Tenant Allowed to Withdraw Service Charge Claim Without Attending Hearing

OUTCOME: Allowed

FIRST-TIER TRIBUNAL

PROPERTY CHAMBER

(RESIDENTIAL PROPERTY)

Case Reference

:

CHI/43UL/LSC/2022/0095

Property

:

4 [ADDRESS] [POSTCODE]

(“the property”)

Applicant: [redacted]

:

None

Respondent: [redacted]

:

Ms [COUNSEL], Counsel, instructed by

[COUNSEL] In-house legal Department, [RESPONDENT] of Application

: Determination of Service Charges (Section 27A of the Landlord and Tenant Act 1985)

Tribunal Members

:

Judge [NAME]

N Robinson FRICS Valuer

Date of Hearing

: [NAME] Member

20th February 2023

Date of Decision March 2023

DECISION AND REASONS

DECISION

The Tribunal determines:

a. The Applicant is permitted to withdraw the application dated 3rd August 2022 for determination of payability and reasonableness of service charges payable for repairs to the property for 2022 (“the application”) pursuant to his request made in writing by email of 17th February 2023 (10.05).

b. The Tribunal waives the requirements for the Applicant to give a written notice of withdrawal or attend the hearing to with draw the application orally (“the requirements”) to comply with rule 22 of the Tribunal Procedure (First-tier Tribunal)(Property Chamber) Rules 2013 (“the Rules”) pursuant to rule 8(2) of the Rules.

c. It is a condition of the waiver of the requirements that the Applicant is not permitted to apply to reinstate the application pursuant to rule 22(5) of the Rules.

d. The Tribunal makes an order under section 20C of the Landlord and Tenant Act 1985 that no part of the Respondents cost of or occasioned by this hearing are relevant cost for the purpose of calculating service charges payable by the Applicant.

e. No order is made for reimbursement of the hearing or application fees under rule 13 of the Rules.

f. The Respondent’s oral application made on 20th February 2023 for an order that the Applicant pays the Respondent’s legal costs of and associated with this application pursuant to rule 13(1)(b) of the Rules is dismissed.

REASONS

Background

1. The Tribunal was asked to determine service charges payable by the Applicant for Flat 4 at the property by an application dated 3rd August 2022. In particular, the Tribunal was asked to determine the payability and “relevance” of the cost of repairs to the building outlined in the Respondent’s “survey and subsequent estimates” amounting to £91,269.40 or £11,408.67 per flat. The Applicant’s case was amplified by a “Written Statement” at page 19 of the Bundle.

2. In these reasons references to pages numbers in [ ] are to a paginated and indexed Bundle containing 499 pages.

3. The property is a converted Edwardian Villa in suburb of Godalming comprising 8 flats, all subject to long residential Leases. Flat 4 is a one bedroom self – contained ground floor flat apparently the subject of occupation by someone other than the Applicant. The Applicant is the leaseholder of Flat 4 under a Lease dated 16th March 1988 made between [COMPANY] and [NAME] for a term of 99 years from 25 December 1987 (“the Lease”).

4. The proportions of service charges payable under the various Leases of the flat at the property were varied by a Tribunal Decision dated 2nd December 2014 [288-294].

5. It emerged during the hearing that the Applicant had made an earlier application to the Tribunal for determination of reasonableness and liability for service charges for the 2015 service charge year which was the subject of a Tribunal decision dated 7th December 2015 (CHI/43UL/LSC/2015/0048). That decision was not referred to in the Respondent’s Counsel’s skeleton argument dated 17th February 2023 which addressed the merits of the application (“the skeleton argument”), not the Respondent’s application for costs.

6. It is clear that the Respondent has been the landlord and freeholder of the property at all relevant times since 2014, if not earlier.

Procedure and non-attendance by the Applicant at the hearing

7. The Applicant did not attend the hearing listed for 10.00 am on 20th February 2023. On 17th February 2023 at 10.03 he sent an email, to the Tribunal copied to [RESPONDENT] of the Respondent’s legal department saying that he wished to “withdraw the case against” the Respondent. That email referred to an earlier email from [RESPONDENT] of the Respondent which had enclosed what was described as “a statement of costs on behalf of the Respondent”.

8. The Tribunal was shown a copy of an email from the Respondent’s [APPELLANT] sending the skeleton argument to the Applicant’s email address at 19.02 on 18th February 2023 (Saturday evening)

9. On 20th February 2023 at 08.03 the Applicant sent an email to the Tribunal forwarding the email from Mr [NAME] to him and saying “All written observations should have been included in the bundle” and complaining that if the skeleton argument was allowed he would not have an opportunity for response. The Applicant’s email also said “Please note that due to unforeseen commitments I am no longer able to attend the case”. No reason for the Applicant’s non- attendance was given.

