Mr Clive Norman (Flat 6) and the tenants of 23 other flats at Dorset House listed in Appendix 1ApplicantDorset House Residential LimitedRespondent
Before
Judge Robert LathamMr Hugh GeddesMr Leslie PackerMr Clive Norman (in person) for the ApplicantProperty Management) For the determination of the for the RespondentDate 10 May 2019Property: London, NW1 5AQ Mr Clive Norman (Flat 6) and theType of application: reasonableness of and the liability to pay a service charge Judge Robert Latham
DECISION
The Tribunal makes an Order under Rule 13(1)(b) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 that the Applicants pay the sum of £30,750 including VAT to the Respondent in respect of costs incurred by it relating to the determination of this application. The said sum is to be paid within 28 days. The Background[87]On 28 August 2018, Mr Clive Norman issued an application seeking a determination pursuant to s.27A of the Landlord and Tenant Act 1985 of his liability to pay service charges for the years 2014 to 2017. Twenty three other tenants have applied to be parties to the application and be represented by Mr Norman.[88]On 10 May 2019, the Tribunal issued its determination. The Tribunal had been asked to determine the payability and reasonableness of some 291 items identified in a Scott Schedule. We found that most items were payable, amounting to around 95% of the items challenged, by value. Our decision records where challenges had been conceded by the Applicant, concessions have been made by the Respondent and the few items which we disallowed. On 24 June, Mr Norman sought permission to appeal this decision. In a separate decision issued today, we have refused permission to appeal. But Mr Norman identified a number of clerical errors in our decision. We have issued a revised decision correcting these errors pursuant to rule 50 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 (“The Tribunal Rules”). None of these corrections affect the substance of the decision.[89]By a letter dated 15 May, the Respondent sought an order under Rule 13(1)(b) of the Tribunal Rules in respect of costs incurred by it relating to the determination of this application. On 30 May 2019, the Tribunal gave Directions for the determination of this application. Pursuant to these Directions, the parties have filed their written representations:(i) The Respondent’s Statement of Case (dated 7.6.2019);(ii) The Applicant’s Response (dated 17.6.2019); and(iii) The Respondent’s Reply (dated 26.6.2019).[90]The Tribunal notified the parties that it considered that this application could be determined on the papers. However, on 21 June, the Respondent requested an oral hearing. In his written representations, Mr Norman had stated his intention to make detailed submissions on costs once the Tribunal had determined his appeal. At the oral hearing, Mr Simon Serota, a Partner with Wallace and Partners, Solicitors, appeared for the Respondent. Mr Norman appeared for the Applicants.[91]The Tribunal explained, and the parties noted, that Mr Geddes was not available for the hearing, so that the Tribunal’s decision would be made by the two remaining members.[92]The Tribunal informed Mr Serota that it did not require submissions from the Respondent on the application for permission to appeal and that his appearance was restricted to the conduct of the Applicant in its conduct of the substantive proceedings. Both Mr Serota and Mr Norman made commendably concise oral submissions highlighting the matters raised in their written submissions.[93]There have been six previous applications and five determinations relating to Dorset House, two of which were heard together:(i) LON/00BK/LSC/2004/0094 (12 April 2005);(ii) LON/00BK/LSC/2009/346 (14 July 2010);(iii) LON/00BK/LSC/2011/0620 and LAM/00BK/2011/0019 (16 July 2012);(iv) LON/00BK/LSC/2016/0135 (5 January 2017); and(v) LON/00BK/LAM/2017/0020 (25 September 2017). Mr Norman represented the tenants in LON/00BK/LSC/2016/0135); and (v) LON/00BK/LAM/2017/0020.[94]The Tribunal have made two previous orders against Mr Norman under Rule 13(1)(b):(i) On 10 January 2018, Judge Vance made an order of £8,256 in LON/00BK/LAM/2017/0020. On 25 September 2017, Judge Vance had struck out the tenants’ application for the appointment of a manager because the tribunal had no jurisdiction to determine it because the requisite Section 22 Notice had not been served. Judge Vance had been satisfied that the applicants did not act unreasonably in bringing the application. However, the defect in the Section 22 Notice was highlighted at the Case Management Hearing (“CMH”). Despite this, Mr Norman had proceeded with the application on behalf of the applicants. It was this conduct that was found to merit a penal costs order.