[2024] UKUT 399 (LC)

Fecha: 09-Dic-2024

The FTT’s power to award costs

The FTT’s power to award costs

Section 29 of the Tribunals, Courts and Enforcement Act 2007 is the source of the FTT’s power to award costs. So far as relevant, it provides:

“29 Costs or expenses
(1)
The costs of and incidental to–
(a)
all proceedings in the First-tier Tribunal, and
(b)
all proceedings in the Upper Tribunal,
shall be in the discretion of the Tribunal in which the proceedings take place.
(2)
The relevant Tribunal shall have full power to determine by whom and to what extent the costs are to be paid.
(3)
Subsections (1) and (2) have effect subject to Tribunal Procedure Rules.”

Tribunal Procedure Rules have been made which significantly restrict the “full power” conferred by section 29(2). Specifically, rule 13 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 limits the power to certain specific types of case (not including residential property cases) and otherwise allows costs to be awarded only as a sanction for what might loosely be called “bad behaviour”. Thus, rule 13(1)(a)-(b) provide:

“13.
Orders for costs, reimbursement of fees and interest on costs
(1)
The Tribunal may make an order in respect of costs only—
(a)
under section 29(4) of the 2007 Act (wasted costs) and the costs incurred in applying for such costs;
(b)
if a person has acted unreasonably in bringing, defending or conducting proceedings in –
(i)
an agricultural land and drainage case
(ii)
a residential property case, or
(iii)
a leasehold case; …”

In its recent decision in Lea v GP Ilfracombe Management Company Ltd [2024] EWCA Civ 1241, the Court of Appeal considered rule 13(1)(b) and this Tribunal’s decision in Willow Court Management Co (1985) Limited v Alexander [2016] UKUT 290 (LC) and confirmed that deciding whether or not there has been unreasonable conduct, and if so, whether an adverse order for costs should be made, is a fact-specific exercise. The test of what is unreasonable is the test laid down bySir Thomas Bingham MR (as he then was) in Ridehalgh v Horsefield [1994] Ch 205, at 232 E-G, where he explained:

""Unreasonable" also means what it has been understood to mean in this context for at least half a century. The expression aptly describes conduct which is vexatious, designed to harass the other side rather than advance the resolution of the case, and it makes no difference that the conduct is the product of excessive zeal and not improper motive. But conduct cannot be described as unreasonable simply because it leads in the event to an unsuccessful result or because other more cautious legal representatives would have acted differently. The acid test is whether the conduct permits of a reasonable explanation. If so, the course adopted may be regarded as optimistic and as reflecting on a practitioner's judgment, but it is not unreasonable."

The leading judgment in Lea was given by Coulson LJwhoquoted, at [8], the three stage approach to applications under rule 13(1)(b) suggested by the Tribunal in Willow Court:

"28.

At the first stage the question is whether a person has acted unreasonably. A decision that the conduct of a party has been unreasonable does not involve an exercise of discretion but rather the application of an objective standard of conduct to the facts of the case. If there is no reasonable explanation for the conduct complained of, the behaviour will properly be adjudged to be unreasonable, and the threshold for the making of an order will have been crossed. A discretionary power is then engaged and the decision maker moves to a second stage of the inquiry. At that second stage it is essential for the tribunal to consider whether, in the light of the unreasonable conduct it has found to have been demonstrated, it ought to make an order for costs or not; it is only if it decides that it should make an order that a third stage is reached when the question is what the terms of that order should be."

The Court of Appeal did not discourage tribunals from following that guidance but said that because of the fact-specific nature of the test, “general guidance as to what does or does not constitute unreasonable behaviour” could not be given.

Importantly, Coulson LJ emphasised, at [9], that conduct which is vexatious or designed to harass is one type of unreasonable conduct, but it is not the only possible type:

“It is important to note that neither Ridehalgh nor Willow Court decide that unreasonable conduct must involve vexatious conduct or harassment. On the contrary, the UT make clear in Willow Court that unreasonable conduct can include conduct which is vexatious or designed to harass, but it does not require such conduct; that is just one way in which unreasonable conduct may be established.”

10.

The conduct with which this appeal is concerned could not be described as vexatious or designed to harass. The FTT made its order because it considered that the appellant’s “failure to engage in any dialogue or communication” with the respondent amounted to unreasonable conduct of the proceedings. Before considering whether that assessment was realistic it is necessary to record the relevant facts in a little more detail.