United Kingdom Upper Tribunal (Lands Chamber)

UPPER TRIBUNAL (LANDS CHAMBER)

UT Neutral citation number: [2014] UKUT 30 (LC)

LT Case Number: LRX/138/2012

 

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

 

LANDLORD AND TENANT – right to manage – claim for landlord’s costs incurred in connection with a notice of claim to acquire the right to manage – whether LVT entitled to conclude no costs incurred – adequacy of reasons – appeal allowed – s.88 Commonhold  and Leasehold Reform Act 2002

 

 

IN THE MATTER OF AN APPEAL AGAINST A DECISION OF THE

LEASEHOLD VALUATION TRIBUNAL FOR THE

LONDON RENT ASSESSMENT PANEL

 

BETWEEN:

 

COLUMBIA HOUSE PROPERTIES (NO.3) LTD Appellants

and

IMPERIAL HALL RTM COMPANY LIMITED Respondents

 

Re: Imperial Hall

104-122 City Road

  London EC1V 2NR

 

Before: Her Honour Judge Alice Robinson

 

 

Sitting at Upper Tribunal, Lands Chamber, 45 Bedford Square, London WC1B 3DB

on

Wednesday 8 January 2014

Justin Bates instructed by Brethertons LLP for the Appellants

Katie Helmore instructed directly by the Respondents

© CROWN COPYRIGHT 2014

The following cases are referred to in this decision:

 

Metropolitan Property Realisations Limited v Moss [2013] UKUT 415 (LC)

London Borough of Havering v MacDonald [2012] UKUT 154 (LC)

Country Trade Limited v Noakes [2011] UKUT 407 (LC)

 

 

The following additional cases were cited in argument:

 

Yorkbrook Investments v Batten (1986) 18 HLR 25, CA

Daejan Investments Ltd v Benson [2011] EWCA Civ 38 and [2009] UKUT 233

Schilling v Canary Riverside Development PTD Ltd (LRX/26/2005)

Arbrath v North Eastern Ry. Co (1883) 11 QBD 440

Poyser and Mills’ Arbitration [1964] 2 QB 467

Westminster City Council v Great Portland Estates Plc [1985] AC 661

UCATT v Brain [1981] IRLR 224

 

DECISION

Introduction

1.           This is an appeal against a decision of the Leasehold Valuation Tribunal for the London Rent Assessment Panel (“the LVT”) dated 17 August 2012 in which it rejected a claim for costs pursuant to s.88 of the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”).  The applicant before the LVT and the appellant before the Tribunal is Columbia House Properties (No.3) Limited (“the Landlord”), the freehold owner of Imperial Hall, 104-122 City Road, London EC1V 2NR (“the Property”), a building containing 63 residential leasehold units.  The respondent before the LVT and the Tribunal is Imperial Hall RTM Company Limited (“the RTM Company”) which took over management of the Property on 4 April 2011.

2.           In November 2006 the RTM Company served a notice of claim to acquire the right to manage the Property.  A counter notice was served and an application made to the LVT.  At the hearing the application was withdrawn and the LVT ordered the RTM Company to pay the Landlord costs in the sum of £700 plus VAT.

3.           In February 2010 the RTM Company served a further notice of claim to acquire the right to manage the Property.  A counter notice was again served.  In August 2010 the RTM Company served a further notice of claim to acquire the right to manage the Property without prejudice to the validity of the previous claim notice.  A counter notice was served but on 27 October 2010 the parties agreed terms.  These included that the RTM Company would acquire the right to manage the Property on 4 April 2011, the LVT application was withdrawn and that the RTM Company would pay the Landlord the sum of £6,312.69 in full and final settlement of its surveyors and legal costs arising from or in connection with the February claim notice.  That sum was duly paid.

4.           In August 2011 the Landlord sought to recover further costs from the RTM Company in respect of all three claim notices totalling £16,488 (subsequently reduced to £15,036 which is not material to this appeal) in respect of work said to have been carried out by the Landlord’s Managing Agents Sterling Estates Management Limited (“SEM”).  The RTM Company refused to pay and the Landlord applied to the LVT for a determination of the amount of costs payable to it pursuant to s.88 of the 2002 Act.

5.           Permission to appeal to the Tribunal was granted on 4 February 2013 by the President. The appeal was ordered to be dealt with by way of a review with a view to a rehearing.

Law

6.           Section 88 of the 2002 Act provides as follows:

“(1) A RTM company is liable for reasonable costs incurred by a person who is –

(a) landlord under a lease of the whole or any part of any premises,

(b)party to such a lease otherwise than as landlord or tenant, or

(c) a manager appointed under Part 2 of the 1987 Act to act in relation to the premises, or any premises containing or contained in the premises,

in consequence of a claim notice given by the company in relation to the premises.

