This is an application by successful applicants for an award of expenses. They applied for the partial discharge or variation of title conditions involving prohibition of sub-division of their property, a very large flat in a development of flats and offices in a converted warehouse. The application was opposed by a large number of the other flat proprietors, jointly represented. The Tribunal granted the application following a hearing lasting three days. We refer to the Tribunal’s Opinion on the merits. In accordance with our normal practice, and with the agreement of the parties, the expenses issue has been decided on the basis of written submissions.
We have decided, on an application of Section 103(1) of the Title Conditions (Scotland) Act 2003, that the applicants are entitled to an award of expenses modified to one half, but that there should be no particular award of expenses in respect of the postponement of the start of the hearing; leaving these expenses, if any, as expenses in the cause.
The Applicants, in their submission not unnaturally emphasised that they had been successful. They pointed to the specific terms of Section 103(1). We were required to “have regard, in particular, to the extent to which the application, or any opposition to the application, is successful”. They stressed that although Section 100 of the Act set out various factors which we required to consider in dealing with the application there was no obligation on the applicant to succeed in every one of the factors and that it was the overall reasonableness of the application which we required to consider. In particular they resisted any suggestion that any award of expenses should be modified to reflect that some evidence or witnesses may have been unnecessary as they had been unsuccessful on these particular factors as set out in the Act. The Respondents had been unsuccessful in their arguments regarding a potential loss of amenity and their only real concern had been in regard to the creation of a precedent. Such concerns could have been addressed directly and in any event existing case law already made it clear that a variation in a title condition need not create a precedent. The Applicants finally suggested that the Respondents failed to ask the Applicants for permission to inspect their flat or to inspect the plans lodged with the Local Authority both actions which, in the Applicants’ opinion, would have allowed the Respondents to satisfy themselves that the property for which the Applicants were seeking a waiver was unique.
The Respondents’ primary motion was for us to make a finding that no expenses were due to or by either party. In the alternative they submitted that any award in favour of the Applicants should be modified. They did not specify the extent of modification sought. In support of their primary argument they firstly argued that the terms of the relevant section of the Act effectively gave a discretion to the Tribunal as to how they award expenses (while acknowledging that we were enjoined to have regard to success). They pointed to the practice established by this Tribunal under the earlier legislation (The Conveyancing and Feudal Reform (Scotland) Act 1970) whereby there would not normally be any award of expenses unless the benefited proprietor had acted unreasonably. They made reference to the case of British Steel PLC v Kaye 1991 SLT (Lands Tribunal) 7 and 9 and Alison v Dunbar (LTS/LO/1983/25) at page 10.
They distinguished the position under the 1970 Act whereby the Tribunal required to consider the merits of any application whether it was opposed or not from the arrangements under the current Act which required an unopposed application to be granted of right. In these circumstances, they felt, a benefited proprietor may have no alternative but to object where the information available on the application was insufficient or perhaps did not provide the detail which was felt necessary to come to a decision on the matter.
The reasoning of the Tribunal in Alison above had even more force given the now automatic granting of consent in unopposed cases. The Respondents focused on the letter written by the property factors to the Applicants in August 2005 which stated that the management committee for Speirs Wharf was not concerned at the splitting of the Applicants’ penthouse flat but were concerned, principally on the grounds of precedence, that an alteration of the Deed of Conditions was required to achieve this. They made reference to one part of the response to that letter (dated 12th October 2005) in which the Applicants’ agents stated that the Applicants could give no guarantees that any agreement by the Management Committee would not be treated as a precedent and that that would be a matter for the Lands Tribunal.
The Respondents claimed that the Applicants had initially advanced their case on a very broad basis including suggesting that the respondents had no entitlement to object. They further had gone through all of the factors in Section 100 of the Act with the result that the arguments in the case became extended. Subsequently the Applicants withdrew their objection to the Respondents’ entitlement on the eve of the hearing. The Tribunal had rejected all of the Applicants’ arguments on the factors in Section 100 save for that related to impediment of enjoyment (factor (c)). It was, of course, this ground under which the Tribunal had granted the application. The Respondents particularly criticised the Applicants’ emphasis on a change in the property market and marketing difficulties as, in effect, confirming their fears that a precedent could be created.
