Thames Valley Holdings Ltd v The National Trust

In an application under the Law of Property Act 1925, section 84, the favourable costs regime for objectors applies once the objector’s entitlement to the benefit of the covenant is established. It is not confined to the final substantive hearing. A preliminary point which fairly and properly forms part of the substantive grounds, and is taken reasonably to save time and expense, will ordinarily remain within that regime. Ordinary costs rules apply to disputes about standing. Purely procedural points, unreasonable conduct, or matters outside the normal range may justify a different order. An order that preliminary-issue costs be costs in the application validly makes them follow the eventual costs order in the substantive proceedings.

The National Trust held the benefit of a restrictive covenant over land near Maidenhead. The covenant was enforceable under section 8 of the National Trust Act 1937. Thames Valley Holdings Limited made a third application under section 84(1)(aa) and (c) of the Law of Property Act 1925 to modify or discharge it.

The National Trust sought strike-out and summary dismissal of the application at a preliminary hearing under Rule 8(3)(c) of the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010. The Upper Tribunal rejected those applications but ordered that their costs be costs in the application. The central issue was whether the ordinary costs rule applied to the unsuccessful preliminary applications, or whether they remained subject to the favourable costs regime for objectors.

1. Appeal dismissed. Lord Justice Lloyd gave the judgment. Lord Justice Sullivan and Sir Nicholas Wall agreed.
2. The practice direction governing costs in applications to discharge or modify restrictive covenants expresses a policy favouring an objector whose property right is established. An unsuccessful objector will not normally pay the applicant’s costs unless it acted unreasonably. A successful objector will usually receive its costs unless it acted unreasonably.
3. The ordinary costs regime applies to a dispute about whether the objector has standing or entitlement to object. That was the distinction identified in Winter v Traditional and Contemporary Contracts Ltd [2006] EWCA Civ 1740. In the present case, the National Trust’s right was established and had never been in doubt.
4. The favourable regime is not confined to the substantive trial. A preliminary point which fairly and properly forms part of the substantive grounds of objection may remain within paragraph 12.5.3 if taken reasonably and for the purpose of saving time and expense. The abuse of process issue substantially overlapped with the merits because it concerned changes in circumstances since the earlier applications. The point under section 84(1)(aa) could also be dealt with at the substantive hearing. Purely procedural issues, unreasonable conduct, or matters outside the range of normality may justify a different costs approach.
5. The Upper Tribunal President correctly concluded that seeking early determination was not unreasonable. The order that the costs of the preliminary issues be costs in the application meant that they would follow the final costs order in the substantive proceedings. It did not require the costs to be reserved, and disclosed no error of law, misdirection, failure of reasoning, or injustice.

• Court of Appeal (Civil Division): On [2012] EWCA Civ 1019, dismissed the appeal and upheld the order that the preliminary-issue costs be costs in the application.
• Upper Tribunal (Lands Chamber): Rejected the National Trust’s preliminary strike-out and summary-dismissal applications, but ordered that their costs be costs in the application and refused permission to appeal.