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A double first: no, not the mark I was awarded in my degree, but the contents of this post.
The first first – and the good news – is that we now have a decision from the Upper Tribunal on rule 13 costs.
The bad news is that it is 38 pages long, which brings me to my second first – my first guest post on this blog, written by my colleague, Mark Loveday, who also sits as a First-tier Tribunal (Property Chamber) judge.
This is his commentary – it is considerably shorter than the decision and identifies the key points you need to know.
As expected, Willow Court puts a firm brake on applications for costs for “unreasonable conduct” by one of the parties. Such applications have been widely perceived to be on the increase in recent months and years – especially in service charge cases.
The basic costs rule appears in Rule 13 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013. It states that “the Tribunal may make an order in respect of costs only … if a person has acted unreasonably in bringing, defending or conducting proceedings…” There is no limit on the level of costs that may be awarded under Rule 13 – unlike the £500 cap on costs under the old LVT rules.
The Upper Tribunal listed three appeals specifically to give general guidance on how Rule 13 should be applied – and to show they were serious Chamber Deputy President Martin Rodger QC sat with the President of the First-tier Tribunal Siobhan McGrath. The decision runs to 145 paragraphs, but below are the ‘juicy’ bits.
The Tribunal started with a general discouragement of Rule 13 applications at para 26:
“We … 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 is the responsibility of tribunals to ensure that proceedings are dealt with fairly and justly, which requires that they be dealt with in ways proportionate to the importance of the case (which will critically include the sums involved) and the resources of the parties. … Tribunals should therefore use their case management powers actively to encourage preparedness and cooperation, and to discourage obstruction, pettiness and gamesmanship.”
Again, at para 43 its stated:
“…such applications should not be regarded as routine, should not be abused to discourage access to the tribunal, and should not be allowed to become major disputes in their own right.”
It then went on to set out a three stage test for Rule 13 costs orders.
The first stage is “whether a person has acted unreasonably”. This was described in para 28 as follows:
“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.”
This is a pretty high threshold.
Unlike the first stage, the second involves a discretion on the part of the Tribunal. Again, this was dealt with at para 28:
“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“
At this stage:
“the nature, seriousness and effect of the unreasonable conduct will be an important part of the material to be taken into account”: see para 30.
Even if stages 1 and 2 are made out, this does not mean there will automatically be an order for costs on the standard basis against one of the parties. At para 29, the Upper Tribunal stated:
“The only general rules are found in section 29(2)-(3) of the 2007 Act, namely that “the relevant tribunal shall have full power to determine by whom and to what extent the costs are to be paid”, subject to the tribunal’s procedural rules. Pre-eminent amongst those rules, of course, is the overriding objective in rule 3, which is to enable the tribunal to deal with cases fairly and justly. This includes dealing with the case “in ways which are proportionate to the importance of the case, the complexity of the issues, the anticipated costs and the resources of the parties and of the Tribunal.” but other circumstances will clearly also be relevant...”
When considering the order to make, there is no need to show that the unreasonable conduct caused any identifiable loss on the part of the innocent party: see paras 40-41. The order need not be confined to the costs: “attributable to the unreasonable conduct”.
The Tribunal ended with some guidance about procedure at para 43:
“…[Applications] should be determined summarily, preferably without the need for a further hearing, and after the parties have had the opportunity to make submissions. We consider that submissions are likely to be better framed in the light of the tribunal’s decision, rather than in anticipation of it, and applications made at interim stages or before the decision is available should not be encouraged. The applicant for an order should be required to identify clearly and specifically the conduct relied on as unreasonable, and if the tribunal considers that there is a case to answer (but not otherwise) the respondent should be given the opportunity to respond to the criticisms made and to offer any explanation or mitigation.”
Tribunal decisions should be short and sweet:
“A decision to dismiss such an application can be explained briefly. 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.”
One possibly controversial conclusion (at least for lawyers) is that the Tribunal should be prepared to apply different standards to litigants in person when compared to parties advised by lawyers. At para 32, it stated that at the first stage:
“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 someone is not legally represented is also relevant (to a lesser extent) at the second and third stages:
“When exercising the discretion conferred by rule 13(1)(b) the tribunal should have regard to all of the relevant facts known to it, including any mitigating circumstances, but without either “excessive indulgence” or allowing the absence of representation to become an excuse for unreasonable conduct.”
Bear in mind Rule 13 applies in England in all the jurisdictions of the Property Chamber of the F-tT. It can be used in enfranchisement cases as well as service charge cases. We now have comprehensive guidance on Rule 13 costs, and it’s likely far fewer such applications will now be made.
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The decision is not yet up on the Upper Tribunal website. Please email Mark at firstname.lastname@example.org, or me email@example.com if you would like a copy.