(ii) On 18 December 2018, Judge Latham had made an order of £4,500 in the current proceedings. At the CMH, the Respondent challenged the Tribunal’s jurisdiction to decide whether the Cleaning and Boiler contracts are Qualifying Long Term Agreements (“QLTAs”) on the ground that this had been determined by a Tribunal on 5 January 2017 in LON/00BK/LSC/2016/0135. The parties agreed that this should be determined as a preliminary issue. On 26 October 2018, Judge Latham determined this issue in favour of the Respondent. The Tribunal was satisfied that the Applicant was estopped from revisiting whether the Cleaning and Boiler contracts are QLTAs by the principle of issue estoppel. The order was restricted to the costs in determining the preliminary issue (assessed at £2,500) and £1,250 for the costs associated with the Rule 13 application). The unreasonable conduct was Mr Norman’s decision to continue to argue that this tribunal should revisit these matters despite the jurisdictional issue having been highlighted at the CMH. Neither order was appealed.[95]Mr Norman informed the Tribunal that in each case he had personally paid the costs albeit that in the first case he was representing 83 other tenants, and in the current application he is representing 23 other tenants. We note that in the current application, the 23 other tenants have played no active role.[96]We record that on 5 July, Mr Serota notified the Tribunal that Dorset House Residential Limited had paid the penal costs ordered by Judge Vance. In a letter of 8 July, Mr Norman responded that he had nonetheless borne the cost. However, this matter does not affect our decision on the current application and the Tribunal need not come to a view on it.[97]The Tribunal’s decision of 10 May 2019 (paragraphs 12-3) noted that our hearing was cut short after lunch on the second day of the hearing when Mr Norman became unwell. The Tribunal issued further Directions, indicating that we were satisfied that we could determine the application on the basis of the detailed written submissions. Both parties agreed that we should proceed on this basis. The Law[98]Rule 13 of the Tribunal Rules provides in so far as is relevant to this application (emphasis added):[13]Orders for costs, reimbursement of fees and interest on costs (1) The Tribunal may make an order in respect of costs only: (b) if a person has acted unreasonably in bringing, defending or conducting proceedings in— ...... (ii) a residential property case;[99]Rule 3 sets out the overriding objectives and the parties’ obligation to co-operate with the Tribunal. The overriding objective is to enable the Tribunal to deal with cases fairly and justly. This includes dealing with the case in ways which are proportionate to the importance of the case, the complexity of the issues, the anticipated costs and the resources of both the parties and the Tribunal. The parties are under a duty to help the Tribunal to further these overriding objectives.[100]In Willow Court Management Company (1985) Ltd v Alexander [2016] UKUT 290 (LC)), the Upper Tribunal (“UT”) gave guidance on how First-tier Tribunals (“FTTs”) should apply Rule 13. The UT for the case consisted of the Deputy President of the UT and the President of the FTT. The UT set out a three-stage test:(i) Has the person acted unreasonably applying an objective standard?(ii) If unreasonable conduct is found, should an order for costs be made or not?(iii) If so, what should the terms of the order be?[101]The UT gave detailed guidance on what constitutes unreasonable behaviour. For the purpose of this application we highlight the following passage from the judgment of the Court of Appeal in Ridehalgh v Horsefield [1994] Ch 205, per Sir Thomas Bingham MR at p.232C (emphasis added): “‘Unreasonable’ also means what it has been understood to mean in this context for at least half a century. The expression aptly describes conduct which is vexatious, designed to harass the other side rather than advance the resolution of the case, and it makes no difference that the conduct is the product of excessive zeal and not improper motive. But conduct cannot be described as unreasonable simply because it leads in the event to an unsuccessful result or because other more cautious legal representatives would have acted differently. The acid test is whether the conduct permits of a reasonable explanation. If so, the course adopted may be regarded as optimistic and as reflecting on a practitioner’s judgment, but it is not unreasonable.” The Submissions of the Parties The Respondent[102]The Respondent seeks an order for costs in the sums of(i)£21,437.50 in respect of legal costs and(ii)£15,324 in respect of managing agent’s fees (both sums include VAT). Mr Unsdorfer, from the managing agents, represented the Respondent at the substantive hearing. He was accompanied by two other members of staff. We have been provided with a schedule of the managing agent’s fees. The Solicitors were instructed by the landlord in September 2018. Mr Serota’s charge-out rate as a partner is £625 per hour (which is very much at the higher end of the scale of what this Tribunal would consider to be reasonable). We have been provided with a Costs Schedule. £7,471.50 is claimed for reviewing our decision and drafting both the Respondent’s Statement of Case and its reply. £2,187.50 is claimed in respect of the cost of attending the hearing. Mr Serota stated that this was on the basis of a hearing of 2.5 hours. In the event, the hearing was concluded in 0.75 hours. Mr Serota stated that the landlord has been invoiced, and has paid, sums in excess of the sums claimed in respect of their involvement in this application.