Upper Tribunal rejects appeal by successful party over refusal costs award against council in improvement notice dispute

A property firm has lost a costs application against the London Borough of Lambeth after Martin Rodger KC, Deputy Chamber President, said at the Upper Tribunal (Lands Chamber) that, despite finding a combination of legal errors in the costs decision of the First-Tier Tribunal Property Chamber, it was inappropriate for him either to remit the case or remake the decision himself.

Property firm Manaquel appealed against the FTT’s refusal to make a costs award even though it was successful in a dispute over an improvement notice served by Lambeth under Part 1 of the Housing Act 2004.

Manaquel is the freeholder of the Dorchester Court estate on which Lambeth served an improvement notice in October 2021 requiring various works.

But in November 2023 the FTT allowed an appeal by Manaquel and quashed the notice without a costs order, with Manaquel seeking £145,000.

Mr Rodger said in his ruling that it was unusual for a successful party to recover costs at the FTT although it had powers to award costs in a residential property case in the event of wasted costs or litigant having acted unreasonably.

The FTT had criticised aspects of Lambeth’s actions but concluded the council had not acted unreasonably.

Lambeth had required Manaquel to rectify excess cold, attributed to the condition of the windows of “most flats" and deficiencies with the heating and hot water system which gave rise to risks of scalding.

Manaquel's appeal to the FTT that some measures had already been attended to and instructions for others were "being urgently implemented".

It emerged that Lambeth had not reinspected the estate in the two years since the notice was served, and no detailed record existed of the condition of the windows or other problems in any specific flat.

Quashing the improvement notice, the FTT said: ”We have major concerns about the contents of the improvement notice itself.

"It is clear that the applicant has carried out certain works which the respondent concedes have remedied some deficiencies and reduced the extent of certain other deficiencies, and the respondent has not reinspected or carried out a recent reassessment of the hazards.

“[Lambeth] is therefore in difficulty when it comes to evidencing the current position and the extent to which remedial action still needs to be taken.”

The FTT said Lambeth’s improvement notice was "seriously flawed" but other factors weighed in the council’s favour including that it had found real hazards.

To treat Lambeth’s conduct as unreasonable conduct for costs purposes “would ultimately in our view be too harsh”, the FTT said.

Mr Rodger said significant parts of Manaquel's case “were presented to the FTT on a legally incorrect basis” as the question before it should have been whether Lambeth was wrong to serve the notice it did, when it did, and not the condition of the estate by the time of the appeal.

Works done since the service of the notice could not undermine its validity and nor was there any requirement for Lambeth's officers to justify or reformulate the notice in the light of those works.

He said aspects of Lambeth’s conduct had been judged ”incompetent” by the FTT but “it was not fanciful to suggest that Manaquel might propose variations to the notice, since that is what the statutory scheme envisages.

“Finally, Lambeth's suggestion…that the hearing be adjourned to enable additional evidence to be prepared showing the current condition of the building was a reflection of the shared misconception about the proper subject matter of the appeal.

“Manaquel's case was founded on that misconception and while it ought not to have been acquiesced in by Lambeth, it did not justify singling the authority out for criticism.”

Mr Rodger said the FTT's decision was flawed because it was persuaded irrelevant matters were important and failed to answer its own question on whether Lambeth’s conduct was open to some reasonable explanation.

He said: “The first flaw pervades the decision and undermines many of the criticisms on which the application for costs was originally based, but it does not cast doubt on the FTT's conclusion that Lambeth's conduct was not unreasonable.”

Mr Rodger said neither party “was enthusiastic about the application for costs being remitted to the FTT” but he could not remake the decision himself as “I am very poorly placed to evaluate Lambeth's conduct as would be required if I were to remake the decision”.

This was because there was no transcript of the hearing and the appeal bundle did not contain the evidence provided to the FTT or correspondence between the parties or with the tribunal.

The FTT had said it found the balancing exercise complicated, “and it would be particularly difficult for me to assess the relative importance of the various flaws which it identified in Lambeth's conduct, some of which were justified, but others not.

“For these reasons this is a case in which it would not be appropriate for this tribunal to re-make the decision on Manaquel's costs application.”

Mark Smulian