First-tier Tribunal Disallows Excessive and Duplicated Costs

SCHEDULE OF DISPUTED COSTS The work was carried out by [COUNSEL] (solicitor) at an hourly rate of £250 + VAT (3 years PQE) with assistance from [NAME] (partner) at an hourly rate of £300 + VAT (35 years PQE). NOTE: The Respondent submits the hourly rate for a solicitor of [COUNSEL] experience is £165 per hour The Applicants submit that the hourly rate for a solicitor of [COUNSEL] experience is £250 + VAT per hour for the reasons set out in the statement of reply Description of Work Time Taken Hourly Rate Total Respondent’s Comments Applicant’s Comments Tribunal’s Comments Receiving and considering the Invitation Notice 0.3 hours £250 £75 Time Accepted but adjust to hourly rate of £165 ph. 49.50 60 Receiving and considering the Initial RTM Notice 0.5 hours £250 £125 Time Accepted but adjust to hourly rate of £165 ph. 82.50 100 65 hours 330.00 [£16,250 (but [COMPANY] to £150 per flat for 95 flats = £14,250)] 2 hours £250 £500 330.00 400 0.5 hours £300 £150 150.00 150 Liaising with the [NAME] regarding the validity of the Initial Notice 0.9 £250 £225 Time accepted but adjust to hourly rate of £165 ph. 148.50 180 1 hour £250 £250 165.00 200 0.5 hours £300 £150 150.00 150 Sub-Total £15,725 + VAT 1405.50 £15,725 + VAT 2440 + VAT The work was carried out by [COUNSEL] (solicitor) at an hourly rate of £250 + VAT (3 years PQE) with assistance from [NAME] (partner) at an hourly rate of £300 + VAT (35 years PQE). Description of Work Time Taken Hourly Rate Total Respondent’s Comments Applicant’s Comments Tribunal’s Comments 1 hour £250 £250 165.00 200 0.5 hours £300 £150 150.00 150 Drafting Instructions to Counsel 1 hour £250 £250 Time accepted but adjust to hourly rate of £165 ph. 165.00 200 Drafting Statement of Case 3 hours £250 £750 Time accepted but adjust to hourly rate of £165 ph. 495.00 600 Hourly rate to stand at £250 ph Hourly rate to stand at £250 ph 1200 Perusing official copies of all the Land Registry titles, plans and leases to the flats and the building to establish whether there were sufficient number of participating members £250 £14,250 Unecessary and in any event excessive. The landlord does not need to obtain land registry titles as it already holds the ownership details and original leases. Checking the membership against its records should take no more than2 hours. The landlord is required to carry out a careful investigation of title to establish whether the Right to Manage Company qualifies to make a claim. Of course, it is necessary to investigate up to date official copies of the title to ensure that the members of the right to manage company continue to be the owners of the flat as some records that our [NAME] have date back to the original granting of the leases. It was also necessary to check in detail the provisions of each lease and the title plans to ensure that the building and tenants qualified for the right to manage claim which entailed detailed investigation. Of course, without investigating the leases, plan and up to date titles in detail then we would not have been able to establish that the building was not a self-contained building or part of a building which eventually precluded the Right to Manage company from making a valid claim. There are are 95 flats in the building and a thorough investigation of title took considerably longer than 0.6 hours per flat but we have [COMPANY] our fees to £150 per flat. The hourly rate to stand at £250 + VAT per hour. Considering the validity of the claim and the Initial Notice Time Accepted but adjust to hourly rate of £165 ph. Drafting and Serving the Counter-Notice Time accepted but adjust to hourly rate of £165 ph. Receiving and Considering the Applicant’s application to the Tribunal Time accepted but adjust to hourly rate of £165 ph.

Liaising with Counsel in respect of the Statement of Case and Hearing 2 hours £250 £500 Time accepted but adjust to hourly rate of £165 ph. 330.00 400 Finalising and serving the Statement of Case 0.5 £250 £125 Time accepted but adjust to hourly rate of £165 ph. 82.50 100 Receiving and considering the Applicant’s Reply and Supplementary Statement 0.5 £250 £125 Time accepted but adjust to hourly rate of £165 ph. 82.50 100 0.5 £250 £125 82.50 100 0.3 £300 £90 90.00 90 Travelling and attending the Tribunal hearing in Bristol 12 hours £250 £3,000 Time accepted but adjust to hourly rate of £165 ph. 1980.00 2400 Correspondence with Client 2.1 £250 £525 Excessive. Reduce as shown. 165.00 [COMPANY] is liable for all costs under section 88(2) so there is no jurisdiction to reduce costs but in any event slightly over two hours of correspondence and attendances for a First Tier Tribunal hearing is not unreasonable. The hourly rate is also to stand at £250 ph 420 Correspondence with Tribunal 2.7 £250 £675 Excessive. Reduce as shown. 82.50 [COMPANY] is liable for all costs under section 88(2) so there is no jurisdiction to reduce costs but in any event we were required to incur two and a half hours of correspondence due to [COMPANY]'s failure to comply with the Tribunal's directions in respect of making their application for permission to appeal within the requisite time limit. The hourly rate is also to stand at £250 ph 540 Correspondence with [NAME] 3.4 £250 £850 Excessive. Reduce as shown. 198.00 [COMPANY] is liable for all costs under section 88(2) so there is no jurisdiction to reduce costs but in any event we were required to incur three and a half hours of correspondence due to the RTM's failure to comply with the Tribunal's directions in respect of making their application for permission to appeal within the requisite time limit. The hourly rate is also to stand at £250 ph 680 Sub-Total £7,415 + VAT 4068.00 £7,415 + VAT 5980 + VAT Description of Work Time Taken Hourly Rate Total Respondent’s Comments Applicant’s Comments Tribunal’s Comments Receiving and considering the First Tier Tribunal’s refusal to grant permission to appeal 1 hour £250 £250 Time accepted but adjust to hourly rate of £165 ph. 165.00 200 Preparing initial costs application 1.5 hours £250 £375 Time accepted but adjust to hourly rate of £165 ph. 247.50 300 Receiving and considering the Application for Permission to Appeal to the Upper Tribunal 1.2 hours £250 £300 Time accepted but adjust to hourly rate of £165 ph. 198.00 240 Receiving and considering the Tribunal’s decision to allow Permission to Appeal 0.4 £250 £100 Time accepted but adjust to hourly rate of £165 ph. 66.00 80 Instructing Counsel for Upper Tribunal Hearing 1 hour £250 £250 Time accepted but adjust to hourly rate of £165 ph. 165.00 200 Approving the Respondent’s Notice and Statement of Case 2 hours £250 £500 Time accepted but adjust to hourly rate of £165 ph. 330.00 400 [COMPANY] is liable for all costs under section 88(2) so there is no jurisdiction to reduce costs but in any event hourly rate to stand at £250 ph [COMPANY] is liable for all costs under section 88(2) so there is no jurisdiction to reduce costs but in any event hourly rate to stand at £250 ph Considering and Serving the Counsel’s Skeleton Argument Time accepted but adjust to hourly rate of £165 ph.

