I won in the First-tier Tribunal and the other side was unreasonable: do they have to pay my legal costs?

The work of the First-tier Tribunal (“FTT”) is spread across seven “chambers” which each have a focus on a particular area of law. The chambers have their own procedure rules and to some extent, their own different cultures, but one important common thread runs through the FTT’s procedures. In the vast majority of cases the FTT is a ‘no costs shifting’ jurisdiction. This means that each party bears their own legal costs and the winner does not get to claim their costs from the loser.

Exceptions to this rule exist (such as land registration cases), but for most types of case in the FTT, a losing party would not automatically be ordered to pay the winner’s costs. Instead, costs orders are only made where a party has acted unreasonably in the proceeding. But what is unreasonable conduct? And what costs can be recovered?

Last year I represented a landlord who was appealing to the FTT property chamber against an emergency prohibition order (“EPO”) made by the local housing authority. After a comprehensive victory in the appeal, the landlord asked the tribunal to order the council to pay his costs. The tribunal decided that the decision to make the EPO (and whether that decision was reasonable) was irrelevant to the question of costs – they were concerned only with what happened during the appeal and the parties’ conduct at that stage.

The standard of what constitutes unreasonable conduct is a high one. The task of the FTT is to consider whether there is a reasonable explanation for the conduct complained of; if there is no such reasonable explanation, the behaviour was unreasonable. The tribunal ruled that the council had acted unreasonably in defending the appeal because a competent officer with a good working knowledge of the relevant statutory provisions would have withdrawn the EPO rather than fight the appeal. The Tribunal awarded the landlord his full costs.

I wrote about this case for Local Government Lawyer and drew a link between my own case and an important costs case heard in the Immigration and Asylum Chamber, Awuah and Others (Wasted Costs Orders) [2017] UKFtT 555 (IAC). In Awuah two senior immigration judges (the UT and FTT chamber presidents) gave guidance on the circumstances when the Home Office would be ordered to be pay an appellant’s legal costs.

That case was followed by a guidance note issued to immigration judges which referred to an objective standard to be applied to decisions and actions made by employees of the Home Office: that is the “hypothetical reasonably competent civil servant”. The immigration judges considered that there is a clear duty on the Home Office to proactively consider the merits of appeals, and to not oppose appeals which have clear merit, and to assess the merits of appeals within a reasonable time frame. The guidance note states that “it will, as a strong general rule, be unreasonable to defend – or continue to defend – an appeal which is, objectively assessed, irresistible or obviously meritorious.”

Distinctive Care Ltd v Revenue and Customs Commissioners

Some of the same issues have now been examined by the Court of Appeal in the context of an appeal from a tax appeal in Distinctive Care Ltd v Revenue and Customs Commissioners [2019] 4 All ER 111. Distinctive Care Ltd had appealed against an information notice under Schedule 36 to the Finance Act 2008 which required them to provide certain information to HMRC. Two weeks after receiving notification of the appeal HMRC accepted that the information notice was unlawful and they withdrew the notice. Distinctive Care asked the FTT to order HMRC pay their costs on the basis that the decision to serve the information notice was unreasonable conduct.

The Court of Appeal held that the tribunal’s power to award costs for unreasonable behaviour did not extend to conduct before the start of the appeal – and therefore it did not matter whether it was unreasonable to serve the notice. It was the action of the respondent after receiving notice of the appeal which needed to be considered. In this case HMRC agreed to withdraw the unlawful notice reasonably promptly, and therefore no costs order should be made.

The Court also commented that their decision did not have the effect that pre-action costs could not be recovered, but rather costs “of and incidental to” the proceedings may include costs incurred before the commencement of the appeal.

Lessons from Awuah and Distinctive Care Ltd

Unfortunately, unreasonable conduct during litigation is quite common, so despite the confirmation in Distinctive Care Ltd that the meaning of ‘unreasonable conduct’ is limited to events after the appeal starts, there will still be plentiful opportunities for costs orders to be made.

However, it will take care to spot truly unreasonable conduct, as opposed to simply a party who disagrees with you. The immigration judges have a clear standard to apply to the Home Office’s conduct: the hypothetical reasonably competent civil servant. In some appeals it will be reasonably easy to extend this principle – in the Property Chamber in an appeal against a local authority decision the equivalent standard might be that of the “hypothetical reasonably competent environmental health officer”.

But it will be must more difficult to assess what is unreasonable conduct from an unrepresented litigant. If their arguments are hopeless, but they do not realise this, does that mean they are acting unreasonably? It seems likely that where the apparently unreasonable party is unrepresented, the First-tier Tribunal is likely to be slow to accept that continuing to fight a hopeless appeal is unreasonable conduct.