United Kingdom Upper Tribunal (Lands Chamber)

UPPER TRIBUNAL (LANDS CHAMBER)

 

 

UT Neutral citation number: [2015] UKUT 230 (LC)

UTLC Case Number: LRX/83/2014

 

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

 

LANDLORD AND TENANT – right to manage- costs- whether RTM company liable for costs of proceedings where application to tribunal withdrawn- ss.88-89 Commonhold and Leasehold Reform Act 2002­- whether withdrawal of application effective to terminate proceedings where no dismissal- appeal allowed

 

 

IN THE MATTER OF AN APPEAL AGAINST A DECISION

OF THE FIRST TIER TRIBUNAL (PROPERTY CHAMBER) FOR THE LONDON REGION

 

BETWEEN:

 

POST BOX GROUND RENTS LIMITED

  Appellant

and

THE POST BOX RTM COMPANY LTD

Respondent

Re: The Post Box,

Upper Marshall Street,

Birmingham

B1 1LA

 

Before: His Honour Judge Stuart Bridge

 

Sitting at: Royal Courts of Justice, Strand, London WC2B 2LL

on

30 April 2015

 

Justin Bates for the Appellant

Daniel Dovar for the Respondent

 

© CROWN COPYRIGHT 2015

 

The following cases are referred to in this decision:

 

Fencott Ltd v Lyttelton Court RTM Companies [2014] UKUT 27 (LC)

Gilchrist v Revenue & Customs Commissioners [2014] UKUT 169 (TCC), [2015] Ch 183

R (O Twelve Baytree Limited) v Leasehold Valuation Tribunal and Others [2014] EWHC 1229, [2015] 1 WLR 276

Silkstone v Tatnall [2012] 1 WLR 400

 

 

 

 

 

DECISION

1.            An RTM (right to manage) company initiates a claim to acquire the right to manage leasehold premises (pursuant to Part 2 of the Commonhold and Leasehold Reform Act 2002) and makes an application to a tribunal for a determination that it has such a right.

2.            If the RTM company withdraws its application before it is due to be heard, is it liable for the reasonable costs incurred by the freeholder in defending those proceedings?

3.            Section 88(3) of the 2002 Act restricts the company’s liability for costs to circumstances where its application has been dismissed. In this case, the Ft T held that:

(1) an application may terminate when it is withdrawn by the company with the freeholder’s consent; and

(2) in such circumstances, there having been no dismissal of the application, the company is not liable for the freeholder’s costs. 

Introduction

4.            On 12 May 2012, the Post Box RTM Company Limited (the respondent) commenced a claim to acquire the right to manage (RTM) three blocks of flats in Upper Marshall Street, Birmingham referred to generically as the Post Box.  Three separate claims were made each in respect of what was claimed by the respondent to be a self-contained building.

5.            The landlord, Post Box Ground Rents Limited (the appellant) replied by letter from their solicitors on 15 June 2012. That letter contained a counter-notice in response to one of the claims, and two further counter-notices were served separately. Although there is no need for me to detail them here, the letter set out the objections made by the appellant to the claims being made.

6.            On 25 June 2012, the respondent made an application to the Leasehold Valuation Tribunal under section 84(3) of the 2002 Act for a determination that it was entitled to acquire the right to manage the premises.

7.            The respondent’s application was listed for hearing on 19 November 2012.  Following service of the landlord’s expert report and a witness statement, the respondent wrote on 12 November 2012 to the Tribunal as follows:

 

 

‘Dear Sirs

‘Property: Flats 1-57; 58-107 and 108-258, the Post Box, Upper Marshall Street, Birmingham B1 1LA

‘Please note that we wish to formally withdraw our application reference BIR/OOCN/LRM/2012/0005.

‘This is due to the fact that the [appellant] has substantially departed from its Statement of Case in relation to two of the blocks on the estate, its original case being that Blocks B and C did not qualify under the 2002 Act because they touched the underground car park.  Only last week we received the [appellant’s] expert evidence which states that blocks B and C are one single structure.

‘We respectfully request that the hearing at the Tribunal on the 19th November 2012 be vacated.’