Finalising and serving the Respondent’s Notice and Statement of Case 0.5 £250 £125 Time accepted but adjust to hourly rate of £165 ph. 82.50 100 Considering and agreeing the Bundle Index 0.5 hours £250 £125 Time accepted but adjust to hourly rate of £165 ph. 82.50 100 Considering the bundle and forwarding a copy to Counsel 1.5 hours £250 £375 Sending bundles does not require solicitor. Reduce as shown. 82.50 he [COMPANY] is liable for all costs under section 88(2) so there is no jurisdiction to reduce costs but in any event hourly rate to stand at £250 ph. Whilst sending a copy of a bundle to Counsel did not require a solicitor the time was spent in considering the bundle to ensure that all the relevant documents were enclosed and that no pages were missing from the bundle which required a solicitor with knowledge of the case. 300 412.50

Attending the Upper Tribunal hearing on 15th May 2018 6 hours £250 £1,500 Time accepted but adjust to hourly rate of £165 ph. 990.00 1200 Reviewing the draft decision for material errors and spelling 1.5 hours £250 £375 Time accepted but adjust to hourly rate of £165 ph. 247.50 300 1 hour £250 £250 165.00 1.5 hours £300 £450 300.00 Considering and approving the Respondent’s Note in response to the Appellant’s Request to Alter the draft decision 1.5 hours £250 £375 Time accepted but adjust to hourly rate of £165 ph. 247.50 [COMPANY] is liable for all costs under section 88(2) so there is no jurisdiction to reduce costs but in any event hourly rate to stand at £250 ph 2 hours £250 £500 0.00 0 2 hours £300 £600 0.00 300 Preparing Updated Costs Statement 3 hours £250 £750 Time excessive. Adjust to 2 hours at hourly rate of £165 ph. 330.00 [COMPANY] is liable for all costs under section 88(2) so there is no jurisdiction to reduce costs but in any event the costs statement was very detailed and required updating to take into account all the costs incurred in respect of [COMPANY]'s failure to make an application for permission to appeal in time, the Upper Tribunal Hearing and [COMPANY]'s request to alter the draft decision. Hourly rate to stand at £250 ph. 600 [COMPANY] is liable for all costs under section 88(2) so there is no jurisdiction to reduce costs but in any event hourly rate to stand at £250 ph 500 Considering Counsel’s Skeleton Argument 2.5 hours £250 £625 Time accepted but adjust to hourly rate of £165 ph. Reviewing the published Upper Tribunal Decision Not a chargebale item [COMPANY] is liable for all costs under section 88(2) so there is no jurisdiction to reduce costs but in any event there is no explanation from [COMPANY] why this is not a chargeable item. Of course, it is necessary to review the Tribunal's decision in order to establish the decision and advise the client accordingly. Hourly rate to stand at £250 ph. 500 Reviewing the Appellant’s Request to Alter the draft decision Excessive. Reduce as shown. [COMPANY] is liable for all costs under section 88(2) so there is no jurisdiction to reduce costs but in any event hourly rate to stand at £250 ph. The request to alter the draft decision was required to be read very carefully to confirm whether any additional comments were required from our client. The request also referred to a detailed 12 page attendance note from the hearing, a 15 page decision and the 82 page Witness Statement of [NAME]. The time was not excessive.

Correspondence with Client 3.5 £250 £875 Excessive. Reduce as shown. 82.50 [COMPANY] is liable for all costs under section 88(2) so there is no jurisdiction to reduce costs but in any event three and a half hours of correspondence and attendances incurred in respect of [COMPANY]'s failure to make an application for permission to appeal in time, the Upper Tribunal Hearing and [COMPANY]'s request to alter the draft decisionis not unreasonable. The hourly rate is also to stand at £250 ph 700 Correspondence with Counsel 6.8 £250 £1,700 Excessive. Reduce as shown. 99.00 [COMPANY] is liable for all costs under section 88(2) so there is no jurisdiction to reduce costs but in any event a considerably amount of detailed correspondence and attendances were required and incurred in respect of [COMPANY]'s failure to make an application for permission to appeal in time, the Upper Tribunal Hearing and [COMPANY]'s request to alter the draft decision is. The claimed costs amounted to almost seven hours and this is not unreasonable. The hourly rate is also to stand at £250 ph 1360 Correspondence with Tribunal 3.1 £250 £775 Excessive. Reduce as shown. 66.00 [COMPANY] is liable for all costs under section 88(2) so there is no jurisdiction to reduce costs but in any event three hours of correspondence and attendances were incurred in respect of [COMPANY]'s failure to make an application for permission to appeal in time, the Upper Tribunal Hearing and [COMPANY]'s request to alter the draft decision and this is not unreasonable. The hourly rate is also to stand at £250 ph 620 Correspondence with [NAME] 1.8 £250 £450 Excessive. Reduce as shown. 66.00 [COMPANY] is liable for all costs under section 88(2) so there is no jurisdiction to reduce costs but in any event under two hours of correspondence and attendances incurred in respect of [COMPANY]'s failure to make an application for permission to appeal in time, the Upper Tribunal Hearing and [COMPANY]'s request to alter the draft decisionis not unreasonable. The hourly rate is also to stand at £250 ph 360 Sub-Total £11,625 + VAT 4425.00 £11,625 + VAT 8160 + VAT Tribunal’s Comments Description of Work Time Taken Hourly Rate Total Respondent’s Comments Applicant’s Comments Receiving and reviewing the Respondent’s Case in respect of costs 1.5 hour £250 £375 Time accepted but adjust to hourly rate of £165 ph. 247.50 [COMPANY] is liable for all costs under section 88(2) so there is no jurisdiction to reduce costs but in any event hourly rate to stand at £250 ph 300 Preparing and serving Applicant’s Reply 3 hours £250 £750 Timeexcessive. Reduce to 2 hours and adjust to hourly rate of £165 ph. 330.00 [COMPANY] is liable for all costs under section 88(2) so there is no jurisdiction to reduce costs but in any event hourly rate to stand at £250 ph. The time spent has not been excessive as we have had to write a statement in reply and provide comments on the disputed costs. We have also had to research various cases that were required to put forward to the Tribunal in respect of reasonable hourly rates. 600

