UPPER TRIBUNAL (LANDS CHAMBER)

                                                                                        

 

UT Neutral citation number: [2015] UKUT 74 (LC)

UTLC Case Number: RA/8/2014

                                                                             

                         TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

 

RATING – costs – withdrawal of appeal – simplified procedure – whether unreasonable or exceptional conduct

 

 

IN THE MATTER OF AN APPEAL FROM A DECISION OF THE VALUATION TRIBUNAL FOR ENGLAND

 

 

BETWEEN                                                        

 

                                                   ANDREW McDONOUGH                             Appellant

     (VALUATION OFFICER)                                      

 

and

 

                                                      MRS ANDREA O’KEEFFE                             Respondent

 

                                                                                                                                                           

 

Re: High Beck Lodge

                                                                  Brecongill

                                                                  Coverham

                                                                  Leyburn

                                                                  North Yorkshire

                                                                  DL8 4TJ

 

                                 Determination on the basis of written representations

 

by

 

A J Trott FRICS

                                                                                                                                                      

 

© CROWN COPYRIGHT 2015

 

 

The following cases are referred to in this decision:

 

Tarafdar v HMRC [2014] UKUT 362 (TCC)

Total Fulfilment Logistics Ltd v Paul May (VO) [2014] UKUT 354 (LC)

 

The following case was also referred to in argument:

 

Redrose Limited v Elizabeth Thomas (VO) [2014] UKUT 311 (LC)

 

 

 

DECISION ON COSTS

Introduction

1.             This is a consolidated appeal by the Valuation Officer (“VO”), Mr Andrew McDonough, against a decision of the Valuation Tribunal for England (“VTE”) dated 2 December 2013.  The VTE’s decision concerned two appeals by the ratepayer, Mrs Andrea O’Keeffe, against the 2010 compiled list assessment in the local non-domestic rating list of a racing stable and premises, Brecongill, Coverham, Leyburn, North Yorkshire, DL8 4TJ.  Mrs O’Keeffe is the respondent in this appeal.

2.             The appeal hereditament was entered in the 2010 list with a rateable value of £17,000.  Following a reduction in the number of stables being used by Mrs O’Keeffe the list entry was altered to £12,000 with effect from 1 September 2010.

3.             The VTE allowed the appeals in part and reduced the rateable value to £8,800 with effect from 1 April 2010 and £6,300 with effect from 1 September 2010.

4.             The VO appealed against the VTE’s decision on 23 December 2013 and in his statement of case dated 17 April 2014 he said that the rateable values should be £12,500 with effect from 1 April 2010 and £8,750 with effect from 1 September 2010.  He maintained these valuations in his reply dated 30 June 2014 to the respondent’s statement of case.

5.             The Tribunal fixed the hearing of the appeal, to be heard under the simplified procedure, for 21 October 2014.  On 24 September 2014 the VO wrote to the Tribunal saying:

“Having considered new evidence and information that only [came] to light since the appeal and Statements of Case were lodged and following further discussion with the Respondent, I am now persuaded that the Rateable Values decided by the VTE are fair and reasonable, although [I] do not necessarily agree with the methodology and approach of the VTE in arriving at those values.

In the circumstances, I do not wish to pursue this case and request permission to withdraw from further proceedings.”

The respondent did not consent to the withdrawal unless the appellant paid her costs.

6.                  There is no longer a dispute about the substantive issues in this appeal, the VO having accepted that the VTE’s determination of the rateable values was correct, although not accepting what he describes as the VTE’s “flawed” reasoning.  The only issue outstanding is whether, in the light of the VO’s notice of withdrawal of his appeal, the respondent should be awarded her costs as a condition of the Tribunal’s consent to the withdrawal under rule 20(2) of The Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010 (as amended).  The parties agreed that this issue should be dealt with by written representations. 

Lands Chamber Practice Directions

7.             Practice Direction 12.8 of the Practice Directions: Lands Chamber of the Upper Tribunal, dated 29 November 2010 states:

“Where proceedings are determined in accordance with the simplified procedure or the written representations procedure, costs will only be awarded if there has been an unreasonable failure on the part of the claimant to accept an offer to settle, or if either party has behaved otherwise unreasonably, or the circumstances are in some other respect exceptional.”

