Chaplair Ltd v Kumari
| Jurisdiction | England & Wales |
| Judge | Lady Justice Arden,Lord Justice Patten,Lord Justice Christopher Clarke |
| Judgment Date | 27 July 2015 |
| Neutral Citation | [2015] EWCA Civ 798 |
| Docket Number | Case No: A2/2014/2233 |
| Court | Court of Appeal (Civil Division) |
| Date | 27 July 2015 |
[2015] EWCA Civ 798
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM Romford County Court
His Honour Judge Wulwik
8BT02390
Royal Courts of Justice
Strand, London, WC2A 2LL
Lady Justice Arden
Lord Justic Patten
and
Lord Justice Christopher Clarke
Case No: A2/2014/2233
Mark Watson-Gandy (instructed by Krishan Kumar Solicitor) for the Appellant
Louise Worton (instructed by Alterman Solicitors) for the Respondent
Hearing dates: Tuesday 18 May
Issues:
(1) Does the court have power to order a tenant to pay any costs to the landlord under the terms of the lease where the costs arose in related leasehold valuation tribunal proceedings?
On 15 May 2014, HHJ Wulwik, sitting in the Romford County Court on appeal from District Judge Watson, made an order for costs against the appellant, Mrs Kamlesh Kumari ("Mrs Kumari"), in favour of her landlord ("Chaplair"). Chaplair had brought these proceedings ("the County Court proceedings") to recover unpaid rent and service charges payable under a lease ("the lease") executed by Mrs Kumari of Flat 13, Brook Court, 510 Ripple Road, Barking, Essex. As part of its costs, Chaplair sought to recover the costs of the proceedings and the costs of certain related proceedings in the leasehold valuation tribunal ("LVT"). Mrs Kumari was unsuccessful in respect of both sets of costs.
Mrs Kumari was partly successful in obtaining permission to appeal against the judge's order. In the heading to this section of my judgment, I have formulated in my own words the two issues which she seeks to raise.
Mrs Kumari has permission to appeal the order to pay costs incurred by Chaplair's in the LVT (Issue (1) above), but her application in regard to Issue (2) has been adjourned to this court with the appeal to follow if permission is granted. We have, however, as is customary in this situation heard full argument on both issues as if Mrs Kumari had permission to appeal in respect of both issues, leaving the question of permission to appeal to be determined in the court's written judgments.
Costs were incurred in the LVT because Mrs Kumari raised issues about her service charge. Because nine other tenants of the same block were already challenging the service charge before the LVT, the County Court transferred those issues to the LVT. Mrs Kumari did not take an active part in those proceedings, in which Chaplair was successful overall, but she obtained the benefit of some reduction in her service charge as a result of the actions of the other tenants.
The County Court proceedings have a long procedural history, but we are not concerned with that save for one procedural step which subsequently became important: the parties to the County Court proceedings agreed to an order which allocated these proceedings to the small claims track ("SCT"). This is the normal track for claims by a landlord not exceeding £10,000. However, significantly for the purposes of this case, the Civil Procedure Rules ("CPR") provide that the court cannot order the payment of any costs, other than the costs of issuing the claim (£260), in SCT cases: CPR 27.14.
Quite separately from the power of the court under the CPR to award costs, the lease contains provisions for Mrs Kumari to pay the landlords' costs of various expenses which it incurs. These are clauses 12 and 14 which provide as follows:-
The Fourth Schedule…
12.
