Leasehold Enfranchisment Update - Elim Court RTM v Avon Freeholds Ltd

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Right to Manage

Substantial compliance

Case name and reference

Elim Court RTM v Avon Freeholds Ltd [2014] UKUT 0397

Summary

In 5 conjoined appeals the UT considered whether there had been a failure to comply with the statutory procedural provisions and where it concluded that there had been it went on to consider whether there was nevertheless substantial compliance.

Issues

The facts of each case were slightly different but together they raised the following issues:

“(a) The Saturday/Sunday issue, namely, whether a notice inviting participation is required by section 78(5)(b) of the 2002 Act to inform non-participating tenants that the RTM company's articles of association are available for inspection on 3 days at least one of which must be a Saturday or Sunday, and, if that question is answered affirmatively, whether the consequence of non-compliance with the requirement is fatal to the whole right to manage procedure or may be overlooked.

(b) The signature issue, namely whether the disputed claim notices purported to be signed by a company and, if they did, whether that signature was ineffective for failing to comply with section 44, Companies Act 2006 ; if the signature was ineffective, whether the notice was nonetheless a good notice for the purpose of section 79 of the 2002 Act and, if it was not, whether its deficiencies are fatal to the whole procedure or may be overlooked.

(c) The intermediate landlord issue, namely whether the claim notice at Elim Court was served on the intermediate landlord and, if it was not, whether service on the intermediate landlord was required and, if it was, whether the failure to serve the intermediate landlord was fatal to the whole right to manage procedure or whether the deficiencies in service could be overlooked.”

 

Decision

In relation to the Saturday/Sunday issue the judge held that the notice failed to comply with the statutory provisions and that there had not been substantial compliance because it was an important part of the statutory scheme that the articles of the RTM should be available for inspection on at least one weekend day.

In relation to the signature issue the Tribunal held that the notices were compliant and the issue of substantial compliance did not arise.

In relation to the intermediate landlord issue the court held that the obligation to serve the landlord was not one where substantial compliance can have been held by Parliament to suffice, and therefore the failure to serve was

Comment

The Deputy President’s formulation of the proper approach where there has been non compliance was as follows:

“The first task is to construe the statutory requirements in their relevant setting . . . and to consider whether substantial compliance can have been intended by Parliament to suffice. If substantial compliance is capable of having the same legal effect as full compliance with the relevant provision, it then falls to consider whether the steps which have been taken have substantially achieved the statutory objective. In addressing that question it is necessary for the Tribunal to consider whether it is satisfied that no such prejudice has been caused as would impair the integrity of the statutory process, with the burden of so satisfying it falling on the RTM company.”

The reasoning in this case, in particular the reference to “substantial compliance” must now be read in the light of the decision of the Court of Appeal in Natt v Osman [2014] EWCA 1520 Civ.