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	England and Wales High Court (Administrative Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> MacDonald v Pricewaterhousecoopers LLP [2012] EWHC 3566 (Admin) (22 November 2012) URL: http://www.bailii.org/ew/cases/EWHC/Admin/2012/3566.html Cite as: [2012] EWHC 3566 (Admin)

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
THE ADMINISTRATIVE COURT

		Royal Courts of Justice Strand London WC2A 2LL
		22 November 2012

1. MR JUSTICE STUART-SMITH: This is an appeal brought by the appellant, Mr George Macdonald, under section 17(4) of the Audit Commission Act 1998 against the decisions of the respondent auditor, PwC LLP, which was contained in letters dated 31 August 2011 and 10 January 2012, not to apply to the court for a declaration that items of account in the accounts of the London Borough of Havering for the year 2009 to 2010 were unlawful. The appellant is a local government elector in the area of the London Borough of Havering and he has appeared today unrepresented. He has presented his case with courtesy and dignity throughout. The respondent is the auditor appointed under the Act for auditing the accounts of the London Borough of Havering.
2. In October 2010, the appellant gave notice of an objection under section 16(1) of the Act to two items which he identified as being allegedly unlawful in the statement of accounts for the year ending 31 March 2010. They were, first, the figure for building insurance income received by the Borough from leaseholders on a given estate and, secondly, communal satellite TV aerial income received by the Borough from leaseholders on the estate. The appellant contended that the items of account were unlawful because the Borough was not entitled, he said, to the income in relation to those items as a result of overcharging leaseholders. The appellant asked the respondent, first, to apply to the court under section 17(1) of the Act for a declaration that the items on account were contrary to law and, second, to issue a report on the matter under section 8 of the Act. It is to be noted that the appellant had made identical objections to the accounts for the year previous, namely 2008 to 2009. Those objections had been investigated by the respondent and the respondent had declined to apply to the court under section 17(1) and/or to issue a report in respect of those objections. No application was made to the court in respect of those applications.
3. The chronology can be shortly outlined. On 20 October 2010, the appellant wrote to Cheryl Coppell of the Borough objecting to the Borough's accounts for the year 2009 to 2010. On 9 November 2010, PwC responded to Mr Macdonald, acknowledging the letter to the Borough and asking him to set out the precise details of his concerns. After further correspondence there was a meeting on 19 January 2011 between PwC, represented by Mr Rickett, who was in charge of the audit, and Mr Macdonald. Mr Macdonald had provided PwC with a pack of information. The purpose of the meeting was to allow Mr Macdonald to present his objection. The minutes of the meeting prepared by PwC record that PwC informed Mr Macdonald that they would read his pack of information, consider what new evidence it provided and write to him to confirm the basis of his objection to the 2009/2010 accounts if it did not understand what the basis of his objection was following its review of the pack of information.
4. On 28 February 2011, PwC wrote to Mr Macdonald stating that -- and I summarise -- he had indicated verbally at the meeting on 19 January that the objections were on the same basis as the objections he had made the year before and setting out how PwC intended to respond in line with its responsibilities as auditor.
5. Mr Macdonald wrote on 21 March 2011 asserting that PwC had already made up its mind and stating that he had nothing further to add to his objection of the previous year. On 30 April 2011, Mr Macdonald wrote to PwC repeating his objections, making allegations of concealment and failures to comply with freedom of information requests, and stating that PwC had failed to recognise and rectify improper performance of duty and unlawful conduct. In the course of that letter he said:

"I confirm that I am requesting that as Auditors you apply to the COURT under section 17 of the Audit Commission Act for a declaration that each of the following is a unlawful item of account. Building insurance income. TV Aerial service income."

6. After carrying out the work which they had said they would carry out PwC issued its provisional decision. I will return to that letter in more detail later but at present it is sufficient to say that they set out the work that they had done and set out their provisional decision, which was to reject the objections.
7. On 11 October 2011, there was a meeting between Mr Macdonald and a friend of his together with PwC's audit team, including Mr Rickett and two others. The minutes of that meeting record that each of the two areas of objection were discussed in some detail. In particular, in relation to the insurance issue, the following appears:

"GM stated that he wanted to see evidence of the personal circumstances that could give rise to different charges.

JR confirmed that PwC had, as part of its investigation, obtained evidence from the Council to support the statements made in the 31/08/2011 letter in respect of Buildings Insurance.

CM quoted an example from the 31/08/2011 of mortgage companies and confirmed we did have evidence to support this being the case.

PwC showed GM evidence relating to property number 30 from GM's Buildings Insurance bundle. This evidence was a letter from Coffin Mew & Clover [a firm of solicitors] to the Council dated 2 February 2007, in which the solicitor requested that their mortgage company's solicitor had contacted them to request that the sum insured on that particular property be increased from £80,278 to £120,000.

...

CM confirmed that PwC had evidence that the Council had applied a loading to properties that had been sub-let but for which the leaseholder had not provided a tenancy agreement.

CM said that the charge levied on GM for Buildings Insurance was not based directly on the rebuild costs for the block, but because leaseholders increase the complexity and potential for the insurer to have to pay out sums to mortgage companies.

...

PwC showed GM an example of the form "Proposal for Buildings Insurance on the Structure of a Flat/Maisonette or House" where a leaseholder had requested accidental damage cover. In this particular example, the leaseholder had ticked the area near the word "YES" near the question "do you require this (accidental damage) cover?"

...

GM began to refer to a breakdown of charges for Buildings Insurance in 2009/10, stating that one particular leaseholder had paid £166.66.

GM stated that Zurich had therefore committed fraud.

The attendees clarified that this example was Number 28 in GM's Buildings Insurance bundle.

CH showed GM the document from Zurich's insurance policy that states that a 30% loading is applied where an assured shorthold tenancy agreement is not in place."

