Tribunal kept power to hear case & award costs even after Company withdrew right to manage flats application

Where a right to manage (“RTM”) company withdraws an application made to acquire the right to manage a building containing self contained flats under the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”):

– is the applicant’s communication of its intention sufficient to effect the withdrawal and end the proceedings or

– does the withdrawal kick in only when the tribunal consents to the withdrawal so that, until then, the tribunal continues to have jurisdiction over the matter to enable it to determine the substantive dispute and order costs?

In O Twelve Baytree Limited, R (On the Application Of) v The Rent Assessment Panel [2014] Beckett House RTM Co. Ltd., (“the RTM”), served a claim notice seeking to acquire the right to manage the property with effect from 11 February 2013.

On 2 April 2013, the RTM wrote to the tribunal ” we … withdraw the Claim Notice, and therefore …the hearing listed for 4 April is cancelled and [the RTM] application is withdrawn.” The tribunal treated that communication as a withdrawal of the application and a cancellation of the hearing. The Claimant contended that the RTM could not unilaterally withdraw its application. It was concerned that the Claimant had incurred costs in preparation for the hearing. It wanted to ensure that the tribunal retained jurisdiction to deal with the application and make any orders including on costs.

The High Court said the legislation contemplated that an application may be withdrawn. That was implicit in section 87(1) of the 2002 Act which recognised that if an application is withdrawn, the claim notice is also deemed to be withdrawn. Section 87(2) of the 2002 Act also provided for “the date of the withdrawal of the application” to be the date upon which the claim notice is deemed to be withdrawn (section 87(2)(b) of the 2002 Act).

The provisions of the 2002 Act were, however, silent on the question of what steps or procedures must be followed in order to bring about a withdrawal of the application. The 2002 Act was also silent on the question of whether a withdrawal is effected solely by the RTM giving notice to the tribunal (or the other parties) of its wish to withdraw the application or whether the tribunal must agree to the withdrawal.

The 2002 Act contained indications that the RTM would not be able to bring about the end of the proceedings simply on giving notice of withdrawal especially in the provisions relating to costs i.e. that the RTM would be liable for the reasonable costs incurred by the giving of the claim notice. Also under section 88(3) of 2002 Act the RTM would be responsible for the costs incurred in proceedings before a tribunal.

However the RTM’s liability for costs incurred as a party to proceedings before the tribunal only arose, if the tribunal dismissed the application.

Since:

– section 89(2) of the 2002 Act said liability for costs continued down to the withdrawal of the application and

– such liability would only arise if the tribunal dismissed the application

the Court took this to indicate that the tribunal retained jurisdiction over an application even where the RTM had given notice that it intended to withdraw. So the withdrawal would only be effective when accepted by the tribunal and when the tribunal dismissed the application, e.g. by dismissing the application on withdrawal.

This sounds like an expedient to make good a deficiency in the legislation by artificially protracting proceedings beyond the RTM’s withdrawal to enable the tribunal to dismiss the application and trigger its own jurisdiction to award costs. The court acknowledged that the tribunal would have no duty to hear and determine the underlying merits of the case in those circumstances.

So the tribunal had been wrong to believe that the notice of withdrawal ended its jurisdiction including to award costs.

This blog has been posted as a matter of general interest. It does not remove the need to get bespoke legal advice in individual cases.