FirstPort Property Services Ltd v Settlers Court RTM Company Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Lord Briggs,Lord Sales,Lady Rose,Lord Burrows,Lord Leggatt |
| Judgment Date | 12 January 2022 |
| Neutral Citation | [2022] UKSC 1 |
| Year | 2022 |
| Court | Supreme Court |
[2022] UKSC 1
Lord Briggs
Lord Sales
Lord Leggatt
Lord Burrows
Lady Rose
Appellant
Simon Allison
Kimberley Ziya
(Instructed by FirstPort Ltd Legal Services)
1st Respondent (Settlers Court RTM Company Ltd)
Mark Loveday
Amanda Gourlay
(Instructed by Lazarev Cleaver LLP)
2nd to 14th Respondents (as listed below)
Intervener (Association of Residential Managing Agents Ltd) (written submissions only)
Rupert Cohen
(Instructed by Property Management Legal Services Ltd)
Respondents:
(1) Settlers Court RTM Company Ltd
(2) [ Mr David Alexander Taylor]
(3) [ Mr Shan Peng and Ms Yingchao Dai]
(4) [ Ms Kanna Parasuraman]
(5) [ Mr Simon Gee]
(6) [ Mr Noel Gordon Young and Mrs Diane Young]
(7) [ Ms Poh Poh Tan]
(8) [ Mr Jeremy Kam Cheong Lee]
(9) [ Ms Ommar Win]
(10) [ Mr Stephen David Huggins and Mrs Jean Elizabeth Huggins]
(11) [ Ms Elena Gabriela Sandu]
(12) [ Ms Marghalar Rasulzada]
(13) [ Mr Qiming Li]
(14) [ Mr Amitesh Caesar Mishra and Ms Chiu Hoong Lim]
Heard on 10 and 11 November 2021
( with whom Lord Sales, Lord Leggatt, Lord Burrows and Lady Rose agree)
This appeal concerns the extent of the “right to manage” conferred by Chapter 1 of Part 2 of the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”). In bare outline, the 2002 Act enables long leasehold tenants of residential flats to take over the management of the building of which their flats form part through the medium of a company (“the RTM company”) of which they are members, in place either of the landlord or any other person upon whom management rights are conferred under the terms of the leases of the flats.
The problem with which this appeal is concerned typically arises where the relevant building (whether a purpose-built block of flats or a house converted into flats) forms part of a larger estate containing other blocks or houses together with facilities or amenities which, under the relevant leasehold structure, are managed by a common landlord or other third party at the collective expense of the tenants of all the blocks or houses in the estate, and which are not exclusively used or enjoyed by the tenants of flats in the relevant building (“the estate facilities”). The question is whether the 2002 Act confers upon the RTM company any and if so what rights of management of the estate facilities.
The Appellant says that the 2002 Act confers upon the RTM company an exclusive right to manage the relevant building, together with any other facilities used exclusively by tenants within that building, but no right to manage the estate facilities. The First Respondent RTM company claims all those exclusive rights, and also a right to share in the management of the estate facilities, together with any other person entitled or obliged to do so, with the terms of shared management and the allocation of its cost to be resolved between them by agreement.
This is a leapfrog appeal from the Upper Tribunal (“UT”). Both it and the First-tier Tribunal (“F-tT”) regarded themselves as bound to decide the question in favour of the Respondents by the decision of the Court of Appeal in Gala Unity Ltd v Ariadne Road RTM Co Ltd [2012] EWCA Civ 1372; [2013] 1 WLR 988. It therefore falls to this court to determine whether that case, which has stood as binding authority for just over nine years, was correctly decided. By contrast with the Court of Appeal in Gala Unity (which was addressed by lay representatives of the companies on both sides) this court has enjoyed the considerable benefit of extensive submissions from teams of counsel experienced in this specialist field, together with the written submissions and evidence of the Association of Residential Managing Agents Ltd (“ARMA”), as intervener. We are particularly grateful to Ms Gourlay who, we were told, appeared pro bono on behalf of the First Respondent RTM company.
This appeal turns upon the true construction of the relevant provisions of the 2002 Act, which sets up a single “right to manage” scheme, enforceable as of right, but applicable to a very wide variety of different types of residential leasehold arrangements, both in terms of buildings and lease structures. The issue is not therefore sensitive to the particular facts of this case, but a brief description of them may illustrate some of the difficulties to which the relevant statutory provisions give rise, especially if interpreted in a particular way.
