THE TRUSTEES OF JOHN LYON’S CHARITY v TERRACE FREEHOLD LLP [2018] UKUT 247 (LC)

UPPER TRIBUNAL

LANDS CHAMBER

[2018] UKUT 247 (LC)

Case No LRX/112/2017

Between

THE TRUSTEES OF JOHN LYON’S CHARITYApplicant

TERRACE FREEHOLD LLPRespondent

Before

His Honour Judge Stuart Bridge

Matthew Henderson for Respondent

Date 26 July 2018

Property: 99 Hamilton Terrace,, London., NW8 9QY

Catchwords: LEASEHOLD ENFRANCHISEMENT – COLLECTIVE ENFRANCHISEMENT- Leasehold Reform Housing and Urban Development Act 1993, section 33- Costs- FTT reduced legal costs claimed by reversioner- whether error of law- appeal allowed in part

[1]This is an appeal from a decision of the First-tier Tribunal (Property Chamber) (“the FTT”) dated 22 August 2017. The decision concerned the amount of costs properly recoverable by the appellants from the respondent under section 33 of the Leasehold Reform Housing and Urban Development Act 1993 in respect of the respondents’ claim for the collective enfranchisement of 99 Hamilton Terrace, London, NW8 9QW. Before the FTT, the appellants had sought initially, pursuant to section 33, legal costs in the sum of £12,045 (plus VAT and disbursements); valuation costs of £15,495 (plus VAT); and a Charities Act report fee in the sum of £250 (plus VAT). The claim for legal costs was however reduced, when the appellants submitted its schedule, to £10,997.50 (plus VAT and disbursements). The FTT determined that the total amount of legal costs recoverable was £4,187.50 plus VAT, together with disbursements of £81, and that the total amount of valuation costs recoverable was £7,620 plus VAT.

[2]On 13 September 2017, the appellants sought permission to appeal to this Tribunal in respect of the legal costs determination only. On 20 December 2017, permission to appeal was granted by HH Judge Gerald “because there is a realistic prospect of successfully arguing that the FTT misapplied the relevant authorities to the assessment of costs and completely failed to take into account the material (including timesheets) before it.” It was directed that the appeal would be by way of a review of the decision of the FTT to be conducted under the Tribunal’s standard procedure and that the only documentary and other evidence permitted would be that which was before the FTT.

[3]The appeal was listed for 7 June 2018. On 23 May 2018, the appellants’ solicitors wrote to the Tribunal stating that the appellants had decided not to be represented at the hearing and were content to rely upon the appellants’ statement, skeleton argument and supporting documents they had submitted. The appellants’ solicitors explained that this decision had been made as the appellants did not wish to incur further expenditure on legal fees which would otherwise be used for charitable purposes and diminish the recoverable costs finally determined. The letter concluded that the appellants appreciated that this decision would put them at a disadvantage but believed they had a strong and compelling case and trusted that the Tribunal would give full and proper consideration to the detailed points made. The letter was placed in the bundle of documents and read by the Tribunal before the hearing.

[4]At the oral hearing the respondent was represented by Mr Matthew Henderson of counsel; the appellants did not appear and were not represented. At the outset of the appeal, Mr Henderson referred the Tribunal to Rule 49 of the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010 which gives the Tribunal power to proceed with the hearing in a party’s absence if it is satisfied that the party has been notified of the hearing and that it considers it is in the interests of justice to proceed with the hearing. The Tribunal was satisfied that the appellants had been duly notified, in view of the letter received from the appellants, and acceded 4 to the appellants’ invitation to proceed, determining that it was in the interests of justice to do so. In hearing the appeal, the Tribunal took account of all the matters contained in the appeal bundle and gave full consideration to all the documentation provided on behalf of the appellants. FTT Decision

[5]In accordance with directions issued by the FTT on 17 May 2017, there was no oral hearing before the FTT and the application was determined on the papers. At the appeal hearing on 7 June 2018, the Tribunal, noting that the appeal was by way of review and not by way of rehearing, took steps to confirm which documents had been before the FTT. Mr Henderson explained that they were those documents inserted in the bundle as below:• Pp 1-6: a schedule of the freeholder’s legal costs, detailing the hourly rates of the lawyers employed and the work carried out in relation to the claim between 2 February 2016 and 28 April 2017.

