The Upper Tribunal (Lands Chamber) has now published its long awaited decision concerning the proper interpretation and scope of Rule 13(1)(b) of the Ft-T(PC) Rules[1] (the power to award costs for unreasonable conduct of proceedings). The decision, determining 3 conjoined appeals in which in every case the appellant had had an order for costs made against it, will be of interest to all who appear in the Tribunal on residential property cases (including service charges, estate management and enfranchisement), agricultural land and drainage matters, rent determinations, and certain other case types – where ordinarily, the Ft-T is largely a ‘no-costs jurisdiction’.

The Upper Tribunal (Martin Rodger QC, Deputy Chamber President and Siobhan McGrath, Chamber President, Ft-T(PC)), allowing all 3 appeals on costs (setting aside the order for costs in each case), gave the following key guidance:

  • The standard of behaviour expected of parties in tribunal proceedings ought not to be set at an unrealistic level.
  • The test can be expressed in different ways, including:
  1. Would a reasonable person in the position of the party have conducted themselves in the manner complained of?  
  2. The ‘acid test’[2] – is there a reasonable explanation for the conduct complained of?
  • A sequential approach to applications should be adopted:
  1. 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 to be unreasonable, and the threshold for making an order will be crossed.  
  2. In light of the unreasonable conduct found, should an order for costs be made or not?  
  3. If so, what should the terms of that order 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 with no 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, should not be abused to discourage access to the tribunal, and should not be allowed to become major disputes in their own right.  
  • Applications should be determined summarily, 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. That development is 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. It is not yet known if any of the Respondents will be seeking permission to appeal the decision further.