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You are here: BAILII >> Databases >> United Kingdom Upper Tribunal (Lands Chamber) >> Marlborough Park Services Ltd v Leitner (LANDLORD AND TENANT – SERVICE CHARGES) [2018] UKUT 230 (LC) (31 July 2018) URL: https://www.bailii.org/uk/cases/UKUT/LC/2018/230.html Cite as: [2019] HLR 10, [2018] UKUT 230 (LC) |
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IN THE UPPER TRIBUNAL (LANDS CHAMBER)
Neutral Citation
Number: [2018]
UKUT 230 (LC)
Case No: LRX/132/2017
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
LANDLORD AND TENANT – SERVICE
CHARGES- Landlord and Tenant Act 1985 section 27A(4)- whether FTT has jurisdiction
to hear application- matters “agreed or admitted”- matters “subject to
determination by a court”- application to strike out under Tribunal Procedure
(First-tier Tribunal) (Property Chamber) Rules 2013, rule 9- appeal from
refusal to strike out tenant’s application allowed in part
IN THE MATTER OF AN APPEAL AGAINST A DECISION OF THE
FIRST-TIER TRIBUNAL (PROPERTY CHAMBER)
BETWEEN:
|
![]() and MR MICHA ![]() |
Appellant Respondent |
Re: (1) 22 Collingwood Court, Washington, Tyne & Wear, NE37 3EB
(2) 54 Kenilworth Court, Washington, Tyne & Wear, NE37 3EA
Before: His Honour Judge Stuart Bridge
Written Representations
© CROWN COPYRIGHT 2018
The following cases are referred to in this decision:
Cain v
Islington BC [2015] UKUT 542 (LC)
Crosspite
Ltd
v
Sachdev [2012] UKUT 321 (LC)
Shersby v
Grenehurst
Park
Residents Co
Ltd
[2009] UKUT 241 (LC)
DECISION
Introduction
1. This is an
appeal by the freehold owner, Marlborough
Park
Services
Ltd
(hereafter “the
appellant”), of two properties, 22 Collingwood Court and 54 Kenilworth Court,
which are situated in Washington, Tyne & Wear, from a decision of the
First-Tier Tribunal (Property Chamber) (hereafter “FTT”) dated 11 October 2017
dismissing its application to strike out the application of the leaseholder of
those properties, Mr Micha
Leitner
(hereafter “the respondent”), for a
determination pursuant to section 27A of the Landlord and Tenant Act 1987 as to
whether
service
charges claimed for those properties were payable or reasonable.
The appellant seeks to review the FTT decision, and permission to appeal was
given by the FTT on 14 November 2017. The Deputy President of the Tribunal
directed that the appeal should be determined, as requested by the appellant,
under the Tribunal’s written representations procedure.
2. Before the FTT
the appellant submitted that the charges being challenged by the respondent in
its section 27A application were either “already determined by the court”
(default judgments having been entered in relation to claims made previously by
the appellants for unpaid service
charges) or “expressly” or “impliedly”
“admitted” by the respondent; and that accordingly the FTT had no jurisdiction
to determine the respondent’s application. Reference was also made by the
appellant to the FTT’s jurisdiction to strike out proceedings where they were
“frivolous” or “otherwise an abuse of process” or had “no reasonable prospect
of success”.
3. The appellant has been represented throughout by JB Leitch Limited, solicitors; the respondent has not been represented. In determining the appeal, I have had regard to the FTT decision, the appellant’s notice, the appellant’s statement of case and accompanying documents, the respondent’s notice, the respondent’s statement of case, and the documents contained in the appeal bundle. I am grateful to the appellants’ solicitors and the respondent for the submissions that have been made.
Background
4. It is not in
dispute that the respondent is the leaseholder in respect of two properties the
freehold of which is owned by the appellant, that pursuant to those leases the
respondent is obliged to pay a service
charge, and that the respondent is
entitled to make application under section 27A of the Landlord and Tenant Act
1987 for a determination of the
service
charge payable. The respondent made two
such applications, one in respect of each property, dated 29 November 2016.