8. After that meeting on 10 January 2012 PwC issued its decision by a letter which took into account and cross-referred back to the provisional decision which it had issued on 31 August 2011. It is the decision set out in the letter of 10 January 2012 which is challenged by Mr Macdonald on this appeal.
9. Mr Macdonald issued two sets of proceedings. The first, having reference number CO/1168/2012, was issued on 2 February 2012. In section 5, in answer to the question, "Please set out the order (or part of the order) you wish to appeal", Mr Macdonald wrote, "I wish to appeal against the district auditor's ... decisions and conclusion with regard to my objections to London Borough of Havering accounts for year 2009/2010," i.e. the decisions and conclusions as stated in his letter 10/1/2012. On the same day, he issued a second set of proceedings, having reference number CO/1171/2012. In section 5 of the appellant's notice he repeated that he wished to appeal against the district auditor's decisions in the same terms as he had in his appellant's notice in the action CO/1168/2012. He did not then, or at any stage before the hearing of the appeal today, provide any detailed form of written argument, although he did provide two useful bundles summarising the documents upon which he relied, one in relation to the insurance issue and one in relation to the TV aerials issue.
10. His real complaint emerged during his submissions to the court today and can be shortly stated. His concerns relate to three blocks of flats which he says are identical in all respects, save that one is 12 storeys high, while the other two are 11 storeys high. He says that the flats within these blocks are also effectively identical. On the insurance issue he referred to the Zurich policy as a buildings policy which is based upon rebuilding values. He has never asked to be provided with a copy of the policy but he has in his possession documents which show that different flats have their insurance premiums calculated by reference to different sums insured. There is a substantial disparity. On the document produced to the court the sums insured range from about £77,750 to over £130,000. His fundamental point as advanced today is to assert that there is no apparent reason for the difference in the sums insured where, he says, properties are identical. He says that the rebuilding cost is all important and will be identical for each flat. His real complaint appears to be that the insureds, including himself, have not seen the policy itself or documentation that shows how an individual person's premium is calculated, and so, he says, you cannot calculate or identify the basis on which his sum insured is arrived at.
11. In relation to the charge for aerials, the Council entered into a series of contracts with a company called Surtees. In the course of the existence of those contracts the charges levied by Surtees under the contract have escalated, it appears, tenfold. Mr Macdonald points to the fact that the contracts refer to, and levy, different charges for terrestrial and satellite services respectively, and that the contract refers to "subscribers" to satellite services. He, and many others like him, make use of the terrestrial service but not the satellite services and yet, he says (and it appears to be correct) that he and other people like him are charged a unitary rate which is assessed by reference to the sums chargeable under the contract between Surtees and the Council for satellite services. He has a subsidiary concern, which is that the figures for 2008 and 2009 were not reconciled until a date which he says was after September 2011. I remind myself that I am concerned with the later year of account, namely 2009/2010.
12. Underlying all of this is his complaint that he has not been shown documentation by the Council or by the district auditor which satisfies him, or others in a similar position, either how the figures that go into the calculation of the insurance premium charged to individual tenants and leaseholders are themselves arrived at or why persons who do not use satellite television should be charged a rate in excess of the rate that is to be found in the contract with Surtees for terrestrial television services. It is on this basis that he brings these two actions against the district auditor.
13. The legal framework is provided by the terms of the Audit Commission Act 1998. Section 16 of the Act provides:

"(1) At each audit of accounts under this Act, other than an audit of accounts of a health service body, a local government elector for an area to which the accounts relate, or any representative of his, may attend before the auditor and ... make objections—

(a)as to any matter in respect of which the auditor could take action under section 17."

14. Section 17 of the Act sets out the procedure and the steps available to an auditor where it appears to the auditor that an item of account may be contrary to law in the following terms:

"(1)Where—

(a)it appears to the auditor carrying out an audit under this Act, other than an audit of accounts of a health service body, that an item of account is contrary to law, and

(b)...

the auditor may apply to the court for a declaration that the item is contrary to law.

(2)On an application under this section the court may make or refuse to make the declaration asked for, and if it makes the declaration then ... it may also—

...

(c)order rectification of the accounts.

...

(4)A person who has made an objection under section 16(1)(a) and is aggrieved by a decision of an auditor not to apply for a declaration under this section may—

(a)not later than six weeks after being notified of the decision, require the auditor to state in writing the reasons for his decision, and

(b)appeal against the decision to the court;

and on such an appeal the court has the same powers in relation to the item of account to which the objection relates as if the auditor had applied for the declaration."

15. The time for bringing an appeal is 28 days from the date of the decision being appealed. The nature of the appeal will be that it is a review of the decision of the district auditor unless the court considers that in the circumstances of an individual appeal it would be in the interests of justice to hold a rehearing. The proper principles to be applied have been authoritatively established, first, in Fagan v Watkinson (4 December 2010), where King J said at paragraph 18:

"Any appeal court will only interfere with [the auditor's] exercise of discretion if, in all the circumstances, it considers that the decision of the District Auditor was unlawful or was unreasonable or perverse or irrational in the sense that the District Auditor has come to a decision to which no reasonable District Auditor could have come on the material before him, or if for example he has failed to take into account that to which he should have had regard, or he has regard to impermissible factors."

16. In Moss v KPMG LLP [2010] EWHC 2923 (Admin), Ouseley J set out the proper approach of the court at paragraphs 14 to 18 as follows:

"14. The objector plays an important role in the audit, but that role is played through informing, assisting or taking issue with the decisions of the auditor. The objector cannot apply to the court. He can only challenge by appeal what the auditor omitted to do ...

...

16. On an appeal by an objector the first question is whether the auditor's decision on lawfulness is wrong and, if so, (and the item is unlawful) the second question is whether the exercise of his discretion not to seek a declaration was wrong.

17. What makes a decision 'wrong' ... depends on the subject matter, the nature of the decision at issue and the nature of the error relied on. The fact that the appeal will normally be by way of review does not require the application of judicial review or Wednesbury principles ... A pure error of law would simply be wrong. A finding of primary fact would be less readily held wrong than an inference drawn from documents or an evaluation of factual material in which the court was as well placed as the auditor to make a decision. The exercise of the discretion is wrong either where it is wrong in principle or where it is outside the range of decisions reasonably open to the decision maker or has been made without consideration of the relevant factors. This involves an approach to discretion probably indistinguishable from judicial review principles.

18. This is especially important where an appeal relates to the exercise of a discretionary judgment by an expert and specialist person or body in the course of a specific statutory function, such as local government auditors. Obviously if no discretion was exercised because the auditor wrongly thought that the item in issue was lawful, the approach by the court to the question of discretion would be very different from that where an auditor had correctly concluded that an item was unlawful but had exercised his discretion against seeking a declaration, or had exercised his discretion against seeking a declaration on the contingent basis that even if the item were unlawful no declaration should be sought."

17. As a matter of best practice and procedure I am told that it is normal to progress through the stages of a draft or preliminary decision followed by a meeting with the objector so as to see whether his concerns have been properly met or whether there is more material that needs to be considered before leading to a final decision. That is the procedure which PwC adopted here.
18. In this case two figures are challenged. The court does not have the actual figures but has been told that they are constituent figures within the lines "tenant's service charges" or "income from leaseholders". The court has also been told that in the Borough these items are accounted for on an accruals basis. It is important to bear in mind before considering the issues in detail that what is challenged is the district auditor's decision not to refer the question of the legality of these figures to the court, it is not a direct challenge to the legality of the figures themselves, though, as the judgment of Ouseley J in Moss makes clear, if the court were to determine that the underlying figures were wrong, that would have an important bearing and would in many cases lead to the conclusion that the auditor's decision not to refer could not stand.
19. I turn therefore, first, to the issue of insurance. In order to do so it is necessary to look in detail at how PwC dealt with this. In their letter of 31 August 2011 PwC first set out the steps that they had taken. They then dealt with their provisional conclusions as follows:

"Building insurance charge process

We examined the process by which leaseholders request and obtain additional insurance cover from the Council. We have specifically considered the circumstances that could give rise to variations in the insurance charge paid by leaseholders in the same block.

