In Part 1 of this blog series on costs in applications to modify or discharge restrictive covenants (which you can find here), I covered the general principles for costs and how they differ from the ‘usual rule’ in normal civil claims in the County Court and High Court.

A reminder of the costs position in these cases: an applicant seeking to modify or discharge covenants will not recover their costs from an objector even if they win, unless the objector has acted unreasonably. Conversely, an objector to an application will usually be awarded their costs if they succeed, unless they have acted unreasonably.

What constitutes ‘unreasonable’ conduct?

The kind of conduct which, in the UTLC’s view, is considered ‘unreasonable’ is best gleaned from the case law. Although each case is considered on its own facts, and the conduct of the parties (or their solicitors) in those cases, the following gives us a good idea:

In Re: Crompton's application - costs (2006) LP/33/2005 the Tribunal held that, where the applicant withdrew the application at a very late stage and where it related to a covenant willingly entered into between the same two parties only 11 years previously, the objector was entitled to his defence costs.

In Re: Nestor’s application costs (2007) LP/53/2005 the Tribunal held that the objector’s predominant motive was the extraction of a large sum of money from the applicant, even though she was hardly affected by the development and her conduct generally in correspondence led her to be liable for the costs.

In Re: Hurley's application costs (2007) LP/74/2007 an applicant withdrew an application, the objector sought to have their costs which were awarded. In this case the unreasonable conduct of one of the parties in refusing to agree to the withdrawal of the application justified refusing a costs order in its favour.

In Re: Jilla’s application (2000) 2 EGLR 99, where an applicant succeeded on one of the three grounds, although successful, two of the grounds did serve to lengthen the hearing. Even though without prejudice save as to costs offers had been made by the applicant, the Tribunal still ordered no order as to costs i.e. the partial victory did not change the default costs rule.

In Lamble v Buttaci (2018) UKUT 175 (LC) a costs order was made to reflect that an applicant that was successful on 2 out of the 3 elements. The objector’s solicitor’s conduct was considered unreasonable behaviour such that what might have been expected to be 1/3, was reduced to 1/6.

In Re-girls Day School Trust (1872) LP/19/1999, it was held there were largely misconceived objections and time had been spent on irrelevant matters from the objectors. The applicant was awarded its costs again, outside of the usual rule.

In Hancock v. Scott (2019) UKUT 16 (LC) the successful applicant applied for costs, claiming unreasonable conduct on the part of the main objector, and questioned its motives. The Tribunal held in a separate costs addendum decision that objections based on noise disturbance and loss of control, peace and quiet were "genuinely made and properly argued" and was not sufficient to clear "a very high hurdle" to recover their costs from the objectors and the order made was that the parties would bear their own costs.

Unreasonable conduct within the meaning of the Practice Direction has been deployed in decisions including Re-Sheikh and Akhtar's Application (2011) UKUT 141 (LC) where the objector recovered 85% of its costs, despite succeeding in its objection, because of a lack of good faith and general unreasonableness. So too in Re-Stanborough's application (2011) UKUT 21 (LC) where 85% of the objector's costs were awarded.

Re-Tate’s Application (2013) UKUT 289 (LC) is a case where objectors claimed £250,000 based on a profit-related measure of compensation, whereas the Tribunal awarded them £3,000. In that case the applicants offered to pay £10,000 plus costs, but the objector did not accept. The usual rule of applicant's bearing their own costs, even where successful, was disapplied and the objector was ordered to pay the applicant's costs from the date of the deadline in that offer.

In addition to the case law, it is also worth considering that, under Practice Direction 16.5, if a party unreasonably refuses to engage in Alternative Dispute Resolution (ADR) at the request of another party, the Tribunal will take that into consideration when deciding costs. This is similar to civil litigation in the County and High Courts, as provided for by CPR 44.2, by which the Court can consider parties’ conduct and offers to settle.

I have written other blogs which give an overview of the process of applying for modification or the discharge of restrictive covenants affecting land in the UTCL, which you will find here.

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.