Tobicon Limited v Rhiannon Collinson & ors [2013] UKUT 047(LC)

Sycamore House is a five storey block of fourteen flats on the Merton Road in London. Tobicon Limited was the freehold owner of the block until 18 January 2011. Ms Collinson and her fellow respondents were the long lessees of flats in the block. Sycamore House (Merton) RTM Company Limited acquired the right to manage the block on 9 November 2010.

The lessees applied to the LVT for a determination as to their liability to pay service charges. They asserted that they were not liable to pay any service charges for the years 2005 to 2010 because the landlord had failed:

1. To provide an address for service in England and Wales as required by s.48 of the Landlord and Tenant Act 1987;
2. To include a summary notice of rights and obligations in relation to service charges with service charge demands contrary to s.21B of the 1985 Act;
3. To notify the Tenants within 18 months that relevant costs had been incurred pursuant to s.20B of the 1985 Act.

All three failures, if made out, permitted the lessees to withhold payment of service charges unless and until remedied.

The lessees named their landlord and two managing agents, Bells Southfields Ltd (“Bells”) and Coughlan Evans (“CE”) as respondents to their application. None of them appeared at the LVT hearing, at which the lessees (perhaps unsurprisingly) were successful. The LVT decided that:

1. None of the service charges for the 2005 – 2010 years had been validly claimed;
2. Service charges which had been paid had not all been spent;
3. The managing agents had failed to pass over to the RTM Company those sums, and
4. £9,400 of unexpended service charges should be paid to the RTM Company.

The lessees then obtained court orders by default from the Wandsworth County Court for repayment of service charges totalling £149,509.26. The orders were addressed to the landlord at the Bells’s address in Wimbledon.

Bells forwarded the court orders to the landlord’s solicitors, who in turn notified the landlord.

The landlord applied to the LVT for permission to appeal, saying that it had not been served with notice of the proceedings and had no knowledge of them.

The Lands Chamber granted permission to appeal, limited to the question of whether the landlord had been served with notice of the proceedings. The landlord was given permission to call evidence on that issue.

All over the place

At the date of the application, the landlord was registered in Jersey, although by the date of the appeal it was registered in the British Virgin Islands. Its business was administered from Zurich by a Ms Jennifer Bruegger.

The registered office in Jersey was at the offices of a company called Overseas Management Company (“OMC”). In late 2010, the address for OMC was on Broad Street, St Helier, Jersey, but by the date of the appeal, it was at 17 The Esplanade, St Helier, Jersey.

I will not dwell on the names and addresses of the various individuals, firms and companies given to the lessees at various points in time. Suffice it to say that the lessees appeared to have been notified of three different addresses for OMC in St Helier on Jersey, and of two different managing agents in the UK – Bells and CE. McEwen Parkinson solicitors acted for the landlord in the UK, and Ms Bruegger appears to have coordinated operations from Zurich.

Unfortunately for the landlord, at the hearing of the appeal the director who gave evidence on the issue of service was not completely up to speed with the details of the case and the landlord’s various representatives in England and Wales.

Submissions

The landlord’s legal argument developed over four propositions:

1. The LVT procedure regulations make no provision for deemed service. They allow the LVT to dispense with service or to make an order for substituted service if a party is outside the UK, but no such order had been made in this case;
2. There is no provision in the regulations for setting aside determinations in the event that a party has not been served;
3. In order to comply with article 6 of the European Convention of the Human Rights, there must be a mechanism for a decision to be set aside if taken in the absence of a party where that party has not been served, and
4. Even if there is no such power in the Regulations the Lands Chamber must in effect exercise such a power and remit the decision for rehearing on an appeal.

However, the landlord conceded that if the proceedings had not been properly served but the Appellant was aware of them the Lands Chamber was not bound to allow the appeal.

The regulations on service

Regulation 5(1) of the 2003 Regulations states that:

“On receipt of an application … the tribunal shall send a copy of the application and each of the documents accompanying it to each person named in it as a respondent”.

Regulation 23(1)(c) expressly permits service on agents, provided that the agent has been appointed to act on the principal’s behalf and gives consent to be served.

Regulations 23(4) and 23(5) permit the LVT, in specified circumstances, including the intended recipient being “out of the United Kingdom”, to make an order either dispensing with service or for substituted service.

The Regulations do not permit the LVT to make an order that the proceedings be served on an address outside the UK.

The Lands Chamber’s findings on service

HHJ Robinson found that the LVT proceedings were served on Bells and CE in their capacity as parties to the application. There was no evidence that they had been served as agents for the landlord.

HHJ Robinson also found as a matter of fact that the LVT proceedings were never served on the landlord at its registered address in Jersey, even though that was the address given by the lessees in their application:

• The case file disclosed that the LVT had not sent the application to Jersey;
• The lessees did not serve the application on the landlord directly. After April 2010, all correspondence relating to the application was sent to the landlord at Bells.

The case file also showed that the LVT had not made an order dispensing with service or for substituted service either.