8.                  Practice Direction 3.3 which deals with the simplified procedure, states at paragraph (4) that:

“In all other cases [not involving section 4 of the Land Compensation Act 1961] no costs order will be made unless the Tribunal –

(i)                 considers it appropriate to take the making of an offer of settlement by a party into account;

(ii)               regards the circumstances as exceptional; or

(iii)             considers a wasted costs order should be made.

If an award of costs is made, the amount will not exceed the amount that would be allowed in proceedings in a county court.”

The case for the appellant

9.             The VO said that he had requested the simplified procedure to save time and costs and because the appeal did not involve any substantial issue of law or valuation and there was no significant dispute about the facts.  He said the respondent had been happy to agree to the use of the simplified procedure in order to avoid costs being awarded against her in the event that the VO was successful in his appeal.

10.         The VO said that having appointed an expert the onus was on the respondent to recognise that the appeal was proceeding under the simplified procedure where it was normal for no costs order to be made.  The respondent, advised by her experienced expert Mr Marriott, could have applied to the Tribunal to transfer the appeal to the standard procedure which would have enabled her to claim for her costs and those of her expert.  She chose not to do so. 

11.         Given the issues identified by the VO on his appeal form he considered “that the Respondent was not obliged to respond to the VO’s notice of appeal”.  The respondent had, in effect, chosen to prepare and present her case in such a way as unnecessarily to cause  costs to be incurred by her and lengthening the proceedings. 

12.         The appellant submitted that the respondent’s own costs, in the final sum of £4,482, were “unconscionable” and should not be allowed.  There was nothing about the running of the appeal that could give rise to such an award of costs.

13.         The VO submitted that:

          “There was no justification in the Respondent engaging Mr Marriott as an expert in this appeal and/or it was disproportionate, given that there was no significant dispute as to fact, but only discrete issues of valuation and the analysis of rental and comparable evidence.”

The VO said that the expert’s fee, based on 48.75 hours at £150 per hour plus VAT, was excessive and submitted that the respondent’s claim for her expert’s costs were “baseless and should not be awarded in whole or in part.”  Furthermore the VO said that Mr Marriott had now been instructed to act on behalf of the ratepayers of other racing yards in the area from whom he was claiming a fee.  Thus “to entertain a claim as put forward for his services in this appeal would lead to double accounting.”

14.         The appellant referred to the test set out in Tarafdar v HMRC [2014] UKUT 362 (TCC) where an application for costs was made on the basis of unreasonable conduct where a party had withdrawn from an appeal.  The Tribunal stated at paragraph 34 that under those circumstances a Tribunal:

          “Should pose itself the following questions:

(i)     what was the reason for the withdrawal of that party from the appeal?

(ii)   having regards to that reason, could that party have withdrawn at an earlier stage in the proceedings?

(iii)  was it unreasonable for that party not to have withdrawn at an earlier stage?”

15.         Addressing those questions the VO said that the reason for his withdrawal from the appeal was the result of further analysis of the rental evidence based upon information provided by the respondent and others that was not previously available to him.  Following the respondent’s instruction of Mr Marriott at the end of March 2014 various details had come to light to enable appropriate rental adjustments to be made.  Mr Marriott had been given access to the relevant leases and it became clear that the details provided on the forms of return, completed by lay people, were inaccurate.

16.         In further written submissions made at the request of the Tribunal the appellant explained that he had not adjusted his valuation to reflect this new information by the time of his reply to the respondent’s statement of case but that having considered the matter further, in particular after a meeting with Mr Marriott in August 2014, he had amended his opinion of the deduction in value to be made to reflect the residential element of the comparables.

17.           Having considered this new information, discussed it with “senior personnel in the VOA” and inspected the appeal hereditament and other local racing yards, “it was their view” that the VTE’s rental determination, but not its approach was correct.  The appellant subsequently explained that his reference to senior personnel was “not intended to convey other than reporting to the Statutory [Valuation] Officer the circumstances behind Mr McDonough’s decision.”  On the same day as that conclusion was reached, 22 September 2014, the VO had told the respondent and her expert of his decision to withdraw the appeal.  The VO wrote to the Tribunal on 24 September 2014 saying that he wished to withdraw.

18.         The VO submitted that he had not acted unreasonably and had not lengthened the proceedings.  He had sought to withdraw the appeal at the earliest opportunity.  His conduct had not been exceptional under the circumstances and to award costs against the appellant would be unjust.

