The Adjudicator to HM Land Registry

 

 

Case Number: Ref/2005/0554

 

Title Number: TGL3220

 

Property: 1B Court Lane, Southwark, London SE21 7DH

 

Applicant: The Incorporated Trustees of the Dulwich Estate

 

Applicant Representation: By Counsel-

 

Respondent: Brigid Catherine Gardner

 

Respondent Representation: In Person

 

Before: Michelle Stevens-Hoare sitting as Deputy Adjudicator

 

At Procession House, London on 10 April 2006

 

 

SUBSTANTIVE DECISION

 

 

Introduction

1.             The Applicants are the managers of the Dulwich Estate under its Scheme of Management (“the Scheme”) which was made under s19 of the Leasehold Reform Act 1967 and approved by the High Court in 1974.

2.             The Respondent is the owner of Ash Cottage, 1B Court Lane, London SE21 7DH (“the Property”), which is one of 3500 enfranchised properties on the Estate subject to the Scheme.

3.             The Scheme provides for the payment of a periodic management fee. The Respondent was late in making payment of such a fee first demanded in September 2003. The fee was paid in March 2004. The Applicants then demanded payment of its costs in the sum of £75.53. That sum was later amended by £10.00 to £85.53. When the Respondent refused to pay those costs the Applicants applied to the Land Registry for a charge over the Property. The Respondent disputes the Applicants’ right to a charge for such costs under the terms of the Scheme.

 

 

Background

Factual

4.             On 15.9.03 the Applicant sent out its standard demand for the total of the estimated 2003/4 management fee and the balancing payment on the 2002/3 management fee. The standard covering notice provided for various means of payment, provided the Applicants’ banking details and warned that the Applicants would actively seek recovery of the sum demanded plus costs and could ultimately register a charge against the property. The sum demanded from the Respondent was £78.90.

5.             On 4.12.03 the Applicants sent the Respondent one of their standard chasing letters. It notified her the Applicants’ records showed her account as being in arrears by £78.90 and asked that she pay. It also warned that if payment was not made by 22.12.03 the matter would be referred to the Applicants’ solicitors with instructions to commence proceedings for recovery and the Respondent would then be liable for the costs of any such proceedings.

6.             The Respondent indicates that around 20^th to 22^nd of December 2003, upon her return to this country, she called the Applicants’ office and indicated that she had in fact sent a cheque for payment in about September 2003. She spoke to a woman who indicated the Applicants would, as the Respondent requested, investigate the position.

7.             On 6.1.04 Sandom Robinson, solicitors for the Applicants sent one of their standard letters to the Respondent. That letter notified the Respondent of the arrears and required payment by 15.1.04 failing which Sandom Robinson were instructed to take further action without further notice.

8.             On 9.2.04 the Respondent telephoned Mr Robinson of Sandom Robinson. The Respondent recalls that she indicated that she had called the Applicants in December and informed them that she had sent a cheque in September and that she understood the Applicants were investigating the position. She indicated she was therefore waiting for them to revert to her and therefore considered matters to be on hold. Mr Robinson only recalls being told about the cheque sent in September not the telephone call in December. Mr Robinson emailed the Applicants detailing his understanding of the call he had had with the Respondent and copied the Respondent into that email. The Respondent did not respond to or comment on that email.

9.             On or about 9.2.04 Simon Shire on behalf of the Applicants emailed the Respondent and informed her there was no record of receipt of her cheque, suggested she should check with her bank and issue a replacement.

10.         On 19.2.04 Sandom Robinson sent another letter noting payment had still not been received and indicating the Applicants had the right to charge the Property and payment should be made within 7 days to avoid such action.

11.         On 4.3.04 the Respondent’s cheque was received by the Applicants. Payment was acknowledged by the Applicants’ letter of 12.3.04. On or about 18.3.04 the Applicants sent an invoice that was stated to be for its solicitor’s costs in writing to the Respondent in the sum of £43.00 plus VAT and the Estate’s costs in the sum of £25.00.

 

The Scheme of Management

12.         The Scheme originally provided for a management fee to be charged. That is provided for by section 10 of the Scheme. Section 10(d) provides:-

“the management charge for each period shall become due on the date three months before the end of that period and shall be payable on that date by any person who is then the owner of the enfranchised property and shall be a charge thereon.”