8.            On the same day the Tribunal wrote to the appellant’s solicitors, enclosing a copy of the above letter.  The Tribunal asked the appellant to return the reply form enclosed “confirming whether or not you agree to this application being withdrawn.”  In turn, the appellants responded by their solicitors on 15 November 2012, stating:

‘Thank you for your letter of 12 November 2012.

‘We do not believe that our client’s consent is required; principally because the [respondent’s] Claim Notice will be deemed withdrawn by virtue of section 87(1)(b) of the Commonhold and Leasehold Reform Act 2002.

‘However, in the event that our consent is required, please accept this letter as formal consent on behalf of the [appellant] to the withdrawal of the application, on the grounds that we have obtained all the relief we could have possibly achieved had the hearing gone ahead.’

9.            The letter enclosed the consent duly signed by the appellant’s solicitor.

10.        On 20 November 2012, the Tribunal wrote to the appellant to inform them that the case had now been withdrawn.

11.        The issue of costs then arose.  Attempts to come to agreement were unsuccessful, and so on 3 May 2013 the appellant made application to the Leasehold Valuation Tribunal in standard form for costs pursuant to section 88(4) of the 2002 Act.  Directions were given by the Tribunal and in compliance with those directions the appellant supplied a Statement of Costs.  This statement, authenticated by a statement of truth, indicating that the costs being claimed totalled £28,117.95.  The solicitor’s fees amounted to £10,812; counsel’s fees £4,106.40; and surveyor’s fees £12,795.30 (each of those figures being inclusive of VAT).

12.        Following a hearing on 15 October 2013, the Ft T gave its decision on 20 December 2013.  The Tribunal considered section 88 of the 2002 Act.  It determined that the respondent was liable for the appellant’s costs for the period between the date of the claim notice (12 May 2012) and the date of the application to the Tribunal (25 June 2012). It considered the representations of the parties in determining the reasonable amount of such costs at £2,883 (inclusive of VAT).  However, the Ft T determined that the respondent was not liable for any costs after that date as a result of section 88(3) of the 2002 Act.  The respondent’s claim had been withdrawn with the appellant’s consent, and accordingly the respondent was not liable for costs incurred by the appellant as a party to the proceedings which commenced on 25 June 2012.

13.        The appellant sought permission to appeal this decision, and on 16 June 2014 the Ft T granted permission to appeal. Reference was made to two decisions, one of the Upper Tribunal and one of the High Court, neither of which were available to the Ft T but which have featured prominently in counsel’s submissions before me.

Issues

14.        The principal issue in this appeal is whether the Ft T was wrong in law in determining that the respondent company was not liable for costs incurred by the appellant in the course of the proceedings before the Tribunal, and in refusing, as a result, to assess the amount of costs payable by the respondent for the period after 25 June 2013.

15.        Resolution of this issue requires this Tribunal to interpret section 88 of the 2002 Act. It will be seen that a further issue then arises from the stipulation, contained in section 88(3), that the RTM company is only liable for the costs of proceedings if its application is dismissed. Where the company withdraws its application, does that terminate the application without more, or does the application remain extant unless and until the tribunal itself dismisses it? In other words, is dismissal the only means of terminating an unsuccessful application to the tribunal? I shall deal with these issues in turn.

Interpreting section 88

16.        Section 88 provides:

(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 [Landlord and Tenant Act 1987] 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 the appropriate 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 the appropriate tribunal.

17.        The Ft T interpreted this provision as follows. It treated section 88(1) and section 88(3) as distinct provisions which did not operate concurrently but consecutively. It held that the appellant was entitled to its reasonable costs, pursuant to section 88(1), from the date of the claim notice to the date when application was made to the Tribunal. However, once the application was made, liability for costs under section 88(1) ended and section 88(3) became the governing provision with the consequence that the RTM Company was only liable for the costs thereafter if the proceedings were dismissed. The purpose of section 88(3) was to give effect to the principle that ‘tribunal proceedings are essentially ‘no costs’ proceedings unless a party can be said to have acted unreasonably.’ In this case, where the application had been withdrawn, there had been no dismissal of the proceedings and hence no liability under section 88(3) arose: a withdrawal and a dismissal were different things. It followed that even if the costs incurred by the appellant following the making of the application were reasonable (and the Ft T made no determination in that regard), the respondent was not liable to pay them.