As stated in our letter to you dated 9 August 2010, the charge for an individual property will vary based on the level of cover required by the mortgage provider and the market value of the property. In addition, individual leaseholders can elect for optional additional cover which will increase the charge.

For first time purchasers the level of cover required is currently set out in the Home Information pack produced by the Council. Mortgage providers may request a higher sum insured and this is communicated by the purchaser or their solicitor to the Council as part of the purchase process. As the Council retains the freehold interest in all leasehold properties it is a requirement of the lease that the leaseholder uses the Council's building insurance. This is common practice in leasehold sales of local authority properties.

For subsequent purchases the previous sum insured is rolled forward by the Council unless the purchaser confirms in writing that a lower sum insured is appropriate and providing evidence that the mortgage company is happy with this situation. This is not a responsibility of the Council.

When a lease is agreed the leaseholder must complete a 'Proposal for building insurance on the structure of a Flat/Maisonette or House' form, which is submitted to the Council. If the leaseholder places a tick mark in the box in relation to extended accidental damage cover, additional cover is provided to that leaseholder. Unless the leaseholder specifically requests in future years that he or she no longer requires the additional cover, the additional charge is rolled over into subsequent years.

We have reviewed the documentation held by the Council in relation to the tendering of their insurance contract and have confirmed that the maximum sum insured for any single property under the policy is sufficient to ensure that all of the building insurance charges to leaseholders are within the limit set out in the policy.

The charge levied on leaseholders is based on the value of the sum insured of the property multiplied by £1.14 per mille, which is the price the provider has agreed with the Council. An extra 5p per mille is levied for leaseholders who opt for extended accidental damage cover, giving a charge £1.19 per mille.

In the instances you noted in your bundle where a leaseholder pays a rate of £1.48 per mille, this is based on the fact these properties are being rented out, but the leaseholders have not supplied the Council with signed copies of the tenancy agreement. It is a condition of the Council's service charging arrangements that when a property is rented out that failure to provide a copy of any sub-lease to the Council results in a 30% loading being applied to the standard rate, due to the fact that the insurance company considers there being additional risks in such arrangements.

For the reasons given above therefore, it is not the case that all tenants will be paying the same insurance charge.

Additional cover for the 8 properties

We have obtained and reviewed documentation from the Council that supports the appropriateness of the Insurance charges to the 8 properties you referred to in item 15 of the building insurance bundle you presented to us in our meeting on 19 January 2011. We have checked back to the original 'Proposal for building insurance on the structure of a Flat/Maisonette or House' forms and are satisfied that all of them requested the additional accidental damage cover. If any of them no longer require this cover then they need to write to the Council informing them of this and they will review the cover and confirm any changes.

Recalculate charges for Nos 28 and 30

We have recomputed the alculation of the insurance premium levied on 'leaseholder number 28 and number 30' on item 15 in your building insurance bundle and have agreed the insurance charges levied on those leaseholders to appropriate supporting documentation provided by the Council, including checking the sum insured back to the sums requested at the time of the lease agreement.

As noted in our letter to you on 28 February 2011, we understand that you are able to appeal to the Leasehold Valuation Tribunal should you wish to receive a determination concerning the reasonableness of the building insurance service charges.

Draft conclusion

Based on the findings of our work as detailed above, we do not propose at this time to take any audit action in relation to the Buildings Insurance service charges as we do not consider there are any unlawful items of account or any matters which need to be brought to the attention of the public."

20. I have already indicated that at a meeting on 11 October 2011 documents are recorded as having been produced to Mr Macdonald. That clearly did not satisfy his concerns. PwC then proceeded to their decision letter, which was on 10 January 2012. In relation to building's insurance, they set out the further steps that they had taken and set out their reasons for and responses to matters which Mr Macdonald had raised in the meeting of 11 October 2011 in the following terms:

"Findings - Buildings Insurance

Having considered all of the information mentioned above, I disagree with your view that the Council is not entitled to receive the income for the buildings insurance charges levied during the relevant period. As set out in my letter to you dated 31 August 2011, I:

• Examined the process by which leaseholders request and obtain additional insurance cover from the Council. I have specifically considered the circumstances that could give rise to variations in the insurance charge paid by the leaseholders in the same block. I explained these circumstances to you in my letter dated 31 August 2011 and at our meeting on 11 October 2011.

• Obtained and reviewed documentation from the Council that supports the appropriateness of the Insurance charges to the 8 properties you referred to in item 15 of the building insurance bundle you presented to us in our meeting on 19 January 2011. I have checked back to the original 'Proposal for building insurance on the structure of a Flat/Maisonette or House' forms and I am satisfied that all of them requested the additional accidental damage cover.

• Recomputed the calculation of the insurance premium levied on 'leaseholder number 28 and number 30' on item 15 in your building insurance bundle and have reconciled the insurance charges levied on those leaseholders to appropriate supporting documentation provided by the Council, including checking the sum insured back to the sums requested at the time of the lease agreement.

In my letter to you dated 31 August 2011 I indicated that I was minded not to seek a declaration under Section 17(1) of the Audit Commission Act 1998 that the income in the accounts in respect of buildings insurance charges is contrary to law.

You indicated in the meeting with you on 11 October 2001 and your subsequent letters that you did not agree with that preliminary view. In summary I consider that the main points that arose from the meeting on 11 October 2011 and your subsequent letters are that you are suggesting that:

•Insurance premium payers should not pay different amounts for buildings insurance when they live in the same block.

•An insurance policy does not exist for the leaseholders detailed in your correspondence with us.

•It is not clear from the service charge statement what the buildings insurance charge relates to.

I believe you contend that these factors mean that the Council is not entitled to receive the income on the insurance charges levied and that it would be unreasonable for us to decide not to seek a declaration under Section 17(1) of the Audit Commission Act 1998 that the income in the accounts in respect of buildings insurance is contrary to law.

I now consider each of these points in turn.

As stated in my letters to you dated 9 August 2010 and 31 August 2011, the charge for an individual property will vary based on the level of cover required by the mortgage provider and the market value of the property. In addition, individual leaseholders can elect for optional additional accidental damage cover which will increase the charge. In my letter dated 31 August 2011 I set out information in respect of the work I had done to evaluate and validate the process by which leaseholders request and obtain additional insurance cover. In out meeting on 11 October 2011 I showed you examples of the documentation that demonstrated why leaseholders pay different amounts for buildings insurance when they live in the same block.

