UT Neutral citation number: [2014] UKUT 422 (LC)

UTLC Case Number: LRA/137/2013                                                                                       

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

LEASEHOLD ENFRANCHISEMENT – costs – “agreement” as to costs – section 91(1) Leasehold Reform Housing Urban Development Act 1993

                        IN THE MATTER OF AN APPEAL AGAINST A DECISION

OF THE FIRST-TIER TRIBUNAL PROPERTY CHAMBER

BETWEEN:

(1) FRIENDS LIFE LIMITED

(2) THE HALLIARD PROPERTY CO LIMITED

Appellant

AND

M.L. JONES

Respondent                                                         

                                                         Re: 10 Solent Court

Garrard Gardens

Sutton Coldfield

B73 6EA

 His Honour Judge Nigel Gerald

Sitting at 45 Bedford Square, London WC1B 3DN

on

15 September 2014

Amanda Gourlay for the First Appellant

The Respondent not being represented at the hearing.

DECISION

Introduction

1.             The First and Second Appellants are respectively the freehold reversioner and the head lessor of Solent Court, Gerrard Gardens, Sutton Coldfield B73 6EA. The Respondent is the lessee or tenant of Flat 10, Solent Court, Gerrard Gardens, Sutton Coldfield.

2.             The Appellants appeal against the 6 August 2013 decision of the Leasehold Valuation Tribunal as it then was that there had been no agreement between the parties as to the conveyancing costs consequent upon the Respondent’s 1 May 2012 section 42 notice for a new Lease of Flat 10 pursuant to Part I of Chapter 2 to the Leasehold Reform Housing Urban Development Act 1993.

3.             The background can be shortly stated and there is no dispute of a factual nature. By 4 February 2013 the parties had agreed the premium for the extension lease. By and on 11 February 2013 the terms of the extension lease were agreed and engrossments of the extension lease were issued by the First Appellant’s solicitors for execution by the parties. Having explained that the extension lease would have to be executed in triplicate for each of the three parties to retain an original and that three triplicates were enclosed with that letter, it concluded that the First Appellant’s solicitors would revert separately regarding the costs of the freeholder and also the head lessor which the Respondent tenant was obligated to pay under section 60 of the 1993 Act.

4.             On 21 February 2013 the First Appellant’s solicitors issued the completion statement. It sets out the premium, solicitors’ fees, valuer’s fees and various incidental matters which one would usually expect to be comprised within a completion statement relating to both the freeholder and head lessor. The proposed fee in respect of the freeholder and head lessor was in the same amount of £2,400 each totalling £4,800 and once all totted up the total required for completion was £18,272.70. The covering letter confirms that the fees of the freeholder and head lessor’s respective solicitors reflected the fact that several notices of claim had been issued in the matter which had to be considered and dealt with hence a broad justification for the level of fees which was being charged.

5.             Five days later on 26 February 2013 the Respondent’s solicitor replied to the effect that they had attended on their client, namely the Respondent, and enclosed the lease executed in triplicate which was to behold in escrow for each of the various parties. A week or so later the Respondent’s solicitor wrote a follow-up letter observing that there had been some miscalculation in the completion statement and asked for confirmation of “the figure required to complete and provide further completion statements by return to enable us to account to our client.”

6.             On 1 March 2013 the First Appellant’s solicitors responded correcting the finer arithmetical errors and enclosed a revised completion statement which having corrected the arithmetical errors resulted in precisely the same balance required for completion as before, namely £18,722.70 which included the same figures of £2,400 solicitors’ fees for the respective solicitors of the freeholder and head lessor. As before the completion statement also enclosed details of the client account to which those money should be paid. Although there were separate solicitors retained by the freeholder and head lessor, for these purposes it was the freeholder’s solicitors which was being used and which was plainly acting on behalf at that point in time of both reversioners.

7.             The following day on 22 March 2013 the Respondent solicitors wrote to the First Appellant’s solicitors confirming that “we have transferred to you the sum of £18,772.70 to complete the lease extension of the above property today”. The letter went on to ask for confirmation that those monies would be held to the order of the Respondent’s solicitors pending receipt of executed extension lease and asking for “confirmation of completion today and signed documentation in due course.”

