Tenant Awarded Costs After Landlord's Unreasonable Conduct Found

OUTCOME: Allowed in Part

FIRST-TIER TRIBUNAL [NAME] (RESIDENTIAL PROPERTY) Case reference : LON/00BK/LSC/2024/0178 Property : Flat 225 [NAME], 11 Harrowby Stret London [POSTCODE] Applicant : [redacted] : Ms [COUNSEL] (Counsel) Respondent : [redacted]

Mr [COUNSEL] (Counsel) Type of [NAME] : [NAME] for costs pursuant to Rule 13(2) of the Tribunal Procedure Rules 2013 Tribunal members : Tribunal Judge Niamh O’[NAME] Tribunal Member [NAME] : 10 [ADDRESS] [POSTCODE] Date of Hearing : 20 May 2025 Date of Decision : 16 June 2025

DECISION Corrected on 31 July 2025 pursuant to Rule 50 of the Tribunal Procedure (First-tier Tribunal) Rules 2013

Decisions of the Tribunal

(1) The Respondent’s [NAME] for costs pursuant to Rule 13(1)b of the First-tier Tribunal ([NAME]) Rules 2013 is allowed in part as set out below.

(2) The Applicant must pay Respondent’s reasonable costs of and occasioned by the hearing of 20 May 2025 assessed in the sum of £4,200 to be paid by 7 August 2025

The Background 1. The Applicant is a right to manage company which acquired the right to manage the building known as [NAME], 11 [ADDRESS] [POSTCODE] in April 2022. The Respondent is the leasehold owner of Flat 225. The building, which consists of 120 flats and common areas in a purpose-built block in Central London, was owned by [COMPANY] and was managed by Kinleigh Folkard & Hayward (KFH) from 2014 onwards. On 7 September 2020 [COMPANY] sold its freehold interest to [COMPANY] who retained the services of KFH as [NAME] agent. On 22 April 2022 the Applicant acquired the right to manage and appointed new [NAME] agents, Canonbury Management, to manage the building on its behalf.

2. On 1 August 2022 the [NAME], Canonbury Management, sent a demand for payment to the Respondent in the sum of £34,976.67. Of this £30,284.54 were arrears said to have fallen due prior to the transfer of management functions to Canonbury and the remaining £4692.15 was the service charge for the period 1 July 2022 to 31 December 2022 and administration charges. The Procedural History 3. On 20 November 2022 the Applicant issued a claim in the county court for the above sums. The Respondent filed a defence stating that he did not know what the sums claimed in respect of the period prior to the acquisition of the right to manage related to, and was concerned that the sums demanded in respect of the period after the right to manage had been acquired had increased substantially. He requested a breakdown of the sums said to have accrued prior to the acquisition of the right to manage.

4. There was considerable delay in the county court proceedings. On 18 March 2024 the proceedings were transferred to the First-tier Tribunal for a determination as to the reasonableness of the service charges. Directions were issued by Judge Martyński on 8 May 2024 which were in standard form, and which set the matter down for a 1-day hearing on 13th September 2024. Judge Martyński directed that the tribunal would only consider the question of payability of the service charges demanded.

5. On 9th September 2024 the Applicant discontinued the county court proceedings and applied to withdraw the proceedings in the First-tier Tribunal. On 4 October 2024 the Respondent filed and [NAME] both for wasted costs against the Applicant’s representatives and for costs pursuant to Rule 13(1)b of

the Tribunal Procedure (First-tier Tribunal)([NAME]) Rules 2013. At the time of the costs [NAME] the total legal costs sought were £9683.40. The costs now sought by the Respondent in respect of the tribunal proceedings as per the schedule dated 9 May 2025 come to £28,609.80.

6. Judge Martyński’s directions required the Applicant to send the Respondent a breakdown of all charges demanded, service charge accounts for the years in question and all demands for payment by 31 May 2024. The Respondent was to file his statement of case in response by 28 June 2024. The Applicant attempted to comply with this direction, albeit late, by sending documents by email to the Respondent on 12 June 2024. The Respondent received the email but was unable to open the documents. He informed the tribunal of this on 20 June 2024 but did not inform the Applicant for a further 4 weeks. The documents were emailed to him again on 29 July 2024 and at that point he instructed solicitors to assist him.