Each application listed, under “
Service
charges to be considered by the
tribunal”, 2007 to 2012 as “past years” and 2013 to 2016 as “current or future
years” for which a determination was sought.
5. Prior to that
determination being sought, the appellant had obtained monetary judgments
against the respondent in respect of claims for service
charge.
6. On 7 March 2016, the appellant’s then solicitors sent two letters, one in respect of each property, to the respondent. Both letters made reference to the Practice Direction on Pre-action Conduct contained in the Civil Procedure Rules.
7. The letter in
respect of 22 Collingwood Court stated that the appellant’s solicitors had been
instructed to collect outstanding rent and service
charge, the amount
outstanding being £1,744.33, and made a final demand for payment of that sum
together with legal fees, totalling £1,837.33 within seven days. In the event
of payment not being received, instructions would be sought to issue county
court proceedings for a determination that the
service
charge is due, and the
letter went on to explain the consequences of such a determination, including
the appellant’s intention to issue forfeiture proceedings.
8. The letter in
respect of 54 Kenilworth Court stated explicitly that the respondent had failed
to pay the judgment amount and implicitly that other sums by way of ground rent
and service
charge were outstanding. A notice pursuant to section 146 of the
Law of Property Act 1925 was enclosed by way of
service,
the right of re-entry
exercisable in the event of rent being unpaid for 21 days after becoming due
being invoked. In order to avoid forfeiture, the appellant required payment of
the total sum of £5,364.92, this sum being made up of the outstanding judgment
and interest, unpaid
service
charges for three periods each of six months
between 1 October 2014 and 31 March 2016, ground rent for 2015-2016,
solicitors’ fees plus
VAT,
together with Land Registry disbursements and
Recorded Delivery fees. The respondent was given 14 days to pay, following
which instructions would be sought to commence possession proceedings.
9. The respondent
Mr Leitner
replied by letter of 21 March 2016. He contended that the letters
dated 7 March 2016 were the first communication he had received from anybody
for at least the past two years on any matter relating to the Ground Rent or
Service
Charges of the two properties, and asked why it was that Town &
City Management
Ltd
had failed to send him any invoices “for at least the past
two years”. The letter continued:
“My accountant has just finished last week my accounts for the year ended 6 April ’15 and he can categorically confirm that:
1) On 22 Collingwood Court a service
charge was paid
by me in April 2014. Thereafter nothing has been received regarding this
property until at least April 2015.
2) Likewise on 54 Kenilworth Court, nothing at all has been received from anybody regarding this property during the period April 2014- April 2015 and beyond.
“How can it be that you state a judgment was dated 22 May ’14 against me; yet I have never heard or received ANY communication on this matter?
“In order to move forward, I will state this:
“I am more than happy to pay for any arrears accrued
on these two properties on Ground Rent and Service
Charges not paid.
“I am NOT prepared to pay for any interest, nor fees nor any other charges.
“Please let me have an up-to-date statement, and copy invoices, of what remains outstanding to date on the basis set out above and I shall be more than happy to let you have by return a cheque in full and final settlement to date.
“I look forward to hearing from you soon.”
10. The appellant’s then solicitors responded to this letter on 4 April 2016 re-stating their position. After thanking the respondent for his letter, they continue:
“With respect to 54 Kenilworth Court, we do not propose to debate matters which have been the subject of court proceedings. The last payment received in respect of this property dates back to May 2012. Our letter of 7 March sets out the amounts required to be paid which total £5,364.92. If that amount is not now paid as a matter of urgency then possession proceedings will be issued on the basis of forfeiture of the lease.
“Similarly, our letter of 7 March relating to 22 Collingwood Court set out the amount required to be paid and enclosed a detailed statement of those amounts. You will recall that court proceedings were previously issued against you and a court judgment was obtained on 18 December 2013. A Section 146 notice was served upon you in respect of that judgment on 8 January 2014 and you made payment to us of £1,747.26 by cheque on 27 January 2014. No payment has been received since.