8.             Later that same day, 22 March 2013, the First Appellant’s solicitor applied to the effect that the monies would be held to their order pending receipt of executed extension lease by all parties. At that point in time the Respondent tenant had executed all three but neither freeholder nor head lessor had executed any. That email concludes that the author was not clear (even though it was) whether completion was to be treated as 22 March 2013 and asked for confirmation of that or whether the Respondent would prefer for the documents to be dated when finally executed by all parties and “returned to me” i.e. the author of that email, Tania Austin of Gardner Austin LLP, solicitors for the freeholder and head lessor. 

9.             That letter was not fully responded to. However it is plain and it is part of the agreed facts that the parties treated completion of the grant of the extension lease as having taken place on 22 March 2013 notwithstanding that the freeholder and head lessor had not then executed it. What is equally clear is that by 30 April 2013 the freeholder and head lessor had executed the extension lease in triplicate and a copy of the executed extension lease was sent to the Respondent’s solicitors under cover of a letter dated 30 April 2013. It therefore follows in law that the grant of the extension lease was completed on or shortly before 30 April 2013 when all three parties had executed it in triplicate, notwithstanding the apparent agreement between the solicitors that completion would be treated as having taken effect on 22 March 2013.

10.         Having forwarded the executed lease to the Respondent’s solicitors on 30 April 2013, the First Appellant’s solicitors spoke to them on 1 May 2013 stating that they would be accounting to the head lessor’s solicitors Wallace & Co for their share of the premium and costs and asking for the Respondent’s solicitors to confirm to the LVT that that had been settled and that proceedings should be withdrawn. The Respondent’s solicitors responded stating

“We confirm the costs application has not been settled and therefore the proceedings should not be withdrawn and our Client’s surveyor is liaising with the Tribunal in disrespect.”

11.         It is to be noted that that is the first time that the Respondent’s solicitors gave any indication of any nature whatsoever that there remained an outstanding dispute in respect of the fees which the freehold and head lessor’s solicitors were charging. Not only had the Respondent’s solicitors themselves checked the arithmetic of the completion statement, but they had sought replacement by a correctly calculated completion statement upon receipt of which they paid the amount requested without comment. A further five or six weeks passed without any further comment until after the Respondent’s solicitors had received the executed lease sent under cover of the letter of 30 April 2013.

12.         Meanwhile, on 14 February 2013 the Respondent tenant had issued an application in the LVT under section 92(1)(d) of the 1993 Act seeking determination of the reasonable costs payable under it is to be inferred section 60(1) of that Act. I say “to be inferred” because there are two boxes, one referring to section 33(1) and other to section 60(1) of the 1993 Act neither of which is ticked. That document was issued by the Respondent acting by his surveyor Richard Bakewell FRICS. In Paragraph 8 the applicant is invited to state the amount or amounts in dispute and also what the applicant considers the appropriate amounts to be. The answer given is that the freeholders and head lessor’s solicitors “have not disclosed their fees” but that “solicitors [fees] to a maximum figure of “722 inc and disbursement (sic)”. Thus, without knowing what the solicitors’ fees were, it would appear somewhat premature for that application to have been issued. However the surveyor does state what he or his client the Respondent regards as being the appropriate maximum fee, namely £722 including VAT and disbursements.

13.         On 13 March 2013 the LVT had issued directions without hearing requiring the Appellants to send a detailed statement of the costs which they sought under section 60(1) of the 1993 Act. That order was not complied with because so far as the freehold and head lessor’s solicitors were concerned completion had taken place and the costs had been agreed and that was an end of the matter. The LVT therefore decided the question of whether or not there had been an agreement thereby ousting the LVT of jurisdiction, to be determined as a preliminary issue.

14.         That matter came before the LVT who issued their decision on 6 August 2013 to the effect that there had been no agreement and therefore their jurisdiction was not ousted. It is that decision which is appealed. The Applicant was represented by his surveyor Mr Bakewell and the Respondents were represented by Mr Sheftel of counsel. The hearing took place on 19 June 2013 and the decision was issued on 6 August 2013. The kernel of the decision is to be found in the following paragraphs:

“21.     It is certainly unfortunate, as the costs were not in fact agreed, that the Applicant’s solicitors simply paid the amount demanded at completion without any sort of condition. As a matter of practice, it is likely that they were simply unaware of the Application, having been retained to carry out conveyancing only, with all terms, and the statutory costs, being negotiated for by Mr Bakewell. It is therefore, of course, arguable that payment on the completion statement does amount to an “agreement” as to the level of the costs. However, the Tribunal does not consider that the matter is quite as simple as that, as suggested by Mr Sheftel.

