UPPER TRIBUNAL (LANDS CHAMBER)

	
UT Neutral citation number: [2015] UKUT 0573 (LC)
LT Case Number: LRX/40/2015

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

LANDLORD AND TENANT - ADMINISTRATION CHARGES – landlord’s costs of proceedings transferred from county court to First-tier Tribunal – whether landlord’s entitlement under contractual indemnity covenant compromised by county court consent order – appeal dismissed

IN THE MATTER OF AN APPEAL AGAINST A DECISION OF THE
FIRST TIER TRIBUNAL (PROPERTY CHAMBER)

BETWEEN:

SINCLAIR GARDENS INVESTMENTS (KENSINGTON) LIMITED
Appellant
and
CHARLES LYN CLEMO
Respondent

Re: Flat 232 Brangwyn Crescent,
Church Road,
London
SW19 2UF

Determination by Written Representations

© CROWN COPYRIGHT 2015

The following cases are referred to in this decision:

Chaplair Ltd v Kumari [2015] EWCA Civ 798
Robinson v Fernsby [2003] EWCA Civ 1820
Altus Group (UK) Ltd v Baker Tilly Tax and Advisory Services LLP and Baker Tilly Tax and Accounting Services Ltd [2015] EWHC 12 (Ch).

	DECISION
Introduction
1.	This is a review of a decision of the First-tier Tribunal (Property Chamber) dated 11 February 2015, pursuant to permission granted by the Deputy President, Martin Rodger QC, on 22 May 2015.
2.	That permission was granted on the basis of one issue, namely:
“… whether it was correct to treat the consent order of 9 August 2013 as a compromise of the applicant’s entitlement to costs under clause 2.15 of the Lease in respect not only of the proceedings before the county court, but also of the costs incurred while the proceedings were before the LVT following their transfer by the county court.”
3.	The background to the appeal and to that grant of permission is as follows.
4.	Mr Charles Clemo (“the tenant”) is the lessee of Flat 232 Brangwyn Crescent, Church Road, London SW19 2UF under a 99-year year lease dated 15 August 1983. The landlord is Sinclair Gardens Investments (Kensington) Ltd (“the landlord”). Clause 2.15 of the lease requires the tenant to pay an administration charge:
“To pay all expenses including Solicitors costs and surveyors fees incurred by the Lessor incidental to the preparation and service of a notice under Section 146 of the Law of Property Act 1925 notwithstanding that forfeiture is avoided otherwise than by relief granted by the court.”
5.	On September 29 2011 the landlord commenced a county court action against the tenant for unpaid insurance rent of £446.77 and an associated administration charge of £146.70. The county court referred to the Leasehold Valuation Tribunal (“the LVT”) the question of liability to pay, and the reasonableness of, both these sums. Following a hearing on 20 March 2013 the LVT gave a decision confirming that both were payable in full. The tribunal declined, at the landlord’s request, to make an order under section 20C of the Landlord and Tenant Act 1985, and added “as the Proceedings were originally issued in the County Court and the Tribunal has no jurisdiction over County Court costs the Tribunal was of the view that the issue of costs was best determined by the County Court.”
6.	The proceedings then returned to the county court. The parties brought the proceedings to an end by agreement in August 2013; a consent order was made by the county court in the following terms (I quote it in full since the construction of that order is crucial to my decision):
“Upon the defendant having paid to the Claimant the sum claimed in the Application returnable on 9th August 2013 of £593.47 plus interest thereon in the sum of £67.65 together with the Claimant’s costs of the action in the sum of £811 being in aggregate the sum of £1472.12
BY CONSENT
IT IS ORDERED:-
The Application returnable on 9th August 2013 be vacated.”
7.	In March 2014 the landlord asked the tenant to pay an administration charge, under the terms of clause 2.15 of the lease, representing the cost to the landlord of the proceedings in the LVT (together with a service charge and interest not relevant to this review). On the tenant’s refusal to pay the landlord brought a county court action. Again the question of the administration charge was referred to what is now the First-tier Tribunal (Property Chamber) (“the FTT”).
8.	The FTT heard lengthy argument about whether the administration charge was payable under the terms of clause 2.15. Its decision of 11 February 2015 summarises those arguments but dismisses them relatively briefly because, it says, the question of costs arising from the landlord’s county court action were compromised in August 2013.
“17. Where cases are transferred from the county court, the tribunal has no jurisdiction to deal with the issue of costs including for that matter section 20C of the Landlord and Tenant Act 1985. Once the tribunal has reached a determination, the case must be remitted to the county court for final orders including the question of costs.
18. In the present case the county court dealt with the question of costs, the costs were subsumed in the consent order dated 7 August 2013. The parties were not entitled to re-litigate that matter or indeed re-open the consent order in the instant case under the guise of administration charges whether before this tribunal or indeed the county court…
19. If the tribunal did not have the jurisdiction at the time to deal with the costs because those costs fell to be considered by the count court it did not have jurisdiction now to deal with those same costs merely because they were described by the landlord as being administration charges or incidental to the preparation of a section 146 notice.
20. Where a case is remitted to the county court for the purposes of costs the parties should ensure that the costs are dealt with by the county court.”
9.	Accordingly the FTT decided that the administration charge was not payable by the tenant. It is against that decision that the landlord now appeals.
10.	Permission to appeal was granted by the Upper Tribunal on 22 May 2015, and in paragraph 2 above I set out the basis on which the appeal was granted. Accordingly I am concerned only with whether the consent order of 9 August embodied a compromise of all the landlord’s costs, or whether it remained open to the landlord to make an additional claim, later, for its expenses in the LVT phase of the action. I am not concerned with whether those expenses fall within the terms of clause 2.15 of the Lease, and for the present purposes I assume that they do.

