NOTE
(Expenses)

Sheltered Housing Management Limited v Margaret Forbes Jack

Introduction and Summary

[1] The Tribunal has received a number of applications in relation to the expenses of an application under Sections 34(1) and 90(1)(c) of the Title Conditions (Scotland) Act 2003 (“the Act”). The applicants had been the managers, and also the feudal superiors, of a sheltered housing development. The majority of the flat proprietors exercised their new rights under the Act to appoint different managers and also to impose new title conditions. The applicants then applied to the Tribunal’s new jurisdiction available in such cases to preserve unvaried the original title conditions. One aspect of the new title conditions was in issue, namely the flat proprietors’ attempt to impose new burdens restricting the use of residual property (still owned by the applicants) such as the warden’s flat and office to use ancillary to the sheltered flats. The applicants challenged these new burdens both on competency grounds and under the new tests set out in Section 98(b) of the Act. Following an oral hearing, the application was unsuccessful. The Tribunal held the new burdens competent and also upheld them on the merits. The applicants then sought compensation under Section 90(6) and (7) of the Act. Following a separate hearing in the form of oral submissions based mainly on the evidence and findings on the merits of the application, the Tribunal awarded compensation of £9178.

[2] We have, in accordance with our normal practice and with parties’ agreement, dealt with the expenses issues on the basis of written submissions. The respondent (the flat proprietor who technically ‘proposed’ the new deed of conditions, and who was represented in the proceedings by a solicitor) sought the expenses of the proceedings on the merits, together with an additional percentage in respect of complexity, etc. The applicants (who were represented by counsel) sought modification of those expenses, and sought the expenses of the compensation hearing. The respondent opposed this and herself sought the expenses of the compensation hearing, which failing a finding of none due to or by, or at least modification. The applicants sought sanction for the employment of junior counsel. Both sides sought certification of the two chartered surveyors who gave valuation evidence as skilled witnesses.

[3] The Tribunal’s decisions on these matters are summarised as follows:-

(i) We find the applicants liable to the respondent in the expenses of the application, under exception of the claim for compensation, without modification;

(ii) In respect of that award, we allow an increase of 40% in the fees authorized by the Sheriff Court Table of Fees;

(iii) We find the respondent liable to the applicants in the expenses referable to the claim for compensation, from the date of submission of that claim onwards;

(iv) We sanction the employment of junior counsel; and

(v) We certify the employment of Mr MacDonald and Mr Begg as skilled witnesses.

[4] Section 103(1) of the Act provides as follows:-

“103 - (1) The Lands Tribunal may, in determining an application made under this Part of this Act, make such order as to expenses as they think fit but shall have regard, in particular, to the extent to which the application, or any opposition to the application, is successful.”

There is also provision in our Rules, the Lands Tribunal for Scotland Rules 2003, in particular Rule 28, in relation to expenses. Where we award expenses, we have a discretion whether to specify taxation, in the event of disagreement, under the Court of Session provisions or the Sheriff Court provisions. Neither side has suggested which should apply in this case. Our Rules also specifically provide that counsel’s fees are only to be allowed if sanctioned by us and, similarly, the additional expenses of expert witnesses only if certified by us. Our normal practice in title conditions cases is to refer to the Sheriff Court scale, and we shall follow that course in this case. We have accordingly had regard to the Act of Sederunt (Fees of Solicitors in the Sheriff Court) (Amendment and Further Provisions) 1993, as amended (“the Act of Sederunt”).

Expenses in relation to merits

[5] As the applicants acknowledge, the respondent was successful on the merits (including the competency issues) and is clearly entitled to an award of expenses in that regard. The applicants, however, suggest two reasons why this might be modified, and they seek modification to 60%. Firstly, they argue that evidence would have been required from all of the witnesses who were led at the hearing on the merits, had matters moved directly to a compensation hearing. Secondly, they refer to a body of productions by the respondent relating to allegations about the applicants’ management and to the fact that the applicants were successful at the hearing in opposing the leading of evidence, or making submission, about this. Considerable time had been spent by the applicants’ solicitors investigating this.