Preparing Bundles and documents in relation to costs hearing 6 hours £250 £1,500 Does not require solicotrs. Reduce as shown, 500.00 [COMPANY] is liable for all costs under section 88(2) so there is no jurisdiction to reduce costs but in any event hourly rate to stand at £250 ph. The time spent is not excessive and in fact should be increased as we have been required to prepare and serve two sets of bundles to the Tribunal and [COMPANY]'s [NAME] due to their failure to submit their statement of items in dispute within the Tribunal deadline and therefore we expect that 9 hours will be required in total. A solicitor is required to compile the bundle to ensure that all the relevant documentation is enclosed due to complex nature of this whole transaction. 800 Sub-Total £2,625 + VAT 1077.50 £3,375 + VAT 1500 + VAT Tribunal’s Comments

Description of Work Time Taken Hourly Rate Total Respondent’s Comments Applicant’s Comments Counsels fees £15,900 Fees in relation to FtT excessive. Reduce by £4000 11900.00 [COMPANY] is liable for all costs under section 88(2) so there is no jurisdiction to reduce cost. These fees are not excessive for preparing and attending a whole day hearing with site inspection. [COMPANY] instructed a QC for the Upper Tribunal hearing whose fees would have been considerably higher than our client's instructed counsel. 15900 Management Fees £8,100 Unreasonable and disproportionate. Client and Solicitor effectively same person. 0.00 [COMPANY] is liable for all costs under section 88(2) so there is no jurisdiction to reduce costs. The client and solicitor are not the same person and are completely different entities. As will be noted the majority of the work carried out has been by [NAME] of [NAME] and the management company has its day to day affairs outsourced to a [NAME] agent who has provided the necessary instructions with reference to the director of the company where needed. We can confirm that there is no double recovery of costs sought. [COMPANY] has not provided any explanation why the costs and unreasonable or disproportionate and must stand as claimed. 0 Disbursements £662 Accepted 662.00 Noted. 662 Sub total £24,662 12562.00 £24,662 19742 (incl VAT) GRAND TOTAL 23538.00 41,438.30 (incl. VAT) NOTE: Insofar as the Landlord and/or its [NAME] agent are registered for VAT the Respondent is not liable for VAT. The landlords [NAME] agent is registered for VAT, number 984 5869 46

1

Case Reference : CHI/OOHB/LCP/2017/0004

Property : Central Quay North, Broad Quay, Bristol, [POSTCODE] and 8 [ADDRESS] [POSTCODE]

First Applicant: [redacted] Applicant: [redacted] : [APPELLANT] Solicitors

Respondent: [redacted] : [RESPONDENT] of RTMF

Type of Application : Right to Manage costs: Commonhold and Leasehold Reform Act 2002, section 88(4).

Tribunal Member : Judge M [NAME] of Decision : 7 February 2019

© CROWN COPYRIGHT 2019

FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

2 DECISION

The Tribunal determines that reasonable fees of £41,438.30 (including VAT in so far as the Respondent is liable for VAT) are recoverable by the Applicants from the Respondent under section 88 of the Commonhold and Leasehold Reform Act 2002. The breakdown is set out in the following table and more particularly on the attached spread sheet.

Costs VAT Sub-total [NAME] costs £18,080 £3,616 £21,696 Counsel’s fees £15,900 £3,180 £19,080 Management Fees £o £0 £ 0 Other disbursements £662.30 £0.00 £ 662.30

Total £41,438.30

REASONS FOR DECISION

The Application

1. These are the reasons for decision of the First-tier Tribunal (Property Chamber) (“the Tribunal”) in the matter of an application (“the Costs Application”) dated 8 November 2017 and made under section 88(4) of the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”) by (1) [APPELLANT] [COMPANY]. and (2) [APPELLANT]. (“The Applicants”). The respondent to that Application is [RESPONDENT] (“the Respondent”), which was incorporated on 8 August 2016. The Applicants are represented by [RESPONDENT] (Solicitors) (“[NAME]”) and the Respondent by [NAME] [RESPONDENT] of [RESPONDENT].

Background to and subsequent history of the Application

2. The Application is related to a claim made by the Respondent [COMPANY] on 5 October 2016 to exercise the right to manage (“the RTM”) premises at Central Quay North, Broad Quay, Bristol, [POSTCODE] and 8 [ADDRESS] [POSTCODE] (“the Premises”) under Chapter 1 of Part 2 to the 2002 Act. Following the service of the claim notice the Applicants served a counter notice on 9 November 2016 disputing the claim. On 20 December 2016 the Respondent made an application to the Tribunal under section 84(3) of the 2002 Act (“the RTM Application) for a determination that it was entitled to exercise the RTM. A hearing of the matter by the Tribunal was held in Bristol on 29 March 2017. At that hearing [APPELLANT] [COMPANY]. and [APPELLANT]., who resisted the claim, were represented

3 by [NAME] [COUNSEL] [NAME], instructed by [NAME] and [COMPANY] was represented by [NAME] [COUNSEL] [NAME] (solicitor advocate), instructed by [NAME] [COUNSEL] of [COMPANY].