The grounds for appeal and the tenant’s response
11.	The landlord’s statement of case, dated 9 June 2015 and filed in response to the permission to appeal, argues that the FTT in February 2015 declined to determine whether the administration charge was payable and reasonable, and did so on the basis of a question of jurisdiction and of res judicata and issue estoppel, which was not the point it was asked to determine. The landlord refers to a number of cases relating to the extent of the tribunal’s jurisdiction, and to its obligation to answer the question put to it and not to raise novel points.
12.	The tenant’s statement of claim focuses on the substance of the FTT’s decision and argues that the consent order of August 2013 was indeed intended to bring the whole matter to an end. It points out that the landlord’s action in the county court was a small claim, so that only very restricted costs were payable. It refers to the information given at the time by the landlord’s solicitor, whose breakdown of costs in his witness statement dated 1 July 2013 does not give any indication that further costs remain for the landlord to claim.  It refers to correspondence at the time which demonstrates the tenant’s state of mind; he thought that he was bringing the whole matter to an end by agreeing the terms of the consent order.
13.	The tenant’s statement of case also argues that the administration charge was disproportionate, and was in any event not recoverable under the terms of the lease but, as I have said, I am not concerned with that question.
14.	The landlord made a reply to the tenant’s response, dated 29 July 2015. It argues that the parties knew that they were compromising only the county court costs and that they did not agree an overall settlement. The tenant was given leave to file a response to that reply which it did on 28 August 2015, focused largely on whether the administration charge was within the scope of clause 2.15.
15.	Accordingly, much of the material before me from the parties is not relevant to the point I have to determine and therefore I must by-pass much of their argument, as did the FTT in its decision of 9 February 2015, in order to focus on the ground on which permission to appeal has been granted: did the consent order of August 2013 compromise the action brought by the landlord so as to preclude any further recovery of the administration charge?
The effect of the consent order 
16.	The object of a clause such as 2.15 is to protect the landlord from the cost of pursuing the tenant for breaches of covenant, even in circumstances where the landlord does not have the benefit of a costs award from a court. Even when a court makes an order for costs, that does not preclude further recovery by the landlord under the terms of the lease. Where costs are limited in the court proceedings, by virtue of their being small claims, the court can nevertheless make an order that reflects the landlord’s contractual right to further costs under the lease: Chaplair Ltd v Kumari [2015] EWCA Civ 798.

