In William Shakespeare’s King John, Philip Faulconbridge prays aid of “fair play” to demand an audience with the pope. From literature to sports to queuing, a sense of fair play underpins the cultural norms of our society. It also underscores the tenets of natural justice that form the legal system in England and Wales.
In English Rose Ltd v Menon and others [2022] UKUT 347 (LC); [2023] PLSCS 4, the Upper Tribunal (Lands Chamber) had regard to one of the fundamental rules of natural justice – that a party to civil litigation is entitled to know the essentials of an opponent’s case in advance, so they can properly prepare their evidence and arguments and to ensure the trial can be conducted fairly.
The background
The respondents were the long leaseholders of flats situated at Ashbrook Terrace in Sunderland. The appellant, English Rose Ltd, was their landlord. The leaseholders occupied their flats pursuant to leases granted by English Rose to their predecessors-in-title in 2002.
Pursuant to clause 5.2 of the leases, English Rose covenanted to insure the property. It recovered the cost of the same through the leaseholders’ service charges. The sixth schedule to the leases set out what items the leaseholders were required to pay for, but did not include the cost of insurance.
During the service charge periods 2014 to 2021, the insurance premiums for the property totalled £81,000. The leaseholders applied to the First-tier Tribunal for a determination of the reasonableness of the same.
The perceived unfairness
When the parties exchanged details of their respective cases, the leaseholders challenged the reasonableness of the insurance premiums, but not payability of those costs under the terms of their leases. At the material time, the leaseholders were without legal representation and remained so until the hearing of their application.
On the day of the hearing, counsel representing the leaseholders raised a new point – namely, as drafted, the service charge provisions of the leases did not oblige the leaseholders to contribute towards the cost of insuring the property. English Rose objected to the new point being raised, but the FTT allowed the same. The FTT also refused an application from English Rose to adjourn the hearing so that it could deal with the new point. As an alternative, the FTT gave English Rose the opportunity to make written submissions and left open the possibility of reconvening the hearing if the need arose.
In its written submissions, English Rose argued the FTT had acted procedurally unfairly in allowing the new point to be raised and finding in the leaseholders’ favour on that point, without giving it the opportunity to file further evidence and having the same tested at a reconvened hearing. The FTT dismissed those arguments.
The FTT commented that further evidence and a reconvened hearing was unnecessary because the question of payability was a question of law that could be determined by construing the leases. It found that £40,000 of the insurance premiums were not payable. English Rose appealed.
Robust, but fair
An appellate court only interferes with a case management decision where the tribunal has failed to take into account a relevant fact, has had regard to an irrelevant factor, or has reached a decision that is plainly wrong. The importance of the decision to the parties is also a relevant factor.
The UT noted that the FTT’s decision to allow the new point at the hearing was a “robust” decision. Yet, it was within the range of decisions open to the FTT. Both sides at the hearing were legally represented and the point in issue was a question of law that could be determined by construing the leases.
Given the importance of the parties’ continuing right under the leases, the FTT’s decision was fair.
English Rose was afforded the procedural safeguards of making written submissions and having a reconvened hearing, if necessary. Although rule 31 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 provided that the FTT must hold a hearing before making a decision which disposed of proceedings, it would be overly restrictive to interpret that rule as necessitating every issue to be determined solely on submissions made at a hearing.
The overriding objective under rule 3 was the correct guide in the circumstances. The FTT was entitled to prioritise flexibility and the avoidance of delay over a more exhaustive approach, provided that could be done fairly.
No mistake
On appeal, English Rose also argued that the failure to include a provision for the recovery of the cost of insurance from the leaseholders arose from a clear grammatical error. It argued it was amenable to rectification by construction under the Chartbrook principle (Chartbrook Ltd v Persimmon Homes Ltd [2009] 3 EGLR 119), whereby the literal meaning of a provision could be corrected if it was clear both that a mistake had been made and what the provision intended to say.
The UT determined that the real error that English Rose required to be corrected for it to succeed was not grammatical, but instead concerned the allocation of responsibility. It required the responsibility for the payment of insurance costs to be reallocated from English Rose to the leaseholders, who would ordinarily bear such costs. Whether that was truly an error in the leases was less obvious, but it was not one that was amenable to corrective construction.
Key points
- Allowing a new point to be raised at a hearing is not automatically unfair if procedural safeguards are put in place
- An error that involves the reallocation of responsibility is not amenable to corrective construction to prove detrimental reliance on it
Elizabeth Dwomoh is a barrister at Lamb Chambers
