Right to manage – Counternotices – Costs – Commonhold and Leasehold Reform Act 2002 – Appellant serving counternotices in response to two notices by respondent seeking to acquire right to manage premises under 2002 Act – Notices ultimately proving ineffective – Appellant claiming costs of preparing counternotices pursuant to section 88 – LVT dismissing claim on ground not advanced by respondent – Whether breach of natural justice – Whether relevant costs lawfully incurred – Appeal allowed
The respondent RTM company made two claims, under the Commonhold and Leasehold Reform Act 2002, to acquire the right to manage certain premises of which the appellant was the freeholder. In each instance, the appellant served a counternotice; this was prepared by the in-house solicitor of a company that provided professional services to landlords. In the event, the respondent’s claims were ineffective, either because they were withdrawn or because the respondent failed, within the requisite period, to apply, under section 84(3) for a determination that it was entitled to acquire the right to manage.
The appellant made a claim, under section 88 of the 2002 Act, to recover its reasonable costs incurred in preparing its two counternotices; it sought to recover the sums of £650.50 and £216, as invoiced by the company for its services. The appellant applied to the leasehold valuation tribunal (LVT) under section 88(4) for a determination of its claim and the matter was considered on written representations.
The LVT found that the invoiced work had resulted from the service of the respondent’s notices, that it was of an extent that could be expected and that the sums requested were reasonable. It none the less found that the relevant costs were not recoverable since they were not lawfully payable by the appellant. It reached that conclusion on the ground that the invoices related to work provided by a solicitor, whereas the company did not purport to be a firm of solicitors, it was not, on the face of its correspondence, regulated or authorised by any professional organisation and its bills did not include or refer to the requirements of solicitors’ professional rules for accounts of legal costs. The LVT stated that the relevant illegality arose from rr 12 and 13 of the Solicitors’ Code of Conduct. The appellant appealed.
Decision: The appeal was allowed.
(1) The basis on which the LVT had refused the appellant’s claim, namely that the demand for payment was unlawful, so that the costs to which it related were not reasonable, was not a point that the respondent had advanced or that it sought to uphold on the appeal. The LVT had taken the point on its own initiative and had failed to put it to the appellant so as to provide it with an opportunity of addressing the issue. That was a breach of natural justice, amounting to a procedural impropriety that had prejudiced the appellant, and the LVT’s decision should be quashed accordingly: Beitov Properties Ltd v Martin [2012] UKUT 133 (LC); [2012] 35 EG 74 considered.
(2) Moreover, the LVT had been wrong to conclude that the company’s invoices were not lawfully payable. The appellant had contracted with the company for work that had been done and was contractually liable to pay for it. The fact that the work had been done by a solicitor employed by the company did not affect that contractual liability. The work was not a reserved legal activity under section 12 of the Legal Services Act 2007, so as to be subject to the limitation in section 13 to persons entitled to carry on such an activity. Nor had the company offended against section 24 of the Solicitors Act 1974 by doing an act of such a nature, or to doing an act in such a manner, as to be calculated to imply that it was qualified or recognised by law as qualified to act as a solicitor; as recognised by the LVT, the company did not purport on its letterhead to be a firm of solicitors, it was not on the face of its correspondence regulated or authorised by any professional organisation and its bills did not include or refer to the requirements of solicitors’ professional rules for submissions for accounts of legal costs. The LVT, although referring to rr 12 and 13 of the Solicitors’ Code of Conduct, had not suggested in what respect those rules had been contravened. The reasons that it gave for its decision were inadequate and the decision itself was plainly wrong. The company could not have contravened the rules because it was not a solicitor. Even if its in-house solicitor had contravened them, that would not render it unlawful for the company to engage in the work that it did through that solicitor or to charge for that work. Since the company’s charges were not unlawful, and the LVT had accepted that the cost of the work was reasonable, the respondent was liable to pay those amounts to the appellant.
The appeal was determined on the written representations of the parties.
Sally Dobson, barrister