(2)  Any costs incurred by such a person in respect of professional services rendered to him by another are to be regarded as reasonable only if and to the extent that costs in respect of such services might reasonably be expected to have been incurred by him if the circumstances had been such that he was personally liable for all such costs.

(3)  A RTM company is liable for any costs which such a person incurs as party to any proceedings under this Chapter before a leasehold valuation tribunal only if the tribunal dismisses an application by the company for a determination that it is entitled to acquire the right to manage the premises.

(4)  Any question arising in relation to the amount of any costs payable by a RTM company shall, in default of agreement, be determined by a leasehold valuation tribunal.

7.           The effect of this provision is to entitle a landlord, amongst others, to recover reasonable costs incurred in consequence of a notice of claim to acquire the right to manage subject to two qualifications.  The first, contained in subsection (2), is that any costs incurred in respect of professional services will only be reasonable to the extent that the landlord could reasonably have been expected to incur them if he were personally liable for the costs.  The second, contained in subsection (3), is that costs incurred as a party to any LVT proceedings can only be recovered if the claim to acquire the right to manage is unsuccessful.  It follows that, subject to the ceiling imposed by subsection (2), a landlord whose right to manage his own property may be expropriated is entitled to investigate and deal with a claim to acquire the right to manage up to the point at which LVT proceedings are commenced, whether the claim is ultimately successful or not.  However, thereafter, if the landlord chooses to contest the claim but in the event is unsuccessful, he is not entitled to recover his costs of the LVT proceedings.

The LVT decision

8.           The invoice from SEM to the Landlord described the work done in respect of each claim notice as “review and preparation of documents and case material, liaison with client & client’s solicitors, professional advice” and gave the number of hours spent by a Property Manager at £85 plus VAT per hour and a director at £150 plus VAT per hour.  In Directions given on 26 January 2012 the LVT required the Landlord to provide a full breakdown of the costs in issue.  No breakdown of the costs was provided but in a Statement of Case dated 9 February 2012 the Landlord described in some detail the nature of the work undertaken by SEM in response to each claim notice.

9.           At the LVT hearing the Landlord was represented by counsel and called oral evidence from Mr Shalim Ahmed the Managing Director of SEM, a fellow of The Institute of Legal Executives, a member of The Institute of Residential Property Management and an associate of the RICS.  The RTM Company was represented by Mr Bruce Maunder-Taylor FRICS MAE and provided a witness statement from Mr Scott Lewis McCabe, the lessee of flat 42.  Mr Ahmed’s evidence is summarised by the LVT in paragraphs 13-22 of the decision:

“13. In Columbia’ statement of case it was stated that where the initial or revised invoice refers to the involvement of a director, this was Mr Ahmed.

14. During the hearing a copy of the management agreement between Columbia and SEM was produced.  Mr Ahmed said Columbia was seeking to recover sums for additional work which was charged at an hourly rate, undertaken by SEM outside the core management arrangements.  Mr Ahmed said that no additional instructions were sent to SEM by Columbia.

15. He produced a copy of the current management agreement and said that such an agreement existed in the past in similar terms.

16. Mr Ahmed described the late charging by Columbia as a ‘procedural error’.  For instance for alleged fees arising in 2007 being charged in 2011.

17. When asked for a full breakdown of the charges and the documents relied on in support the contention that work had carried out by SEM and charged to Columbia, Mr Ahmed was unable to provide a breakdown.  He said that the charges stated in the original and revised invoice had been assessed by SEM having been discussed with Columbia.

18. Mr Ahmed said that the time spent by SEM and claimed for in the initial and revised invoice was more extensive than claimed.  The costs would have been higher had these not been ‘assessed’.  The application had been complex in terms of who qualified or who did not.  Mr Ahmed submitted that the sum claimed had been substantially reduced following agreement with Columbia.  It was also stated that a reduced charging rate had been used of £150 plus VAT, rather than £180 plus VAT for a director.  However no invoices from SEM to Columbia (other than the revised invoice in 2012), correspondence or file notes were produced to support the discussions or agreement contended for.

19.According to the revised invoice, Mr Ahmed as a director had carried out a similar number of hours to the property manager.  However, when Mr Ahmed was asked how much of the work he had carried out (as a director) he said that this was 90% of the work in respect of each of the claim notices.  This was inconsistent with the hours charged in the initial and revised invoice.  When asked for an explanation Mr Ahmed said he had done the majority of the work on the applications and that the invoice and costs were discussed with Columbia some time in 2011, but could not give the date.

