Decision Nº LRX 84 2012. Upper Tribunal (Lands Chamber), 17-12-2013
| Jurisdiction | UK Non-devolved |
| Judge | Martin Rodger QC, Deputy President |
| Date | 17 December 2013 |
| Court | Upper Tribunal (Lands Chamber) |
| Judgement Number | LRX 84 2012 |
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UPPER TRIBUNAL (LANDS CHAMBER)
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UT Neutral citation number: [2013] UKUT 0586 (LC)
UTLC Case Number: LRX/84/2012 and LRX/88/2012
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
LANDLORD AND TENANT – administration charges - costs of legal proceedings – whether recoverable under indemnity covenant – whether within s.11, Commonhold and Leasehold Reform Act 2002 – whether affected by paragraph 10(4) of Schedule 12 to Commonhold and Leasehold Reform Act 2002 – adequacy of leasehold valuation tribunal’s reasons -
IN THE MATTER OF AN APPEAL AGAINST A DECISION
OF A LEASEHOLD VALUATION TRIBUNAL FOR THE
LONDON RENT ASSESSMENT PANEL
BETWEEN
(1) ALEXANDER CHRISTOFOROU
(2) DIOGENIS & COSTAS DIOGENOUS
Appellants
and
STANDARD APARTMENTS LIMITED
Respondent
Re: Flats 3 and 10 Standard Apartments,
Crescent Road,
London N8 8AW
Before: Martin Rodger QC, Deputy President
Sitting at 43-45 Bedford Square,
London WC1B 3DN
on 14 November 2013
Paul Letman, instructed by YVA Solicitors for the Appellants
Carl Fain, instructed by Harbottle & Lewis, solicitors, for the Respondent
© CROWN COPYRIGHT 2013
The following cases are referred to in this decision:
Canary Riverside Pte Ltd v Schilling LRX/65/2005
Galloo Ltd v Bright Grahame Murray [1994] 1 WLR 136
Lownds v The Home Office [2002] 1 WLR 2450
Staghold Ltd v Takeda [2005] 3 EGLR 45
DECISION
Introduction
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This appeal is against a decision of a leasehold valuation tribunal for the London Rent Assessment Panel (“the LVT”) given on 19 March 2012 in an application relating to the costs of previous proceedings brought by the respondent, Standard Apartments Limited, the owner of the freehold interest in Standard Apartments, Crescent Road, London N8 (“the Building”), against the appellants, the leaseholders of two of the sixteen flats in the Building, Mr Christoforou of flat 3 and Messrs Diogenis & Costas Diogenous of flat 10.
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The LVT decided that the respondent was entitled to recover the sum of £6,944.37 from each of the appellants under covenants in their respective leases which permitted the recovery of costs and expenses arising directly or indirectly out of any omission or breach or non-observance by them of any other covenant. That sum represented each appellant’s equal share of the costs incurred by the respondent in proceedings before a differently constituted leasehold valuation tribunal in 2009 when the appellants’ liability to pay a service charge had been determined.
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The appellants subsequently obtained the permission of the LVT to appeal to the Tribunal on one ground. On 25 July 2012 the Tribunal (George Bartlett QC, President) granted the appellant’s permission to appeal on two additional grounds.
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The single ground on which the LVT granted permission to appeal was whether it had erred in law in concluding that the landlord’s costs of the proceedings before the earlier leasehold valuation tribunal were the result of a breach or non-observance by the appellants of terms of their leases and were therefore recoverable as an administration charge within the meaning of paragraph 1(1) of Schedule 11 to the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”).
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The two additional grounds for which permission was given by the Tribunal raised the following issues:
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whether the LVT failed to address the appellants’ challenge to the amount of costs claimed, where the sums were in respect of solicitor’s charges calculated on a timed unit cost; and
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whether the LVT ought to have made an overall assessment of the reasonableness of the costs claimed so as to reduce the same substantially and whether it failed to have regard to the disproportionate level of the costs compared to the amounts in dispute in the section 27A application which had formed the subject of the earlier leasehold valuation tribunal proceedings.