• Pp 7-15: the respondent’s Statement of Case.

• Pp 16-24: the applicants’ statement in response.

• Pp 25-26: a document headed “matter transaction listing”, referred to as the “timesheet”, which details work done, and recorded contemporaneously, by the appellants’ solicitors between 2 February 2016 and 11 April 2016.

• Pp 27-36: a report from Pemberton Greenish LLP, the appellants’ solicitors to their clients the John Lyon Charity estate, dated 6 April 2016.

• Pp 37-53: three draft transfer documents on the usual Land Registry forms.

• Pp 54-60: the agreement for the sale of 99 Hamilton Terrace.

• Pp 61-72: email correspondence between the parties’ solicitors between 2 December 2016 and 24 April 2017.

• Pp 73–124: a number of previous FTT decisions which the appellants wished to refer to by way of comparison in the course of its application.

[6]The FTT decision made reference to a single authority, Drax v Lawn Court Freehold Ltd

[2010] UKUT 81 (LC)

(hereafter Drax) which, it stated, set out “the proper basis of assessment of costs in enfranchisement cases under the 1993 Act”. The FTT noted that section 33 of the 1993 Act provided that the costs “must be reasonable and incurred in pursuance of the notice and in connection with the purposes listed.” Reference was then made to section 60 of the 1993 Act, a provision which is not directly relevant to a case of collective enfranchisement but which is analogous to section 33. The FTT considered the test it should apply, referring to the decision in Drax where the test was described as a “(limited) test of proportionality of a kind associated 5 with the assessment of costs on the standard basis” and where it was confirmed that “the landlord should only receive its costs where it has explained and substantiated them.” The FTT went on to state that it did not follow that this was an assessment of costs on the standard basis, the costs jurisdiction under the 1993 Act being self-contained.

[7]The FTT set out the respondent’s objections to the costs being claimed by the appellants. Those objections, which are the same now as then, can be summarised as follows:

[1]The hourly rate claimed for each grade of staff was excessive;

[2]Much of the work suitable for junior or unqualified staff was instead allocated to higher qualified and experienced staff;

[3]This was not a complex case as the subject property consisted of only five flats and the intermediary head leasehold interest only had nominal value.

[8]The FTT stated that it had not received directly any breakdown of costs as such, but instead two sets of documents originally generated by the applicant (that is, the appellant) in support of its claim for costs. This is a reference to the schedule [pp 1-6 of the bundle] and the timesheet [pp 25-26]. The FTT observed that the two documents, while to an extent complementary, were not completely aligned: the schedule covered a period from 2 February 2016 to 28 April 2017 while the timesheet did not refer to any work conducted after 11 April 2016. The FTT stated that there were “contradictions and striking differences” which were of concern. It is the case (as Mr Henderson was able to establish in the course of the oral hearing before the Tribunal) that even if one limits consideration to the period where the two documents overlap, there are some 282 minutes on the schedule which are not supported by the timesheets, a divergence of 36.71 per cent.

[9]The FTT then proceeded, in the light of these observations on the documentary evidence with which it had been provided, and in the absence of any further explanation, to make its assessment of the costs recoverable. Certain items it did not consider were recoverable as legal costs within section 33. It decided that the hourly rate being claimed for each grade of staff was excessive, albeit not as excessive as the respondent had claimed, and reduced the hourly rate for a grade A solicitor to £350 per hour (£395 per hour having been claimed) and the hourly rate for a grade C solicitor to £225 per hour (£265 per hour having been claimed). It then decided that much of the work had been allocated to more experienced staff than was necessary and went through the work done item by item, determining not only that the work could have been done by less experienced staff but also that the work could have been done more quickly. In arriving at its final figure, the FTT therefore reduced the number of minutes chargeable as well as the rate at which those minutes could be charged.

