Case No: C3/2006/0847

Neutral Citation Number: [2006] EWCA Civ 1740
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM 
His Honour Judge Rich, QC
LP/49/2005
Royal Courts of Justice
Strand, London, WC2A 2LL

20th December 2006
Before :

LORD JUSTICE BUXTON
LORD JUSTICE LONGMORE
and
LORD JUSTICE CARNWATH
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Between :

	WINTER & ANR	Appellants	
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	TRADITIONAL & CONTEMPORARY CONTRACTS LTD	Respondent	
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Laura Collignon (instructed by Messrs. Royds) for the Appellants
Richard Colbey (instructed by Traditional & Contemporary Contracts Ltd) for the Respondent

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Judgment
Lord Justice Carnwath : 

1.	This is an appeal by Mr and Mrs Winter against Judge Rich’s order in respect of costs of preliminary proceedings before the Lands Tribunal.  
2.	We are told that the costs involved are of the order of £6,000. I regret very much that the parties have had to bear the additional expense and anxiety of a full appeal to this court, on what should have been a routine issue. I have particular sympathy for the Winters, to whom none of the blame seems to attach, except perhaps that they did not wake up to their rights until rather late in the day. The present problem seems to have arisen from failures on both sides in understanding the rules under which the case was being conducted: on the respondents’ side, because they took no legal advice at the right time; on the Winters’ side, because their lawyers seem to have been stronger on substance than procedure. However, as often happens in such cases, the appeal has thrown up some issues of more general importance, to which I shall return.
Background
3.	The Winters are the owners of freehold land at 99 Ravensbourne Avenue, Bromley. The respondents (“the developers”) own the adjoining land (Nos 95/7). They have demolished the single dwelling house previously sited on the land, and constructed two detached houses. They started work in February 2004, and the work was largely complete by November 2004.
4.	The Winters had objected to the planning application. But it was not until about November 2004 that they realised that they might have a stronger weapon. They discovered that their property might have the benefit of a restrictive covenant which prevented the erection of anything other than a single dwelling house or bungalow on the land at 95/97. The restriction had been imposed when the land at 95/97 was conveyed by John Cator on 16th July 1923, and was expressed to be for the benefit of “the Cator Estate at Beckenham”. On 21st June 2005 the developers applied to the Lands Tribunal to modify the covenant. The standard form of application (para 7) requires the applicant to specify “the land to which the benefit of the covenant is believed to attach”. Under this head, they referred to “the Cator Estate” with a note (“discharged by deed dated 2004”), and added:
“No other names or addresses given on the restricted (sic) covenant, but the following party believe they have the benefit: Mr and Mrs Winter…” 
The application was signed by Mr Lee and Mr Simner, directors of the respondent company.
5.	On 5th September 2005 the Winters served a notice of objection, signed by their solicitors (“Royds”), again on a standard form. This set out their grounds of objection to the merits of the development. They suggested that the problem might be reduced if the gap between the two houses were to be closed. They asserted that they were entitled to the benefit of the covenant, because their property had been part of the Cator Estate when the covenants were imposed in 1923, and before it was sold on by John Cator in 1934. No further details were given in support of that claim. They indicated that they were also (or, possibly, in the alternative) claiming compensation of £5,000 plus costs.   
6.	On 19th September the developers wrote asking for - 
“… sight of the necessary proof that your clients’ land formed part of the Cator Estate on 23 July 1923, together with the Title Deed showing that the benefit of the restrictive covenant runs with it. In the absence of these documents, we will apply to the Lands Tribunal on 26 September for a ruling as to whether your clients have a valid objection.”
7.	After some further correspondence, the developers wrote to the Registrar of the Lands Tribunal on 28th September asking for a ruling whether the Winters had a valid objection. (It appears from the letter that they were expecting the ruling to be made by the Registrar himself.) On 19th October the President, George Bartlett QC, ordered that the question whether the Winters should be admitted as objectors must be determined at a preliminary hearing; and directed them to file and serve copies of all documents of title and other documents relied on by 28th October. At the Winters’ request, time was later extended to 4th November.
8.	On 3rd November 2005 Royds filed and served a detailed letter attaching various documents in support of the Winters’ claim to the benefit of the covenant. Attached was a letter from Victoria Perry, the archivist for Bromley L.B.C., confirming her view, based on the estate records which were held by the council, that the Winters’ property had formed part of the Cator Estate in 1889 and until it was sold in 1934. On 19th December the developers wrote to the Registrar repeating the request for a ruling. The letter commented on the history of the area, and their own proposal, but it did not refer in terms to the material provided by Royds. They said:
“It is our belief, that in order to further his possible claim, the objector should be able to prove that his land was part of the Cator Estate at Beckenham and in its ownership on 16 July 1923… The objector has not been able to show that this was the case. In their final submission, a year after their first claim and having been granted an extended time limit by the Lands Tribunal, the objector’s solicitors were only able to state that ownership was ‘highly probable (if not certain).’”