18.        Neither party to this appeal has sought to support the interpretation of section 88 advanced by the Ft T. Both parties have accepted that the decision of this Tribunal in Fencott Ltd v Lyttleton Court RTM Companies [2014] UKUT 0027 (LC) has advocated an approach to section 88 with which the decision of the Ft T cannot stand.

19.        In Fencott, this Tribunal, having allowed an appeal by landlords and reversed a determination by the LVT that a number of RTM companies were entitled to the right to manage, included an ‘Addendum on Costs’ which considered in some detail the circumstances in which an unsuccessful RTM company was required to pay the costs of a successful freeholder on appeal to the Upper Tribunal. In doing so, the Tribunal set out its own interpretation of section 88. The Deputy President stated, at [84]:

‘…Section 88(1) creates a liability, in quite general terms, making an RTM company liable for reasonable costs incurred “in consequence of a claim notice given by the company in relation to the premises.”  That general liability to meet reasonable costs incurred is subject to further qualification by sections 88(2) and (3).  Section 88(2) elaborates on the meaning of “reasonable costs”, and is relevant to the quantification of the liability in the event of a dispute, but not to the existence of the liability in principle.  Section 88(3) then creates an exception to the liability which arises under section 88(1).  That exception prevents the recovery of costs incurred in proceedings before the appropriate tribunal unless a condition is satisfied, namely, the dismissal by that tribunal of the RTM company’s application.  That exception to the general rule is limited in its scope to the costs incurred as party to any proceedings under the Chapter before the appropriate tribunal.

‘[85] I see nothing in section 88 which requires or permits costs incurred in proceedings before the appropriate tribunal to be disregarded in any other circumstances.  Such costs are clearly incurred “in consequence of a claim notice given by the company” since, but for the claim notice, the proceedings before the appropriate tribunal would never have taken place.  It seems to me to be a misreading of section 88 to regard sub-section (3) as creating a liability for costs at all.  Sub-section (3) acts only to qualify the general liability created by section 88(1) in the particular circumstances there identified.’ 

20.        The parties to this appeal have proceeded on the basis that that is an accurate statement of principle, and while I am conscious that I am not formally bound by previous decisions of the Upper Tribunal, I entirely agree with, and adopt for the purposes of this appeal, the terms in which the Deputy President explained the effect of section 88.

21.        The appellant pursues its appeal by reference both to policy and to principle. As far as policy is concerned, it contends that it should not be the case that an RTM company can make a claim to exercise RTM, follow it with an application to the tribunal, withdraw the application at the very last minute, having caused the freeholders to incur substantial costs in defending it, and then deny any liability for the costs incurred after the making of the application. The underlying policy of section 88 is tolerably clear: if the RTM company is successful in its application then it should not be liable for costs incurred by the freeholder in defending it. But if it is not, and the application fails, then it should face the consequences and be liable for its opponent’s costs. The appellant contends that section 88 should be construed in such a way as to make this policy work.

22.        The respondent does not seek to support the policy as stated in the Ft T- that as a matter of principle tribunal proceedings are ‘no costs’ proceedings save where a party has acted unreasonably. It would be difficult to do so, not least because of section 88(3) which, in providing that the RTM company will be liable for the costs of proceedings in the event of a dismissal, imposes no additional condition that the company has acted unreasonably. Instead, the respondent contends that in the circumstances such as this case, where there has been a withdrawal of the application, and where the application has not been ‘dismissed’, the liability for costs, being an entirely statutory liability, never arises.

23.        I accept that the liability to pay costs is entirely statutory. Moreover, it is not dependent on any costs order being made by the tribunal. Liability arises in accordance with the terms of section 88, and the only function of the tribunal is to determine the amount of costs payable in default of the parties’ agreement: see section 88(4). No authority other than section 88 is needed for these propositions, but the point is well made in Fencott at [88].

24.        The respondent therefore resists this appeal on the single ground that the condition to be satisfied before it would be liable for costs in proceedings before the tribunal was not met in this case. The application was withdrawn; the appellant consented to that withdrawal, and that was the end of both the application (to the Tribunal) and the claim (of the appellants). In short, the application was never dismissed. The resolution of this appeal therefore depends upon the effect of a withdrawal of an application to the tribunal for a determination of entitlement to acquire the right to manage (pursuant to section 84(3) of the 2002 Act).

