Right to manage – Notice – Validity – Appellant RTM company seeking to acquire right to manage building – Appellant serving tenants with notice of invitation to participate and subsequently giving claim notice to respondent freeholder of building – Sections 78 and 79 of Commonhold and Leasehold Reform Act 2002 – Whether notices complying with statutory requirements – Whether any non-compliance invalidating right-to-manage claim – Appeal allowed
The appellant was a company formed for the purpose of acquiring the right to manage a block of flats in Plymouth pursuant to Chapter 1 of Part 2 of the Commonhold and Leasehold Reform Act 2002. The appellant served notices of invitation to participate, under section 78 of the 2002 Act, on those qualifying tenants in the building who were not already members. The notice was in a statutorily prescribed form and set out the place and time at which tenants could inspect the appellant’s articles of association.
The appellant then served a claim notice on the respondent, as the freeholder of the building, under section 79 of the 2002 Act. The claim notice was signed by J, a director of the Right to Manage Federation Ltd, which acted as the company secretary of the appellant, trading under the name RTMF Secretarial in that capacity; J was also a director of the appellant.
The respondent served a counternotice under section 84, in which it disputed the appellant’s entitlement to acquire the right to manage pursuant to the claim notice. It contended that: (i) the notice of invitation to participate was invalid, since the times that it specified for inspection of the articles of association did not include a Saturday or Sunday, contrary to section 78(5)(b) of the 2002 Act; (ii) the signing of the notice by J did not comply with the requirements of section 44 of the Companies Act 2006 for a signature by the appellant company; and (iii) the claim notice had not been validly served on an intermediate landlord of one of the flats as required by section 79(6) of the 2002 Act.
The leasehold valuation tribunal held that the right-to-manage claim was invalidated on the first of those grounds only. On an appeal from that decision, the Upper Tribunal held that the claim was invalidated on both the first and third grounds. It held that the claim notice had been validly signed by the director, but that the defect in the notice of invitation to participate and the failure to serve a claim notice on the intermediate landlord were fatal to the validity of the claim: see [2014] UKUT 397 (LC). The appellant appealed.
Held: The appeal was dismissed.
(1) The words “(including a Saturday or Sunday or both)”, as set out in parenthesis in in section 78(5)(d), were mandatory, not permissive. The whole of section 78(5) was governed by the word “must” which appeared before the lettered paragraphs. Moreover, the parenthesis in section 78(5)(d) was also governed by the words “at least” which immediately preceded it. There was no justification for departing from the ordinary and natural meaning of the words used. The purpose of the requirement to include a Saturday or Sunday was to facilitate inspection of the articles by working tenants. It followed that the appellant had failed to comply with the requirements of section 78(5)(d).
(2) The Upper Tribunal had been correct to find that the claim notice was validly signed by J. The respondent’s submission to the contrary depended on construing the words in square brackets, “ [Signature of authorised member or officer]”, under the space for signature on the prescribed form as allowing signature by only two classes of people: (i) an authorised member of the company; or (ii) an authorised officer of the company. J was not a member of the company and the respondent’s submission was that the relevant authorised officer was the company secretary, which was itself a company; that in order for that authorised officer of the appellant to have signed the notice, The Right to Manage Federation Ltd itself had to have signed it; and signature by J, who was no more than a director of the officer of the RTM company, was not enough because it did not satisfy the requirements of section 44 of the Companies Act 2006. However, there was no merit in that highly technical argument.
Section 79(3) of the 2002 Act required the claim notice to be given by the RTM company but there was no express requirement in the 2002 Act itself, or in the Right to Manage (Prescribed Particulars and Forms) (England) Regulations 2010, that such a claim notice be signed by the RTM company or by anyone in particular. It was not disputed that J was a director of the appellant and was in fact authorised to sign the claim notice on its behalf. Since J’s signature neither purported to be that of a company, nor could as a matter of law be that of a company, the claim notice was in fact signed by an individual, J, who was an authorised member or officer of the appellant and was authorised to give the claim notice on its behalf: Newbold v Coal Authority [2013] EWCA Civ 584; [2014] 1 WLR 1288 considered.
(3) It was not disputed that the claim notice should have been served on the intermediate landlord was not challenged. The only issue was as to the consequences attached to that failure.