“If full payment in respect of 22 Collingwood Court of £1,837.33 is not now paid as a matter of urgency court proceedings will be issued against you.
“If you are unclear as to your position we would recommend that you obtain legal advice.”
The principles
11. Rule 9 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 imposes a duty and confers a power on the FTT. I refer to those parts of the Rule which are relevant to the current case.
12. Under rule 9(2), a duty is imposed:
“the Tribunal must strike out the whole or a part of the proceedings or case if the Tribunal-
(a) does not have any jurisdiction in relation to the proceedings or case or that part of them.”
13. Under rule 9(3), a power is conferred:
“the Tribunal may strike out the whole or a part of the proceedings or case if-
(d) the Tribunal considers the proceedings or case (or
part of them), or the manner in which they are being conducted, to be frivolous
or vexatious
or otherwise an abuse of the process of the Tribunal; or
(e) the Tribunal considers there is no reasonable prospect of the applicant’s proceedings or case, or part of it, succeeding.”
14. Section 27A of
the Landlord and Tenant Act 1985 permits applications to be made to the
appropriate tribunal (that is the FTT) for a determination whether a service
charge is payable, and, if it is, the amount which is payable. However, and
this is central to the current appeal, section 27A(4) states:
“No application… may be made in respect of a matter which-
(a) has been agreed or admitted by the tenant; [or]
(c) has been the subject of determination by a court.”
15. Section 27A(5) qualifies section 27A(4)(a):
“But the tenant is not to be taken to have agreed or admitted any matter by reason only of having made any payment.”
16. The issue in
this case is jurisdictional. It is whether, in view
of section 27A(4), the FTT
has any jurisdiction to hear the respondent’s current application. The
appellant contends that the whole matter has been “agreed or admitted” by the
respondent; and that a significant part of the application has already been the
subject of determination by the court. If the appellant is right, then the FTT
should have struck out the whole or part of the claim pursuant to rule 9(2), as
it is obliged to do in the event of its not having jurisdiction.
17. Although reference has been made to rule 9(3) which gives the FTT power to strike out in the circumstances there specified, no reliance has been placed on that provision in the course of this appeal.
The FTT decision
18. In determining the application to strike out, the FTT found no practical distinction between the two properties, and did not therefore differentiate between them.
19. The respondent,
who it was noted by the FTT had not engaged with the strike out application,
had not challenged the fact that default judgments were made, and the FTT
accordingly held that it did “not have jurisdiction to determine the service
charges claimed within those judgments.” But that did not result in the FTT
striking out that part of the claim. The FTT explained, at [15]:
“Having considered the accounts annexed to the
[appellant’s] position statement, it is noted that default judgements likely
relate to service
charges on account or budgeted amounts and not to the final
out turn. This is apparent from the date of the certified accounts.
Accordingly, it is open to the [respondent] to request a determination of the
final sums now that this expenditure has crystallised. Accordingly, the
[appellant’s] strike out application fails in that regard.”
20. The FTT went on
to consider the argument that there was an express or implied admission of the
charges payable. It held that the evidence did not contain an express admission
or agreement to a specific service
charge demanded, the correspondence
indicating payment of arrears to avoid proceedings; it therefore did not find
that there was an express agreement to pay
service
charges. The FTT further
held that this was not a case of a tenant paying “without qualification or
protest”, finding that there was a reluctance to pay and a need to resort to
legal proceedings to enforce payment. No agreement to the specific
service
charges could therefore be implied. Finally, the FTT did not find that the
provisions of rule 9(3) were engaged, and the application to strike out was
dismissed.
The appeal
21. The appeal has
been brought to this Tribunal with permission from the FTT. The respondent to
the appeal (the original applicant) wrote to the FTT on 16 November 2017
respectfully asking the FTT to reconsider its decision and withdraw the
permission it had granted, asserting that the appellant had failed to supply
any evidence of what they had done in favour of the two properties other than
supplying copies of budgets of costs and sets of financial accounts. The
respondent repeated his allegation that the charges levied were excessive and
that service
on the part of the appellant had been “rotten” for many years.
