Tenants Ordered to Pay £70,000 in Costs for Unreasonable Conduct

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00AG/LSC/2023/0432 LON/00AG/LAM/2023/0013 LON/00AG/LDC/2024/0067 Property : 9A [ADDRESS] [POSTCODE] Applicant : [redacted] [COUNSEL] (2) Representative : In person Respondent : [redacted] : [COUNSEL] [NAME] of counsel, instructed by [COUNSEL], solicitor, and [COUNSEL], paralegal, of [COMPANY] of application : Determination of service charges; dispensation from consultation; appointment of a manager and application for an order under section 20C Landlord and Tenant Act 1985 Tribunal member(s) : Judge Adrian Jack and Tribunal Member [NAME] of hearing : 10 [ADDRESS] [POSTCODE] over 3rd and 4th October 2024 Date of decision : 25th November 2024 Corrected under the slip rule 5th December 2024

COSTS DECISION

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1. Pursuant to the directions given in our substantive decision of 10th October 2024 the landlord has applied for costs. The tenants have made submissions in answer and asked for an order under section 20C of the Landlord and Tenant Act 1985. The landlord did not make submissions in reply. Section 20C 2. The tenants’ section 20C application can be dealt with speedily. The tenants lost comprehensively. There is in our judgment no sufficient ground on which the Tribunal could properly prevent the legal costs of these proceedings being put through the service charge account. The Tribunal will not lightly interfere with the contractual rights of parties to a lease. We refuse the application. The main costs application 3. This Tribunal is, save in relation to the fees payable to it, in principle a “no costs” jurisdiction. Subject to an irrelevant exception, under rule 13(1)(b) of The Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 “the Tribunal may make an order in respect of costs only… if a person has acted unreasonably in bringing, defending or conducting proceedings” 4. The Lands Chamber of the Upper Tribunal has given guidance on the approach which this Tribunal should take on an application for such costs. [ADDRESS] Co (1985) [COMPANY] v Alexander [2016] UKUT 290 (LC), [2016] L & TR 34, it said (reading from the headnote): “(1) [ADDRESS] of Appeal guidance on what constitutes ‘unreasonable’ conduct in the context of wasted costs applies in FTT proceedings for the purposes of r.13(1)(b), rather than this term having a wider interpretation, Ridehalgh v Horsefield [1994] Ch 205 applied. The test for unreasonable conduct 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, is there a reasonable explanation for the conduct complained of? (2) A systematic or sequential approach to applications under r.13(1)(b) should be adopted. 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

3 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. (3) Applications under r.13(1)(b) 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 dealt with summarily, preferably without the need for a further hearing, and after the parties have had the opportunity to make submissions.” 5. The landlords submit: 6. …that the Tenants acted unreasonably in the following respects: 6.1.. Pursuing allegations which were obviously hopeless. 6.2 Making and pursuing serious allegations vexatiously.

7. As noted in the Decision, only one of the allegations in the s22 Notice was made out (the 2007 statutory declaration allegation at [D49]). However, this was 17 years old and was never going to get close to persuading the Tribunal that it would be appropriate to appoint a manager.

8. Other than the proven allegation, [NAME] raised many allegations in the s22 Notice that, as highlighted by the Tribunal at [D49—D56] were unsupported by the documents, inherently implausible, bad in law and/or so old as to be irrelevant to the Tribunal’s discretion under s24.

9. Not only were the allegations made hopeless, but they were also pursued in a vexatious manner. Some examples are: 9.1. Repeated unfounded allegations of harassment, fraud and other improper behaviour directed against the Landlords, culminating in Mr [NAME] skeleton accusing the Landlords of offences under the Bribery Act 2010 and appending a document seeking to compare the Landlords’ conduct to that of people who torture prisoners of war. By way of analogy, unwarranted allegations of fraud are often seen as founding a basis for indemnity costs in civil cases as constituting unreasonable behaviour. 9.2. Frankly nonsensical interpretations of objectively benign events to suit the narrative, the most obvious examples being (1) the [NAME] allegation [D16], (2) the allegation that it was the Landlords who ‘falsely accused’ [NAME] of removing an

4 internal wall re: the Castle Trust Remortgage [D20—D22] (3) the deeply suspicious circumstances relating to the 2017 Flood [D25—D27] and (4) the ‘special price’ [D31].

10. Whilst the Service Charge and Dispensation Applications were simpler and less contentious, the fact remains that [NAME]’ position was hopeless. They persisted with a challenge to compliance with the Consultation Regulations which made no sense on the documents (thus forcing the Landlords to make the Dispensation Application) and they had no evidence in support of their challenge to the Major Works. The repeated references to mediation as some kind of defence was unattractive; [NAME] had no intention to negotiate unless it was entirely on their terms.

