Tenant's Cost Claim Rejected in Lease Extension Dispute

OUTCOME: Dismissed

Case Ref: LON/00AF/OLR/2020/1207 IN THE FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) ( Judge Shepherd and Marina Krisko FRICS)

AND Claim No.: J00CR098 IN THE COUNTY COURT AT CROYDON BOTH SITTING AT ALFRED PLACE, [POSTCODE]

[ADDRESS], [POSTCODE] (the “Property”)

B E T W E E N:

[NAME]

Claimant/Applicant

- and -

[NAME]

Defendant/Respondent

DECISION on costs

1. Further to the Tribunal’s decision dated 18th July 2024 the [APPELLANT] has applied for his costs pursuant to Rule 13 of the Tribunal Procedure (Property Tribunal) (Property Chamber)Rules 2013.

2. The Claimant issued a claim for a lease extension under Chapter II of the Leasehold Reform, Housing, and Urban Development Act ( 1993). The Respondent contested the claim on the basis of ground rent and service charge arrears.

3. The matter was commenced in the County Court and was transferred to the First-tier Tribunal to determine all matters in the case. The first hearing took place on 25 October 2023. Some days after that hearing the Respondent disclosed for the first time an Order of the County Court dated 7 March 2023 dismissing the Applicant’s claim.

4. The Tribunal directed that the Applicant needed to apply for that Order to be set aside before it could make a determination on the application for the lease extension. The Respondent opposed that application.

5. At a hearing on 30 January 2024, the County Court upheld the Applicant’s application and the Order dated 7 March 2023 was set aside.

6. The Tribunal then listed a further hearing on 29 May 2024. The Respondent made a late oral application to forfeit the Applicant’s lease on the grounds of the alleged arrears and for further alleged breaches of covenant that were the subject of a section 146 notice dated 5 December 2023 and which had not been at issue in the previous hearings.

7. The Decision dated 18 July 2024 dismissed the oral application and made an Order that the Respondent grant the new lease on the terms agreed in the Engrossment.

8. The Applicant alleges that the Respondent behaved unreasonably by failing to comply with directions and submitting late evidence. They also criticise the fact that the Respondent failed to accept a settlement offer prior to the final hearing. The Applicant claims the following costs:

Solicitors’ fees £17,000 plus VAT Counsel’s fees £6,000 plus VAT FTT hearing fee £200 Court fees £532.

The law

9. The relevant parts of Rule 13 state the following:

Orders for costs, reimbursement of fees and interest on costs

13.—(1) The Tribunal may make an order in respect of costs only— (a) under section 29(4) of the 2007 Act (wasted costs) and the costs incurred in applying for such costs; (b) if a person has acted unreasonably in bringing, defending or conducting proceedings in—

(i) an agricultural land and drainage case, (ii) a residential property case, or (iii) a leasehold case; (iv) a tenant fees case; (c) in a land registration case, or (d) in proceedings under Schedule 3A to the Communications Act 2003 (the Electronic Communications Code)— (i) under Part 4A (code rights in respect of land connected to leased premises: unresponsive occupiers); or (ii) that have been transferred from the Upper Tribunal. ….. (3) The Tribunal may make an order under this rule on an application or on its own initiative. (4) A person making an application for an order for costs— (a) must, unless the application is made orally at a hearing, send or deliver an application to the Tribunal and to the person against whom the order is sought to be made; and (b) may send or deliver together with the application a schedule of the costs claimed in sufficient detail to allow summary assessment of such costs by the Tribunal. 11 (5) An application for an order for costs may be made at any time during the proceedings but must be made within 28 days after the date on which the Tribunal sends— (a) a decision notice recording the decision which finally disposes of all issues in the proceedings; or (b) notice of consent to a withdrawal under rule 22 (withdrawal) which ends the proceedings. (6) The Tribunal may not make an order for costs against a person (the “paying person”) without first giving that person an opportunity to make representations. (7) The amount of costs to be paid under an order under this rule may be determined by— (a) summary assessment by the Tribunal; (b) agreement of a specified sum by the paying person and the person entitled to receive the costs (the “receiving person”); (c) detailed assessment of the whole or a specified part of the costs (including the costs of the assessment) incurred by the receiving person by the Tribunal or, if it so directs, on an application to a county court; and such assessment is to be on the standard basis or, if specified in the costs order, on the indemnity basis. (8) The Civil Procedure Rules 1998(a), section 74 (interest on judgment debts, etc) of the County Courts Act 1984(b) and the County Court (Interest on Judgment Debts) Order 1991 shall apply, with necessary modifications, to a detailed assessment carried out under paragraph (7)(c) as if the proceedings in the Tribunal had been proceedings in a court to which the Civil Procedure Rules 1998 apply. (9) The Tribunal may order an amount to be paid on account before the costs or expenses are assessed.

