Practice and procedure – First-tier Tribunal (FTT) – Paper determination – FTT determining service charge on papers – Service charges being disallowed due to insufficiency of evidence – Appellant landlord appealing – Whether procedure being fair to unrepresented parties – Appeal allowed
The appellant owned a property known as 131 St Michael’s Road, Aldershot, a Victorian house which was converted by the appellant into five flats. The respondent held a lease of flat 5. A dispute arose concerning service charges payable by the respondent for the four years from 2016-2019.
The respondent applied to the First-tier Tribunal (FTT) under section 27A of the Landlord and Tenant Act 1985 for a determination of the charges payable since the grant of his lease. He explained that until the previous month the only information he had received had been the annual invoices, and he did not accept that the sums charged were reasonable.
Rule 31 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 allowed the FTT to adopt an entirely written procedure if all parties consented. The respondent signified that he would be content with a paper determination if the tribunal thought it appropriate. The appellant did not object and the matter was considered under the FTT’s paper determination procedure.
The appellant supplied its service charge accounts and estimates for the disputed years in brief and without any verification by an accountant or other agents. Although headed “service charge accounts”, for each year except 2018 the document supplied was the service charge estimate prepared at the beginning of the year. The respondent provided a statement explaining his objections to the charges for each year.
Having explained the consequences of the appellant’s omission to supply the summary of rights and obligations required by section 21B of the 1985 Act (that the amounts were not payable until demands including the required information were delivered), the FTT concluded that the appellant had not sufficiently explained, justified, or evidenced its entitlement to the disputed amounts. Over the four years in issue the appellant claimed service charges totalling £17,296.45, but the FTT reduced those charges to £6,411.46. The appellant appealed.
Held: The appeal was allowed.
(1) The FTT had treated the respondent’s application as if it was enough in itself to place a burden on the appellant to justify and document each item of expenditure without advancing any affirmative case that services had not been provided, or had been provided to a poor quality. The sums claimed appeared modest and not enough to incite suspicion that costs had not been incurred or had been unreasonably incurred. Yet that was what the FTT assumed, unless the appellant could prove the contrary.
It was for the party disputing the reasonableness of sums claimed to establish a prima facie case. Where, as in this case, the sums claimed did not appear unreasonable and there was only very limited evidence that the same services could have been provided more cheaply, the FTT was not required to adopt a sceptical approach; it might reasonably have taken the view that the respondent had failed to establish any ground for thinking the sums claimed had not been incurred or were not reasonable, which would have left only the question whether any item of expenditure was outside the charging provisions: Yorkbrook Investments Ltd v Batten [1985] 2 EGLR 100 considered.
(2) In its original directions the FTT assigned the application to an entirely paper-based procedure unless the parties opted out. It did not appear to have considered at any subsequent stage whether that procedure was appropriate to the issues or to the parties and created a real risk that the eventual outcome would depend on the competence of each party in presenting its case.
The overriding objective or guiding principle of dispute resolution in the FTT, identified in rule 3 of the 2013 Rules, was to deal with cases fairly and justly. The 2013 Rules reflected the requirement of section 22(4) of the Tribunals, Courts and Enforcement Act 2007, that the power to make Tribunal Procedure Rules should be exercised with a view to securing that, in proceedings before tribunals, justice was done and the tribunal system was accessible and fair. As rule 3(2) explained, a fair and just handling of a case included dealing with it in ways which were proportionate to the importance and complexity of the issues and the anticipated costs, and the resources of the parties and the FTT itself. It also included ensuring, so far as practicable, that the parties were able to participate fully in the proceedings and using any special expertise of the tribunal effectively.
(3) Where both parties were unrepresented it was necessary for the FTT to consider how it could ensure, so far as practicable, that they were able to participate fully in the proceedings and how it could meet its own objective of dealing with their case fairly and justly. If specific consideration had been given to those questions in the present case, it would have been set on a different procedural course. The decision to direct a paper determination was premature. There was insufficient material at that stage to justify the conclusion that an entirely paper procedure was appropriate, yet it was at that point that the FTT handed the choice of procedure to the parties.
By allocating the application to a written procedure without making it clear to both unrepresented parties what was expected of them, and then by relying on deficiencies of evidence and presentation as grounds of determination, the FTT fell short of the standard required by its overriding objective. By foregoing the opportunity for the parties to explain uncertainties created by their evidence, and by giving different guidance to each of them as to the content of that evidence, the FTT did not ensure so far as practicable that the appellant was able to participate fully in the proceedings. It also hamstrung itself in making effective use of its own special expertise. That expertise was not limited to assessing the reasonableness of a service charge, but also included facilitating lay parties in presenting their own cases to their best advantage, and using the judge or panel’s own skills in careful questioning to achieve a full understanding of the relevant facts.
(4) In all the circumstances, the FTT’s decision was arrived at by a route which was procedurally unfair and which significantly affected the eventual outcome and had to be set aside.
Eileen O’Grady, barrister
Click here to read a transcript of Enterprise Home Developments LLP v Adam