9.	Miss Collignon (for the Winters) points to the last sentence as showing that the developers had misunderstood the civil burden of proof. That may be true, since there is no indication that they had taken legal advice. However, in its context I read it as more an indication of the frustration of businessmen whose project had been held up for over a year by a new, and still apparently less than certain, claim. 
The proceedings in the Tribunal
10.	The preliminary hearing was listed for 11th January 2006 before Judge Rich. Mr Woodman, of Royds, appeared for the Winters. Mr Lee and Mr Simner were permitted to represent the respondent company, as directors. We have a transcript of the hearing. It is clear that the judge found himself in something of a dilemma. The directors seemed to have little understanding of what the hearing was about, or of what needed to be proved. On the other hand, Royds had not got their procedural tackle in order if required to prove their case strictly. There was no formal evidence from Miss Perry, and there was some doubt about the position of a “green line” on the available copies of the 19th C plans. There was a short break, during which apparently Mr Woodman showed the directors a copy of an 1889 plan with a green line on it, but they were not satisfied. 
11.	On the resumption, the judge gave Mr Woodman the option of proceeding on what was available and inviting him to “draw inferences”, or adjourning so that Miss Perry could be called to give evidence and produce the documents. Mr Woodman chose the latter option. Accordingly the judge agreed to an adjournment, but on terms that the Winters paid “the costs of today in any event”. He added:
“… if at a second round you  do succeed in proving your case, having given proper notice of it, (The developer) will be at risk as to costs of such further hearing.” 
He urged the directors to take legal advice. 
12.	Shortly after the hearing, the developer reconsidered their position, and decided to admit the Winters’ right to object. The Tribunal was so informed on 17th January 2006. 
The application for costs
13.	To understand the judge’s eventual order, it is necessary to review the exchanges between the parties with some care. In his letter to the Tribunal of 17th January, Mr Lee claimed that their change of position was due to “new documentation” in the form of a plan with “a boundary etched in green”. Royds disputed that this was justification for their change of position. They applied for an order – 
“…that the Applicant pay the Objectors’ costs of the Preliminary Hearing” (emphasis added)
In order to avoid another hearing purely on costs, they suggested that this matter be reserved to the final hearing of the main application. (This suggestion was not pursued, and both parties seem to have been content that a decision would be made on the basis of written representations.)
14.	It is clear that the reference to the costs of “the preliminary hearing” was misconceived, at least if it was intended to refer to the hearing of 11th January, since the costs of that hearing had already been awarded to the developers “in any event”. What Royds may have intended to apply for was the costs of the Preliminary Issue (apart from those of the hearing of 11th January). 
15.	Unfortunately this mistake was not picked up by the Tribunal. It issued a notice on 24th January, stating that, as title had been admitted, the adjourned hearing would be vacated, and noting that the Objectors had applied for “their costs of the hearing of 11 January 2006”. It was directed that, unless the developers made representations in writing by 7th February, there would be an order for the Winters to be paid “their costs of such hearing” to be assessed if not agreed. 
16.	The developers did submit representations on 6th February, in which they noted that the costs of that hearing had been awarded to them “in any event”. They referred to the production of “sudden new evidence” at the hearing, in the form of the plan with a green line, and claimed that this had been the reason for the adjournment. In reply (dated 15th February) Royds disagreed that there had been “sudden new evidence”. They said that the hearing would have been unnecessary if the developers had accepted “from the outset” that the Winters’ property was part of the Cator Estate. They concluded:
“The need for the Preliminary hearing could have been easily avoided if due care and attention had been paid to the evidence produced by our Clients in November 2005. It would be very unfair for our Clients to be penalised when the evidence to support their assertions was produced over two months before the hearing, sufficient time for the Applicant to verify the position and apply to vacate the hearing.”
17.	The order for costs was dated 23rd February 2006 (although apparently not received by the Winters’ solicitors until 13th March 2006). The judge noted that the request was for the costs of “the Preliminary hearing”, which he had already awarded to the developers; and that, even if he had the power to reconsider that order, there was no reason to do so. He continued:
“I have however considered whether it is appropriate to make any further order as to the costs of establishing the Objector’s title to object. Having regard however to the Objector’s need for an adjournment in order to produce the material which satisfied the Applicant, and the Applicant’s prompt admission of title upon being so satisfied, I have decided that there should be no further order as to costs in respect of the proof of the Objector’s title.”
18.	The substantive objection was disposed of by the Lands Tribunal by a decision dated 1st August 2006, and the objectors were awarded their costs; but the costs related to the preliminary issue (the present dispute) were expressly excepted (LP/49/2005).