10. I have emphasised the words wasted costs because that is what we are dealing with here. The Tribunal is primarily a no costs tribunal. Unlike the County Court costs do not follow the event. A victorious Applicant or Respondent cannot argue that their opponent was unreasonable simply by maintaining a claim or defence which was ultimately unsuccessful. Something more is required.

11. The criteria for Reg 13 costs were set out in the well known case of [ADDRESS] Co (1985) [COMPANY] v [NAME] v 231 [COMPANY] v [ADDRESS], [COMPANY] [2016]UKUT 290 (LC)

12. In that case the Upper Tribunal held that an assessment of whether behaviour was unreasonable required 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. There was no reason to depart from the guidance on the meaning of "unreasonable" in Ridehalgh v Horsefield [1994] Ch. 205, [1994] 1 WLUK 563, Horsefield applied. Unreasonable conduct included conduct that was vexatious and designed to harass the other side rather than advance the resolution of the case. It was not enough that the conduct led to an unsuccessful outcome. The test could be expressed in different ways by asking whether a reasonable person in the position of the party would have conducted themselves in the manner complained of, or whether there was a reasonable explanation for conduct complained of.

13. The Upper Tribunal stated further that Tribunals ought not to be over-zealous in detecting unreasonable conduct after the event and should not lose sight of their own powers and responsibilities in the preparatory stages of proceedings (see paras 24, 26 of judgment).

14. The first stage of the analysis was an objective decision about whether a person had acted unreasonably. If so, a discretionary power was engaged and the tribunal had to consider whether it ought to make a costs order. If so, the third stage was the terms of the order.

15. There was no general rule in the tribunal that the unsuccessful party would be ordered to pay the successful party's costs. Unlike wasted costs, no causal connection between the conduct and the costs incurred was required, [NAME] v [COMPANY] ([NAME]) [2004] EWCA Civ 569, [2004] 3 All E.R. 266, [2004] 5 WLUK 273 applied.

16. Rule 13(1)(a) and (b) should be reserved for the clearest cases and it was for the party claiming costs to satisfy the burden of demonstrating that the other party's conduct had been unreasonable.

17. An application should be determined summarily, preferably without the need for a further hearing, and after the parties had had the opportunity to make submissions.

Determination

18. I do not consider that the conduct of the Respondent was unreasonable in the sense described in [ADDRESS]. The application was challenged both in the Tribunal and in the County Court. This was the Respondent’s prerogative. There was on occasions a failure to comply with directions but these rarely sound in costs in the Tribunal. The oral application was ill founded but again it was the Respondent’s prerogative to raise it. The failure to accept the settlement offer was ill advised but not unreasonable. It is not unusual for a landlord to fight a lease extension tooth and nail. That was the position here. The application for costs is dismissed.

Judge Shepherd

18th October 2024

ANNEX - RIGHTS OF APPEAL Appealing against the tribunal’s decisions

1. A written application for permission must be made to the First-tier Tribunal at the Regional tribunal office which has been dealing with the case.

2. The application for permission to appeal must arrive at the Regional tribunal office within 28 days after the date this decision is sent to the parties.

3. If the application is not made within the 28-day time limit, such application must include a request for an extension of time and the reason for not complying with the 28- day time limit; the Tribunal will then look at such reason(s) and decide whether to allow the application for permission to appeal to proceed despite not being within the time limit.

4. The application for permission to appeal must state the grounds of appeal, and state the result the party making the application is seeking. All applications for permission to appeal will be considered on the papers 5. Any application to stay the effect of the decision must be made at the same time as the application for permission to appeal.