The effect of withdrawal

25.        The 2002 Act makes express provision for withdrawal of the claim notice and for withdrawal of the application to the tribunal. It provides that an RTM company may withdraw the claim notice by giving a notice of withdrawal to the landlord (and other parties specified in the statute): see section 86.

26.        The claim notice will be deemed to be withdrawn in the circumstances set out in section 87. Where a counter-notice challenging the claim has been given to the RTM company, the claim notice will be deemed to be withdrawn if no application for a determination is made to the tribunal within two months or if an application is made but is subsequently withdrawn: section 87(1) (save only where the parties have previously agreed in writing that the RTM company is entitled to acquire the right to manage: section 87(3)). Deemed withdrawal also occurs in the event of a number of specified events mostly relating to the insolvency of the RTM company: section 87(4).

Section 89(2)

27.        Section 89 applies:

‘where a claim notice given by a RTM company-

(a) is at any time withdrawn or deemed to be withdrawn by virtue of any provision of this Chapter, or

(b) at any time ceases to have effect by reason of any other provision of this Chapter.’ (section 89(1))

28.        The costs consequences of withdrawal are then dealt with by section 89(2):

‘The liability of the RTM company under section 88 for costs incurred by any person is a liability for costs incurred by him down to that time.’

29.        Counsel for the appellant has attempted to persuade me that section 89(2) is itself determinative of this case. He contends that its effect is that the RTM company is liable for costs up and until the date it withdraws its claim notice and that in those circumstances section 88(3) is not engaged at all. Section 88(3) only comes into play when the tribunal is asked to make a decision on the merits, and if the RTM company withdraws its claim notice before then, it is liable for all the costs under section 89(2).

30.        I do not accept this argument. Section 89(2) is, like section 88(3), not self-standing. As Fencott makes clear, the general liability to meet reasonable costs is imposed by section 88(1), that liability being further qualified by the remainder of section 88. Section 89(2) makes express reference to that general liability (that is, ‘the liability of the RTM company under section 88’), and it follows, in my judgment, that it must be read subject to the entirety of section 88. While the RTM company is liable for reasonable costs in the event of withdrawal of its claim notice, it will only be liable for such costs incurred subsequent to an application being made to the tribunal if the tribunal dismisses that application. I accept the submissions of counsel for the respondent that section 88 is engaged in every case.

Section 88(3)

31.        The case for the respondent is that the effect of the withdrawal of the application, and the acceptance by the Tribunal of that withdrawal, was to terminate the application before the Tribunal. There was accordingly no ‘dismissal’ of the respondent’s application and section 88(3) operated to restrict its liability for costs.

32.        In developing their argument, the respondent contends that there are three ways in which an application to the tribunal may terminate, with the effect that the tribunal becomes functus officio. The three possibilities can be broken down, with reference to the statute, as follows:

(1) Termination of the application may occur where the application succeeds: either the tribunal itself finally determines that the RTM company was on the relevant date entitled to acquire the right to manage, or the person by whom the counter-notice was given (usually the freeholder) concedes the claim and agrees in writing that the company was so entitled: see section 84(5). 

(2) It may occur where the tribunal finally determines that the RTM company was not on the relevant date entitled to acquire the right to manage, in which case the tribunal will dismiss the application and the claim notice will cease to have effect: see section 84(6).

(3) Or it may occur where there is a withdrawal, either of the claim notice itself (section 86) or of the application to the tribunal which results in the claim notice being deemed to be withdrawn (section 87). There are also circumstances, such as the insolvency of the RTM company, which will result in the claim notice being deemed to be withdrawn: see section 87(4).

33.        The appellant contends that there are only two ways in which an application to the tribunal may terminate: while it accepts (1) and (2) above, it does not accept that (3) has the effect that the application terminates. It contends that a withdrawal of an application does not, without more, terminate the application and that the tribunal must take active steps and dismiss the proceedings. It submits that, on this basis, section 88(3) assumes a proper place in policy terms. In (1), the RTM company is not liable for the freeholder’s reasonable costs after the date of making its application to the tribunal: a justifiable result, as the application has succeeded. In (2), the RTM company is liable for the freeholder’s reasonable costs throughout: it has failed in its claim, the claim has been dismissed, and the condition in section 88(3) is met.

