First-tier Tribunal Determines Reasonable Costs Under s.60(1) of the 1993 Act

© CROWN COPYRIGHT

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00BE/OC9/2023/0059 Property : 24 [ADDRESS] [POSTCODE] Applicant : [redacted] : Mrs [COUNSEL] (Director) Respondent : [redacted] the Dulwich Estate (2) [COMPANY] : [RESPONDENT] [NAME] [RESPONDENT] [NAME] of application : Costs applications under Section 60(1) of the Leasehold Reform, Housing and Urban Development Act 1993 and Rule 13(1) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 Tribunal member(s) : Judge J P Donegan Date of paper determination : 23 April 2024 Date of decision : 24 April 2024

DECISION

This has been a paper determination. A face-to-face hearing was not held, as I considered it unnecessary. All issues could be decided on the documents.

2 Decision of the Tribunal A. The costs payable by the applicant to the first respondent, pursuant to section 60(1) of the Leasehold Reform, Housing and Urban Development Act 1993 (‘the 1993 Act’) are £2,467 (Two Thousand, Four Hundred and Sixty-Seven Pounds), including VAT. B. The first respondent’s application for a wasted costs order is dismissed. The background and procedural history 1. These proceedings arise from a statutory lease extension claim for 24 [ADDRESS] [POSTCODE] (‘the Flat’), pursuant to the 1993 Act. The applicant (‘A’) is the current lessee of the Flat, which is situated on the Dulwich Estate (‘the Estate’). The first respondent (‘[NAME]’) is the freeholder of the Estate. The second respondent (‘[NAME]’) is one of two intermediate landlords. The other intermediate landlord is [ADDRESS] Limited (‘[NAME]’), which is not a party to these proceedings.

2. A’s predecessor in title, Mr [NAME] served a section 42 notice of claim on [NAME], [NAME] and [NAME] 01 February 2022. He subsequently assigned the Flat lease, and the benefit of the notice of claim to the applicant. [NAME], as the competent landlord, served a counter-notice dated 31 March 2022, admitting the claim but proposing higher premiums and attaching a draft lease.

3. The parties agreed the premiums in February 2023, following a Tribunal application under section 48 of the 1993 Act. The new lease completed on 21 March 2023.

4. In the run up to completion there was lengthy correspondence as to the costs payable under s.60(1) of the 1993. [NAME]’s solicitors, [COMPANY] (‘TWL’) initially claimed £3,532.50 plus VAT for their costs. The was disputed by the applicant, as were [NAME]’s legal costs (£1,500 plus VAT). There were four completion statements, with differing costs figures. A only paid part of the disputed costs on completion.

5. The Tribunal received an application to determine.60(1) costs on 06 April 2023. This identified the following disputed items: [NAME]’s legal costs - £3,532.50 plus VAT (A’s proposal £1,352.50 plus VAT) [NAME]’s legal costs - £1,500 plus VAT (A’s proposal £300-500 plus VAT)

3 6. The Tribunal issued directions on 27 April 2023. TWL then applied for a wasted costs order in a letter to the Tribunal dated 02 May 2023. The Amended directions, dealing with both costs’ applications, were issued on 04 May 2023.

7. The case has been allocated to the paper track and none of the parties has objected to this or requested an oral hearing. The paper determination took place on 23 April 2024.

8. The parties exchanged documents in accordance with the amended directions and the Tribunal was supplied with a 262-page determination bundle that included copies of the application, amended directions, various costs statements and schedule, the parties’ statements of case, the notice of claim and counternotice, relevant email correspondence and witness statements for A. The Tribunal was also supplied with a 22-page document headed “the Applicant’s Legal Arguments” and a one-page statement in response from [NAME]. I considered all these documents when making this decision.

9. A has now agreed [NAME]’s legal costs as claimed (£1,500 plus VAT). This means I am only required to determine the legal costs payable to [NAME]. It is convenient to deal with these costs first and then address [NAME]’s wasted costs application.

10. The relevant legal provisions are set out in the appendix to this decision. Section 60(1) submissions 11. The bundle included various documents detailing [NAME]’s costs, including a costs schedule dated 17 May 2023. The work was primarily undertaken by [NAME] [NAME] [NAME] who is a partner in TWL. She is a grade A fee earner, and her charging rates were £260 per hour between April 2021 and March 2022, £285 per hour between April 2022 and March 2023 and £310 per hour from April 2023. She was assisted by a Grade D legal assistant whose charging rate was £165 per hour throughout.