Secondly, in relation to the insurance policy, the Council has a contract in place with Zurich Municipal to provide insurance cover for leaseholders, including those on the PETRA estate. A blanket policy is in place for the whole building, but the amounts paid by individual leaseholders vary, for the reasons explained above.

I agreed at our meeting on 11 October 2011 that I would ask the Council to consider improving the clarity of the information on the service charge notices. I will draft a recommendation to the Council shortly asking them to review the service charge notices for this item and to consider improving the disclosure to make it clear what the cost of additional accidental damage cover is and also what the sum insured is for the property.

Application to Court: decision

I do not propose to apply to the courts for a declaration under Section 17(1) of the 1998 Act in relation to the Buildings Insurance service charges as I do not consider there are any unlawful items of account or any matters which need to be brought to the attention of the public."

21. The question for the court on this appeal is whether the decision of PwC not to apply to the court for a declaration under section 17(1) of the 1998 Act in relation to the building insurance service charges is unlawful or wrong in accordance with the principles as set out in the cases of Fagan and Moss, to which I have just referred.
22. In my judgment, Mr Macdonald has failed to show any reasonable basis upon which it could be said that the decision of the district auditor was unlawful or wrong. His objection may not have had the result of enabling him to see the documents that satisfy his concerns but that is a different question altogether. The decision letter, taken in conjunction with the preliminary letter of 31 August 2010, is cogent, takes into account all relevant considerations and provides a reasoned decision. Nothing in the material I have seen leads me to consider that the underlying figure in the accounts is unlawful. On the contrary, all the available information supports the conclusion that the figures are lawful and reasonably calculated in the way explained by PwC in its letters. Whether the council could be more transparent in their dealings with individuals who are required to pay these charges is a separate question upon which I am not required to rule and do not rule.
23. On the issue before the court today Mr Macdonald's appeal fails for the reasons I have set out in relation to the insurance issue.
24. I turn to the aerials issue. Going first to the letter of 31 August 2010, PwC started by referring to the previous recommendations that they had made arising out of the 2008/2009 accounts and said that they would continue to monitor progress on those matters. Then turning to the issue of the 2009/2010 accounts, they said:

"Review of the lawfulness of the TV access service charge

As part of considering this matter we feel it is important to reconfirm the Council's ability to charge for the TV access service. Your lease agreement with the Council, dated 14 November 2005, sets out the basis of your rights and responsibilities under the lease. Clause 9 of the eighth schedule of the agreement grants you the right (subject to contributing and paying your proper share of the cost of erection maintenance and running of the TV aerial, which such share to be determined by the Council) to connect a TV with any aerial erected by or on behalf of the Council. It is clear from the lease therefore that the Council has the right to issue a charge for the provision of TV aerial access to your property.

In 2005, the Council approved the decision to apply a separate service charge for aerial access to its tenants. It was agreed that tenants would receive a single unitary charge regardless of whether they had a terrestrial TV aerial or satellite access point in their property. The then Head of Housing used his delegated powers under the Council's constitution to extend the same, standard charge to leaseholders.

This decision was not formally documented at the time, though we understand from officers that this position has now been formally documented by the Council. In 2010 we discussed the position with the Monitoring Officer who confirmed her view that the exercise of the delegated authority was legal and that not documenting the exercise of that authority did not undermine the legality of the decision made.

We are therefore satisfied that the Council is able to charge for the TV access service.

Review of the findings of the Leaseholder Valuation Tribunal (LVT)

We have reviewed decision LON/ooAR/LSC/2010/0691 of the Leasehold Valuation Tribunal in relation to your application for a determination as to the reasonableness of the service charge levied in respect of the maintenance of television signaling to your property.

The LVT confirmed in its decision that your lease agreement provides for service charges to include the cost of provision and maintenance by the Council of television signals. They also agreed that prior to the start of the 2008/09 year the Council, through its service provider, had fitted in the property an outlet point capable of receiving both satellite and terrestrial television signals with your consent.

In its determination the LVT highlighted the lack of specific evidence:

a. as to the value for money of the initial contract at the time it was let;

b. to support the length of the initial contract, although they did accept the Council's assertion that the length of the contract was related to the period over which the contractor would recover its initial investment.

c. for the differential in charges for terrestrial and satellite service; and

d. to explain why the 2001 contract variation was entered into, in relation to both the increase in prices and the 13 year extension of the contract term. They further confirmed that in their view the 2001 contract extension was inexplicable.

The LVT determined that the charges levied by the Council in respect of the provision and maintenance of television signals were unreasonable.

We have sought to discuss matters a. b. and c. with staff at the Council who were in post at the time that the original contract was agreed to understand how the Council assured itself that the contract represented value for money. Unfortunately none of the staff involved in the original contract letting process are still in post and as organisations are only required to retain 7 years worth of financial information it is not possible for us to review any of the documentation relating to value for money considerations or to understand the rationale for differential pricing for terrestrial and satellite services.

In considering point d. above we have also sought to speak to the officers involved in extending the contract but have not been able to do so for the same reasons set out above.

Our inability to obtain evidence in relation to these matters is not a significant issue given the time elapsed since those dates for our consideration of your objection. We understand that the Council has appealed against the determination of the LVT and that an outcome is awaited from the appeals process.

The finding of the LVT that the charge levied upon you for TV signal access was unreasonable is a key point for us to consider in determining whether the charges levied by the Council were unlawful.

Were the charges so unreasonably high as to be unlawful?

The Wednesbury principle, which dates from a court case in 1947, states that public bodies are required to be reasonable in the decisions that they make. The test for reasonableness has three parts:

• In making the decision, the body took into account factors that ought to have been taken into account, or

• On making the decision, the body did not take into account factors that ought not to have been taken into account, or

• The decision was so unreasonable that no reasonable authority would ever consider imposing it.

In order to conclude, therefore, that the charges made by the Council are unlawful, we would have to conclude the Council's calculation of the service charges was unreasonable in the Wednesbury sense as the Council had powers to enter into the agreement with Surtees and to charge for the service.

In the determination of the charges to be levied the Council carried out a costing exercise in 2005/06, based on the contract payments and associated costs and used it to calculate the average weekly charge to be applied to each tenant. Since that date the average weekly charge has been increased annually by RPI +0.5%. We have previously recommended that the Council updates the basis for charging for this service to ensure that it reflects the actual costs incurred in the provision of the service.

We have reviewed the documentation supporting the calculation of the charge levied in 2005/06 and are satisfied that the Council only included relevant costs in the calculation and have recalculated the charge to confirm the value as at that date.

What is the view of the Monitoring Officer to the Council

We have discussed the Council's view as to the legality of the service charges with the Monitoring Officer and their opinion is that the service charge for TV access points are lawful.