[6] It is the case that at the compensation hearing neither side led any fresh oral evidence. There was simply some up-dating of the two valuation surveyors’ views in the light of the Tribunal’s findings in connection with the merits and oral submissions by the representatives. This had the commendable effect of restricting expenses in the compensation side of the case, but as regards the case on the merits it did not, so far as we can see, lengthen that case in any way: all the evidence, albeit raising valuation issues (in relation to the issue of “unfair prejudice” under section 98(b)), was directed at the merits. No time was taken with either evidence or submission which solely related to compensation. The issue on the merits was the overriding issue in the case, and indeed the only issue until after the decision on the merits was given, since the applicants, entirely legitimately, only then intimated their claim for compensation. We should add that we do not agree that, if the issue had only been compensation, all the same witnesses would have been required. While it is true, therefore, that some of the evidence led on the merits also had a bearing on compensation, in the particular circumstances we do not see this as a reason for modifying our award of expenses on the merits.

[7] On the matter of allegations regarding the applicants’ management of the development over the years, we accept that it is appropriate to consider whether to modify expenses, in effect on the ground of ‘divided success’. This can arise where one identifiable area of evidence or argument, on which the successful party did not in fact succeed, can be seen to have occupied substantial time and caused expense. In this case, the respondent clearly succeeded on all the issues as to competency of the imposition of these burdens and whether they should be preserved which arose at the first hearing of the case. What we have is one line of evidence which they proposed to lead and were not allowed to. Clearly, time was not taken up by this at the hearing, because we went to the length of excluding such evidence, so the issue relates only to the expenses of preparation. We are not persuaded on the material before us that this would have been a substantial enough area of preparation to justify modification by us of this award. We bear in mind that Paragraphs 8 and 9 of Schedule 1 of the Act of Sederunt give the auditor of court power to exclude items, without direction from us. He will no doubt consider, amongst other things, the extent to which this kind of evidence had in fact emerged at earlier stages, i.e. before the application with which we are concerned had been made. We think that with, presumably, a detailed account of expenses, he will be in a better position to reflect this matter if appropriate.

[8] In these circumstances, we do not consider that we should modify the award of expenses in favour of the respondent.

Percentage Increase

[9] Paragraph 5 of Schedule 1 to the Act of Sederunt authorises the court to allow a percentage increase in the fees authorised by the Table of Fees “to cover the responsibility undertaken by the solicitor in the conduct of the cause”, and provides that in fixing the amount “the following factors shall be taken into account:-

“(i) the complexity of the cause and the number, difficulty or novelty of the questions raised;

(ii) the skill, time and labour, and specialised knowledge required, of the solicitor;

(iii) the number and importance of any documents prepared or perused;

(iv) the place and circumstances of the cause or in which the work of the solicitor in preparation for, and conduct of, the cause has been carried out;

(v) the importance of the cause or subject-matter of it to the client;

(vi) the amount or value of money or property involved in the cause;

(vii) the steps taken with a view to settling the cause, limiting the matters in dispute or limiting the scope of any hearing.”

The respondent has referred to (i), (ii), (v), (vi) and (vii).

[10] The applicants questioned the competency of the Tribunal ordering such an increase, pointing out that there is no specific basis in our Rules for such a course. In our opinion, the reference in our Rule 28(3) to taxation “according to the Sheriff Court Table of Fees” entitles us to proceed on the basis of Schedule 1 of the Act of Sederunt, including the first part thereof, headed ‘General Regulations’; or at least to invoke Paragraph 5(b), the provision regarding percentage increases, which is prefaced: “The court shall have the following discretionary powers in relation to the Table of Fees.” It might be noted that it is Paragraph 5(a) which gives the power to direct modification, a step which the applicants themselves invited us to take. These general regulations distinguish between powers of the court and powers of the auditor in relation to application of the Table of Fees and we think that Rule 28(3) envisages us proceeding as a court would. It might be suggested that the specific references in Rule 28(4) and (5) to counsel’s fees and expert witnesses shows an intent to include these, and thus that additional fees are excluded, but reference to these rules shows them to be restrictive (“ … only where … ”): Rule 28(3), viewed on its own, would in our view allow them, and the same applies to the percentage increase. The Tribunal rejected an argument that it was not competent to allow an additional fee in Paramount Entertainments (Glasgow) Ltd v Strathclyde Regional Council 1990 SLT (Lands Tr) 110, although it is fair to say that the reasoning in that case was not identical because the reference in what is now Rule 28(3) to expenses under Court of Session rules was (and still is) slightly differently worded.