The case for the respondent

19.         Mrs O’Keeffe was a litigant in person.  She sought costs in the sum of £13,608.75 plus VAT comprising Mr Marriott’s costs of £8,137.50; Mrs O’Keeffe’s own costs of £4,482 (calculated at 249 hours at £18 per hour); the costs of an administration assistant in the sum of £696.20 (34 hours at £20 per hour plus expenses); and photocopying/binding costs of £293.05.

20.         Mrs O’Keeffe submitted that the VO had acted unreasonably in the manner in which the 2010 rating list had been compiled, in the manner in which he contested the appeal before the VTE, and, having appealed against the VTE’s decision, in withdrawing his appeal just before the hearing.

21.         Mrs O’Keeffe stated that the VO’s contention that he had withdrawn the appeal because new evidence had come to light upon receipt of the respondent’s statement of case was “completely without foundation” and “patently untrue”.  The only evidence considered by Mr Marriott on behalf of the respondent was that which the VO himself had produced.  All Mr Marriott had done was to undertake “a proper, detailed, forensic examination of that evidence.”

22.         Mr Marriott provided the VO with his initial analysis of the VO’s comparables as early as 8 April 2014, before the appellant had even produced his statement of case.  Not only that but on 8 May 2014 Mr Marriott gave the VO a copy of his draft expert report so as to inform a meeting to be held between the parties the next day.  The appellant did not alter his opinion in the light of Mr Marriott’s analysis of the evidence.

23.         Mr Marriott sent a further analysis to the VO on 15 May 2014 and on 20 June 2014 sent a copy of his draft expert report to Mr Keith Newbigin, the VO’s line manager, because the VO was on sick leave.

24.         On 25 July 2014, three months after his statement of case, the VO asked the respondent to organise site inspections of the comparables upon which he relied as evidence in his appeal.  The same properties had been visited by the appellant on 30 May 2013 and by the VTE on 14 November 2013.

25.         Mrs O’Keeffe said that the VO had treated the respondent as though she was the appellant in this appeal.  But it was for the VO as the appellant to make his case and despite the respondent having done everything possible to explain why the VO had misinterpreted his own rental evidence and thereby over valued the appeal hereditament, the VO, in Mr Marriott’s words, had not “materially altered [his] mind on anything.”

26.         Mrs O’Keeffe challenged the VO’s statement, contained in his representations, that:

          “The reason for the appeal raised by the VO was that the Valuation Tribunal appeared to have ignored the rental evidence and then applied a series of allowances that were inappropriate in arriving at the standard loose box rate for racing yard stables.”

Mrs O’Keeffe stressed that the VTE had not ignored the rental evidence before it, but had not found it to be helpful.  The VTE stated in paragraphs 13-15 of their decision:

          “13. The panel was mindful that in line with the Lands Tribunal decision on Lotus v Delta the rent on the subject property should be the starting point. …

          14. The panel was of the opinion that the rental evidence presented was extremely variable and inconclusive.  The actual rent paid had to be adjusted to reflect the living accommodation, any land, services and sewerage, prior to the normal adjustments to reflect repairs and insurance…. the adjustments were based on an opinion of value and were not definitive, therefore little weight was attached to this evidence.

          15. The panel therefore had to consider the rest of the evidence presented in order to establish appropriate valuations for the appeal premises.”

27.         Mrs O’Keeffe said that she had not agreed willingly to the use of the simplified procedure.  As a lay person she had no knowledge or understanding of what procedure was appropriate and it was the Tribunal that had allocated the appeal to the simplified procedure.

28.         Mrs O’Keeffe expressed amazement that the VO should suggest in his representations that she had not been obliged to respond to the VO’s notice of appeal.  She said that she had had no choice other than to respond since if the appeal was successful then the continued operation of her business would have been financially impossible.  Mrs O’Keeffe also rejected the VO’s submission that her conduct may have led to incurring unnecessary costs and/or lengthening the proceedings.  She had met every deadline, often early, without any applications for an extension of time.  This contrasted with the conduct of the VO who had requested a three month extension to submit his statement of case almost as soon as the appeal was made.

