Landlord and tenant – Service charges – Reasonableness – Judge striking out appellant tenant’s defence to demand for service charges – Respondent landlord claiming judgment for sum specified on claim form – Court transferring case to First-tier Tribunal (FTT) to determine reasonableness of amount claimed – Respondent’s appeal against transfer allowed – Appellant appealing – Whether question of reasonableness to be determined notwithstanding issue not pleaded – Appeal dismissed
The appellant occupied flat 3, 32 St John’s Road, Eastbourne under a lease granted in May 2001.It contained a provision for the payment by the appellant of 22.5% of the total “maintenance charge” payable by the tenants of all the flats in the building to the respondent landlord.
The respondent issued proceedings against the appellant in 2016 for unpaid service charges said to be due in the sum of £73,163.98. The sums claimed mostly related to major works which were said to be necessary to maintain the building and were based on an assessment of the necessary works and their cost by a building surveyor. The works had not been carried out, and the claim was a prospective one to raise funds for the work. At their completion, there would be an adjustment to reflect their actual cost. The appellant served a defence to the claim but did not dispute the reasonableness of the amount claimed. The defence was struck out as an abuse of process and judgment was given for the respondent.
The deputy district judge then referred to the First-tier Tribunal (FTT) the issue of the amount of the service charges payable. An appeal against that referral was allowed on the basis that this was a claim for a specified amount of money, with the result that it was not open to the defendant to claim that the amount claimed was not due after the defence had been struck out.
The appellant appealed contending that, by virtue of section 19 of the Landlord and Tenant Act 1985, the court had properly transferred the proceedings to the FTT, under section 176A of the Commonhold and Leasehold Reform Act 2002, to determine the question of reasonableness notwithstanding that that issue had not been pleaded.
Held: The appeal was dismissed.
(1) A party whose defence had been struck out could not raise anything after that point which had to be pleaded in a defence before it could be relied on. The defence had to raise the issue of the reasonableness of service charges. It was incumbent on a tenant who contended that service charges were irrecoverable, in part because they were unreasonable under section 19 of the Landlord and Tenant Act 1985, to plead that case in the defence.
Section 19 did not place an onus on the court to investigate the issue of reasonableness in all cases, whether they were defended or not. The mere fact that its purpose was to provide protection for a tenant was not enough to justify reading in the necessary words. There were many legislative provisions designed to provide protections of one kind or another, and the general rule was that a party wishing to rely on them had to invoke them. That rule might be changed by parliament in particular cases but that was not done in section 19, which adjusted the contractual rights arising under a tenancy as between the parties to that tenancy. Section 19(2) expressly provided for the situation where service charges were payable before the cost of the works was incurred, and provided for an adjustment after the event to reflect any difference between the service charge and the actual costs incurred. It prevented the landlord from demanding unreasonable service charges. It did not direct the court how it should proceed if it was claimed that a landlord had made unreasonable service charge demands. The court would proceed in the same way that it did in any other debt claim. If a defence was raised that the debt was not properly due because of the terms of the contract between the parties, as adjusted by the Act, it would adjudicate on that issue. Otherwise, it would not. The same principle applied to the consultation process required under section 20 of the 1985 Act as there was no independent obligation on the court to consider the adequacy of compliance with consultation requirements before judgment could be entered: Yorkbrook Investments Ltd v Batten [1985] 2 EGLR 100 followed.
(2) The fact that a tenant was a litigant in person did not affect that position. The requirement for a party to set out its case in writing within a particular time of service of the claim form was not a complex concept. Their lack of representation would often justify making allowances in case management decisions and in conducting hearings. But it would not usually justify applying to litigants in person a lower standard of compliance with rules or orders of the court. On the facts of this case, the documents produced by the appellant showed that he understood the need to set out his case and had done so. The documents together showed a knowledge of the relevant law and of civil procedure. They did not show any substantial challenge to the reasonableness of the service charges. Where the defence was struck out, the position was the same as if there had never been one in the first place, and CPR 12.11(1)(a) applied: Barton v Wright Hassall LLP [2018] UKSC 12 followed.
(3) The decision to transfer the whole case to the FTT was not one which was properly open to the deputy district judge. Section 176A of the 2002 Act required the court to identify a “question” which “falls for determination” which it might then “transfer”. The question identified by the judge in her order as drawn up was “the reasonableness of the service charges”. The judge had allowed the appellant the opportunity to raise a defence to the reasonableness of the service charges. In the event, he produced a document which was far too late and which failed to set out a case which was sufficiently meritorious to justify its admission at that stage. The only appropriate course was for the judge was to decline to have regard to it and to enter judgment for the claimant in the sum claimed plus interest, and to make an order for costs. That was what the judge did on appeal. That was the right course and one which was reasonably open to him.
James Petts (instructed by Weil, Gotshal & Manges (London) LLP) appeared for the appellant; Ryan Kohli (instructed by KDL Law) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of Gell v St John’s Road (Eastbourne) Management Co Ltd