13.         The Scheme provides for the calculation of the annual management fee at section 10A of the Scheme. The annual charge arises by reason of the amendment of the Scheme in the mid 1990s. Section 10A(7) contains the equivalent of Section 10(d) which provides that the annual management fee is payable by the owner of the enfranchised property in each Accounting Period following service of a Managers’ Certificate and shall be a charge on the enfranchised property.

14.         Section 11 provides that:-

“Any monies charged by the Scheme upon an enfranchised property shall be recoverable by the Managers forthwith from any owner of such property but shall not be deemed to have become due within the meaning of s101 of the Law of Property Act 1925 until the service of a notice by the Managers on an owner requiring payment of the same. Such notice shall bear the rate of interest……….the Managers shall have (without prejudice to other remedies against the owner or other person) such rights over the enfranchised property and for the recovery of principal monies interest and other monies as they would have had if they had been first mortgagees of the freehold thereof under a Mortgage created on the date of the enfranchisement and protected by the deposit of documents relating to the legal estate effected………..”.

15.         It is worth noting a number of the other provisions of the Scheme in so far as they relate to enforcement and charges on the enfranchised property.

16.         Section 3 deals with the prohibition on alterations to the exterior appearance of any building without written consent. Provision is made at Section 3(c) for:

“any reasonable costs incurred by the Managers……in connection with the application for approval and consideration thereof whether the same shall be granted or not shall be borne and paid by the applicant and shall be charged upon the enfranchised property.”

17.         Section 4 deals with exterior and structural repairs and maintenance imposing obligations on the owner. Section 5 deals with the obligation to rebuild after fire etc to the same appearance unless the Managers consent otherwise. Section 6 contains restrictions on use and appearance including trees, the depositing of temporary objects and the displaying of posters and the like as well as the hanging of washing lines and prevention of any plants that might amount to a nuisance.

18.         Section 8 contains a number of enforcement powers. Section 8 lies at the heart of the dispute about construction in this matter and accordingly I will set it out in full.

“(a) The Managers and all persons authorised by them may from time to time (but not more often than once a year unless in the meantime the Managers have reasonable grounds for suspecting a breach of any of the provisions of the Scheme) on giving reasonable prior notice enter any enfranchised property or any part thereof at any reasonable time for the purpose of ascertaining whether the Scheme is being complied with in respect of that property.

(b) Any owner of an enfranchised property to whom notice of any breach of the obligations imposed by the Scheme shall be given by the Managers shall if in default be bound to commence to make good such breach within three months after service of such notice and thereafter proceed diligently with the work and in default thereof and whether or not there shall be any other person also liable the Managers and any persons authorised by them may enter the enfranchised property and take such steps and carry out such works as the Managers shall reasonably think necessary to make good the breach

(c) all reasonable costs and expenses incurred under sub-clause (b) of this clause by the Managers in case of default of the owner shall be recoverable by them and shall be charged upon the enfranchised property.”

 

 

The Issues

19.         The parties have suggested that the questions I should determine are as follows:-

(1)          Whether or not the Scheme of Management entitles the Dulwich estate to apply for a charge to be registered at HM Land Registry against Title TGL3220 ie whether or not the provisions of paragraph 8 are relevant to costs arising from the provisions of paragraph 10 and 10A;

(2)          Whether the costs invoiced to the Respondent were reasonable (a subsidiary question is asked in the event I conclude the answer to question (1) above is no, namely whether I nevertheless have any jurisdiction to answer this question);

(3)          Whether the Applicants can also recover the costs of this application under paragraph 8(c) or only by the order of the Adjudicator.

 

 

The Applicants’ Submissions on Construction

20.         The Applicants originally claimed to be entitled to a charge in respect of their outstanding costs by reason of Section 11 of the Scheme. However when the Respondent challenged that assertion by contending that the sums claimed were not “monies charged by the Scheme” the Applicants sought to rely on Section 8 of the Scheme.

21.         It is the Applicants’ contention that it is entitled to recover its costs as costs incurred under Section 8(b) and in those circumstances Section 8(c) entitles it to a charge over the Property.

22.         Mr Thomas Seymour for the Applicants urge me to conclude that one would expect as a matter of principle, that the Scheme would operate on the basis that “the defaulter pays” and I should approach the question of construction very much with that purpose in mind.