12. TWL claim 10 units (1 hour) for drafting the counternotice and new lease, 17 units (1.7 hours) for perusing/preparing documents and 123 units (12.3 hours) for correspondence. This gives a total of £4,135.50 plus VAT, which is higher than the sum claimed originally (£3,532.50 plus VAT). They contend these costs are reasonable, given the unusual aspects of the case (two intermediate leases, two leasehold titles for the Flat and the assignment of the s.42 notice) and the costs agreed for [NAME].

13. A relies on a statement of case, two witness statements, her “Legal Arguments” document and various First-tier and Upper Tribunal

4 decisions. In summary, she contends [NAME]’s costs are excessive and unreasonable. Some are irrecoverable, as they are outside s.60(1) or relate to these proceedings or administration. Some should be discounted on “unfair advantage grounds” and the time claimed for investigation and correspondence is excessive. She also complains that TWL failed to supply proper costs information prior to completion.

14. The witness statements are from [NAME] [COUNSEL], who is a director of A and a solicitor, Mr [COUNSEL]. The latter deals with 1993 Act cases and is of the view that £1,500 plus VAT and disbursements is reasonable for the legal work on this lease extension claim, taking account of the two intermediate leases.

15. A has analysed TWL’s timesheets and believes the recoverable costs should be £1,352.50 plus VAT. Given the relatively modest sum at stake and having regard to the Overriding Objective at Rule 3 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 (‘the 2013 Rules’), I have not recited al of A’s arguments. I am also conscious the s.60(1) costs are to be summarily assessed and have adopted broadbrush approach to this assessment. The Tribunal’s decision 16. I determine that legal costs of £2,055.50 plus VAT are payable by A to [NAME], pursuant to s.60(1) of the 1993 Act. This equates to £2,466.50 including VAT, which I have rounded up to £2,467. Reasons for the Tribunal’s decision 17. A is only liable to pay “reasonable” costs under s.60(1). The legal costs are limited to investigating her right to a new lease and the conveyancing on the grant of the new lease (s.60(1)(a) and (c)). This means her costs liability ended on completion (21 March 2023). Further, she is not liable for any of [NAME]’s costs of the s.48 application to determine the new lease terms (s.60(5)). 18. [NAME]’s costs will only be regarded as reasonable “if and to the extent that costs in respect of such services might reasonably be expected to have been incurred by him if the circumstances had been such that he was personally liable for all such costs” (s.60(2)).

19. I allow the charging rates claimed for both fee earners. These are reasonable for specialist work of this type. The Grade A rates are consistent with the current SCCO guideline rate for Outer London (£301ph). The Grade D rate is higher than the guideline rate (£138ph) but is still reasonable.

5 20. I derive little assistance from Mr [NAME] statement, as he was not involved in the transaction and, presumably, has not seen the correspondence or documents. Equally, I derive little assistance from the costs agreed for [NAME]. This was a commercial settlement and [NAME]’s solicitors are based in Central London with higher charging rates than TWL, who are based in Bromley.

21. I accept [NAME]’s point that there were unusual features to this transaction, which increased the work involved. The total time claimed for work on documents (2.7 hours) is reasonable and I allow 2 hours at the 2021/22 Grade A rate (£260ph) and 0.7 hours at the Grade D rate (£165). This totals £635.50 plus VAT.

22. I agree with [NAME] that the time claimed for correspondence is excessive and some of this time is outside s.60(1) or relates to these proceedings or administration. Further, it appears that [NAME] is claiming for emails/letters in, which are not recoverable inter partes. I do not accept that [NAME] or TWL took unfair advantage of A.

