“16. The respondent asked for an order that the costs of the proceedings should not fall on the service charge. Mr Hammond [Counsel for the Applicants/Appellants] invited the tribunal to make such order as follows the award. In that case there would be no order as the monetary effect of the tribunal’s determination is largely for the applicant. However the tribunal has found that Mrs Derdabi had grounds for her complaint about poor service and that appearance before the tribunal was her only recourse. Accordingly the tribunal makes the order.” 10. The LVT elaborated on its reasons in its 24 th February 2011 refusal to grant the Applicants permission to appeal thus: “1. With regard to proportionality, and the guidance issued by His Honour Michael Rich Q.C., each case has to be determined on its facts. The respondent’s complaints had always been about the poor quality of management and in that, albeit that she did not in her statement of case quantify the proper cost of what she received, she succeeded. Many of her disputes were not about how much things cost but such matters as: equipment that was broken and not repaired quickly enough, that cleaning staff were not properly supervised, careless accounting and budgeting and lack of adequate communication of information to tenants. “2. It would have been simplistic in this case to allocate money values to the specific items whose costs were not themselves challenged (other than via the management fee) and calculate the fee as a proportion of the whole for the purpose of determining whether and to what extent a section 20C order should be made. “3. The respondent’s only course to ventilate her complaint about poor service due to poor management was to the LVT and in that she succeeded. “4. With regard to the landlord’s claim to have no knowledge prior to the hearing that management fees were an issue, the respondent’s statement of case was dated29 December 2010 . This was recognised to be late and for that reason little criticism could be directed at the applicant for the lateness of their own response – delivered to the respondent and the tribunal the night before the hearing. “5. But the explanation given for that late delivery was the need to investigate the respondent’s claims. It was perfectly plain from her statement of case that, although specific service items were the subject of complaint, it was poor management of the building that formed the bulk of her dissatisfaction rather than the cost of the items themselves.”
“(1) A tenant may make an application for an order that all of any of the costs incurred, or to be incurred, by the landlord in connection with proceedings before a… leasehold valuation tribunal… are not to be regarded as relevant costs to be taken into account in determining the amount of any service charge payable by the tenant or any other person or persons specified in the application. “(3) The court or tribunal to which the application is made may make such order on the application as it considers just and equitable in the circumstances.” 15. By section 20C(3), the LVT is vested with a discretion. In Iperion Investments Corporation v Broadwalk House Residents Limited[1995] 2 EGLR 47 (CA) Peter Gibson LJ referred to section 19 of the 1985 Act (which he said “prevents a landlord from recovering so much of a service charge as consists of costs unreasonably incurred”) and section 20C (“which goes further”) and then said at 49F: “Thus it is apparent that the court has a discretion to direct that litigation costs be excluded from a service charge, even if the costs have passed the test of section 19 and have been reasonably incurred. The obvious circumstances which Parliament must be taken to have had in mind in enacting section 20C is a case where the tenant has been successful in litigation against the landlord and yet the costs of the proceedings are within the service charge recoverable from the tenant.”
“To my mind, it is unattractive that a tenant who has been substantially successful in litigation against his landlord and who has been told by the court that not merely need he pay no part of the landlord’s costs, but has had an award of costs in his favour should find himself having to pay any part of the landlord’s costs through the service charge. In general, in my judgment, the landlord should not ‘get through the back door what has been refused by the front’: Holding & Management Ltd v Property Holding & Investment Trust plc[1989] 1 WLR 1313 at p1324 per Nicholls LJ.” 16. In The Tenants of Langford Court (Sherbani) v Doren Limited LRX/37/2000 His Honour Judge Rich Q.C. (sitting as a member of the Lands Tribunal) set out the principles upon which the discretion under section 20C should be exercised:- “28. In my judgement the only principle upon which the discretion should be exercised is to have regard to what is just and equitable in all the circumstances. The circumstances include the conduct and circumstances of all parties as well as the outcome of the proceedings in which they arise. 29. I think that it can be derived from [ Iperion ] that were a court has power to award costs, and exercises such power, it should also exercise its power under s20C, in order to ensure that its decision on costs is not subverted by the effect of the service charge. 30. Where, as in the case of the LVT, there is no power to award costs, there is no automatic expectation of an Order under s.20C in favour of a successful tenant, although a landlord who has behaved improperly or unreasonably cannot normally expect to recover his costs of defending such conduct. 31. In my judgement the primary consideration that the LVT should keep in mind is that the power to make an order under s.20C should be used only in order to ensure that the right to claim costs as part of the service charge is not used in circumstances that make its use unjust. Excessive costs unreasonably incurred will not, in any event, be recoverable by reason ofs.19 of the Landlord and Tenant Act 1985 . Section 20C may provide a short route by which a tribunal which has heard the litigation giving rise to the costs can avoid arguments under s.19, but its purpose is to give an opportunity to ensure fair treatment as between landlord and tenant, in circumstances where even although costs have been reasonably and properly incurred by the landlord, it would be unjust that the tenants or some particular tenant should have to pay them. 32. Oppressive and, even more, unreasonable behaviour however is not found solely amongst landlords. Section 20C is a power to deprive a landlord of a property right. If the landlord has abused its rights or used them oppressively that is a salutary power, which may be used with justice and equity; but those entrusted with the discretion given by s. 20C should be cautious to ensure that it is not itself turned into an instrument of oppression.” 17. In Schilling v Canary Riverside Development PTE Limited LRX/26/2005 His Honour Judge Rich Q.C. said in cases (such as the instant case) where the LVT had not exercised its discretion to order that the landlord pay the tenant’s costs on the basis that it had acted improperly or unreasonably: “13. … The ratio of the [ Doren ] Decision is “there is no automatic expectation of an Order under s20C in favour of a successful tenant.”
“15. Accordingly the tribunal determines that the fees in each of the years 2007 and 2008 should have been£150 plus VAT per unit – a total of£42235 instead of£72789 , a reduction of£305,554 and reducing Mrs Derdabi’s liability by£210 .” 32. Reliance was placed on Schilling ( supra ) where it is submitted that at paragraph 17 Judge Rich indicated that a 6.4% reduction in recoverable service charges “was hardly a successful outcome”
“17. … Thus on the LVT’s determination, the landlords were held to have been unreasonable in their claimed service charges to the extent of 6.4% as I calculate the reduction in the charges payable by Dr and Mrs Schilling, it is … less than£2 . The LVT … described this as having achieved “significant successes”