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You are here: BAILII >> Databases >> England and Wales Lands Tribunal >> Tenants of Langford Court v Doren Ltd [2001] EWLands LRX_37_2000 (31 March 2001) URL: http://www.bailii.org/ew/cases/EWLands/2001/LRX_37_2000.html Cite as: [2001] EWLands LRX_37_2000 |
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[2001] EWLands LRX_37_2000 (31 March 2001)
LRX/37/2000
LANDS TRIBUNAL ACT 1949
Landlord and Tenant Act 1985 s.20C - Order to disregard litigation costs as relevant costs for service charge - Does not follow event of litigation - "just and equitable" criterion - Procedure on appeal from LVT under Landlord and Tenant Act 1985 s. 31A - Rehearing discretionary
IN THE MATTER OF AN APPEAL AGAINST A DECISION OF
THE LONDON LEASEHOLD VALUATION TRIBUNAL
BETWEEN THE TENANTS OF LANGFORD COURT Appellants
(DR & MRS EL SHERBANI AND OTHERS)
and
DOREN LIMITED Respondent
Re: Langford Court
Langford Place,
London NW8 9DN
Before: His Honour Judge Michael Rich QC
Sitting at 48/49 Chancery Lane, London WC2A 1JR
on Tuesday 13 February 2001
The following cases are referred to in this decision:
Trustees of the Eyre Estate v Saphir [1999] 34 EG 71
Iperion Investments Corporation v. Broadwalk House Residents Ltd [1995] 2 EGLR 47
Holding & Management Ltd v Property Holding & Investment Trust plc [1989] 1WLR 1313
Re Elgindata Ltd (No 2) [1992] 1WLR 1207
A.E.I. Rediffusion Music Ltd v Phonographic Performance Ltd [1999] 1WLR 1507
Stan Gallagher instructed by Messrs Wood & Co, agents (surveyors), for the appellants
Paul StJ Letman instructed by Morgan Cole, solicitors, for the respondent
DECISION
Factual Background
"On any such appeal (a) the Lands Tribunal may exercise any power available to the leasehold valuation tribunal in relation to the original matter."
"the Tribunal has decided to grant leave because it considers that it is appropriate that it should consider whether no order under section 20C should have been made despite the fact that the landlord was only partly successful before the LVT; and what are the appropriate principles for deciding whether such an order should be made."
"unless we have misunderstood the letter [in which the President's explanation of granting leave was set out], the appeal will go ahead on only one point alone; that being whether "no order" is the correct approach where a landlord is partly successful on the substantive issues."
"1. The Member takes the directions given in the Tribunal's letter dated 18 October (directions which were given by the President) to have been made on the basis that the appellant tenants are limited to the grounds of appeal set out in paragraphs 10 to 21 of the application for permission to appeal, and that therefore if the Lands Tribunal is not satisfied that the grounds given by the LVT for refusing the Order under s.20C do not justify such decision, the decision should stand.
2. If the appellant does not accept such limitation then notice must be given to the respondent and to the Tribunal before 15 December 2000.
3. If the respondent wishes to assert that the decision was justified by other matters than those set out in the LVT's decision letter, then notice must be given to the appellant and to the Tribunal before 15 December 2000.
4. If either party gives such notice then a pre-trial review will be held on Tuesday 9 January 2001 at 10.00 am."
I also repeated the directions as to the preparation of a trial bundle and lodging of skeleton arguments. Neither party gave notice in accordance with my directions by 15th December 2000, but at the hearing on 13th February, 2001, the appellants sought leave to invite this Tribunal to exercise its discretion afresh in accordance with s.31A(7)(a)of the Act of 1985.
Scope of Appeal
"The Lands Tribunal will treat the appeal as a fresh hearing of the issues to which the application to the LVT gives rise, except where leave has been granted on conditions which limit the appellant to particular grounds" [my emphasis]
"(a) The Lands Tribunal may exercise any power available to the leasehold valuation tribunal in relation to the original matter .." [I have in repeating this provision added my emphasis].
The sub-section does not, therefore, require the Lands Tribunal in determining an appeal in respect of a s.20C matter to exercise its own discretion. If the Lands Tribunal is of the opinion that the LVT's exercise of its power was within the power granted to the LVT by s.20C, even though the Lands Tribunal might have exercised its discretion differently, it has no obligation to substitute its own discretion for that of the LVT, if it thinks that it would be in the interests of justice not to do so.
Justification for LVT's Decision
"Whilst the Tribunal has found failings in the Respondent [landlord] as set out above such that it considers it is just and convenient, in all the circumstances, to make an order under Section 24(1) of the 1987 Act to appoint a manager, the Tribunal considers that some culpability must lie with the Applicants who have, by their words and actions over a long period of time, had the avowed intention of removing the present managing agents from their position. Indeed, as stated above, at the Hearing itself, when Miss Marshall [the Chairman of the Residents' Association] was asked by the Tribunal whether there would be any purpose in her having a discussion with Mr Wolbrom [of the managing agents] after he had expressed a desire to start a fresh dialogue with the Applicants and make significant changes, her reply was immediate in its rejection.
As the Tribunal has stated before, the present managing agents have been starved of funds, necessitating protracted litigation against some tenants. This litigation was only commenced after some years of these tenants' refusal to pay, and contrasts sharply with the intention of the Applicants' choice of manager of "zero tolerance" in respect of non-payment of service charges.