[103]Mr Serota notes that the Applicants have challenged service charge expenditure totalling £407,507 in a Scott Schedule in which 291 items were identified under 18 heads of expenditure. Of these, the Respondent conceded 32 items totalling £17,227.91 in its response to the Scott Schedule or subsequently at the hearing. 52 items were conceded by the Applicant. Of the 207 items which fell to be determined by the Tribunal:(i) Two items totalling £1,413.73 were determined in favour of the Applicant; and(ii) 205 items were determined in favour of the landlord.[104]The unreasonable conduct is summarised as follows:(i) The matters which the Tribunal described in paragraphs 9, 10 and 11 of our decision;(ii) Raising and pursuing a vast number of challenges which were either misconceived and/or without merit, and/or without any supporting evidence.(iii) Mr Norman’s continual attempts to expand or alter the applicants’ grounds of challenge. The Applicant[105]Mr Norman did not accept Mr Serota’s analysis of our decision. He suggested that the Tribunal would disallow more items when we reviewed our decision. He emphasised that he is not a lawyer and was representing himself. He notes that the Tribunal found a number of his claims to be legitimate. His long Scott Schedule was meant for mediation purpose. In the event, the Respondent refused to mediate. He states that the Respondent refused to engage with him unless he cleared his arrears. He attaches a number of documents to his Statement of Case. On 28 April 2017, Nilesh Shah responded to a 2014 Scott Schedule submitted by Mr Norman. Mr Norman then submitted a revised Scott Schedule and stated that he would be submitting similar schedules for 2015 and 2016. On 31 July, Mr Shah responded that the managing agents were under no obligation to respond to such schedules. Before any further schedules were sent. Mr Shah asked Mr Norman to settle his outstanding arrears of £35,826.98. This was not an unreasonable request.[106]The CMH was held on 18 September. It is apparent that a Scott Schedule was produced which was not broken down under any cost headings. Judge Andrew directed the Applicants to file a revised Scott Schedule with the cost headings clearly identified. Mr Norman states that the Scott Schedule was prepared in the hope that the matter could be resolved by mediation. Whilst Judge Andrew had accepted Mr Serota’s suggestion that given the background to the application the case was not suitable for mediation, he nonetheless encouraged the parties to meet to see if the issues could be narrowed. On 18 October, a meeting was held which lasted just under five hours. The Respondent limited a second meeting on 7 December to two hours. In the event it lasted less than this.[107]Mr Norman also disputes the amount of the costs which are sought. He notes that at the CMH Mr Serota stated that Mr Unsdorfer, from the managing agents, would represent the landlord at the hearing. Mr Norman argues that any legal costs after this date are unwarranted and unreasonable. He also contends that the involvement of a partner charging an hourly rate of £625 was excessive when much of the work could have been done by a more junior member of staff. Our Determination[108]The Tribunal must apply the three-stage test:(i) Has the person acted unreasonably applying an objective standard?(ii) If unreasonable conduct is found, should an order for costs be made or not?(iii) If so, what should the terms of the order be?[109]The Tribunal is satisfied that Mr Norman has conducted the proceedings unreasonably. We would characterise this as the product of excessive zeal. As we noted in our decision, Mr Norman’s Scott Schedule extended to 31 pages and raises 291 items under 18 heads of expenditure. He did not seek to identify the items which raise general points of principle. At the beginning of the hearing, we reminded Mr Norman that it is not the role of this Tribunal to micro-manage the manner in which a landlord maintains its service charge accounts. A landlord is entitled to a significant margin of discretion as to how it manages a block of flats. Mr Norman did not accept this. He rather sought to hold the managing agent to account for every invoice that it has paid over a period of four years.[110]Mr Norman sought to challenge service charge expenditure of £407.507. He was not only acting for himself, but also 23 other lessees. Although Mr Norman sought to challenge the quality of the service in respect of cleaning and pest control, he adduced no evidence to support his claim. None of the 23 tenants made witness statements. Whilst Mr Norman referred at the hearing to complaints by other leaseholders on various matters, he provided no evidence.[111]Throughout the hearing, we urged Mr Norman to focus on the significant items in dispute and to recognise the margin of discretion afforded to managing agents. Where the landlord had provided a full explanation, Mr Norman merely sought to identify new grounds of challenge. We sought to emphasise to Mr Norman that this approach was not acceptable. We regret that Mr Norman continued regardless, as deaf to our interventions as he was to any explanation provided by the landlord.