7. On 31 July 2024 the Respondent’s legal representatives sought an extension of time for the Respondent to file his statement of case and his evidence to 23 August. The Applicant objected but suggested that the Respondent’s statement of case should be provided by 16 August to preserve the hearing date. A legal officer of the tribunal amended the directions which now required the Respondent to supply his evidence and statement of case by 16 August, with the Applicant to serve its witness statements by 30 August.

8. The Respondent filed his statement of case and schedule of disputed charges on 16 August 2024. On 27 August 2024 the Applicant applied to postpone the hearing to allow it more time to consider documents sent to it by the previous [NAME] agents in respect of the years 2010 to 2018. The Applicant did not comply with the amended deadline for filing its evidence in response. The [NAME] to adjourn was opposed by the Respondent and was refused by Judge Vance on 6 September 2024 on the basis that the newly discovered documents were not relevant to any question that the tribunal had to determine. He also raised concerns about the Applicant’s standing to pursue the sums said to be owed to the freeholder prior to the acquisition of the right to buy, there being no evidence that the right to pursue those arrears had been assigned to the Applicant by the current or previous freeholder. In the absence of such evidence the tribunal would be limited to determining the service charges which fell due after April 2022. Judge Vance also noted that the Applicant had failed to serve its witness statements by 30 August 2024 as required by the amended directions, and had failed to file a bundle and required the same to be filed on 9th September 2024.

The [NAME] 9. On 9 September 2024 the Applicant filed notice of discontinuance in respect of the county court claim and requested the tribunal’s permission to withdraw the proceedings before the tribunal. The reason given for the withdrawal [NAME] were the issues identified by Judge Vance set out above. The Respondent then applied for both a Rule 13(1)b costs order and a wasted costs

order against the solicitors who had represented the [COMPANY] up to the point of discontinuance.

10. On 14th October 2024 Judge Dutton gave directions for the determination of the Respondent’s costs applications which was to be the subject of a summary assessment without a hearing. The Applicant was required to respond to the [NAME] by 6 December 2024, with any reply by the Respondent to be sent by 17 January 2025. The Applicant did not comply and on 10 January 2025 the tribunal received an email from the [NAME] stating that their previous solicitors were no longer instructed and seeking a further 28 days to file its evidence in response to the costs [NAME]. That [NAME] was opposed by the Respondent and refused by Judge Korn on 22 January 2025.

11. On 24 January 2025 the [NAME] emailed the tribunal to say that the costs [NAME] had been settled. This prompted the tribunal to send out notice of intention to strike out the [NAME] on the grounds of lack of jurisdiction; if the [NAME] had been the subject of a settlement the tribunal would have had no jurisdiction to determine it. This was followed by an email from the [NAME] to the Tribunal on 19 February denying that any settlement had been reached. The matter was considered by Mr [NAME] on 18th March 2025 who noted the confusion as to whether the matter had settled and noted that settlement had not in fact been reached and further noted the failure of the Applicant to comply with any of the directions. He did not strike out the proceedings and instead directed that the matter be listed for a hearing. The [NAME] wrote again to the tribunal on 27 March 2025 indicating again that the matter had essentially been settled. On 21 March 2025 the Respondent again wrote to the tribunal denying that any settlement had been reached.

12. The tribunal listed the costs [NAME] for a hearing on 20 May 2025. On 15 May 2025, two working days before the hearing, the Applicant applied for permission to rely on the witness evidence of a director of the [COMPANY] [NAME], and on a statement of case opposing the Respondent’s costs [NAME]. The Applicant disclosed written advice from counsel dated 12 August 2024 which identified the same issues as Judge Vance namely the lack of evidence that the Applicant had any standing to pursue the bulk of the arears claimed. It also appears from this written advice that the Applicant had little or no evidence to support its claim in respect of historic arrears alleged to have accrued prior to the acquisition of the right to manage in 2022. The Hearing 13. The Respondent was represented by Counsel Ms [COUNSEL] and the Applicant was represented by Counsel Mr [COUNSEL] and we are grateful to both counsel for their helpful submissions. Ms [COUNSEL] did not object to the admission of Mr [APPELLANT] statement but did object to the admission of the Applicant’s statement of case on the grounds that it was 161 days late and on the grounds that the Applicant had been deprived of the opportunity to file a reply. She confirmed that the [NAME] for wasted costs against the Applicants’ former solicitors was not being pursued.

