Landlord and tenant – Service charges – Procedure – First-tier Tribunal (FTT) asked to determine service charges payable by respondent leaseholders – Respondents taking new point on day of hearing – FTT permitting point to be taken and ruling in favour of respondents – Appellant landlord appealing – Whether FTT decision procedurally unfair – Whether lease capable of rectification – Appeal dismissed
An application was made under section 27A of the Landlord and Tenant Act 1985 for a determination of service charges payable by the respondent leaseholders to the appellant landlord of nine self-contained flats at 1-4 Ashbrook Terrace, Sunderland. The leases of each of the flats included provision for the appellant to insure the property. Since 2002, the appellant had complied with that obligation and recovered the cost through the service charges paid by the respondents.
After a large increase in premiums, the respondents applied to the First-tier Tribunal (FTT) for a determination of the reasonableness of the insurance charges and other service charge items. The total sum in issue from 2014 to 2021 was just over £81,000.
When the parties exchanged details of their respective cases, the respondents challenged the reasonableness of the insurance premiums, but not the principle that they were liable to reimburse the cost incurred by the appellant in insuring the property.
The FTT also allowed the respondents to raise a new point that nothing in the lease required them to contribute towards the cost of insuring the building. The appellant submitted, amongst other things, that the failure to include a provision in the lease for the recovery of the cost of insurance was a clear mistake and that the lease should be rectified accordingly.
The FTT held that the procedure it had adopted was fair; the insurance premiums were irrecoverable; and the appellant’s argument that there was an estoppel by convention that insurance premiums were recoverable was wrong. The appellant appealed.
Held: The appeal was dismissed.
(1) Appeals from case management decisions would only be allowed where the tribunal had failed to take into account a relevant factor or had regard to an irrelevant factor or had reached a decision that was plainly wrong. The importance of the decision to the outcome of the proceedings was a relevant factor for the original decision-maker, but the same approach applied to appeals even where the case management decision in question had had a very significant impact on the proceedings: Mannion v Grey [2012] EWCA Civ 1667 applied.
The FTT was entitled to raise new points of law which arose out of the uncontested facts or the evidence which the parties had put before it but it should think very carefully about the consequences for the course of the hearing before doing so. It was vitally important that any court or tribunal should preserve the reality and appearance of its own independence. Taking a new point which favoured one side over the other put that appearance of independence at risk. As well as the new point itself requiring consideration it might also open up unanticipated factual or legal issues which the parties might need to consider and investigate.
(2) The Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 provided for a hearing to take place unless both parties consented to the proceedings being determined without one. A decision made without a hearing where one party had requested one was liable to be set aside. But in this case the FTT did hold a hearing and gave more than 14 days’ notice before doing so.
Rule 31 required that the FTT “must hold a hearing before making a decision which disposes of proceedings”. It would require a restrictive interpretation of that rule to read it as requiring that each and every point be determined exclusively on the basis of submissions presented at a hearing. The FTT was right to make the overriding objective of dealing with cases fairly and justly in rule 3(2)(c) its primary guide. That included “ensuring, so far as practicable, that the parties are able to participate fully in the proceedings”. It was entitled to prioritise flexibility in the proceedings and the avoidance of delay over a more exhaustive approach, provided that it was satisfied that it could do so without unfairness and with proper consideration of the issue: Tallington Lakes Ltd v South Kesteven District Council [2022] UKUT 334 (LC) distinguished.
(3) In the present case, the new point raised was a point of law capable of being determined on the basis of submissions. In those circumstances even if the FTT’s decision might have given rise to a risk of unfairness, it could be seen that none had eventuated. The safeguard which the FTT put in place was sufficient to avoid the risk of unfairness. The appellant was given the opportunity to make further submissions in writing after the hearing. When it made its original decision, the FTT did not exclude the possibility that the appellant might be able to provide additional evidence and that it might be necessary to reconvene the hearing if necessary. The approach taken by the FTT to case management was not unfair and nor was the final outcome.
By providing directions for written submissions and being willing to reconvene the hearing if necessary, the FTT had provided a sufficient safeguard to avoid unfairness. Rule 31 did not require an oral hearing to determine every argument raised by the parties.
(4) The nature of the suggested mistake had put it beyond the limits of the Chartbrook principle under which the literal meaning of a provision could be corrected if it was clear both that a mistake had been made, and what the provision was intended to say. That was in principle a different exercise from choosing between rival interpretations: Chartbrook Ltd v Persimmon Homes Ltd [2009] 3 EGLR 119 applied.
The appellant’s suggestion that the parties had made a mistake in the structure of the document and the allocation of responsibility between them was a mistake of a different quality beyond the scope of the principle relied upon. It was much more difficult to accept that a mistake of the suggested type would have gone unnoticed by any of those who had to check and advise on the draft before the leases were executed.
Overall, the suggested mistake was not sufficiently obvious and was not amenable to a corrective construction because it involved reallocating responsibilities rather than correcting a linguistic or arithmetic slip. To interpret the leases as the appellant suggested would in effect be to rewrite them.
Daniel Dovar (instructed by Protopapas LLP Solicitors) appeared for the appellant; Edward Blakeney (instructed by Direct Access) appeared for the respondents.
Eileen O’Grady, barrister
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