29.         The VO claimed that there was no justification for the respondent to instruct an expert witness because “there was no significant dispute as to fact, but only discrete issues of valuation and the analysis of rental and comparable evidence.”  Mrs O’Keeffe said this was precisely why she had instructed Mr Marriott.  As an unqualified person she had been unable to persuade the VO to act upon any of the information that she had provided to him over a sustained period of time.  The appointment of Mr Marriott as a qualified expert was reasonable in order to make progress on the valuation issues to which the VO referred in his submissions.  His fees were not excessive and the fact that he had also been instructed by other ratepayers in the vicinity was completely irrelevant to her application for costs.

30.         Turning to the tests set out in Tarafdar Mrs O’Keeffe said that the reason for the appellant’s withdrawal of the appeal was the involvement of senior VOA personnel who made a site visit and reviewed the evidence.  But such senior personnel had been involved in the appeal process since 2010 and the current VO, Mr McDonough, had taken over from a more senior colleague in order to conduct the appeals before the VTE and this Tribunal.

31.         The VO had all the necessary information relating to his comparables by the end of March 2014.  It was wrong for the VO to talk of “crucial information” only being made available at the point of submission of the respondent’s statement of case on 15 May 2014.  The VO had made further site inspections in March and April 2014 and had met with the respondent on 9 May 2014, prior to the submission of the respondent’s statement of case.  Mrs O’Keeffe said that no further information was provided by her in responding to the appeal after 9 May 2014.  The further site visits called for by the VO in August 2014 were totally unnecessary and had caused additional expense.

Discussion

32.         In my opinion Mrs O’Keeffe was entitled to respond to the appeal in such detail as she saw fit.  The VTE substantially reduced the compiled list rateable value of the hereditament on appeal.  The VO sought to overturn this decision and if he succeeded Mrs O’Keeffe’s business would be under financial threat.  It was entirely reasonable for her to respond to the VO’s appeal.  Her statement of case was detailed but it was cogent, relevant and competently presented.  It provided the VO with a substantial amount of useful information.  I find it extraordinary that the VO should suggest that this was (i) not necessary and (ii) lengthened the proceedings.

33.         I am most surprised by the appellant’s submission that the respondent was not justified in instructing an expert witness and that to do so was “disproportionate”.  In his notice of appeal the VO states that “the case involve[s] pure valuation and the analysis of rental and comparable evidence”.  That is precisely why the respondent felt it necessary to instruct an experienced expert valuer.  Indeed it was only after the appointment of Mr Marriott that the VO was provided with the information that enabled him to amend his rental values.  In a statement dated 25 November 2014 forming part of his written representations on costs Mr McDonough said:

“Much of the confirmation of these matters has come to light since the involvement of Mr Marriott who was given access to the actual leases.  Information he took from these has allowed me to make amendments to the rental adjustment. …It is through lengthy discussions over a period of time with Mr Marriott…that I have become satisfied that the adjustment and analysis of the rents has produced a basis which enables the VO to accept the RVs reached by the VT[E] in respect of the subject properties.”

It was obviously reasonable for the respondent to have instructed Mr Marriott whose involvement was the key to the resolution of the dispute.  For the appellant to suggest otherwise is, frankly, absurd and contrary to his own evidence.

34.         Nor do I accept the VO’s suggestion of double counting in the payment of Mr Marriott’s fees.  The fact that he is retained by other ratepayers does not affect the work that he has done for the respondent.  I do not understand him to be charging twice (or more) for the same work.

35.         In Total Fulfilment Logistics Ltd v Paul May (VO) [2014] UKUT 0354 (LC) the Tribunal, Mr Peter McCrae FRICS, held at paragraph 15 that:

“The application for the withdrawal of a case should be made as early as possible, both for the parties’ benefit and in order that judicial resources can be reallocated.”

The key questions in this appeal are whether the VO should have withdrawn his appeal earlier and whether he was unreasonable not to have done so until a month before the hearing.

36.         A persistent theme which emerges from the representations is that Mr McDonough, although duly authorised to act as the VO in this appeal, either would not or could not withdraw the appeal without the approval of more senior staff within the VOA.  In his statement dated 25 November 2014 Mr McDonough said:

“I know the locality well having grown up nearby but have not dealt with the valuation of racing stables (or other equestrian premises) prior to this.”

