Khalid Qayyum Rana & Anor v Maitland Court Limited

When exercising its discretion under paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002, the First-tier Tribunal must consider all relevant circumstances, including the parties’ conduct and the extent to which the tenant succeeded. Substantial concessions or corrections made before the hearing may materially affect that assessment. A tenant has no automatic entitlement to an order extinguishing liability for litigation costs, but a decision is vulnerable on appeal if the tribunal ignores a relevant consideration bearing directly on its principal reasoning. The Upper Tribunal should respect the tribunal’s discretion unless there is an error of principle, irrelevant consideration, failure to consider a relevant matter, or a plainly wrong decision.

The appellants appealed against the First-tier Tribunal’s decision under paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002. The FTT had determined that only £259.74 was payable after substantial concessions and correction of an accounting error, but ordered that up to half of the respondent’s litigation costs could be recovered as an administration charge. It relied on the parties’ relative success, the self-managed nature of the block, and Tenants of Langford Court v Doren Limited. The central issue was whether the FTT had lawfully exercised its discretion.

1. The appeal was allowed and the FTT’s paragraph 5A decision was set aside.
2. Paragraph 5A gives the FTT a discretion to reduce or extinguish liability for litigation costs recoverable as administration charges. The discretion is not automatically exercised in favour of a successful tenant, and success does not necessarily determine the proportion of costs to be excluded. The governing consideration is what is just and equitable in all the circumstances, including the conduct and circumstances of the parties and the outcome of the substantive proceedings.
3. The approach in Church Commissioners v Mrs Khadia Derdabi [2011] UKUT 380 (LC) applies equally to paragraph 5A applications. The tribunal should identify the issues, assess the extent of success, consider what proportion of costs should remain recoverable, and adopt a robust, broad-brush approach rather than conduct a detailed taxation exercise.
4. An appellate tribunal must exercise restraint when reviewing a discretionary decision. Under the principles stated in Johnsey Estates (1990) Limited v Secretary of State for the Environment [2001] EWCA Civ 535, intervention is justified where the tribunal erred in principle, considered irrelevant matters, failed to consider relevant matters, or reached a plainly wrong or perverse conclusion.
5. The FTT failed to consider the significance of the respondent’s substantial pre-hearing concessions, which reflected payments already made and an admitted error in the sums claimed. That omission undermined its principal conclusion that the appellants’ failure to pay the remaining sum justified the order. The appellants’ conduct was understandable in the circumstances and the FTT’s reasoning was therefore flawed.
6. The Upper Tribunal substituted its own decision. The appellants’ liability to pay the respondent’s FTT litigation costs by way of administration charge was extinguished.

• First-tier Tribunal (Property Chamber): Following its service-charge determination of 10 April 2023, amended on 31 August 2023, the FTT ordered that no more than half of the respondent’s litigation costs could be recovered. The Upper Tribunal set that decision aside.
• Upper Tribunal (Lands Chamber): Appeal allowed. The appellants’ liability for the respondent’s FTT litigation costs as an administration charge was extinguished.