0
The Court of Appeal (Coulson, Stuart-Smith, Holgate LLJ) has handed down judgment in Lea v Ilfracombe Management [2024] EWCA Civ 1241. The case represents the first occasion on which the Court of Appeal has considered the extent of the FTTs powers to award costs under the Tribunal Procedure (First Tier Tribunal) (Property Chamber) Rules 2013 .
The appeal was by leaseholders of properties at Ilfracombe Holiday Park (“the Appellants”) against the order of the First-tier Tribunal (“FtT”), subsequently upheld by the Upper Tribunal (“UT”), refusing them their costs of proceedings in an unsuccessful service charge claim for £2.4 million brought by the Respondent (“the Respondent”).
The issues
The appeal raised two issues. First, the appropriate test to be applied in circumstances where one party claims that the other has acted “unreasonably” and should therefore pay the costs of proceedings which would otherwise be ‘costs-neutral’. Second, whether on an application of the correct test, the FtT wrongly concluded that the Respondent had not acted unreasonably and was not liable for costs.
The decision
The Court of Appeal allowed the appeal on the second issue.
On the first issue, the Appellants argued that the decisions of the Court of Appeal in Ridehalgh v Horsefield [1994] Ch 205 and the UT in Willow Court Management Co (1985) Limited v Alexander [2016] UKUT 290 (LC) did not constitute appropriate guidance for deciding applications for costs under rule 13(1)(b) of the 2013 Rules, and that a different or wider test should apply.
The Court of Appeal disagreed. The guidance set out in Ridehalgh and Willow Court was sufficient, and there was no basis for treating rule 13(1)(b) in any different way to any other jurisdiction which operates a generally ‘costs neutral’ regime. A good practical rule is for the tribunal to ask: would a reasonable person acting reasonably have acted in this way? Is there a reasonable explanation for the conduct in issue? Neither Ridehalgh nor Willow Court had decided that unreasonable conduct must involve vexatious conduct or harassment.
On the second issue, the Court found that the FtT had failed to ask themselves directly the questions identified in Ridehalgh and Willow Court, and/or failed to take into account relevant matters. Had they done so, they would have concluded that the relevant conduct was unreasonable. The claim had been issued in circumstances where the Respondent had no reasonable belief in the accuracy of its budgets or demands. Having made the finding of unreasonable conduct, the Court of Appeal exercised its discretion and made an order for costs in favour of the Appellants.
The judgment is expected to be available online shortly.
Justin Bates KC and Edward-Arash Abedian acted for the Respondent, instructed by Brethertons LLP.
