In most cases in the County Court or High Court the general rule is that the loser of a claim or application pays the winner's costs, subject to certain procedural rules (Part 36) and the parties’ conduct. But what about the costs of bringing (or defending) an application in the Upper Tribunal Lands Chamber (UTLC)?
I have written other blogs that give an overview of the process of applying for modification or discharge of restrictive covenants affecting land in the UTLC, which you will find here. The purpose of this article is to give a brief overview of the position on legal costs in such cases when they come before the UTLC, because it is different from ‘normal’ litigation.
‘Usual rule’ position on civil litigation costs
In the County Court or High Court, judges have a wide discretion on what costs orders are made, but usually if a party has been successful in all or part of a claim it will receive its costs of the successful part. The Court can have regard to ‘without prejudice save as to costs’ negotiations – if a party has made a reasonable settlement offer and the other party rejected it, but failed to beat it at trial, a judge may take that into account in making a particular order, and even disapplying the usual rule. Part 36 of the Civil Procedure Rules also gives some automatic costs consequences and penalties where a party has ‘beaten’ its offer i.e. achieved a more favourable outcome than what was offered previously.
What’s different in the UTLC?
There are two important documents to be aware of in these proceedings. The first are the Upper Tribunal (Lands Chamber) Rules as in effect from 21 July 2020 (the Rules); and the Practice Directions Upper Tribunal (Lands Chamber) 19th October 2020 (the Practice Directions).
Applications to modify or discharge restrictive covenants affecting land under Section 84 of the Law of Property Act 1925 are dealt with under part 6 of the Rules. Part 6 deals with the procedure for making an application, notices to be given, how objections are dealt with, statements of case, and orders for compensation. Under the Practice Direction, costs are dealt with at section 15.
Practice Direction 15.7 gives the Tribunal power to award costs on an application to discharge or modify a covenant. The position is different as between A] challenges to a beneficiary’s entitlement to the covenant and B] The substantive dispute over the covenant.
A] Challenges to a beneficiary’s entitlement to the covenant
Before the Tribunal deals with the substance of the application (whether or not to modify or discharge the covenant), an applicant may challenge an objector's entitlement to the benefit of the restriction. If that happens, the Tribunal will deal with it as a preliminary issue. Practice Direction 15.8 provides that where an applicant succeeds with the challenge, the objector will normally be ordered to pay the applicant's costs in dealing with that challenge. Likewise, under Practice Direction 15.9 where an applicant is not successful in challenging an objector’s entitlement, the applicant will usually be ordered to pay the objector’s costs of the challenge.
This is analogous to the ‘usual rule’ position on civil litigation costs set out above.
B] The substantive dispute over the covenant
Practice Direction 15.10 deals with unsuccessful objectors. These are those who have the benefit of the covenant, have objected to the application to modify it, but have not succeeded. Such objectors will not normally be ordered to pay any of the applicant's costs, unless they have acted unreasonably.
This is where the UTLC differs from the ‘usual rule’ as set out above; the objector has lost, but is not having to pay the winner's costs. The rationale for this is given within the Practice Direction itself:
"because the applicant is seeking to remove or diminish the property rights of the objector, the Tribunal will not usually regard making an objection and pursuing it to a hearing as unreasonable"
Conversely, under Practice Direction 15.11 successful objectors will usually be awarded their costs, unless they have acted unreasonably. By successful, I mean that an applicant has asked for the covenant to be modified or discharged, and the objector has succeeded in the application not being granted.
If you are an applicant seeking to modify or discharge covenants you will not recover your costs from an objector even if you win, unless the objector has acted unreasonably. Conversely, if you are an objector to an application to modify or discharge you will usually be awarded your costs from the applicant if you succeed, unless you have acted unreasonably. If you are not awarded your costs, this means that you bear your own legal and professional costs (including those of any expert or surveyor) with no recourse to recover these from your opponent.
If you’d like to know more about what constitutes ‘unreasonable conduct’ you’ll need to read Part 2 of this blog. Watch this space!
Toby Walker and his team specialise in disputes over property, include applications to the UTLC. They act for both owners and developers as well as those seeking to uphold covenants in all stages from initial advice, negotiations, deeds of variation and litigation. To find out more, please contact Toby Walker on 01494 893512.