20. Mr Ahmed said that he had a note on his firm’s file of how the hours charged had been calculated.  However this was not in the hearing bundle and was not produced at the hearing.  He also said that SEM could not produce any time sheets or other records to support the sums claimed as none had been prepared by SEM or Columbia at the time.  There were no invoices from SEM to Columbia (apart from the revised invoice) in respect of the hours of work or identifying the particular work the charges were in respect of.

21. It was noted that the description of the work claimed to have been carried out in respect of each of the claim notices was identical Review and Preparation of Document and Case Material, Liaison with Client & and Client’s solicitors, Professional Advice.

22. In respect of the respondent’s view that some of the work carried out by SEM was legal work, Mr Ahmed commented that this was not usually the work of managing agents, but SEM would deal with this if the client asked them to do so.  Mr Ahmed said that as managing agents his firm often do work connected to acquisition of the right to manage.

10.        In paragraph 23 of the decision, the LVT referred to the management agreement between the Landlord and SEM dated 1 September 2010.  It was accepted on behalf of the RTM Company that the management agreement relating to earlier relevant periods was in similar terms, see paragraph 24 of the LVT decision.

11.        As set out in the LVT decision, clause 4.2 of the management agreement states:

“The Client authorises SEM Managing Agents to act for it in its name and on its behalf at its expense:

4.2.1 To perform or do anything referred to in clause 6 hereof …”

The obligations included in clause 6.5 are:

“To perform the services detailed in Parts I, II and III of the summary of services shown at Appendix 1”

The obligations included in clause 6.6 are:

“To perform any of the other services detailed in Part IV of the summary shown as instructed by the Client”

12.        The LVT decision records

 

“The summary of services covered in the management fee at Appendix 1 was provided.  These included various day to day normal management services in Parts I, II and III. 

Part IV of Appendix 1 specified additional services may be provided by SEM, if instructed, for which additional fees would be charged or earned.  This included:

“(e) Dealing with non-routine matters arising under the terms of the Landlord and Tenant Act 1985 and 1987 and the Housing Act 1996 and as and where amended/updated.

(f) Preparation of documents and administrative work in connection with Court appearances.

(g) Appearance in Court as a witness in respect of service charge arrears etc

(h) Preparation of documentation and information and attendance at a Leasehold Valuation Tribunal or such other Court in the management of the Estate.

(i) Involvement in litigation related to the management of the Estate and by the duties contained within this agreement.

.

.

For the above

The following basis of charges will apply

 

(f) – (k) to be charged on a time and materials basis subject to prior agreement.”

The LVT then went on to identify an Addendum to Part V of the Management Agreement headed “Schedule of Additional Management Fees or Earnings” which gave the hourly rates of a partner/director as £180-£220. a senior property manager of £150 and a property manager/clerk of £85 plus VAT at the prevailing rate.

13.        So far as the costs claimed by the Landlord in respect of dealing with the 2006 claim notice are concerned the LVT decided, in accordance with the submissions advanced on behalf of the RTM Company, that the s.88 costs were dealt with by the LVT at the hearing on 20 April 2007 when the claim was withdrawn and the RTM Company was ordered to pay the landlord £700 plus VAT in costs.  Accordingly the LVT held that it did not have jurisdiction to make a further determination in respect of any additional costs relating to that claim notice, see paragraphs 38 to 42 of the decision. There is no appeal against that aspect of the decision.

14.        So far as the costs relating to the February 2010 claim notice were concerned, the LVT concluded that any legal and surveyors costs had been compromised in the consent order dated 27 October 2010 but that did not exclude a further application pursuant to s.88 in respect of other costs and that it was free to deal with any application for costs relating to the August 2010 claim notice, see paragraph 44.

15.        As to these costs the LVT decided that the Landlord “has not shown on the evidence presented that it is entitled to the sums claimed on the revised invoice dated 21 March 2011”, see paragraph 59.  The LVT went on to describe the invoices.  It noted that the description of work relating to each claim notice was substantially the same.  The decision then continued:

“63. It was the submission by the RTM company that Columbia had not produced any or any satisfactory evidence that the costs claimed had been incurred.  The main witness was Mr Ahmed, the managing director of SEM, who, the Tribunal was told was the person who had undertaken the hours of work as a director in the invoice.

64. However, there was no documentary supporting evidence to support what work had been undertaken in the hours claimed.  There were no time sheets, no contemporaneous or other invoices to Columbia for the work, no file notes, no correspondence with Columbia accepting the work or paying any sums to SEM for this.  There was no clear identification of the clauses in the management agreement relied on by SEM supporting contractual liability to pay for the alleged work.  Further, the Tribunal considers that there was no satisfactory evidence that any work undertaken by SEM exceeded what would come within normal management duties.

