Queensland Place, 2 Chatham Place, Liverpool, L7 3AA MAN/00BY/OAO/2024/0001
DECISION
[95]The question for the Tribunal to determine was whether the transfer of the freehold of the property at Queensland Place, 2 Chatham Place, Liverpool, Merseyside L7 3AA (registered at HM Land Registry under title number MS447299 “the Freehold”) by 1Dom Limited (“1Dom”) to the Respondent on 16 December 2021 was a ‘relevant disposal’ for the purposes of section 11 of the LTA 1987. REQUISITE MAJORITY[96]In order to do that, the Tribunal would need to determine whether the Applicant had the requisite majority of qualifying tenants included in the Section 12 B Notice for the purposes of the application; and whether or not the transfer was excluded from the definition of a relevant disposal by section 4(2)(l) of the Act on the basis that the Respondent was an Associated Company of 1 Dom.[97]The Tribunal having considered the evidence provided by the parties determined that Type 1 and 1A units would not qualify as flats for the purposes of the Act. Type 1A are more or less similar to Type 1 leases.[98]The Tribunal determined that Type 2 units be treated as flats; they are more comparable to Type 3 leases. The parties agreed there were 14 Units.[99]Both parties agreed that Type 3 units be treated as flats and the Tribunal agrees with that interpretation. The Tribunal determined on the evidence before it that there were 26 Type 3 Units; because of the Applicant's position in the RTM proceedings, and the statement of Katie Edwards with the evidence of the 26th flat attached. Of these, only 23 were held by qualifying tenants, because the Lewandowskis held three leases so were precluded from being qualifying tenants by s3(2) of the Act.[100]Niall Maguire Limited was said to be the owner of two flats, one type 2 and one type 3. They would still have a vote as a qualifying tenant for each flat, for the qualifying tenant; they had not been double counted.[101]In terms of qualifying tenants, the Tribunal notes that the relevant date for determination is the date of the s12B Notice (31 October 2023) in accordance with section 18A(2)(c ) of the Act. There was no evidence before the Tribunal that the owners of Flat 397 were not owners at that date, or indeed that the nominated person had become aware of the same at any time.[102]Consequently the Tribunal determines that for the purposes of the application the flats and qualifying tenants are as follows: d. Type 2 Units: 14 with 8 qualifying tenants e. Type 3 Units : 23 with 13 qualifying tenants[103]21 qualifying tenants were included in the section 12B notice, which is 56% of the 37 flats. On this basis, the section 12B notice is valid. ASSOCIATED COMPANIES[104]The Respondent's skeleton argument on this point stated that the Applicants had failed to provide a positive case or sufficient evidence for the Tribunal to properly consider and determine the Application in their favour. The Respondent reiterates the matters set out in Miss Edwards’ witness statement.[105]The Applicant having satisfied the Tribunal that the Notice under s12B was properly served, the burden of proof falls to the Respondent to support their argument that the transaction is exempted because the Respondent and their predecessor are associated companies. If the Respondent asserts this, they must prove it, and inevitably they are best placed to do so.[106]The Tribunal will not admit the Stock Transfer adduced late in evidence purportedly from 2019 with no corroboration behind it Even were it to do so, it would raise more questions than it answers. There is no supporting statement explaining where it has come from, when it was produced, and why it was provided so late. No evidence was offered as to the contradiction between the document and the Liquidation report, or records at Companies House. No explanation could be provided as to why the central figure in this matter, Mr. Elliott Lawless, has taken no active part in these proceedings.[107]Accordingly, the Tribunal determines that the Respondent was not an Associated Company of 1Dom.[108]The Tribunal further determines that the transfer of the freehold of the Property by 1Dom to the Respondent on 16 December 2021 was a ‘relevant disposal’ for the purposes of section 11 of the LTA 1987. COSTS[109]By virtue of Rule 13 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, the Tribunal has power to award costs against a person found to have acted unreasonably in bringing, defending or conducting proceedings .[110]In Willow Court Management Company (1985) Ltd and Others v Alexander and Others [2016] UKUT the Upper Tribunal laid down a three stage test: (iii) Whether, objectively, the person has acted unreasonably?; (iii) unreasonable conduct is found, whether, applying it's discretion and taking into account all relevant factors, it is appropriate to make an order for costs or not; (iii) If the order for costs is to be made, the terms of such order, the form and quantum of the costs aware.[111]The Tribunal found that overall, the conduct of the Defendant was such that the proceedings were delayed, confused and the Applicant put to further expense.[112]The Respondent maintained until the 11th hour their defence that the s11B Notice had not been served; despite having expressly acknowledged receipt through in their solicitors' letter of receiving the Notice under s11 dated 7 June 2023. This argument was hopeless and destined to fail, but they continued to put the Applicant to proof of service. Having said that, the s11B Notice was not relied upon in the end.[113]The Associated Companies defence was made without any direct evidence and was bound to fail.[114]The Respondent withheld evidence/submissions until long after directions had closed with no explanation as to why it had not been provided/put forward previously, both in respect of the unit types, and the stock transfer form. The Applicants were given no useful notice of intention to rely on further documents; there was a very short period between statement of case and witness evidence provided on 6 January 2025. Without proper explanation, it appeared as if the Respondent's game plan in the litigation was to deliberately withhold information, and then release it at the last possible opportunity which had a disruptive effect on the proceedings and put the Applicant to further expense.[115]Countering this, the Tribunal notes that the points the Respondent made in respect of the requisite majority were arguable, and valid to raise. The Applicant was not successful on all points, and indeed reliance upon the Section 11 Notice was subsequently abandoned.[116]The Upper Tribunal in Willow Court noted that unreasonable conduct is a pre-condition of the FTT’s power to order the payment of costs by a party.[117]In considering the proper interpretation of Rule 13(1)(b) and particularly the scope of the term "unreasonable" the Upper Tribunal indicated that the “conduct includes conduct which is vexatious, and designed to harass the other side rather than advance the resolution of the case. It is not enough that the conduct leads in the event to an unsuccessful outcome".[118]Whilst the Upper Tribunal declined to give examples of conduct that might be caught in the basket of unreasonable conduct, it stated the test was what would a reasonable person in the position of the party would have conducted themselves in the manner complained of.[119]The Tribunal finds that the Respondent acted unreasonably by filing late submissions and evidence, and effectively derailing the hearing on the 7th January. That was not the only example of late submissions and evidence on the part of the Respondent. No explanation at all, let alone a reasonable explanation, was put forward for this.[120]The Tribunal determines that an Order for costs should be made, due to the nature, seriousness and effect of the unreasonable conduct. The proceedings were unnecessarily delayed, and hopeless argument pursued.[121]The Tribunal finds that not all of the costs were unreasonably incurred, but the Respondent putting the Applicant to proof of matters unnecessary to raise, delaying, obfuscating the application, attempting to introduce late submissions of evidence even at this adjourned hearing, and changing arguments as to the numbers of qualifying tenants from that contained in Ms. Edward witness statement of 7th January, determines that it is reasonable to make an order on a "broad brush" basis, that the Respondent should pay 40% of the total costs (£38,987) of the Respondent, being the sum of £15,594.80. J N Murray Judge 11 February 2025