It was therefore understandable that Mr McDonough should seek the advice of the valuation officer appointed under section 61(1)(a) of the Local Government Finance Act 1988 and of the “Head of the Racing Stable team in the VOA” both of whom inspected the appeal and other comparable hereditaments on 15 August 2014.  A month later on 22 September 2014 “senior personnel in the VOA considered the matter as a whole with all the information now available to the VOA” and decided to withdraw the appeal.

37.         Mrs O’Keeffe and Mr Marriott insist that all relevant information was available to the VO much earlier than 22 September 2014.  Mr McDonough acknowledges that Mr Marriott sent him his draft rental analysis on 8 April 2014 and provided further information at a meeting on 9 May 2014.  In his submissions the appellant says that “Crucial information was only provided by the Respondent … at the point of her statement of case, namely 14.5.14.”  Further relevant information is said by the appellant to have been provided subsequently by way of clarification.

38.         This is the VO’s appeal.  It is his obligation to show that the VTE’s decision was wrong.  He is relying upon the same evidence he presented to the VTE but throughout this appeal he has relied upon the respondent to obtain and provide further details to enable him to make adjustments to his own comparables.  Those details were made available to him by Mr Marriott whose appointment the VO now challenges.

39.         In my opinion the VO had sufficient information by the middle of May 2014 at the latest to realise that his valuations were wrong and needed to be revised.  He did not revise them in his reply to the respondent’s statement of case and it required yet further inspections and meetings by Mr McDonough and other senior personnel before an amended valuation was produced and the appeal was withdrawn on 22 September 2014.  Was this the earliest that the appellant could reasonably have withdrawn his appeal?  In my opinion, on balance, it was.  The respondent has emphasised that no new evidence was adduced after May 2014 but I consider that it was reasonable for Mr McDonough to check thoroughly that the evidence provided to him was rigorous and that it clearly supported the VTE’s determination of the rateable value given that the VO had consistently disagreed with the underlying valuation approach adopted by the VTE and given Mr McDonough’s inexperience of this type of valuation. Once the appellant had satisfied himself and the other senior personnel within the VOA that the VTE was correct and the rating list was accurate he withdrew the appeal without delay and saved the parties the cost of the hearing.

40.         I acknowledge that it is the respondent and her expert who have taken the lead in obtaining the evidence to allow the appellant to interpret properly the comparables upon which he relies.  The respondent has acted with commendable thoroughness and perseverance throughout the appeal and her endeavours have undoubtedly meant that an unnecessary hearing has been avoided.  But the question here is not whether the respondent has acted reasonably but whether the appellant has acted unreasonably.  In my opinion it was not unreasonable for him to appeal the decision of the VTE given his genuine concerns about the principle of the approach taken by the VTE to the valuation of racing stables and the lack, at the time of the appeal before the VTE, of certain relevant information.  Nor do I think it was unreasonable for the appellant to examine carefully the information provided to him subsequently.

41.         The early settlement of disputes is to be encouraged.  It would be unhelpful if a party which had reassessed the strength of its case was to be discouraged from withdrawing an appeal in a simplified procedure case by concern that it would automatically become liable for the costs of the respondent.  To withdraw an appeal which is believed to have little prospect of success is a reasonable course of action, not an unreasonable one, and it should not automatically be penalised.  Some additional factor is likely to be necessary in a simplified procedure case (such as a frivolous or a purely tactical appeal) to make it appropriate to order the appellant to pay the respondent’s costs.

42.         This is an appeal under the simplified procedure which is not a procedure where costs are normally awarded.  In this context I do not consider that the appellant’s conduct was unreasonable or that the circumstances of this case were so exceptional as to justify an award of costs to the respondent in respect of the resolution of the substantive issues in dispute.  But when considering the conduct of a party the Tribunal shall have regard to whether a party has acted reasonably in pursuing or contesting an issue (practice direction 12.2).  In my opinion the appellant’s submissions about the respondent’s conduct, including criticism of the presentation of her case and the appointment of an expert valuer, and which form a significant part of the appellant’s written representations, are wholly unjustified and unreasonable for the reasons that I have stated above.  I therefore determine that the appellant shall pay 50% of the respondent’s costs on the indemnity basis of preparing her written representations on the issue of costs in this appeal, such costs if not agreed to be the subject of a detailed assessment by the Registrar. Upon the basis of this determination on costs the Tribunal consents to the appellant’s withdrawal of the appeal.

Dated:  2 March 2015

                                                            A J Trott FRICS