65. The hours claimed in the initial and revised invoice were inconsistent with the oral evidence of Mr Ahmed in respect of the person undertaking the work.  His evidence was that 90% of the work was carried out by him as a director, which is inconsistent with the hours claimed in respect of the property manager in the revised invoice.  Overall, the evidence of Mr Ahmed was that the hours, and therefore the sums claimed by multiplying these with the rates charged, had been ‘assessed’ by SEM and Columbia, rather than reflecting an accurate claim for identifiable items of work.  No full breakdown of the costs in issue was provided as required by the Tribunal’s directions.

65. The test of reasonableness under Section 88(2) encompasses that any costs incurred by a landlord in respect of professional services rendered to him or her by another are to be regarded as reasonable only if and to the extent that costs in respect of such services might reasonably be expected to have been incurred by him or her if the circumstances had been such that he was personally liable for such costs.  Having considered the evidence provided, we find that Columbia has not shown that the costs claimed were incurred by the categories of persons under s.88(1) or that this claim meets the test of reasonableness under Section 88(2).

66. In the circumstances, having considered the evidence as a whole, the Tribunal find that Columbia has not shown that the costs claimed have been incurred or that the reasonableness test has been met.”

For ease of reference, throughout the rest of this decision I shall refer to the first paragraph 65 of the decision as paragraph 65(1) and the second paragraph 65 as paragraph 65(2).

The appeal

16.        The grounds of appeal against the LVT decision are as follows:

(1)  The LVT erred in law and/or failed to take account of relevant evidence or considerations, and

(2)  The LVT failed to give reasons for its decision that the costs were unreasonable.

17.        As refined in his Skeleton Argument and oral submissions, Mr Bates, counsel for the Landlord, submitted that in the light of the evidence before the LVT of work carried out by SEM on behalf of the Landlord dealing with the three claim notices, it was not open to the LVT to conclude that the landlord had failed to show that any of the costs claimed had been incurred by it.  It was clear from the evidence that SEM had acted as the landlord’s managing agent throughout the relevant period. Further, it was plain that some work had been undertaken by SEM responding to the three claim notices and appearing at LVT hearings. That work had been fully described in the Landlord’s Statement of Case.  Any concerns expressed by the LVT in relation to the lack of documentation such as time sheets and inconsistencies in Mr Ahmed’s evidence were relevant to how much work had been done and its value but it could not be said that none had been undertaken.

18.        As to contractual liability to pay for SEM’s work, the management agreement as quoted by the LVT identified the additional services specified in Part  IV of Appendix 1 which would incur additional charges and the work carried out by SEM plainly fell with one or more of those headings.  It was clear that dealing with notices of claim to acquire the right to manage fell outside normal management duties covered by the management fee, as demonstrated by paragraph 2.5(t) of the RICS Service Charge Residential Management Code. Even if the work did fall to be remunerated within the fee for day to day management services, the fee should be apportioned on a quantum meruit basis and the appropriate proportion was payable under s.88.

19.        Mr Bates relied upon the decision of the Tribunal (Martin Rodger QC, Deputy President) in Metropolitan Property Realisations Limited v Moss [2013] UKUT 415 (LC), a decision concerning s.60 of the Leasehold Reform, Housing and Urban Development Act 1993.  That entitles a landlord served with a notice requiring the grant of a new lease to be reimbursed his reasonable costs of investigating the claim, obtaining advice on the premium to be paid and completing the formal steps necessary to grant the new lease.  There the LVT had given directions requiring provision of any relevant client care letter, details of time spent and hourly rates applied with copies of bills of costs from the solicitors whose costs were being sought by the landlord in that case.  Although a detailed schedule of costs was provided it did not contain any statement that those sums were payable by the landlord, it was not signed by the solicitor and the documents did not include any invoice from the solicitors to the landlord or any documents showing that solicitors had been instructed by the landlord.  Although the point had not been taken on behalf of the lessee the LVT was critical that no client care letter or bills had been produced and stated:

“20. The Tribunal considered the matter and found that there was no evidence that the applicant had been asked to pay or agreed to pay the costs.  The Tribunal came to the conclusion that no profit costs claimed by Wallace LLP should be payable by the respondent because the Tribunal could not be satisfied on the evidence provided the applicant was actually liable to pay Wallace LLP all or any part of the costs claimed…”

