But this being crazy leasehold, will the ruling end up helping more landlords than tenants?
Both the First Tier Tribunal and the Upper Tribual refused to make a costs order against a management company that had wrongly demanded £2.6 million in service charges for a park home site in Ilfracombe.
But the Court of Appeal has over-ruled them, in the leaseholders’ favour.
The FTT did find that none of the service charges were payable, but when the leaseholders asked for their costs under Rule 13 on the basis that GP Ilfracombe Management Company Limited had behaved unreasonably – the least of it, see more below – they were turned down.
The FTT refused because the management company had not behaved frivolously, abusively or in a vexatious way. The Upper Tribunal, under Elizabeth Cooke, agreed.
But the Court of Appeal didn’t, and last month found that the test of unreasonable behaviour includes but is not limited to conduct that is vexatious or intended to harass.
The test of whether a party has behaved unreasonably is really a straightforward one: is there a reasonable explanation for what someone did? Would a reasonable person have done the same thing in the same circumstances? In this case, it was obviously unreasonable to demand more than £2 million with no basis whatsoever and then try to defend it in the FTT.
The Court of Appeal ruling seems to open the door to more costs applications by leaseholders against landlords who resist every point for the sake of it. Time will tell which way the decision beds down.
But, unfortunately, there is a possibility that this superficially welcome ruling opens the door to more claims under Rule 13 by landlords against unrepresented leaseholders who pursue hopeless cases.
Interestingly, this case is connected to a wider investment fraud.
The freehold of the Ilfracombe park home site is owned by a company owned and controlled by Nicholas Spence and Derek Kewley. They advertised the leases over the individual park homes as investments to people who could make money by using a tied company to advertise them for holiday lets. This scheme failed and the tied company went into administration in 2020.
Mr Spence and Mr Kewley have just been found liable to repay millions (damages to be assessed, but may be as high as £45 million) to investors in the Ilfracombe holiday park site and various other student lets:
Commercial Court hands down Judgment in Significant Fraud Claim
Judgment in significant fraud claim: Daniel Saoul KC acts for successful claimants in deceit and unlawful means conspiracy group action.
Mr Spence and Mr Kewley were made subject to Worldwide Freezing Orders in the High Court during those proceedings. Kewley breached the freezing order by failing to disclose £5 million in assets which he attempted to sell in breach of the freezing order.
On 24 June 2024 Kewley was sentenced to five months in prison suspended for two years for contempt of court (see para 7(iv) of High Court judgment). Here:
Mr Justice Foxton describes Kewley as someone showing “no signs of having a moral compass, or at least not one capable of deflecting him from the path of his own self-interest …”
Mr Justice Foxton notes that Spence observed the first part of the trial remotely, but then failed to return from Florida (where he had moved) to be cross-examined.
Mr Justice Foxton said:
“The contemporary documents reveal numerous instances when Mr Spence was willing to mislead others to his own benefit, and at times he and Mr Kewley demonstrated a cynicism and indifference to the interests of others which is striking.”
The court of Appeal ruling is here:
Mr Justin Bates KC, the barrister who specialises in contesting right to manage applications, acted for the management company in this appeal.
Mr Bates also acted for A1 Properties (Sunderland) Ltd in the recent Supreme Court case on whether a technical error in a right to manage claim invalidated the claim.
A company owned and controlled by Spence / Kewley tried to block RTM at Tudor Studios, a former factory in Leicester now converted into student accommodation because it had not been given notice of the claim to right to manage. The building of 237 “study studios” and three larger flats, included a common room, communal laundry, reception and a gym.
The study studios and the flats are held by investor tenants on 250-year leases in tripartite form between the freeholder, the investor tenant and the management company.
A1 Properties (Sunderland) Ltd held leases over common parts attracting huge ground rents.
The Supreme Court found that the error in failing to give notices to A1 Properties (Sunderland) Ltd did not invalidate the claim, but may make it voidable on any judicial review of the FTT’s decision to allow RTM to go ahead.
Mr Bates was instructed by Roger Hardwick and Emma Bush of Brethertons. They also acted for A1 Properties in the Supreme Court case.
The Supreme Court press summary is here:
Related posts:
Israel Moskovitz loses epic Elim Court right to manage battle in landmark Court of Appeal decision
Two former employees of ABC Estates ‘face £60,000 each in costs after libel claim, and must apologise in open court’
Should the RTMF be taking the Elim Court battle for right to manage to the Court of Appeal?
Court of Appeal ruling on Mundy case’s ‘inconvenient truth’ expected on Wednesday
Court of Appeal backs rights of 200,000 shared ownership leaseholders after right to manage duel with Israel Moskovitz
Spender wards off attempt to frustrate his appeal over £590,000 ‘contract for eternity’ intercom systems
