Landlord and tenant – Service charges – Appellant leaseholders appealing against decision of First-tier Tribunal (FTT) that disputed service charges were reasonable and payable – Whether FTT giving sufficient reasons for rejecting appellants’ challenges to service charges – appeal allowed
The appellants were the leaseholders of nine flats in two blocks in Abbey Wood in south-east London known as Chantry Close and Hermitage Close which together comprised 162 flats arranged around a communal garden.
In 2013, the respondent right to manage companies were formed, one for each block. In 2014, the respondents succeeded in acquiring the right to manage and took over responsibility for the provision of services and collection of service charges and appointed a managing agent.
In January 2019, the appellants applied to the FTT under section 27A of the Landlord and Tenant Act 1985 to determination the service charges payable in each of the four service charge years from 2014 to 2018 and for the then current year 2018-19.
The FTT concluded that the service charges demanded for each of the years in dispute were reasonable and payable, as were the interim charges demanded for 2018-19. Taking a holistic approach to the issues before it in connection with the service charges, the FTT determined that the building was economically run. Overall, the FTT preferred the evidence of the respondents.
The appellants appealed, the main issue being the adequacy of the FTT’s treatment of the appellants’ case and the sufficiency of its reasons for finding entirely in the respondents’ favour.
Held: The appeal was allowed.
(1) The FTT was obliged by rule 36(2)(b) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 to provide written reasons for any final decision. The duty was a function of due process, and therefore of justice. Its rationale had two principal aspects. The first was that fairness required that the parties, especially the losing party, should be left in no doubt why they had won or lost. Without reasons, the losing party would not know whether the court had misdirected itself, and thus whether he might have an appeal on the substance of the case. The second was that a requirement to give reasons concentrated the mind; if it was fulfilled, the resulting decision was more likely to be soundly based on the evidence than if it was not: Flannery v Halifax Estate Agencies Ltd [2000] 1 WLR 377 applied.
The first of those aspects implied that the want of reasons might be a good self-standing ground of appeal. Where, because no reasons were given, it was impossible to tell whether the judge had gone wrong on the law or the facts, the losing party would be deprived of his chance of an appeal unless the court entertained an appeal based on the lack of reasons itself.
The extent of the duty depended on the subject matter. Wherever the dispute involved something in the nature of an intellectual exchange, with reasons and analysis advanced on either side, the judge had to enter into the issues canvassed before him and explain why he preferred one case over the other: English v Emery Reinbold & Strick Ltd [2002] 1 WLR 2409 considered.
(2) In service charge cases involving a large number of factual and technical issues, it would often be possible for a tribunal to deal with a number of issues as a group, without delving into detail on each and every one. But where charges were disputed on a number of distinct grounds, each of which would provide an independent defence to liability, it would always be necessary for the tribunal to consider each ground of challenge, and to explain its reasons for dismissing it, at least until it found a challenge which provided a complete defence. A tribunal did not need to deal with every argument, but it did need to deal with every issue which might have a determinative effect on the outcome of part of the proceedings.
The application was made under section 27A of the 1985 Act and required the FTT to determine what service charges were payable by the appellants to the respondents in each of the years in issue. The appellants had identified the individual charges with which they were dissatisfied and the FTT was required to consider in relation to each charge whether it was payable or not.
(3) Section 47 of the Landlord and Tenant Act 1987 required a demand for payment of service charges to contain the name and address of the landlord. The consequence of a failure to provide that information was that the charge was treated for all purposes as not being due at any time before the information was furnished by the landlord by notice given to the tenant. Although the effect of non-compliance was only suspensory, that did not diminish its significance since the fact that charges had to be treated as not having been due might be important for other reasons, including where costs had been incurred in demanding arrears which the landlord had sought to recover as administration charges.
The FTT stated that it was satisfied that the requirements of section 47 had been met for reasons given by the respondents. However, those reasons did not address the question of whether the landlords’ names and addresses were included in the service charge demands, and relied instead on alternative arguments that the appellants knew who their landlords were or, if the proper procedure had not been followed, that new demands could be served. Neither of those arguments was an answer to the appellants’ case. No findings were made about the identity of the landlords or the content of the demands and no reference was made to either of the appellants’ points. It was therefore impossible to know from the decision whether the service charges were payable or not. The FTT clearly needed to deal with the substance of the issues but wholly omitted to do so. That alone required that the FTT’s decision be remitted to it for further consideration.
(4) Even after the matter had been reconsidered by the FTT, and perhaps further demands issued to reflect necessary adjustments and reconciliations, the final outcome might not be so very different from the FTT’s original decision to have justified the substantial expense and effort involved in achieving it. Both parties should therefore consider whether the dispute might be resolved more satisfactorily through the services of a mediator.
Qaseem Ahmed (instructed by Direct Access) appeared for the appellants; Richard Granby (instructed by Naylors Solicitors) appeared for the respondents.
Eileen O’Grady, barrister