20.        In his judgement the Deputy President said that:

“26. I am satisfied that by focussing its attention on the absence of a client care letter, the LVT failed to take account the totality of the evidence before it.  It was clear beyond argument (and the contrary had not been suggested by the respondent) that Wallace had acted for the appellants in connection with the enfranchisement claim.  Wallace is a well known and reputable firm of solicitors specialising in work of this type.  It is neither a charitable institution nor a gang of conspirators and in the context of an application under section 60 the LVT adopted a surprisingly sceptical approach to what it was told by the firm’s representative.  There was no reason for the LVT to disregard the material contained in the points of reply signed on behalf of Wallace and confirmed by Miss Neale that the work comprised in the schedule had been carried out at the agreed charging rates.  Had the LVT considered all of the evidence before it and asked itself whether, on balance of probability, there existed a contract between the appellant and its solicitors which obliged the appellant to make payment for legal services supplied to it, only one conclusion could have been reached.

27. Any suggestion that Wallace was acting gratuitously would have been fanciful and neither the LVT nor the respondent has suggested that to be the case. The alternatives to taking the schedule of costs at face value were, therefore, that the costs incurred in the connection with the enfranchisement claim were to be paid by the Council, rather than by the appellant, or alternatively, that Wallace were to receive nothing from their client and were to be entitled only to such sum as the respondent agreed to pay or the LVT was willing to award.  Neither of those possibilities were canvassed by the LVT and neither stands up to scrutiny…  Nor could it credibly have been suggested that Wallace had acted on a speculative basis so that their remuneration was not to be a liability of their client but rather was to come only from the respondent.  Why any reputable firm of solicitors should agreed to act on that basis is not obvious but in any event the evidence before the LVT was that Wallace had rendered an interim invoice to their client.  Unless that invoice was to be regarded as a sham, which was not a conclusion remotely open to the LVT on the evidence before it, it was wholly inconsistent with any notion that the solicitors were acting without the expectation of being paid by their own client albeit that their client would be entitled to be reimbursed for so much of their charges as fell within section 60 of the 1993 Act.”

The Deputy President went on to point out that a client care letter was not mandatory and even if one should have been sent that would not prevent the solicitors from recovering a reasonable fee for the work undertaken.

21.        Mr Bates submitted that s.60 was a similar provision to s.88 in that it created a right to costs subject to consideration of reasonableness.  As in that case it was clear that here SEM had acted as agents on behalf of the Landlord, SEM is “… neither a charitable institution nor a gang of conspirators…” and it is “fanciful” to suggest that SEM were acting gratuitously.  For the reasons already given, it was not open to the LVT to conclude that SEM’s work dealing with the claim notices did not exceed what would come within normal management duties.

22.        Finally, although Mr Bates did not abandon the argument set out in the Statement of Case that the LVT had wrongly decided the issue having regard to the burden and standard of proof, he acknowledged that his argument in this respect was largely bound up with his submissions relating to the Metropolitan Property case.

23.        As to the second ground of appeal, Mr Bates submitted that the standard of reasons required of the LVT had recently been summarised by the Tribunal (Her Honour Judge Walden-Smith) in London Borough of Havering v MacDonald [2012] UKUT 154 (LC) at paragraphs 31 and 32.  He submitted that although reasons could be briefly stated, when considering the reasonableness of costs you would expect to see some analysis of the nature of the work undertaken, how many hours were spent, the amount charged and the reasonableness of each.  It was not open to the LVT to simply award nothing.  If it concluded that sums claimed were excessive then the LVT should use its experience to decide what would be a reasonable amount having regard to the available evidence, see for example Country Trade Limited v Noakes [2011] UKUT 407 (LC).

24.        Miss Helmore, counsel for the RTM company, submitted that the LVT was entitled to conclude that there was no evidence or no credible evidence that any of the costs claimed had been incurred by the Landlord.  At the time the consent order was made in October 2010, the RTM company agreed to pay a substantial amount of the Landlord’s professional costs of dealing with the February 2010 claim notice and that sum has subsequently been paid.  At the time the August 2010 claim notice was accepted and there had never been any LVT proceedings relating to it.  The evidence that SEM was the Landlord’s managing agent and had undertaken work for the landlord was nothing to the point.  The issue was whether the Landlord could demonstrate that it had incurred any costs by virtue of a liability to pay SEM for work done in consequence of the 2010 claim notices.

25.        The LVT analysed the evidence in detail and found that there was no documentary evidence to support what work had been done, no clear identification of the clause in the management agreement relied on by SEM, no satisfactory evidence that any work done exceeded what would usually come within normal management duties and the invoices were inconsistent with Mr Ahmed’s oral evidence. As a specialist tribunal which heard the oral evidence the Landlord was unable to demonstrate that its decision was irrational.  The LVT plainly found that Mr Ahmed’s evidence was not credible and it was in a unique position to assess that.  Having regard to the paucity of documentary evidence and the unsatisfactory nature of Mr Ahmed’s oral evidence the LVT was entitled to reach the conclusion it did.

