Drax v Lawn Court Freehold Ltd, Court of Appeal - Lands Tribunal, March 24, 2010, [2010] UKUT 81 (LC)

Resolution Date:March 24, 2010
Issuing Organization:Lands Tribunal
Actores:Drax v Lawn Court Freehold Ltd
 
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© CROWN COPYRIGHT 2010

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UT Neutral citation number: [2010] UKUT 81 (LC)

LT Case Number: LRA/58/2009

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

Leasehold enfranchisement - costs - initial notices - basis of assessment - costs of proceedings - unreasonable conduct - appeal allowed in part - section 33 Leasehold Reform, Housing and Urban Development Act 1993 - paragraph 10 Schedule 12 Commonhold and Leasehold Reform Act 2002

IN THE MATTER OF AN APPEAL FROM A DECISION OF THE LEASEHOLD VALUATION TRIBUNAL FOR THE SOUTHERN RENT ASSESSMENT PANEL

BETWEEN JEREMY RYTON PLUNKETT-ERNLE-ERLE-DRAX Appellant

and

LAWN COURT FREEHOLD LIMITED Respondent

Re: Lawn Court,

9 Surrey Road,

Bournemouth,

BH2 6BP

Determination on the basis of written representations under Rule 27 of the Lands Tribunal Rules (as amended)

by

A J Trott FRICS

The following cases are referred to in this decision:

Re Cressingham Properties Limited [1999] 2 EGLR 117

London County Council v Tobin [1959] All ER 649

DECISION

Introduction

  1. This is an appeal by the freeholder of Lawn Court, 9 Surrey Road, Bournemouth BH2 6BP, Mr Jeremy Ryton Plunkett-Ernle-Erle-Drax (Mr Drax or the appellant), against a decision of the Leasehold Valuation Tribunal for the Southern Rent Assessment Panel dated 21 March 2009. The decision of the LVT concerned an application made by the nominee purchaser, Lawn Court Freehold Limited, under section 91 of the Leasehold Reform, Housing and Urban Development Act 1993 (the 1993 Act) for the determination of the amount of Mr Drax's costs payable by the nominee purchaser under section 33 of the 1993 Act arising from a claim for the collective enfranchisement of Lawn Court (the enfranchisement price having been settled by agreement).

  2. Lawn Court is a five storey purpose built block of nine flats. There are two flats on each of four floors with a penthouse occupying the whole of the top floor.

  3. The LVT considered three issues:

    (i) The determination of the costs payable in respect of an initial notice under section 13 of the 1993 Act that was purported to have been served by the nominee purchaser on Mr Drax on or about 5 September 2007. The amount claimed by Mr Drax was £1,423 for legal fees and £270 for valuation fees.

    (ii) The determination of the costs payable in respect of a second initial notice served by the nominee purchaser on Mr Drax on 12 October 2007. The amount claimed by Mr Drax was £7,804 for legal fees (excluding the legal fees on the first initial notice).

    (iii) The determination of an application by Mr Drax that the nominee purchaser should pay his costs of the proceedings in accordance with paragraph 10 of Schedule 12 of the Commonhold and Leasehold Reform Act 2002 (the 2002 Act) due to its unreasonable conduct in making an application to the LVT to determine costs rather than making a worthwhile offer to him.

    (All costs are exclusive of VAT.)

  4. The LVT found in favour of Mr Drax on the first issue and this part of its decision is not subject to appeal. On the second issue the LVT awarded costs in the sum of £2,500. On the third issue the LVT refused to make an order for costs upon Mr Drax's application under paragraph 10 of Schedule 12 of the 2002 Act.

  5. Mr Drax sought leave to appeal the LVT's decision on the second and third issues but this was refused by the LVT on 27 April 2009. He then applied to this Tribunal for permission to appeal on 11 May 2009. His Honour Judge Reid QC granted permission to appeal by way of written representations on 13 October 2009.

