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When can unreasonable behaviour be costly?

In the conjoined appeals of Willow Court Management Co Ltd v Ratna Alexander, Shelley Sinclair v 231 Sussex Gardens Right to Manage Ltd, Raymond Stone v 54 Hogarth Road, London SW5 Management Ltd [2016] UKUT 290 (LC),

...the Upper Tribunal (Lands Chamber) provided useful guidance on how the First-tier Tribunal (Property Chamber) should exercise the power conferred on it by rule 13(1)(b) Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, when considering making an award of costs against a party on account of their unreasonable behaviour in bringing, defending or conducting proceedings before it.

The Upper Tribunal adopted the meaning of “unreasonable” enunciated by the Court of Appeal in Ridehalgh v Horsefield [1994] Ch 205. “Unreasonable” conduct included conduct which was vexatious, and designed to harass the other side rather than advance the resolution of the case. The mere fact that the conduct led to an unsuccessful outcome was insufficient.

The following systematic approach to applications made under rule 13(1)(b) was recommended:

  1. At the first stage one must ask whether, objectively, a person had acted unreasonably.  If no reasonable explanation exists for the conduct complained of, the behaviour would be deemed unreasonable and cross the threshold for the making of an order.
  2. At the second stage, the tribunal must consider whether in light of the unreasonable conduct it ought to make an order for costs or not.
  3. If the tribunal decided to make an order, at the third stage the question should be the nature of the terms of the order.

At the second and third stages the tribunal when exercising its discretion must have regard to all relevant circumstances.

The fact that a party was unrepresented may be a relevant factor at the first stage and 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 material facts, including any mitigating circumstances, but without “excessive indulgence” or allowing the absence of representation to become an excuse for unreasonable conduct.

A genuine willingness on the part of a party to mediate, even if unreciprocated, should garner credit, if other aspects of their conduct gave rise to a tribunal considering making an order.  

Philippa Seal, of chambers, appeared for the successful applicant, Ms Sinclair.

Elizabeth Dwomoh / 31st Aug 2016


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