The Upper Tribunal (UT) allowed all 3 appeals on costs and set aside the order for costs in each case. The Upper Tribunal (Lands Chamber) has now published its long awaited decision concerning the interpretation and scope of Rule 13(1)(b) of the Ft-T(PC) Rules – the power to award costs for unreasonable conduct of proceedings. The decision determined 3 conjoined appeals where the appellant had an order for costs made against it in each case.
The UT gave the following key guidance on the application of rule 13:
+ The standard of behaviour expected of parties in tribunal proceedings ought not be set at an unrealistic level. The test can be expressed in different ways, including:
- Would a reasonable person in the position of the party have conducted themselves in the manner complained of?
- The ‘acid test’ – is there a reasonable explanation for the conduct complained of?
+ A sequential approach to applications should be adopted:
- Has the person acted unreasonably, applying an objective standard? If there is no reasonable explanation for the conduct complained of, the behaviour will properly be adjudged as unreasonable, and the threshold for making an order will be crossed.
- In light of unreasonable conduct found, should an order for costs be made or not?
- If so, what should the terms of that be?
+ The fact that a party ‘acts without legal advice’ is relevant at the first stage of the inquiry: the behaviour of an unrepresented party without legal knowledge should be judged by the standards of a reasonable person who does not have legal advice. This may also be relevant, to a lesser extent, in the second and third stages.
+ Rule 13 should be reserved ‘for the clearest cases’. 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.
+ 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).
+ Once the first stage has been passed, the power to award costs is not constrained by the need to establish a causal nexus between the costs incurred and the behaviour to be sanctioned. Applications for costs under rule 13(1)(b) should not be regarded as routine, abused to discourage access to the tribunal, nor allowed to become major disputes in their own right.
+ Applications should be summarily determined, preferably without the need for a further hearing and after the parties have had the opportunity to make submissions. Submissions are likely to be best made in light of a tribunal’s decision, rather than in anticipation of it; applications at an interim stage should not be encouraged.
Whilst the procedural guidance as to the manner and timing of Rule 13 costs applications and the structured approach to determining such an application is likely to be welcomed by all, the high bar set by the Upper Tribunal to establish unreasonable conduct is likely to mean that Rule 13 costs are, in reality, only awarded in exceptional cases.
This is, therefore, unlikely to be popular with the majority of legally represented parties who effectively have to meet a higher standard of conduct than those who have not obtained representation.
Yashmin Mistry is Partner and Property Practice Group Leader at JPC Law.
For more information and advice on all leasehold matters, please contact her:
E: ymistry@jpclaw.co.uk
T: 020 7644 7294
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