17.	Had the county court made an order for costs after a contested hearing the landlord would nevertheless have been able to recover further costs under clause 2.15, unless the court order expressly dealt with that entitlement. The LVT here took the view that the court order did preclude any further recovery under clause 2.15, because it was a consent order that embodied a compromise that disposed of all the costs in the action. Accordingly it took the view that the landlord could not come back for a second bite of the cherry.
18.	Was the LVT correct? As the landlord points out, the schedule of costs provided by Paul Chevalier, the solicitor, in his statement of 1 July 2013, only included expenses that related to the county court action. That may not have been obvious to the tenant at the time, nor, looking at the matter objectively, may it have been obvious to a reasonable lay person in the same position as the tenant.
19.	Paul Chevalier’s statement purports to set out (at para 10) “The Claimant’s costs of the claim as at the issue of this Application”, the application being for judgment, and lists them. There is no mention of any other costs. There is an argument that the landlord is estopped by that statement, upon which the tenant relied in agreeing the terms of the consent order, from now claiming any more; the tenant does not put it in that technical way but that is clearly the point made in his statement of case at paragraphs 9 to 13. Whether or not there is technically an estoppel, Mr Chevalier’s statement is a clear indication of what the parties must then have had in mind in making the agreement that both parties intended the consent order to embody, and is evidence therefore of the scope of that agreement. 
20.	Why the landlord’s costs were stated so restrictively is not known. It may be that the separate costs of the LVT phase of the action were forgotten by both parties at that stage. But at any rate it appears that both parties thought they were bringing the proceedings as a whole to an end; that is clearly what anyone in the tenant’s position would have understood.
21.	As to the order itself, what was “the action” to which it referred? There was only one action, brought by the landlord to recover insurance rent and the associated small administration charge.  The landlord did not bring two actions, one in the county court and one in the LVT; it brought one, although because of the legislative structure the action had to take a winding road from court to tribunal and back again. The plain meaning of the order is that it dealt with the tenant’s liability to the landlord for the costs of the action as a whole. It left nothing open.
22.	Accordingly I take the view that the decision reached by the LVT was correct and I agree with its reasoning. In view of that, I do not have to consider any of the other issues raised by the parties.
23.	The decision of the LVT is upheld and the appeal is dismissed.

Postscript
24.	In accordance with the usual practice in this tribunal and elsewhere, I circulated a draft of this decision to the parties prior to handing it down in case there were any errors of detail or of typography. In response, the Appellant addressed further written argument to me as to the merits of the appeal.  
25.	As the Appellant’s solicitor should be aware, the practice of circulating a decision in draft is not to provide a further opportunity to continue the argument, but is to provide an opportunity to correct errors of expression or factual detail (see Robinson v Fernsby [2003] EWCA Civ 1820, at paragraphs 94 to 98).  Nevertheless , it is established that there is power for a court or tribunal to reconsider its decision in these circumstances and that the reasoning or even the conclusions might change as a result (see Altus Group (UK) Ltd v Baker Tilly Tax and Advisory Services LLP and Baker Tilly Tax and Accounting Services Ltd [2015] EWHC 12 (Ch).
26.	If the Appellant’s submissions in response to the draft judgment had revealed any error in my draft judgment I would have invited submissions by both parties. But in my view they did not. The Appellant takes the view that the consent order of the County Court did not, on its true construction, deal with the costs of the hearing in the FTT. As I said in paragraph 17 above, the County Court’s order does not include the costs incurred in the FTT unless it expressly does so and I have explained (in paragraph 21) why I take the view that it did indeed encompass those costs. I am not persuaded by the Appellant’s argument to the contrary.
27.	The Appellant says that it intended the consent order to leave open its costs of the FTT for recovery later, contrary to my view (paragraph 20 above) as to what it appeared that the parties intended. But the Appellant’s intention as he now explains it was a subjective intention, not disclosed to the tenant. It was inconsistent with the objective meaning of Mr Chevalier’s statement of 1 July 2013 and inconsistent with the order on what I have explained is its true construction.
28.	Accordingly I have not sought the respondent’s submissions in response to those of the Appellant and my decision is unaltered.

	Dated: 3 November 2015

Elizabeth Cooke
Sitting as Deputy Judge of the Upper Tribunal 
(Lands Chamber)