34.        Central to the disposition of this appeal is the effect of the withdrawal of the claim notice, itself an issue that was recently considered at some length by the High Court in R (O Twelve Baytree Ltd) v Leasehold Valuation Tribunal [2014] EWHC 1229 (Admin), [2015] 1 WLR 276 (hereafter ‘Baytree’). An RTM company formed by the tenants of a block of flats served a claim notice on the freeholders under section 79 of the 2002 Act. A counter-notice was served by the freeholders, the RTM company made application to the LVT under section 84(3), and then two days before the hearing wrote to the Tribunal purporting to cancel the hearing and to withdraw its application. The Tribunal treated that communication as a withdrawal, informed the freeholders accordingly and, when the freeholders raised the issue of costs, stated that the proceedings had now ended and that it was functus. The freeholders sought judicial review of the Tribunal’s refusal to determine the RTM company’s claim (that it was entitled to exercise the right to manage the leasehold flats), contending that they had the right to seek a determination of the substantive issue of the RTM company’s eligibility to claim and then exercise their right to recover costs under section 88.

35.        While the Upper Tribunal is not bound by a decision of the High Court (see most recently Gilchrist v Revenue & Customs Commissioners [2014] UKUT 169 (TCC), [2015] Ch 183), it may and indeed should take relevant decisions into account, and give them due and proper weight, treating them in appropriate circumstances as persuasive. For my own part, having analysed the 2002 Act in the course of this appeal and with the assistance of counsel, I agree with and adopt the analysis of Lewis J in Baytree.

36.        Lewis J set out the relevant provisions of the 2002 Act, and proceeded to analyse the issues as follows:

[32] The legislation contemplates that an application may be withdrawn. That is implicit in section 87(1) of the 2002 Act which recognises that if an application is withdrawn, the claim notice is also deemed to be withdrawn. Section 87(2) of the 2002 Act also provides for the date upon which the claim notice is deemed to be withdrawn: that is “the date of the withdrawal of the application”: section 87(2)(b) of the 2002 Act. The provisions of the 2002 Act are, however, silent on the question of what steps or procedures must be followed in order to bring about a withdrawal of the application. The 2002 Act is also silent on the question of whether a withdrawal is effected solely by the RTM giving notice to the tribunal (or the other parties) of its wish to withdraw the application or whether the tribunal must agree to the withdrawal.

[33] There are indications in the 2002 Act that Parliament would not have intended the RTM to be able to bring about the end of the proceedings simply on giving notice of withdrawal. The clearest indications come in the provisions relating to costs. The provisions envisage that the RTM will be liable for the reasonable costs incurred by the giving of the claim notice. In addition, section 88(3) of 2002 Act provides that the RTM will be liable for the costs incurred in proceedings before a tribunal but only where the tribunal dismisses an application by the RTM for a determination that it is entitled to acquire the right manage the premises as at the date of the giving of the claim notice. Section 89 of the 2002 Act deals with the costs of a claim where a claim notice is withdrawn or deemed to be withdrawn by reason of any provision of Chapter 1 of Part 2 of the 2002 Act. Those provisions include section 87 of the 2002 Act whereby a claim notice is deemed to have been withdrawn where an application under section 84(3) of the Act is withdrawn. Section 89(2) of the 2002 Act continues the liability of the RTM for costs incurred “down to that time”, ie down to the date of the withdrawal of the application.

[34] The liability of the RTM to costs, including costs connected with tribunal proceedings, is derived from section 88 of the 2002 Act. It is the liability to costs under section 88 of the 2002 Act which is continued under section 89 down to the time of the deemed withdrawal of the claim notice. The liability for costs incurred as a party to proceedings before the tribunal only arises, however, if the tribunal dismisses the application. Given that section 89(2) of the 2002 Act contemplates the liability for costs continuing down to the date of withdrawal of the application (which will, or is likely to, include some costs incurred in respect of the proceedings), and given that such liability will only arise if the tribunal dismisses the application, those provisions indicate that the tribunal retains jurisdiction over an application even where the RTM has given notice that it intends to withdraw. As section 89 of the 2002 Act contemplates that the RTM is liable for costs incurred as a party to proceedings before the tribunal, and as such costs can only be recovered if the tribunal dismisses the application, that indicates that a notice of withdrawal does not automatically bring about the end of the proceedings but some action on the part of the tribunal is required to bring the proceedings to an end. The provisions indicate that the withdrawal will only be effective when accepted by the tribunal and when the tribunal dismisses the application, for example, by dismissing the application on withdrawal. Conversely, if a withdrawal was effective simply on the giving of notice by the RTM, so that the proceedings were automatically at an end, that would prevent the recovery of costs (as there would be no dismissal of the application) in circumstances where Parliament contemplated that the RTM would be liable for costs. That factor, indicates, in my judgment, that the statute does contemplate that the tribunal retains jurisdiction over the application when the RTM gives notice that it wishes to discontinue its claim and withdraw the application.