In some respects therefore, the Tribunal considers the existing managing agents were acting under great difficulty in managing a block where some of the tenants were patently obstructive and where funds were severely limited.
Mr Gallagher argues for the Applicants that 'whatever the substantive decision, there were good grounds for having brought the application [that is under s.24 of the 1987 Act].' Mr Golstein [for the landlord] argues that 'the costs involved in rebutting this [s.24] Application are substantial and well beyond the Landlord's net rental income for this block for many years to come. The Landlord has already committed vast sums of its own money to fund the service charges which the Applicants are not paying ..'
In the Tribunal's view, in the circumstances of this particular case, and in that its determination on the substantive application was only reached after considerable deliberation and not without difficulty, it is just and equitable that the costs incurred by the Respondent in connection with proceedings before this Tribunal are to be treated as relevant costs to be taken into account in determining the amount of any service charge payable."
"Miss Marshall, for her part, showed intransigence and a reluctance to start any form of dialogue with the managing agents."
That intransigence which made it convenient to appoint a new Manager, militated against its being equitable to deprive the landlord of its contractual right to recover as costs, reasonably and properly incurred in connection with the Building, the costs of resisting the substantive application. Indeed the LVT, reversing the burden, held that it was just and equitable that such costs should be taken into account in determining the service charge. They clearly recognised the difference in the criteria relevant to the two applications.
"The Tribunal accepts the evidence put forward by the Applicants that the management fell short of reasonable standards and in particular that unreasonable service charges had been demanded and the Respondent had failed to comply with the appropriate code of management practice."
That, as I understand their reasoning on the application under s.20C, is why they refer to the "culpability" of the Applicants and the "great difficulty [of the agents] in managing a block where some of the tenants were patently obstructive and where funds were severely limited". They have taken the findings as to the landlord's fault into account and explain why such faults do not make it just and equitable to make the order under s.20C.
"No costs incurred by a party in connection with proceedings under this Act before a leasehold valuation tribunal shall be recoverable by order of any court."
"..the court has a discretion to direct that litigation costs be excluded from a service charge, even if the costs have passed the test of section 9 and have been reasonably incurred. The obvious circumstance which Parliament must be taken to have had in mind in enacting section 20C is a case where the tenant has been successful in litigation against the landlord and yet the costs of the proceedings are within the service charge recoverable from the tenant."
That, as Mr Gallagher points out, is exactly the situation with which the LVT was confronted in this case, at least in respect of the lessees of 44 out of the 125 units. The order for costs made in the tenant's favour, in the Iperion case, had been reduced because of the tenant's "reprehensible behaviour" and so in upholding the order made under s.20C the judgement continued at p. 49H:
"To my mind, it is unattractive that a tenant who has been substantially successful in litigation against his landlord and who has been told by the court that not merely need he pay no part of the landlord's costs, but has an award of costs in his favour should find himself having to pay any part of the landlord's costs through the service charge. In general, in my judgement the landlord should not "'get through the back door what has been refused by the front': Holding & Management Ltd v Property Holding & Investment Trust plc [1989] 1WLR 1313 per Nicholls LJ"
Precisely because the LVT has no power to award costs, there is no danger of its order being undermined by the landlord's contractual rights. It is however, in the context of the absence of any such power that the LVT has to exercise its discretion as to whether to make an order under s.20C.
"(i) Costs are in the discretion of the court. (ii) They should follow the event except when it appears to the court that in the circumstances of the case some other order should be made. (iii) The general rule does not cease to apply simply because the successful party raises issues or makes allegations on which he fails, but where that has caused a significant increase in the length or cost of the proceedings he may be deprived of the whole or part of his costs. (iv) Where the successful party raises issues or makes allegations improperly or unreasonably, the court may not only deprive him of his costs but may order him to pay the whole or a part of the unsuccessful party's costs."
The principles (iii) and (iv) show how the Courts have found it necessary, in the interests of justice, to depart from a general rule which was laid down by the statutory instrument RSC O.62, r.3(3), which was itself repealed by the Civil Procedure Rules 1968. In spite of his reliance upon these principles Mr Gallagher maintained that since the LVT had no power to award costs, it should not even have restricted its order depriving the landlord of the right to recover service charges to a part only of his costs.
"As the discretion [of the Tribunal] is not expressly subject to general principles .. or provisional statutory steer or fetter, it should be interpreted and applied as a wide discretion to be exercised judicially and reasonably by taking into account and giving due weight to, all relevant factors in a principled and proportionate fashion."
He went on to discuss some matters material to proceedings before the Copyright Tribunal.
"We were not asked to make any similar order under section 20C of the Landlord and Tenant Act 1985 in relation to other tenants and do not do so. Indeed it would be a disaster for the defendant, a company owned by residents of Broadwalk House, if such an order were made; the company would presumably be insolvent unless it could raise further capital."
Although the Respondent in this case is not owned by the residents, unlike the ultimate reversioner Limebroad Ltd, which I was told was owned by some of the present appellants and whose conduct the LVT thought fit to comment on, it does appear to me that the LVT was entitled to take into consideration the points which it recorded as being made by Mr Golstein on behalf of the landlord as to the effect of an order upon it. It may well have thought that the request for an order in respect of charges to other tenants than the successful appellants was an attempt to squeeze the landlord out of its property.
Principles upon which discretion should be exercised
Costs
Dated: 5 March 2001
(Signed) His Honour Judge Michael Rich QC