23. The unusual tenure for the Flat and the assignment of the s.42 notice would have generated some additional correspondence. This should only account for an extra couple of hours and does not justify a total of 12.3 hours. Based on my experience, both as an enfranchisement solicitor in private practice and Tribunal Judge, I consider a reasonable figure for the recoverable correspondence is 6 hours, with 2 hours at the 2021/22 Grade A rate (£260ph), 2 hours at the 2022/23 rate (£285ph) and 2 hours at the Grade D rate (£165). This totals £1,420 plus VAT and when added to the time allowed for documents, £635.50 plus VAT, gives a grand total of £2,055.50 plus VAT. Wasted costs 24. The grounds of [NAME]’s application are detailed in their costs schedule and statement in response. In brief they contend that A acted unreasonably in refusing to accept an ‘offer’ to reduce their legal costs by £1,500 plus VAT, to £2,032.50 plus VAT. This arose from an omission of [NAME]’s costs in one of the completion statements. When A pointed this out, TWL suggested a reduction in [NAME]’s costs by a corresponding amount (£1,500 plus VAT). This was a reduction of 42% on the original costs claimed (£3,532.50 plus VAT) and more than 50% on their actual costs (£4,135.50 plus VAT). 25. [NAME] also complains they have been put to disproportionate costs arising from [NAME] approach to the current proceedings, relying on the length of the bundle and the breadth of her legal arguments. They seek to recover £1,008.50 plus VAT for TWL costs of these proceedings, representing 32 units (3.2 hours). By my calculations these costs, charged at [NAME] [NAME] current rate of £310ph, should come to £992 plus VAT.

6 26. Surprisingly, the costs schedule and statement in response make no mention of Rule 13(1)(a) of the 2013 Rules or s.29(4) of the Tribunals, Courts and Enforcement Act (‘the 2007 Act’). These provisions establish the basis for wasted costs orders in the Tribunal. Such orders can only be made against a legal or other representative (s.29(4)(b) of the 2007 Act).

27. There are other notable omissions in these documents. They do not identify the legal or other representative against whom the order is sought, and no authorities are cited. [NAME] [NAME] has represented A in these proceedings, but her name is not mentioned. 28. [NAME]’s complaints are all directed at [NAME], rather than [NAME] [NAME]. She is a director of A but they have separate legal identities.

29. Given these omissions, the wasted costs application does not get off the ground and it is dismissed. This means it is unnecessary to address A’s lengthy grounds for opposing the application.

30. It may be [NAME] intended to seek a costs order under Rule 13(1)(b) but this is not pleaded in their documents. Further, they did not address the three-stage test outlined in [ADDRESS] Co (1985) [COMPANY] v Alexander [2016] UKUT 290 (LC). When deciding Rule 13(1)(b) applications, the Tribunal must first decide if there has been unreasonable conduct. If this is made out, it must then decide whether to exercise its discretion and make an order for costs in the light of that conduct. The third and final stage is to decide the terms of the order.

31. Either party can still apply for a costs order under Rule 13(1), within the time limit at Rule 13(5) but are reminded the threshold for making such orders is a high one. Name: Judge J P Donegan Date: 24 April 2024

Rights of appeal

By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, the Tribunal is required to notify the parties about any right of appeal they may have. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber), then a written application for permission must be made to the First-tier Tribunal at the regional office which has been dealing with the case.

7 The application for permission to appeal must arrive at the regional office within 28 days after the Tribunal sends written reasons for the decision to the person making the application. If the application is not made within the 28-day time limit, such application must include a request for an extension of time and the reason for not complying with the 28-day time limit; the Tribunal will then look at such reason(s) and decide whether to allow the application for permission to appeal to proceed, despite not being within the time limit. The application 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 making the application is seeking. If the Tribunal refuses to grant permission to appeal, a further application for permission may be made to the Upper Tribunal (Lands Chamber).

8 Appendix of relevant legislation Leasehold Reform, Housing and Urban Development Act Section 60 Costs incurred in connection with new lease to be paid by tenant (1) Where a notice is given under section 42, then (subject to the provisions of this section) the tenant by whom it is given shall be liable, to the extent that they have been incurred by any relevant person in pursuance of the notice, for the reasonable costs of and incidental to any of the following matters, namely— (a) any investigation reasonably undertaken of the tenant’s right to a new lease; (b) any valuation of the tenant’s flat obtained for the purpose of fixing the premium or any other amount payable by virtue of Schedule 13 in connection with the grant of a new lease under section 56; (c) the grant of a new lease under that section; but this subsection shall not apply to any costs if on a sale made voluntarily a stipulation that they were to be borne by the purchaser would be void. (2) For the purposes of subsection (1) any costs incurred by a relevant person in respect of professional services rendered by any person shall only be regarded as reasonable if and to the extent that costs in respect of such services might reasonably be expected to have been incurred by him if the circumstances had been such that he was personally liable for all such costs. (3) Where by virtue of any provision of this Chapter the tenant’s notice ceases to have effect, or is deemed to have been withdrawn, at any time, then (subject to subsection (4)) the tenant’s liability under this section for costs incurred by any person shall be a liability for costs incurred by him down to that time. (4) [NAME] shall not be liable for any costs under this section if the tenant’s notice ceases to have effect by virtue of section 47(1) or 55(2). (5) [NAME] shall not be liable under this section for any costs which a party to any proceedings under this Chapter before the appropriate tribunal incurs in connection with the proceedings. (6) In this section “relevant person”, in relation to a claim by [NAME] under this Chapter, means the landlord for the purposes of this Chapter, any other landlord (as defined by section 40(4)) or any third party to the tenant’s lease.

