Costs recovery for tribunal claims

This Q&A was written in conjunction with Faiza Ahmad, Head of Legal at Estates and Management Ltd, for the RICS Property Journal.

Question

Is there anything my landlord clients can do to recover their costs in defending claims in the First-tier Tribunal (Property Chamber)? Such claims are sometimes without merit and are withdrawn, often at the last minute, by leaseholders who usually act without representation.

Answer

This problem is particularly acute in the First-tier Tribunal (Property Chamber) because it is generally a no-costs jurisdiction, in which each party bears their own costs. This issue can crop up with any party in First-tier Tribunal proceedings, whether professionally represented or otherwise. Fortunately, there are limited court procedures to control the worst abuses of the process and limit your client’s exposure to irrecoverable costs. Tribunal procedure is governed by its rules.

Rule 8 addresses the position where a party has failed to comply with any rules, practice or tribunal directions. The tribunal can strike out the defaulting party’s case or bar or restrict their participation in the proceedings. Rule 9 addresses the tribunal’s power to strike out a case against your client in certain circumstances, including if the other party has failed to cooperate with the tribunal, the proceedings are conducted in a frivolous or vexatious manner or are otherwise an abuse of process. Cases can also be struck out if there is no reasonable prospect
of success. If you think your opponent’s conduct merits action under rules 8 or 9, you should send a written application to the tribunal case officer: such action should not be taken lightly.

conclusion of a case, the tribunal can order one party to reimburse the other with the whole or part of any fee paid. You should seek this in your submissions to the tribunal. Usually, the fees will be ordered to be repaid if your client is successful at the final hearing. However, the tribunal fees will generally be a fraction of the other professional costs. Where the other side is  represented by lawyers or otherwise, it is possible to apply for “wasted costs” to be paid by that representative. It would be extremely unusual to be in a position to do this – you would need to show that your clients incurred costs because of improper, unreasonable or negligent acts or omissions on the part of the other party’s representative.

Rule 13(1)(b) allows the First-tier Tribunal to award costs where a person has “acted  unreasonably in bringing, defending or conducting proceedings”. This rule was considered by the Upper Tribunal in a series of conjoined appeals, Willow Court v Alexander [2016] 0290 UKUT (LC).

Any rule 13 application for costs for unreasonable conduct should usually be made up to 28 days after the decision. When you make an application, the tribunal will then follow a three-stage test:

1. Is the conduct you have complained of “unreasonable”? The guidance states that the standard of behaviour of parties in tribunal proceedings ought not to be set at an unrealistic level. Conduct that is vexatious or designed to harass your client might well be unreasonable. A good test is to ask whether there is an explanation, but the fact that the other party is not represented must be factored in, albeit without allowing this to become an excuse or showing excessive indulgence. Seeking to concede issues or drop cases altogether is unlikely to be seen as unreasonable conduct. The First-tier Tribunal does not wish to discourage sensible concessions, even at the last minute.
    
2. Only if the conduct is found to be unreasonable at stage 1 will the tribunal go on to consider making a costs order
    
3. If the tribunal considers that an order should be made, there is no reason why the costs of the entire proceedings cannot be sought. There does not have to be a connection between the unreasonable conduct and the additional costs this has caused. However, the simple fact that your client has won and the other side has lost is not a reason to award all or part of the costs.

Clients cannot rely on an order being made; the guidance states that rule 13 unreasonable conduct costs applications should be reserved for the clearest of cases.

Notwithstanding this strict guidance, rule 13 costs applications have continued to succeed in the right cases, such as Matier v Christchurch Gardens [2017] UKUT 56. But success is far from guaranteed, and your clients may have to pay significant legal costs in defending applications they consider unreasonable.