14. We noted the Applicant’s casual approach to compliance with the directions of the tribunal and did not accept that the fact that the Applicant was until recently acting without professional legal advice was a good reason for the very late service of the Statement of Case. However we noted that the Applicant was not debarred from taking part in the proceedings and that the contents of the Statement of Case essentially consisted of legal argument, which Ms [NAME] had responded to in her skeleton argument. For those reasons we permitted the Applicant to rely on its statement of case. Rule 13(1)b: The law and relevant authorities.

15. The tribunal may make an order under Rule 13(1)b of the 2013 Rules if it is satisfied that a party has acted unreasonably in bringing defending or conducting proceedings.

16. [ADDRESS] Co v Alexander [2016] UKUT 290(LC) the Upper Tribunal declined to adopt a wider interpretation of ‘unreasonable conduct’ to encompass, by way of example the conduct of a party who fails to prepare adequately for a hearing, fails to adduce proper evidence in support of their case, fails to state their case clearly or seeks a wholly unrealistic or unachievable outcome and went on to observe at para 24;

‘An assessment of whether behaviour is unreasonable requires a value judgment on which views might differ but the standard of behaviour expected of parties in tribunal proceedings ought not to be set at an unrealistic level. We see no reason to depart from the guidance given in [NAME] at 232E, despite the slightly different context. “Unreasonable” conduct includes conduct which is vexatious and designed to harass the other side rather than advance the resolution of the case. It is not enough that the conduct leads in the event to an unsuccessful outcome. The test may be expressed in different ways. Would a reasonable person in the position of the party have conducted themselves in the manner complained of? Or Sir [NAME] “acid test”: is there a reasonable explanation for the conduct complained of?’

17. In [NAME] v GP Ilfracombe Management Company Ltd [2024] EWCA Civ. 1241 the Court of Appeal defined the that the test as follows at paragraph 15;

“A good practical rule for the tribunal to consider is; would a reasonable person acting reasonably have acted in this way?”

18. At paragraph 28 of [ADDRESS] the Upper Tribunal set out the three-stage approach which the tribunal should adopt when considering whether to make an award of costs under Rule 13(1)b;

“At the first stage the question is whether a person has acted unreasonably. A decision that the conduct of a party has been

unreasonable does not involve an exercise of discretion but rather the [NAME] of an objective standard of conduct to the facts of the case. If there is no reasonable explanation for the conduct complained of, the behaviour will properly be adjudged to be unreasonable, and the threshold for the [NAME] of an order will have been crossed. A discretionary power is then engaged and the decision maker moves to a second stage of the inquiry. At that second stage it is essential for the tribunal to consider whether, in the light of the unreasonable conduct it has found to have been demonstrated, it ought to make an order for costs or not; it is only if it decides that it should make an order that a third stage is reached when the question is what the terms of that order should be’.

19. At paragraph 35 of [COUNSEL] [NAME] observed in respect of an allegation of unreasonable behaviour in the context of the withdrawal of a claim;

‘In one of the appeals with which we are now concerned ([NAME]), costs were awarded under rule 13(1)(b) on the grounds that the applicant had delayed in withdrawing proceedings until after a time when it should have been clear to him that he had achieved as much by concession from the management company as he could realistically expect to obtain from the FTT by proceeding to a hearing. It is important that parties in tribunal proceedings, especially unrepresented parties, should be assisted to make sensible concessions and to abandon less important points of contention or even, where appropriate, their entire claim. Such behaviour should be encouraged, not discouraged by the fear that it will be treated as an admission that the abandoned issues were unsustainable and ought never to have been raised, and as a justification for a claim for costs’.