[10]The FTT decision does not give a detailed explanation in relation to each individual item stating why it is that the work in question falls outside section 33, or why the input of a more experienced solicitor could not be justified, or why the work could have been achieved in fewer minutes than claimed. Had it done so, the decision would have been very much longer. 6 However, the FTT noted that it had considered each side’s “brief submissions”, and it then proceeded to exercise its judgment in arriving at its final determination of the costs recoverable. Submissions

[11]The appellants’ solicitors applied for permission to appeal in respect of the determination of legal costs by letter of 13 September 2017. The letter stated that the appellants did not accept the view expressed in Drax that section 33(2) introduced a limited test of proportionality as that test applied only to assessment of costs in “litigation proceedings” and emphasised that as leasehold enfranchisement was a form of compulsory purchase “landlords should not be penalised by having to pay costs that are reasonably recoverable”. The letter implicitly criticised the FTT for not having taken the decision of the Upper Tribunal in Sinclair Gardens Investments (Kensington) Ltd v Wisbey [2016] (hereafter Sinclair Gardens) into account. That decision had not, as the respondent has pointed out, been referred to the Tribunal by either party.

[12]The appellants contended that the timesheet which was before the FTT was “originally intended for our internal use only”. They said that it had been sent to the respondent’s solicitors “for information purposes in response to their request for an estimate of our recoverable costs”, that it did not include conveyancing work because that was not completed until April 2017, and that the FTT was wrong to assume that it had been sent in support of the schedule and the application as a whole. The appellants denied that there was “contradictions and striking differences” and sought to explain how it was that there were differences between the timesheet and the schedule.

[13]The appellants contended that the hourly rates allowed by the FTT were inconsistent with the higher rates previously allowed by tribunals for similarly experienced solicitors specialising in leasehold enfranchisement work in central London, a contention it had sought to support with reference to four FTT decisions it had appended to its response. It was normal for a senior solicitor to deal with matters throughout and reference was made again to the decision in Sinclair Gardens.

[14]After permission to appeal had been granted on 20 December 2017, the respondent provided a Statement of Case drafted by counsel containing its grounds for opposing the appeal. It set out succinctly and cogently the respondent’s arguments and concluded by asserting that the appeal (which was to be by way of review) raised no point of law, and demonstrated “an attempt to challenge the FTT on its lawful and correct assessment of reasonableness and proportionality”.

[15]The appellants responded in turn with a Statement in Reply and in due course with a Skeleton Argument. It does not appear from those submissions that the appellants maintain their earlier contention that the reference in Drax to proportionality was incorrect. Indeed, the Skeleton Argument set out the Drax formulation (together with the Sinclair Gardens decision) as confirming the principles relevant to the FTT decision. The appellants further accepted that the FTT decisions filed “for comparison purposes” in relation to hourly rates were not binding. However, making reference to the specific items claimed, the appellants stated that they considered “the size and scale of the FTT’s reductions to be excessive and unreasonable”. 7

[16]The appellants’ approach to this appeal has prompted the respondent to urge the Tribunal to question what error of law or principle it is on which the appellants rely, making the point that insofar as Sinclair Gardens contained principles of importance then it was open to the appellants to have referred to it before the FTT. The principles to be applied

[17]Section 33 of the 1993 Act states, so far as is relevant: “(1) Where a notice is given under section 13, then ….. the nominee purchaser shall be liable, to the extent that they have been incurred in pursuance of the notice by the reversioner …, for the reasonable costs of and incidental to any of the following matters, namely –(a) any investigation reasonably undertaken – (i) of the question whether any interest in the specified premises or other property is liable to acquisition in pursuant of the initial notice, or (ii) of any other question arising out of that notice;

