Restrictive covenants – Costs – Applicant developer successfully applying to discharge restrictive covenants on part of golf course – Applicant and objector both seeking orders for costs – Whether applicant entitled to costs because of objector’s unreasonable behaviour in pursuing manifestly hopeless legal argument – Applicant’s application granted – Objector’s application dismissed
The applicant family company was the freehold owner of Earls Colne Golf Course in Colchester, Essex. It was a site of around 125 acres, with a clubhouse, greenkeeper’s building, golf course and practice area. The site had been purchased from the objector, in 2001, as a going concern. Covenants were imposed prohibiting residential development without the transferor’s consent for a period of 30 years. But there was an exception for residential development and occupation by the transferee, its employees and their respective family members.
The High Court subsequently granted an application by the applicant under section 84(1)(aa) and (c) of the Law of Property Act 1925 to discharge the covenants to permit occupation by persons other than its employees and their families, in respect of a small area: [2021] UKUT 169 (LC); [2021] PLSCS 128.
Following receipt of that decision, both the applicant and the objector claimed their costs. In particular, the applicant applied for an order that the objector pay its costs, subject to detailed assessment on the standard basis if not agreed. The objector argued that the applicant should pay all, or a fair proportion (say, 70%), of its costs of the application or, alternatively, that there should be no order for costs. The applications were determined under written representations.
Held: The applicant’s application was allowed. The objector’s application was dismissed.
(1) By section 29(1) of the Tribunals, Courts and Enforcement Act 2007, the tribunal had full power, subject to its Procedure Rules, to determine by whom and to what extent the costs were to be paid.
Rule 2(1) of the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010 as amended stated that the “overriding objective of these Rules is to enable the Tribunal to deal with cases fairly and justly”. Rule 2(3) required the tribunal to “give effect to the overriding objective when it… (a) exercises any power under these Rules…”.
The tribunal might make an order for costs on an application or on its own initiative (rule 10(1)) including in applications under section 84 of the 1925 Act (rule 10(6)(c)). The tribunal had to have regard to the size and nature of the matters in dispute (rule 10(8)) and might order that an amount be paid on account before costs were assessed (rule 10(13)).
Paragraph 15.7 of the Upper Tribunal (Lands Chamber) Practice Directions 2020 stated that the tribunal had power to award costs on an application to discharge or modify a restrictive covenant affecting land. However, unsuccessful objectors would not normally be ordered to pay any of the applicant’s costs, unless they had acted unreasonably. Because the applicant was seeking to remove or diminish the property rights of the objector, the tribunal would not usually regard making an objection and pursuing it to a hearing as unreasonable. Successful objectors would usually be awarded their costs unless they had acted unreasonably.
(2) The tribunal’s power to award costs was discretionary, and it would usually be exercised in accordance with the principles applied in the High Court. The general rule was that the successful party ought to receive their costs from the unsuccessful party. The tribunal would have regard to all the circumstances of the case, including the conduct of the parties, whether a party had succeeded on part of their case, even if they had not been wholly successful, and admissible offers to settle. The conduct which might be taken into account would include conduct during and before the proceedings; whether a party had acted reasonably in pursuing or contesting an issue; the manner in which they had conducted their case; whether or not they had exaggerated their claim; and whether they had unreasonably refused to engage in ADR or comply with a relevant preference protocol: para 24.10.
In the present case, by maintaining its hopeless position, that it was entitled to damages equating to more than one third of the sum the applicant paid for the whole golf course, the objector frustrated or made much less likely the prospects of early settlement, obliged the applicant to adduce detailed and expensive expert evidence, and increased the length of the hearing (which might otherwise have been dealt with in a single day), and thus the costs of counsel, experts and solicitors. Taken together, the objector’s conduct was sufficiently unreasonable to justify a costs order in favour of the applicants.
(3) The objector had argued that the present application could be distinguished from earlier authorities on the basis that this was a qualified covenant; the contract explicitly contemplated that the covenantee would have the opportunity to give consent to a breach of covenant, and that therefore the objector had the benefit of control of development and of occupation of the land. The objector took a considerable risk in pursuing an argument that flew in the face of authority and that, had it succeeded, would have generated the irrational result that a qualified covenant provided better protection than an absolute one. That was not a realistic standard of behaviour. The risk had not paid off and the pursuit of a hopeless argument was unreasonable behaviour on the objector’s part and sufficient in itself, without any other factor, to justify an award of costs in the applicant’s favour: Re Tate’s Application [2013] UKUT 0289, Winter v Traditional & Contemporary Contracts Ltd [2007] EWCA 1008; [2008] 1 EGLR 80 and One Step (Support) Ltd v Morris-Garner [2018] EGLR 26 considered.
(4) There was no general principle that the applicant should pay the objector’s costs or a proportion of them as the price of its success, although such an order would in some circumstances be appropriate. But in the present case, where litigation was inflated out of all proportion by the pursuit of a hopeless argument, it would be unjust to make such an order and the application was refused.
The objector would be ordered to pay the applicant’s costs amounting to £123,187.51, to be assessed if not agreed, of which £86,000, or 70%, had to be paid on account within 14 days of the tribunal’s order.
Philip Sissons (instructed by Ellisons Solicitors) made written representations for the applicant; Andrew Francis and Lina Mattsson (instructed by DMH Stallard LLP) made written representations for the objector.
Eileen O’Grady, barrister
Click here to read a transcript of Father’s Field Developments Ltd v Namulas Pension Trustees Ltd