The Appeal
19.	For the Winters, Miss Collignon says that the judge erred in principle in failing to award to them the costs of the preliminary issue (other than those of the hearing on 11th January)  either on the simple ground that they won on that issue, or because that is the effect of paragraph 20.4 of the Lands Tribunal Practice Direction. Alternatively, he should have found that the developers had been unreasonable to contest their title, and should have rejected their purported reliance on “new evidence” produced at the hearing. 
The correct principles 
20.	The Practice Direction explains that the Tribunal will normally follow the principles applied in the courts, but paragraph 22.4 deals separately with proceedings to modify restrictive covenants:
“22.4 On an application to discharge or modify a restrictive covenant the general rule as to costs does not apply. The nature of the proceedings under section 84 of the Law of Property Act 1925 is that the applicant is seeking to have removed from the objector particular property rights that the objector has. In view of this (and subject to any offer that either party may have made), an unsuccessful objector who had the benefit of the covenant which has been discharged or modified will not normally have to pay any part of the applicant’s costs unless he has acted unreasonably, and a successful objector will normally get all his costs unless he has in some respect been unreasonable.” (emphasis added)
21.	This paragraph follows the approach adopted by the President in an “Addendum on costs” in Fairclough Homes Ltd [2004] EWLands LP/30/2001. It is important to note that there was no issue in that case as to the objectors’ right to the benefit of the restrictions (see para 6). Accordingly, the Practice Direction (which echoes the language of that decision) refers to “particular property rights that the objector has”. Where the objector’s title is not in doubt, the applicant is asking the Tribunal to authorise a compulsory interference with those rights for his own benefit. It is entirely reasonable that the costs rules should favour the objector. 
22.	I do not, however, read the Practice Direction as designed to cover the position where there is a substantial preliminary dispute as to whether the objector has the property right. That is much closer to a conventional property dispute, and more appropriate for the application of ordinary costs rules. There may, however, be an important difference from normal party and party litigation. In such cases, the parties are known, and, at least since the Woolf reforms, the issues should be reasonably well defined and all the cards on the table, before the litigation begins. In a restrictive covenant case, by contrast, an owner who is seeking release from restrictive covenants apparently affecting his land, particularly if they were imposed a long time ago, may have no easy way of knowing who, if anyone, is still entitled to the benefit. 
23.	This possible uncertainty is recognised in the standard application form:
“Land to which the benefit of the covenant is believed to attach.
Note: …the names and addresses, if known, of all those believed to be entitled to the benefit of the covenant should be listed.
If there is uncertainty the Tribunal will assume, until the matter is clarified, that the benefit attaches to all land in the immediate neighbourhood of the application land….”
The applicant may be aware (as in the present case) of some potential objectors, but others may emerge during the course of the proceedings. If this happens the Tribunal will have to give appropriate directions to enable their claims to be tested.
24.	It would be difficult to formulate a single rule as to how costs are to be dealt with in the early stages, since the circumstances may vary greatly. But as a general rule it would seem fair for the applicant not to be at risk as to costs, at least until he has had an opportunity to consider the evidence relied on as establishing the objector’s title. If having had this opportunity he persists in resisting the objector’s claim, and loses, then there is no reason why he should not pay the costs in accordance with the ordinary rule. Conversely, if an objector has held up a potential development in reliance on a claimed right which he is unable in the event to establish, there is no reason why he should not pay the costs. 
25.	Against this background, when a party is claiming the costs of a preliminary dispute of this kind, it is important for him to make clear what precisely he is claiming and from when.
The present case
26.	As has been seen, the Winters’ solicitors failed to do that. They initially claimed the costs of the “preliminary hearing”. If they intended something other than those of the 11th January, it is not at all clear what they had in mind. On the most generous interpretation of the correspondence as a whole, it is difficult to read them as claiming anything before 3rd November, when they had supplied details in support of their claim. Thus the letter of 15th February 2006 draws particular attention to that letter, and the developers’ failure to give it “due care and attention”. There is no suggestion in the letter that the information provided prior to that date should have been regarded as sufficient. Miss Collignon suggested that, since the relevant material was available to the public in the council’s office, the developers could have done their own research. I do not think that is a fair approach. It was for the Winters to justify their claim. 
27.	I would accept that the developers were quite lucky in the order that was made, at least in respect of the period after receipt of the letter of 3rd November, although the costs incurred in that period were probably not substantial.  The judge might well have taken the view that a major contributor to the muddle on 11th January was their ignorance of the procedure, and failure to take legal advice. Furthermore, if they had any further queries following the letter of 3rd November, they could easily have asked for more information, rather than taking the unhelpful (and apparently mistaken) position reflected in the letter of 19th December. 