(b) deciding, evidencing and verifying the title to any such interest;

(d) any valuation of any interest in the specified premises for the property;

(e) any conveyance of any such interest; but this subsection shall not apply to any costs if on a sale made voluntarily a stipulation that they were to be borne by the purchaser would be void. “(2) For the purposes of subsection (1) any costs incurred by the reversioner … in respect of professional services rendered by any person shall only be regarded as reasonable if and to the extent that the costs in respect of such services might reasonably have been expected to have been incurred by him if the circumstances had been such that he was personally liable for all such costs.” 8

[18]Two previous decisions of the Tribunal are of particular relevance to the issues in this appeal: Drax, relied upon by the FTT, and Sinclair Gardens, to which the FTT was not referred. I shall deal with each in turn. Drax v Lawn Court Freehold Ltd

[19]In Drax, a leasehold valuation tribunal awarded costs by way of legal fees in favour of a freeholder following the collective enfranchisement of Lawn Court, and the freeholder appealed the amount of costs awarded. The Tribunal heard the appeal by way of written representations. Unlike the current appeal, it was not restricted to a review of the FTT decision but took effect as a rehearing. The Tribunal allowed the appeal and increased the amount of costs recoverable.

[20]The Tribunal (AJ Trott FRICS) accepted that there was a confusion, evident from cases in the leasehold valuation tribunals cited in argument, about how section 33 should be interpreted. There was an analogy with compulsory purchase, the underlying principle of which was equivalence:

“the person from whom the property is acquired should be no worse (or better) off after the acquisition than before”

. That had led to the assessment of legal costs in compulsory purchase cases being on an indemnity basis, the acquiring authority having to show that the costs claimed following service of notice to treat were unreasonably incurred or unreasonable in amount: see London County Council v Tobin [1959] 1 All E.R. 649. However, the Tribunal did not accept that the indemnity basis was appropriate to enfranchisement claims as a result of section 33, explaining at [22]:

“To qualify for payment by the nominee purchaser such costs must be reasonable and have been incurred in pursuance of the section 13 notice in connection with the purposes listed in sub-paragraphs 33(1)(a) to (e). The nominee purchaser is also protected by section 33(2) which limits the costs to those that the reversioner would be prepared to pay if he were using his own money rather than being paid by the nominee purchaser. This, in effect, introduces a (limited) test of proportionality of a kind associated with the assessment of costs on the standard basis.”

[21]The Tribunal emphasised (at [25]) that it was for the reversioner to prove his case: the reversioner “should only receive his costs where he has explained and substantiated them”. That is why the Tribunal, in coming to its decision on the rehearing, disallowed certain items in the absence of adequate details having been provided by the reversioner. In Sinclair Gardens, the Tribunal made the same point in construing the analogous section 60 of the 1993 Act, holding (at [31]) that “there is a burden upon a landlord who is claiming costs for professional services… to prove that the costs are (and the extent to which the costs are) reasonable.”

[22]In Drax, the Tribunal allowed costs relating to emails and telephone calls between the reversioner, his solicitor and his valuer on the ground that it was reasonable for a solicitor to keep his client informed about progress and to seek instructions as and when necessary. It is however open to the FTT to decide how much contact is necessary and to disallow costs where contact has been excessive: see Drax at [27]. 9

[23]Costs were allowed where they were associated with the preparation and service of a counter-notice, this being a cost incurred “in pursuance of the notice” and therefore potentially within section 33: see Drax at [28]. The costs of a counter-notice were accepted to be recoverable similarly in Sinclair Gardens (where the Tribunal was considering the costs of a claim for a lease extension). Having referred to service of the counter-notice as “a crucial step in the procedure”, failure to do so having serious adverse effects upon the landlord’s position, the Tribunal continued, at [24]:

