Avon Ground Rents Limited v Sarah Louise Child [2018] UKUT 0204 (LC), Part I
RRAdmin Administration Charges, Procedure, Service Charges, Tribunal-Appointed Managers 0
The three witches in Macbeth are not named, but…
Together with Freeholders of 69 Marina (St Leonard’s on Sea) v Oram, Ghoorum [2011] EWCA Civ 1258 and Chaplair Ltd v Kumari [2015] EWCA Civ 798, this case completes a potent trio of weyward sisters, spell-binding – and not necessarily in a good way – as they shackle the law of unintended consequences to their creaking carriage, and drive it full tilt at the costs jurisdictions of the courts and tribunals.
This appeal might at first glance appear to be an innocuous appeal about procedure, and in many ways, it is just that. But do not be deceived: in one paragraph, the Upper Tribunal has created a creature that has the potential to run a coach and horses through the “no costs” regime in the First-tier Tribunal (Property Chamber). That potential is not limited to leasehold disputes.
The appeal was heard by the President of the Upper Tribunal (Lands Chamber), the Hon. Mr Justice Holgate, and His Honour Judge Hodge QC. I will refer to them together as “the Tribunal”.
A word of warning. This appeal is heavy. I am dividing it into several posts so as to keep it (relatively) manageable. This post reviews the factual and procedural background. It concludes with an overview of the grounds of appeal.
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The narrow point argued by the landlord was that only the county court, not the FTT, had the power to determine liability to pay and/or the amount of costs payable by a lessee if those costs were:
- Claimed in a county court claim under section 51 of the Senior Courts Act 1981, and
- Not the subject of an application under paragraph 5 of schedule 11 to the Commonhold and Leasehold Reform Act 2002.
The landlord’s wider point was that current procedure rules rendered unlawful a pilot scheme under which FTT judges also sat as county court judges.
That scheme is known as “double-hatting”. It is to that headgear that I now turn.
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In 2013, section 5 of the County Courts Act 1984 was amended by the Crime and Courts Act 2013. The result was that, under sections 5(2)(t) and (u) of the 1984 Act, FTT judges are County Court judges too.
In this post, I refer to judges as “FTT judges” when they exercise their FTT powers, and as “County Court judges” when they exercise their county court powers.
In 2015, the Civil Justice Council set up a working group to consider the viability of flexibly deploying that expanded judiciary.
In May 2016, the working group recommended flexible deployment in landlord and tenant, property and land registration cases. The aim was to resolve in one place disputes that would otherwise need to flit between the jurisdictions of the County Court and the FTT. A pilot scheme, the Residential Property Dispute Deployment Pilot, was set up to see whether that flexible deployment would work.
The scheme has come to be known as “double/twin-hatting” because it involves judges who are authorised to exercise both FTT and County Court powers exercising those powers in tandem, normally in the hearing rooms of the FTT.
In this case, as we shall see, that doubling-up of headwear led to no end of confusion.
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Generally, the pilot scheme has been implemented in two situations.
First, where a county court claim has been transferred to the FTT. The power to make that transfer appears in section 176A of the Commonhold and Leasehold Reform Act 2002. A transfer can only be made if the FTT has the power to decide the issues transferred and those issues arise under:
- The Commonhold and Leasehold Reform Act 2002 itself;
- The Leasehold Reform Act 1967,
- The Landlord and Tenant Act 1985,
- The Landlord and Tenant Act 1987,
- The Leasehold Reform, Housing and Urban Development Act 1993, and
- The Housing Act 1996.
Secondly, where an application containing elements that fall within the exclusive power of the county court has been made directly to the FTT, and the FTT has decided to resolve the whole of the dispute by having the case heard by a judge who can sit as both FTT and county court judge.
The double-hatted scene being set, we return to the facts of the case before the Tribunal.
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Ms Childs was the long leasehold owner of Flat 63 at The Icon in Southernhay, Essex.
Her landlord issued a claim in the County Court at Chelmsford. The claim was quantified thus:
- £1,698.18 in service charges and administration charges;
- A court fee of £115 and legal representatives’ costs of £80.
Ms Childs paid £342 at about the same time that the claim was issued, and defended the claim on the basis that:
- She had not received any relevant demands;
- She had by then paid the balance of the service charge debt, and
- She was not liable to pay the administration charges.
District Judge Mitchell in Chelmsford then issued the following, laconic order:
“Sent to First Tier Property Tribunal for a determination”.
At that moment, the landlord’s costs clock stopped ticking in the County Court and started ticking in the FTT.
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FTT judge Edgington gave directions to bring the proceedings to a final hearing.
About a week before the hearing, the FTT informed to the landlord’s solicitors that “the FTT judge would like to use his County Court jurisdiction to deal with all matters relating to costs so that another hearing in the County Court could be avoided” and asked for further detail of its costs, so that they could be assessed at the hearing.
The landlord queried the FTT’s power to assess its costs, but nonetheless provided a breakdown on Form N260, the county court form used for summarily assessing costs. The £4,425 total included:
- The county court issue fee;
- The FTT hearing fee;
- Time spent on the case in both the County Court and FTT from the date of receipt of the defence in the County Court to the date of the FTT hearing, and
- VAT.
It did not cover the preparation and submission of the claim to the County Court or the processing of the request for judgment. It appears that those costs were the subject of a fixed fee, although it is unclear whether the landlord considered those costs to be fixed contractually or under the Civil Procedure Rules.
