First-tier Tribunal Denies Claimant's Request for Costs

OUTCOME: Dismissed

FIRST-TIER TRIBUNAL

[NAME]

(RESIDENTIAL PROPERTY)

Case reference : LON/00BK/LBC/2024/0022

Property : 40b [ADDRESS], [POSTCODE]

Applicants : [redacted]

Ms [COUNSEL] [NAME] : [COUNSEL] [RESPONDENT]

(ref. RXW/LFP/1ED0109-1)

Respondent: [redacted]

Tribunal member(s) : Judge [NAME] : 10 [ADDRESS] [POSTCODE]

Date of hearing : Original hearing 06 March 2025

Reconvened hearing 11 July 2025

Date of decision : 16 July 2025

DECISION

Decision of the tribunal - Costs

(1) The Tribunal declines to make an Order under Rule 13(1)(b) of the Tribunal Procedure (First-tier Tribunal) ([NAME]) Rules 2013 that the Respondent pays the costs incurred by the Applicants in these proceedings.

Background

1. By application dated 03 May 2024, the Applicants sought determinations pursuant to section 168(4) of the Commonhold and Leasehold Reform Act 2002 that the Respondent had committed a series of breaches of leasehold covenants.

2. After an inspection and subsequent hearing on 06 March 2025, by written decision dated 15 April 2025 the Tribunal determined that the Respondent had breached various provisions in its lease, including clauses 4(a), 15 and 20 of the Sixth Schedule thereto, but did not find that the Respondent had breached further clauses as had been alleged, including clauses 17(b) and 22 of that Schedule.

3. The Applicants’ counsel’s skeleton argument prepared for the hearing on 06 March 2025, intimated that the Applicants intended to seek an order under rule 13(1)(b) of the Tribunal Procedure (First-tier Tribunal) ([NAME]) Rules 2013 (“the Rules”).

4. Rule 13(1)(b) provides that the Tribunal may make an order in respect of costs if a person (which includes a corporate entity) has acted unreasonably in bringing, defending or conducting proceedings in a residential property or leasehold case.

5. Rule 13(6) provides that the Tribunal may not make an order for costs against a person (“the paying person”) without first giving that person an opportunity to make representations.

6.

Accordingly, by directions dated 15 April and circulated on 16 April 2025 the tribunal indicated that it considered that any application for costs may be determined by summary assessment, pursuant to rule 13(7)(a), and directed the Applicants within 28 days either to write to the Respondent and to the Tribunal confirming no application for costs was to be pursued, or in the alternative event that such an application was to be made, to send to the Respondent a statement of case setting out:

(a) The reasons why it is said that the Respondent acted unreasonably in bringing, defending or conducting proceedings and why this behaviour is sufficient to invoke Rule 13, addressing in particular the issues identified in the Upper Tribunal decision in [ADDRESS] Company (1985) [COMPANY] v Mrs [NAME] [NAME] [2016] UKUT (LC), with particular reference to the three stages that the tribunal will need to go through, before making an order under rule 13;

(b) Any further legal submissions;

(c) Full details of the costs being sought, including:

• A schedule of the work undertaken;

• The time spent;

• The grade of fee earner and his/her hourly rate;

• A copy of the terms of engagement with the applicant;

• Supporting invoices for solicitors’ fees and disbursements;

• Counsel’s fee notes with counsel’s year of call, details of the work undertaken and time spent by counsel, with his/her hourly rate; and

• Expert witnesses’ invoices, the grade of fee earner, details of the work undertaken and the time spent, with his/her hourly rate.

7. In the event such an application was made and statement of case served, the Respondent was directed to send a statement in response, addressing:

(a) The reasons for opposing the application, with any legal submissions;

(b) Any challenge to the amount of the costs being claimed, with full reasons for such challenge and any alternative costs;

(c) Details of any relevant documentation relied on with copies attached.

8. There followed provisions for the Applicants’ reply, and the matter was then to be the subject of a paper determination, as now represented by this decision.

