It cost you how much?

Law can be expensive.

This is particularly so in relation to the process of law, i.e. the costs of going to the law. By this I mean things such as the court or tribunal fees, but particularly the costs of the lawyers. If you lose in civil litigation, the normal rule is that you’ve got to pay not just for your own lawyers, but for the other side’s too. Due to the way that costs are assessed and recovered, even the winner often has to foot the bill for some their own lawyers’ fees. It is fair to say that the general public doesn’t think too highly of the fees charged by lawyers. Now, a lot of the criticism is unfair (“If you think a professional is expensive, wait ’til you try an amateur”) and based on misinformation and misunderstanding. Nonetheless, there is force in some of the criticism.

The general rule described above doesn’t apply in the same way in tribunal proceedings, partly in an attempt to try to keep costs down by obviating the need for lawyers. That didn’t work too well, did it? Anyway, in tribunal proceedings parties usually have to pay their own costs. To this there are two general exceptions.

First, landlords normally ensure that they have something in the leases that allows them to recover costs from their tenants (hence Landlord and Tenant Act 1985, s.20C).

Secondly, statute has provided in certain circumstances that one party will have to pay some costs of the other party. One such set of circumstances arises in enfranchisement cases, where those exercising their enfranchisement rights are statutorily responsible for some of the costs of the landlord/freeholder.

Other than that, in LVT proceedings the costs that could be recovered from the other side were limited to £500 and, even then, that only applied where the other side had behaved really shoddily.

Things are now changing a bit. The £500 limit has been lifted since 1 July (more on that below) and the Supreme Court has shown a willingness to interpret legislation so that tenants can recover their costs from landlords in some other situations (see Daejan v Benson, our note here, although that is otherwise a very landlord friendly decision).

Anyway, on to the actual point of this post. The new Deputy president of the UT(LC), Martin Rodger QC, has been busy in this area recently, bagging himself a brace of decisions this month to go with one from July which it is high time we covered.

Starting then with Arora, re: 68B Maud Road [2013] UKUT 362 (LC).

The appellant, Ms Arora, was the freeholder of 68B Maud Road. The joint tenants of the property applied for a new long lease (Pt 1, Ch.2, Leasehold Reform, Housing and Urban Development Act 1993). As I have already alluded to, a tenant who applies for a new long lease is liable to pay their landlord’s reasonable costs: s.60(1).

The costs claimed by Ms Arora included £1,750 for 7 hours of legal work at a rate of £250 per hour. This had been carried out by a solicitor with 8 years PQE, called Mr Arora. He happened to be employed by a company owned by members of Ms Arora’s family. The decision doesn’t say it, but it is probably safe to assume in those circumstances that he and the freeholder were related.

The LVT acknowledged that if Ms Arora had used specialist solicitors, as she would have been entitled to do, the cost to the tenants could have been considerably higher. Nonetheless, the hourly rate of £250 was too high, because “In-house solicitors do not have the costs and expenses of running a private practice, such as office rent, staff salaries, to say nothing of the expense of maintaining professional indemnity cover.” An hourly rate of £200 was allowed. The LVT also held that 8 hours was too high and allowed 5 hours. The reference to 8 hours was clearly wrong as only 7 had been claimed.

Ms Arora appealed against both parts, but was only granted permission to appeal on the hourly rate. On that point, her appeal was allowed.

The Deputy President observed that while an in-house solicitor may not have to personally meet all of the costs of private practice, they were not avoided altogether. The cost of office space and support staff would be met by the employer. He said that while “the expense of insurance may be avoided, the risk which it is designed to guard against is carried by the employer; in principle I can see no reason why the sum representing the reasonable cost to the employer of a solicitor undertaking work on an uninsured basis should not include an element to reflect that risk”.

Mr Arora’s hourly rate was within the guideline rates so that rate should be awarded. As Ms Arora had been refused permission to appeal against the number of hours, the outcome was costs assessed at £1,250, which represented 5 hours at £250 per hour.