The correct approach, applying Section 103(1) of the Act of 2003, to claims for expenses by applicants who have been successful in opposed applications for discharge or variation of title conditions is not straightforward. The unsuccessful opponents are ‘benefited proprietors’ seeking to uphold their legal rights. It is not at all surprising that they will be unhappy at the prospect of not only losing the rights but also having to pay the sometimes very substantial professional expenses of the party who had purchased property on the basis that it was burdened by those rights.
The question whether to make an award of expenses in favour of one party against another in civil litigation is generally said to be at the discretion of the court which heard the case. That, however, is somewhat misleading, because there is a very clear overriding principle, which finds expression in a clear general rule with one or two well recognised exceptions. The principle is that the expenses should be borne by the person who caused them. The general rule arising out of that principle is that “expenses follow success”, because parties’ rights are taken to have been all along such as the court has found them to be. The party who has required to vindicate rights, either by bringing the action in which he has been successful, or by successfully defending, has been caused expense by the unsuccessful party.
The main recognised exceptions, which may be seen also to arise from the general principle, are that the rule may not be applied, or may be modified, if the court disapproves of some aspect of the successful party’s conduct (which may be said to have caused or contributed to the expense) or if it can be said that there has been ‘divided success’. In the latter case, the court is not so much looking to see whether the successful party has got as much as claimed, or succeeded on all points argued as looking at whether substantial unnecessary time has been taken up (and therefore expense caused) on areas in which the successful party was not in fact upheld. The system of ‘tendering’, where a successful party awarded less than an amount formally tendered does not get expenses in respect of the period after the tender and indeed has to pay the opponent’s expenses in relation to that period, also fits in with the general principle: a party who persists in a claim after having been formally offered more than he is found entitled to has caused expense to the other party even although he was successful in the case.
The ‘discretion’ lies in the court’s consideration of how these rules apply to the particular circumstances, in the light of the general principle.
The Tribunal generally has power to award expenses. There was no special statutory provision in relation to the expenses of applications under the Conveyancing and Feudal Reform (Scotland) Act 1970 for discharge or variation of land obligations. The Tribunal, however, developed a clear practice of not awarding expenses against unsuccessful objectors who were benefited proprietors unless they had acted unreasonably, because benefited proprietors were simply seeking to uphold their rights: unless there was some unreasonable aspect to their opposition, they should not have to pay the applicants’ expenses. It is of interest to know that recent Practice Directions of the Lands Tribunal of England and Wales confirm that in their jurisdiction the same approach is, and is still, applicable.
However, Section 103(1) of the 2003 Act provides as follows:-
“The Lands Tribunal may, in determining an application made under this Part of the Act, make such order as to expenses as they think fit but shall have regard, in particular, to the extent to which the application, or any opposition to the application, is successful”.
Special provision is made in Sections 97(4) and 99(3) for expenses in two particular situations in which, under certain different procedures introduced by the Act, the application is to preserve, rather than discharge or vary, existing rights. Rule 28(1) of the Lands Tribunal for Scotland Rules 2003 provides:-
“For the purposes of determining applications under Part 9 of the Act of 2003, expenses shall be determined in accordance with sections 97(4), 99(3) and 103 of that Act. In all other cases except those to which the provisions of section 11 of the Act of 1963 apply or proceedings referred to in paragraph (6) of this rule, the Tribunal shall deal in such manner with the expenses as in its discretion it thinks fit.”
We reject the submission that notwithstanding these provisions the Tribunal should follow its previous approach. To do so would be to have regard, in particular, to the fact that the unsuccessful benefited party was merely seeking to uphold existing rights. What the provision does in relation to this class of application, is to start by affirming the Tribunal’s discretion but then introduce a particular direction to have regard to the extent of success. The Parliament must be taken to have been aware of the Tribunal’s previous practice and must inevitably be taken to have intended that this should change.
