect on the conduct of the public body if costs are routinely ordered against it even where the body has acted reasonably.
Regrettably in the author’s view, the court stopped short though of jettisoning the ‘general rule’ in all proceedings: “The assessment that, in the kinds of proceedings dealt with directly in Booth, Baxendale-Walker and Peripanathan [respectively a licencing appeal, an SRA (then the Law Society) case, and a cash forfeiture case] 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”.
However, the fact that in those proceedings that general risk indicated no order as to costs as a starting point is appropriate, did not mean that all public bodies should be shielded from the costs consequences of the decisions they make. The assessment as to whether the chilling effect is sufficiently plausible to justify a starting point of no order as to costs is an assessment best made by the court or tribunal in question.
The Supreme Court considered the CAT’s costs jurisdiction was distinguishable from those in the line of authorities starting with Booth:
- The CAT’s Rules were brought into force in 2015 without attempting to modify the then established position that the Booth line of authorities did not apply to the CAT.
- The CMA’s specific funding arrangements meant they could recover costs paid out from recovered fines before accounting for those fines to the consolidated fund, so there was no likelihood of a chilling effect on its use of enforcement powers (§125). The SRA on the other hand, undertake about 120-130 prosecutions a year, and is funded by the profession.
- Right to appeal to the CAT is “an essential part of the system by which competition authorities, in return for receiving extensive enforcement powers, are held to account by the courts” (§130). There are specific policy reasons why public bodies should be held to account for the decisions they make, and costs follow the event in judicial review proceedings.
- The CAT’s caselaw established that it took account of the factors in Booth despite adopting a starting point of costs following the event.
The Supreme Court’s decision leaves a number of outstanding questions.
It would appear that the “no costs” starting point remains good law before the SRA, in licensing appeals, and in cash forfeiture. Beyond that the issue is perhaps up for grabs. What about other regulators with a costs regime? Does the cash forfeiture caselaw apply to the similar but in practice far more intrusive account forfeiture orders? The answer may depend on the specific legislative context and funding arrangements for a particular regulator or authority.
The reasons given for distinguishing the CMA from those other authorities is not entirely satisfactory. Why are the CMA, but not the SRA, held to account for imposing disproportionate penalties or pursuing an unmeritorious case? This perhaps demonstrates a problem that sometimes arises in adversarial appeal. The court was confronted with a number of regulators arguing that the Booth rule should apply to their regimes, and with the Appellants and other interveners arguing that the CAT or another particular regime should be distinguished. But no one appears to have been arguing that in fact on a proper reading Booth did not lay down any general rule, that the “rule” that had subsequently developed was wrong in principle, and that this represented an opportunity for the Supreme Court to dispense with it.
Finally, to what extent does the Court of Appeal’s reanalysis of the caselaw and setting out of the principles that “a good reason” is required to depart from the no costs starting point, rather than “exceptional circumstances”, survive the Supreme Court overturning the decision?
At best, Flynn leaves substantial room for uncertainty. At worst, it is an opportunity missed to correct a rule that causes substantial injustice across a number of different jurisdictions.