It is somewhat surprising that the LVT decided this case the way it did. It was set out in Re Eastwood (Deceased) [1975] Ch 112, CA, that the bill of costs of a party represented by a salaried solicitor should be treated as though it were the bill of an independent solicitor, and the costs allowed may include a figure for profit costs. That decision was applied by the UT as recently as May 2012 in the case of OM Property Management, re: 36 Culpepper Close [2012] UKU 102 (LC). In fact, it has been established for well over a century that there is no difference between in-house and external solicitors: see Henderson v Merthyr Tydfil UDC [1900] 1 QB 434, QBD.

Next in time we get to Metropolitan Property Realizations Ltd v Moss [2013] UKUT 415 (LC).

MPR had a 199 year lease of a property, which was owned by Thanet DC. Mr Moss was the leaseholder flat 11B. MPR his immediate landlord. Mr Moss applied for a new long lease. MPR and Thanet agreed between themselves that they would both instruct the same solicitors and that MPR would be responsible for the solicitor’s costs.

Although at one point an application was made to the LVT by Mr Moss, seeking a determination of the terms of acquisition, in the end that was all agreed and his application was withdrawn.

The parties could not, however, agree the costs to be paid. MPR claimed legal fees of £2,100 and surveyor’s fees of £1,350, while Thanet’s costs were £285. MPR applied to the LVT for a determination of these costs. The LVT gave directions requiring them to prepare a bundle which included any relevant client care letters.

MPR duly served a bundle, but it did not contain any client care letters. The statement of costs contained within it claimed a total of £2,418 + VAT. Mr Moss then served points of dispute, as he had been directed to do. He did not dispute that the solicitors had been instructed, nor did he take any issue with the absence of a client care letter. He did, however, take issue with the choice of solicitors (a specialist London firm, which was said to be inappropriate for a low value enfranchisement claim in Margate) and challenged a number of individual items in the schedule of costs. MPR then served points of reply, responding to the points taken by Mr Moss.

The LVT held a hearing, at which the tribunal did take issue with the absence of any client care letters. MPR’s representative explained, not unreasonably, that this was not understood to be an issue, but that a copy could be faxed to the tribunal. The LVT refused an adjournment to allow this to be arranged and went on to conclude that none of the legal costs were payable. The surveyor’s costs were also reduced.

MPR appealed to the UT. The Deputy President allowed the appeal. He said that the LVT had focussed on the absence of a client care letter and had failed to take into account the totality of the evidence, which demonstrated that it was clear that the solicitors involved had acted for MPR in connection with the claim for a new lease. The contrary had not been suggested by Mr Moss. The Deputy President commented that the solicitors involved were a well-known and reputable firm and it was “neither a charitable institution nor a gang of conspirators”.

The LVT’s decision was also procedurally unfair as Mr Moss had not relied on the failure to provide a client care letter. The LVT should have allowed a brief adjournment to allow time for a copy of the client care letter to be faxed through. On that basis the sum recoverable was agreed by the parties as £1,500.

There was also a discussion about VAT, but it is probably not necessary to go into that here.

Finally in this romp through the Deputy President’s portfolio of costs judgments, we get to Curzon v Hobbs [2013] UKUT 419 (LC) (the decision is headed “[2012]” etc, but that can’t be right).

Mr Curzon was the freeholder of a building which had 6 flats in it. Mr Hobbs, along with others, were leaseholders of 4 of the flats. One of the other flats was occupied by Mr Curzon. There was no lease for that flat.

Mr Hobbs served a notice claiming the right to acquire the freehold of the building (Pt 1, Ch.1, LRHUDA 1993) as far back as 17 November 2004. An application to the LVT was made to determine the terms of acquisition. The parties subsequently agreed terms of settlement, which included granting a leaseback of his flat to Mr Curzon, along with a garage and a garden, but the terms of the lease could not be agreed.

An application was duly made to determine the relevant terms of the leaseback. There were then some procedural kerfufflings that we need not trouble ourselves with, before in April 2011 the LVT made its determination as to the terms of the leaseback, which was to reject the various terms that Mr Curzon had been arguing for.