37.        The respondent has contended that in Baytree Lewis J was leaving open (3) as a possible way by which an application to the tribunal might cease, and that on a proper construction of the 2002 Act a notice of withdrawal, accepted by the tribunal, will result in the application ceasing and the tribunal becoming functus. In such circumstances, there would be no need for the tribunal to dismiss the company’s application.

38.        I do not agree with this contention. In Baytree, Lewis J was clearly of the view that withdrawal did not in itself terminate the application to the tribunal: note in particular at [34] above where he states that ‘the withdrawal will only be effective when accepted by the tribunal and when the tribunal dismisses the application’ (my emphasis).

39.        Counsel for the respondent then made specific reference to two later paragraphs ([42] and [43]) of the judgment of Lewis J. The context of those paragraphs (which I will set out below) is significant in that they immediately follow Lewis J’s consideration of the conclusions of Rimer LJ in Silkstone v Tatnall [2012] 1 WLR 400 at [48] to [50]. In that case, the Court of Appeal considered the effect of a purported withdrawal of proceedings before the Chief Land Registrar under section 73(7) of the Land Registration Act 2002, the relevant procedural rules not dealing expressly with the right of a party to withdraw or discontinue. Rimer LJ stated that in such circumstances while the party must be entitled to withdraw (as he cannot be compelled to advance a case if he no longer wishes to), it would be for the tribunal (or in that case adjudicator) to determine, having considered all the circumstances including the wish having been expressed, what to do with the proceedings. The tribunal might decide to permit the withdrawal, and make an order terminating the reference with appropriate directions on matters such as costs; or it might decide to proceed to a substantive hearing in which it could rule on the merits.

40.        The comments of Rimer LJ are, as one might expect, directed to the specific jurisdiction relevant to the case before him, but Lewis J felt able to adopt a ‘similar approach’ to the interpretation of the relevant provisions of the 2002 Act. His Lordship stated as follows:

[42] In my judgment, a similar approach ought to be taken to the interpretation of the relevant provisions of the 2002 Act. First, the statute expressly contemplates that an application made under section 84(3) of the 2002 Act may be withdrawn. There is no statutory prohibition or bar on such a withdrawal. Secondly, however, the relevant provisions do not specify how such a withdrawal is to be effected. In my judgment, the intention is that such a withdrawal will only be effective to terminate proceedings where the tribunal consent to the withdrawal. The tribunal will be required to reach a decision. It may, and usually will, be satisfied that the application should be dismissed by reason of the withdrawal. That will be sufficient to ensure that the liability of the RTM to pay the costs incurred by the proceedings is preserved as a dismissal upon withdrawal will satisfy the requirement of section 88(3) of the Commonhold and Leasehold Reform Act 2002 that the costs incurred in proceedings on an application can be recovered only if the application is dismissed.

[43] There will, usually, be little purpose in continuing to a hearing if the RTM no longer wishes to acquire the right to manage the premises and, usually, good reasons to avoid incurring further costs. There may be rare occasions when a tribunal will consider it appropriate to hear and determine the underlying issue, namely whether the RTM had acquired the right to manage the premises on the date when the claim notice was given or whether it was not so entitled because, for example, the premises were not premises to which the right to manage provisions apply. The circumstances when this course of action will be appropriate are likely to be rare. The landlord (or other appropriate person) will retain the right to manage and will be entitled to obtain its costs and so will not be prejudiced if the application is dismissed on withdrawal (and the claim notice deemed to be withdrawn) without ruling on the underlying issues. Furthermore, a ruling as between one RTM and a landlord as to whether the premises were, or were not, ones to which the relevant provisions of the 2002 Act applied would not, it seems, be binding on any future company set up by different grouping of tenants seeking to acquire the right to manage at some stage in the future. Whether or not it would be appropriate to continue to a hearing, however, will ultimately be a matter for the tribunal, having regard to all relevant circumstances which are likely to include the stage at which the proceedings have reached, the reasons for the wish to withdraw and any likely prejudice that would be caused by simply dismissing the application on withdrawal rather than dealing with the underlying merits.