It was incontrovertible that the proceedings came to the attention of McEwen Parkinson, the landlord’s solicitor in the UK because on 10 January 2011, Mr Parkinson wrote to the LVT about the application using the landlord’s name as his reference, albeit on behalf of Bells.

It followed from HHJ Robinson’s findings that there was no service on the landlord in accordance with the Regulations.

Having read this far, the landlord must have been wondering how it could lose the appeal. And yet…

Did the landlord know about the proceedings?

HHJ Robinson moved on from determining whether the application had been served on the landlord to consider whether the landlord knew about the proceedings.

The landlord’s evidence was that there was regular contact with Mr Taylor of Bells through Ms Bruegger of OMC, and with Mr Parkinson, the landlord’s solicitor, who was acting for the landlord in the appeal. This turned out to be far from helpful to the landlord’s cause. HHJ Robinson concluded:

“I accept Ms Collinson’s submission that it is inconceivable that neither Mr Taylor nor Mr Parkinson would have informed the [landlord] of the existence of the LVT proceedings … I find that the [landlord] was well aware of the proceedings but chose not to take any part in them and I reject Mr Isenchmid’s evidence to the contrary. At best his evidence was wholly unreliable and at worst it was untruthful … The only conclusion that can properly be drawn from the evidence as a whole is that Mr Taylor and Mr Parkinson informed the [landlord] about the LVT proceedings and the [landlord] took a deliberate decision not to take part in them”.

In HHJ Robinson’s view, the landlord had only been prompted to act by reason of the county court judgments against it for very large sums of money.

How did this finding affect the question of service and setting aside the LVT’s determination?

Dispensing with service: the Nelson effect

In connection with the setting aside of default judgment, in Nelson v Clearsprings (Management) Limited [2007] 2 All ER 407, CA Sir Anthony Clarke MR said:

“43. … It was pressed upon us that … on an application to set aside a judgment, (albeit irregularly obtained) a claimant might be able to demonstrate that there would be no point in setting aside the judgment…

“44. The question is whether the CPR permits such an approach. In our judgment there are procedural ways to achieve that result…

“45. As already stated, r 6.9 gives the court power to dispense with service. Although, again as already stated, the authorities show that the power should only be exercised in exceptional circumstances, the circumstances just described seem to us to be capable of amounting to exceptional circumstances. Thus, it might well make sense to dispense with service and refuse to set aside the judgment…”

HHJ Robinson reminded herself that, by virtue of s.175(4) of the 2002 Act, on an appeal the Lands Chamber may exercise any power which was available to the LVT.

Regulations 23(4)(a)(iii) and 23(5)(a) of the Regulations give the LVT power to dispense with service where the party is out of the UK.

Thus, in her judgment, the Lands Chamber had the power to dispense with service of the proceedings and to, in effect, refuse to set aside the LVT’s decision and remit the case. She continued:

“… In this case I have heard no evidence or submissions about the substantive merits of the Tenants’ application to the LVT, although I note that, apart from drawing attention to the fact that the LVT application gave an address for each respondent, the application for permission to appeal does not assert that the relevant notices were served. However, whether exceptional circumstances exist must be a question of fact in the particular case…

“The overriding objective in rule 2 of The Tribunal Procedure (Upper Tribunal)(Lands Chamber) Rules 2010 (SI 2010 No.2600) to deal with cases fairly and justly only applies to the exercise of powers under the rules rather than any powers on appeal. However, in my judgment it would be entirely appropriate for the Lands Chamber to apply similar principles to the exercise of any powers of the LVT on appeal pursuant to s.175(4) of the 2002 Act”.

“In my judgment, in a case such as the present the Lands Chamber has a discretion whether to allow the appeal. In this case I have found that the [landlord], although not formally served with the LVT proceedings, was well aware of them through its surveyor and solicitor in the UK and took a deliberate decision not to participate, actions which are consistent with its longstanding unwillingness to engage with management of the Flats. In my judgment those are exceptional circumstances which amply justify a decision by this tribunal to dispense with service of the LVT proceedings on the Appellant and to refuse to remit the case to the LVT. This appeal is dismissed”.

The amount of money at stake here is large – large enough perhaps to warrant the landlord considering a second appeal.

Questions of service of documents do not arisen very often, if at all, in my service charge practice, and I have a feeling that a fair amount of dust would fly up if I open my copy of the 2003 Regulations at regulation 23. For this reason if no other, this case is useful to me.

It is also a good reminder that outside the Landlord and Tenant Act 1985, sections 47 and 48 of the Landlord and Tenant Act 1987 can be critically important to the landlord’s ability to recover service charges.

It is also worth remembering that a procedural defect will not always see a party home, and an appeal on procedural grounds should set out the substantive reasons for bringing the appeal. Otherwise the Lands Chamber may dismiss the appeal because there is no reason to believe that the appellant will be successful on the substance of the dispute.

The challenges in digesting this case were more than legal for me: they were also geographical and constitutional: is Jersey part of the UK? Answer (I know now): no.