26.        Miss Helmore submitted that there were a number of significant differences between the Metropolitan Property case and the present case.  There the lessee had never challenged the fact that the landlord had incurred some solicitor’s costs, merely their quantum.  Further, whereas costs would inevitably be incurred for purposes of s.60 by the virtue of a grant of a lease extension, there may be no costs incurred if a notice of claim to acquire the right to manage property is accepted and any work carried out by managing agents could be included in their normal management fee.  The list of items in Part IV Appendix 1 of the Management Agreement did not refer to dealing with right to manage issues or the 2002 Act and the LVT was entitled to conclude that there was no satisfactory evidence that any work undertaken by SEM exceeded what would come within normal management duties, there being no evidence of any separate instructions. Therefore it was not possible to say that any costs had been incurred in consequence of a claim notice for the purpose of s.88. Further, there is no evidence that that the RICS Code was relied on before the LVT.

27.        As the second ground of appeal, Miss Helmore submitted that there was no issue as to the standard of reasons required by the authorities.  She submitted that the conclusion at the end of  paragraph 65(2) of the LVT decision that the landlord has not shown that the claim meets the test of reasonableness under s.88(2) was based on the assessment set out in paragraph 64 and paragraph 65(1) which set out fully the LVT’s reasons.  Further having made a clear finding that the relevant costs had not been incurred, it was not incumbent on the LVT to go on and consider the alternative submissions as to reasonableness.  The adequacy of reasons given on the issue of reasonableness had to be judged by reference to its decision on the first issue although she was unable to cite any authority in support of such an approach.  When assessing the question of reasonableness the LVT was well aware that the RTM company had already paid a large sum in respect of legal and surveyor’s costs relating to the claim to acquire the right to manage, see paragraph 34 of the decision.

Decision

28.        The RTM Company’s case before the LVT on the issues which are relevant to this appeal was succinctly summarised in paragraph 21 of its’ Statement of Case:

“Alternatively, the Respondent submits that is does not have any liability for the Applicant’s managing agent’s costs as there is no evidence that the Applicant has “incurred” such costs as required under Section 88 of the 2002 Act. Even if the Applicant had incurred such costs, the Respondent submits that such costs are unreasonable…”

That is reflected in the LVT’s summary of the RTM Company’s case at the hearing in paragraphs 52 to 57 of the decision. In particular, the RTM Company relied on a lack of evidence that the Landlord was personally liable for SEM’s costs, no letter of instruction or evidence of payment for example. It also made the point that the costs of a managing agent could not be recovered under s.88 of the 2002 Act unless appointed under Part 2 of the Landlord and Tenant Act 1987. It is important to note from this that the RTM Company did not assert that SEM had not carried out any work or incurred any costs in connection with the claim notices. The RTM Company’s case was that there was a lack of evidence to show that the Landlord was liable to pay such costs.

29.        That is not surprising because there was ample evidence that SEM had undertaken work in connection with the claim notices. The February 2010 claim notice was addressed to the Landlord care of SEM and to SEM personally. The August 2010 claim notice was also addressed to the Landlord care of SEM. Thus the notices would have been received initially by SEM. Although the counter notices are not in evidence the Landlord’s Statement of Case before the LVT, signed with an accompanying statement of truth, asserted that “SEM assisted the Applicant in preparing and issuing a Counter Notice in response to this second Claim Notice” (paragraph 15.5) and “the Applicant once again engaged the services of SEM in undertaking…preparation and service of [the counter notice]” (paragraph 16.4). That the counter notices were served by SEM was not disputed by the RTM Company. The Statement of Case also describes other work carried by SEM at the Landlord’s request of the kind a landlord would be expected to undertake on receiving a notice of claim to acquire the right to manage, such as checking the details of lessees and floor areas, and refers to SEM assisting with the preparation of documents for the LVT proceedings. There is no assertion by the RTM Company that such work was not necessary or in fact undertaken by SEM. Its case was that it was unreasonable to have to pay for both solicitors and SEM to do such work, see paragraph 56 of the LVT decision. The Statement of Case was supported by some documents that were exhibited. These include a letter dated 27 April 2010 from SEM to the RTM Company’s solicitors replying to a letter they had written to SEM dealing with issues arising out of the February 2010 claim notice and asking for further information. The agreement reached on 27 October 2010 was recorded in another letter from SEM to the RTM Company’s solicitors and a consent order in the LVT proceedings signed by SEM on behalf of the Landlord.