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In paragraph 77 of its decision the LVT had recorded that “there was no attack on the time taken, the range of tasks and the hourly rates applied” and when granting permission to appeal by way of review on these additional grounds the Tribunal said this:
“The contentions at paragraphs [5(a) and (b) above] seem to me to run counter to what is said in paragraph 78 of the decision. Since, however, the LVT did not address them in its decision on the application for permission, I am granting permission, but the contentions will only be arguable if the appellants establish that they did challenge the amounts claimed and submit to the LVT that there were disproportionate.”
It seems to me likely that the reference to paragraph 78 of the decision was in fact intended as a reference to paragraph 77.
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In the course of argument a further issue resurfaced, and Mr Letman was encouraged by me to seek permission to raise it as an additional ground of appeal. He had argued before the LVT that the respondent was precluded by paragraph 10(4) of Schedule 12 to the 2002 Act from recovering any of the sums which it claimed in respect of the costs of the 2009 proceedings. The LVT had not accepted that argument and Mr Letman had not sought to raise it again in on appeal. However, shortly before this appeal I had heard another appeal in which none of the parties was professionally represented and in which the same point was taken. I was therefore interested in the argument which had been presented to the LVT and I am very grateful to both Mr Letman and Mr Fain for their considerable assistance in enabling me to consider it as an additional point in this case.
The facts
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Each of the appellants occupies a flat in the Building under the terms of a standard form of lease which requires the respondent to provide services and the appellants to contribute towards the cost of those services by means of a service charge. The service charge is expressly reserved as rent and at clause 3.1 of the lease each appellant covenanted to pay the rent on the due date and not to exercise any right or claim to withhold the rent.
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The appellants, and the leaseholders of one other flat, failed to pay any of the service charges demanded of them by the respondent for the years 2006 and 2007 and refused to pay an estimated service charge for the year ended 2008. The respondent engaged solicitors in December 2006 and incurred expense in seeking to recover the service charges. Eventually the respondents made an application to the leasehold valuation tribunal under section 27A of the Landlord and Tenant Act 1985 (“the 1985 Act”) for it to determine the appellants’ liability for the disputed years.
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The service charges claimed in each year seem to have been in the order of £1,100 to £1,500 per flat. The sum under consideration in the section 27A application is therefore unlikely to have exceeded about £15,000 in total. Not all of the service charges were disputed, although none of the appellants paid or offered to pay any part of the outstanding sum while the application continued.
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On 26 March 2009 the leasehold valuation tribunal issued a decision in which it found that, with the exception of a modest reduction of £50 per flat in the annual management charge, and subject to some other reductions which had been conceded, the service charges claimed by the respondent were reasonable.
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The respondent incurred costs in connection with the 2009 proceedings, and it incurred further costs in seeking to recover the service charges which the tribunal found was payable by the appellants. The respondent eventually obtained judgments against the appellants in the county court and received payment in 2011. In total the appellant incurred costs of £20,833.11 in connection with the 2009 proceedings.
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By clause 3.22 of their leases the appellants covenanted as follows:
“To be responsible for and to keep the Landlord fully indemnified against all damage, damages, losses, costs, expenses, actions, demands, proceedings, claims and liabilities made against or suffered or incurred by the Landlord arising directly or indirectly out of –
3.22.1 Any act, omission or negligence of the Tenant or any persons at the Premises expressly or impliedly with the Tenant’s authority or
3.22.2 Any breach or non-observance by the Tenant of the covenants conditions or other provisions of this lease or any of the matters to which this demise is subject.”
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After the disputed services charges had been paid the respondent turned its attention to the costs which it had incurred. It claimed entitlement to recoup those costs from the appellants under clause 3.22 of their leases. The appellants resisted that claim and the respondent therefore commenced these proceedings pursuant to paragraph 5 of Schedule 11 of the 2002 Act to obtain a determination of the appellants’ liability from the LVT.
Relevant Statutory Provisions
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Schedule 11 of the 2002 Act is concerned with “administration charges”, and “variable administration charges”, expressions which are defined by paragraph 1 (so far as is relevant) as follows:
“1.-(1) In this Part of this Schedule “administration charge” means an amount payable by a tenant of a dwelling as part of or in addition to the rent which is payable,...
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