Landlord and tenant – Right to manage – Validity of notice – Respondent RTM company seeking to acquire right to manage – Respondent serving claim notice on appellant landlord – Respondent withdrawing first defective notice and serving second notice – Respondent notifying qualifying tenants of withdrawal following day with copy of second notice – Whether failure to serve notice of withdrawal on qualifying tenants on same day rendering notice invalid – Appeal dismissed
The appellant was the landlord of flats at Spire House, Lancaster Gate, London W2 which comprised a Victorian church tower and spire, a block of 23 flats on six floors accessed through the tower with a car park beneath, and an enclosed garden. The respondent was an RTM company set up by qualifying tenants to acquire the right to manage the property.
The respondent served on the appellant a claim notice under section 79 of the Commonhold and Leasehold Reform Act 2002. The appellant sent a counter-notice saying that the first notice did not comply with the 2002 Act. The respondent then wrote two letters. The first letter, dated 17 June, was addressed to the appellant and received on 18 June which purported to withdraw the first claim notice and to serve a second notice correcting the defects. The second letter was dated 18 June and addressed to the qualifying tenants, notifying them about the withdrawal of the first notice, with a copy of the second notice.
The appellant contended that the second notice was invalid because, under section 86 of the 2002 Act, a notice of withdrawal had to be given both to the landlord and to the qualifying tenants. Notice of withdrawal given on 19 June was too late to save the second claim notice because, by section 81(3) of the 2002 Act, no subsequent notice could be given while an earlier notice was in force.
That argument failed before the First-tier Tribunal. On appeal, the Upper Tribunal held that the withdrawal took effect when the appellant was served with the notice and the failure to serve the qualifying tenants on that date, though a breach of the 2002 Act, was not fatal: [2020] UKUT 199 (LC). The appellant appealed.
Held: The appeal was dismissed.
(1) The right way to analyse this case was by reference to the principles concerning failures to comply with statutory requirements. There were two categories of case, one concerning public bodies and public law in which substantial compliance could be sufficient, and another concerning the acquisition of private rights, where there was no such concept. In the private rights category, the question was whether a step, such as a notice, was wholly valid or wholly invalid. The right approach in answering that question was one of statutory construction, determining the legislative intention as to the consequences of non-compliance in the light of the statutory scheme as a whole. The scheme for the acquisition of the right to manage under the 2002 Act fell within the private rights category. However, it did not follow that if a case fell into the second category every defect, however trivial, invalidated the step in question. The court still had to decide whether the step was wholly valid or wholly invalid. While prejudice on the particular facts was irrelevant, prejudice in a generic sense could be relevant. Those principles were applicable to any step in the statutory scheme: Natt v Osman [2015] EGLR 11 and Elim Court RTM Co Ltd v Avon Freeholds Ltd [2017] EWCA Civ 89; [2017] PLSCS 46 applied.
(2) The fundamental question was the role and importance of the relevant step in the context of the procedure as a whole. Thus, if the scheme required information, there was a difference between missing information of critical importance, and missing ancillary information. Useful pointers (which could not be put too high and were not determinative) were whether: (i) the step was provided for in particular terms in the statute or only in general terms; (ii) the requirement was in the primary legislation or in subordinate legislation; and (iii) the person taking the step could immediately do it again if the impugned attempt was invalid.
While there was force in the point that landlords needed certainty, that could not be carried too far because it would mean any deviation from what was prescribed would invalidate the whole procedure, and that was not the law. The legislator could be taken to have assumed that the courts would take a realistic and pragmatic approach in determining the significance of different steps in a procedural scheme laid down by statute.
(3) Section 86 of the 2002 Act enabled withdrawal of a claim notice and set out how it was to be done. The section provided that withdrawal was to be effected by service which meant service on all those specified in section 86(2)(a) to (d). Therefore, a failure to give notice to one of the persons in subsection (2)(a) to (d) (assuming they existed) was a breach of the terms of the Act. However, the fact that failure to serve the persons in subsection (2)(d) was a breach of the provisions was just the beginning of the analysis. The court’s task was then to assess the importance of the requirement which had been breached.
In assessing the significance of who was to be given the notice of withdrawal, the landlord could point to the word “must” in section 86(2) as requiring the giving of notice to the four classes of person listed in sub-sections (a) to (d), including the qualifying tenants at (d). However, when the scheme as a whole was examined as a matter of substance, it was plain that there was a difference in importance between giving notice of withdrawal to the landlord and managers (persons in the first three classes in section 86(2)(a) to (c)), as compared to the qualifying tenants in class 86(2)(d).
The main practical purpose of the notice of withdrawal was to alert the landlord to the fact that the claim to which the notice applied had been abandoned. The landlord was the person who needed to know. By contrast, the service of notice on the qualifying tenants was simply a matter of information. It had no other purpose. They were entitled to have the withdrawal notice sent to them and to know that the claim notice had been withdrawn. However, the consequence of not sending it was not that the withdrawal was ineffective.
Jonathan Upton (instructed by Watson Farley & Williams LLP) appeared for the appellant; Philip Rainey QC and Nicola Muir (instructed by Foot Anstey LLP) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of Eastern Pyramid Group Corporation SA v Spire House RTM Co Ltd