The Monitoring officer stated that 'the lease for Mr MacDonald's flat includes a provision that enables the Council to levy a service charge for the provision of and maintenance of the commercial TV aerial system in the block. That has been confirmed by the Leasehold Valuation Tribunal'.

He confirmed that the charges levied then have to be fair and reasonable, reflecting the costs incurred by the Council in providing the service. Such costs can include the charges made by external contractors for the provision of the services and the costs incurred by the Council/its agents i.e. Homes In Havering, in administering the service provision. The 'fair and reasonable' test means that a range of charges could come within these criteria. It does not necessarily mean the cheapest possible price. It also means that there could be a range of charges depending on the service provided.

The Monitoring officer also confirmed that the Council has appealed against the decision of the Leaseholder Valuation Tribunal (LVT) in respect of the reasonableness of your particular service charge.

Communication with the Audit Commission Solicitor

Having considered the matters raised by your objection we have also discussed the matter with the Audit Commission Solicitor to get her view as to the implications of the LVT decision on the consideration of whether the charges levied by the Council were so unreasonable as to be unlawful. In her response the Solicitor stated that:

'a finding by the Tribunal that the Council's charges were unreasonable does not mean the charges were unlawful. In order to conclude that the charges are unlawful, you would have to conclude the Council's decision to enter into the agreement with Surtees was unreasonable in the Wednesbury sense [see above] as the Council had powers to enter into the agreement and charge for the service. The threshold for concluding that a decision is "Wednesbury unreasonable" is high as it requires a conclusion that the decision to enter into the arrangement was so unreasonable that no other local authority in the same position would have entered into it.

Although the LVT decision suggests that the increased term and prices agreed in 2001 are inexplicable, in my view this is not sufficient to conclude that the decision to agree them was unlawful at the time. If the local authority enters into new arrangements, it will have regard to the LVT's findings about reasonableness.'

Draft conclusion

Based on the findings of our work as detailed above, we do not propose at this time to take any audit action in relation to the TV Access Service Charges as we do not consider there are any unlawful items of account or any matters which need to be brought to the attention of the public.

In any event even if the charges were unlawful we would not exercise our discretion to seek a declaration from the Court for the following reasons:

- The appropriate forum for challenging the reasonableness of a particular service charge is the Leasehold Valuation Tribunal;

- The amounts involved are small in the context of the Authority's overall budget; and

- There is an outstanding appeal to the LVT which means the issue is not yet settled.

Given the above views of the Audit Commission Solicitor we consulted with, we do not at this time propose to undertake further work in relation to the TV Access Service Charges."

25. Again, the TV access service charges were discussed at the meeting of 11 October. When they came to deliver their decision on 10 January 2012, PwC wrote as follows:

"Findings - TV Aerial Charge

Having considered all the information mentioned above, I disagree with your view that the Council is not entitled to receive the income for the TV Aerial charges levied during the relevant period.

As set out in my letter to you dated 31 August 2011, I:

• Looked again at the question of whether the charges for TV access, although within the powers of the Council, were so unreasonably high that they may be unlawful.

• Reviewed the findings and conclusions of the Leaseholder Valuation Tribunal.

• Communicated with the Monitoring Officer to seek his opinion as to the legality of the charges implemented by the Council.

In my letter to you dated 31 August 2011 I indicated that I was minded not to seek a declaration under Section 17(1) of the Audit Commission Act 1998 that the income in the accounts in respect of TV Aerial charges is contrary to law.

You have indicated in our meeting with you on 11 October 2011 and your subsequent letters that you do no agree with that view. In summary I consider that the main points that arose from the meeting on 11 October 2011 and your subsequent letters are that you are suggesting that:

• The charges levied by the Council are fraudulent as you contend that replacing the face plate of the aerial outlet point costs £3, that Surtees are charging you £60 per year for the aerial outlet point.

• The changing of the outlet points is of no value, serves no purpose and is of no benefit to residents as it does not enable them to access any different services.

• The Cabinet decision in January 2005 to charge a single leasehold charge for satellite and terrestrial access was intended to apply only for tenants in receipt of a satellite signal - not leaseholders, and that the decision was only to levy a £1 per week maintenance charge for tenants in receipt of satellite signals.

• You are being charged £60 per year but the contract with Surtees only allows for £22 per year and that the LVT stated that the charge should be £26 per year.

I believe you contend that these factors mean that the Council is not entitled to receive the income on the TV Aerial charges levied and that it would be unreasonable for us to decide not to seek a declaration under Section 17(1) of the Audit Commission Act 1998 that the income in the accounts in respect of buildings insurance charges is contrary to law.

I now consider each of these points in turn. Firsty, in respect of the annual charge levied by the Council on leaseholders, in my letter to you dated 9 August 2010, I explained that the Council's contract with Surtees is for rental and maintenance, whereby the Council rents the aerials and cabling from Surtees, who are responsible for provision, maintenance and availability.

Secondly, the access points were changed on agreement between the Council and the Supplier to upgrade the communal antenna systems to accept digital television signals in 2001.

Thirdly, in Ciaran McLaughlin's letter to you on 17 October 2011 he enclosed a copy of the minutes of the January 2005 Cabinet meeting and a copy of the notice of the executive decision by the individual Cabinet member dated 3 March 2005 which implemented the recommendation from the Cabinet. I have nothing further to add to the views expressed in that letter.

Finally, I explained to you in my 31 August letter how I had considered the findings of the leaseholder valuation tribunal. I have nothing further to add to the views expressed in that letter.

Application to Court: decision

I do not propose to apply to the courts for a declaration under Section 17(1) of the 1998 Act in relation to the TV Aerial service charges as I do not consider there are any unlawful items of account or any matters which need to be brought to the attention of the public."

26. The PwC decision on this issue, therefore, was twofold: one, not to refer the matter to the court and, secondly, that it would not exercise its discretion to refer the matter to the court even if it had been of the view that the sums involved might be unlawful.
27. As a footnote to the chronology, on 17 May 2012 HHJ Walden-Smith heard the Borough's appeal from the original decision of the LVT, allowed the appeal and ordered that the case be remitted for hearing before a differently constituted LVT. In the event, the differently constituted LVT heard the matter on 25 October 2012, and on 15 November 2012 promulgated its decision, coming to a conclusion which was directly opposite to that which had been reached by the first LVT. This is a relatively new decision but the essence of it can be deduced from paragraph 24, which is in the following terms:

"We find therefore that it is wholly within the Council's rights and the terms of the lease for them to charge Mr Macdonald on such a basis as they consider to be appropriate for the purposes of a provision of a television signal to his flat. The charge follows the decision of the Council in 2005 to mirror the charge being made to their tenants for the same service based on the costs to the Council. They clearly charge less than they themselves are being charged by Surtees and there can therefore be no suggestion that they are making a profit out of this arrangement. The combination of the terrestrial and satellite charge to produce one generic fee seems to us to be wholly reasonable. To endeavour to police any potential changes from terrestrial to satellite by a resident would be almost impossible to undertake. It would require a review on a regular basis, perhaps more than once a year, and potentially on each occasion when the ownership of the flat changed hands. That would be disproportionate and the costs of complying with such vetting arrangements wholly inappropriate given the costs associated with the provision of this service. We therefore find that the local authority is entitled to make the charges which they have sought to recover for these two years and that Mr Macdonald should pay them. We accept that Mr Macdonald has been driven by something of an egalitarian wish to achieve fairness but that wish to us seems to be somewhat misplaced insofar as these proceedings are concerned."

