It would not be reasonable for an “impecunious” company to withdraw a crowdfunded claim for judicial review if it was denied a costs-capping order (CCO), because its shareholders have sufficient resources to back the case, the High Court has ruled.
For the same reason, Mrs Justice Farbey said it was “not realistic” to suggest that these people would be denied justice in the absence of a CCO.
She was ruling on the application for a CCO by We Love Hackney Ltd – a company owned by 10 local residents –after it was granted permission to apply for judicial review of the decision of the London Borough of Hackney to adopt a revised statement of licensing policy.
The company had sought to cap its liability for the council’s costs at £35,000, and any liability of the defendant for the claimant’s costs to reasonable hours at the rates paid to counsel by the Government Legal Department and the rates it charged out its solicitors.
Mr Justice Lavender rejected it on the papers and, at the renewed oral application, Farbey J agreed that these were not public interest proceedings justifying a CCO, because the challenge was to the way in which the council formulated its policy and there were insufficient wider ramifications.
In any case, this would not be an appropriate case for a CCO because the claimant’s shareholders included wealthy individuals with a commercial interest in the litigation as they owned businesses affected by the licensing policy.
The judge noted: “At the core of both the claimant’s application for a CCO and the defendant’s application for security for costs is the claimant’s impecuniosity.”
An initial £20,000 crowdfunding target, through CrowdJustice, has been met and the company continues to raise further money in order to reach its ‘stretch target’ of £53,000.
“The evidence which I have seen suggests that multiple donors have each made comparatively small donations,” the judge said.
“The generosity of members of the public has been at the forefront of my mind and has weighed heavily with me. I am nonetheless obliged to consider the evidence as a whole and to apply the legislation that governs CCOs.”
Section 88(6)(b) of the Criminal Justice and Courts Act 2015 says the court may only make a CCO if it is satisfied that, in the absence of the order, the applicant would withdraw the application for judicial review or cease to participate in the proceedings.
While the judge accepted that the claim would be withdrawn, the Act also required her to consider whether this would be reasonable.
“In this regard, it is relevant to note that the claimant’s directors and significant supporters are individuals who have a commercial interest in the proceedings.
“I do not accept that either they as individuals, or their businesses if commercial advantage warranted it, would individually or together be unable to fund litigation which they say is of great significance to them.
“A number of well-resourced individuals have chosen to litigate the claim via an impecunious company which has taken possession of funds donated by members of the public. Given their individual and cumulative financial resources, I infer that the directors and other backers do not want to fund the litigation beyond the level of third party support, rather than that they are incapable of doing so.
“I do not accept on the evidence before me that the claimant would be forced to withdraw the claim through impecuniosity.
“In my judgment, absent any compulsion to withdraw through impecuniosity, it would not be reasonable for the claimant to withdraw its application for judicial review. This part of the statutory test for a CCO is not met and, for this reason too, the application for a CCO does not succeed.”
She did, however, grant the council’s application for a security for costs order.