It is perhaps common sense that a party seeking to enforce a claim against another should first check that it has a claim or, as in this case, that the Court or First Tier Tribunal in which they plan to bring the case has jurisdiction to rule upon the claim being brought.   Common sense perhaps but it is not an advice always followed and what occurred here in the case of Zaid Alothman Holdings Ltd and 75 others v Better Intelligent Management Ltd [2024] is a prime example of not fully considering (even with legal advice) the above most basic of points.

The facts

This was an appeal to the Upper Tribunal from the First-tier Tribunal’s refusal to award costs in favour of the appellants, the leaseholders in Phoenix Place, Liverpool.  The leaseholders sought an order for costs against the Respondents, the landlord and managing company of the block, or alternatively their legal representatives, after the FTT had declared that it had no jurisdiction to hear the application the landlord and management company had brought against them in the FTT, and which had been dismissed for lack of jurisdiction.

Phoenix Place consists of 348 units of purpose-built student accommodation. There are two types of unit:

• 74 self-contained studios with a bedroom, bathroom and kitchenette (“the Studios”); and

• 274 en-suite bedrooms grouped into clusters with shared kitchen and common room facilities (“the Cluster Units”).

All were let on long leases as income-producing investments, being let to students.

Better Intelligent Management Limited (“LL”) was the landlord of Phoenix Place and, Phoenix Place (Liverpool) Management Limited (“ManCo”), was responsible for the management of the block.

The LL and ManCo issued two FTT applications against all 348 leaseholders. One was for a determination under section 168 of the Commonhold and Leasehold Reform Act 2002 that the leaseholders were in breach of covenant because they had failed to repair their windows. The second was for dispensation from consultation requirements, under section 20ZA of the 1985 Act in respect the ManCo’s intention to replace itself through the service charge all the windows, on the basis that it was urgently required to be done during the summer vacation while the students were away and the leaseholders had not undertaken the works themselves.

The leaseholders knew nothing about the two applications until they were served with the papers in November 2022.  Why were they unaware?  Well, because neither LL or ManCo, despite being legally represented, had served any form of letter before action prior to issuing the claims

In its first action in response to the applications, the FTT issued a “Case Management Note and Directions” which stated that “Following a preliminary review of the applications a procedural judge is concerned that the Tribunal may not have the jurisdiction to determine either all or part of the applications because all or some of the individual student units may not constitute dwellings within the meaning of the Landlord and Tenant act 1985… The parties and their representatives are specifically referred to the Upper Tribunal decision in [JLK Ltd v Ezekwe]… and are invited to make written representations in respect of this jurisdictional matter in line with the directions set.” 

The reason behind the FTT’s direction here was that it only has jurisdiction in respect of leasehold property that is a “dwelling”.  By s.38 Landlord and Tenant Act 1985 “dwelling” means a building or part of a building occupied or intended to be occupied as a separate dwelling, together with any yard, garden, outhouses and appurtenances belonging to it or usually enjoyed with it.”   In JLK Ltd v Ezekwe [2017] UKUT 277 (LC) the Tribunal had decided whether “cluster rooms” let to students, where the letting was of a room with en-suite bathroom and the student also had the use of a shared kitchen and lounge and showers along with other student tenants, was a “dwelling” for the purposed of s.38LTA1985. The Tribunal found in that earlier case that such “cluster rooms” were not occupied or intended to be occupied as a separate dwelling because the tenant is not tenant of the whole of that accommodation, but only of part of it.  

Accordingly, because the Cluster Units were not dwellings, the application in the FTT as against the owners of those units could not continue as the FTT did not have jurisdiction where the complaint was not in respect of a “dwelling”.

Oddly, in response to the FTT’s initial Direction, Counsel for the LL/ManCo filed written representations that “The Applications have been made adopting an abundance of caution and so as to avoid any failure on the part of the Applicant to comply with its obligations pursuant to: a. Section 168(4) of the Act 2002; and/or b. Section 20 of the Act 1985. 15. Shortly put, the Applicant avers that neither the [Cluster] Units nor the Studios are a ‘dwelling’ for the purposes of the Act 2002. As such the Applicant avers that it is permitted to serve a s.146 Notice without reference to s.168(4) of the Act 2002.” (emphasis added)

As a result, the FTT had to dismiss the claims made in respect of the Cluster Units. 

In response to that entirely correct dismissal of the claims against the owners of the Cluster Units the FTT  was asked by the solicitors then representing a large number of the leaseholders to order, under Rule 13, that the LL and ManCo should pay the leaseholders’ costs of what was a wasted and ill judged application.  The FTT refused to make such an Order and so the leaseholders therefore applied to the Upper Tribunal in respect of that refusal.

Costs awards in the FTT/UT

The Tribunal does have the power to award costs but the circumstances under which it will order a party to pay are limited. The FTT’s power to award costs is derived from section 29 of the Tribunals, Courts and Enforcement Act 2007 which provides that such awards will be at the discretion of the Tribunal but it can award “wasted costs”.  Wasted costs means any costs incurred by a party:-

(a)    as a result of any improper, unreasonable or negligent act or omission on the part of any legal or other representative or any employee of such a representative, or

(b)    which, in the light of any such act or omission occurring after they were incurred, the relevant Tribunal considers it is unreasonable to expect that party to pay.

The relevant parts of rule 13 provide as follows:

“(1) …The Tribunal may make an order in respect of costs only—

(a)    under section 29(4) of the 2007 Act (wasted costs) and the costs incurred in applying for such costs;

(b)    if a person has acted unreasonably in bringing, defending or conducting proceedings; …”

It was asserted by the leaseholders that the LL/ManCo had acted unreasonably in bringing proceedings which (as the LL/ManCo later admitted in the submission referred to above) the FTT had no jurisdiction to determine.  Accordingly, their conduct in bringing the proceedings was unreasonable because they knew that there was no jurisdiction and therefore the claim issued (and necessitated a response) was entirely pointless.

The UT agreed and awarded the leaseholders of the Cluster Units 90% of their costs (just under £20k) which it was for the LL/ManCo to pay.

This case is a lesson in the costly effect of not properly considering matters before launching into the issue of a claim.  It may be that in this matter the claim was raised, despite the clear knowledge of those advising the LL/ManCo that “it had no legs”, in the hope that proceedings would be sufficiently “scary” to force the leaseholders into complying with the demands of the LL/ManCo.  Whatever the motivation, and no matter how well intentioned it might have been, the simple fact is that a consideration of whether or not the claim could succeed is a fundamental step seemingly missed or ignored by the LL/ManCo and those advising them in this case.  Be wary not to fall in to that trap!

Disclaimer

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