Termhouse (Clarendon Court) Management Ltd v Athir Al-Balhaa
| Jurisdiction | England & Wales |
| Judge | Lord Justice Newey,Lord Justice Nugee,Mr Justice Francis |
| Judgment Date | 10 December 2021 |
| Neutral Citation | [2021] EWCA Civ 1881 |
| Docket Number | Case No: B2/2021/0515 |
| Court | Court of Appeal (Civil Division) |
[2021] EWCA Civ 1881
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE COUNTY COURT AT CENTRAL LONDON
Her Honour Judge Baucher
Case No: E01W1947
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Newey
Lord Justice Nugee
and
Mr Justice Francis
Case No: B2/2021/0515
Timothy Cowen (instructed by direct access) for the Appellant
Jonathan Wragg (instructed by PDC Law) for the Respondent
Hearing date: 1 December 2021
Approved Judgment
The First-tier Tribunal (Property Chamber) (“the FTT”) does not itself have enforcement powers, but its decisions can potentially be enforced through Court mechanisms, notably pursuant to section 176C of the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”) or section 27 of the Tribunals, Courts and Enforcement Act 2007 (“the 2007 Act”). The issue raised by the present appeal, which is of wider significance, is whether a decision of the FTT on an application under section 27A of the Landlord and Tenant Act 1985 (“the 1985 Act”) can be enforced in such a way.
Basic facts
Clarendon Court, Sidmouth Road, London NW2 comprises six blocks, each of ten flats. The appellant, Mr Athir Al-Balhaa, has a long lease of one of these. The freehold is held by Clarendon Court (Freehold) London Limited, a tenant-owned company. The respondent, Termhouse (Clarendon Court) Management Limited (“Termhouse”), a management company, has responsibility for, among other things, raising the service charges for Clarendon Court.
On 3 September 2017, Mr Al-Balhaa made an application to the FTT under section 27A of the 1985 Act. The application was stated to relate to service charges for 2013–2017. Asked by the application form for a “Description of the question(s) you wish the Tribunal to decide”, Mr Al-Balhaa listed, among other things, whether or not “(1) there are any service charges outstanding”, “(7) There are no provisions in the lease for me to make a compulsory contribution to the Reserve Funds” and “(9) the funds from the sale of the garages in the amount of £66,000 can be distributed and my share of £1,100 be paid to me”.
When the matter came before the FTT (Tribunal Judge Adrian Jack and Tribunal Member Susan Coughlin), it was agreed between the parties that “the sole issues for the Tribunal were the determination of the service charges due in 2015–16 and 2016–17” and that, under the terms of Mr Al-Balhaa's lease, “the landlord is entitled to recover contributions to the reserve fund from the tenant” and “the landlord is not entitled to recover through the service charge its legal costs incurred in litigation with the tenant” (see paragraphs 3 and 4 of the FTT's decision). In the course of its decision, given on 16 May 2018, the FTT explained that the landlord had claimed by way of service charge contributions two half-yearly payments of £2,385.01 for each of 2015–2016 and 2016–2017 (or, in total, £9,540.04) and that Mr Al-Balhaa had disputed a number of elements of the service charge accounts, including £23,604 for legal fees. The FTT decided that only £2,000 of the legal fees were properly allowable and concluded its decision as follows under the heading “DETERMINATION”:
“1. The figure of £21,604 in respect of legal costs is disallowed in the final service charge accounts for 2015–16. Otherwise nothing is disallowed.
2. Nothing is disallowed in the service charge demands on account in 2016–2017.
3. The landlord shall reimburse the tenant £200 in respect of the fees payable to the Tribunal.
4. The Tribunal refuses to make an order under section 20C of the Landlord and Tenant Act 1985 or a costs order under rule 13 of the Tribunal's Procedure Rules.”
On 9 August 2018, Termhouse applied to the County Court at Willesden for the FTT's decision to be enforced pursuant to CPR 70.5. The application, which was made using practice form N322A, identified “The amount of the decision” as £9,196.54 and left blank a box for “Less amount paid”. After adding a Court fee of £44 and solicitor's costs of £75.50, the “Total now owing” was given as £9,316.04.
On 25 September 2018, a “Proper Officer sitting at the County Court at Willesden” ordered that Termhouse “may enforce the award in this court” and specified the “amount enforceable” as £9,316.04.
