R (Twelve Baytree Ltd) v Rent Assessment Committee [2014] EWHC 1129 (Admin) is that rare beast – a judicial review of the LVT (as it was; FTT(PC) as it is now). It concerns how you withdraw a Right to Manage claim. I confess, when I first heard about this case, I had thought it would be more interesting than it has turned out to be.
By way of background,the Right to Manage is, as you know, a right for qualifying leaseholders of flats to form an RTM company and, in broad terms, take over the management of the block of flats. The RTM company serves a claim notice and, if the landlord opposes it, he must serve a counter-notice. The LVT (as was and remains in Wales) or the FTT(PC) will then determine the issue. An RTM company can withdraw the claim, either expressly (s.86) or impliedly (s.87)
The RTM process is an exception to the normal “no costs” rules in the Tribunal (albeit in favour of the landlord): see ss.88 and 89, by which, broadly, the landlord gets his costs of responding to the claim notice (s.88(1)) including his costs before the Tribunal if he wins (s.88(3)). If the claim is withdrawn, he gets his costs down to that date (s.89).
On the issues of withdrawal, the general rule in civil litigation is that a claimant/applicant who wants to abandon their claim should be able to (albeit that there might be costs consequences). That rule is, of course, subject to exceptions. In Hanson v Church Commissioners for England [1978] 1 Q.B. 823, for example, it was held that someone couldn’t simply withdraw a case before the Rent Assessment Committee to determine a fair rent because there was a public interest in that question; the rent set by the committee would be binding in rem (i.e. against the world, including successors in title to both the freehold and rented interests). The consent of the committee would therefore be needed.
In the present case, the RTM company served a claim notice and, in turn, the landlord opposed the claim via a counter-notice. Proceedings were issued in the LVT (as it was then) and, two days before the trial was due to start, the RTM company purported to withdraw the application. The Tribunal accepted that and cancelled the hearing.
The landlord was aggrieved by this and wanted the LVT to retain jurisdiction to deal with the wasted costs it had incurred preparing for a hearing which had been cancelled (incidentally, this won’t necessarily be a problem now, since the new FTT rules allow for subsequent applications for costs but the position was much less clear under the old LVT rules and remains unclear in Wales). The Tribunal rejected this, holding that it was now functus.
Thank you for your letter of the 4th April, the contents of which have been noted by the Tribunal chair. He is grateful to you for your analysis of the situation but unless you can point to some determinative authority for the view that a person who makes an application cannot withdraw it without the Tribunal’s permission, then it cannot go on to make other decisions when it is functus. The directions order invited any application for costs and your clients chose not to make one which means that there is no longer any issue to determine. There is nothing to dismiss.
The landlord issued judicial review proceedings to determine that the LVT could not accept a unilateral withdraw, but retained jurisdiction both to decide the case and to deal with the issue of costs. The High Court found for the landlord. The provisions on costs indicated that the applicant could not simply withdraw the claim unilaterally; there was an on-going liability for costs which had to be determined as part of any withdrawal. The Tribunal had to consent to the withdrawal and, in turn, dismiss the claim. That preserved the right to costs in ss.88 and 89. It would be a rare case where the Tribunal would refuse to consent to the withdrawal. This was consistent with the position under the new FTT(PC) Rules (r.22) (but not, I note, the LVT (Wales) Rules).
So, consent is required to withdraw an RTM claim. It will usually be granted but with the dismissal of the claim, thus preserving the right to costs.
There is a broader question here which attaches to the potential personal liability for costs of the directors of an RTM company which follows their talking over management responsibility. Sensible directors would purchase full directors’ liability insurance. Sensible insurers wouldn’t touch with a barge pole a situation with a litigious freeholder, as in this case. So what do a group off leaseholders do when exercising their legal rights to RTM when they can’t get insurance and won’t take they risk of being endlessly at the end of a litigious freeholder?
Only a potential liability if found to be conducting litigation in their own interests, not the company’s, by and large. Or in breach of fiduciary duty to the company, again, where no justifiable reason for directors’ actions.