Claimant's Cost Application Rejected in Property Management Case

OUTCOME: Dismissed

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case Reference : LON/00AW/LAM/2018/0013 Property : 33 [ADDRESS] [POSTCODE] Applicants : [redacted] leaseholders of Flat 1 Respondents :

[redacted] :

Supplemental cost [NAME] following [NAME] for appointment of manager

Tribunal Members :

Judge P Korn Mr N Martindale FRICS

Date of receipt of all written submissions : 9th April 2019 Date of Supplemental Decision : 13th May 2019

SUPPLEMENTAL DECISION ON COSTS

Decision of the tribunal The tribunal makes no order under paragraph 13(1)(b) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 (“the Tribunal Rules”). The background 1. This [NAME] is supplemental to an [NAME] (the “[NAME]”) made by the Applicants pursuant to section 24 of the Landlord and Tenant Act 1987 for the appointment of a manager in relation to the Property. The respondents to the [NAME] were 33 [RESPONDENT] (the First Respondent), [RESPONDENT] (the Second Respondent) and [RESPONDENT] and [RESPONDENT] (the Third Respondents).

2. The [NAME] was successful in that the tribunal agreed to appoint the Applicants’ proposed manager, albeit that the tribunal did not agree to all of the terms of the Applicants’ proposed management order.

3. This supplemental [NAME] is a cost [NAME] made by the Applicants pursuant to paragraph 13(1)(b) of the Tribunal Rules against the Second Respondent and the Third Respondents. For ease of reference, the Second Respondent and the Third Respondents will be referred to in this decision simply as “the Respondents” as they are the sole respondents to this supplemental [NAME]. In addition, the First Respondent to the [NAME] will be referred to in this decision as “the Company”. Applicants’ written submissions 4. The Applicants submit that the Respondents acted unreasonably in a number of ways. The Respondents repeatedly and consistently failed to agree to the appointment of a manager despite the clear lack of management of the Property and the inability of the shareholders and company directors to agree to take the necessary management steps. They also repeatedly and consistently failed to agree to the identity of the manager.

5. In particular, the Applicants argue that if the Respondents had agreed earlier in the process that a manager should be appointed then the cost of the [NAME] would have been significantly reduced. They also consider that the Respondents’ continuous opposition to the appointment of [NAME] (the manager appointed by the tribunal) was in order to be obstructive and to waste time. They add that “given that Ms [NAME] clearly was an appropriate manager (see paragraph 42 of the Tribunal Decision) the Second and Third Respondents should not have resisted her appointment”. They also object to the Respondents’ refusal to “abide to the suggestion by the Court that Mrs [NAME] was a suitable Manager for the purpose of the [NAME]”.

6. In conclusion the Applicants state that the Respondents’ conduct throughout the proceedings was vexatious, obstructive and solely designed to slow down the resolution of the case. Respondents’ written submissions 7. The Respondents in their written submissions refer the tribunal to the three- stage test for considering cost applications set out in the decision of the Upper Tribunal in [ADDRESS] (1985) [COMPANY] v Alexander (2016) UKUT 0290 (LC). They submit that unreasonable conduct is an essential pre- condition to the power to order costs under paragraph 13(1)(b) of the Tribunal Rules and that the tribunal may only take into account behaviour relating to bringing, defending or conducting proceedings. It therefore follows that the Respondents’ conduct leading up to the [NAME] may not be taken into account in considering whether that pre-condition has been met. Furthermore, where a respondent is joined as party to existing proceedings it is only that person’s conduct from the date of joinder that can be taken into account.

8. The Respondents further state that the Applicants refused to engage with them as individuals on any management issues until they were joined to the proceedings. The [NAME] was not made until 14th September 2018, and most of the alleged conduct relied upon by the [NAME] took place before that date. The Respondents were only notified as interested persons pursuant to directions issued on 21st September 2018 and the substantive documentation required to be served in support of the [NAME] was only served on the Company on 22nd October 2018. The Respondents asked to be joined to the proceedings on 19th November 2018 and – although all parties were acting on the assumption that they would be joined as parties from either 5th November or 19th November – they were only technically joined at the hearing itself.

9. The Respondents agreed to the principle that a manager should be appointed in their statement of case served on 26th November 2018. The differences between the parties were therefore just in connection with the identity of the manager and the terms of the management order. The Respondents do not accept that it was unreasonable of them to seek the appointment of Mr [NAME] over Mrs [NAME], and as regards the terms of the management order the Respondents were successful in obtaining a number of changes to those terms.

10. Even if, which is not accepted by the Respondents, the Applicants have satisfied the stage one pre-condition, the Respondents do not accept in any event that the tribunal should exercise its discretion to make a cost award. The Applicants refused to engage with them as individuals prior to their joinder to proceedings, the original form of management order sought by the Applicants was unreasonably wide and the Respondents have been largely successful in persuading the tribunal to address their concerns in relation to the wording of the management order. The tribunal’s analysis

11. We note that the Applicants refer in their submissions both to paragraph 13(1)(b) of the Tribunal Rules and to the power to make a wasted costs order under section 29(4) of the Tribunals, Courts and Enforcement Act 2007 (“the 2007 Act”). However, the reference to wasted costs is erroneous, and it seems clear that the Applicants’ intention was just to apply for a cost order under paragraph 13(1)(b) of the Tribunal Rules and not for an order under the 2007 Act or indeed for an order under paragraph 13(1)(a) of the Tribunal Rules which itself cross-refers to the 2007 Act.