41.        I consider that these paragraphs, read in context, emphasise and expand upon the point made earlier in the judgment. An application, once made under section 84(3), may be withdrawn, as is contemplated by section 87(1)(b). Although the statute does not expressly state what the consequences of the withdrawal are, the tribunal retains jurisdiction unless and until it is satisfied that the application ‘should be dismissed by reason of the withdrawal’. The tribunal may, in exercising the jurisdiction it retains, go on to consider the merits, although it is difficult, as Lewis J himself indicates, to think of circumstances where any purpose would be served in doing so.

42.        I therefore conclude that the withdrawal of an application does not, without more, bring that application to an end. The application ends only when the tribunal formally dismisses it. This construction of section 89 has the desired effect in policy terms of imposing liability for costs on the company. If and when dismissal occurs, the RTM company will become liable for the reasonable costs incurred by the freeholders (or any other party to the proceedings) as the restriction placed on its liability by section 88(3) will be removed.

43.        The respondent contends that such a conclusion will prevent the RTM company from raising any misconduct in the proceedings on the part of the freeholders (for example, in deliberately refraining from putting a decisive counter-argument until the last minute) as a reason why they should not be liable to pay the freeholders’ costs. I do not accept this contention. Section 88 restricts the liability of the RTM company to ‘reasonable costs’. That term is sufficiently wide to allow the RTM company to raise any objections concerning the conduct of the freeholders on the ground that the costs claim being made is not reasonable, and in the event of dispute the tribunal has jurisdiction to make a determination under section 88(4).

Conclusion

44.        Prior to considering the issue of costs, the Ft T should have considered whether, in light of the respondent’s withdrawal of its application, it should have dismissed the application. No such determination having been made, it is open to me to remit the application to the Ft T to consider such determination, and I have considered whether that is an appropriate course.

45.        I have decided that it is unnecessary to do so. There is clearly no reason in this case why the tribunal would wish to retain jurisdiction any further. The Upper Tribunal has the powers of the Ft T, and I consider that I should, in light of the application made to the LVT on 25 June 2012 having been withdrawn, now dismiss that application. The application is therefore dismissed.

46.        The effect of the dismissal means that the respondent is liable for the reasonable costs incurred by the appellant in consequence of the claim notice (section 88(1)) and, as I have held above, that liability includes costs incurred as a party to the proceedings before the tribunal. The respondent’s liability for costs ended on the date of the withdrawal of the application: see sections 87(1)(b), 89(2).  The respondent would however be liable from the date of the claim notice being given (12 May 2012) to the date of the withdrawal of the application to the tribunal (12 November 2012).

47.        In my judgment, the Ft T was therefore wrong in its determination that the respondent was not liable for the appellant’s costs following the making of the application to the tribunal on 25 June 2012. The appeal must be allowed.

48.        The parties will be given the opportunity to agree the costs payable to the appellant as a result of this decision. In the event of no agreement having been reached within 28 days, the matter may be referred to the Ft T for determination of the appropriate amount under section 88(4).  The issue that remains is the quantification of the costs incurred by the appellant as party to the proceedings.  The costs payable in respect of the period prior to application being made to the Tribunal have already been assessed.  In the event of agreement not being reached, it will be for the Tribunal to determine the amount of costs payable after application was made up to the date that the application was withdrawn, that is for the period between 25 June 2012 and 12 November 2012.  In determining what costs are reasonable for that period, the Tribunal must take into account any misconduct on the part of either party which it considers relevant (see paragraph 43 above) as well as any material findings it may have made when it determined what costs were reasonable for the period before 25 June 2012.

His Honour Judge Stuart Bridge

 

 

 

Dated: 1 June 2015