Representation in Small Claim Court and Costs

[Esio Trot]

My company has managed a block of 18 flats for the last 18 months, and is registered as Company Secretary under the management company formed as part of the reversionary lease, of which one of the obligations is to pay a single ground rent payment on behalf of all the leaseholders.

Prior to us managing, the previous agent allowed the ground rent to become some years in debt. The requirements of using the prescribed demand for ground rent does not apply due to the reversionary lease.

We paid all arrears of ground rent within a short while of being appointed. However the lease provides for default interest at 2% every 28 days over due, which upon calculation came to almost £800. Under the directors remit, we refused to pay and the freeholder has taken out a small claims action.

We defended on the basis of the charge being a penalty and the hearing is due the middle of this month.

Query
The freeholders laywer has now written to us thus:

1. That the documents submitted in defence have been signed by me, representing the Company Secretary and "not by your client, and you do not have the necessary legal standing to sign the documents". We do have on file a signed document from the directors authorising the Company Secretary to both sign documents relating to any legal action and to represent the management company at any hearing. Is this sufficient, and if not how can I correct this.
2. Despite being a small claim, I have had served on me a a letter (not marked "without prejudice") containing an invitation to withdraw as the "defence is without merit", accompanied by a Statement of Costs (form N260 Statement of Costs summary assessment) that will be sought amounting to £585 plus VAT of £112 making £702 total. My understanding of small claims is that the provision for the claiming of costs is quite limited, thus it seems to me that the sending of this notice of costs is intended to coerce us to withdraw.

I would really appreciate some insight into the above, please.

[mikejclark]

Re: Representation in Small Claim Court and Costs

Hi,

What are your duties under your contract as acting as management agent. Im not sure whether you should be liabel for the past companies debts, unless you agreed to take them on under your contract?

Regarding your arument relating to the 2% and it being a penalty, penatly clauses are unlawful in the letter of the law. However, it is in fact very hard to argue a clause is a penatly clause (and thus unlawful) as Courts like to see certainy in contract and as such only a very unreasonably high penatly clause may have the chance of being considered unlawful.

As for the letter to settle, you are correct about costs. The court does have the power to award them in the small claims court but only in exceptional circumstances and in more claims than not costs are not awarded.

Hope this helps.

[Esio Trot]

Re: Representation in Small Claim Court and Costs

For those of you who have been following this thread, the CASE WAS LOST.

At the hearing the claimants were represented by a very articulate lawyer, and having been involved with some quite mediocre ones, I have to say he was very good.

The judge overruled him when he claimed I did not have the legal standing to appear for the defendants. The judge said that as I was an officer of the corporate body that was the company secretary, he saw no barrier to me representing the management company (reversionary leaseholder). I should add, that I did suggest to the directors that they obtain proper legal representation, but in view of the amount involved (£800) having to pay for legal representation on top of the amount claimed might put themselves at a financial disadvantage as they were worried about a personal liability for this element. So they were happy to stick to me only.

Regarding the issue of default interest, the judge said that under consumer law, he would have been duty bound under current legislation to side with us and dismiss the case. However, as the parties were a freeholder and a Limited company as the reversionary leaseholder, he must treat this as a business agreement. As such the directors of the reversionary lease would have, or if not should have, sought legal advice on each clause of the agreement they were looking to enter into. Therefore, they must have been fully conversant with the conditions for levying interest on late payments, and of the rate and period charged.

A couple of days before the hearing I also came across a Bailii recorded decision of 2009, the link I cannot now find, which dealt with a similar case. The case went the same way as ours, though from what I recall different arguments were used.

The current directors are happy it finally went to hearing, even though the case was lost - they are aware that you can never tell in court, and with a different judge it could have gone the other way.

Thank you to Mikejclark for contributing. Hopefully this thread may be of use to someone else at some time in the future.