30.        When I asked Miss Helmore if the LVT had in effect concluded that the claim was fraudulent because it wholly disbelieved Mr Ahmed such that SEM had not carried out any work at all and its invoice was a sham she replied that she did not go that far. In my judgment she was right to do so. That formed no part of the RTM Company’s case and the LVT’s reasons have to be read in the context of the arguments before it. Any finding of fraud would have to be very clear on the face of the LVT decision and there is none. It follows that in my judgment the LVT’s conclusion that the Landlord had not shown it had incurred costs was based on a lack of evidence as to its liability for SEM’s costs rather than that SEM had not carried out any work.

31.        The reasons given by the LVT for accepting the RTM Company’s case on both issues raised in this appeal are set out collectively in paragraphs 64 and 65(1) of the decision. Those which refer to the Landlord’s liability to pay are contained in paragraph 64 and may be summarised as follows:

(1)  No documentary evidence or correspondence from the Landlord accepting the work or paying for it.

(2)  Unclear which clauses of the management agreement give rise to the Landlord’s contractual liability to pay for the work.

(3)  No satisfactory evidence any work by SEM exceeded normal management duties.

32.        I accept Mr Bates’ submission that it was clear SEM was acting as the Landlord’s agents and indeed that is not disputed. However, the position here is rather different from the Metropolitan Property case where there was no evidence of any other basis on which the landlord could be liable for the solicitors’ fees. Here SEM was acting throughout as managing agent pursuant to an agreement under which it was paid a management fee. If SEM’s work was covered by the management fee then that was not a cost ‘incurred in consequence of a claim notice’ for the purpose of s.88(1) (my emphasis) and I regard the contrary as unarguable. Thus the issue is this: was the LVT entitled to conclude that the Landlord had not satisfied the tribunal that the work carried out by SEM exceeded its normal management duties for which it would be paid a fee in any event?

33.        The LVT did not set out the normal management duties contained in parts I, II and III of Appendix I to the management agreement nor was I provided with a copy of the agreement. However, the LVT referred to them as “day to day normal management services” which were contrasted with the “specified additional services” quoted from Part IV of Appendix I. The character of these latter services gives some indication of what would not normally fall within the description “day to day normal management services.” The fact that claims for a right to manage are not listed in Part IV is not determinative. If work falls outside both normal management duties and the specified additional services a landlord may agree for the managing agent to carry the work out anyway. Even if there were no express agreement for payment the agent would be entitled to a reasonable sum for the work done. Moreover, as Miss Helmore accepted, there is no requirement for any such agreement or an instruction to carry out specified additional services to be in writing.

34.        In my judgment it is clear from the list of specified additional services in Part IV paragraph (h) that they include dealing with LVT proceedings. Further it is clear from the documentary evidence (as opposed to Mr Ahmed’s oral evidence) that some of the work undertaken by SEM fell into that category. It was not suggested by Miss Helmore that the cost of such work could not be recovered by virtue of s.88(3) of the 2002 Act because the proceedings were settled on terms favourable to the RTM Company. Accordingly, there was clear evidence of some work undertaken pursuant to clause 6.6 and Appendix 1 Part IV paragraph (h) of the management agreement which made provision for the charges to apply.

35.        Further, I consider that while it may be within a managing agent’s day to day duties to pass on notices served on it in its capacity as agent for the Landlord and possibly to serve counter notices, the sort of investigations which SEM was undertaking on the Landlord’s behalf to deal with the 2010 claim notices fall well outside what could reasonably be described as “day to day normal management services”, even by the LVT as a specialist tribunal. Such work could not be described as ‘day to day’, nor is it routine and it could involve considerable work and therefore cost. It is of a similar character to the sort of work described as specified additional services. Whether passing on notices and serving counter notices do fall within day to day management services depends on the terms of Parts I, II and III of the management agreement which I have not seen. However, it is not necessary for me to do so to reach a decision in this appeal.

36.        I do not consider it necessary to rely on the RICS Service Charge Residential Management Code. My conclusions derive from the terms of the management agreement as set out in the LVT decision. Further, despite the LVT’s expertise it cannot be criticised for failing to refer to an RICS code which was never drawn to its attention by the parties.

37.        It follows that the LVT’s findings that it is unclear which clauses of the management agreement give rise to the Landlord’s contractual liability to pay for the work and that there was no satisfactory evidence any work by SEM exceeded normal management duties cannot be sustained. Either the LVT failed to have regard to the evidence or those findings were not reasonably open to the tribunal on the evidence before it.