28.	However, the judge may have regarded those matters as in effect overtaken by his order following that hearing. Whatever criticisms might have been made of the developers, the Winters had been forced to concede that they were not in a position to prove their case. The judge warned the developers of the risk of costs, but only in relation to what was to happen thereafter. (I doubt if he was aware, since no-one told him, that the costs involved ran into thousands of pounds.) Against that background, I think that his decision, though perhaps harsh to the Winters, was within the discretion allowed to him. I do not see any grounds on which we could properly interfere.
Conclusion
29.	For these reasons I would dismiss this appeal, and uphold the judge’s order.
Lord Justice Longmore : 
30.	I regret not to be able to agree with my Lord in this appeal on costs.  The fact is that issue was joined between the parties on the question whether Mr and Mrs Winter could prove their title and the applicants in due course conceded that Mr and Mrs Winter had the title which they said they had.  To my mind it follows that, absent some special circumstances, the winners of that issue should recover the costs incurred in respect of that issue.
31.	The costs of the abortive hearing on 11th January, when the objectors were not in a position formally to prove their case since they had not procured the attendance of the Bromley archivist, Ms Victoria Perry, had already been awarded against Mr and Mrs Winter by Judge Rich QC and there is no appeal against that order.  But as Judge Rich himself recognised that left the remainder
“of the costs of establishing the Objector’s title to object”.
32.	The only reason given by him for refusing the Objector’s costs of the issue which was conceded is that the Applicants made a prompt admission of title after the abortive hearing.  But this is not a satisfactory reason since, however promptly any admission was made by the applicants after 11th January, the costs of proving title were necessarily incurred well before 11th January 2006 in researching the title in the Cator Estate papers held by Bromley Council.
33.	Once the reason of the judge is shown to be illogical, there is no further reason why costs should not follow the event.  If it was going to be said that any part of the costs were unreasonably incurred that should have been said before Judge Rich came to his conclusion.
34.	It may be that there should be some special provision about the costs of proving title in the Lands Tribunal Practice Direction along the lines suggested by my Lord in paragraph 24 of his judgment.  But no such provision exists at the moment and, indeed, para. 22.4 of that Direction states that the usual order would be for the Applicant to pay all the Objector’s costs.  To that extent the Practice Direction and the CPR march hand-in-hand.
35.	Left to myself I would have allowed the appeal.
Lord Justice Buxton : 
36.	Like Carnwath LJ I would dismiss this appeal.   The case has been made unnecessarily difficult for the judge, and for this court, by the failure of both parties before the Lands Tribunal, one then professionally represented and one not, to identify the real issues or to express clearly what they were seeking.  However, and despite the muddle apparent in the objectors’ solicitors’ letters after the 11 January hearing, which my Lord has detailed in §§ 13-16 above, the Judge was plain as to what he was being asked about: the costs of the preliminary issue.
37.	His reason for not giving the objectors their costs was, with deference to Longmore LJ, two-fold.  First, the prompt acknowledgment of title by the applicants.  Second, the failure of the objectors to prove their claim in any satisfactory form until the date of the hearing itself.   Although the applicants might have accepted the assertions from Miss Perry annexed to the letter of 3 November 2005 I do not see that they were obliged to do so: not just because of lack of legal proof, but also because while Miss Perry’s opinion referred to a map determining the position in 1889 that map was not exhibited.  And the map purportedly of the Cator Estate in 1864 that was annexed to the solicitors’ letter did not in fact delineate the boundaries of that Estate.   That latter point was only established by the map with the green line marking the boundary that was brought to the 11 January hearing by the objectors’ solicitor, but not produced by him until asked to show it to the applicants.   They did not accept what was shown on the map there and then, and it would have been unreasonable to expect them to do so; but after short reflection they very properly accepted the solicitor’s assurance that the line was correct, and on that basis admitted title.
38.	This long drawn-out process, and in particular the inability of the objectors to prove their case when they launched their objection, was in my view sufficient to justify the judge in refusing them their costs of the issue; although at the same time I acknowledge that another judge might have taken a different view.   In particular, I do not agree that we are constrained, or that the judge should have been constrained, by § 22.4 of the Practice Direction, quoted by my Lord in §20 above.  The Judge was hearing a preliminary issue, where the onus was on the objector to establish that he indeed had the property right that the applicant was said to be attacking.   Before that right was established, the costs assumption in favour of the objector did not apply:  neither under the verbal terms of the Direction nor under the policy to which it gives expression.  So to say is not to introduce a new rule into the Direction, but simply to mark that the rule that is there does not apply to this case.
39.	The Judge does not seem to have been told that the costs claimed were as much as £6,000, and that sum only emerged collaterally before us.   We have not seen how that sum is made up, but on the assumption that it was indeed all directed at the preliminary issue it would seem to underline that this was an unusual case, where the objectors needed to undertake fairly elaborate steps before they were in a position to launch their objection in a form that would withstand scrutiny.  The judge was entitled to think, as he appears to have done, that that necessary precaution was left to too late in the day.