3. The Tribunal issued its decision to the parties on 7 June 2017. The decision was that the Respondent was not entitled to exercise the RTM on the basis that the requirement in section 72(1)(a) of the 2002 Act, that the building be a self contained building or part of a building, was not satisfied. On 17 August 2017 the Tribunal refused the Respondent permission to appeal. On 19 September 2017 the Upper Tribunal granted the Respondent permission to appeal. The Upper Tribunal held a hearing of the subsequent appeal on 15 May 2018 and on 23 May 2018, Judge Hodge QC sent his draft decision, dismissing the appeal, to the parties. On 5 June 2018 counsel for the Respondent [COMPANY] submitted a Note to the judge asking him to alter his reasons and reverse the decision for the reasons stated in the Note. On 1 August 2018 the Upper Tribunal issued its final decision, which reflected the alteration of a passage in the draft reasons but not the decision. Thus the appeal was dismissed.

4. By the present Application, the Applicants seek a determination from the Tribunal as to the costs payable by the Respondent under section 88 of the 2002 Act. The Application is dated 8 November 2017, that is to say after the Upper Tribunal granted permission to appeal the Tribunal’s determination under section 84(3) of the 2002 Act.

5. Judge D R Whitney issued Directions on 24 November 2017. The Directions stated that the Application would be determined without a hearing, unless either party objected within 28 days, and set out a timetable for submission of arguments. On 1 December 2017 the Tribunal stayed the Directions of 24 November 2017 at the request of the Respondent. On 11 September 2018 the stay was lifted and the Directions of 24 November 2017 became operative subject to specified amendments regarding the timetable dates.

6. On 1 October 2018 [NAME] submitted a witness statement by [COUNSEL], the solicitor who has handled the bulk of the case for the Applicants. The Respondent then produced a schedule of disputed costs to which [NAME] produced a statement in reply dated 7 November 2018.

7. The Tribunal informed the parties on 27 November 2018 that the matter would be determined on the notified date on the basis of written representations and without an oral hearing.

8. Although neither party had requested an oral hearing, there was subsequently an exchange of emails between the [NAME] of the parties and the Tribunal as to whether the Respondent was entitled at that stage to request an oral hearing or, if not, whether the Tribunal’s decision would be provisional. The Directions of 27 November 2017 had stated that the decision “may” be provisional (emphasis supplied). A procedural judge decided that it was too late to request a

4 hearing and that it was a matter for the Tribunal as to whether its decision would be provisional. The Tribunal subsequently, by way of a series of questions addressed to [NAME], required further particulars and documentation from the Applicants, such materials to be copied to the Respondent. The Tribunal received the Applicant’s response and associated documentation from [NAME] on 28 January 2019.

9. On 31 January 2019 the Respondent’s representative, [NAME] [COUNSEL], submitted comments on the Applicant’s response, to which [NAME] replied in turn on the same day. [NAME] asked the Tribunal to ignore the Respondent’s comments of 31 January 2019, on the basis that they were out of time as representations and unrequested by the Tribunal. However, the Tribunal has in fairness considered them, together with [NAME]’s reply refuting the points made by the Respondent.

The Law

Section 88 of the 2002 Act provides as follows:

(1) A [COMPANY] is liable for reasonable costs incurred by a person who

is—

(a) landlord under a lease of the whole or any part of any premises,

(b) party to such a lease otherwise than as landlord or tenant, or

(c) a manager appointed under Part 2 of the 1987 Act to act in

relation to the premises, or any premises containing or

contained in the premises,

in consequence of a claim notice given by the company in relation to

the premises. (2) Any costs incurred by such a person in respect of professional services

rendered to him by another are to be regarded as reasonable only 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) A [COMPANY] is liable for any costs which such a person incurs as

party to any proceedings under this Chapter before the appropriate

tribunal only if the tribunal dismisses an application by the company

for a determination that it is entitled to acquire the right to manage the

premises. (4) Any question arising in relation to the amount of any costs payable by a

[COMPANY] shall, in default of agreement, be determined by the

appropriate tribunal.

The Applicants’ claim

5 10. The Applicants claim costs of £72,710.30 in respect of the proceedings

in the First-tier Tribunal and the Upper Tribunal. They are summarised

as follows:

Costs VAT Sub-total [NAME] costs £37,390 £7,478 £44,868 Counsel’s fees £15,900 £3,180 £19,080 Management Fees £6,750 £1,350 £8,100 Other disbursements £662.30 £0.00 £662.30

Total £72,710.30

11. The Applicants distinguish between, on the one hand, costs incurred following receipt of the claim notice on 5 October 2016 and up to the service of the counter notice on 9 November 2016 and on the other hand, costs incurred in connection with the proceedings in the First -tier and Upper Tribunals. They submit that the first set of costs was reasonably incurred and are therefore recoverable under section 88(1) of the 2002 Act. They further submit that because the RTM application was dismissed by the Tribunal the second set of costs is not subject to the Tribunal’s jurisdiction. The Applicants reason that section 88(3) (erroneously referred to by them as s. 88(2)) provides that a [COMPANY] is liable for any costs incurred by the landlord in circumstances where the claim is dismissed (emphasis supplied). The Applicants say it follows that such costs are recoverable in full and are immune from scrutiny by the Tribunal. [NAME]’s services were provided mainly by an assistant solicitor, [COUNSEL] assisted to a [COMPANY] extent by a partner, [NAME] [RESPONDENT] (“[RESPONDENT]) [RESPONDENT].

The Respondent’s case

12. The Respondent’s objection to the sum claimed is based on the following assertions. First that [NAME] hourly charging rate should be reduced from £250 to £165. (No issue is taken with the hourly rate of £300 for work carried out by [NAME] [NAME] (35 years PQE). Second, that some tasks charged for by [NAME] were unnecessary and/or excessive. Third, that counsel’s fee for the First-tier Tribunal hearing was excessive. Fourth, that the costs of the Management Company (the second Applicant) should be disallowed as being unreasonable and disproportionate because the client and solicitor were “effectively the same person.” The Respondent submitted that the recoverable costs should be £23,538. (This sum excludes VAT). The detailed differences between the costs claimed by the Applicants and those argued by the Respondent to be reasonable are set out in the spreadsheet attached to this decision. As will be seen there is a considerable discrepancy between

6 the two sets of figures. It is implicit in the Respondent’s case that the Tribunal has jurisdiction over all the costs claimed.