23.         Further it is was submitted that Section 8 (b) is directed to three distinct matters, as Mr Seymour put it:-

(A)        the giving of notice of breach of any obligation imposed by the Scheme;

(B)         the owner’s remedying of the breach within 3 months after service of a notice;

(C)         the Manager’s right if default persists after expiry of that period to do remedial works.

He goes on to submit Section 8(c) provides for the recovery of the Manager’s reasonable costs of the same or for practical purposes costs of actions taken under (A) and (C).

24.         Mr Seymour submitted that the 4.12.03 letter was a notice under Section 8(b) and accordingly the costs of that letter and all actions intimately connected to it were recoverable as costs “incurred under sub-clause (b)”.

25.         Mr Seymour focused heavily on the words at the beginning of Section 8(b) namely “Any owner…….to whom notice of any breach of the obligations imposed by the Scheme………” as demonstrating that the notice referred to could relate to the breach of any obligation under the Scheme including the obligation under Section 10A to pay the annual management fee. Mr Seymour submitted that the provision was clearly not related to the obligations in Sections 4 to 7 in isolation and made the powerful point that if that had been intended clear wording to that effect could have been used.

26.         Mr Seymour summarised his submissions both in writing and oral on the basis Section 8(b) empowered the Managers to give notice of any breach and Section 8(c) empowered them to recover the costs reasonably incurred by doing so by a charge on the Property.

 

 

The Respondent’s Submissions on Construction

27.         The Respondent submitted that the powers in Section 8 to inspect, carry out works following notice of breach and to recover the costs should be construed as relating to Sections 4 to 7 alone. She had initially included Section 3 in that submission but has conceded it should not be that as it had its own provision dealing with such matters. In those circumstances she submits that any costs incurred by the Applicants do not fall within the scope of the costs referred to in Section 8 and are therefore not recoverable under that provision in the Scheme. The Respondent points to the fact that the Applicants originally relied on Section 11 in support of her submissions.

 

 

The Construction of Section 8 of the Scheme

28.         The Applicants urge me to take a purposive approach to the construction of Section 8 and to proceed on the basis that making the defaulter pay for defaults is one purpose of the Scheme. Looking at the remainder of the Scheme it is correct that there are provisions clearly designed to ensure the defaulting enfranchised property owner pays for the actual costs of remedying his default, as distinct from the costs of pursuing him for his default. There are provisions designed to ensure the defaulter pays the sums due under the Scheme by creating a charge over his property in respect of those sums, imposing interest on any delayed sum and requiring him to pay the costs incurred by the Applicants in doing what the enfranchised owner failed to do. However there are no provisions that relate to recovery of the administration or legal costs of pursuing a defaulter. Looking at the Scheme as a whole it does not provide for the recovery, under the terms of the Scheme, of the costs of recovery or enforcement incurred by the Applicants in pursuing defaulters although it does provide for the payment of interest on outstanding sums and recovery of the costs of remedying the defaulters’ breach. Section 8 alone cannot be said to be a general provisions for recovering the costs of pursing defaulters regardless of the type of default and method of recovery since sub-section (c), which deals with recoverable costs, limits the costs and expenses concerned to those incurred under Section 8(b).

29.         Further, I note the Applicants’ implicit acceptance of the Respondent’s contention that the costs of pursuing the Respondent were not recoverable under Section 11 because they were not monies charged by the Scheme, is consistent with that analysis. If that contention is right it seems to me it might be said to undermine the Applicants’ submissions. If the costs claimed are recoverable under Section 8(b) they are monies charged by the Scheme.

30.         In any event it follows considering the provisions of the Scheme as a whole there is not a discernable purpose to make the defaulter pay for the costs of enforcement against and recovery from him. With the benefit of hindsight the Applicants no doubt would wish the Scheme to operate so as to achieve that purpose however there are no express words to that effect in the Scheme nor any words or provision that can conceivably be read as having that general effect.