20. Finally at paragraph 43 he gave the following guidance on the approach which the tribunal should take when considering such applications;

“We conclude this section of our decision by emphasising that such applications should not be regarded as routine, should not be abused to discourage access to the tribunal, and should not be allowed to become major disputes in their own right. They should be determined summarily, preferably without the need for a further hearing, and after the parties have had the opportunity to make submissions. We consider that submissions are likely to be better framed in the light of the tribunal's decision, rather than in anticipation of it, and applications made at interim stages or before the decision is available should not be encouraged. The applicant for an order should be required to identify clearly and specifically the conduct relied on as unreasonable, and if the tribunal considers that there is a case to answer (but not otherwise) the respondent should be given the opportunity to respond to the criticisms made and to offer any explanation or mitigation. A decision to dismiss such an [NAME] can be explained briefly. A decision to award costs need not be lengthy and the underlying dispute can be taken as read. The

decision should identify the conduct which the tribunal has found to be unreasonable, list the factors which have been taken into account in deciding that it is appropriate to make an order, and record the factors taken into account in deciding the form of the order and the sum to be paid.

The Parties’ Submissions

21. The Respondent in its costs [NAME] submits that the following amounted to unreasonable conduct on the applicant’s part;

(a) Refusing to grant the Respondent an extension of time to file his statement of case; (b) Applying in the weeks before the substantive hearing to submit additional documents; (c) Missing its own suggested deadline to file its statement of case in the substantive proceedings; (d) Withdrawing its claim 5 days before the substantive hearing; and (e) Bringing proceedings with insufficient evidence to prove its case.

22. Mr [NAME] submitted that none of the above amounted to unreasonable conduct but that if it were unreasonable conduct the tribunal should not exercise its discretion in this case because the Applicant is a [COMPANY] run by [NAME] with no assets of its own, and its potential insolvency might cause issues for the management of the building. He further submitted that the majority of the issues raised by the Respondent in his statement of case in the substantive proceedings were not relevant to the issue of payability which was the sole issue to be determined as identified by Judge Martyński in the initial directions. [NAME] submitted that we should not make any order in respect of costs incurred by the Respondent after the [NAME] for costs was first made. He submits that those costs were not incurred as a result of any unreasonable conduct on the part of the Applicant.

23. Ms [APPELLANT] argued that to require there to be a direct casual nexus between the costs sought and the behaviour complained of would risk depriving the successful costs applicant of the benefit of the order for costs. Further she submitted that the conduct of the Applicant following the issue of the costs [NAME] was in any event unreasonable.

Determination 24. We do not consider that the multiple breaches of directions prior the withdrawal of the proceedings amounted to unreasonable conduct, nor do we consider it unreasonable for the Applicant to have objected to the Respondent’s request for an extension of time to file his statement of case. We do not consider that the failure of the Applicant to appreciate that it was not entitled to recover arrears owed to the previous freehold owners in the absence of a deed of assignment amounted to unreasonable conduct; neither party seemed to have appreciated that this was the case despite the fact that they were both legally represented.

However we consider that the behaviour of the Applicant was unreasonable in one respect; it seems that the Applicant had little or no information regarding the historic arrears said to have accrued prior to the acquisition of the right to manage when it issued proceedings in the county court. In the course of the hearing we were given a copy of the Respondent’s defence in which he expressly stated that he did not know what the alleged arrears related to and that he had not had any explanation from the Applicant despite repeated requests for that information.

25. It seems from the disclosed written advice that the Applicant did not have documentary evidence to support its claim for historic service charge arrears and issued the county court proceedings solely on the basis of what the previous [NAME] agents had stated were arrears owed as at the acquisition of the right to manage. In his witness statement Mr [NAME] lays the blame for this at the door of Mr [NAME], an employee of Canonbury Management. However the same Mr [NAME] was a director of a company which was itself one of 5 directors of the [COMPANY] until 1 July 2024. Consequently it is not possible to separate the conduct of Mr [APPELLANT] from that of the Applicant. Furthermore Mr [APPELLANT] apparently informed the other 5 directors of the absence of evidence to support the claim by email dated 12 June 2024. Mr [NAME] in his statement says that the other 5 directors were ‘shocked’ to discover that the case had progressed so far with so little available information. He then says he was informed on 14th June 2024 of the inability of the Applicant recover arrears owed to the freeholders prior to the acquisition of the right to manage in the absence of a deed of assignment.

