In Re: IP Bradley Investments S ECI 2023 03410, Irving AsJ held that objectors may be entitled to the reasonable costs of ascertaining whether or not they enjoy the benefit of a restrictive covenant.

This has implications for plaintiffs when suggesting the form and extent of notice in section 84 applications.

Traditionally, the view has been that only beneficiaries of restrictive covenants have sufficient skin in the game to attract the benefit of a costs order, but Irving AsJ held that objectors were entitled to the costs of seeking advice as to whether they were properly entitled to join as defendants.

34 I have decided to order that the plaintiff pay the costs of the objectors in an amount that will be discussed further below. My reasons are as follows.

35 First, the plaintiff asked the Court to make orders for notification of its application by public notice. That notice stated the plaintiff’s application, which was put in the alternative, seeking a declaration or modification of the restrictive covenant. In providing notice of that application the plaintiff invited people who saw the notice to consider whether they may be beneficiaries of the covenant the plaintiff sought, albeit in the alternative, to modify.

36 I accept that in requesting the orders for notification of the application the plaintiff was motivated by fairness and the interests of justice. The plaintiff is not to be criticised for seeking orders to provide public notice of its application. An award of costs is, however, compensatory and not punitive. There is some force in the objectors’ counsel’s submission that it was open to the plaintiff to seek to have its declaration application determined on an ex parte basis and that if it had done so, the issue of the objectors’ costs may, if the Court agreed it was appropriate to proceed on that basis, have been avoided.

37 Second, having seen the terms of the notice which set out the alternative applications made by the plaintiff, it was reasonable for the objectors to seek legal advice about whether their interests were affected by the application. Additionally, this was not a case in which the plaintiff had filed preliminary submissions which objectors could seek to inspect on the Court file. In those circumstances it was reasonable for the objectors to seek their own legal advice.

38 Third, the plaintiff’s suggestion that in order to be eligible for an award of costs the objectors had to possess a legal interest capable of being affected by the plaintiff’s application, is, in my view, too inflexible in light of the particular, and perhaps unusual, facts of this case. On the terms of the notice, it was clear that the plaintiff’s primary contention was that there were no beneficiaries. In my view, particularly given the plaintiff’s alternative application for modification of the covenant, the objectors were entitled to investigate and should have their reasonable costs of that investigation up until the point it was clear they held no interests capable of being affected by the plaintiff’s application.

39 Fourth, I accept that not every passer-by who observed the notice would be entitled to the legal costs of investigating their own title. In this case, the costs sought are of the investigation of the plaintiff’s application. That investigation involved a large number of objectors obtaining one counsel’s advice on the accuracy of the plaintiff’s analysis of the covenant, provided under cover of the plaintiff’s solicitor’s letter of 30 October 2023.

40 Fifth, putting to one side for the moment the issue of costs at the hearing on 7 March 2024, the objectors have acted reasonably and sought to minimise costs by retaining a common solicitor and barrister and by notifying the plaintiff’s solicitor and the Court at the earliest opportunity that they did not intend to join the proceeding as defendants to the plaintiff’s declaration application.

It follows that where a plaintiff is confident there are no beneficiaries, a ruling should be invited on the effectiveness of the covenant–before orders for notice are made.