22. A respondent’s
notice dated 30 January 2018
was filed late, with an apology, on 31 January
2018,
the notice attaching a copy of the original claim for a determination and
the letter of 16 November 2017. The notice asked the Tribunal to dismiss
outright the appeal, setting out grounds as follows:
“This Tribunal Case has been going on for more than
twelve months now. Throughout, JB Leitch Solicitors have been “waffling” their
way through the case, producing files and files of figures which repeat
financial budgets and financial accounts year after year, without even ONCE,
spelling clearly what exactly have their clients, Marlborough
Park
Services
Ltd.,
actually DONE ON MY BEHALF, for my two properties over many years of
charging me excessive management fees.”
That is the extent to which the respondent has engaged with this appeal. There has been no engagement on the distinct jurisdictional issues raised by the appellant in its Statements of Case.
23. In considering
the issues, I intend to divide the service
charges which the appellant claims
into distinct periods: (1) Charges payable between 1 April 2012 and 31 March
2013; (2) Charges payable prior to 1 April 2012; and (3) Charges payable after
31 March 2013. The reasons for doing so will become apparent in the course of
the discussion that follows.
Charges payable between 1 April 2012 and 31 March 2013
24. The appellant,
by its Grounds of Appeal and Amended Statement of Case dated 6 April 2018,
contends that the FTT had copies of the default judgments upon which reliance
was placed when it heard the application to strike out. It further submits that
those judgments constituted final determinations and that the FTT was therefore
correct to hold (as it did at [14] above) that it did not have jurisdiction to
determine the
service
charges claimed within those judgments.
25. The appellant states in its Amended Statement of Case at paragraph 23:
“The accounts for the period 01/04/2013- 31/03/2013 [sic] were certified on 16 December 2013; prior to the date of both default judgments. The primary case for the Appellant is that, because the expenditure, as at the date of the default judgment, had crystallised then it must be said that the FTT has made an error of law.”
26. There is a clear error in the Amended Statement of Case: it is an error which appeared both in the earlier Statement of Case, prior to its amendment, and in the Position Statement filed with the FTT. The period stated as “01/04/2013- 31/03/2013” should read “01/04/2012- 31/03/2013” in order to make sense, and it is that period which is supported by the documentary evidence that has been filed, including an accountant’s certificate endorsing the accounts for that year.
27. The default
judgments were entered on 18 December 2013 and 22 May 2014. It is therefore
contended by the appellant that service
charges which were duly certified and
the payment of which outstanding debt was ordered by those judgments must be
treated as having been the subject of determination by a court.
28. The logic of
the appellant’s argument is in my view
compelling. The FTT should take a robust
approach where it is clear that an application under section 27A is seeking to
challenge
service
charges which have been the subject of the judgment of the
court, whether that judgment follows contested proceedings in the county court
or whether it has been entered by default. The issue goes to jurisdiction. The
FTT should therefore have struck out the application insofar as it related to
service
charges the subject of prior judgments of the court, that is to say for the
period from 1 April 2012 to 31 March 2013. Although the judgments also related
to
service
charges for later periods (from 1 April 2013 to 31 March 2015),
those charges could not have been certified prior to default judgments being
entered, and the FTT was right not to strike out the application in relation to
such charges on this ground.
Service
charges
before 1 April 2012
29. The appellant
contends that the respondent’s conduct in paying service
charges since 2007
without qualification or protest has been such that it is safe to infer an
agreement that he was liable for those charges. This submission is in my
view
of particular significance when considering the
service
charges which pre-date
but are not the subject of the default judgments to which reference has been
made.
30. In order to satisfy the FTT that it should strike out the proceedings as it relates to these charges, the appellant must prove that the respondent had agreed or admitted those charges. Putting to one side the letter of 21 March 2016, consideration should be given to the conduct of the respondent in the period between 2007 and 2012. The charges for that period have been paid, and charges accrued subsequently have led, as explained above, to default judgments being entered.
