[2025] UKUT 19 (LC)

As I mentioned above, the respondent in the FTT failed to comply with directions to such an extent that on 26 June 2024 it was barred from adducing any evidence or producing any more documents before the hearing on 11 July 2024. On 2 July 2024 the leaseholders made an application for a costs order against the respondent, supported by a statement of case extending to 12 pages and a statement of costs. Those costs were confined to those they said they had incurred as a result of procedural defaults by the respondent, and amounted to £4,767.60.

The FTT is a no-costs jurisdiction in applications under section 27A of the Landlord and Tenant Act 1985. However, costs may be awarded under rule 13(1)(b) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 “if a person has acted unreasonably in bringing, defending or conducting proceedings”, and that was the basis of the appellants’ application. The explanation they gave in their application was as follows.

First, the revised directions dated 21 December 2023 (see paragraph 7 above) required disclosure by the respondent by 22 January 2024. On 23 January 2024 the respondent sent a document in a form that was inaccessible because it was blocked by the appellants’ solicitors’ security software; after some work by the IT department it was rendered readable on 24 January and was found to be in complete. i.e. not disclosing all the material required by the directions

On 26 January 2024 the appellants applied for an “unless” order requiring proper disclosure. However, on 2 February they also made an application for further disclosure. In response to both those applications the FTT on 20 February 2024 directed the respondent to produce the documents missing from its January disclosure together with the additional documents the appellants required.

On 11 April 2024 the FTT issued directions vacating the hearing in May and re-listing it in July, and requiring the respondent to serve its witness statement, its comments on the Scott Schedule, copies of various invoices and a statement of case by 24 May 2024.

On 24 May 2024 the respondent’s representative asked for an extension to 29 May, to which the appellants agreed. On 29 May the respondent filed its comments on the Scott Schedule but nothing else.

On 3 June 2024 the appellants asked the FTT for an order debarring the respondent from relying on a witness statement, a statement of case or any other document material, because they did not want to be ambushed by material produced at the last minute. On 10 June 2024 the FTT ordered the respondent to explain why it had failed to comply with the directions of 11 April 2024. It did not do so, and on 26 June 2024 the FTT made an order debarring the respondent from producing any further material or relying upon any document in the hearing other than what it had already filed.

In their application for costs under rule 13(1) the appellants complained that there could be no reasonable explanation for the respondent’s conduct of the litigation, that it had acted “unreasonably” and “with impropriety”, and had treated the FTT with contempt. The hearing had to be postponed as a result of its behaviour. It failed to explain its behaviour when given the opportunity to do so. It failed to make proper disclosure and therefore made it extremely difficult for the appellants to challenge the service charges. It caused the appellants to incur additional costs.

The leaseholders were entitled to a proper response to that application from the FTT, and the cursory paragraph with which their application was disposed of was inadequate. The FTT did not properly explain its decision, and its decision is set aside. I have before me the material available to the FTT and therefore I can re-make the decision.

In Willow Court Management Company (1985) Limited v Alexander [2016] UKUT 290 (LC) the Tribunal explained the approach to be taken to such applications. There is a three-stage process; first the FTT has to decide whether the conduct complained of is unreasonable in the sense required by rule 13(1)(b). If it is, then it has a discretion to make a costs order, and thirdly if it decides to make an order it must decide the amount.

The first of those three stages is not a discretionary decision. The test of what is unreasonable was set out by Sir Thomas Bingham MR in Ridehalgh v Horsefield [1994] Ch 205, at 232 E-G:

The decision in Willow Court was approved by the Court of Appeal in Lea v GP Ilfracombe Management Company [2024] EWCA Civ 1241. Giving the leading judgment, Coulson LJ said this:

The conduct complained of in the present case essentially comprised failure to comply in full with the directions of 21 December 2024, failure to comply with the directions of 11 April 2024 beyond the somewhat minimalist annotations made by the respondent to the Scott Schedule, and failure overall to make full disclosure. Those failures were unexplained, despite an explicit direction by the FTT to explain them. There may have been no intention to harass the appellants or to be vexatious, but the conduct was nevertheless a hindrance and a cause of expense to the appellants, and an impediment to the efficient conclusion of the proceedings by the FTT. The fact that ultimately the appellants succeeded in challenging most of the service charges in issue does not make the conduct any less unreasonable.

Essentially the respondent did not bother to comply with directions. Its failure to comply in unexplained and inexplicable. In my judgment that passes Lord Bingham’s “acid test”, and the discretionary power to make a costs order is engaged.

The respondent’s conduct caused expense and inconvenience to the appellants, and caused the hearing to be postponed. It was penalised by the debarring order, which meant that any late attempt to make good its default was prevented and the arguments available to it at the hearing were very limited, but the appellants had still had to go through a more protracted and expensive procedure than they would other wise have had to go through. I have no hesitation in saying that a costs order should be made the appellants’ favour.

The appellants have asked only for £4,767.60, being the costs occasioned by the respondent’s default. They arise from the solicitors’ need to communicate with their client about the respondent’s defaults, and from the additional applications made to the FTT as a result of the defaults. They also include the costs of making the costs application itself. The costs are reasonable and proportionate. The respondent at the hearing before the FTT offered no comment upon or criticism of the amount claimed. I allow it in full. The sum of £4,767.60 is an award in addition to the determinations regarding service charges