Cussens v Realreed Ltd

Factual and Procedural Background

In November, a judge sitting in the Central London County Court heard two claims brought by a landlord against a tenant who leased two flats in a block known as Chelsea Cloisters, London SW1. The landlord sought declarations that the tenant was in breach of the terms of her leases, specifically that the flats had been used for prostitution, which was prohibited by the lease covenants. The judge made orders declaring breaches of the leases and ordered the tenant to pay the landlord's costs. The tenant appealed this decision with permission granted after an initial refusal.

Legal Issues Presented

1. Whether the County Court had jurisdiction to make a determination of breach under section 168 of the Commonhold and Leasehold Reform Act 2002, given the statutory role of the Leasehold Valuation Tribunal (LVT) in such matters.
2. Whether the judge erred in awarding costs to the landlord on the standard basis, contrary to the costs regime applicable before LVTs under the 2002 Act.

Arguments of the Parties

Appellant's Arguments

• The County Court lacked jurisdiction to hear the landlord's application for a declaration under section 168(4) of the 2002 Act, which contemplates applications to the LVT.
• The judge incorrectly applied the standard basis costs regime, ignoring the limited costs powers and caps applicable to proceedings before LVTs under schedule 12 of the 2002 Act.

Respondent's Arguments

• The County Court had jurisdiction under its ordinary jurisdiction and section 15 of the County Courts Act 1984 to hear actions founded on contract, including lease covenants enforceable by landlords.
• The proceedings sought declarations, a form of relief properly within the County Court's jurisdiction, and thus the judge was correct to make the declarations and award costs on the standard basis.
• The tenant had every opportunity to apply to transfer the proceedings to the LVT before trial but did not, so the costs order was justified.

Table of Precedents Cited

Court's Reasoning and Analysis

The court examined the statutory framework of section 168 of the Commonhold and Leasehold Reform Act 2002, which requires a determination of breach before a landlord can serve a forfeiture notice under section 146 of the Law of Property Act 1925. The statute contemplates applications to the Leasehold Valuation Tribunal (LVT) for such determinations. The judge below had assumed jurisdiction under section 168(4) to make the declarations, but this was rejected on appeal.

The court reasoned that section 168(4) permits applications to the LVT but does not expressly or implicitly confer jurisdiction on the County Court to make such determinations. The statutory language and context suggest that determinations under section 168 are primarily for the LVT, with courts only recognizing determinations already made in other proceedings.

However, the court found that the County Court did have jurisdiction to hear the landlord's claims under its ordinary jurisdiction pursuant to section 15 of the County Courts Act 1984, which allows it to hear actions founded on contract. Lease covenants are contracts enforceable by landlords through privity of estate. The court relied on established case law to confirm that claims based on lease covenants fall within this jurisdiction.

The court rejected the tenant's argument that the application for a determination under the 2002 Act was not an "action" within the meaning of section 15. The landlord's claim was for declarations, a recognized form of relief within the County Court's jurisdiction in contract-based actions. The declarations effectively constitute determinations for the purposes of section 168.

The court also dismissed the contention that the landlord's claims breached the prohibition on splitting causes of action under section 35 of the 1984 Act, holding that a claim for a declaration and a later claim for forfeiture are distinct causes of action.

Regarding costs, the court acknowledged the judge's misunderstanding of the costs regime applicable to LVT proceedings but found this was not material. The tenant had not sought to transfer the proceedings to the LVT before trial, and both parties accepted the County Court as the forum. The court upheld the judge's exercise of discretion to award costs on the standard basis, applying the general rule that the unsuccessful party pays costs.

Holding and Implications

The court DISMISSED THE APPEAL.

The holding confirms that while the County Court does not have jurisdiction under section 168(4) of the 2002 Act specifically to make determinations of breach, it does have jurisdiction under section 15 of the County Courts Act 1984 to hear actions founded on contract, including claims for declarations of breach of lease covenants. The declarations made by the County Court are effective for the purposes of section 168 of the 2002 Act.

The court upheld the costs order made by the judge, finding no error in principle or injustice in awarding costs on the standard basis. The decision clarifies the interplay between the statutory role of the LVT and the ordinary jurisdiction of the County Court in leasehold disputes, emphasizing procedural fairness and the parties' conduct in choosing the forum. No new precedent was established beyond the application of existing principles to the facts.