[112]Mr Norman has shown no sense of proportionality, and in fact does not seem to accept the concept. Mr Norman’s position was and apparently remains that each item of challenge raised an important point of principle and deserved equal attention regardless of whether his liability was £1,000 or £1 (in one case just 21p).[113]Further, evidence is almost entirely absent from Mr Norman’s presentation of his case, either written or in the hearing. Whilst Mr Norman is a lay person, he is experienced in bring matters to the Tribunal and he knew, or should by now know, the sort of factual information and supporting evidence that is needed. Whilst 23 other leaseholders (out of some 200) joined in the application, none were willing to put their heads above the parapet to support the claims Mr Norman made. None attended the hearing; none made witness statements; there were no written complaints from them in the bundle.[114]Finally, Mr Norman, despite being a highly-qualified professionally person, shows no realism about the day to day practicalities of managing a large and complex property, and the element of discretion and judgment needed by landlords and agents. This is evident, for example, where Mr Norman argued that contractors should have been pursued for past repairs which had to be revisited, with little thought of practicality or cost-effectiveness; or where he argued that insurance claims should have been pursued, notwithstanding the risk of multiple claims leading to higher future premiums, as the Respondent reasonably pointed out.[115]In all, we should make clear that Mr Norman showed no malice or improper motives. He was courteous at all times, and sensibly agreed after 1.5 days of hearing for the remaining issues to be dealt with on the papers. We recognise that his unreasonableness is rather a matter of excessive zeal, unrealism, and a persistent lack of understanding of either the practicalities of property management or the requirements of the legal process, despite repeated previous cases brought to the Tribunal.[116]Be that as it may, the costs which Mr Norman’s conduct has generated are substantial, including Tribunal costs to the public purse. The Respondent has had no alternative but to address them in detail, relating as they did to over £400k of disputed costs. His conduct has been manifestly unreasonable in its consequences to others and it must properly be reflected in an award of penal costs.[117]The third issue is the size of any penal costs order. Mr Serota seeks costs of £15,324 in respect of the managing agents’ fees. We award £14,500. We make a modest reduction in respect of the items upon which Mr Norman succeeded (less than 5%).[118]Mr Serota further claims legal costs of £21,437.50. We are satisfied that the landlord has paid legal fees in excess of this. We are further satisfied that there is no overlap between the sums now claimed and those awarded in respect of the preliminary issue. However, we have reduced this to £16,250. Mr Serota accepted that the sum claimed for the hearing (£2,187.50) needed to be reduced as it was much shorter than he had anticipated. The Tribunal had previously indicated that the matter could be determined on the papers. We are also satisfied that not all the work needed to be done by a partner charging an hourly rate of £625.[119]Mr Norman’s main objection is to the fact that Wallace and Partners were involved after the CMH, when the managing agents stated that they would represent the landlord at the hearing. Given the size of the sums in dispute and the complexities of this application (largely created by Mr Norman), we are satisfied that the continued involvement of solicitors was justified.[120]To conclude, are satisfied that this is an exceptional case in which it is appropriate to make a penal costs order. We make an order in the sum of £30,750, namely £14,500 + £16,250. Judge Robert Latham 9 July 2019 ANNEX - RIGHTS OF APPEAL[5]If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber) then a written application for permission must be made to the First-tier Tribunal at the Regional office which has been dealing with the case.[6]The application for permission to appeal must arrive at the Regional office within 28 days after the Tribunal sends written reasons for the decision to the person making the application.[7]If the application is not made within the 28 day time limit, such application must include a request for an extension of time and the reason for not complying with the 28 day time limit; the Tribunal will then look at such reason(s) and decide whether to allow the application for permission to appeal to proceed despite not being within the time limit.[8]The application for permission to appeal must identify the decision of the Tribunal to which it relates (i.e. give the date, the property and the case number), state the grounds of appeal, and state the result the party making the application is seeking.