[11] Turning to the merits of this application, we do think it appropriate in this case to mark the responsibility undertaken by the respondent’s solicitor with an additional fee. We think that this was a case in which he bore exceptional responsibility. This was apparently the first attempt to invoke the new right under the Act to replace the managers of a sheltered housing development and consequently also the new procedure under section 33 of the Act to vary the title conditions. Variation in this context includes imposing new conditions against the will of the benefited proprietor, something previously unknown. The respondent and her fellow proprietors were attempting to secure use of property, in particular the warden’s flat, which was in the unfettered ownership of the applicants, for the sheltered flats. Invoking these rights was strenuously opposed, leading to a tense and difficult situation for the flat owners. It seems to us to have been both a highly significant issue for the respondent and the other flat proprietors and something in the nature of a test case. In these circumstances, the responsibility of resisting the ex-managers’ application to, in effect, preserve their unfettered right in the warden’s flat, was a heavy one. It was undertaken without the assistance of counsel, so that this is not a case in which it can be said that decisions about the arguments, and shape of the respondent’s case, together with the oral advocacy, were in other hands. Under specific reference to the seven factors listed in the Act of Sederunt, of which the respondent relies on five, we find the following matters particularly apply: the complexity of the cause and the difficulty and novelty of questions raised (i); skill and specialised knowledge required of the solicitor (ii); and the importance of the cause to the client (v). We do not uphold (vi) because we do not think the monetary value of this matter was exceptional: the effect on the value of the sheltered flats might not have been much in monetary terms and the amounts involved in the compensation claim were not out of the ordinary. As to (vii), we would expect parties in every case to consider Joint Minutes of Admissions of evidence, and the respondent is not in a position to draw attention to particular attempts to settle the whole matter, but there is certainly nothing adverse to the respondent’s position in relation to this factor.

[12] Thus, the increase is justified by reference to some of the specified factors. We think, however, that the appropriate percentage falls far short of 100%, which we think should be reserved for far more complex and involved cases. In all the circumstances, we think that a fair percentage uplift is 40%.

Expenses in relation to compensation claim

[13] We are satisfied that the applicants are entitled to their expenses in relation to the compensation claim. The claim succeeded, albeit only at the lowest of the three levels claimed. There is nothing in the respondent’s position which is in any way comparable to a tender or acceptance that some award of compensation was appropriate. To the contrary, the respondent advanced reasons why, even if there was some loss to the applicants, compensation should not be awarded. The Tribunal found against her on these arguments. No doubt it would have been difficult in practice for the respondent to reach a clear enough view of the prospects on compensation in this novel area to enable her to make any offer, but that can often be said to some degree in litigation. There is a suggestion that this claim may have been something of an afterthought, perhaps arising out of our indication, in relation to the ‘unfair prejudice’ issue, that one factor in relation to that issue is that the Tribunal has power to award compensation. Whether that be so or not, we think it unlikely that the procedure followed would in this case have been in any way different if the applicants had indicated from an earlier stage that they would, in the alternative, be claiming compensation. Our decision in relation to the expenses of the application on the merits means that this claim includes only the expense of such ‘pleading’ and related work as there was on the issue of compensation, of some up-dating of the valuation experts’ opinions and of the hearing itself. We can see no reason why the respondent should be awarded her expenses, as she seeks, or that there should be no award, or even that there should be modification of the award in favour of the applicants who succeeded.

Employment of junior counsel

[14] We are satisfied that we should sanction the employment of counsel. We would resist one inference from the applicants’ submissions in this regard, to the effect that it might be very common to sanction counsel for appearances before the tribunal on title condition issues. However, we are in no doubt that the novelty, importance and difficulty of this particular case justifies it. We agree with the applicants that it is appropriate here to look at the case as a whole, but we would reach the same view even if only the issue of compensation was being considered.

Certification of skilled witnesses

[15] Both parties seek certification of their expert valuation witness. We are entirely satisfied that this is appropriate in this case. Again, it applies to the whole case.

Note issued: 9 June 2008

Member: J N Wright, QC, I M Darling, FRICS

Case Ref: LTS/TC/2006/01


Certified a true copy of the decision of the Lands Tribunal for Scotland intimated to parties on 9 June 2008

Neil M Tainsh – Clerk to the Tribunal