The Applicants’ response.

13. In their response the Applicants reiterate that section 88(3) (again erroneously referred to as section 88(2)) renders [COMPANY] liable for any costs incurred by the [NAME] landlord or Management Company as parties to the tribunal proceedings (both the [NAME] and the Upper Tribunal proceedings) because the (First-tier) Tribunal dismissed the claim. They therefore maintain their submission that the costs incurred from 10 November 2016 are recoverable in full as “there is no jurisdiction under this section for the [T]ribunal to determine the reasonableness of these costs which has not been disputed by the Respondent.”

14. With regard to [RESPONDENT] charging rate, the Applicants say that they have instructed [NAME] on various matters since September 2012 at an hourly rate of £250 plus VAT for an assistant solicitor of similar experience to [COUNSEL] (i.e. 3 years PQE). The Applicants state that £250 + VAT per hour is a reasonable charging rate for a solicitor of [COUNSEL] experience based in postcode SW3 in Central London who specialises in claims under the 2002 Act and under the Leasehold Reform Housing and Urban Development Act 1993. They say that the Respondent has not produced any evidence or reasoning for proposing that the hourly charge out rate should be reduced to £165 plus VAT.

15. The Applicants refer to two Leasehold Valuation Tribunal decisions. The first is [COMPANY] v [COMPANY] (LON/ENF/785/02) where (in an enfranchisement case) the tribunal held that a landlord is not obliged to find the cheapest or a cheaper solicitor but only in effect to give instructions as he would ordinarily if he himself would bear the costs. In the second case, 9 [COMPANY] (LON/OOAU/LCP/2008/0007) the tribunal determined that a broad brush approach should be taken to section 88 costs and that a landlord is not obliged to reduce costs otherwise reasonably incurred by him to the cheapest rates or to rates acceptable to tenants.

Discussion

16. Chapter 1 of Part 2 of the 2002 Act provides for the Right to Manage

premises to which that Chapter applies. The right is exercisable by a

Right To Manage Company established under that Chapter serving a

claim notice on the landlord or another party to the lease (or to a

tribunal appointed manager). If the claim is contested by one or

more recipients of a claim notice serving a counter notice, the

Company may apply to the [NAME], under section 84(3) of the Act for a

determination that it is entitled to exercise the RTM.

7 17. Section 88(1) of the 2002 Act provides that where a [COMPANY]

seeks to exercise the right to manage, the Company is liable for the

reasonable costs incurred by the landlord or another party to the

lease (or to a tribunal appointed manager) in consequence of a claim

notice given by the Company under the Act.

18. This general principle is qualified first by section 88(2) of the Act,

which provides that where the costs arise as a result of professional

services having been afforded to the landlord or other person

entitled to costs under s. 88(1), the costs shall only be regarded as

reasonable 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 would have been personally

liable for such costs. In other words the question must be asked

whether the landlord would reasonably be expected to have incurred

those costs had they not been recoverable from the Company. To the

extent that that they would not have been expected to be so incurred

they are deemed to be unreasonable.

19. The second qualification, contained in section 88(3), is that any costs

incurred by the landlord or another as party to tribunal

proceedings under the RTM provisions of the Act are recoverable

only if the Tribunal dismisses the claim.

20. Finally, section 88(4) provides that any question arising in relation to

the amount of any costs payable by a [COMPANY] shall, in

default of agreement, be determined by the First Tier-tribunal.

21. The Applicants, who are the [NAME] landlord and the Management

Company, argue that the effect of the reference in section 88(3) to

“any costs incurred in connection with tribunal proceedings under

Chapter 1 (of Part 2 of the Act) ” means that, because the RTM claim

was dismissed, those costs are recoverable in full and not subject to

scrutiny by the Tribunal. No authority is cited in support of this novel

interpretation which the Tribunal considers to fly in the face of section

88 when read as a whole. The structure of section 88 is that by virtue

of subsection (1) only reasonable costs incurred (including those

incurred in connection with tribunal proceedings) are recoverable

(subject to subsection (2)). However, any costs (i.e. any such costs)

incurred as a party to tribunal proceedings are recoverable only if the

tribunal dismisses the RTM claim. Section 88(4) applies in default of

agreement to all costs for which [COMPANY] is liable. This

interpretation is supported by decisions of the Upper Tribunal ([NAME]) in [COMPANY] v [COMPANY] [2015] UKUT 0230 and [COMPANY] v

[ADDRESS] Companies [2014] UKUT 27. In the Fencott

case the Deputy President, [NAME] QC, stated

“I am satisfied that in both appeals, section 88(1) of the 2002 Act

entitles the successful appellants to recover from the respondent

companies the reasonable costs incurred by them in consequence of the

8

claim notices given by the companies in relation to the premises,

Section 88(1) creates a liability, in quite general terms, making an [COMPANY] liable for reasonable costs incurred “in consequence of a

claim notice given by the company in relation to the premises.” That

general liability to meet reasonable costs incurred is subject to further

qualification by sections 88(2) and (3). Section 88(2) elaborates on the

meaning of “reasonable costs”, and is relevant to the quantification of

the liability in the event of a dispute, but not to the existence of the

liability in principle. Section 88(3) then creates an exception to the

liability which arises under section 88(1). That exception prevents the

recovery of costs incurred in proceedings before the appropriate

tribunal unless a condition is satisfied, namely, the dismissal by that

tribunal of [COMPANY]’s application. That exception to the

general rule is [COMPANY] in its scope to the costs incurred as party to any

proceedings under the Chapter before the appropriate tribunal.”

