Landlord and tenant – Service charges – First-tier Tribunal (FTT) – FTT reviewing own decision in relation to liability of respondent leaseholders to pay service charges – Upper Tribunal allowing respondents’ appeal – Appellant landlord appealing – Whether power exercisable only where appeal likely to be successful on point of law – Whether costs incurred by former landlord in administration forming part of service charge payable to appellant – Appeal allowed
The Point West Building in Cromwell Road, London SW7 was a mixed residential and commercial development comprising 399 leasehold apartments and commercial space including a supermarket. Until July 2014, the headlessee was PWL which entered administration in June 2012. The appellant acquired the headlease on 4 July 2014 and PWL went into creditors’ voluntary liquidation.
The respondent leaseholders applied under section 27A of the Landlord and Tenant Act 1985 challenging their liability to contribute towards service charges totalling £577,577. The FTT reduced some of the disputed charges. For the period between PWL’s administration and the acquisition of the headlease by the appellant, as the administrators had spent about half their time managing the complex, rather than simply managing the insolvency administration, the FTT disallowed half of the total charge of £557,557, notwithstanding that it had already allowed in full the accountancy and surveying fees, an additional management charge and the notional rent for PWL’s office space, which made up that sum.
Following the respondents’ application for permission to appeal, the FTT exercised its power, under section 9 of the Tribunals, Courts and Enforcement Act 2007, to review its decision that part of the administrators’ fees could be attributed as “management fees” in the service charge. In January 2018, it issued a new decision concluding, on a new point not contained in the grounds of appeal, that the appellant had no contractual liability to pay the amounts demanded for the time the landlord’s interest had been vested in PWL, and which the appellant had no liability to pay to PWL. It did not explain clearly how much, if any, of its original decision should remain undisturbed.
The Upper Tribunal held that the FTT was wrong to find that the disputed sums were irrecoverable; and none of the FTT’s conclusions on the reasonableness of the notional rent, disbursements and management charge could stand: [2019] UKUT 137 (LC). The appellant appealed.
Held: The appeal was allowed.
(1) The power of review on a point of law was intended, among other things, to provide an alternative remedy to an appeal. Where an appeal was bound to succeed, a review would enable appropriate corrective action to be taken without delay. The power of review was not intended to enable the FTT to usurp the Upper Tribunal’s function of determining appeals on contentious points of law. Nor was it intended to enable a later FTT, or the original FTT on a later occasion, to take a different view of the law, when both views were tenable. If a power of review was to be exercised to set aside the original decision because of perceived errors of law, it should only be done in clear cases. The key question was what, in all the circumstances, including the degree of delay that might arise from alternative courses of action, would best advance the overriding objective of dealing with the case fairly and justly. The primary purpose of the power to review was to avoid an unnecessary appeal to the Upper Tribunal, where the FTT had made an obvious error of law: R (on the application of RB) v First-tier Tribunal (Review) [2010] UKUT 160 (AAC) applied.
The statutory power to review was a power to review a decision on a matter in a case, as distinguished from the whole decision. If, following the review, the FTT decided to set aside the decision it had to either re-decide “the matter” or refer “that matter” to the Upper Tribunal. The mere fact that the FTT’s power to review had arisen did not without more entitle the FTT to start all over again. The power to review was discretionary. It was for the FTT itself, not the parties, to determine the scope of any review it was willing to undertake. The Upper Tribunal was right to hold that the appellant was entitled to challenge the scope of the review undertaken by the FTT.
(2) While it was permissible for the FTT to use the review process to clarify what had already been decided, it should refrain from seeking to justify its decision on other better grounds or from seeking to defend its decision in advance from an attack that was anticipated in an appeal. If, having considered the grounds of appeal, the FTT was satisfied that one or more of the grounds were likely to succeed, it might set aside its decision (or part of it) and re-decide the matter. That might require the FTT to promulgate a decision based on different grounds in relation to the part of the decision it had set aside. The appellant had relied on the power given to the FTT by section 9(8) of the 2007 Act to make further findings of fact but that did not give the FTT carte blanche to re-open all its factual findings. If the FTT decided to expand the scope of a review, elementary fairness required that it made clear which parts of its decision were vulnerable to being set aside.
(3) The FTT ought not to have allowed the leaseholders to take an entirely new point on a review. In so doing, the FTT (and the Upper Tribunal) had lost sight of the important principle of finality in dispute resolution. Although the Upper Tribunal was correct in saying that the FTT intended to relieve the leaseholders from liability for the sums claimed, its sole reason for doing so in its review decision was because of the new legal point. There was no discussion in the Upper Tribunal about the FTT’s assessment of reasonableness or about the right way forward in the event of a decision that the FTT’s conclusions on reasonableness could not stand: That was a procedural irregularity. The original findings of the FTT about the reasonableness of the notional rent, the disbursements and the management charge would be reinstated: The Ampthill Peerage case [1977] AC 547 and Scriven v Calthorpe Estates [2013] UKUT 469 (LC); [2013] PLSCS 309 considered.
Timothy Morshead QC and Jonathan Wills (instructed by Eversheds Sutherland (International) LLP) appeared for the appellant; Daniel Dovar (instructed by Wallace LLP) appeared for the respondents.
Eileen O’Grady, barrister
Click here to read a transcript of Point West GR Ltd v Bassi and others
