Landlord and tenant – Right to manage – Appurtenant property – Respondents exercising right to manage block of flats – Appellant continuing to provide estate services as part of wider estate – First-tier Tribunal determining service charges not payable to appellant – Appellant appealing – Whether Court of Appeal decision in Gala Unity v Ariadne Road RTM Co Ltd being wrongly decided – Appeal dismissed
The respondents had exercised the right to manage, under the Commonhold and Leasehold Reform Act 2002, in respect of a block of flats known as Settlers Court which was situated on the Virginia Quay Estate, London E14. The appellant was the named management company under a tripartite lease of flats in the blocks on the estate, as well as under the terms of freehold transfers of the houses.
Following the respondents’ acquisition of the right to manage, the appellant continued to provide the estate services because of its obligations to lessees and freeholders in other parts of the estate. It also sought to recover estate service charge costs from the lessees in Settlers Court. The respondent’s solicitors indicated that they disputed the right of the appellant to continue to manage the estate and to demand/collect service charges in respect of those services. They also challenged the reasonableness of the fees and raised a discrete point on the management costs.
The respondents applied to the First-tier Tribunal (FTT) for a determination of the liability to pay services charges said to be due from a number of Settlers Court leaseholders for the management of the estate. The FTT determined: that the service charges were not payable to the appellant; that it was bound by the Court of Appeal decision in the case of Gala Unity Ltd v Ariadne Road RTM Co Ltd [2012] EWCA Civ 1372; [2012] 3 EGLR 79; that the management functions under the residential leases had passed from the appellant to the respondents on the date the right to manage was acquired; and that those functions related to both block and estate services.
The appellant appealed contending that Gala Unity had been wrongly decided to the extent that it determined that a right to manage company acquired the right to manage the wider estate where there was more than one block on a development.
Held: The appeal was dismissed.
(1) The appellant accepted that there was no basis on which to distinguish Gala Unity and therefore to succeed the appellant had to show that the decision was made per incuriam in that it was given in ignorance or forgetfulness of some inconsistent statutory provision or of some authority binding on it, such that part of the decision or the reasoning on which it was based could be found to be demonstrably wrong. That would turn on the relatively high hurdle that had to be passed before it would consider disregarding a decision of the Court of Appeal and on the basis upon which the Upper Tribunal might find that the appeal should succeed. As a general rule, the only cases in which decisions should be held to have been per incuriam were those of decisions given in ignorance or forgetfulness of some inconsistent statutory provision or of some authority binding on the court concerned. That definition was not necessarily exhaustive, but cases not strictly within it which could properly be held to have been decided per incuriam were very rare: Morelle v Wakeling [1955] 2 QB 379 followed.
(2) Having regard to that test, Gala Unity was not decided per incuriam. It was not decided in ignorance or forgetfulness of a binding authority. Furthermore, neither the decision in Gala Unity nor the reasoning leading to that decision could be said to be demonstrably wrong. In reaching that conclusion, the court was conscious that the implications of Gala Unity were far-reaching and could cause real difficulties in the management of estates and in the effective implementation of the right to manage itself. However, that was an insufficient reason to say that the Court of Appeal was in error. The prospect of dual responsibility for the management of some of the appurtenant property in this and other similar cases was not a happy one. There was the potential for duplication of management effort and for conflict between the old management company and the new RTM company in respect of such appurtenant property. However, those consequences were not so grave, or the end product so manifestly absurd, that the court would be justified in adding a gloss to words “appurtenant property” which were already defined in the Commonhold and Leasehold Reform Act 2002.
(3) It was also difficult to say that the statutory interpretation of section 72(1)(a) and sections 96 and 97 (concerning management functions under leases) of the 2002 Act was manifestly wrong. The appellant suggested that section 72(1)(a) should be read to give proper effect to the dominant description “self-contained”. Given that the context of the Chapter 1 of Part 2 of the Act was the acquisition of management, it was possible that the inclusion of the words “with or without appurtenant property” were included not to give effect to the meaning of self-contained but to make it clear that appurtenances were in fact to be included in the transferred management rights. Finally, the words “with or without appurtenant property” did not simply make it clear that it was irrelevant to the operation of the RTM scheme whether or not the self-contained building or part of a building, had property appurtenant to it. Such an interpretation would create uncertainty about the management of property which was solely appurtenant to the building. Although the point at issue here was of importance, the difficulties resulted from the legislation itself.
(Per curiam) The challenges of creating a regime which gave lessees the right to manage the block of flats in which they lived but which also sought to give them rights of management in respect of the estate where the block of flats was located was not to be underestimated. The Law Commission was currently considering the right to manage scheme generally and in January 2019 issued its consultation paper Leasehold home ownership: exercising the right to manage. It was likely that its recommendations would seek to address Gala Unity and the management of estates more generally.
Simon Allison (instructed by Firstport Property Services Ltd) appeared for the appellant; The respondent appeared by its representative.
Eileen O’Grady, barrister
