COST BITES 307: DOES A FINDING THAT AN APPELLANTS HAD ACTED UNREASONABLY BELOW, AND SHOULD PAY COSTS, MEAN THAT THEY SHOULD ALSO PAY THE COSTS OF AN UNSUCCESSFUL APPEAL

Here we have a case where a party was  ordered to pay costs because it acted unreasonably in bringing an application, even though the tribunal in question was normally “cost-neutral”.  That party then appealed the costs order and the appeal was unsuccessful.   Does that mean that this unsuccessful appellant should pay the costs of the appeal?

(The landlord was awarded costs at first instance but not on appeal. An important point to remember)

“The landlords submit that, given the appeal was against a costs order made on the basis of unreasonable conduct in the FTT, it would be highly unjust if costs incurred defending an appeal against that order were not considered to fall within the relevant rule. I reject that submission. The rule requires unreasonableness, and there was none. That is the end of the matter. Nor do I consider that outcome to be unjust. It is important that the parties against whom such an order is made should have a genuine opportunity to challenge it on appeal, just as they might challenge any other decision, and as long as they do so reasonably, without fear of a costs sanction in a jurisdiction which is, save as the Rules provide, cost-neutral.”

KEY PRACTICE POINTS

This is a very niche point, but very important to anyone who litigates in a tribunal, or court, that is normally “costs-neutral”. Unreasonableness at trial does not mean that an attempt to appeal was also unreasonable.  The appeal court here declined to make any award of costs of the appeal. This is an important point to bear in mind if advising either an appellant or respondent in these circumstances.

THE CASE

Coogan v Taheri (LANDLORD AND TENANT – SERVICE CHARGES – COSTS – APPEAL COSTS – UNREASONABLENESS) [2025] UKUT 370 (LC) HHJ Neil Cadwallader

THE FACTS

The tenants (the appellants in this appeal) had brought an appeal against the First-Tier Tribunal (Property Chamber).  The First-Tier Tribunal is normally a costs-neutral tribunal.  However in this case it had found that the tenants had acted unreasonably and ordered them to pay £70,000 in costs. The tenants’ appeal against that decision was dismissed.  The landlord applied for the costs of the appeal. The landlord argued that the tenants had already agreed to pay the costs or, alternatively, that this being an appeal against costs because of unreasonable conduct then it should recover its costs.

WHAT HAPPENED IN A NUTSHELL

The Upper Tribunal rejected both of the landlord’s arguments that it should recover the costs of the appeal..  Firstly there was nothing that indicated a binding agreement that the tenants would pay the costs. Secondly the fact that there had been a finding of unreasonable conduct below did not mean that an unsuccessful appeal was unreasonable.  There had been nothing unreasonable about the bringing of the appeal or the way it was conducted.

THE FIRST ISSUE: HAD THE TENANTS AGREED TO PAY THE LANDLORD’S COSTS OF THE APPEAL

5. The submission that the tenants have agreed to pay the landlords’ costs is based upon emails between counsel for the respective parties of following the decision of this Tribunal in attempting to agree a form of order to reflect that decision. I am satisfied that these emails are not privileged for present purposes.

6. Counsel for the landlords proposed an order, paragraph 1 of which read

“The Appellants shall pay the Respondents’ costs of the application for permission to appeal and the appeal to be the subject of a summary assessment on the standard basis if not agreed.”

Counsel for the tenants’ substantive response was that the proposed wording of the order “was probably still appropriate” and that “presumably the first line of the proposed order should see the costs dismissed”. The reference in the second passage to seeing the costs dismissed makes no literal sense, and must be a reference to seeing the appeal dismissed (something for which the draft order had not actually provided).

7. It is perfectly plain in the context of the email exchanges that there was, at best, an agreement in principle as to the incidence of costs, but that the parties were still negotiating the terms of the order of which that was only one. This Tribunal is unable to read the correspondence as amounting to a concluded or binding agreement that the tenants should pay the landlords’ costs.

THE SECOND ISSUE: SHOULD THE TENANTS PAY THE LANDLORD’S COSTS OF THE APPEAL

The rules provide that parties should be liable for costs in very limited circumstances “if the Tribunal considers that a party or its representative has acted unreasonably in bringing, defending or conducting the proceedings…”

Rule 10 of the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010/2600

(1) The Tribunal may make an order for costs on an application or on its own initiative.

(2)  Any order under paragraph (1)—

(a)  may only be made in accordance with the conditions or in the circumstances referred to in paragraphs (3) to (6);…

(3)  The Tribunal may in any proceedings make an order for costs—…

(b)  if the Tribunal considers that a party or its representative has acted unreasonably in bringing, defending or conducting the proceedings…”

THE TRIBUNAL HAD ORDERED THE TENANTS TO PAY COSTS BELOW

The tribunal had ordered the tenants to pay £70,000 in costs below because, it held, the tenants had acted unreasonably.

THE TENANTS’ APPEAL WAS DISMISSED: HOWEVER THAT DID NOT MEAN THAT THEY HAD CONDUCTED THE APPEAL UNREASONABLY

8. The difficulty which the landlords face in seeking an order for the costs of the appeal on the basis that the tenants or their representative had acted unreasonably in bringing, defending or conducting the appeal was that they did not act unreasonably. The tenants were entitled to challenge the costs order, and obtained permission to appeal it, and pursued their appeal in a manner which it is impossible to characterise as unreasonable.

9. The landlords seek to meet that difficulty by saying that it was clear from this tribunal’s decision on the appeal that it was an appeal in substance wholly without merit, and represented an unreasonable attempt to relitigate issues already conclusively determined below. But the fact that an appeal fails does not mean that it is wholly without merit, or that it is brought or pursued unreasonably. It is true that a forensic attempt was made to undermine, or at least to gloss, the finding of fact by the FTT that Mr Coogan had been dishonest. This Tribunal would not, and did not, encourage that attempt. But it was only a part of the appeal submissions and it was not to be regarded as unreasonable conduct. If it were, this Tribunal would not regard it as sufficiently unreasonable or important to merit a costs order.

10. The landlords submit that, given the appeal was against a costs order made on the basis of unreasonable conduct in the FTT, it would be highly unjust if costs incurred defending an appeal against that order were not considered to fall within the relevant rule. I reject that submission. The rule requires unreasonableness, and there was none. That is the end of the matter. Nor do I consider that outcome to be unjust. It is important that the parties against whom such an order is made should have a genuine opportunity to challenge it on appeal, just as they might challenge any other decision, and as long as they do so reasonably, without fear of a costs sanction in a jurisdiction which is, save as the Rules provide, cost-neutral.

11. Accordingly, the application for costs is dismissed, and there will be no order as to the costs of and incidental to the appeal.