[2024] UKUT 253 (LC)

The FTT’s power to award costs is derived from section 29 of the Tribunals, Courts and Enforcement Act 2007 which provides:

“(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.

(4)

In any proceedings mentioned in subsection (1), the relevant Tribunal may–

(a)

disallow, or

(b)

(as the case may be) order the legal or other representative concerned to meet,

the whole of any wasted costs or such part of them as may be determined in accordance with Tribunal Procedure Rules.

(5)

In subsection (4) “wasted costs”  means any costs incurred by a party–

(a)

as a result of any improper, unreasonable or negligent act or omission on the part of any legal or other representative or any employee of such a representative, or

(b)

which, in the light of any such act or omission occurring after they were incurred, the relevant Tribunal considers it is unreasonable to expect that party to pay.

Despite the breadth of that provision, the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 have the effect that the FTT is for the most part a no-costs jurisdiction. The relevant parts of rule 13 provide as follows:

“(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;

(c)

in a land registration case , or

(d)

in proceedings under Schedule 3A to the Communications Act 2003 (the Electronic Communications Code) including proceedings that have been transferred from the Upper Tribunal.”

Accordingly, there is power to order costs in land registration and electronic communications proceedings, which in practice is exercised on the usual basis that costs follow the event, but aside from that the only possibilities are the power to make a wasted costs order against a legal representative (section 29(4) of the 2007 Act), the power to order costs under rule 13(1)(b) where a person has acted unreasonably in bringing, defending or conducting proceedings. There is also a power to order one party to reimburse the fees the other has paid to the tribunal, which is not relevant here.

There is authority about the basis on which the power to order a legal representative to pay wasted costs under rule 13(1)(a), or to make on order against a party who has behaved unreasonably under rule 1391)(a), should be exercised.

As to wasted costs, the leading authority is Ridehalgh v Horsefield [1994] EWCA Civ 40 where Sir Thomas Bingham considered the meaning of the statutory requirement for “improper, unreasonable or negligent act or omission” on the part of a legal representative.

As to rule 13(1)(b) the Tribunal (the Deputy Chamber President, Martin Rodger QC, and the President of the Property Chamber of the First-tier Tribunal, Siobhan McGrath) in Willow Court Management Company (1985) Ltd v Alexander [2016] UKUT 290 (LC) gave the following guidance on the meaning of “unreasonable conduct”:

“24.

… An assessment of whether behaviour is unreasonable requires a value judgment on which views might differ but the standard of behaviour expected of parties in tribunal proceedings ought not to be set at an unrealistic level. We see no reason to depart from the guidance given in Ridehalgh at 232E, despite the slightly different context. “Unreasonable” conduct includes conduct which is vexatious, and designed to harass the other side rather than advance the resolution of the case. It is not enough that the conduct leads in the event to an unsuccessful outcome. The test may be expressed in different ways. Would a reasonable person in the position of the party have conducted themselves in the manner complained of? Or Sir Thomas Bingham’s “acid test”: is there a reasonable explanation for the conduct complained of?

25.

It is not possible to prejudge certain types of behaviour as reasonable or unreasonable out of context … For a professional advocate to be unprepared may be unreasonable (or worse) but for a lay person to be unfamiliar with the substantive law or with tribunal procedure, to fail properly to appreciate the strengths or weaknesses of their own or their opponent’s case, to lack skill in presentation, or to perform poorly in the tribunal room, should not be treated as unreasonable.”

The Tribunal went on to suggest a three-stage approach to applications:

“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.”

It is worth emphasising that the decision at the first stage is not a discretionary one; the question whether a party has behaved unreasonably is to be assessed against an objective standard of conduct.

Bearing all that in mind I turn to the application made to the FTT and the FTT’s decision.