“22.     Firstly, there is the question of the Application, the validity of which cannot be in doubt, as the evidence is that neither Respondent had disclosed the level of costs claimed at the date of the Application. The costs were first disclosed on 21 February 2013 by the submission of the first completion statement. However, the Directions were not issued until 13 March 2013. Directions 3 required the parties to notify the Tribunal of their legal representatives. Wallace LLP complied with this Direction on 19 March 2013 and Gardner-Austin on 21 March 2013, i.e. on the day before completion.

“23.     In point of fact, the Applicant did not comply strictly with this Direction, because it required legal representatives to be identified. However, on 18 March 2013, the Applicant had submitted a letter confirming Mr Bakewell was the person appointed. This must be evidence that the Applicant had not agreed the costs at that date. They had been disclosed four weeks previously. If they were agreed, there would have been no reason to notify the Tribunal of Mr Bakewell’s appointment. On the contrary, the Applicant would, in order to save costs, have notified the Tribunal that the costs were agreed, and that the Application should be withdrawn. The letter of 18 March 2013 is also evidence that the Applicant had not appointed his solicitors to represent him in respect of the Application. There is no evidence of non-compliance with Direction 12, and so, prime facie, the Respondents would have been aware that Mr Bakewell, and not HCB French and Co, was representing the Applicant in respect of the Application.

“24.     Direction 4 then required the Respondent to send to the Applicant, by 8 April 2013, detailed statements of costs in accordance with section 60(1) of the Act. Direction 5 required that the statements should include details of hours spent, level of fee earners and hourly rates, or alternative basis of charging.

“25.     Despite this Direction, and despite the fact that both Respondents’ solicitors had complied with Direction 3 prior to completion, there was no compliance with Direction 5. Neither of the Respondents’ solicitors notified the Tribunal that the amount of their costs had been disclosed by the completion statement of 21 February 2013, and it cannot, in the opinion of the Tribunal, be argued that the completion statement amounted in any case to a “detailed statement of costs”. Accordingly, there had been no proper compliance with Direction 4 either.

“26.     It is of course the case at common law that a solicitor or other duly appointed agent may bind a party, and that if he does so without authority, it is to the solicitor or agent that the party must look to for recompense. However, the circumstances of this case are such that, in the view of the Tribunal, the payment of the completion monies by HCB French and Co does not amount to an ‘agreement’ as to the amount of the costs shown on the completion statement. The Respondents were aware that there was an Application, they also were aware that HCB French and Co were not representing the Applicant in respect of that Application and neither of them had complied with the Tribunal’s Directions as to the provision of a detailed statement of costs and the basis upon which the costs were to be calculated. The Tribunal finds that the Applicant was entitled to rely upon the extant, valid Application in place at the date of completion and that the payment of the demanded monies is therefore not a deemed agreement by him as to the level of the costs shown on the completion statement.

“27.     The determination of the Tribunal is, therefore, that the payment of the costs on the completion statement did not amount to an agreement binding upon the Applicant, which therefore excludes the jurisdiction of the Tribunal to determine the Application. Further Directions will now be issued with a revised timetable for the determination of the Application.”

15.         The Appellants appeal the Decision on the ground firstly that the Tribunal wrongly interpreted or wrong applied the relevant law and secondly that it failed to take account of relevant considerations. The central thrust of the appeal is that the Tribunal should have found a binding agreement as to the amount of the solicitor’s conveyancing fees occurred or was made on payment of the costs, included in the completion monies, on 22 March 2013.  

16.         The factual background must be considered against the material statutory context of section 91 of the 1993 Act which provides as follows:

“91(1)  … any question arising in relation to any of the matters specified in subsection 2 shall, in default of agreement, be determined by [a Leasehold Valuation Tribunal].

“(2)      Those matters are:

“…

            “(d)      the amount of any costs payable by any person or persons by virtue of any provision of Chapter I or II and, in the case of the costs to which section 33(1) or 60(1) applies, the liability of any person or persons by virtue of any such provision to pay any such costs; and

            “(e)       the apportionment between two or more persons of any amount (whether of costs or otherwise) payable by virtue of any such provision.”

