[2024] UKUT 253 (LC)

The appellants’ application for costs set out the basis of the FTT’s ability to award costs and said at paragraph 18:

“It is submitted that the Applicants acted unreasonably in bringing proceedings against persons (ie the owners of the cluster units) which (as the Applicants later admitted and averred) the FTT had no jurisdiction to determine.”

The principal argument was that the respondents’ conduct in bringing the proceedings was unreasonable because they knew that there was no jurisdiction as against the cluster units and that therefore the proceedings against them were pointless. The appellants pointed out that had the respondents sent a letter before action the parties could have agreed the position as to jurisdiction and there would have been no need for any of them to incur costs in dealing with it.

In the alternative, if the respondents did not know the law about the cluster units, their legal advisers were “negligent (in an untechnical sense) and/or unreasonable in failing to advise the applicants that the FTT had no jurisdiction in respect of the cluster units.”

The costs sought by the appellants were the whole of the costs incurred by the owners of the cluster units, and the costs incurred by the owners of the studios in respect only of the issue about jurisdiction.

In response, counsel for the respondents pointed out that neither party had considered the decisions in Q Studios (Stoke) or in Goodrich v Paisner, which the FTT had considered informative, and argued that unfamiliarity with the law was not sufficient to warrant the making of a costs order.

The FTT set out the law and the parties’ arguments, and dismissed the application for the following reasons (paragraph 40):

“a.

Whilst the case law is now straightforward and settled, none of the parties in the case had referred to the case law that the Tribunal considered to be of most assistance in determining the matter, including Q Studios and Goodrich.

b.

There is no clear correspondence provided by either party which would lead the Tribunal to consider that the substantive application either should not have been issued or should have been withdrawn or compromised.

c.

The Tribunal does not consider the conduct of the Applicant in this matter to be “vexatious” or “designed to harass the other side” (Willow Court). It seems clear to this Tribunal that the conduct of the Applicant in issuing the proceedings was to seek confirmation of whether the Tribunal did have jurisdiction.

d.

The Applicants’ reasons for issuing the substantive application were unusual. However, the Tribunal does not consider it to be unreasonable conduct for a party to issue proceedings in order to achieve certainty in circumstances where the legal position as it is known to them is uncertain.

e.

It is not appropriate for the Applicants or their representatives to be penalised for not being familiar with the full extent of existing case law in circumstances where it would appear that the position was not known to the other parties in the case either. To do so would be contrary to the principles of fairness as set out in Rule 3.

f.

It is not considered that the issuing of the substantive application led to the Respondents incurring significant costs. If the Respondents’ are correct in their submission that the position was so obvious that the substantive application should not have been made, then there would have been very little work for the Respondents to do. They could have simply responded by referring the Tribunal to the case law without incurring significant costs.

g.

The Tribunal does not find that the position on behalf of the present Respondents to be different to that of the Second Group of Respondents for the following reasons:

i.

Lack of familiarity with the law in a complex area and in circumstances where neither party had referred to the pertinent case law is not sufficient to warrant the making of a costs order in the present circumstances.

ii.

No unreasonable conduct by the Applicants has been identified.

h.

Any order for costs based on it being unreasonable for a party to pursue an application before a tribunal where they have a reasonable belief that the application might fail would seem to be close to making a finding that it was unreasonable for a party to bring a case which has simply not succeeded in any case where the merits are dubious.

i.

The following words from Ridehalgh are noted:

“… 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.”

j.

It is not considered that the conduct of the Applicants’ representatives amounts to improper, unreasonable or negligent conduct.

k.

The Tribunal has not seen any clear correspondence, by way of an offer to resolve the substantive application between the parties, and certainly not from the First Group of Respondents to the Applicants which would have provided the Applicants with the certainty required and beyond which the Applicants should not have proceeded.”