9. That determination was originally to have taken place in the week commencing 21 July 2025, but was administratively expedited to 11 July to accommodate other professional commitments of the Tribunal members, which was notified to the parties. Neither party objected, nor requested a hearing, and we therefore determined this matter on the papers, without a hearing attended by the parties.

The Law - Costs

10. Rule 13 of the Tribunal Rules provides in so far as is relevant to this application (emphasis added):

13. Orders for costs, reimbursement of fees and interest on costs

(1) The Tribunal may make an order in respect of costs only:

(b) if a person has acted unreasonably in bringing, defending or conducting proceedings in—

......

(ii) a residential property case;

11. [ADDRESS] Company (1985) [COMPANY] v [NAME] [2016] UKUT 290 (LC), the Upper Tribunal (“UT”) gave guidance on how First-tier Tribunals (“FTTs”) should apply Rule 13. The UT for the case consisted of the Deputy President of the UT and the President of the FTT.

12. The UT set out a three-stage test:

(i) Has the person acted unreasonably applying an objective standard?

(ii) If unreasonable conduct is found, should an order for costs be made, or not?

(iii) If so, what should the terms of the order be?

13. The UT gave detailed guidance on what constitutes unreasonable behaviour, citing the judgment of the Court of Appeal in Ridehalgh v Horsefield [1994] Ch 205, and at §28 provided:

“A decision that the conduct of a party has been unreasonable does not involve an exercise of discretion but rather the application of an objective standard of conduct to the facts of the case. 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. A discretionary power is then engaged and the decision maker moves to a second stage of the inquiry. 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; it is only if it decides that it should make an order that a third stage is reached when the question is what the terms of the order should be...”

14. In the recent decision in Lea v GP Ilfracombe Management Company [COMPANY] [2024] EWCA Civ. 1241 the Court of Appeal held that the acid test is with the conduct in question permits a reasonable explanation:

“[15] A good practical rule for the tribunal to consider is; would a reasonable person acting reasonably have acted in this way? Is there a reasonable explanation for the conduct in issue?”

15. In Lea, the Court expressly rejected the contention that the pursuit of an unrealistic or unachievable outcome should axiomatically be regarded as unreasonable behaviour for the purposes of Rule 13.

Analysis

16. The Applicants neither wrote within 28 days of the directions indicating that they did not intend to pursue a costs application, nor did they send a statement of case addressing the various issues as directed. Instead, by letter to the Tribunal from their solicitors, [NAME], dated 06 June 2025 (which was within the 28-day period specified), the Applicants’ position was articulated thus:

“The Applicant’s (sic) maintain the view that the Respondents ought to be subject to a costs Order due to their conduct in these proceedings. The costs that the Applicants incurred amounts to the sum of £30,024.00. These were based on [NAME] [NAME] hourly rate of £350.00 plus VAT and [NAME] [NAME] hourly rate of £450.00 plus VAT. However, after careful consideration, our clients do not want to spend more money on counsel drafting submissions on this matter especially at a time when the Respondents continue to threaten the Applicants with making applications which are without merit. The Applicant (sic) wants a resolution to this matter.”

17. It follows that the Applicants clearly articulated the desire to seek a Rule 13 costs order, while providing none of the specificity as to the basis for such application as had been directed, and in particular no detail of why it was contended that the Respondent had acted unreasonably in defending or conducting the proceedings, why such behaviour was sufficient to invoke Rule 13, or addressing in particular the issues identified in [ADDRESS] and the three stage test summarised above.

18. No correspondence was received by the Tribunal from the Respondent in response to [RESPONDENT] letter of 06 June 2025, perhaps unsurprisingly in the absence of any explanatory statement.

19. The directions of 15 April 2025 provided for the submission of a bundle by the Applicants in advance of the reconvened hearing to consider the costs application. This was not done. Upon Tribunal staff chasing, [NAME] replied on 08 July 2025 in the following terms:

“You state we have not complied with the directions, however we did not think that they applied to us as we did not draft submissions in relation to costs.

We enclose a copy of the Court bundle which was used at the Tribunal Hearing which should facilitate the Tribunal in determining the matter...”