“Section 60(1) allows recovery of the reasonable costs “of and incidental to” the matters mentioned in sub-paragraphs (a), (b) and (c). The service of the counter-notice is effectively the result of the work undertaken within sub-paragraph (a) (the investigation reasonably undertaken of the tenant’s right to a new lease), and the service of the counter- notice is a necessary step to be taken if the landlord is to be able to advance its arguments regarding the valuation of the flat and the price to be paid (i.e the valuation matters contemplated in sub-paragraph (b)). The service of the counter-notice is also a necessary prerequisite, so far as the landlord is concerned, of the grant of the new lease under section 56. It is true that a new lease can be granted even though no counter-notice has been served, but if the landlord is to have a satisfactory status upon which it is able to make representations regarding the terms of the grant of the new lease it is necessary that it has served a valid counter-notice.”

Sinclair Gardens Investments (Kensington) Ltd v Wisbey

[24]In Sinclair Gardens, the Tribunal (HH Judge Huskinson) heard an appeal, by way of review, from an FTT decision pursuant to section 60 of the 1993 Act determining the costs properly recoverable from the respondent tenants following a claim for a lease extension. There are no differences of real substance between section 60 and section 33. Drax itself was not cited to the Tribunal in Sinclair Gardens, reference being made (at [14]) principally to the decision of the Tribunal (the Deputy President, Martin Rodger Q.C.) in Metropolitan Property Realisations Ltd v Moss

[2013] UKUT 0415 (LC)

which lucidly summarised the purpose of section 60 as follows:

“9. These provisions are straightforward and their purpose is readily understandable. Part I of the 1993 Act is expropriatory, in that it confers valuable rights on tenants of leasehold flats to compel their landlords to grant new interests in those premises whether they are willing to do so or not. It is a matter of basic fairness, necessary to avoid the statute from becoming penal, that the tenant exercising those statutory rights should reimburse the costs necessarily incurred by any person in receipt of such a claim in satisfying themselves that the claim is properly made, in obtaining advice on the sum payable by the tenant in consideration for the new interest and in completing the formal steps necessary to create it. “10. On the other hand, the statute is not intended to provide an opportunity for the professional advisers of landlords to charge excessive fees, nor are tenants expected to pay landlords' costs of resolving disputes over the terms of acquisition of new leases. Thus the sums payable by a tenant under section 60 are restricted to those incurred by the landlord within the three categories identified in section 60(1) and are further restricted by the requirement that only reasonable costs are payable. Section 60(2) provides a ceiling by reference to the reasonable expectations of a person paying the 10 costs from their own pocket; the costs of work which would not have been incurred, or which would have been carried out more cheaply, if the landlord was personally liable to meet them are not reasonable costs which the tenant is required to pay. “11. Section 60 therefore provides protection for both landlords and tenants: for landlords against being out of pocket when compelled to grant new interests under the Act, and for tenants against being required to pay more than is reasonable.”

[25]It can be observed that there is no inconsistency apparent between this characterisation of the function of section 60 and the explanation of section 33 by a differently constituted Tribunal in Drax. It is not therefore surprising that in their application of the legislative provisions Sinclair Gardens and Drax are entirely consistent. Note has already been made of the acceptance in both decisions that the burden is on the party claiming costs to prove the reasonableness of its claim, and that the costs of serving a counter-notice are, as a matter of principle and subject to the reasonableness of the amount claimed, recoverable.

[26]There are respects in which Sinclair Gardens goes beyond Drax, reflecting the fact that there were issues in Sinclair Gardens which had not arisen in the earlier case. In Sinclair Gardens, the Tribunal had to consider whether and to what extent a solicitor’s costs in instructing a valuer and considering the valuer’s report were within section 60. The Tribunal accepted that it was reasonable for a landlord to instruct a solicitor “to be involved in relation to the valuer’s report”. While the action of instructing the valuer was itself an administrative rather than professional task (following Sidewalk Properties Ltd v Twinn

[2015] UKUT 0122

) and the solicitor’s costs not therefore recoverable without more, should the solicitor consider the valuation once it is provided, the costs of doing so are prima facie recoverable as being “incidental to” the valuation.