38.        In the face of evidence that SEM had carried out work which fell outside its normal management duties, the LVT’s concern that there was no documentary evidence to support the Landlord’s liability to pay for that work cannot be sustained either. As I have already said, there is no dispute that SEM was acting on the Landlord’s behalf and it is not necessary for any agreement to be in writing. There is no evidence that SEM was acting gratuitously and to assume that they were would be ‘fanciful’, to borrow the phrase used by the Deputy President in the Metropolitan Property case. It was and is no part of the RTM Company’s case that the invoice was a sham. Again, as in the Metropolitan Property case, if the LVT had considered all of the evidence and asked itself whether, on the balance of probability, there existed a contract between the Landlord and SEM which obliged the Landlord to make payment for services supplied to it, only one conclusion could have been reached.

39.        I turn to the second ground of appeal, namely that the LVT failed to give reasons for its decision that the costs were unreasonable. If the LVT’s alternative conclusion pursuant to s.88(2) that none of the costs claimed were reasonable stands then, notwithstanding my conclusions on the first ground, the appeal must fail.

40.        There was no dispute as to the proper approach to the standard of reasons required which for present purposes is encapsulated in the first principle set out in paragraph 31 of the recent decision in London Borough of Havering v MacDonald [2012] UKUT 154 (LC):

“proper and adequate reasons must be given, so that they are intelligible and deal with the substantial points that have been raised, and the reasons should deal, in short form, with the substantial issues raised in order that the parties can understand why the decision has been reached.”

41.        However, Miss Helmore also submitted that the adequacy of the LVT’s reasons must be read in the light of the fact that the comments were obiter and did not have a bearing on the outcome of the application. That submission was unsupported by any authority and in my judgment is wrong as a matter of principle. If there are two separate grounds on which a court or tribunal can decide a case and it finds that the first one is made out it has a choice. Either the court or tribunal may say it is not necessary in the circumstances to decide the second ground and leave it there. Alternatively it may go on to express a view on the second ground. That may be out of deference to the parties’ arguments or it may be in case, on appeal, the decision on the first ground is held to be wrong. If there comes a point at which an appellate tribunal has to decide whether any decision on the second ground is correct, the reasons given on the second ground must be considered on their merits in accordance with usual legal principles because they will in this event decide the case.

42.        In paragraphs 64 and 65(1) the LVT gave a number of reasons as to why it considered that the costs claimed were unreasonable:

(1)  There was no documentary evidence to support what work had been undertaken in the hours claimed such as time sheets, invoices or file notes.

(2)  Mr Ahmed said he had done 90% of the work whereas the invoice claims the director did less than that (about half of the work, the other half being done by a Property Manager at a lower rate).

(3)  Mr Ahmed said the hours claimed had been “assessed” rather than reflecting an accurate claim for identifiable work.

43.        These reasons might well support a substantial reduction in the amount claimed by the Landlord. However, in the face of the evidence as to what work was actually carried out by SEM (see paragraph 28 above), it is difficult to see how they sustain a conclusion that none of the cost is reasonable. The reasons question the amount of work undertaken, the time it took and how much it was worth. They do not support a conclusion that none of the work carried out was reasonable or that a reasonable figure for that work would be zero. Accordingly the Landlord does not know on what basis the LVT concluded that none of the costs were reasonable. Some work was done, and it is for the LVT using its judgment and experience to assess what a reasonable figure for that work would be, see Country Trade Limited v Noakes [2011] UKUT 407 (LC) at paragraphs 16 and 17.

44.        Having said that, I do not accept Mr Bates’ submission that the LVT could not conclude that a reasonable figure would be zero. For example, an LVT might conclude that it was unreasonable to employ a managing agent, surveyor and solicitor to deal with the February 2010 claim notice which involved duplication (a point relied on by the RTM Company) and/or that the figure of £6,312.69 paid pursuant to the consent order in respect of costs is a reasonable one for all the work carried out. Put another way, the Landlord could not reasonably have been expected to incur any greater costs than this if he had been personally liable for them. However, these were not the reasons given by the LVT. I emphasise that I do not say that is necessarily the right conclusion to draw and in any event it leaves open the question of any costs of dealing with the August 2010 claim notice. The issue of reasonableness will have to be determined afresh.

Conclusion

45.        For all the above reasons this appeal is allowed and the LVT decision is set aside. The Landlord’s application for s.88 costs will be remitted to the LVT for redetermination.

46.        At the conclusion of the oral hearing both parties indicated that, whatever the outcome, neither would be making an application for costs. Accordingly this decision is now final.

Dated 30^th January 2014

 

Her Honour Judge Alice Robinson