10. The Applicant did not attend hearing at 10.00 am. The hearing did not start substantively until after 10.30 am. The Tribunal case worker called the Applicant’s telephone number at 10.33 but was unable to make contact with the Applicant or leave a message. No other messages were received from the Applicant during the entirety of the hearing. There was no request for an adjournment.

11. The Tribunal determined that it was in the interests of justice and consistent with the overriding objective:

a. To permit the Applicant to withdraw the application (this was not opposed by the Respondent);

b. To waive the requirement that the withdrawal comply with the formal requirements of rule 22(1) of the Rules;

c. To hear the Respondent’s application for costs under rule 13 of the Rules in the absence of the Applicant;

d. To determine any ancillary or consequential issues in the absence of the Applicant;

The Respondent’s application for costs under Rule13

12. This application was made orally by the Respondent’s Counsel on 20th February 2023. It did not appear to have been mentioned in previous correspondence with the Applicant shown to the Tribunal. The emails sent to the Applicant in mentioned above did not refer to the basis upon which an application for costs would be made, or the grounds for such an application,

13. As canvassed with the Respondent’s Counsel at the hearing, the Tribunal considers the application for Rule 13(1)(b) costs by reference to the structure and guidance in the Upper Tribunal decisions in [ADDRESS] Co (1985) [COMPANY] v Alexander [2016] UKUT 290 (LC).

14. “At the first stage the question is whether the person has acted unreasonably. At the second stage it is essential for the tribunal to consider whether, in light of the unreasonable conduct it has found, it ought to make an order for costs or not. If so, the third stage is what the terms of the order should be. At both the second and third stages the tribunal is exercising a judicial discretion in which it is required to have regard to all relevant circumstances. Whether the party whose conduct is criticised has had access to legal advice is relevant at the first stage of the enquiry, as the behaviour of an unrepresented party with no legal knowledge should be judged by the standards of a reasonable person who does not have legal advice; it may also be relevant, though to a lesser degree, at the second and third stages, without allowing it to become an excuse for unreasonable conduct. At the third stage, a causal connection with the costs sought is to be taken into account, but the power is not constrained by the need to establish causation.”

The Tribunal considers the issues in turn.

Was there unreasonable conduct by the Applicant for the purpose of Rule 13(1)(b)?

15. Ms [APPELLANT] laid emphasis upon definition of “unreasonable conduct” given at one part of the [ADDRESS] decision namely: Would a reasonable person in the position of the party have conducted themselves in the manner complained of? Or, is there a reasonable explanation for the conduct complained of?

16. Ms [APPELLANT] argued that the Applicant’s contentions in this application were bound to fail and had no foundation. To understand this, the Tribunal identified, as far as it could from the bundle the strands of the Applicant’s complaint before withdrawal. These appeared to be:

a. Major repairs works were carried out to the property in 2016;

b. Repairs had not been carried out subsequently as the lease required in breach of the landlord’s repairing covenants and the cost of repair had been increased by reason of the delay: see application form at [page 10];

c. The work should be divided up into works required immediately and those required in 12-24 months and those works required on period maintenance: see report of [NAME] – pages [22-30];

d. The necessary repair works could be carried out for much cheaper price such as that put forward by Crowzon Construction Services in their letter of 23rd May 2022 at [20-21] which provides Guide costs in the region of £50586.00 excluding VAT;

e. The majority of the proposed repair works are renovation not falling within the landlord’s repairing covenants in paragraph 4 of the Sixth Schedule to the Lease;

f. The Respondent’s managing agents [NAME] have not provided copies of photographs and site inspections carried out during the 5 years since 2016: se the statement at [19].

17. Ms [NAME] sought to argue that no reasonable person could have made those complaints as they were unfounded and/or not supported by the evidence. Her oral arguments mirrored those contained in the skeleton argument dated 17th February 2023.

18. In addition Ms [APPELLANT] sought to argue the Applicant’s case and his conduct was the same as it was when he sought to challenge the cost of external works to the property in the Decision of the Tribunal in 2015 CHI/43UL/LSC/2015/0048 arguing that the costs of works payable under the service charge should be reduced by reason of “historic neglect” on the part of the Respondent and freeholder/landlord in failing to carry out works timeously. She drew attention to the fact that the Applicant had failed to adduce any evidence in that decision that the cost of the works had increased by reason of the alleged neglect and he had failed to produce any evidence of that kind in this application.