20. This seemed to the Tribunal to connote a marked lack of enthusiasm on the Applicants’ part in pursuing their costs application, while not amounting to an unequivocal withdrawal of the express application for costs set out in the letter of 06 June 2025.

21. While the Tribunal sympathises with the financial position expressed in the 06 June letter, and detects an understandable desire on the Applicants’ part not to throw what they may perceive to be good money after bad in pursuit of their disputes with the Respondent, specific directions as to provision of information and submissions in support of particular applications are intended to assist the Tribunal in, ultimately, considering such arguments in reaching its determination, and should be complied with. In the absence of such compliance, we are left to consider a situation where the Applicants continue to seek costs based on alleged unreasonable behaviour, but have failed or refused to explain why. This is really not good enough, against seeking to persuade the Tribunal to surmount the high bar that exercise of its discretion in relation to Rule 13 requires.

22. Counsel’s skeleton argument from the substantive hearing adds no clarity: with respect to Ms [NAME], §25 contains (just) the following:

“If successful, the Applicants will make an oral application for costs on the grounds that the Respondent has behaved unreasonably in defending and conducting these proceedings under Rule 13(1)(b) of the Tribunal Procedure (First-tier Tribunal) ([NAME]) Rules 2013.”

That really rather begs the question.

23. In the absence of any defined submissions from the Applicants, we have examined the evidence available to us, and conclude that we do not consider that the conduct of the Respondent in these proceedings in defending the allegations of breach considered at the hearing was such as to amount to unreasonable behaviour.

24. As set out in §83 of the original decision, whether or not the egresses of water from Flat 40B were contingent on the Applicants’ alleged breach of their own repairing covenant in respect of external roof repairs and maintenance, and whether the Applicants’ state of knowledge was contingent upon provision of notice of defects to the roof was outside the somewhat binary scope of our decision, which was to determine whether or not one or more breaches of the Respondent’s covenants had occurred. While not canvassed at the hearing (or in the paucity of subsequent documents), and while we make no express finding on this issue, it does appear to the Tribunal that the facts of the matter may well engage legal issues akin to the ‘prevention principle’, as described in [NAME] v The Bury Improvement Commissioner [1870] LR 5 CP 310, thus:

“...it is a principle very well established at common law, that no person can take advantage of the non-fulfilment of a condition the performance of which has been hindered by himself… and also that he cannot sue for a breach of contract occasioned by his own breach of contract, so that any damages he would otherwise have been entitled to for the breach of the contract to him would immediately be recoverable back as damages arising from his own breach of contract...”

25. While we ultimately found against the Respondent in relation to three separate breaches of covenant, its conduct as a litigant was far from the poor behaviour required to amount to unreasonable conduct within the meaning of [ADDRESS]. We direct ourselves in accordance with LB Southwark v Woelke [2018] UKUT 375 (LC), where the Upper Tribunal rejected a costs application under Rule 13, reiterating that the test is high and applications should not be used to punish a party for merely defending a case or for procedural missteps.

26. Even had we found the Respondent’s conduct to have been unreasonable (which we do not), we would have declined to exercise our discretion against the Respondent in this case where it successfully defended 2 of the 5 specific allegations of breach, and to that extent was entirely vindicated in its defence of the proceedings.

Name: Judge M Jones Date: 16 July 2025

Rights of appeal

By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) ([NAME]) Rules 2013, the tribunal is required to notify the parties about any right of appeal they may have.

If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber), then a written application for permission must be made to the First-tier Tribunal at the regional office which has been dealing with the case.

The application for permission to appeal must arrive at the regional office within 28 days after the tribunal sends written reasons for the decision to the person making the application.

If the application is not made within the 28-day time limit, such application must include a request for an extension of time and the reason for not complying with the 28-day time limit; the tribunal will then look at such reason(s) and decide whether to allow the application for permission to appeal to proceed, despite not being within the time limit.

The application for permission to appeal must identify the decision of the tribunal to which it relates (i.e. give the date, the property and the case number), state the grounds of appeal and state the result the party making the application is seeking.

If the tribunal refuses to grant permission to appeal, a further application for permission may be made to the Upper Tribunal (Lands Chamber).