28. Just as the first LVT's decision was not determinative in favour of Mr Macdonald in these appeals, so the new decision is not relied upon by PwC as determinative: each decision is and was material albeit not determinative. On this issue again the question for the court is whether the decision of PwC not to apply to the court for a declaration under section 17(1) of the 1998 Act in relation to TV aerial services charges or their decision that they would exercise their discretion not to make an application even if the circumstances might otherwise have warranted it was unlawful or such as no reasonable district auditor could have come to on the material before him applying the principles that I have already set out from Fagan and Moss.
29. In my judgment, Mr Macdonald has failed to show any reasonable basis upon which it could be said that the decision of the district auditor in relation to the aerial service charge was unlawful. His objection again may not have had the result of enabling him to see the documents that might satisfy his concerns but that is a different question altogether. The decision letter, taken in conjunction with the preliminary letter of 31 August 2010, is on this issue also cogent. It takes into account all relevant considerations and provides a reasoned decision. PwC carefully and rationally reviewed the basis of charging under Mr Macdonald's lease. They identified the steps which they had taken and the limitations in the information they had been able to accumulate. They gave full attention to the findings of the first LVT decision. They asked themselves the right question and took appropriate advice from the Monitoring Officer and the Audit Commission Solicitor. They received correct advice which they applied correctly. In my judgment, there is no basis for any criticism of their conduct or conclusions. There is no basis for finding today either that the underlying figures were, or might have been, wrong or that the district auditor's decision either on legality or in relation to the exercise of discretion was unlawful or should be overturned. On the contrary, in my judgment they were clearly right on all these matters.
30. For these reasons these appeals fail.
31. I have already said that Mr Macdonald has presented his case with courtesy and dignity. Despite that, I regret to say that it is my view that these appeals were completely without merit. For these reasons, unless I am asked to, I am not going to rule on the time point which was also raised by the Borough. Do you want me to rule on it?
32. MR PATEL: No.
33. MR JUSTICE STUART-SMITH: Are then any ancillary orders sought?
34. MR PATEL: My Lord, yes, there are. The respondent would seek its costs of the appeal.
35. MR JUSTICE STUART-SMITH: Have you served a schedule?
36. MR PATEL: I have, yes.
37. MR JUSTICE STUART-SMITH: Have I got the schedule?
38. MR PATEL: It was certainly filed with the court.
39. MR JUSTICE STUART-SMITH: In that case I probably have. In fact, now you come to mention it, I think I may have seen it and immediately hidden it but let me have a look.
40. MR PATEL: I have got another copy if you would like it.
41. MR JUSTICE STUART-SMITH: Yes, please. (Handed).
42. MR PATEL: My Lord, if I may, the basis for costs is made on three grounds. This is the principle. The first is, costs follow the event of the appeal. The second is that in February when we received the notice of appeal we wrote on two occasions to Mr Macdonald -- both letters are in the bundle, I can take you to them in a moment -- and said to him that we were confident that our decision letters had been properly come to, they gave all relevant reasons and that the appeals would fail, and we gave him an opportunity to withdraw. We warned him at that point that if the appeal went further and we were successful then we would seek our costs.
43. MR JUSTICE STUART-SMITH: You probably have an obligation to your other taxpayers.
44. MR PATEL: We also told him the rough estimate of the costs and, in fact, if one takes off VAT in relation to the schedule, which is not appropriate for Mr Macdonald, the amount of costs that we seek are less than the estimate. The third basis is that on a number of occasions, at both the meeting that Mr Macdonald had and in all of the paperwork and, in fact, today, he has made criticism of the district auditor and the district auditor's approach, we say without any basis whatsoever. We say that that is an element of his conduct with which the auditor had to deal. You will have seen that Mr Rickett dealt with the matters of fraud in part of the witness statement and we say that provides a ground for costs. I would not be relying upon that, my Lord, as an independent freestanding ground but I say it adds to the other two grounds as to why costs should be awarded. So we say on those three bases PwC should have an order that its costs be paid for by Mr Macdonald.
45. MR JUSTICE STUART-SMITH: Can you show me the letters, please.
46. MR PATEL: Yes, they are in the bundle. The first one is at 367. My Lord, we set out the legal issues for him because we thought he may not have obtained legal advice and we set out over the page at 368 the point about services, which again I have not pressed before you, my Lord, and then the cost award comes on page 369 at paragraph 7 through to the end, and then the bottom of the page we advise him to seek independent legal advice. My Lord, he received that letter, because if you look at 370 he responds directly, in that he did not respond to Wragge & Co, he responded directly to the two auditors.
47. MR JUSTICE STUART-SMITH: Was this the first time that Wragges had written to him?
48. MR PATEL: Yes, Wragges were instructed just shortly before.
49. MR JUSTICE STUART-SMITH: So 1 March has got to be a reference to 24 February.
50. MR PATEL: I think that is his letter of 1 March.
51. MR JUSTICE STUART-SMITH: Yes. 370 has to be a reference to 36 --
52. MR PATEL: Yes. Then over the page, a bit further on, at 384, we give him a second chance. This is a letter of 9 March. We refer him to the case of Moss and then tell him about the fact that costs can be enforced against him by way of a charging order. We have no response to that at all. Again, that letter is sent in the same way as all the others have been, by way of first-class post.
53. MR JUSTICE STUART-SMITH: You mentioned giving him an estimate.
54. MR PATEL: Yes, that is in the first letter. If you go back to paragraph 9 on page 369, it says:

"You should therefore be aware that, if you choose to pursue these appeals to hearing, our client will incur substantial legal costs comprising our fees, which, at present, is estimated to be £30,000 plus VAT, and Counsel's fee, estimated, at present, at £15,000 plus VAT."

So the figure that we have estimated was £45,000 plus VAT. In fact, the figure that has been spent on this claim is £34,764.30.