26. In [NAME] v [COMPANY] above) Lord Justice Coulston observed at para 38;

“A service charge can only be the subject of a bona fide dispute when the charge is rendered with adequate supporting explanation and information, and a reasonable period is allowed for the lessees to consider that material. If a landlord or [NAME] agent suspects that a service charge is going to be disputed, he should provide sufficient information to enable the lessees to understand the services to which the charges relate and the justification for and basis of the amounts demanded. It is an abuse of the process to commence proceedings like this, without any justification or supporting material, and hope, like Mr [NAME], that some benefit may eventually turn up. Such an approach may lead – and in this case did lead – to proceedings which the FtT themselves described as “a pointless exercise”.

27. As regards the costs of pursuing the costs [NAME] itself, as the Upper Tribunal made clear at paragraph 40 of [ADDRESS], there is no need for there to be a direct casual connection between the conduct complained of and the costs sought. Further in our view the Applicant via its then representative behaved unreasonably when they wrote to the tribunal indicating that the matter had settled when it had not. The confusion caused by this communication led the tribunal to issue a ‘minded to strike’ notice and ultimately led to the matter being listed for an oral hearing rather than being determined on the papers as originally

envisaged. No explanation, reasonable or otherwise, has been given as to why the [NAME] did this or why the previous agent commenced proceedings in the County Court without adequate material to support the claim.

28. However as regards the exercise of our discretion we consider that it is relevant that much of the time spent on this case, up to the date the costs [NAME] was sent to the tribunal, related to the Rule 13 costs [NAME] itself and the preparation of the Respondent’s statement of case and witness statement in the substantive proceedings. The Statement of Case and witness statements prepared by the Respondent for the substantive proceedings did not focus on the issue identified by Judge Martyński in the initial directions and largely related to the reasonableness of costs incurred in 2023. They did not consider the issue of payability, nor did they identify the issue of the Applicant’s legal right to pursue the historic arrears. We also consider that the Respondent did not act reasonably when he delayed informing the Applicant that he was unable to read the documents disclosed by email for 4 weeks after they had been sent.

29. We further note that the costs sought by the Respondent have increased from £9,683 in October 2024 to £28,609. We bear in mind the warning of the Upper Tribunal in [ADDRESS] that Rule 13(1)b costs applications should not become major disputes in their own right and should not normally require a hearing. We consider that the approach of the Respondent to this [NAME] has been disproportionate. In the circumstances we consider that it would be just to require the Applicant to pay the Respondent’s reasonable costs of the hearing on 20 May 2025 only. The only reason that the tribunal listed a face-to-face hearing was due to the confusion caused by the Applicant’s erroneous representation that the matter had settled. Had the Applicant not done so the matter would have been decided on the papers without a hearing.

30. As regards quantification of those costs we consider that the sums claimed in respect of counsel’s fee of £4,500 plus VAT and the additional work to prepare for the hearing to be disproportionate. We allow the total sum of £2,500 for counsel’s fees and an addition £1,000 plus VAT for briefing counsel and preparing the hearing bundle.

Name : Judge O’[NAME] 16 June 2025

Rights of appeal By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) ([NAME]) 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 [NAME] for permission must be made to the First-tier Tribunal at the regional office which has been dealing with the case. The [NAME] for permission to appeal must arrive at the regional office within 28 days after the tribunal sends written reasons for the decision to the [NAME]. If the [NAME] is not made within the 28-day time limit, such [NAME] 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 [NAME] for permission to appeal to proceed, despite not being within the time limit. The [NAME] for permission to appeal must identify the decision of the tribunal to which it relates (i.e. give the date, the property and the case number), state the grounds of appeal and state the result the party [NAME] the [NAME] is seeking. If the tribunal refuses to grant permission to appeal, a further [NAME] for permission may be made to the Upper Tribunal (Lands Chamber).