Cussens v Realreed Limited [2013 EWCH 1229 (QC): County Court Has Jurisdiction

Summary: A county court has jurisdiction under the County Courts Act 1984 s.15 to make a declaration for the purposes of s.168 of the Commonhold and Leasehold Reform Act 2002 that a tenant was in breach of covenant.

Facts: The appellant tenant (T) held two flats in a block called Chelsea Cloisters, London SW1 under two leases. The respondent was the landlord (L). Both leases provided that “No Apartment may be used for any unlawful or immoral purpose and the Lessee shall not do any act or thing that may be or become a nuisance disturbance damage annoyance or misery to the Landlord or the occupiers of any other part of Chelsea Cloisters”.

The Judge found that the two flats had, when sub-let, been used for prostitution, that the leases imposed on T absolute obligations that they should not be, and that therefore in the case of each lease the tenant was in breach of her covenant.

In his judgment the Judge said: “The declaration sought is actually an application for a determination that a breach of a covenant or condition in each of the respective leases has occurred, pursuant to section 168(4) of the Commonhold and Leasehold Reform Act 2002 . That being a necessary precursor to the service of notice under s.146 of the Law of Property Act 1925 and proceedings for forfeiture of the leasehold interest held by [T].

It is accepted that this court has jurisdiction to hear these matters, notwithstanding the reference in section 168(4) to the LVT. Although the defendant’s costs position has been reserved in light of the claimant’s choice to use the courts facilities to resolve the issues between the parties rather than the [LVT].”

The judge ordered T to pay L’s costs to be assessed on the standard basis. In so doing, he rejected T’s argument that costs should be decided as if the proceedings had been brought in the LVT on the basis that she had not previously raised the issue that the proceedings should have been brought there.

Issue: T appealed on the grounds that the judge incorrectly ruled that (1) the county court could hear an application for a declaration by a landlord under s.168(4); and (2) he was entitled to follow the normal rule of awarding costs on a standard basis to the successful party even though a LVT designated to hear such applications had no such power.

Decision of Appeal: Dismissing the appeal, Andrew Smith J held that the judge was wrong that he had jurisdiction under s.168(4) to make the declaration in the county court. The section contemplated firstly that the determination required before notice of forfeiture could be made on application to the LVT. Section 168 did not contemplate that proceedings could be brought in the county court simply for the purposes of obtaining a determination. However, under s.15 of the County Courts Act 1984 a county court could hear any action founded on a contract. A lease was a contract and a landlord was entitled to enforce a tenant’s covenants. L had to allege and prove the terms of the lease on which he based the claims, therefore, the proceedings for declarations were within the jurisdiction conferred by s.15. The determinations of breach made in those proceedings were effective under s.168.

As to the costs order, the judge’s incorrect decision on his jurisdiction did not drive his decision on costs or materially affect his essential reasoning on costs. Neither party objected to the proceedings in the county court and both appeared content with the forum so there was no good reason for the judge to have departed from the general rule that costs follow the event.

Comment: In a footnote to his judgment, Andrew Smith J remarked that he could see “no proper or principled objection to the costs judge taking into account on the assessment the alternative procedure available to the landlord [i.e. an application to the LVT], and, to some extent, to restrict the costs awarded on the assessment in light of that.” This remark is obiter but it must be questioned whether, as a matter of principle, the fact that an issue could have been determined in another (costs free) tribunal is relevant to the assessment of costs, particularly where neither party applied to transfer there.

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