    The LVT's decision

  6. In respect of the second issue, dealing with the costs of the second initial notice, the LVT said:

    ``24. We invited the respondent [Mr Drax] to explain why the costs were so high, indicating that in our experience we would expect them to be in the region of £2,000-£3,000. The answer that we have from Mr Drax and Miss Foye [a senior assistant solicitor with Preston Redman, Mr Drax's solicitors] is that a very substantial amount of work had to be done because of service charge matters raised by CM [Coles Miller, solicitors to the nominee purchaser]

    ...

  7. That raises two issues:

    (a) What proportion of the second notice costs relate to service charge matters?

    (b) Are those costs relating to service charges recoverable under section 33?''

    On the first point the LVT noted that there was little documentary evidence to assist in determining how much of the costs incurred related to service charges. They said:

    ``28. ...Miss Foye did not seem to demur from our suggestion of at least 40% of the costs arising from service charge issues... On the available evidence, we therefore found that a very substantial part of the high level of costs related to service charge matters. Bearing in mind that the Respondent was in control of service charge accounting it was unnecessary and inappropriate for PR [Preston Redman] to be significantly involved in those issues and we found therefore that their costs on that aspect were not reasonably incurred.''

    On the second point the LVT found that the provisions of section 33(1) of the 1993 Act, dealing with the costs of enfranchisement, were:

    ``29. ...very specific and do not, in themselves, include dealing with service charges.''

    However the section provided that costs that were incidental to the listed matters were liable to be paid by the nominee purchaser. The LVT said:

    ``30. ...We took the view that incidental work, to fall within the Section, is to be construed tightly... While we accept that service charge issues arose as a result of the initial notice, we found that those issues did not fall within the meaning of `incidental' in Section 33(1) and that they should be disallowed accordingly.''

    The LVT noted that Mr Drax was a chartered surveyor and that he was ``very fully involved'' in the transaction which ``has had a significant effect on the level of costs recorded by PR.'' The LVT said that the specific items referred to in section 33(1) did not necessitate a significant input from Mr Drax and that:

    ``31. ...There would be nothing particularly unusual about the necessary involvement of the freeholder in this case as against that of the freeholder in other similar cases.''

    The case was not materially different from the enfranchisement of any other small block of flats. The LVT concluded that as it did not have sufficient evidence to enable them to undertake a detailed analysis of the costs it could:

    ``32. ...only take a broad brush approach and determine what we believe, taking into account other cases and using our own knowledge and experience, a case such as this would reasonably justify as regards costs payable under section 33.''

    They noted three LVT cases to which they had been referred under section 33 and others in relation to section 60 of the 1993 Act (grant of a new lease). The LVT concluded:

    ``35. Taking all the above into consideration we believe that the circumstances of this matter in relation to the second notice and the limited amount of work provided for under section 33, that a reasonable sum for the Respondent's legal costs does not exceed £2,500.''

  8. In respect of the third issue, the application for costs under paragraph 10 of Schedule 12 of the 2002 Act, the LVT said that the nominee purchaser's suggestion that Mr Drax's section 33 costs should be limited to some £240:

    ``38. ...was not a helpful attitude and unless there were other considerations, we might have found a costs order to be appropriate. However, this is a case where we have found that the Respondent's claim for Section 33 costs has been very significantly overstated to the extent that we do not feel any reasonable offer (measured in terms of our determinations) from the Applicant would have achieved settlement. For that reason we decided we would not, in this instance, make such an Order.''

    In its reasons for refusing leave to appeal the LVT said that:

    ``To put it another way, had the [appellant's] costs claim been limited to Section 33 costs, there would have been more likelihood, in our view, of a sensible offer being made. So we considered the [appellant's] claim was unreasonable and should also be taken into account in deciding this issue.''

    The LVT went on to say that it considered the nominee purchaser's attitude in its points of dispute to have been unreasonable and of no assistance but it had considered that behaviour in the context of the appellant's overstated claim. The LVT...

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