11. Having heard Mr [NAME] give evidence, it is difficult to conclude otherwise than [NAME] were willing to say whatever they could, truthful or not, to suit their purposes, and pursued the litigation without any regard for due process, fairness or courtesy. Put another way, no professionally advised litigant would ever have commenced, or pursued, this litigation in the manner it has been pursued. [NAME]’ conduct was manifestly unreasonable.” 6. The tenants submit: “The decision in this matter reflects a genuine dispute on substantial grounds and a position legitimately held and pursued by [NAME] to reflect their concerns and experiences as the Lessors’ tenants. Whilst it is not intended to conflate issues pertaining to the reasonableness of the parties’ conduct or to relitigate issues which were determined, it is apparent from the reasoned decision that: (a) Issues between the parties can be traced throughout the period of the lease, over some 17 years, to when [NAME] are said to have ‘gazumped’ the Lessors attempts to purchase the property and unite the titles, initiating what went on to become highly regrettable and long-standing poor relations; (b) [NAME] spent a substantial amount on improving the property, particularly on relocating the boiler, which ought ordinarily to have been a constructive step for all parties. However the Lessors then threatened to forfeit the lease on the basis of the associated works, with [NAME] [NAME] even attempting to force a written admission of breach from [NAME]; (c) Issues concerning the fire safety of the ceiling appear to have fomented further animosity, disagreement and distrust; (d) [NAME] attempted to sell their leasehold title in 2014 but consider the Lessors’ conduct to have contributed to that not progressing (albeit that the Tribunal did not accept that this was the principal cause of the buyers’ pulling out);

5 (e) The Lessors were concerned with issues relating to the location of walls and structural integrity which predated [NAME]’ lease; (f) There were issues surrounding a flood and a disagreement as to the refusal for consent for a pet (albeit that this was found to have been carefully considered by the Lessors and therefore refused within the discretion afforded by the lease); (g) [NAME], facing a demand for roof works (which would not affect them directly, being on the lowest floor, but for which they would be required to contribute 25%), sought permission to inspect the roof so that they could be satisfied that the works and their cost were justified; (h) [NAME] settled all ordinary, periodic service charge demands (see para.37); (i) The professional fees of the surveyor supervising major works were checked overnight during the hearing (see paras.39-40) such that they did not crystallise until that point; (j) Although the Tribunal determined that a s.20 notice allegedly served on 11th February 2022 had been seen by [NAME], matters were nevertheless complicated by the intervention of issues with roof drainage (para.42) such that [NAME]’ reluctance to conclude the issue was rational and not merely an attempt to avoid paying, and it is clear that Mr [NAME] sought clarification; (k) [NAME] suggested mediation (para.43), which was an entirely proportionate response to concerns which were legitimate and authentic whether or not the Lessors’ position was ultimately validated by the decision itself; (l) The Lessors had objected to [NAME]’ application for the appointment of a manager on jurisdictional grounds, only to withdraw that subsequently, albeit that the Tribunal decided not to do so. This was itself a wasteful diversion. The issues explored in this context again reflected a level of disagreement that might in appropriate circumstances realistically have been mollified by an independent intermediary such that it was a reasonable avenue for [NAME] to pursue.” Discussion: the first question 7. In this section and the next we refer to the landlord as the applicant and the tenants as the respondents. We start by considering the first question (or questions): 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? 8. We remind ourselves that the respondents are not lawyers. However, Mr [NAME] had been a property professional and Mrs [NAME] (who made the legal submissions on their behalf) was an impressive lay advocate who had clearly been able to research the law. Both were clearly intelligent. Only Mr [RESPONDENT] gave evidence, but we accept the landlord’s submission that he was willing to say whatever, whether truthful or not,

6 suited his and his wife’s purposes, and that both pursued the litigation without any regard for due process, fairness or courtesy. We also accept the other points made on the landlord’s behalf, which are amply borne out by the evidence adduced before us.