He then applied for permission to appeal to the UT, which was granted on the basis that it was arguable that the LVT’s decision had been procedurally unfair (due to those kerfufflings).

The appeal was due to be heard in January this year, but no judge was available so it was eventually relisted for July.

At that hearing, Mr Curzon’s counsel (who, it should be noted, appears to have only been instructed very shortly before) withdrew the appeal. Realistically he had to do that, because in October 2012 Mr Curzon had granted himself and his wife a 999 year lease of his flat (as he was entitled to do). Unsurprisingly, he had done so on terms which were more favourable to him than those decided on by the LVT. The appeal was therefore academic.

Mr Hobbs and the other leaseholders were not told about this until they received a letter 11 days before the appeal hearing. The letter, rather optimistically, invited Mr Hobbs to concede the appeal. Mr Curzon’s solicitors then said that refusing to concede the appeal was “an act of vindictiveness” and threatened to ask for costs against Mr Hobbs and the other leaseholders.

Following the appeal being withdrawn, the tables were turned and an application for costs was made against Mr Curzon.

Prior to 1 July, the maximum award of costs that the UT could make if it considered that the party ordered to pay costs had acted unreasonably in bringing, defending or conducting the proceedings was £500: Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010 (SI 2010/2600), r.10(8). Rule 10 was amended with effect from 1 July to lift the £500 limit. The Tribunal Procedure (Amendment No. 3) Rules 2013 (SI 2013/1188) provide that the UT may apply the old rules in relation to any proceedings commenced before 1 July.

It was pretty clear that Mr Curzon had acted unreasonably. The only real issue for the Deputy President was whether he should apply the old rules, so that the costs that Mr Curzon had to pay were £500, or the new rules, so that Mr Curzon could be expected to pay considerably more. Purely because the appeal had originally been listed to be heard in January, but had then been delayed due to no judge being available, the Deputy President considered that it would not be fair to apply the new rules and make an order for costs exceeding the previous £500 limit. Mr Curzon was ordered to pay £500 towards the costs, which the Deputy President noted would “represent only a modest proportion of the costs incurred by the respondents since October 2012, when the appropriate course would have been for the appellant to have notified them of the grant of the new lease”.

I think Mr Curzon has had a bit of a lucky escape here. This is surely the type of case in the UT will start to make orders for costs in excess of £500 (as now can the FTT(PC): Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 (SI 2013/1169), r.13). I see the force in the Deputy President’s argument, but it does seem to me that there was an element of the conduct after 1 July which was very unreasonable (indeed, Mr Curzon’s solicitors when threatening costs against the leaseholders pointed out the UT’s power to make an unlimited costs order). I think it would have been very difficult to criticise the UT if it had decided not to exercise its power under the transitional provisions to apply the old rules, but had said that the unreasonable conduct after 1 July was sufficient to engage the new rules and the leaseholders should have been entitled to, say, all the costs of dealing with matters after Mr Curzon’s letter informing them of the lease (including costs of attending the appeal) plus £500 for the pre-July unreasonable conduct. I suspect a future freeholder who acts like this will not get off anywhere near as lightly.

As a side note, the acquisition in this case still isn’t concluded and the matter has to go back to the first instance tribunal. It looks like this case, in which, lest we forget, the notice was served in 2004, will not be resolved until 2014. Even that may be conservative, as the tenants appear to be considering attempting to get the leaseback set aside as an unlawful conspiracy to undermine the settlement agreed between the parties or to claim that they should have been given the right of first refusal (see [13]).

If that debate gets entered into, who can say that this will even get resolved next year? I hesitate to think how much this whole process will have cost when all is said and done. Which, rather tortuously, brings us back to where we started:

Law can be expensive.

About chief

chief is a barrister in the big city. he specialises in public law, landlord & tenant, football and rock 'n' roll (the last two are only when his clerks aren't watching). he sometimes pops by here, but not as often as he'd like. he will occasionally eschew capital letters. the reasons for this odd affectation are lost in the mists of time.
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