55. MR JUSTICE STUART-SMITH: Let me have a look at the schedule. It is clear that Miss Novak has done most of the work.
56. MR PATEL: She has.
57. MR JUSTICE STUART-SMITH: 21 hours' attendance on client. 30 hours' attendance on others. Who is others?
58. MR PATEL: Can I take some instructions on that.
59. MR JUSTICE STUART-SMITH: At the moment, nearly 40 hours work on documents looks distinctly heavy to me.
60. MR PATEL: The others, I am told, will be the Council and the Audit Commission, who are obviously involved in these appeals. The documents, I would say that that is reasonable in the sense that she produced the witness statement of Mr Rickett.
61. MR JUSTICE STUART-SMITH: The preparation of a witness statement would be included in attendance on client, would it not?
62. MR PATEL: Some of it will.
63. MR JUSTICE STUART-SMITH: I may have a misapprehension because you have presented me with one file with 400 pages in it, with does not immediately look like a case requiring 38.6 hours work done on documents.
64. MR PATEL: It does not. I am pleased you said that because that means that my solicitors did their job properly because there was huge amount of documentation.
65. MR JUSTICE STUART-SMITH: If you are telling me that there are 10,000 documents that Miss Novak had to read in order to get down to 400 pages then, of course, I will hear it but at the moment -- PwC obviously did a lot of work in preparing the letters, so Mr Rickett, who I believe is sitting behind you, knew the case inside out, he knew exactly what he had done, he had got, presumably, all of the letters from Mr Macdonald. At the moment -- I will hear you but a total of 90 hours to prepare this for a one day hearing looks heavy to me.
66. MR PATEL: My Lord, can I take some instructions?
67. MR JUSTICE STUART-SMITH: Yes, please do.
(A short pause)
68. MR PATEL: My Lord, I cannot tell you whether there are 10,000 documents but there were a considerably greater number than the 400 that you see in this bundle because, to give you some idea of how it started, Mr Macdonald produced three separate bundles for each of his --
69. MR JUSTICE STUART-SMITH: They were produced to PwC at the 11 October meeting, were they not?
70. MR PATEL: They were produced sporadically, in fact. There were some produced at the meeting, some produced after the meeting, some produced, in fact, after the appeals had been lodged but they all related to the three bundles which were the building insurance claim, the aerial claim and a separate LVT bundle, and you have a summary, or a flavour, of all three of those bundles in our hearing bundle but there was a considerable amount of more documentation than that --
71. MR JUSTICE STUART-SMITH: Mr Macdonald has confirmed that himself.
72. MR PATEL: -- which Miss Novak had to go through because although PwC had seen it, they had been referred to it by Mr Macdonald throughout these meetings, so she had to go through it and work out which bits worked with which other bits and which bits to put in the bundle, and certainly she had to work out which bits of it had to be attached to Mr Rickett's witness statement.
73. MR JUSTICE STUART-SMITH: Essentially, all the documents that I have got, or 95 per cent of the documents, are those which it was decided to put in Mr Rickett's statement, which is a very useful statement, very beautifully put together, it is very clear and I would not exactly describe it as a pleasure to read but it could have been a lot worse. So I accept, do not get me wrong, that an objection such as Havering and PwC have faced from Mr Macdonald is very heavy and straining on resources, as an general approach I accept that, it is just that I am left with a feeling that 90 hours feels heavy.
74. MR PATEL: My Lord, I certainly think that in terms of attendance on clients, that is not simply just to go through the witness statements, there were meeting to work out what tactics to employ and the like. My Lord, I do not think I can say any more other than two points I think I can make. The first is that, obviously, Miss Novak has spent all this time dealing with this claim and although it is not a difficult claim in the sense of the issues were quite straightforward, it is difficult in the management of the information that was provided by Mr Macdonald. It is not that easy to read Mr Macdonald's letters, it has to be said. Whether your Lordship found that. That is not a criticism of way he writes, it is a criticism of the pen that he uses and the ink and the way that it is written, not in the style it is written.
75. THE CLAIMANT: Can I ask you a question?
76. MR JUSTICE STUART-SMITH: I will hear you in a moment. I am hearing his submissions on costs and then you will be able to say whatever you want to say in reply.
77. MR PATEL: I think the second point is that certainly the time and the estimate of costs is a lot less than was envisaged at the beginning. So when we gave a fair estimate of our costs at the beginning, this gives you about £10,000 less than that. My Lord, I do not think I can add any more.
78. MR JUSTICE STUART-SMITH: Can I just ask you this: when not so very long ago I was still at the bar we used to feel that anyone who had been on the bench for more than a week should not be allowed to take any view on brief fees at all and I still tend to that view but £6,500 for advising and conference, can you give me an indication of whether that was done on an hourly rate.
79. MR PATEL: That was two conferences, in fact. One was, I think a day spent at the offices of PwC and the second was over the telephone for -- I cannot recall.
80. MR JUSTICE STUART-SMITH: So do you charge by the hour?
81. MR PATEL: I think the day charge is a daily rate and the hours would have been charged by the hour. I think, in fact, that includes all three together.
82. MR JUSTICE STUART-SMITH: Can you give me a rough indication, just for transparency, because this is asking a lot of money on any view, do you have an hourly rate which would have been applicable to this?
83. MR PATEL: I do, yes.
84. MR JUSTICE STUART-SMITH: Roughly?
85. MR PATEL: £350.
86. MR JUSTICE STUART-SMITH: Thank you. Anything else you want to say?
87. MR PATEL: No, I do not think so, could I just ask?
88. MR JUSTICE STUART-SMITH: Yes.
(A short pause)
89. MR PATEL: My Lord, I think Mr Ellis makes a good point on my behalf in terms of the conferences, which is that that includes not just the day and the telephone but also looking at all the documents, which would have taken some time as well.
90. MR JUSTICE STUART-SMITH: Thank you.
91. Now, Mr Macdonald, can I just tell you where we are at the moment. The first thing is I know you are going to tell me that you cannot afford to pay, so that is fine, take that as a given and assume that I am going to be with you on that. The difficulty of your position is, first of all, you chose to bring these proceedings. Secondly, they went much further than people often do in drawing your attention to the jeopardy that you would be putting yourself in if you continued, by the letters that I have been shown. Thirdly, I am afraid to say, you have lost. So normally that would lead to an order that you should pay their costs. Whether, of course, they try to enforce that order is a completely different matter and they may not decide to do so. That is the first thing. So I would like you to address me on anything you want to say on why you should not be ordered to pay their costs generally. Then if there is anything you want to say about these figures, then I would like to hear anything you would like to say about that.
92. THE CLAIMANT: Well, I've not studied the figures. When there was reference to the three bundles, this was in regard to an objection to the -- have I got to pay for objecting to the accounts? I made objections to the accounts for two years running and I have to pay for that as an elector when I object to the accounts. I felt I had a valid -- and even to -- I can't question your decision making but there was contracts there that made statement of what I should pay, there was contracts or agreements that have not been adhered to, and so I felt that I had a valid argument to make. Now, with regard to -- it's a learning curve for me -- I am being charged for objecting to the accounts.
