[2025] UKUT 293 (LC)

There was no difference between the appellants and the respondents before me as to the nature of that test at stage one. In particular, counsel for the appellants did not pursue an earlier suggestion that the test involved exceptionality in some way. He accepted that it was simply a question of whether the tenant had acted unreasonably. This Tribunal had concluded in Willow that the language and approach of rule 13(1)(b) were clear and sufficiently illuminated by the decision in Ridehalgh v Horsefield [1994] Ch 205. In that case it was held that

“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.”

In Willow, the Tribunal declined to adopt a wider interpretation in the context of rule 13(1)(b) and to treat as unreasonable, for example, the conduct of a party who fails to prepare adequately for a hearing, fails to adduce proper evidence in support of their case, fails to state their case clearly or seeks a wholly unrealistic or unachievable outcome. It held,

“…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?”

It went on to say,

“We also consider that tribunals ought not to be over-zealous in detecting unreasonable conduct after the event and should not lose sight of their own powers and responsibilities in the preparatory stages of proceedings. As the three appeals illustrate, these cases are often fraught and emotional; typically those who find themselves before the FTT are inexperienced in formal dispute resolution; professional assistance is often available only at disproportionate expense.”

It continued,

“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.”

And further,

“In the context of rule 13(1)(b) we consider that the fact that a party acts without legal advice is relevant at the first stage of the inquiry. When considering objectively whether a party has acted reasonably or not, the question is whether a reasonable person in the circumstances in which the party in question found themselves would have acted in the way in which that party acted. In making that assessment it would be wrong, we consider, to assume a greater degree of legal knowledge or familiarity with the procedures of the tribunal and the conduct of proceedings before it, than is in fact possessed by the party whose conduct is under consideration. The behaviour of an unrepresented party with no legal knowledge should be judged by the standards of a reasonable person who does not have legal advice. The crucial question is always whether, in all the circumstances of the case, the party has acted unreasonably in the conduct of the proceedings.”

The fact a party who has behaved unreasonably does not have the benefit of legal advice may also be relevant, though to a lesser extent, at the second and third stages. The burden is on the party claiming costs.

Finally,

“Unreasonable conduct is a condition of the FTT’s power to order the payment of costs by a party, but once that condition has been satisfied the exercise of the power is not constrained by the need to establish a causal nexus between the costs incurred and the behaviour to be sanctioned.”

But,

“At this stage [stages 2 and 3] the unreasonable conduct, its nature, extent and consequences are relevant factors to be taken into account in deciding whether to make an order for costs and the form of the order.”

At this point it may be convenient to observe that counsel for the appellants submitted in his skeleton argument and, initially, in his oral submissions, that a judge minded to make an order for costs must establish a causative link between the conduct complained of and the relevant cost said to have been wastefully incurred. That submission could not be maintained, however, in the face of the passages cited immediately above, and the Tribunal did not understand it to be pursued.

Helpfully, the decision in Willow also sets out the Tribunal’s thinking on how a costs judgment ought to be approached.

“A decision to award costs need not be lengthy and the underlying dispute can be taken as read. The decision should identify the conduct which the tribunal has found to be unreasonable, list the factors which have been taken into account in deciding that it is appropriate to make an order, and record the factors taken into account in deciding the form of the order and the sum to be paid…we remind ourselves that an appellate tribunal should exercise restraint when undertaking a review of a discretionary decision of a first-tier tribunal. If that tribunal properly directed itself on the applicable law, took into account all relevant matters and was not swayed by irrelevant matters, and did not reach a conclusion which is irrational, it is not for us to substitute our own assessment.”