[27]The other issue discussed in Sinclair Gardens is the extent to which costs of specialised solicitors can be claimed pursuant to section 60. The Tribunal took the view (at [26]) that it was reasonable for the landlord to instruct a solicitor with experience in what is a specialised area of the law (and went on to state that £250 per hour for such a solicitor was “a reasonable rate of charge”). A little later, at [28], the Tribunal took into account “the specialised nature of the transaction”, and considered it “reasonable for the appellant to continue to use for this category of work a person of the experience of Mr Chevalier rather than using some lower grade fee earner.” Discussion

[28]In determining an application for legal costs following a collective enfranchisement claim the governing provision is section 33 of the 1993 Act, the meaning of which is clear. In order for costs to be recoverable from the nominee purchaser, the reversioner must satisfy the FTT, the burden being on the reversioner, that the costs are reasonable, and that they are the costs of and incidental to any of the matters listed in section 33(1). Despite the analogy between 11 compulsory purchase and leasehold enfranchisement, section 33 does not adopt the indemnity principle which is invoked in compulsory purchase cases but requires, in the absence of agreement between the parties, a determination of the reasonableness of the costs being claimed. Jurisdiction being vested in the FTT, it is expected to apply its practical experience of the conduct of such claims to decide whether the costs being claimed are reasonable. In determining whether the costs incurred are reasonable, the FTT may consider previous decisions by way of comparison, but precedent as such does not apply, and the FTT is not bound by them.

[29]In making its determination of reasonableness of the costs incurred in respect of professional services, the FTT must consider whether the reversioner might have reasonably been expected to pay such costs from his or her own resources if no claim had been made against the nominee purchaser: section 33(2). This provision operates as a limit on the costs recoverable under section 33. Any sum over and above the amount the reversioner might have reasonably been expected to incur is not to be treated as a reasonable amount of costs and cannot therefore be claimed against the nominee purchaser.

[30]Both Drax and Sinclair Estates make the important point that it is for the reversioner to make out its case, to prove that the sums claimed by way of costs are both reasonable and within the scope of section 33, and to put before the FTT sufficient material by way of evidence to support the claim that it being made.

[31]When permission to appeal was granted, two specific grounds were identified by HH Judge Gerald from the appellants’ application. The first was whether the FTT had “misapplied the relevant case law authorities”. The context for this was the appellants’ criticism, in its application for permission, of the decision in Drax and the failure of the FTT to refer to Sinclair Estates.

[32]In our judgment, there is no inconsistency between Drax and Sinclair Estates, and the fact that the FTT did not specifically refer to Sinclair Estates (a decision which the appellants had not put before the FTT despite having had the opportunity to do so) is of no consequence. Sinclair Estates decided that, in appropriate circumstances and subject to the reasonableness of the sums claimed, the costs of the reversioner’s counter-notice are recoverable from the nominee purchaser. In any event, it is clear that the FTT did not proceed on the basis that the costs of the counter-notice were irrecoverable; it endorsed the claim for such costs, albeit limiting them in extent to what it considered to be reasonable. Sinclair Estates decided that, again in appropriate circumstances and subject to reasonableness, the costs of the solicitor considering the valuation report (as opposed to instructing the valuer) are recoverable. The FTT decision refused to allow the costs of the solicitor instructing the valuer, an approach entirely consistent not only with Sinclair Estates and also with the decision in Sidewalk Properties Ltd v Twinn

[2015] UKUT 122 (LC)

[33]On examination of the decision under review, there is no respect in which it can be said that the FTT was wrong in law in the manner it dealt with these authorities. On the contrary, in its application of principle to the facts the decision of the FTT cannot be faulted. 12