9. As to the respondents’ points, (a) and (b) were the only allegations made out by them, but the points (as they should have appreciated) were so old as to have negligible weight in the Tribunal’s determination whether to appoint a manager. (c), we are afraid, shows the unreality of the respondents’ approach to the case. There were and are major concerns about the fire safety of the ceiling of the respondents’ flat. As to (d), we did not in our substantive judgment accept that the applicant scuppered the sale of the flat. We have dealt with (e) and (f) in our substantive judgment: there is no valid criticism which could have been made of the applicant. 10. (g) shows the respondents’ unreasonable approach to the litigation. The cost of roof repairs to them was about £162.50. Their complaint is that the landlord did not permit them to go on the roof, using a ladder and without any form of harness, despite potential health and safety issues and the absence of any contractual right to do so. It is in our judgment farfetched to suppose that this allegation could have supported the respondents’ application to appoint a manager. 11. (h) is of little weight. If anything it tells against the appointment of a manager, because the applicant was managing the ordinary expenses in a proper manner. (i) and (j) are also make-weights.

12. As to (k), having seen Mr [RESPONDENT] give evidence, we agree with the landlord’s submissions that “[NAME] had no intention to negotiate unless it was entirely on their terms.” 13. As to (l), we heard no argument about the jurisdictional matters raised, but then retracted, by the landlord. It cannot affect the reasonableness or otherwise of the respondents’ litigation behaviour. However, it is relevant to the second and third stages of our consideration.

14. Looking at these matters in the round, in our judgment the respondents have behaved unreasonably in the manner in which they have brought their application and conducted the matter. Discussion: the second and third questions 15. We turn then to the second question as to whether we should make a costs order. This is a discretionary matter. In our judgment this is a bad case. Obviously bad points were pursued vigorously. Serious allegations of fraud and bad faith were bandied about vexatiously. In our judgment, this is an appropriate case to exercise our discretion to make a costs order.

16. We then turn to the third question. Although we note that our “power is not constrained by the need to establish causation”, it is significant in

7 our judgment that the respondents’ 2007 allegation against the landlord was made out and that the landlord did withdraw her application to strike out the application in limine on jurisdictional grounds.

17. The respondents submit: “9. If the Tribunal is minded to make an award in the [applicant’s] favour, it would be invited to award a very small proportion of the costs claimed in the schedule by way of a summary assessment. The Tribunal is also invited to bear in mind in this context that [NAME] would ordinarily only be required to pay 25% of the building’s administrative costs.

10. If conducting an assessment, the Tribunal will note that the vast majority of costs claimed pertain to [COUNSEL] fees. However diligently and effectively [COUNSEL] undertook his task, the fee claimed is obviously very high for this type and complexity of work.” 18. We do not see the relevance of the fact that the respondents’ share of the service charges is a quarter. If the respondents conduct the litigation in an unreasonable manner, we do not see why the applicant should bear three quarters of the cost of their doing so.

19. As to the costs claimed, we note that the respondents dispute counsel’s fees only. They do not dispute the time spent and the hourly rates claimed by the solicitors, nor the disbursements other than counsel’s fees. Disbursements for counsel comprise fees of Mr [COUNSEL] billed as follows: 17th April 2024 £1,254; 20th July 2024 £855.00; and 16th October 2024 £1,900.00 (in each case, plus VAT); and those of Mr [NAME] with a brief fee of £10,000.00 with one refresher of £3,000.00 and £1,250 in respect of the costs application (again, in each case, plus VAT). The total costs claimed in respect of solicitors’ and counsel’s fees and disbursements (including VAT) is £91,911.60.

20. In our judgment the fees billed by counsel are reasonable. We were not told the combined value of the various flats in [ADDRESS], but the property is undoubtedly valuable. The appointment of a manager would both be expensive in itself and potentially affect the value of the house as a whole. The respondents’ extreme allegations potentially impacted the applicant’s reputation. Counsel’s fees are proportionate in our judgment. Accordingly we disallow nothing.

21. This leaves the third question: the order we should make. Standing back and looking at the modest matters on which the respondents won or where the outcome was neutral, in our judgment the appropriate order is that the respondents should pay the applicant £70,000.00 in respect of the application under rule 13(1)(b).

22. For the avoidance of doubt, this leaves the balance of £21,911.60 of legal costs which the applicant has not recovered against the respondents under rule 13(1)(b). The reasonableness and payability of this sum under

8 the service charge provisions of the lease are not matters before us and will have to be litigated separately if issues in respect of them arise. DETERMINATION 1. Pursuant to rule 13(1)(b) of The Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, we order that the tenants, the applicants in the substantive application and the respondents to the landlord’s application for costs do pay the the landlord, the respondent in the substantive application and applicant in the application for costs £70,000.00 in respect of costs.

2. The Tribunal refuses the tenants’ respondents’ application for an Order under section 20C of the Landlord and Tenant Act 1985.

Name: Judge Adrian Jack Date: 25th November 2024 5th December 2024