Leases, tribunals and contractual costs

87 St George’s Square Management Ltd v Whiteside [2016] UKUT 438 (LC)

The vexed issues of costs in service charge disputes rumble on. Willow Court Management Company (1985) Ltd v Alexander [2016] UKUT 0290 (LC) (our note) set out guidance for how and when rule 13 costs awards will be engaged and awarded in the First Tier Tribunal (for unreasonable conduct). But in this case, the landlord had been awarded 20% of their costs under a Rue 13 decision, but then sought to recover the full costs under a contractual entitlement to costs of an enforcement action under the lease, and sort the FTT’s determination of those as a variable administration charge.

The FTT had decided that the landlord could not do this. The issue of recoverable costs had been determined by the Rule 13 decision. The landlord appealed to the Upper Tribunal.

The Upper Tribunal held that the FTT had elided two entirely separate entitlements to costs. The landlord was entitled to contractual costs, insofar as they were reasonably and properly incurred. The landlord was also entitled to seek costs under Rule 13.

Where a party has two legal routes to the recovery of the same sum, it will not be entitled to recover that sum twice but there is no reason why it should be required to elect between those routes unless they are inconsistent. In Stevens & Cutting Limited v Andersen [1990] 1 EGLR 95 Stewart-Smith LJ stated the principles relevant to the doctrine of election between causes of action in the following terms:

“A party may be deprived of the right to pursue a certain course of conduct if, when faced with two alternative and inconsistent courses of action, he chooses one rather than the other and his election is communicated to the other party.”

In this case there is no inconsistency between a claim to enforce the contractual right to recover costs and an invitation to the F-tT to exercise his discretionary power to award costs. The exercise of the tribunal’s procedural power under rule 13(1)(b) depended on the satisfaction of a condition, namely that there should have been unreasonable conduct on the part of Mr Whiteside, which was not a requirement of the appellant’s substantive contractual claim under clause 3(e). The position was simply that the appellant had two routes to the achievement of the same objective; its ability to pursue one route did not require it to make any assertion or claim which undermined or contradicted the basis of its entitlement to rely on the alternative route. There was simply no inconsistency between the two courses available to the appellant.

Further, there as no abuse of process or issue estoppel in later bringing a demand for contractual costs (Henderson v Henderson (1843) 3 Hare 100 was not applicable), as the submissions on Rle 13 were at the FTT’s request, neither party had anticipated costs arising at the hearing and the landlord could not be expected to have a full schedule in the circumstances. There had been no submissions on contractual costs at that time.

So, the landlord could, in principle, recover the contractual costs of the FTT proceedings in full as an administration charge, despite the Rule 13 costs decision.

But this turned out to be a somewhat Pyhrric victory. The FTT proceedings had concerned both the reasonableness of major works charges (found to be reasonable) and an application for dispensation from consultation requirements under s.20ZA Landlord and Tenant Act 1985 for being two days short on the consultation period.  The dispensation was granted, as the lessee had indeed responded, in detail and at length.

But, the UT held, the very large majority of the landlord’s costs were not incurred in ‘enforcement of the Lessee’s covenants’ (the lease clause on costs) because until the landlord was granted dispensation, the Lessee’s liability for major works was limited to £250, which had been paid.

 

 

About Giles Peaker

Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts, and still is Nearly Legal on Google +.
Posted in Housing law - All, Leasehold and shared ownership and tagged , , .

4 Comments

  1. The Contactual Costs clause is death-knell on any occupier wishing to dispute a service charge. Most don’t even know or understand the risks they are facing when disputing SCs….The more they dispute or challenge or ask for a fuller explanation, the more the CCs go up…

    I was assisting on a case where the CCs claimed at the 3rd and final hearing were over £14,000 for a disputed £353 SC, which had been paid before the first hearing…

    Fortunately, in this case, LL took a beating and were not allowed any of their costs at all and had to pay my client’s costs of £2,250….(£1750 of which were for a DA barrister…), but it’s rare that this happens.

    There should no costs in small claims, full stop, other than court fees and a fixed charge of £150 for preparing and serving claim, otherwise it just encourages legal costs factories, (they know who they are), who revel in the chance to cite Marina 69 etc.

    • Well, it depends on the lease clause. But advice to any leaseholder disputing a charge is to pay it, then challenge. That way at least a s.146 notice costs clause can’t bite, nor could a ‘costs of enforcement’ clause.

      The huge difficulty is that leaseholders will continue to withhold, or not pay and argue, rather than either paying, or starting proceedings themselves (which would also be outside s.146 or enforcement costs clauses).

    • The problem is that even if one pays the disputed SC, there will likely still be additional costs claimed which will remain unpaid which means the s.146 notice clause still bites…

      It’s a nightmare for tenants….Some of the larger managing agents and their legal teams prey on unsuspecting tenants and pray for their withholding of sums to engage the clause.

      In my case, the £353 disputed charge (conveniently just £3 over the starting point for action), carried with it an additional costs claim for over £1k at the time of issue, and the need for three hearings was down to their errors, by which time they were claiming over £14k…so win-win for them, in most cases.

      I have told my children to buy ex-Council properties where there is still LA engagement with the SCs. Despite their other misgivings, SC disputes with them are rare, unlike the private sector vampires…

    • There should not be additional costs claimed if charge is paid before action. And even if there were, could not realistically fall under the s.146 clause. Possibly fall under a ‘costs of enforcing covenants’ clause, I suppose. But they would have to be demanded as an admin charge anyway, itself subject to reasonable and payable tests.

      And believe me, LA service charge issues and disputes are not rare…

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