[2023] UKUT 108 (LC)

Grounds 2 and 3 both begin by making the same point, under ground 2 about the FTT’s assessment of the conduct of the respondents in bringing the proceedings and under ground 3 about the FTT’s assessment of their conduct in conducting the proceedings. In both cases it is said that the FTT failed to make the necessary assessment of the conduct of the respondents, and instead focused too narrowly on the formal correctness of the application. Thus under ground 2 it is said:

“There was the assessment (at §§67-8) that it was plain the demands were going to be subject to challenge, because of the unsatisfactory nature of the leases . The lease was not followed and there was not a reasonable methodology adopted to determine the amount. So the application that was brought, in the result, failed. That, however, cannot be an appropriate assessment of the action in bringing the claim: the action must be more than merely using the correct form and raising questions envisaged by and within the Tribunal’s jurisdiction. The Tribunal is only engaged at all if a claim is brought and, in practice, costs only arise for consideration if it fails. The assessment of the action of bringing the application cannot be so narrowly focused or the Rule becomes redundant.”

Again under ground 3 it is said:

“Once again, the focus of the Tribunal was too narrow. The conduct of the proceedings means more than merely the compliance (or, in this case, frequent non-compliance) with directions, but the broader question of whether GPIMCL, Mr Gubbay and Epworth acted reasonably. The processes by which each acted is not “noise”, but the substance of the complaint and there is no reasonable explanation for them.”

Having made those points, under ground 2 Mr Verduyn then repeats the arguments made in the original costs application as to why the respondents behaved unreasonably in bringing proceedings, and under ground 3 the arguments as to why they behaved unreasonably in conducting the proceedings.

If I have understood correctly, Mr Verduyn in the passages quoted just above is arguing that the FTT in paragraphs 67-68, quoted in my paragraph 27 above, took the view that the test in rule 13 was not met because the application was in correct form, and that the FTT failed to look at the substance of the allegations against the respondents. And having made that argument – I will call it the “narrow focus argument” - he then re-argues the points made in the original application on the basis that they were not properly considered by the FTT. This, he says, is not an attempt to re-open a discretionary decision; the FTT failed to get to the point of exercising its discretion because it failed to conduct an objective assessment of the conduct of the respondents, first in bringing and then in conducting the proceedings.

Insofar as I understand the narrow focus argument I find it unsustainable. The FTT in paragraphs 67-8 was not looking simply at procedural correctness. It was making an assessment of whether bringing and conducting the proceedings was reasonable, and it went on in the following paragraphs to explain its view by assessing the conduct of the parties.

I see no failure by the FTT to grapple with the arguments raised by Mr Verduyn, and no sign of a narrow focus. Rather, there is an assessment of various aspects of that conduct – quite a succinct analysis it is true, and not picking up on each and every one of the points in the application – and a conclusion that it was not unreasonable in the Willow Court sense, as can be seen from the quotation and summary at paragraphs 28 to 31 above.

The “noise” to which the FTT referred at its paragraph 75 was not that conduct, but the other matters going on between the parties, in particular the High Court proceedings. The events between the parties have been complicated and this is the sort of case where it is terribly tempting to look through the corporate veil at the individuals behind the various companies, especially given the connections between those companies and their common shareholding. But GPIMCL was not Messrs Spence and Kewley. The FTT carefully and correctly shut out from its consideration of the costs application the High Court proceedings and the allegations of fraud and looked at this without reference to those other disputes.

So the appeal must fail on that point. The further points made under grounds 2 and 3 all repeat the arguments in the costs application, and most of the appeal hearing was taken up with those arguments and with the development of the submission that the FTT failed properly to assess the conduct of the respondents. I agree with the appellants that the assessment of that conduct is not a matter of discretion, as the Tribunal said itself in Willow Court at paragraph 28; but it is an evaluative decision, where there is no single right answer. As the Tribunal put it at paragraph 24 of Willow Court, “An assessment of whether behaviour is unreasonable requires a value judgment on which views might differ”. The Tribunal’s role on appeal is to consider whether the FTT reached a conclusion that was open to it, having taken into account relevant matters and without taking into account irrelevant matters.

I am going to make use of my summary of the arguments in the costs application, at paragraph 24 above, to structure my consideration of the arguments in the appeal, omitting item (iv) where the appellants were successful.