31. In Shersby v
Grenehurst
Park
Residents Co
Ltd
[2009] UKUT 241 (LC), the lessee made payments towards insurance premiums pursuant
to his obligations under the lease between 1997 and 2004, only challenging the
payments demanded in 2007, and having made a separate application to a
leasehold
valuation
tribunal in the interim in relation to
service
charges in
the course of which he did not raise the issue of insurance. The Tribunal held,
in conducting a re-hearing on appeal from the FTT, that the lessee must be
taken to have agreed or admitted the insurance premiums.
32. In Cain v
Islington BC [2015] UKUT 542 (LC), the
lessee paid
service
charges between 2001 and 2007 without any protest,
challenging the sums payable by application to the FTT in 2014. The FTT took
the
view
that it was “now no longer appropriate” for those years to be
litigated: not only had the lessee made the payments, he had also waited an
extremely long time before making his challenge, in the meantime there having
been other cases involving the same parties. The Tribunal upheld the decision
of the FTT to treat the lessee as having admitted or agreed the amounts of
service
charge over the period between 2001 and 2007. Following the reasoning
in Shersby, the Tribunal addressed section 27A(4) as follows:
“[14]… An agreement or admission may be express, or implied or inferred from the facts and circumstances. In either situation the agreement or admission must be clear, the finding being based upon the objectively ascertained intention of the tenant which may be express or implied or inferred from the conduct of the tenant—usually an act or a series of acts or inaction in the face of specific circumstances or even mere inaction over a long period of time or a combination of the two.
“[15] Absent [section 27A(5)] and depending upon the facts and circumstances, it would be open to the FTT to imply or infer from the fact of a single payment of a specific sum demanded that the tenant had agreed or admitted that the amount claimed and paid was the amount properly payable, a fortiori where there is a series of payments made without challenge or protest. Part of the reason for this is that people generally do not pay money without protest unless they accept that that which is demanded is properly due and owing, and certainly not regularly over a period of time. Whilst it would generally be inappropriate to make such an implication or inference from a single payment because it could not be said that the conduct of the tenant was sufficiently clear, where there have been repeated payments over a period of time of sums demanded, there may come a time when such an implication or inference is irresistible.”
33. In my judgment, the FTT erred in law in
failing to recognise the significance of the payment of service
charge without
protest over a period of time long before the application to the FTT was made,
the issue of proceedings in the county court to enforce payment of subsequent
amounts of
service
charge and the entry of default judgments in favour of the
lessor. As the Tribunal said in Cain at [18], “it would offend common
sense for a tenant who without qualification or protest has been paying a
series of demanded
service
charges over a period of time to be able to turn
around and deny that he has ever agreed or admitted to that which he has
previously paid without qualification or protest.”
34. It should be noted that the FTT
acknowledged the weakness of the respondent’s claim in this regard where,
having observed that the application related to service
charges back to 2007,
it stated that the respondent had “not taken timely action in respect of those
charges and we find it likely that little evidence will be available of the
services
provided” but added “We do not consider this should prevent the
application proceeding in its entirety.” On the basis of this statement, with
its reference to the “entirety” of the application, it appears that the FTT may
not have taken into account its statutory duty to strike out part of the
proceedings or case where it does not have jurisdiction in relation to that
part: see rule 9(2) above.
35.
The Tribunal takes the view
that the FTT should have found that the
respondent had agreed or admitted the
service
charges due before 1 April 2012,
and have struck out that part of the respondent’s claim which related to
service
charges between 2007 and 1 April 2012.
Service
charges after 31 March 2013
36. The appellant seeks to strike out the claim
as a whole on the basis of the respondent’s letter dated 21 March 2016 where
the respondent stated “I am more than happy to pay for any arrears accrued on
these two properties on Ground Rent and Service
Charges not paid.”