31.         As I have highlighted the costs and expenses recoverable under Section 8(c) are expressly limited. Section 8(c) expressly provides for the payment by the defaulter of costs and expenses incurred under Section 8(b). It follows it is pertinent to identify the actions that may be taken by the Applicants under Section 8(b) that might generate costs and expenses. As described in paragraph 22 above the Applicant contends that under Section 8(b) the Applicants are empowered to serve a notice of default and ultimately to undertake the works necessary to remedy the default itself. However, the notice referred to in Section 8(b) is notice warning the enfranchised property owner that if the default is not remedied within 3 months from the notice the Applicants will remedy the default themselves and charge the owner for the costs incurred in doing so. The wording of Section 8(b) empowers the Applicants to remedy a default provided they have complied with the precondition of servicing the requisite notice. The reference to the notice is a precondition to that remedial action not something the Applicants are empowered or required to do other than in the context of it being a precondition to recovering the costs of the work it may subsequently undertake. It follows as a matter of logic a notice under Section 8(b) can only be served in relation to a default that is capable of remedy by the Applicants. Further the notice referred to is a notice warning that if they do not remedy their breach within 3 months the Applicants will exercise their power to remedy and recover the costs of doing so.

32.         The cost and expenses that are recoverable under Section 8(c) are therefore the costs and expenses incurred by the Applicants in remedying an enfranchised owner’s continued default at least 3 months after the service of a notice warning that the Applicants propose to take that step and arguably the costs of the requisite notice.

33.         A notice requiring the enfranchised property owner remedy a failure to pay outstanding managements fees by a certain date is not a notice under Section 8(b). The notice relied upon by the Applicants as its notice under Section 8(b), the letter dated 4.12.03, was clearly not a notice given under that provision. It relates to a default that is not capable to remedy by the Applicants, it does not warn that the defaulter has 3 months until the Applicants take steps to remedy the breach themselves and it is not served as a precondition to the recovery of the costs of remedying the owner’s default.

34.         I have concluded as a matter of the proper construction of the Scheme steps taken to pursue an enfranchised owner for payment of the management fee under Section 10A are not permitted by or taken under Section 8(b) and accordingly are not recoverable pursuant to Section 8(c). In particular the letter of 4.12.03 is not a notice under Section 8(b) and the costs of that letter or indeed any of the subsequent steps are not recoverable under Section 8(c). To answer the first issue raised the provisions of Section 8 are not relevant to the recovery of monies payable under Section 10 or 10A and the Applicants are not entitled under Section 8(c) to charge the Property in respect of the costs it seeks from the Respondent as a result of her delay in payment.

35.         Given that my jurisdiction arises from and in respect of the application to the Land Registry for a charge over the property having concluded there is not entitlement to a charge I have no jurisdiction to determine whether the Applicants are otherwise entitled to recover those costs and whether if so those costs are reasonable.

36.         It follows from the conclusions I have reached that the Applicants have no entitlement under the Scheme to recover the costs they claim. The letter of 4.12.03 relied upon as being a notice under Section 8(b) was not such a notice and even if I were wrong about that, the subsequent correspondences claimed for although related in the sense that it followed on from that letter can not be said to have been undertaken pursuant to that provision.

 

 

The Reasonableness of the Sums Claimed

37.         Given my conclusion on the construction point it is not necessary for me to decide the reasonableness of the costs incurred. However, having heard the evidence called, in case it becomes relevant at a later stage I will make findings in that respect.

38.         There was a great deal of evidence about the communications between the Respondent and the Applicants or their advisers. On the Respondent’s account she indicated to the Applicant just before Christmas that she had sent the cheque and she then understood the position was being investigated.

39.         The Respondent then took no further steps to investigate the position herself or ensure that payment was made. Even if the assurance given by the Applicants’ representative in December 2003 justified her initial inactivity, the Applicant’s solicitors’ actions seeking clarification and the Applicants’ response on 9.2.04 cannot be said to be unreasonable. At best the Respondent can suggest the 6.1.04 letter should not have been sent. The work undertaken by the Applicants and their solicitors amount to three letters, two telephone calls and two emails. The sum claimed for those communications is low and cannot realistically be characterised as unreasonable.

 

 

The Costs of these Proceedings

40.         Given my conclusion on the construction point it is my view in so far as the Respondent, who has acted throughout in person, has incurred any recoverable disbursements the Applicants should pay the same. Mr Seymour indicated in the event I came to the conclusion I have come to he anticipated he would not be in position to resist such an order. Accordingly, I will give permission either party to apply within 14 days for further submissions to made as to costs failing which the Applicants should pay the Respondent’s costs.

 

 

Dated this 3 May 2006

 

 

 

By Order of The Adjudicator to HM Land Registry

 

 

 

(Michelle Stevens-Hoare)