The Respondents’ submission that Section 97(1) of the 2003 Act gives a benefited proprietor who has reasonable concerns about the application no alternative but to object, because the application will now otherwise simply be granted unopposed, and that the Tribunal should therefore continue to follow its old practice, cannot be accepted. As we recognise below, we can accept, under this jurisdiction in particular, that a respondent faced with an unclear or vague application should not be penalised in expenses just because he lodges representations, but it is a huge leap from there to saying that this justifies following our former practice in the face of the new provision. The Applicants correctly pointed out that a benefited proprietor with reasonable concerns had, under the 1970 Act provisions as well as under the new provisions, to enter opposition.
The new rule, however, is not precisely that “expenses follow success”, rather that the extent of success is to be a particular consideration. That would seem to require consideration of the extent of success of the applicant or the opponent without the necessity for any formal tender. We think that this is a reference to the extent of success of the application (or the opposition to it) rather than of individual arguments. For example, we do not think it justifies any approach of counting up success in relation to the individual factors listed in Section 100, unless some particular chapter or area of evidence and submission (on which the applicant has not been successful) can be identified as having taken up a substantial amount of time. It does, however, clearly seem to permit consideration of the fact that, as quite often happens, an application for discharge is granted only to the extent of variation to enable a particular development to proceed. Objection which has led to such, sometimes very considerable, reduction in the extent of curtailment of the benefited proprietor’s rights, clearly has resulted in some success for the objector.
There is, we think, nothing to suggest that the Parliament was seeking to depart from the broad principle that liability for expenses should fall on the party who caused them. Generally, the unsuccessful objector has not caused the expense of the initial application (although an applicant who has taken all reasonable steps to obtain the benefited proprietor’s agreement at no expense to the benefited proprietor might be in a position to argue otherwise). Normally, therefore, we would still not be inclined to award expenses in respect of any period before the objector has lodged representations. We would not expect applications for awards of expenses of unopposed applications. The fact that the Parliament felt it necessary to make particular provision in Sections 97(4) and 99(3) for situations in which applications to preserve are unopposed (the expense of these applications having been caused by the “terminator” or “proposer”, who is not the applicant) supports the general exclusion of expenses of unopposed applications (and also seems to confirm the Parliament’s appreciation of the underlying principle).
Nor do we consider that Section 103(1) does anything to exclude the other exception to the general rule that expenses follow success, where disapproval is being shown of some aspect of the successful party’s conduct. We think one important application is in relation to any failure or delay in setting the case for the application out clearly. If an application, particularly one based on a particular proposed development, is vague and not justified by detailed averments or evidence until shortly before the hearing, the objector may well be able to argue that had he known the details he would not have opposed or not maintained opposition.
More generally, it might be added that consideration of conduct would include consideration of the approach and efforts of the parties towards reaching agreement. No hard and fast rules can be laid down as to steps which parties should take in this direction, each case being dependent on its own circumstances. The Tribunal, however, would expect parties to give reasonable consideration to this question, including reasonable consideration of any suggestions by other parties that matters should be discussed.
Applying these considerations to the present case, we acknowledge immediately that there has been nothing unreasonable in the Respondents’ position and it seems clear to us that we would not have awarded expenses against them under our former practice. They took arguments, mostly around the theme that this application would create a precedent and that the integrity of the deed of conditions required, in this case in particular, to be protected. These were genuine and reasonable arguments, but they have not prevailed and the opposition has not been successful. Moreover, the application, which from the outset was to vary the title condition prohibiting sub-division, but only to enable this sub-division at this particular property to proceed, with consequent variation of the shares of liability for common expenses, has been entirely successful. The application was couched in slightly different terms, asking for partial discharge rather than variation, but its limitation to this sub-division of this property was made perfectly clear. The suggestion that the application had initially been on a very broad basis, involving a suggestion that the respondents had no entitlement to object, is based on the Applicants’ Answers to the first round of objections received and is not, we think, entirely fair. The Applicants at that stage were primarily advancing, we think with some justification, the argument that some of an unfortunate earlier history in relation to this particular property was irrelevant.