The Tribunals, Courts and Enforcement Act 2007 Section 29 Costs or expenses (1) The costs of and incidental to— (a) all proceedings in the First-tier Tribunal, and (b) all proceedings in the Upper Tribunal,

9 shall be in the discretion of the Tribunal in which the proceedings take place. (2) The relevant Tribunal shall have full power to determine by whom and to what extent the costs are to be paid. (3) Subsections (1) and (2) have effect subject to Tribunal Procedure Rules. (4) In any proceedings mentioned in subsection (1), the relevant Tribunal may— (a) disallow, or (b) (as the case may be) order the legal or other representative concerned to meet, the whole of any wasted costs or such part of them as may be determined in accordance with Tribunal Procedure Rules. (5) In subsection (4) “wasted costs” means any costs incurred by a party— (a) as a result of any improper, unreasonable or negligent act or omission on the part of any legal or other representative or any employee of such a representative, or (b) which, in the light of any such act or omission occurring after they were incurred, the relevant Tribunal considers it is unreasonable to expect that party to pay. (6) In this section “legal or other representative”, in relation to a party to proceedings, means any person exercising a right of audience or right to conduct the proceedings on his behalf. (7) In the application of this section in relation to Scotland, any reference in this section to costs is to be read as a reference to expenses.

The Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 Overriding objective and parties’ obligation to co-operate with the Tribunal 3. - (1) The overriding objective of these Rules is to enable the Tribunal to deal with cases fairly and justly. (2) Dealing with a case fairly and justly includes – (a) dealing with the case in ways which are proportionate to the importance of the case, the complexity of the issues, the anticipated costs and the resources of the parties and of the Tribunal; (b) avoiding unnecessary formality and seeking flexibility in the proceedings; (c) ensuring, so far as practicable, that the parties are able to participate fully in the proceedings; (d) using any special expertise of the Tribunal effectively; and (e) avoiding delay, so far as compatible with proper consideration of the issues. (3) The Tribunal must seek to give effect to the overriding objective when it –

(a) exercises any power under these Rules; or

(b) interprets any rule or practice direction.

10 (4) Parties must –

(a) help the Tribunal to further the overriding objective; and

(b) co-operate with the Tribunal generally. …

Orders for costs, reimbursement of fees and interest on costs

13.- (1) The Tribunal may make an order in respect of costs only – (a) under section 29(4) of the 2007 Act (wasted costs) and the costs incurred in applying for such costs; (b) if a person has acted unreasonably in bringing, defending or conducting proceedings in – (i) an agricultural and land drainage case, (ii) a residential property case, or (iii) a leasehold case; or (c) in a land registration case. (2) The Tribunal may make an order requiring a party to reimburse to any other party the whole or part of the amount of any fee paid by the other party which has not been remitted by the Lord Chancellor. … (7) The amount of costs to be paid under an order under this rule may be determined by – (a) summary assessment by the Tribunal; (b) agreement of a specified sum by the [NAME] and the person entitled to receive the costs (the “[NAME]”); (c) detailed assessment of the whole or a specified part of the costs (including the costs of the assessment) incurred by the [NAME] by the Tribunal or, if it so directs, on an application to a county court; and such assessment to be on the standard basis or, if specified in the costs order, on the indemnity basis. (8) The Civil Procedure Rules 1998(a), section 74 (interest on judgment debts, etc) of the County Courts Act 1984(b) and the County Court (Interest on Judgment Debts) Order 1991(c) shall apply, with necessary modifications, to a detailed assessment carried out under paragraph 7(c) as if the proceedings in the Tribunal had been proceedings in a court to which the Civil Procedure Rules 1998 apply. The Tribunal may order an amount to be paid on account before the costs or expenses are assessed. …