[34]The second ground upon which HH Judge Gerald gave permission concerned the failure of the FTT “to properly take into account the material before it.” The FTT was presented with a number of documents, listed above, and was expected by the appellants to understand those documents, in particular the schedule and the timesheet, in the absence of any clear written explanation (and without the benefit of any oral representations by the appellants explaining and substantiating its claim). The timesheet had been put before the FTT by the respondent, it having been provided by the appellants to the respondent in an apparent attempt to explain how the costs claim had been calculated. The appellants had the opportunity to explain the significance of the timesheet, and its relationship with the schedule (which the appellants had themselves submitted to the FTT) when they replied to the respondent’s Statement of Case, but they failed to do so. As a result, the differences between the schedule and timesheet remained unexplained, and the FTT came to the conclusions it did based on the material that was before it.

[35]There are three specific complaints made by the appellants in relation to the quantification of costs. First, the FTT reduced the hourly rates being charged by its solicitors, specifically from £395 to £350 per hour for its consultant (with 25 years’ experience of leasehold enfranchisement work), and from £265 to £225 for its junior solicitor with three years’ post- qualification experience. The appellants do not dispute the rate allowed for the junior solicitor “in view of his limited experience of collective enfranchisement claims” but submit that £350 per hour was too low a rate for a senior solicitor specialising in leasehold enfranchisement and that £395 should have been allowed. The appellants sought to draw comparisons with other cases where a higher hourly rate for work of this kind conducted by a senior solicitor had been sanctioned by other FTTs. It should be said that the difference is not striking, the range of the decisions being between £350 (allowed in 2016 in relation to the very same solicitor: see Burford v Crow MR LON/00AN/OC9/2015/0312 at p73 of the bundle) and £420. As has been emphasised above, the FTT was not bound by these decisions, and in carrying out its task of assessing the costs reasonably incurred it was entitled to apply its own knowledge and expertise. While it may be that the hourly rate of £350 may be considered to be relatively low, taking into account the location of the solicitors’ practice and the area of specialisation, it is comfortably within the range of what is reasonable, and it is not for this Tribunal to intervene in the absence of any error of principle.

[36]The second contention of the appellants is that the FTT deducted certain specific items claimed as being outside section 33. In their skeleton argument, the appellants make reference to a number of such items, claiming that the FTT in effect misunderstood the claim being made. Some communications between solicitor and client were disallowed although it is accepted (in Sinclair Gardens) that keeping the client informed is recoverable; some work was disallowed on the ground that it involved duplication of the work of the valuer on the part of the solicitor; and there are other specific complaints in relation to other items. The Tribunal takes the view that it is necessary to view these complaints in the light of a failure on the part of the appellants adequately to explain and substantiate their claim before the FTT. It accepts the respondent’s submission, at least with regard to these specific items, that the appeal is an attempt to revive issues which should have been dealt with by the FTT and would have been dealt with had the appellants furnished it with the essential information. The current process is a review, not a rehearing, and on granting permission it was directed, in our judgement rightly, that the review must be restricted to the documentation that was before the FTT. The contentions made by the appellants rely upon matters which have been raised for the first time on the appeal. Again, 13 reviewing the decision of the FTT reveals no error of principle in relation to this aspect of its determination.

[37]The third and final criticism concerns the way in which the FTT attributed the work done by solicitors instructed by the appellants, accepting the argument of the respondent that much of the work could have been carried out by a more junior solicitor than the highly experienced solicitor who performed the large majority of the work: indeed it seems that the junior solicitor was only engaged when his superior was on leave. The hourly rates therefore allowed were reduced by the FTT from the senior fee earner rate (£350 as allowed by the FTT) to the junior fee earner rate (£225 as allowed by the FTT) for 21 items out of the 33 being claimed. The appellants submit that this exercise was not consistent with the principle in Sinclair Gardens that it is reasonable for a senior and experienced fee earner to deal with this kind of work. Moreover, combined with the FTT reducing the time claimed in relation to 17 of the 21 items, the appellants suffered reductions twice over in relation to a significant proportion of its claim. The respondent counters by saying that this was, as with the other matters, well within the discretion of the FTT when it came to decide what a reasonable sum of costs was to be, and that the appellants are simply seeking to re-litigate the issues in a way which is not legitimate on a review as opposed to a re-hearing.