19. Separately Ms [APPELLANT] sought to argue that the conduct of the Applicant in announcing his intention to withdraw at the last minute was unreasonable and could have taken place much earlier or at least a week earlier. She suggested that the lateness of the withdrawal meant that costs would be incurred by the landlord.

The Tribunal’s decision on unreasonable conduct for the purpose rule 13(1)(b) of the Rules

20. The Tribunal finds that the apparent weaknesses in the Applicant’s case carefully identified by Ms [APPELLANT] do not come within the meaning of unreasonable conduct for the purpose of Rule 13(1)(b). Assuming without deciding, that the Applicant’s allegation that the Respondent’s failure to carry out the repair works which are the subject of the 2022 charge is to be characterised a the same as an allegation of historic neglect made in the 2015 Tribunal decision, it is clear that that head of complaint was one of 6. In distinction from the 2015 decision, the Applicant had produced some evidence to support his case from [NAME] and from an [NAME] albeit that evidence did not support an allegation of increased costs by reason of delay.

21. On a separate issue there was some evidence to support the contention that maintenance should have been carried out in a “traffic light” approach. This places the Applicant’s case in a different category from the 2015 Tribunal decision.

22. Ms [APPELLANT] was unable to point to evidence that the Applicant as a person without the benefit of legal representation or advice should have realised or did realise at an earlier stage that the contentions raised by him were to use the phrase she used in the skeleton argument “misconceived” . It did not assist the Respondent’s case on this issue that the Applicant and his wife had requested a site meeting with the Respondent’s surveyor [RESPONDENT] to air their concerns, but had been told such a meeting would only take place if they agreed to pay the surveyors time charges at an hourly rate of £160 per hour plus VAT with no firm figure being offered to the Applicant: [redacted]

23. The Tribunal finds support for it’s approach from the passages in [ADDRESS] at paragraph 34 which suggest that an order for costs under Rule 13(1)(b) should be reserved for the clearest of cases. Whatever the Tribunal’s provisional views about the merits of the Applicant’s case put forward in the application, this is very far from the clearest of cases. The Respondent has not discharge the burden of showing that it was the clearest of cases.

24. If anything, the Respondent’s application for costs under Rule 13(1)(b) on the ground that the application was bound to fail comes very close to arguing that the original decision to issue the application or make the complaints was unreasonable – not just the bringing of the application or its conduct by analogy with the approach in Distinctive Care v HMRC [2019] Cost LR 999.

25. The Respondent has failed to discharge the burden of showing that withdrawal of itself or at the last minute was unreasonable conduct within Rule 13(1)(b). Ms [APPELLANT] contention that the Applicant knew or ought to have known that costs would be incurred if left to the last minute was unsubstantiated and not supported by the evidence. If anything, the lateness of service of the skeleton argument, and of the Respondent’s Statement of costs all suggest to the Tribunal that Counsel was instructed and the statement of cost was prepared the very last minute. (Ms [NAME] was unable to proffer any explanation for the lateness of service of these documents or the fact that the Statement bore an incorrect date suggesting it was prepared in 2022, rather than 2023.

26. The Tribunal bears in mind the comments made in paragraphs 35-36 of the [ADDRESS] decision to the effect that withdrawals should not be discouraged by concern about orders for costs even where they amount to abandoning a case. The Applicant’s decision to withdraw saved the Tribunal considerable time and costs. The Respondent would also have benefited to some extent from that saving had it decided not to be represented by Counsel at the hearing and pursue an application for costs under Rule 13.

Discretion

27. The Tribunal assumes at this stage of its reasons that contrary to its earlier conclusion some or all of the Applicant’s conduct in bring or conducting the application was unreasonable, as the Respondent alleges. It is not necessary to show a causal nexus between the conduct complained of and the costs incurred.

28. The Tribunal has no hesitation in finding that it would exercise its discretion not to make an order under Rule 13 (1)(b) in a case of this kind. The Applicant appears to be a builder according to the 2015 decision. There is no evidence that he was aware (a) legal costs would be incurred for which he might become liable (b) that the Respondent had drawn this to his attention. On the other hand as discussed during the costs hearing, the Respondent is a company which is part of a much larger group which has an “in house” legal department with at least one solicitor (who signed the statement of costs) and two legal executives. It has access to considerable legal expertise and resources.

