Practice and procedure – Costs – Appellant landlord discontinuing lift service to respondent’s flat on grounds of unpaid service charges – Respondent applying for mandatory injunction for restoration of lift service – First-tier tribunal making determination that certain service charge demands invalid – Appellant restoring lift service – Injunction application dismissed at invitation of respondent but costs awarded in his favour – Whether court entitled to make such costs order – Whether obliged to treat request for dismissal as discontinuance of claim – Appeal dismissed
The respondent and his wife were the joint registered proprietors of a long lease of a flat in London, W8. The lease contained a covenant by the appellant, as the landlord, to use its reasonable endeavours to provide various service, including the provision of a lift in the building, for “so long as the lessee shall pay the service rent”.
A dispute arose between the parties over the payment of service charges. In mid-February 2014, the appellant cut off the lift service to the respondent’s floor of the building. The appellant brought county court proceedings to recover the unpaid charges and an issue was referred to the first-tier tribunal (FTT) as to the reasonableness of those charges. In a determination issued in March 2015, the FTT found that a number of the service charge demands were not valid.
Meanwhile, in April 2014, the respondent made a payment of £12,770 to the appellant in respect of service charges for the year ending in 2014. He then applied to the court for an interim mandatory injunction requiring the appellant to restore the lift service. In June 2014, while at court, the parties agreed that the appellant would restore the lift service and the respondent would pay a £980. The matter was adjourned with liberty to apply.
The respondent’s application for an interim mandatory injunction was later restored at the request of the respondent, who invited the court to dismiss the application on the grounds that the appellant had already restored the lift service and the application had no further utility.
The court acceded to that request, but also ordered the appellant to pay the respondent’s costs of the proceedings in the sum of £10,845.40. The recorder found, in light of the FTT’s determination, that the respondent did not owe any sums to the appellant at the time when he applied for the injunction, that accordingly he was not in breach of any of his obligations under the lease, and that he had obtained a substantial practical advantage, namely the restoration of the lift service, as a result of making the application. The appellant appealed against the costs order; its main contention was that the court should have treated the respondent’s request for the dismissal of his application as a discontinuance of the claim and that, accordingly, the recorder should not have embarked on a consideration of the merits of that claim.
Held: The appeal was dismissed.
(1) The award of costs was an exercise of discretion by the recorder, with which the court was only entitled to interfere if the exercise of discretion was wrong as a matter of principle or was irrational. The recorder had been entitled to make the costs order that he did in the instant case.
The recorder was not obliged to treat the respondent’s request for the dismissal of his claim as equivalent to a decision to discontinue that claim. A claim was discontinued by service of a notice of discontinuance under CPR 38.3(1), which had certain prescribed costs consequences. In the instant case, by contrast, there was no discontinuance and the respondent was merely inviting the court to dismiss the claim on the ground that he had obtained the relief that he sought, namely the restoration of the lift service. Continuation of the claim would have been pointless. As a matter of both form and substance, that situation was entirely different from discontinuance: Nelson’s Yard Management Co v Eziefula [2013] EWCA Civ 235; [2013] PLSCS 89 distinguished.
That being so, the costs were at large and it was a matter for the recorder to determine the appropriate costs order. The merits of the claim were potentially relevant to the exercise of discretion on costs. The recorder was entitled to consider whether the factual background was sufficiently clear as to enable him to draw conclusions, without conducting a trial, as to the respective merits of the parties’ position. Given the findings of the FTT, the position was tolerably clear. FTT had reached a number of conclusions on the facts which made it possible to analyse the account in short order and come to a conclusion as to whether, in fact, the respondent’s account was in credit. The recorder had been entitled to conduct that exercise and then to base the exercise of his costs on the conclusions that he reached: R v Croydon London Borough Council [2012] 1 WLR 2607 applied.
(2) On the basis of the recorder’s conclusions, no service charges were due at the date of the injunction application and accordingly there was no question of the appellant being entitled under the lease to discontinue service of the lift. It had not been established that the failure to pay the service charge made difficult or impossible the provision of the lift service. The respondent’s application for a mandatory injunction to require the appellant to provide that service did not amount to an application for specific performance of the lease, which the court would not order unless all parties entitled to enforce a contract were before the court. Instead, the claim for the mandatory injunction was being dismissed by consent. What was before the recorder was an application for costs following the dismissal of the claim. While there were sound reasons of policy why specific performance could not be ordered in the absence of the parties entitled to enforce the contract, those considerations did not apply when the recorder was deciding whether or not to exercise his discretion to award costs: Tito v Waddell [1977] Ch 106 distinguished.
Nigel Woodhouse (instructed by Pemberton Greenish LP) appeared for the appellant; Daniel Dovar (instructed by Collyer Bristow LLP) appeared for the respondent.
Sally Dobson, barrister
Click here to download the transcript of Winchester Park Ltd v Sehayek
