Public Law

A protective expenses order (PEO) is an order which regulates the scope of a party’s liability in expenses in certain types of environmental litigation.

The purpose of a PEO is to redress the potential imbalance of financial resources between parties in relation to funding litigation. PEOs are available in certain types of environmental appeals and judicial reviews where a petitioner or appellant is less likely to receive legal aid than they would be for a private law matter.

PEOs are rarely awarded in Scotland, with the first award being made in the case McGinty, Petitioner four years after a Court of Session ruling that such orders were competent. To read more about this click here.

Importantly, new rules on PEOs were introduced by the Court of Session on 10 December 2018 and apply to all proceedings commenced on or after this date.

The new rules:

Under the new rules, a standard PEO will limit:

i) the applicant’s liability in expenses to £5,000, or such other sum as may be justified on cause shown; or
ii) the respondent/appellant’s liability in expenses to the applicant to the sum of £30,000, or such other sum as may be justified on cause shown.
Any party who seeks to deviate from the standard sum above will need to show cause for why a different amount should be granted.

When will a PEO be granted?

A PEO will be granted in circumstances where the court proceedings are considered “prohibitively expensive”. In determining whether proceedings are “prohibitively expensive”, consideration will be had to whether the costs and expenses likely to be incurred by the applicant for a PEO either:
(a) exceed the financial means of the applicant; or
(b) are objectively unreasonable having regard to a number of factors.

The cost of proceedings must neither exceed the financial resources of the person concerned nor appear, in any event, to be objectively unreasonable.

The financial means of the applicant

Part (a) of the test requires the court to look at the financial means of the applicant. If the court finds that the costs and expenses are within the applicant’s financial means then it is unlikely a PEO will be granted.

Objectively unreasonable – the factors 

There are six factors the court will take into account in deciding whether the cost and expenses are objectively unreasonable:

  • Situation of the parties – this is aimed at a more general assessment of the parties involved beyond the merely financial.
  • Reasonable prospects of success – this mirrors the current rules which give the court discretion to refuse a PEO if there is no real prospect of success.
    However, having reasonable prospects of success and having a real (as opposed to having no real) prospect of success is not the same thing. This could now be a higher hurdle for an applicant.
  • Importance of what is at stake for the applicant – this seems to be a negative aspect for the applicant. If the applicant has extensive economic interests at stake in the proceedings then the courts suggest the applicant should bear a higher risk in relation to expenses – ie no, or at least a lower, PEO.
  • Importance of what is at stake for the environment – in contrast this should be positive for the applicant. The more important for the environment the case is then the more likely it is that a PEO will be justified.
  • Complexity of law and procedure – this could also be treated as a negative for the applicant. A complex case requires higher expenditure resulting in higher awards of expenses, meaning there is less justification for a PEO restricting recovery.
  • Whether the case is frivolous – if the court is persuaded the applicant’s case is frivolous then the prospect of getting a PEO is minimal. It is hard to see how any of the other factors which favour a PEO could be found to exist if the case were to be considered frivolous.

How to apply for a PEO?

An applicant should apply for a PEO “no later than is reasonably practicable” after they become aware their petition or appeal is defended. The application should be intimated on the respondent and all other parties (if applicable) 14 days before enrolment with the court.

The application should be lodged with a statement setting out:

  • the grounds for seeking the order;
  • the terms on which the applicant is represented;
  • an estimate of the expenses that the applicant will incur in relation to the proceedings;
  • an estimate of the expenses of each other party for which the applicant may be liable in relation to the proceedings; and
  • in the case of an application for liability in expenses to be limited to an amount lower or higher than the standard amount, then the grounds on which the lower or higher amount is applied for.

Any documents or other materials the applicant relies on should also be lodged with the application.

A party seeking to oppose the application for a PEO must lodge a notice of opposition to the application. As above, this should be lodged alongside a statement setting out the grounds for opposing alongside any documents or other materials they intend to reply on.

What will happen if a PEO application is refused by the court?

If an applicant is unsuccessful then liability in expenses for the application is limited to £500 except on “exceptional cause shown”. This appears to be a new test set down by the court with a higher threshold than normal, although no doubt the court will provide further guidance on this as it starts to hear applications.

If you require any further advice or information on a PEO please contact Niall McLean.

Niall McLean

Associate at Brodies LLP
Niall is a member of Brodies' market leading Government, Regulation and Competition practice. Niall gives both public and private sector clients advice in a broad range of areas including: corporate crime and investigations, governance, defamation and reputation management, public law and statutory interpretation.
Niall McLean