17.         By section 60 of the 1993 Act it is the enfranchising tenant who must pay the costs of the extension lease. Where those costs are in dispute there is a mechanism for completion to take place without resolution of the dispute. This is provided by section 56(3) which provides:

“56(3)  A tenant shall not be entitled to require the execution of any such new lease otherwise than on tendering to the landlord, in addition to the amount of any such premium and any other amounts payable by virtue of Schedule 13, the amount so far as ascertained:-

“(a)      of any sums payable by him by way of rent or recoverable from him as rent in respect of the flat up to the date of tender;

“(b)      of any sums for which at that date the tenant is liable under section 60 in respect of costs incurred by any relevant person (within the meaning of that section); and

“(c)      of any other sums due and payable by him to any such person under or in respect of the existing lease;

“and, if the amount of any such sum is not or may not be fully ascertained, on offering reasonable security for the payment of such amounts as may afterwards be found to be payable in respect of them.”

18.         The central trust of the Appellant’s argument summarised in paragraph 11(e) of the grounds of appeal as follows:

“It is the fact that the costs demanded were paid in full without condition which is what establishes that they were in fact agreed.”

19.         The Appellant’s case is that by simple application of the well-established law of offer and acceptance was a binding agreement as to the amount of the freeholder and head lessor costs to be inferred from the fact of payment of the total completion monies demanded. No authorities have been cited in support of that argument, resort being had to the general and well-established principles of contract and offer and acceptance.

20.         The test of whether or not the parties have reached agreement is objective. For these purposes there is no doubt that the Appellant’s statement of their conveyancing fees as stated in their original completion statement dated 21 February 2013 as revised on 1 March 2013 constituted an offer in respect of those costs which could have been accepted and so making a binding contract. The question is whether or not there has been an acceptance of that offer. In law the party is only to be treated as having accepted an offer if there is a final and unqualified expression of an assent to what has been offered. The offer may of course be accepted by conduct. However conduct will only amount to acceptance if it is clear that the act of alleged acceptance was with the intention, ascertained objectively, of accepting the offer.

21.         In my judgement in the circumstances of this case it cannot be said the mere payment of the full amount demanded amounts to an unequivocal acceptance of the amount of solicitors’ fees claimed, notwithstanding that the Respondent’s solicitors did not make any express clarification in the 22 March 2013 letter or otherwise. The reasons are as follows.

22.         At the time of receipt of the 22 March 2013 offer, the Respondent was acting by two agents namely his conveyancing solicitors and also his surveyor. By his surveyor the Respondent had already made clear that so far a he was concerned the maximum amount payable in respect of solicitor’s fees should be £722 plus disbursements. The Respondent by his surveyor had applied to the LVT challenging whatever amount of fees exceeded £722 plus disbursements, and the LVT had by directions of 13 March 2013 given the Appellants directions to give full details of their costs by the 8 April 2013. Those details were, as directed, to include details of hours spent, the level of fee earners, hourly rates or alternative basis for charging. Consequently on 19 and 21 March 2013 the freeholders and head lessor’s appointed solicitors respectively notified the LVT that they represented the relevant reversioners.

23.         When viewed in that context in my judgment the payment of the completion monies could not amount to an unequivocal acceptance of the 22 March 2013 offer. Rather, the payment of the full completion fees is consistent with the operation of section 56(3) of the 1993 Act, which requires that were the amount is not agreed the tenant can not require completion without tendering the amount “so far as ascertained” of the costs for which the tenant is liable under section 60. Here of course the amount of the costs was “ascertained”, and full payment had been tendered and made, but had not been “agreed” because any costs in excess of £722 plus disbursements and VAT were disputed as was clear from the 14 February 2013 Application.

24.         In short, when viewed objectively, the payment of the costs on 22 March 2013 was the provision of full “security” so as to enable completion to take place to abide the outcome of the Application to the LVT. The fact that the tenant was acting by two representatives, or agents, does not alter the conclusion. Their several acts must be regarded as the joint acts of the principal, the Respondent. They are not, for the reasons stated, objectively inconsistent or contradictory. 

25.         Where in my judgment the LVT fell into error was to infer or comment, without any proper basis for doing so, that the solicitor did not know what the surveyor was doing. There is nothing to suggest that that it the case. Not even a flicker of embarrassment or awkwardness when the question is raised as to whether the Application should now be withdrawn. Rather, when viewed objectively, their separate acts are consistent with each other and comply with statutory procedure. The error, such that it was, was of no materially to the ultimate decision the LVT correctly reached.

26.         Ultimately, therefore, turning back to whether the LVT had jurisdiction, this depends upon a construction of section 91(1) of the 1993 Act. It provides that the LVT only has jurisdiction “in default of agreement” as to the amount of costs recoverable under section 60. As a matter of fact there was no agreement. For those reasons I dismiss this appeal.

Dated 30 September 2014

His Honour Judge Gerald