The locus in quo for this dispute is the Virginia Quay Estate (“the Estate”), lying on the north bank of the tidal Thames opposite the O2 Centre (formerly the Millennium Dome). It was developed between 1999 and 2002 as a residential estate containing ten blocks of flats (ranging from five to 11 storeys) and rows of three storey freehold terraced houses. The blocks of flats and houses are surrounded by communal areas including accessways, gardens and grounds together with a river wall separating the Estate from the Thames. The communal areas, including the river wall, are all “estate facilities” as defined above, because they serve or are used by all the residential occupiers of the blocks of flats and houses. The Estate includes some 778 residential units in all.
One of the blocks of flats is called Settlers Court. It contains 76 flats, all let on 999-year leases in substantially identical terms. The Appellant FirstPort Property Services Ltd (“FirstPort”) is named in all the leases of flats within the Estate as the management company (then called Peverel OM Ltd) responsible for the management of the buildings, houses and estate facilities throughout the Estate, and entitled to payment of service charges from lessees (and freehold rentcharges from owners of the freehold houses). The service charge provisions (and therefore the Appellant's service charge accounts) divide the service charge liabilities and expenditure into Estate Costs, Water/Drainage Costs, Block Costs and Parking Facility Costs, with a stated proportion of each type due from each leaseholder. The Appellant covenants to provide specified management services described under those headings, and the lessees covenant to pay the Appellant their specified share of the costs of management.
The services consisting of managing the estate facilities (“the Estate Services”) do not exactly correspond with Estate Costs as defined in the leases, but they include maintenance of all the communal areas (including the river wall), secure parking control systems, CCTV camera installations, on-site concierge and management facilities. In 2015–16 the recoverable cost of the Estate Services (“the Estate Charges”) amounted to £379,702.78, and the aggregate share of them payable by the lessees within Settlers Court was 15.2% of the total.
The First Respondent Settlers Court RTM Company Ltd is the RTM company which, on 8 November 2014, acquired the statutory right to manage Settlers Court under the 2002 Act. The other respondents are all lessees of flats within Settlers Court. It is common ground that, from that date, the First Respondent has had both the exclusive responsibility and the exclusive right to manage the Settlers Court block itself, and the exclusive right to charge the lessees of Settlers Court for the provision of those management services, in place of the Appellant.
But the parties are in dispute about which of them have the responsibility and the right to provide the Estate Services, and the right to levy a proportion of the Estate Charges on the lessees of Settlers Court. In default of any agreement the Appellant has continued to provide the Estate Services, so as to avoid being in breach of its covenants to do so, given to the lessees of flats in the other blocks and to the freehold owners of the terraced houses. The Appellant claims that its exclusive right to provide and charge for the Estate Services is unaffected by the First Respondent's right to manage Settlers Court under the 2002 Act. But some of the lessees of Settlers Court and the First Respondent have denied liability to contribute a share of the Estate Charges, and the First Respondent has done nothing (with very minor exceptions) to contribute in kind to the provision of the Estate Services, pending agreement about some form of sharing of the cost. The basis of this denial is that, so it is said, the effect of the 2002 Act is to remove from the Appellant the right to provide the Estate Services, and the concomitant obligation of the Settlers Court lessees to pay the Appellant a share of the cost of providing them, unless there is a sharing agreement with the First Respondent which has yet to be made. The court was informed that the First Respondent is collecting from the Settlers Court lessees, and holding, a fund from which to make such payments, following an appropriate sharing agreement, or the outcome of this litigation. Meanwhile the Appellant is incurring a shortfall of approximately 15% between its cost of providing the Estate Services and the Estate Charges being received from all the other residential occupants of units within the Estate. Neither side suggests that the fault, if any, for the absence of a sharing agreement in the meantime is relevant to the issue as to the construction of the 2002 Act with which this appeal is concerned.
The “right to manage” provisions in the 2002 Act represent the second incursion by Parliament into the often uncomfortable relationship between long leaseholders of flats and the landlord or other third party responsible for the provision of services. Its first was in Part II of the Landlord and Tenant Act 1987 (“the 1987 Act”), which confers upon the Leasehold Valuation Tribunal (“LVT”), now the F-tT,...
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