(4) Cases involving the acquisition of the right to manage fell within the category of cases in which a statute conferred a property or similar right on a private person, in which the issues of whether non-compliance with the statutory requirement precluded that person from acquiring the right in question would depend on interpreting the notice to see whether it actually complied with the strict requirements of the statute. The intention of the legislature as to the consequences of non-compliance, where not expressly stated in the statute, was to be ascertained in the light of the statutory scheme as a whole. Where the notice or the information which was missing from it was of critical importance in the context of the scheme, the non-compliance with the statute would generally result in the invalidity of the notice. Where, on the other hand, the information missing from the statutory notice was of secondary importance or merely ancillary, the notice might be held to be valid: Natt v Osman [2014] EWCA Civ 1520; [2015] 1 WLR 1536; [2015] EGLR 11 and Triplerose Ltd v Mill House RTM Co Ltd [2016] UKUT 80 (LC); [2016] L&TR 23; [2016] PLSCS 68 applied.
(5) Applying that approach, the failure to include a Saturday or Sunday in the times specified for inspection of the articles of association did not invalidate the notice of invitation to participate. It might be questioned what was the purpose of the right to carry out a physical inspection of the RTM company’s articles of association, given that they had to be in a prescribed form and the recipient had the right to obtain a copy of them on payment of a modest fee. It might also be questioned what difference it made to the landlord, who was the only person objecting, whether or not a potential member of the RTM company had or has not been given the opportunity to inspect the articles of association, provided that, when the claim notice was served, there were in fact sufficient qualifying tenants who were members of the RTM company to make it eligible to claim the right to manage. It was unrealistic to view a landlord who fiercely resisted the acquisition of the right to manage as being in some way the guardian angel of the qualifying tenants. Moreover, under article 26 of the articles of association, a potential member of the company who had not received a notice of invitation to participate in the correct form could apply later to become a member, either when given a copy of the claim notice or at any time thereafter, and the directors have no power to refuse the application. Since a landlord might also become a member of the RTM company after it acquired the right to manage, parliament clearly envisaged that the number of members of the RTM company might change with the passage of time. Bearing those matters in mind, a failure by the RTM company to comply precisely with the requirements for a notice of intention to participate did not automatically invalidate all subsequent steps; and the particular failure would not have done so in this case.
The appellant had substantially complied with the requirements of section 78(5). Qualifying tenants had been given the right to have a copy of the articles on payment of a modest fee, and there were two validly specified days on which they could be physically inspected, and also a third day, albeit not at the weekend. The absence of one day at the weekend for a possible, and probably theoretical, physical inspection of the articles was a trivial failure of compliance which did not invalidate the notice of invitation to participate.
(6) Similarly, the mere fact that a claim notice was not given to all those entitled to receive one would not, without more, invalidate the claim notice. Parliament had specifically considered the case in which, at least in some circumstances, a claim notice had been given to some landlords but not all of them, and had decided that that did not invalidate the claim: see sections 79(7) and 85 of the 2002 Act. It could not therefore be said that giving a claim notice to everyone entitled to receive it was necessarily an essential feature of the statutory scheme. The primary persons affected by the acquisition of the right to manage were those with management responsibilities. The transfer of an intermediate landlord’s non-management functions under an intermediate lease was ancillary to the primary objective of the legislation, which was to enable an RTM company, simply and cheaply, to acquire the right to manage; and to avoid both duplication of effort and administrative untidiness once it had been acquired. That being so, a failure to serve a claim notice on the intermediate landlord of a single flat with no management responsibilities did not invalidate the notice. It followed that the appellant’s right-to-manage claim was validly made.
(7) The procedures for acquiring the right to manage should be as simple as possible to reduce the potential for challenge by an obstructive landlord. That policy had not been implemented by the current procedures, which still contained traps for the unwary. The government might wish to consider simplifying the procedure further, or to grant to the first-tier tribunal a power to relieve against a failure to comply with the requirements if it was just and equitable to do so. Otherwise, objections based on technical points which were of no significant consequence to the objector would continue to bedevil the acquisition of the right to manage.
Winston Jacob (instructed by the Bar Pro Bono Unit) appeared for the appellant; Justin Bates (instructed by Scott Cohen Solicitors, of Henley-on-Thames) appeared for the respondent.
Sally Dobson, barrister
Click here to read a transcript of Elim Court RTM Co Ltd v Avon Freeholds Ltd.
