[2024] UKUT 122 (LC)

It is most unusual for a decision of this kind to be challenged on appeal, because of its discretionary nature. The respondent in its written representations urges me not to interfere with it for that reason. It cites Johnsey Estates (1990) Limited v Secretary of State for the Environment [[2001] EWCA Civ 535 where Chadwick LJ said this about appeals from an exercise of discretion:

“21.

… an appellate court should not interfere with the judge's exercise of discretion merely because it takes the view that it would have exercised that discretion differently.

22..  [That principle] requires an appellate court to exercise a degree of self restraint. It must recognise the advantage which the trial judge enjoys as a result of his ‘feel’ for the case which he has tried. Indeed, as it seems to me, it is not for an appellate court even to consider whether it would have exercised the discretion differently unless it has first reached the conclusion that the judge's exercise of his discretion is flawed. That is to say, that he has erred in principle, taken into account matters which should have been left out account, left out of account matters which should have been taken into account; or reached a conclusion which is so plainly wrong that it can be described as perverse.”

That decision was made in a different context but those words are entirely relevant to this appeal.

Some of the arguments in the appellants’ statement of case in the appeal are not relevant, for example that the respondent has failed over a long period to tell him whether his account is in credit or not. That does not appear to be part of the appellants’ argument before the FTT. Moreover the appellants say that they had in fact overpaid their service charges in 2020; again this is not a fact that the FTT found, and it cannot be the basis for an appeal.

However, the FTT’s decision is on its face a little unexpected. It initially refused a section 20C order even though the respondent had succeeded only in respect of half of what was in issue by the time of the hearing - ignoring the fact that by that time more than half of the original claim had been ruled inadmissible or had been conceded. In its decision of 31 August it made a paragraph 5A order in respect of half the respondent’s costs, even though what the respondent had recovered had now been reduced by nearly 75% and was now a very small fraction of the original claim.

That does call for explanation. And on the face of it the reasons the FTT gave are all relevant ones. Looking both at the decision of 10 April 20 and the paragraph 5A order of 31 August 2023, what strikes me is that the most significant of those reasons in the mind of the panel seems to have been the first, essentially that the appellants knew that money was due and did not pay it. And I agree that if that was straightforwardly the case then the order made by the FTT would be unassailable; the conduct of parties is entirely relevant to the decision even if on those facts and on those figures I might have made a different decision.

But the difficulty with the FTT’s reasoning is that it ignored what happened just before the hearing, when substantial concessions were made by the respondent – reducing the amount in issue by half – on the basis of payments made by the appellants in the sum of £1,294.80 (paragraph 6.1 of the skeleton argument of counsel for the respondent in the FTT) and as a result of an error (paragraph 6.2 of the skeleton argument admitted that the sum of £1,338.09 in the application should have read £43.29).

So even if the appellants knew, or could have worked out, before the hearing that £259.74 was payable, their withholding of payment was understandable in light of the fact that sums were being demanded in the proceedings that they had already paid, and other sums were being demanded that were not in fact due. As they put it in their application for permission to appeal in the FTT, had they paid all that was being demanded at any time until those concessions were made they would have overpaid a considerable sum. And there is no finding that the appellants did know before the hearing that the £259.74 was payable, only that they did not contest that sum when applying for permission to appeal. Indeed, one of their complaints was that the respondent had not kept proper accounts and could not tell them whether their service charge account was in credit or debit; the concessions made before the hearing by the respondent are consistent with there having been some confusion on the respondent’s part, which again makes it difficult to criticise the appellants for not paying the £259.74 in addition to what they had already paid.

So the FTT’s refusal to order that the respondent should be prevented from recovering all, or 95 %, of its costs as an administration charge turns out to be flawed because it failed to take into account a relevant consideration, and a consideration that weighed heavily against the FTT’s main reason for that refusal.

For that reason I set the decision aside.

I substitute the Tribunal’s own decision, making an order that the appellants’ liability to pay the respondent’s litigation costs in the FTT by way of an administration charge be extinguished. I do so because that seems to me to be just and equitable in light of the fact that the appellants were by far the more successful party in the proceedings before the FTT.