On 22 October 2018, Mr Al-Balhaa applied for the 25 September order to be set aside. In a witness statement made in opposition to that application, Mr Reece Wheeldon of Termhouse's solicitors explained how the £9,316.54 figure had been arrived at. He said that, since Mr Al-Balhaa's contribution to Clarendon Court service charges is set by his lease at 1.59%, the amount that fell to be deducted from his service charges as a result of the FTT's disallowance of legal fees of £21,604 was “1.59% x £21,604 = £343.50”. On that basis:
“the Claimant sought to enforce the award of the FTT in the sum of £9540.04 — £343.50 = £9197.04. In addition to that sum the Claimant also sought its costs of seeking to enforce the award being £44.00 (the court fee) and £75.00 (being fixed legal costs) = £9,316.54.”
(I observe in passing that Mr Wheeldon's arithmetic has gone slightly awry. £9,540.04 minus £343.50 is £9,196.54 and the total when sums of £44 and £75 are added is £9,315.54, not £9,316.54. However, the amount deemed enforceable in the 25 September order was £9,316.04 and that accurately represented the aggregate of £9,196.54, £44 and the “solicitor's costs” of £75.50.)
District Judge Kanwar dismissed Mr Al-Balhaa's application on the papers on 27 September 2019, but Mr Al-Balhaa appealed. His appeal came before Her Honour Judge Baucher, sitting in the County Court at Central London, who, however, dismissed it. Mr Al-Balhaa now challenges Judge Baucher's decision in this Court.
The legal framework
Section 27A of the 1985 Act, pursuant to which Mr Al-Balhaa made his application to the FTT, provides:
“(1) An application may be made to the appropriate tribunal for a determination whether a service charge is payable and, if it is, as to—
(a) the person by whom it is payable,
(b) the person to whom it is payable,
(c) the amount which is payable,
(d) the date at or by which it is payable, and
(e) the manner in which it is payable.
(2) Subsection (1) applies whether or not any payment has been made.
…
(4) No application under subsection ( 1) or (3) may be made in respect of a matter which—
(a) has been agreed or admitted by the tenant,
(b) has been, or is to be, referred to arbitration pursuant to a post-dispute arbitration agreement to which the tenant is a party,
(c) has been the subject of determination by a court, or
(d) has been the subject of determination by an arbitral tribunal pursuant to a post-dispute arbitration agreement.
(5) But the tenant is not to be taken to have agreed or admitted any matter by reason only of having made any payment ….”
Preceding sections of the 1985 Act impose restrictions on the service charges which can be claimed from tenants. Thus, by section 19(1), costs can be taken into account in determining the amount of a service charge “only to the extent that they are reasonably incurred” and, “where they are incurred on the provision of services or the carrying out of works, only if the services or works are of a reasonable standard” and “the amount payable shall be limited accordingly”. As Lewison LJ said of section 19(1) in Point West GR Ltd v Bassi [2020] EWCA Civ 795, [2020] 1 WLR 4102 (“ Point West”), at paragraph 8, “the 1985 Act overlays the lessee's contractual liability by the imposition of a cap”. Other limitations on service charge claims are to be found in, for example, section 20B (setting a time limit on service charge demands), section 21A (allowing a tenant to withhold payment of a service charge if the landlord has failed to supply information or a report in accordance with section 21) and section 21B (allowing a tenant to withhold payment of a service charge if a demand for it was not accompanied by the requisite summary of the rights and obligations of tenants).
Section 27A of the 1985 Act was inserted into it by the 2002 Act. As amended in 2013, the 2002 Act also provides, by section 176A, that, where Court proceedings raise a question which the FTT would have jurisdiction to determine under, among others, the 1985 Act, the Court may transfer to the FTT “so much of the proceedings as relate to the determination of that question” and, by section 176A(3), once the FTT “has determined the question, the court may give effect to the determination in an order of the court”. When first enacted, the 2002 Act similarly provided, by paragraph 3 of schedule 12, for transfers to the leasehold valuation tribunal, the FTT not yet having been established.
Paragraph 3 of schedule 12 to the 2002 Act and, now, section 176A(3) of that Act find an echo in section 81(5A) of the Housing Act 1996 (“the 1996 Act”), which was first added to the 1996 Act by the 2002 Act. In its present form, section 81, headed “Restriction on termination of tenancy for failure to pay service charge”, provides:
“(1) A landlord may not, in relation to premises let as a dwelling, exercise a right of re-entry or forfeiture for failure by a tenant to pay a service charge or administration charge unless—
(a) it is finally determined by (or on appeal from) the appropriate tribunal or by a court, or by an arbitral tribunal in proceedings pursuant to a post-dispute arbitration agreement, that the amount of the...
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