12. Paragraph 13(1)(b) of the Tribunal Rules (“Rule 13(1)(b)”) states as follows: “The Tribunal may make an order in respect of costs … if a person has acted unreasonably in bringing, defending or conducting proceedings in … a leasehold case”.

13. In the Upper Tribunal decision in [ADDRESS] (1985) [COMPANY] v Alexander (2016) UKUT 0290 (LC) the Upper Tribunal considered, inter alia, what is meant by acting “unreasonably”. [ADDRESS] the Upper Tribunal stated that whilst what constitutes acting unreasonably is fact-sensitive, the approach to be followed when determining whether conduct has been unreasonable was as set out in the case of Ridehalgh v Horsfield (1994) 3 All ER 848.

14. In Ridehalgh v Horsfield Sir [NAME] MR described the acid test of unreasonable conduct in the context of a cost [NAME] as being whether the conduct permits of a reasonable explanation. This formulation was adopted by the Upper Tribunal in the case of [COMPANY] v Belmont Hall and [ADDRESS] Company [COMPANY] 130 2007 and (as noted above) in [ADDRESS]. One principle which emerges from these cases is that costs are not to be routinely awarded pursuant to a provision such as Rule 13(1)(b) merely because there is some evidence of imperfect conduct at some stage of the proceedings.

15. Sir [NAME] also said that unreasonable conduct includes conduct which is vexatious and designed to harass the other side rather than advance the resolution of the case, and he added that conduct could not be described as unreasonable simply because it led to an unsuccessful result.

16. As noted by the Respondents, [ADDRESS] also sets out a three-stage test. The first stage is to show that a person has acted unreasonably. The second stage is the discretionary stage of deciding whether – if unreasonable conduct has taken place – the tribunal should make an order for costs. The third stage – if the tribunal decides that it should make an order for costs – is to determine the terms of any cost order.

17. As regards the first stage of the three-stage test, Rule 13(1)(b) relates to a party’s conduct in bringing, defending or conducting proceedings. Conduct prior to that point cannot therefore form the basis for a cost award under Rule 13(1)(b). The Respondents were joined to the proceedings no earlier than 19th November

2018 and they then agreed to the principle that a manager should be appointed on 26th November 2018, i.e. just a week later.

18. The issues in dispute after 26th November 2018 were the terms of the management order and the identity of the manager. The Respondents’ objections to the terms of the management order were not unreasonable objections, and indeed the tribunal agreed with the Respondents on certain key points. As regards the identity of the manager, whilst the tribunal agreed to the appointment of Mrs [NAME] it does not follow that the Respondents acted unreasonably in seeking the appointment of an alternative manager.

19. Mr [NAME] was a perfectly plausible choice of alternative manager, and there is no evidence that the Respondents proposed him as manager merely in order to frustrate the process. The [NAME] for the appointment of a manager arose out of a situation of serious conflict between the relevant parties, as such applications usually do, and it is understandable that the Respondents had some reservations about the Applicants’ choice of manager. As regards the tribunal’s statement part way through the hearing that it was leaning towards agreeing to appoint Mrs [NAME] as manager, we simply do not accept that the Respondents’ decision to press on with their opposition to Mrs [NAME] appointment came anywhere close to unreasonable conduct for the purposes of Rule 13(1)(b). Whilst the tribunal felt that it would be helpful to the parties to give a preliminary indication as to its thinking at that point in the proceedings, the Respondents were perfectly entitled to continue to argue the case for the appointment of Mr [NAME].

20. The Applicants have therefore failed to meet stage one of the test set out in [ADDRESS], and it is therefore unnecessary to go on to stages two and three. We do not accept that the Respondents have acted unreasonably within the meaning of, and for the purposes of, paragraph 13(1)(b) of the Tribunal Rules, and accordingly, we decline to make an order under paragraph 13(1)(b) of the Tribunal Rules.

Name: Judge P. Korn Date: 13th May 2019

RIGHTS OF APPEAL

A. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber) a written [NAME] for permission must be made to the First-tier Tribunal at the regional office dealing with the case.

B. The [NAME] for permission to appeal must arrive at the regional office within 28 days after the tribunal sends written reasons for the decision to the [NAME].

C. If the [NAME] is not made within the 28 day time limit, such [NAME] must include a request for extension of time and the reason for not complying with the 28 day time limit; the tribunal will then look at such reason and decide whether to allow the [NAME] for permission to appeal to proceed despite not being within the time limit.

D. The [NAME] for permission to appeal must identify the decision of the tribunal to which it relates (i.e. give the date, the property and the case number), state the grounds of appeal, and state the result the party [NAME] the [NAME] is seeking.