93. MR JUSTICE STUART-SMITH: No, what you are being charged for, or what you should be being charged for and what is says you are being charged for is the costs of defending your claim, the costs attributable to defending your claim. So if there were costs, for example the meeting of 11 October 2011 with PwC, there should not be, and I do not believe there are, any costs in there relating to that meeting. What these are, on the basis of the certificate and what I have been told, are the costs attributable to you bringing the claim in court.
94. THE CLAIMANT: I understand that. They referred to three bundles was when I met them to explain my objections to the accounts, that wasn't to do with -- they hadn't made a decision then, so it was nothing to do with this court. The bundles in reference to this court, which I have here, is 18 pages and 30 odd pages, about 48 pages, that's total, there's no other. That's what I come to court with, these are my bundles, 48 pages.
95. MR JUSTICE STUART-SMITH: I have your point, which is that you have produced bundles with very few pages in them, the exact numbers do not matter.
96. THE CLAIMANT: No, but when they referred to bundles which have got reference to my objection to the accounts, this case, which has gone against me, is regards my appeal against -- that's got nothing to do with my objections to the accounts, has it?
97. MR JUSTICE STUART-SMITH: I think what they would say is yes because given the way the process goes when you press the nuclear button and decide to go to court on an appeal, they have to instruct solicitors to make sure that the position they are taking is right and so the solicitors have to review the material that you provided to make sure that they are right, and that is what I am being told, and so -- I do not need even to check this with Mr Patel -- this is what would have happened, that although you provided the documents before, there was, or could have been, material in it which showed reasons why you were right and why Wragg & Co and Mr Patel would have to advise PwC that you have an argument here. In the event, they did not but that is why the money goes.
98. THE CLAIMANT: I was informed by the appeals office that my bundles was what I intended to rely on and that's all I intended to rely on and, really, I think -- I'm expressing a personal view -- these costs should relate to my appeal against their decisions and they're saying it relates to my objections to accounts. How many years -- I've objected to accounts for 2 years and I didn't think there was any -- I've never -- there's never been any suggestions that I would have to pay for making objections to accounts as an elector. I tried to keep my appeal very simplistic to keep the costs down. As I say, it amounts to 50 pages, and that's total. There is some other documents with it but the actual objection to the accounts, the bundles that I intended to use in court, was 50 pages.
99. MR JUSTICE STUART-SMITH: Anything else? Do you want to say anything about the actual figures?
100. THE CLAIMANT: I've got no idea about the figures. What can I say? I'm an old age pensioner. What can I say when someone's charging me thousands of pounds?
101. MR JUSTICE STUART-SMITH: Thank you.
102. The defendant, PwC, which is a major multinational firm of accountants, seeks its costs from Mr Macdonald, who is a pensioner of very limited means. At first sight, that might look like an unfair and unreasonable request but I am going to make an order for costs for the following reasons. First of all, the defendants have been successful. Secondly, and more importantly, when Mr Macdonald issued his proceedings, solicitors acting for PwC wrote on two occasions, the first being 24 February 2012, shortly after proceedings were issued, the second being on 9 March 2012. In each of those letters they set out in very clear terms two things: one, the basis upon which they were defending the case and why the case should fail; and secondly, the risk of costs being incurred, which in their letter of 24 February they assessed at being an overall risk of being £45,000 if the matter was taken to a hearing. More than that, PwC did two things: first of all, they urged Mr Macdonald to seek legal advice; and, secondly, they offered in their letter of 24 February that if he withdrew his appeals by 9 March no order for costs would be sought against him. Despite the terms of these letters Mr Macdonald went on. He says, and I accept, that he cannot afford to pay for representation at these hearings but it is not clear at all whether or not he took the advice to seek independent legal advice either from lawyers or from the citizens advice bureau or otherwise. The fact remains that PwC did everything they possibly could to encourage Mr Macdonald to withdraw these claims, which in the event I have found to be without any merit whatsoever.
103. It therefore seems to me not unreasonable that an order for costs should be made in favour of a successful party albeit a very large organisation, where the actions of Mr Macdonald were, and were obviously going to be, a major drain on resources both of time and money. Whether, of course, PwC think it in their interests to try and enforce such an order is another matter completely and is a matter entirely for them. The question then arises as to what that sum should be. I have a statement of costs. The copy I have is unsigned but I assume, and ask Mr Patel to confirm, it has been signed by Mr Ellis.
104. MR PATEL: Yes, it has.
105. MR JUSTICE STUART-SMITH: It is in the sum of £34,764.30. That is over £10,000 less than the estimate that PwC gave in the letter of 24 February but it still requires the court to give anxious scrutiny to the amounts being claimed. Scrutiny reveals that most of the work has been done by a grade C solicitor who spent 21.8 hours in attendance on the client, 30.9 hours in attendance on others and 38.6 hours in work on documents. The court has had the benefit of a full and very helpful witness statement from Mr Rickett and I can accept that that would have taken a significant amount of solicitor time to prepare. The documents presented to the court run to only about 400 pages plus, in a well prepared defendant's bundle that has made the court's job easier but the point is made that there were many more documents which had to be reviewed by the solicitors and, in particular, reference is made to three bundles of documents provided by Mr Macdonald over time.
106. Mr Macdonald's response to that is that those bundles were produced before the action started and that he has, in fact, relied on two very slim files of documents which provide the bare minimum of documents on which he relies. It is undoubtedly true that the documents which Mr Macdonald produced were focused and few in number and were the documents that he wanted to rely upon to support his claim but, as Mr Macdonald should have realised, this was a claim in which he made very serious allegations, including numerous allegations of fraud, which he had made liberally both before he issued these proceedings and even up until today. Even in the appeal forms that he issued on 2 February he made express allegations that PwC had lied. These are not allegations which any organisation, and certainly not any district auditor, can afford to take lightly. In my judgment, it is obvious, and should have been obvious to Mr Macdonald, that if he persisted in these claims it would be necessary for solicitors advising PWC to review the documentation that he had previously provided to see whether there was a basis of any claim there.
107. It therefore seems to me entirely reasonable that the solicitors should have reviewed those documents. Even so, I am left with the uncomfortable feeling that 90 hours to bring this case to trial is too heavy. I do not propose to do anything more than a broad-brush assessment but it seems to me that a proper and proportionate award of costs which reflects both the seriousness of the case to PwC and the necessity for discretion to be used at all times is an order that the costs will be summarily assessed in the sum of £27,500.
108. MR PATEL: Thank you, my Lord. I will draw up the order and send it.
109. MR JUSTICE STUART-SMITH: Please. Could you try to agree the terms with Mr Macdonald before you go away from court and then send them to me. If there is any difficulty in reaching agreement, draw up a document which sets out what you think it should be, what Mr Macdonald thinks it should be, submit it to me, and I will get a document done. Thank you both very much.