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07 November 2016

A commentary on Willow Court Management Company (1985) Limited v Alexander [2016] UKUT 0290 (LC) and the recovery of costs in the First-tier Tribunal (Property Chamber)

The power of a Tribunal to award costs is governed by the Tribunals, Courts and Enforcement Act 2007 (‘the Act’), which provides at section 29 that the costs of proceedings are at the discretion of the Tribunal and that the Tribunal has the power to make an award of costs.

The power for each distinct Tribunal is governed by its own rules. For the FTTPC, the relevant rule is found at rule 13 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 (‘the Rules’), which provides that the FTTPC may make an order for costs “if a person has acted unreasonably in bringing, defending or conducting proceedings in … a leasehold case”.

The power to award costs must be viewed in the context of the overriding objective set out at rule 3. This requires the FTTPC to deal with cases fairly and justly.

In this case, the Upper Tribunal was asked to interpret the meaning of unreasonable behaviour, insofar as it related to the Rules. The Upper Tribunal defined unreasonable conduct as including “conduct which is vexatious, and designed to harass the other side rather than advance the resolution of the case”. However, “it is not enough that conduct leads in the event to an unsuccessful outcome”. This decision followed the test for unreasonable conduct which had previously been given by the Court of Appeal when considering the ‘wasted costs’ jurisdiction. 

The Upper Tribunal went on to set out a three stage test for an application under rule 13 for costs. The first stage is for a judgment to be made as to whether the behaviour was unreasonable. Simply put, the FTTPC must decide whether there is “a reasonable explanation for the conduct complained of”. This must be a decision based on an objective standard of conduct to the facts of the case.
 
The second and third stages are where the FTTPC’s discretionary powers are engaged. The second stage is only engaged if the conduct is found to be unreasonable. The FTTPC must consider whether it ought to make an order for costs, taking into account the wider factors of the case and all relevant circumstances. Finally, at the third stage the FTTPC should determine the terms of any order for costs.
 
The Upper Tribunal went on to consider the position of unrepresented parties.  Although it was accepted that there was only one set of rules which applied equally to represented and unrepresented parties, the Upper Tribunal held that the question of reasonableness could be swayed by this factor. Unrepresented parties with no legal knowledge were not be judged to the same standards as represented parties, and should only be judged against a reasonable person who did not have the benefit of legal advice.
  
Finally, the Upper Tribunal noted that it was essential to demonstrate a causal link between the unreasonable behaviour and the costs arising from it. The purpose of the rule was not punitive in nature and the award and the FTTPC should have regard of this when making an order for costs.
 
This is a general summary of the law as at the date of this article. It should not replace legal advice tailored to your specific circumstances. If you wish to discuss the implications of this matter further please contact us on 020 8909 0400 or by email at info@millschody.com.