22. The Tribunal has therefore determined the reasonableness of all

disputed costs, whether incurred before, or as a party to,

proceedings in the First-Tier and Upper Tribunals. The costs, which

the Applicants seek, are detailed, together with the Applicants’

comments, on the spread sheet attached to this decision. Also shown on

that spread sheet are the Respondent’s comments together with the

sums agreed or disputed by the Respondent. The costs determined as

reasonable by the Tribunal are set out in the final column of the

spread sheet.

Disputed costs (1) Solicitors fees from receipt of claim notice

to service of counter notice.

23. Subject to the exception dealt with in paragraph 25 below the

Respondent accepts the time spent by [NAME] on dealing with the claim

notice and drafting and serving the counter notice (amounting in total

to 5.7 hours) but disputes the hourly rate of £250. The Applicants

submit that they were entitled to employ solicitors of their choice in

dealing with the claim notice received from the Respondent. They say

that there is no evidence to suggest that the Applicants would not have

instructed [NAME] ([NAME]) had they not been able to recover the

costs from the Respondent. They also state that there is no evidence

that it would have been reasonable for [NAME] to have used a solicitor at a

lower charging rate for dealing with a complicated case of this

kind.

24. The Respondent argues for a rate of £165 per hour. This is presumably

derived from the Solicitor’s Guideline Hourly Rates issued in 2010 (and

left unchanged on review in 2014) by HM Courts and Tribunal

Service. The hourly rate specified for a London Grade 3 Band C solicitor

(i.e. less than 4 years PQE) is £165 .The hourly rate for a London Grade

3 Band A solicitor (i.e. 8+ years PQE) is £229-£267. The Tribunal was

told that [NAME], who investigated the claim and prepared and

served the counter notice, was a 3 years PQE assistant solicitor. (We

9

were not told the date when she qualified). This would make her

[NAME]’s postcode is SW 3, which is London Grade 3.

25. The question therefore is whether it is unreasonable for the Applicants

to have engaged [COUNSEL], a Band C solicitor, to handle the

case at an hourly fee rate of £250. The Guideline hourly rates are only

guidelines and they were last fixed in 2010. On balance the Tribunal

determines that, taking all relevant factors into account, including the

unchallenged comparative hourly fee rate of £300 charged by [NAME] [NAME], a partner of 35 years PQE, a reasonable hourly rate would

have been £200. The LVT decisions cited by [NAME] are specific to the

facts of those cases.

26. The exception referred to in paragraph 22 above relates to the charge

by [NAME] of £14,250 in respect of “perusing official copies of all the Land

Registry titles, plans and leases to the flats and the building to

establish whether there was a sufficient number of participating

members” as detailed in [NAME]’s Costs Statement 5th October 2016 to 9th

November 2016. [NAME] says that this task took 65 hours at £250 per

hour (amounting to £16,250) although they had [COMPANY] their charge

to £150 per flat (amounting to £14,250).

27. The Respondent submits that this cost was unnecessary and excessive

because the Applicant landlord already had the leases and

ownership details and checking the membership against its

records should have taken no more than two hours (at £165 per hour).

28. In its response submission, [NAME] states that it was necessary to verify

that the members of [COMPANY] still owned the flats because

“some records that our [NAME] have date back to the original granting of

the leases.” The response further states that

“it was also necessary to check in detail the provisions of each lease

and the title plans to ensure that the building and tenants qualified for

the right to manage claim which entailed a detailed investigation. Of

course without investigating the leases, plans and up-to-date titles in

detail then we would not have been able to establish that the

building was not a self-contained building or part of a building

which eventually precluded the Right to Manage company from

making a valid claim.”

29. [NAME] is therefore asserting that the 65 hours was reasonably spent not

only in establishing whether there were a sufficient number of

participating tenants but also whether the building was a self contained

building or part of a building by reference to the chain of titles in the

development.

30. The Tribunal had some concern that in its covering letter to the

Respondent, when serving the counter notice, [NAME] had stated

10

“We anticipate that this firm’s recoverable fees to date pursuant to

section 88 of the Act are £750 + VAT and disbursements for

investigating the matter if it is accepted that the Company does not

have the right to manage the Premises. However, if the right to manage

is disputed then we will incur costs in respect of the investigation of the

Company’s claim which we have fixed at £150 + VAT and

disbursements per flat, i.e. £150 x 95 = £14,250 + VAT and

disbursements.”

This suggests that the investigation of title work had not been carried

out at that stage. However, if that were the case it is difficult to

understand how the Applicants were able to assert in the counter

notice that the Respondent was not entitled to claim the RTM.

31. If on the other the work was completed at some stage, and there is no

evidence to rebut [NAME]’s statement that it had been done, the question

arises as to whether the costs were reasonably incurred. The Tribunal

finds that they were not. It is far from clear why it was

considered necessary to carefully investigate the title to, and provisions

of, every lease in order to establish “whether there were a sufficient

number of participating tenants.” The leases were in the same form, as

submitted by the parties at the substantive hearing, when the

Tribunal was provided with a copy of one lease by way of sample.

32. Section 75(2) of the 2002 Act provides that a person is the qualifying

tenant of a flat if he is the tenant of the flat under a long lease. At least

half of the members of [COMPANY] must be qualifying tenants

(section 79(5) of the 2002 Act). Thus all that the Applicants (and

therefore [NAME]) needed to do was verify that half of the members of [COMPANY] were qualifying tenants. In the present case the

Applicants knew that all the flats were held on long leases. The

Landlord had been given a list of the members of [COMPANY]. It

was then simply a matter of checking those names against the

office copies of the lease titles supplied by HM Land Registry. This

did not require a solicitor who charged a fee rate of £250 per hour.

33. The Tribunal considers that this could have been done in 4 hours and

that a sum of £800 in respect of the same would be reasonable. The

Tribunal finds that whilst it was also reasonable as a separate matter to

examine the title structure of the buildings in the development in order

to help decide whether the building in question was a qualifying

building, it is far from clear that this would take more than two

days. The Tribunal considers that a sum of £1,200 would be

reasonable for this task (6 hours at £200 per hour).

