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A comment on the decision in Chaplair v Kumrai  EWCA Civ 798.
In the last article that was posted on the subject of collection of service charge arrears, it was suggested that it is becoming somewhat difficult to recover the costs of proceedings instigated to recover service charge arrears when a claim is allocated to the small claims track in the county court. In particular, the position taken by many District Judges was that, despite any contractual provisions to the contrary, the point of the Small Claims Track was to put both parties on an even keel. This meant that costs recovery was generally limited to fixed costs.
However, the decision in Chaplair v Kumrai has set a helpful precedent on the recovery of contractual costs, pursuant to the terms of a lease, when a matter is proceeding on the small claims track.
The background to this claim is fairly unusual – the landlord brought a claim in the county court for the recovery of unpaid rent and service charges. This was allocated to the Small Claims Track. The portion of the matter relating to service charge arrears was subsequently transferred to the LVT as 9 other leaseholders had challenged the landlord in relation to these.
In the LVT, following a favourable outcome, the landlord tried to recover its costs but was unsuccessful. Proceedings were remitted to the county court and the landlord once again sought to recover its costs, including those incurred in the LVT proceedings. The landlord relied on a clause in the lease, which contained standard wording and entitled it to the recovery of its costs “in or in contemplation of any proceedings under sections 146 and 147 of the Law of Property Act 1925”.
The District Judge did not award any costs as the matter had been allocated to the small claims track and so the court was restricted by Part 27 of the CPR. The landlord appealed and was successful, with the Circuit Judge awarding the costs of the county court, LVT and appeal proceedings. The Circuit Judge reasoned that the costs were payable under the lease and no the CPR. The costs were awarded on the indemnity basis and were subject to an assessment.
In the Court of Appeal, the tenant argued that the landlord was estopped from recovering the costs of the LVT proceedings in the county court as it had already sought, unsuccessfully, to recover these at the LVT. This argument was rejected.
The second argument raised by the tenant was that the costs recoverable in the county court should have been limited to fixed costs, given that the claim had been allocated to the small claims track. Once again, this argument was rejected – the Court of Appeal held that the Circuit Judge was entitled to find that the landlord could recover its costs having had regard to the terms of the lease and was free to assess costs without the restraints of CPR Part 27. This included the LVT costs as they fell within the scope of the contractual right.
This is a helpful case for landlords who are seeking to recover rent and service charges from their tenants in the county court – it is also possible to recover the costs of those proceedings even if the claim is allocated to the small claims track. This right is not affected even if the matter is transferred to the LVT for determination on specific issues. However, it is important to remember that the contractual right to costs must be pleaded in the particulars of claim.
This article is for information purposes only and is not legal advice. It should not be acted or relied upon and legal advice should be sought before applying any of the information in this article to any facts or circumstances.