(a) To pay to the Landlord all costs charges and expenses (including legal costs and fees payable to a surveyor) which may be incurred by the Landlord in or in contemplation of any proceedings under Sections 146 and 147 of the Law of Property Act 1925 notwithstanding forfeiture may be avoided otherwise than by relief granted by the Court
(b) To pay all proper and reasonable expenses including solicitors' costs and surveyors' fees incurred by the Landlord of and incidental to the service of all notices and schedules relating to wants of repair to the Flat whether the same be served during or after the expiration or sooner determination of the term hereby granted ( but relating in all cases to such wants of repair that accrued not later than the expiration or sooner determination of the said term as aforesaid)
(c) To pay all reasonable expenses of the Landlords its Managing Agents or Solicitors in respect of any requests for information previously provided…
14
(a) To comply with all requirements whatsoever of any local or other competent authority corporation or others in relation to the demised Premises and to comply at the Tenant's own expense with any notices whatsoever served by any such authority or others whether on the Landlord or the Tenant in relation to the Demised Premises
(b) At all times hereafter to indemnify the Landlord from and against all actions proceedings costs losses expenses claims and demands arising out of any failure by the Tenant to observe or perform any of its obligations under this Lease in relation to any legislation for the time being in force and non-compliance with any of the provisions herein contained in general or any matters referred to in sub-clause (a) and (b) hereof in…
At the end of the LVT proceedings, Chaplair made an application to the LVT under schedule 12 of the Commonhold and Leasehold Reform Act 2002 ("the 2002 Act") for the tenants to pay some costs on the basis that they had conducted the proceedings "vexatiously, abusively, disruptively or otherwise unreasonable" for the purposes of schedule 12. That application failed.
The tenants countered with an application under section 20C of the Housing Act 1985 that the landlord should not be able to add the costs of the proceedings to the service charge. The tenants did not have to proceed with this application because Chaplair conceded that it could not add the costs to the service charge.
There was no order as to costs in the LVT. Following the determination of the LVT proceedings, the issues in the County Court proceedings were also at an end, save for any order for costs. Chaplair applied to the County Court to determine costs as it would be unable to rely in any forfeiture notice on non-payment of those costs unless they had been determined by a court (Commonhold and Leasehold Reform Act 2002 ("the 2002 Act"), section 168). Accordingly, Chaplair applied to the county court to restore these proceedings for hearing. It was common ground that the judge would have to deal with their contractual claim to costs (which Chaplair had pleaded) as well as all other issues.
District Judge Watson held that, since the County Court proceedings had been allocated to the SCT, the court could not award more than £200, the amount fixed by CPR 27.14. Chaplair appealed that order.
Judgment of the judge
The judge allowed an appeal against District Judge Watson's decision. He held that Chaplair could recover the LVT costs in the County Court under the terms of the lease. He directed himself that the discretion to award costs should normally be exercised in favour of an order which reflects the contractual rights to costs: this point is established in relation to a mortgagee's costs in Gomba Holdings (UK) Ltd v Minories Finance Ltd (No 2) [1993] Ch 171, and was extended to the landlord's costs in Church Commissioners v Ibrahim [1997] EGLR 13.
The judge had to determine the appropriate proportion of the LVT costs to be paid by Mrs Kumari. The judge accordingly ordered that Mrs Kumari should pay 90% of 10% of the costs of the LVT proceedings, to be the subject of a detailed assessment on the indemnity basis in accordance with the terms of her lease from the respondent to this appeal ("Chaplair").
The judge further held that the limitation of costs on the SCT did not apply because the costs were not payable under the CPR but the terms of the lease. He also awarded Chaplair its costs of the County Court proceedings on the same basis.
The judge's decision is recorded in the following provisions of his order:
2. The Defendant shall pay to the Claimant 90% of 10% of the costs of the proceedings before the Leasehold Valuation Tribunal, to be the subject of a Detailed Assessment if not agreed, such Detailed Assessment to be on an indemnity basis in accordance with the provision of the lease dated 17 th December 2002.
3. The Defendant shall pay to the Claimant 90% of the costs of the County Court proceedings up to and including the hearing before Deputy District Judge Watson on the 29 th July 2013 and 100% of the costs of the Appeal to be the subject of a Detailed Assessment, if not agreed, such Detailed Assessment to be on an indemnity basis in accordance with the provisions of the lease dated 17 th December 2002 and to be subject to the very anxious scrutiny approach referred to by the Court of Appeal in O'Beirne v Hudson [2010] 1 WLR 1717.
The direction to the costs judge that these costs should be assessed on a "very anxious scrutiny" basis is derived from this court's decision in O'Beirne v Hudson, where this court held that, the case having been settled before allocation by a consent order ordering costs to be paid on the standard basis, the costs judge was entitled to take the view that the case would have been allocated to the SCT and, in determining what costs were necessarily or reasonably incurred, to decide, if he thought fit, that it was not reasonable for the paying party to pay more than would have been recoverable in a case that was allocated to the SCT.
The direction would thus mean that it would be a matter for the costs judge to take into account whether the costs...
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