Disputed costs (2): Solicitor’s costs in preparing for the [NAME] hearing

34. The Respondent does not dispute the time taken on the various matters

by [NAME] when preparing for the [NAME] hearing. However, it does dispute

the hourly rate of £250 and also disputes the time taken over three

11

particular matters: (1) correspondence with client (2.1 hours) (2)

correspondence with Tribunal (2.7 hours) and (3) correspondence

with [COMPANY]’s [NAME] (3.4 hours). These times

include that spent by [NAME] dealing with [COMPANY]’s

application to the [NAME] for permission to appeal the Tribunal’s decision.

35. The Tribunal agrees with the Respondent that the hourly rate of £250

is unreasonable for the reasons given above and should be reduced to

£200. However, it has no evidence that the time taken on these

matters was excessive. At the request of the Tribunal, (see above) [NAME]

produced time sheets which detailed the number of

communications in categories (1) to (3) above together with the time

taken, which the Tribunal does not consider to have been excessive.

The Application to the Tribunal by the Respondent for permission to

appeal the section 84(3) decision was made out of time and entailed

extensive communications between the parties and the Tribunal before

the Tribunal extended the time limit. The sums claimed are therefore

allowed subject to the reduction in the hourly rate from £250 to

£200.

Disputed costs (3): Solicitor’s costs in relation to the time from refusal of the application for permission to appeal by the Tribunal to issue of the final Upper Tribunal decision dismissing the appeal.

36. The Respondent does not dispute the time taken on most of the matters

under this head. It disputes the hourly rate of £250 for the services of

[NAME]. The Tribunal agree that the rate of £250 is unreasonable

for the reasons given above and reduces it to £200 accordingly. The

Respondent also argues that sending the hearing bundle in relation to

the appeal to counsel did not require a solicitor and submits that the

cost of £375 should be reduced to £87.50. [NAME] says that a solicitor was

required to consider the bundle and ensure that all relevant documents

were enclosed. The Tribunal agrees with [NAME] but reduces the

reasonable cost to £200 per hour (i.e. £300).

37. Furthermore, the Respondent also disputes three time periods under

this head. The first is 1 hour at £250 per hour and 1.5 hours at £300

per hour for reviewing the Note submitted by counsel for the

Respondent to the Upper Tribunal judge requesting a change to the

draft decision. The Respondent says that £700 is excessive and

should be reduced to £465 (i.e. 1 hour at £165 and 1 hour at £300).

The Tribunal considers that 1 hour for each solicitor at rates of £200

and £300 respectively was reasonable and accordingly allows £500.

38. The second period is of 1.5 hours at £250 per hour for considering and

approving the Applicants’ response to the Note. The Respondent

accepts the time but not the hourly rate. The Tribunal agrees that the

rate of £250 is unreasonable for the reasons given above. The allowed

hourly rate is reduced to £200.

12 39. The third period is 2 hours at £250 per hour and 2 hours at £300 per

hour for reviewing the published Upper Tribunal decision. The

Respondent says that this is not a chargeable item. The Tribunal

agrees that it was necessary to read the decision and convey the

outcome to the client. However, the outcome was that the appeal was

dismissed. Quite apart from the duplication involved in having it read

by two solicitors it did not require 4 hours, or indeed 2 hours, to

read the decision and convey the outcome to the Applicants, who

had successfully defended the appeal. The Tribunal allows as

reasonable a charge of £300.

Disputed costs (4): Correspondence by solicitors with client (3.5 hours), Counsel (6.8 hours), Tribunal (3.1 hours) and Respondent’s [NAME] (1.8 hours) all charged at £250 per hour.

40. The Respondent says the time spent on all these matters was excessive

and that the costs should be reduced to the sums requested. At the

request of the Tribunal [NAME] produced time sheets with regard to all of

these matters and the Tribunal accepts that the time spent was not

excessive. It is accordingly allowed but at the rate of £200 per hour

rather than £250.

Disputed costs (5): Costs of (a) preparing the costs statement (3 hours at £250 per hour), (b) receiving and reviewing the Respondent’s case in respect of costs (1.5 hours at £250 per hour), (c) preparing and serving the Applicants’ reply (3 hours at £250 per hour) and (d) preparing the bundles and documents in relation to the costs hearing (6 hours at £250 per hour).

41. The Respondent disputes the time in relation to (a) and seeks a

reduction to 2 hours. It accepts the time in (b) but says that the rate

should be £165 per hour. The Respondent seeks a reduction in

time for (c) to two hours at £165 per hour and says that (d) does not

require a solicitor and should be reduced to £500. The Applicants say

that they have incurred extra costs because they have been required to

prepare and serve two sets of bundles to the Tribunal and [COMPANY] due to the latter’s failure to submit the statement of items in

dispute within the Tribunal’s deadline. They have therefore adjusted

their claim under (d) upwards to 9 hours.

42. The Tribunal considers that with regard to (a) and (b) the hourly rate

should be £200 per hour. It does not have any evidence that 3

hours was unreasonable with regard to (a) or (c). With regard to (d) the

Tribunal finds that even including time to research case law 9 hours is

unreasonable for preparation and serving of the costs bundle. It

considers that 6 hours at £200 per hour was reasonable, the use of a

solicitor being necessary for the reasons given by the Applicants.

Disputed costs (6): Counsel’s fees

13

43. The Respondent says that counsel’s fee for the [NAME] proceedings was

excessive and should be reduced by £4000. The Applicants submit that

counsel’s fee was not excessive for preparing and attending a whole day

hearing with site inspection. The Applicants noted that a QC had

represented the Respondent at the Upper Tribunal hearing and it

could reasonably be expected that his fee would be considerably higher

than that of the Applicants’ counsel.

44. The Tribunal has no evidence that counsel’s fee for the [NAME] hearing

was unreasonable. [NAME] [COUNSEL] is an experienced counsel with special

expertise in the area of RTM and whilst his brief fee is undoubtedly at

the top end of the range the Tribunal finds that it cannot be said to be

self evidently unreasonable.

Disputed costs (7): Management Company fees

45. This head of charge has proved to be highly contentious. The

[NAME], [APPELLANT[COMPANY] and the

Management Company, [APPELLANT[COMPANY],

are both privately [COMPANY] companies registered in England and

Wales. [NAME] [NAME], who is as noted above, a partner in [NAME], is

the sole Director of both Companies. The address of both companies,

26 [ADDRESS] [POSTCODE] is the same as that of their solicitors,

[NAME].