29. Against that background it is of very considerable concern to the Tribunal:

(a) The 2015 Tribunal decision relied upon by Ms [NAME] was not included with in the hearing bundle or served upon the Applicant in advance of the hearing;

(b) The Applicant does not appear to have been notified that an application for costs would be made against him under Rule 13(1)(b) or provided with an explanation of what that might mean;

(c) the statement of costs was apparently serve without any explanation the Friday before a hearing of this kind (less than 48 hours that would be required in the county court or the High Court).

(d) The statement of costs referred to a hearing due to take place on 27th January 2023 on the first page and bearing the date 14th February 2022. The clerical errors referred to are minor but the amount sought by way of cost in the sum of £6507.10 are comparatively high.

(e) a fair hearing of the Rule 13 costs application would have required an adjournment so that the Applicant could take advice and provide his comment; this would have been disproportionate;

What order for costs would the Tribunal make under Rule 13(1)(b)?

30. If the Tribunal had decided to make an order for costs, it would have scrutinised the Respondent’s statement of costs very carefully having regard to the principles upon which it should exercise its discretion and proportionality by comparison for example with the amounts awarded in comparable County Court cases, such as those on the Fast track or small claims track.

31. The Respondent engaged professional managing agents [NAME] who prepared a witness statement for Mr [NAME] the director. Mr [NAME] engaged with the Tribunal and clearly was an intelligent and articulate person. It was not explained why the input of a Grade C fee earner at £177.00 per hour plus VAT was needed to compile that statement in addition to the £500.00 plus VAT charged for telephone calls at £200 per hour.

32. Even if that input was required, the Tribunal was unpersuaded that this was the kind of case which if it justified the instruction of an advocate, required the expenditure of the brief fee and the cost of briefing of an advocate of the seniority of Ms [COUNSEL].

33. If, an advocate of the seniority of Ms [COUNSEL] was thought to be necessary, the Tribunal would have expected that to have been made clear to the Applicant in advance.

34. As it was, it became clear by early morning on 17th February 2023 that the hearing might not go ahead. The Tribunal would have expected the Respondent to attempt to mitigate any liability it might have for Counsel’s fees. None was shown to the Tribunal.

35. On one analysis if the late withdrawal was unreasonable conduct much of the fees claimed would not have been associated with that unreasonable conduct as many of the legal costs were incurred much earlier – such as the preparation of the bundle- whether or not the costs were caused by the conduct complained of.

36. Had it been minded to make an order for costs under Rule 13, the Tribunal would have taken a lot of persuasion that it should exceed the figure of £500 plus VAT. That would have been a proportionate figure to reflect unreasonable conduct for the amount at stake to the Applicant in a case of this kind.

The Applicant’s request for an order under section 20C of the 1985 Act

37. The Respondent was faced with the difficulty that no warning or communication about the Respondent’s desire to charge its costs associated with this application to service charge. The contrast with the 2015 decision where the Respondent was represented by its then managing agents [NAME] is stark. There is no evidence that the Applicant would have been expecting legal costs to be charged to service charges from his experience on the earlier occasion, let alone legal costs of the order claimed.

38. It is the Tribunal’s view that it is both just and equitable to make an order pursuant to section 20C of the Landlord and Tenant Act 1985. Having considered the conduct of the parties, their written submissions and taking into account the determination set out in the decision above, the Tribunal determines that it is just and equitable in the circumstances that such an order be made. As such these costs may not be included as a service charge expense – even if which the Tribunal does not decide, the Respondent may have been contractually entitled to claim such costs.

39. The Tribunal take into account the guidance made by HHJ Rich in Tenants of [ADDRESS] v [COMPANY] (LRX/37/2000) in that it was decided that the decision to be taken was to be just and equitable in all the circumstances. The s.20C decision in this dispute gave the tribunal an opportunity to ensure fair treatment as between landlord and tenant in circumstances where costs have been incurred by the landlord which the Tribunal has decided not to award under rule 13 of the Rules.

40. As was clarified in The Church Commissioners v [NAME]/29/2011 the tribunal takes a robust, broad-brush approach based upon the material before it. The tribunal takes into account all the circumstances including the complexity of the matters in issue, the evidence presented an the fact that no attempt at mediation or other alternative dispute resolution appears to have been suggested or attempted by the Respondent. The Respondent’s legal department would have been well aware of the importance attached to such remedies.

41. The Tribunal is far from satisfied that the legal costs incurred even if they would otherwise be chargeable as service charge under the Lease, were proportionate or appropriate to resolve the issues which it ash ben aske to determine.

Reimbursement of application and hearing fee

42. The Tribunal considers it just and equitable that the Applicant bears these fees and makes no order for reimbursement given his conduct and the failure of his complaints.

[NAME]

Tribunal Judge

21st March 2023