37. The letter must be read in the context of
the correspondence of which it forms part. It was a response to the letters
from the appellant’s solicitors dated 7 March 2016 in which demands for payment
were being made. The letter concerning 54 Kenilworth Court threatened
forfeiture proceedings in the event of non-payment within 14 days and enclosed
a section 146 notice. The letter concerning 22 Collingwood Court did not
threaten forfeiture but made reference to proceedings being issued in the
county court for a determination that the service
charge was due. It should be
said that it is not entirely clear what jurisdiction that letter was referring
to.
38. It is important to note that the respondent’s letter does not admit any particular sum being owed. It is a statement that the respondent “is more than happy to pay”, that is he is willing, if not necessarily ready or able to pay. What is he “more than happy to pay”? He is more than happy to pay “any arrears accrued” on the two properties “not paid”. There is an element of tautology in the words used, as the existence of arrears that have accrued presupposes debts owed to the landlord that have not been paid. But grammatical inelegancies apart, the natural construction of the words used is that the respondent is willing to pay whatever arrears there might be.
39. At this stage in the correspondence, the appellant had demanded two specific sums, one in relation to each property. There is nothing in the words of the letter whereby the respondent expressly, or by necessary implication or inference, accepts any liability to pay those sums. On the contrary, the respondent’s response is ambivalent, quite possibly deliberately so, and in the event of further correspondence one might anticipate the respondent to dispute the actual amount due, and to challenge the appellant to prove what arrears have accrued and have not been paid.
40. The respondent’s letter continues. The respondent, having asserted that he is “NOT” prepared to pay for “any interest, nor fees nor any other charges”, then requests an “up-to-date statement, and copy invoices, of what remains outstanding to date on the basis set out above”, and then states, in similar terms to the earlier paragraph, “I shall be more than happy to let you have by return a cheque in full and final settlement to date.”
41. It could be argued that those words tend to
negate the fact that the respondent is contesting the amount that is payable to
the appellant and that he is indicating that he is willing to pay whatever sum
the appellant demands. But that would, in my judgment, be going too far. There
remains an express condition that the appellant provide further documentation,
the purpose for which, one assumes (taking a generous view
of the respondent’s
conduct as one must on an application to strike out), being to enable the
respondent to assure himself that he is paying sums that are properly due.
There is still no express or implied agreement or admission of the amount that
is actually owing, and in the absence of such agreement or admission, the FTT
would have been wrong to allow the appellant’s application to strike out for
want of jurisdiction.
42. It is important to consider what issue it is
to which the application under section 27A relates. In Crosspite Ltd
v
Sachdev [2012] UKUT 321 (LC), a lessee who stated that he was “not averse
to paying an administration charge” was held to have admitted that a charge
could be made. As a result the tribunal did not have jurisdiction to determine
whether the lessor was entitled to demand an administration charge at all, the
lessee having admitted, by implication or inference, that he was under a
liability to pay such a charge.
43. In this case, there is no dispute that the
respondent is liable to pay a service
charge under the terms of the lease, and
if the issue before the FTT was whether the respondent was so liable, then the
respondent’s letter would in all likelihood have been decisive of that issue,
as the respondent could properly be taken to have admitted liability to pay. In
this case, however, the issue is not merely entitlement to charge, but the
reasonableness of the charge being claimed. The respondent may have accepted,
in the letter of 7 March 2016, that the appellant is entitled to a
service
charge, and agreed that he will pay such arrears as may be due, but there is no
agreement or admission of the amount that he is liable to pay.
44. In the circumstances, the FTT was correct in law in determining that the appellant’s application to strike out the entirety of the respondent’s application should fail.
Conclusion
45.
The appeal is therefore allowed in part. The Upper Tribunal determines that
the FTT had no jurisdiction to determine the service
charges payable by the
respondent in respect of periods prior to 1 April 2013 and that the FTT should
therefore have struck out that part of the respondent’s application pursuant to
rule 9(2).
Dated
31 July 2018
His Honour Judge Stuart Bridg