We note the Respondents’ contention that if they had been able to obtain some form of guarantee that a precedent was not being sought they would have withdrawn their opposition. We have no difficulty in accepting that the Respondents were genuine in this, but we agree with the Applicants that this was not something which they could provide. Although we have in our opinion affirmed that we do not see this relaxation of the restrictive condition in the deed of conditions, in relation to this unique property, as in any way creating a precedent, we do not think that this can properly be described as some measure of success by the Respondents in opposing the application. In short, this desire (however understandable) to avoid a precedent being set was simply an aspect of the unsuccessful opposition. The position about precedent is no different following our decision from what it would have been had the Respondents consented: if there were to be some other application, the relevance, or lack of relevance, of this relaxation of the title condition would be the same.
The Applicants are therefore in our view, in principle, entitled to expenses. However, we do think that there is one matter which should lead to modification of the award. As mentioned above, we do not think a ‘totting up’ of success or failure in relation to the list of factors set out in Section 100 is relevant, but, as we made clear in our Opinion, we were unimpressed by the Applicants’ case in so far as it related to their lack of success in selling the property. This was a major part of the Applicants’ argument, although their application was in the event successful. It was an issue which involved the expense of expert evidence which would not, we think, otherwise have been required and which undoubtedly substantially prolonged the hearing. Remembering that we are reflecting in this also the expense caused to the Respondents in relation to this issue, we consider that the award of expenses in favour of the Applicants should be restricted to one half of the expenses occasioned by the Respondents’ objection .
There is nothing in our view to justify an award of the Applicants’ expenses before the Respondents entered their opposition. The Applicants should receive one half of their judicial expenses, as taxed, from and after the date of intimation to them of the opposition by Simon Mullen and others. It should be noted that two other flat proprietors (Ballinger and McClintock) initially submitted separate representations, and we do not interpret the Applicants’ motion as applying to their expenses responding to these other representations.
It is accepted that the case is suitable for the certification of junior counsel, and also of the Applicant’s witness Mr Keith Denholm.
This leaves one remaining matter, the expenses occasioned by a delay of one day in the commencement of the hearing. The hearing was set down for 4 days commencing Monday 14 November. On 11 November the Respondents requested this delay because they had only learnt on 4 November that the Applicants proposed to call a valuation surveyor, Mr Denholm, to give evidence and only on that date received intimation of a report by him. Only at that point had the Respondents decided to instruct an expert surveyor and they were thus not quite ready to commence on 14 November. The one day postponement was agreed under reservation of any issue about expenses. In the event, the hearing only lasted 3 days and was therefore concluded within the original timescale, but the Applicants say that they additionally incurred counsel’s fee for one day.
The Respondents submit that there should be no separate award in respect of this discharge, but do not themselves seek any award arising out of it. Having regard to our general decision, the Applicants’ motion in this regard becomes one for the whole amount of that extra expense (if they satisfied the auditor that it was properly incurred) instead of only 50%. In our opinion, the Applicants were very slightly at fault in respect that their intimation of Mr Denholm’s report was a few days late. In many situations, the Respondents might have been criticised for not having instructed an expert earlier, but in the particular circumstances of this case we do not think that the Respondents can be particularly criticised for not themselves instructing this expert before they learnt about Mr Denholm’s involvement. The solution which the Respondents suggested, of starting the hearing one day late in the reasonable expectation that it could still be concluded in the time allotted, as happened, was a sensible one. Overall, we think that both parties’ conduct of the litigation at this point was reasonable and we do not think that the Respondents should be penalised in expenses. We decline to make any particular award in respect of additional expense to the Applicants, and any such expense will simply be part of the expenses of the cause.
Note issued: 1 September 2006
Members: J N Wright, QC; K M Barclay, FRICS
Case Ref: LTS/TC/2005/01
Certified a true copy of the statement of reasons for the decision of the Lands Tribunal for Scotland intimated to parties on 1 September 2006
Neil M Tainsh – Clerk to the Tribunal