Avon Ground Rents Ltd v Child [2018] UKUT 204 (LC)

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The UT comprised of Holgate J and HHJ Hodge QC (also sitting as County Court judges) gave valuable guidance concerning the importance of judges maintaining jurisdictional clarity and seperation when sitting as both FTT judges and County Court judges under the Residential Property Dispute Deployment Pilot.

Facts

The Respondent is the tenant under a long lease (“the Lease”).  The Lease contained the usual covenants to pay service charges and the usual indemnity clauses relating to the landlord’s legal expenses in enforcing the tenant’s covenants.

In 2016, the Appellant landlord issued proceedings in the County Court at Chelmsford for the recovery of service charge arrears and administration charges.  The Respondent filed a defence in which she denied having received the service charge demands, asserted that she had paid the balance of the service charges and disputed her liability to pay the administration charges.  District Judge Mitchell then ordered the proceedings to be sent to the FTT for a determination.  No further costs were incurred in the County Court and all further costs were incurred in the FTT.

The FTT gave directions for witness evidence to be exchanged and a hearing was listed on 8 June 2017.  On 30 May 2017, the FTT Judge informed the parties by way of a letter that he intended to use his County Court jurisdiction as to costs so that a further hearing in the County Court could be avoided. 

The Appellant filed an N260 setting out their costs from the receipt of the Respondent’s defence up to the day Tribunal hearing in the sum of £4,425.  Nothing was claimed for the preparation of the claim as these costs were fixed.  

First Instance

The FTT determined the substantive disputes on 8 June 2017 in favour of the Appellant.  The FTT then proceeded to, “determine the costs claimed contractually as administration charges”.   The FTT assessed the Appellant’s costs at £2,796.96.  The FTT Judge then drew an order as a judge of the County Court reciting that the FTT determination was “known to the court” and ordering that the Respondent pay the Appellant’s costs on or before 31 July 2017.

The Appellant sought permission to appeal.  An application was made to appeal to the UT and this application was granted by Martin Rodger QC.  An application for permission to appeal was also made in the County Court and was granted by HHJ Walden-Smith, who granted permission out of time and transferred the matter to the County Court at Central London.  The parties agreed that the County Court appeal should be heard by the UT.  Both members of the UT on this occasion were judges of the County Court pursuant to s. 5(1) and (2) of the County Courts Act 1984.

Issues

  1. Did the FTT have jurisdiction to determine post-issue legal costs?
  2. Did an FTT Judge sitting as a district judge have power to give effect to the FTT's decision by means of a County Court order?

Decision of appeal

The provisions permitting the flexible deployment of FTT judges as district judges, i.e. the capacity for tribunal judges to wear “two hats” do not alter the statutory provisions governing the respective jurisdictions of the FTT and the County Court and do not alter the procedural rules governing each.

In assessing post-issue costs, it was apparent to the UT that the FTT had purported to assess costs as administration charges pursuant to Schedule 11, Paragraph 2 of the 2002 Act.  The post-issue costs had not yet become payable and had not yet been demanded.  The service of an N260 had not served to do so.  These costs had not been demanded pursuant to the Lease and therefore could not be “administration charges” under the 2002 Act.  Further, even if these were administration charges, the question of their reasonableness had not been referred to the FTT.  The FTT had in effect exercised a statutory jurisdiction which it did not possess.  The UT applied Cain v Islington LBC [2015] UKUT 117 (LC) to hold that the FTT’s jurisdiction was confined to the questions transferred to it and by the matters which could properly be transferred to it pursuant to s.176A(2) of the 2002 Act.

The FTT’s jurisdiction to award costs was clearly set out.  Upon transfer from the County Court, it had no jurisdiction to determine costs incurred in the Country Court after the issue of proceedings.  Pursuant to s.51 of the Supreme Courts Act 1981, these costs could only be determined by the County Court.

The pilot envisaged a two-stage process.  Once the FTT had determined the substantive issues properly transferred to it by the County Court, the FTT judge would then don his other “hat” and proceed to sit alone as a district judge and determine costs under s.51.

This two-stage process had not been implemented ion 8 June 2017.  It was held that the costs determination had been made by the FTT, not the County Court.  In reaching this conclusion, the UT drew support from the FTT Judge’s repeated references to administration charges under the 2002 Act. The costs determination was therefore set aside and re-made in exactly the same sum.    

It is to be noted that on 8 June 2017, Paragraph 5A of Schedule 11 of the 2002 Act did not apply to these proceedings as they were commenced before 6 April 2017. 

Paragraph 5A is as follows:

“1) A tenant of a dwelling in England may apply to the relevant court or tribunal for an order reducing or extinguishing the tenant's liability to pay a particular administration charge in respect of litigation costs.

2)The relevant court or tribunal may make whatever order on the application it considers to be just and equitable”

This provision would have furnished the FTT with the discretion to reduce the Respondent's contractual liability to pay the legal costs that the Appellant had incurred in the substantive proceedings.  The point was alluded to at Paragraph 58 of the judgment.

As to the second issue, namely the Appellant’s suggestion that the FTT Judge sitting as a County Court judge ought not to have given effect to the FTT decision by means of drawing a County Court order was rejected.  It was held that the County Court has the power to give effect to the FTT’s decision pursuant to s.176A(3) of the 2002 Act.  There was no need for the successful party to resort to the enforcement procedure under s.176C.

Comment 

Although arguably not part of the ratio of the decision, it was held that the costs of the proceedings in the FTT fell within the scope of s.51 of the Senior Courts Act 1984 as forming “costs of and incidental to” the proceedings in the County Court, since the case had been sent to the FTT by order of that Court. This essentially means that the FTT’s rules on costs do not apply to cases which are commenced in the county court and transferred to the FTT. The extent to which this point was argued is not clear but it is certainly arguable that, on this point, the decision is wrong.  It would certainly be very difficult for a judge of the county court to assess the cost of proceedings in the FFT under CPR 44 when the judge did not hear the case.    

Further, although it must be conceded that this appeal achieved little to nothing in practical terms, the decision nevertheless demonstrates the importance of a clear delineation between the respective jurisdictions of the FTT and the County Court.

The UT suggested that, when transferring proceedings to the FTT, the County Court ought to set out which matters are being transferred and to take particular care that the FTT has jurisdiction to determine those matters.

The UT criticised the Practice Guide for the Residential Property Dispute Deployment Pilot for suggesting that the FTT may decide issues falling outside its own jurisdiction but within that of the County Court, and vice versa.  While an FTT judge who is also a County Court judge may wear both hats, the Pilot does not serve to create a single jurisdiction and it is crucial that their respective jurisdictions be exercised separately.

It was emphasised that the FTT only has jurisdiction to order costs under Rule 13 and Paragraph 5A set out above.  Section 51 of the 1981 Act remains the preserve of the County Court.  It was helpfully pointed out that, given that a 5A application must be made to the court or tribunal to which the proceedings relate, it would be prudent to make 5A applications in both the court and tribunal proceedings to protect a party’s position.

Even if no 5A application is made, the County Court could nonetheless turn its mind to whether the instruction of solicitors and/or counsel in straightforward disputes is reasonable pursuant to CPR 44.4(3).

Finally, given the importance of maintaining jurisdictional integrity as referred to above, an FTT judge who is also sitting as a County Court judge must not involve his fellow panel members when making any decision pursuant to his or her County Court jurisdiction.