It is worth noting that none of the £4,425 had been demanded from Ms Child under the terms of her lease, nor – unsurprisingly therefore – had she made any application to determine their reasonableness under paragraph 5 of Schedule 11 to the 2002 Act.
Responding to the landlord’s query about the FTT’s powers, Judge Edgington responded that, after the FTT matters had been heard, as a County Court judge, he could deal with anything else that remained live in the County Court claim whilst everyone was still present, thereby avoiding a further hearing.
The landlord remained unconvinced as to the FTT’s powers to deal with the County Court costs, and expressed that concern in a letter back to the FTT, asking whether the case was being heard as part of the Pilot.
By then the hearing date was upon the parties. It was conducted by FTT Judge Edgington and two Tribunal members.
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Unpacking the correspondence, the Upper Tribunal held that two things would have been clear to “the reasonable and well-informed reader”:
- First, that the FTT proposed to deal with the substantive dispute as the FTT;
- Secondly, that the FTT judge proposed to sit alone as a County Court judge, wearing his second hat, to decide the question of the costs of the County Court and FTT proceedings.
That, observed the Tribunal, seemed to be the approach understood by the landlord’s legal representatives, including Counsel representing it at the hearing.
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Four days before the FTT issued its decision, Judge Edgington, sitting as a County Court judge in Chelmsford, made a rather peculiar order. Not least amongst its peculiarities was the recital that “the FTT’s decision was known to the Court”.
Pursuant to the order:
- The claim was allocated to the Small Claims Track;
- Judgment was given for the landlord in the sum of £2,481.96 plus £315 court and tribunal fees;
- The total amount, £2,796.96, was payable on or before 31 July 2017.
The FTT’s decision, in favour of the landlord, followed.
It included a determination of “the costs claimed contractually as administration charges”, by which the landlord’s £4,425 was reduced to £2,208.80.
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The FTT refused the landlord’s application for permission to appeal “because it would be disproportionate to the amounts involved and the general points made are not justified in view of the decision, the law or the facts”.
It added that “following the hearing a Tribunal decision was made in respect of all matters and a county court judgment was drawn up and issued”.
Take note: the decision had been made by the FTT, and “in respect of all matters”.
Unfortunately however, the FTT then:
- Declined to clarify whether an appeal should be lodged against the county court judgment;
- Stated that no guidance was needed on the question of how cases should be conducted when the FTT judge exercised jurisdiction as a County Court judge since the procedures for such hearings were “already known”; and
- Recorded that the contractual costs had been “assessed as administration charges” on the basis that the claim which had been transferred to the FTT had included unspecified “costs”, and a variable administration charge was “payable only to the extent that the amount of the charge is reasonable” (see Schedule 11, paragraph 2 of the 2002 Act).
Not madly helpful, it has to be said.
The Upper Tribunal (Martin Rodger QC) granted permission to appeal because “the proposed grounds of appeal are arguable and raise issues of general importance”.
To avoid any further procedural confusion, at the Upper Tribunal’s prompting, the landlord sought and was granted permission to appeal those parts of the decision (if any) that had been made using County Court powers. The appeal was then transferred from Chelmsford to the county court at Central London.
Sir David Holgate and His Honour Judge Hodge QC were judges of the County Court and empowered to sit as judges of the Upper Tribunal (Lands Chamber).
It was therefore agreed that they would hear both the FTT and County Court aspects of the appeal.
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There were four grounds of appeal.
Ground 1: jurisdiction
This was the primary, main ground. It related to the powers and jurisdiction of the FTT and the County Court.
The landlord’s position was that the FTT had the power to deal with the legal costs incurred up to and including the date of issue of the County Court claim, but that only the County Court had the power to deal with the costs incurred after that date.
Regrettably, said the landlord, in Ms Child’s case, the FTT had exceeded its powers by arrogating to itself the power to determine those post-issue costs.
The dispute should, said the landlord, have been resolved as follows:
- The County Court should have transferred to the FTT those parts of the claim over which the FTT had jurisdiction;
- The FTT should have determined those issues;
- The FTT should then have sent those issues back to the County Court for the County Court to exercise its power to determine the amount of costs payable under section 51 of the Senior Courts Act 1981.
There was no room for double-hatting in those rules.
The entire pilot scheme should therefore be consigned to the hattery in the sky.
Ground 2: the court order
If all of the above was wrong, and the FTT was entitled to assess the costs incurred by the landlord after issue of the claim, the landlord’s second ground of appeal was that the judge should not have issued a County Court order giving effect to the FTT decision.
There was, argued the landlord, a proper procedure to be followed under section 176C of the Commonhold and Leasehold Reform Act 2002. The FTT should have issued its decision and allowed the landlord to follow that procedure.
Ground 3: failure to give reasons
After those two heavy grounds of appeal, ground 3 was relatively lightweight, albeit allied with the first: the FTT had not explained its procedure and jurisdiction.
That meant that the parties could not establish which parts of the decision had been made by the FTT and which parts by the County Court.
They therefore did not know how to appeal it. In the County Court an appeal from a District Judge lies to the Circuit Judge, whereas an appeal from the FTT is to the Upper Tribunal.
Ground 4: natural justice
Here the ground was breach of natural justice.
The landlord’s complaint was again simple. The FTT had not given its legal representatives the opportunity to address it on points that it addressed in its decision, and that had caused it to reduce the amount of costs to which, in its view, the landlord was entitled.
In the next post, the Tribunal gets to grips with the landlord’s first, and main, ground of appeal.
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