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Costs and Unreasonable Conduct in the First Tier Tribunal (Property Chamber)

In Willow Court Management Company (1985) Ltd v Alexander [2016] UKUT 290 (LC) the Upper Tribunal (Lands Chamber) (UT) gave guidance on Rule 13 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013. In three conjoined appeals the UT considered, for the first time, how the Tribunal should exercise its discretion to award costs pursuant to Rule 13 and in particular when costs should be awarded where a party has acted unreasonably in bringing, defending or conducting proceedings.

In each of the appeals the First-tier Tribunal (FTT) had found unreasonable behaviour and awarded costs pursuant to Rule 13(1)(b). In Willow Court Management Company (1985) Ltd v Alexander, the management company had not properly implemented the contractual procedure for determining the service charge, notwithstanding this having been explained in previous tribunal decisions. The FTT found this to have been unreasonable and Mrs Alexander was awarded £13,095 plus VAT as a contribution towards her costs.

In Sinclair v 231 Sussex Gardens Right to Manage Ltd, the FTT found that Miss Sinclair had behaved unreasonably by failing to pay her service charges, defending herself on what was considered to be spurious grounds, unsupported by sufficient evidence, and in general, behaving unreasonably. She had been ordered to pay £16,800 towards the costs incurred by the right to manage (RTM) company.

In Stone v 54 Hogarth Road London SW5 Management Ltd, Mr Stone had withdrawn his application for a determination of the service charge shortly before it was due to be heard by the FTT. The FTT was satisfied that he had had reasonable grounds for commencing his application but nevertheless considered that he had acted unreasonably in not withdrawing the application at an earlier stage, after concessions had been made by the landlord and when fewer costs would have been incurred. Mr Stone was ordered to pay £2,260.80 towards the costs incurred by his landlord.

The UT allowed all three appeals (setting aside the order for costs in each case), stating that the standard of behaviour expected of parties in tribunal proceedings ought not to be set at an unrealistic level. The Tribunal then proceeded on giving general guidance on how the tribunal should approach Rule 13 applications.

The UT held that when exercising any power under the 2013 Rules, the tribunal had to give effect to the overriding objective, namely dealing with cases justly and fairly. The UT set out a three stage test:-

Firstly, the tribunal must first assess (as an value judgment and not as the exercise of its discretion) whether the conduct complained of is objectively “unreasonable”.;

Secondly, if the conduct meets the “unreasonable test” threshold, the tribunal must consider whether, in the exercise of its discretion, and taking account of all relevant factors, it is appropriate to make a cost order.

Thirdly, if the tribunal considered that it is appropriate to award costs the tribunal must, as a further exercise of discretion, consider the form and quantum of the costs award.

The UT stressed that each case would turn on its own facts. However, “rule 13(1)(a) and (b) should both be reserved for the clearest cases and that in every case it will be for the party claiming costs to satisfy the burden of demonstrating that the other party’s conduct has been unreasonable”.

The UT held expressly that a party does not have to show “causation”; thus a party would not have to establish a causal nexus between the costs incurred and the behaviour to be sanctioned.

The UT held that the standard of reasonable conduct between represented parties and unrepresented parties would differ, recognising that legal advice was often only available at a disproportionate cost to litigants in the tribunal.

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 fact that a party “acts without legal advice” is therefore relevant at the first stage of the inquiry. This may also be relevant, to a lesser extent, in the second and third stages.

Parties, especially unrepresented parties, should be assisted to make sensible concessions and abandon less important points, or where appropriate, their entire claim. Such behaviour should not be discouraged by the fear that it will be treated as an admission that the abandoned issues were unsustainable and ought never to have been raised (and thus would arguably be justification for a claim for costs).

In a more recent case, Matier v Christchurch Gardens (Epsom) Ltd [2017] UKUT 56 (LC), the Upper Tribunal (UT) considered whether to uphold a cost order under rule 13(1)(b) of the Property Chamber Rules 2013 (Rule 13) against a litigant in person (M) on the basis that he acted unreasonably in conducting proceedings.

The First-tier Tribunal (FTT) determined proceedings between M and M’s landlord (C) concerning payment of a service charge. It then granted C a cost order against M under Rule 13 on the basis that M had acted unreasonably in conducting proceedings by:

  • Providing unnecessarily lengthy written submissions.
  • Vigorously objecting to the manner in which his material had been edited in the hearing bundle.

The UT upheld the costs order. In doing so, it was heavily influenced by M’s failure to follow the FTT’s directions about the preparation of submissions and hearing bundles. The UT held that:

  • M’s long written submissions were unreasonable because they considerably exceeded what was reasonable and proportionate to deal with the issues (as set out in the FTT’s direction).
  • M’s objections to the bundle were unreasonable. The UT took into account that M continued making these objections in an aggressive manner even after it was pointed out to him that his proposed arrangement of the bundle was inconsistent with the FTT’s direction.

The UT made clear that similar cases will turn on their facts. It noted that where a litigant in person acts in good faith in their defence (even if misconceived), this would rarely amount to unreasonable conduct. However, this case is a powerful reminder to litigants that acting inconsistently with tribunal directions may lead to an adverse costs order.

For more information, or to discuss in more detail, contact Jeremy Weaver on 0333 0300 200 or email jpw@slcsolicitors.com.

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