46. By an invoice dated 30 March 2017 the Management Company

requested payment from the [NAME] company of £4,800 plus VAT

(total £5,760). The invoice was raised by the Management Company

c/o [COMPANY], [ADDRESS], [ADDRESS], Westbury on

Trym, Bristol [POSTCODE]. [COMPANY] is the Company to whom day

to day management of the premises has been outsourced by the

Management Company. The invoice was stated to be in respect of

“costs incurred in providing instructions to the [COMPANY] in

relation to the building, to including travelling and attending the

hearing and all meetings and correspondence and research

concerning the same [COMPANY] to 16 hours.” The charge rate is £300 per

hour.

47. By an invoice dated 17 May 2018 the Management Company requested

payment from the [NAME] company of £1,950 plus VAT (total

£2,340) in respect of “costs incurred since 31st March 2018 to date in

providing instructions to the [COMPANY] in relation to the

Upper Tribunal hearing, to include travelling and attending part of the

hearing and all meetings and correspondence and research

concerning the same [COMPANY] to 6.5 hours.” The charge rate is again

£300 per hour.

48. In response to a request by the Tribunal for further details, [NAME] stated

that [COMPANY] had played no part in the case and that the costs

referred to in the second invoice “were incurred by [NAME] [COUNSEL]

14

[COUNSEL] as consultant costs as representative of the Management

Company and [COMPANY] for which the [COMPANY] is

ultimately liable as they are not costs incurred in relation to

management. The consultant’s charge out rate is £300 plus VAT per

hour.” The research in the second case involved, according to [NAME],

“reviewing the notice of appeal, Respondent’s notice and some 339

pages of appeal bundle documents and emails, with [NAME] at

[NAME]. The attendance of [NAME] [NAME] at the appeal hearing was [COMPANY] to

3 hours + one hour travel time. The cost of reviewing the appeal

documents was [COMPANY] at 2.5 hours despite it having taken

considerably longer than that. No charges had been made for

reviewing both the application to amend the draft appeal decision

and a lengthy case cited by way of precedent by the Respondent’s legal

[NAME].”

49. The Respondent says that the Management Company fees should be

disallowed as being unreasonable and disproportionate because the

client and solicitor were “effectively the same person.” In essence the

Respondent submits that there is a degree of artificiality about the

arrangement as to [NAME] [NAME] representation of the Applicants

and associated costs because of [NAME] [RESPONDENT] several roles. Indeed the

Respondent goes further and argues that the invoices were shams

issued with no expectation of settlement. It says that an

examination of the published accounts for both the [NAME] shows that these sums have never been paid or appeared

in the relevant accounts.

50. In its response to the Tribunal’s request for further information [NAME]

stated that the [NAME] had not paid the invoice of 17 May 2018

(and presumably the earlier invoice) because “the [COMPANY]

owes the management company for the service charge shortfall so it

will be a contra entry by accountants.”

51. The Applicants further state that the client and solicitor are not in law

the same person but are completely different legal entities. They state

that [NAME] has completed the bulk of the legal work carried out

by [NAME] and the Management Company has its day-to-day work

outsourced to a [NAME] agent (HML, which has had no part to play

in these proceedings). They say that there is no attempted double

recovery of the costs incurred.

52. The reality is thus that the [COMPANY] and the

Management Company, which are both controlled by [NAME] [NAME],

engaged his own firm of solicitors, of which he is a partner, to represent

them in this matter. This is perfectly acceptable, as the Respondent

acknowledges. However, we are also told that quite separately the

[COMPANY] engaged the Management Company to

provide services to the [COMPANY] in connection with the claim

and proceedings in both the First-tier and Upper tribunal and in turn

the Management Company engaged its sole Director, [NAME] [NAME]

to provide those services. We were not provided with written evidence

15

of any of these contracts or any evidence that [NAME] [NAME] had been

paid by the Management Company for his services. The Applicants

have been perfectly frank in stating that this was the only way

that [NAME] [NAME] could be remunerated for his work, given that he is not

an employee of the Management Company. It is the legitimacy of this

arrangement that is challenged by the Respondent.

53. Whilst it is legitimate for a company to engage its sole director to

perform services for the company, it is not clear what consultancy

services were being provided in this case by [NAME] [NAME]. The

Management Company was set up to manage the services at the

property and to levy service charges to cover the costs of the same.

Indeed we are told that the day to day management of the development

was carried out by HML. [NAME] [NAME] is not an employee of the

Management Company. He is a Director. The fact is that had there not

been a claim or tribunal proceedings it is most probable that [NAME]

[NAME] would not have performed any services for either of the

[NAME].

54. The case for the Applicants before the Tribunal was based on legal

arguments and turned on the application of the relevant law to the

building as physically configured and defined in the relevant title

documentation and plans. The case before the Upper Tribunal was

based on whether the First-tier tribunal had erred in law. It seems

therefore that [NAME] [NAME] contribution was based on his legal

expertise and opinion. However, the Applicants were legally

represented by [NAME] and at the hearings by counsel. The Tribunal

therefore considers that there is indeed merit in the Respondent’s

argument that the costs incurred by the [NAME] were excessive

and a duplication and they are accordingly disallowed as being

unreasonably incurred.

RIGHT OF APPEAL

1.

A person wishing to appeal this decision to the Upper Tribunal ([NAME]) must seek permission to do so by making written application to the First-tier Tribunal at the [NAME], which has been dealing with the case.

2.

The application must arrive at the Tribunal within 28 days after the Tribunal sends to the person making the application written reasons for the decision.

3.

If the person wishing to appeal does not comply with the 28 day time limit, that person shall include with the application for

16 permission to appeal a request for an extension of time and the reason for not complying with the 28 day time limit; the Tribunal will then decide whether to extend time or not to allow the application for permission to appeal to proceed.

4.

The application for permission to appeal must identify the decision of the Tribunal to which it relates, state the grounds of appeal, and state the result the party making the application is seeking.

[NAME]