[38]This Tribunal recognised that there is an expectation, based in part on what was said in Sinclair Gardens, that it is perfectly proper for those defending enfranchisement claims to instruct specialist practitioners, and within that specialism to employ solicitors who have considerable experience. It is a difficult area of the law and experience comes at a premium. Mr Henderson has argued, on behalf of the respondent, that Pemberton Greenish, whom the appellants instructed, are a firm specialising in leasehold enfranchisement, that even relatively junior solicitors within the firm will have relevant expertise, and therefore that it is neither necessary nor reasonable to engage the time of a senior fee earner for the large majority of the work carried out.

[39]It must be right that the FTT consider each and every item claimed and determine whether it is reasonable, and in this respect whether it was reasonable to engage the solicitor actually employed on the particular work in question. It appears, however, that in deciding the costs recoverable under section 33, and having reduced the number of hours, the FTT took the view that it was unreasonable for a senior fee earner to take the lead, and to carry out much of the work that was claimed, accepting the respondent’s argument that the majority of the work (in the region of 75 per cent) should have been carried out by the junior fee earner. As a result, when considering the claim item by item, the FTT reduced, as the appellants have stated, 21 items on the basis that the junior solicitor could have done the work.

[40]In this respect, and this respect only, I take the view that the approach of the FTT was fundamentally flawed, such that it was acting under an error of law. While section 33 vests the FTT with a generous discretion in determining what is reasonable, and what should therefore be recoverable by the reversioner from the nominee purchaser by way of legal costs, it is important that there is a degree of certainty of principle upon which those acting for the reversioner can depend. I agree with HH Judge Huskinson in Drax that in view of the specialised nature of leasehold enfranchisement work it is reasonable for the reversioner to use an experienced practitioner rather than a lower grade fee earner, even where the firm instructed is itself a firm 14 specialising in this kind of work. I consider that the FTT, in determining that so much of the work could have been conducted by a junior solicitor, and that it was unreasonable to seek reimbursement at the rates chargeable by a senior solicitor where that solicitor had done the work, was acting under an error of law and the decision to that extent cannot stand. Conclusion

[41]The appeal should therefore be allowed to a limited extent. In view of the Tribunal’s finding that the FTT decision regarding the appropriate hourly charging rates and determining which items were properly recoverable under section 33 was correct as a matter of law, the only matter which requires remedy is the wrongful attribution of the chargeable hours to the junior fee earner rather than the senior fee earner. In my judgment, the FTT should have sanctioned the senior fee earner rate for all the work actually carried out by a senior fee earner.

[42]Having found that the FTT made its calculation acting under an error of law, it would be open for the Tribunal to remit the application to the FTT for a rehearing. In view of the amounts involved, however, that would be a disproportionate course to take, and in the interests of saving upon further costs the Tribunal can and should, in allowing the appeal, make the necessary amendments to the decision of the FTT.

[43]The FTT acted properly and lawfully in reducing the hourly rates claimed and in deducting specific items. The only area which invites review and amendment is where the FTT has allowed junior fee earner rates when it should have allowed senior fee earner rates. The extent of the shortfall is, by my calculation, £525: that is, 252 minutes were allowed at £225 per hour when they should have been allowed at £350 per hour. Instead of the total of £945 being allowed in respect of those 21 items, the total of £1,470 should have been allowed. The amount recoverable should be increased, therefore, from £4,187.50 (plus VAT) to £4,712.50 (plus VAT). To that extent, this appeal is allowed. Dated 26 July 2018 His Honour Judge Stuart Bridge

THE TRUSTEES OF JOHN LYON’S CHARITY v TERRACE FREEHOLD LLP [2018] UKUT 247 (LC)

Cited in 4 later judgments