Updates

Robert Court RTM Company Limited v The Lough’s Property Management Limited [2019] UKUT 0105 (LC)

30th May 2019

Summary

An application to the FTT that fails to identify what it is, is not capable of being saved from invalidity under Rule 8.

If successful, landlords likely cannot recover their costs under Section 88 of the 2002 Act of proceedings in the FTT relating to the validity of applications under Section 84(3) from the RTM company.

Facts

RC served a Claim Notice on LPM to acquire the right to manage under Part 2, Chapter 1 of the Commonhold and Leasehold Reform Act dated 10 March 2017. LPM served a Counter-Notice contesting RC’s entitlement to acquire the RTM on 10 April 2017.

The parties agreed that, pursuant to Section 84(4) of the 2002 Act, RC had until 9 June 2017 to apply to the First-tier Tribunal (Property Chamber) for a determination that it was entitled to acquire the RTM.

On 31 May 2017, RC sent a partially completed copy of the FTT’s standard form RTM: Application relating to (No Fault) Right to Manage to the FTT. That form permits six different kinds of application to be made to the FTT under the RTM provisions of the 2002 Act.

The form attached copies of the Certificate of Incorporation and Articles of Association of RC, and a cheque for the issue fee. However, RC failed to indicate which of the six applications was being made by RC (by ticking one of the six available boxes on the form).

Further, for each of the six applications that may be made, further documents must be included. For an application for a determination as to the entitlement to acquire the RTM, copies of the Claim Notice and Counter-Notice must be attached. These were not attached.

On 8 June 2017, the FTT’s administrative staff returned the form to RC, asking RC to tick the relevant box and resend the application attaching the relevant further information.

On 12 June 2017, RC resubmitted the form, ticking the correct box, but failing to attach the Claim Notice and Counter-Notice.

On 13 June 2017, the FTT’s administrative staff again returned the form to RC, as it lacked the notices.

On 15 June 2017, RC submitted a complete application form, box ticked with the notices attached.

The FTT informed LPM that an application had been received, and LPM disputed that the FTT had jurisdiction to consider the application as it had been made out of time.

The matter proceeded in the FTT as an application to determine whether the application had been made out of time.

RC was successful at first instance, and LMP appealed the decision. By the appeal date, RC and LPM agreed that the appeal ought to be allowed. However, the parties were at odds as to the costs consequences of the application having been made out of time. LPM did not made a formal application for a determination as to the costs payable by RC to LMP under Section 88 of the 2002 Act, but did seek the UT’s guidance on the issue at the appeal hearing.

Issues

  1. Whether the application was made out of time;
  2. If the application were made out of time, the extent of RC’s liability for LPM’s costs under Chapter 2, Part 1 of the 2002 Act.

First instance

RC accepted that when the application was first sent on 31 May 2017, it was in breach of three requirements of the Tribunal Procedure (First-tier Tribunal) Rules 2013:

  1. Rule 26(2)(h), as it failed to state the result RC was seeking;
  2. Rule 26(2)(j), as it failed to state the reasons why RC was making the application; and
  3. Rule 26(2)(n), as it failed to attach additional documents required by practice direction (the Claim Notice and Counter-Notice).

RC also accepted that it had failed to comply with Rule 26(2)(n) when the application was sent the second time.

However, RC submitted that under Rule 26(1), an applicant starts proceedings by sending or delivering a notice of application to the FTT. Where that notice of application is defective, it is preserved by Rule 8(1), which provides that an “irregularity resulting from a failure to comply with any provision of these Rules, a practice direction or a direction does not itself render void the proceedings or any step taken in the proceedings.”

RC’s position was that as the FTT had not struck out the application under Rules 8(2) and 9 upon receipt of the defective application, RC had made a valid application under the Rules on 31 May 2017, regardless of its defects. It had therefore been made in time for the purposes of Section 84 of the 2002 Act.

LPM’s position was that the first time a proper application for the purposes of Section 84 of the 2002 Act was received by the FTT was after 9 June 2017. Prior to that date, nothing the FTT had received was identifiable as an application for a determination that RC was entitled to acquire the RTM. Accordingly, the FTT did not receive, prior to the limitation date, an application pursuant to Section 84(3) of the 2002 Act. Regardless of the effects of Rule 8(1), the FTT did not have jurisdiction to hear RC’s application.

The FTT agreed with RC. The FTT knew upon receipt of the application on 31 May 2017 that it was receiving an application pursuant to Part 2, Chapter 1 of the 2002 Act (being one of six possible applications). It was not fatal that the application was incomplete by virtue of Rule 8(1), and RC had perfected the application subsequently. That the perfection occurred out of time was irrelevant, as the application itself had already been made by that date.

Decision on appeal

Albeit that the appeal was conceded by RC, Deputy President Martin Roger QC gave judgment as he considered the issue of whether the application was valid to be an important one. He agreed with the parties that the appeal should succeed.

The Deputy President determined that when RC sent its defective application notice to the FTT on 31 May 2017 it was obvious that RC wanted to apply for something, but the document was not itself an application for anything. It was certainly not at that time an application under Section 84(3) of the 2002 Act.

This was not a defect that could be cured by Rule 8(1). Rule 8(1) can cure defects in compliance with the Rules, but cannot cure “a defect in compliance with the minimum requirements of section 84(3).” Unless the minimum requirements of Section 84(3) are met before the limitation date, no valid application under the 2002 Act can be made. At a minimum, an application under Section 84(3) must ask for a determination that the applicant is entitled to acquire the RTM.

The application sent to the FTT on 31 May 2017 did not satisfy that minimum requirement. This minimum requirement was only satisfied once the application as resubmitted on 12 June 2017, which was out of time. Rule 8(1) could then have perfected the failure to attach copies of the Claim Notice and Counter-Notice, had that resubmitted application have been made in time.

The Deputy President then made clear that he had no jurisdiction to make a costs order under Section 88 of the 2002 Act, because no such application had been made. However, he was willing to express a view as to the costs consequences of RC’s application having been made out of time.

He took the view that RC were only liable to pay LPM’s costs pursuant to the costs machinery of Part 2, Chapter 1 of the 2002 Act until 9 June 2017.

Under Section 88(1) of the 2002 Act, the general rule is that RC is liable to pay LPM’s reasonable costs incurred as a consequence of service of the Claim Notice.

Section 88(3) provides that RC pay LPM’s reasonable costs of proceedings under Part 2, Chapter 1 of the 2002 Act where RC makes an application under Section 84(3) and it is dismissed.

Sections 89(1)(a) and (2) provide, however, that where an RC’s Claim Notice is deemed withdrawn, RC’s liability for costs under Section 88 is limited only to the date of deemed withdrawal of the Claim Notice.

Under Section 87(1)(a) of the 2002 Act, if no application under Section 88(3) is made prior to the expiry of the limitation period, the Claim Notice is deemed withdrawn.

From the above, it followed that because RC’s application was not made in time, its Claim Notice was deemed withdrawn on 9 June 2017, and RC would only have to pay LPM’s reasonable costs incurred pursuant to Section 88 until that date.

However, throughout the proceedings RC had maintained the validity of its application, and this had caused LPM to incur significant cost in obtaining a determination that it was invalid. Given this, the Deputy President then considered whether RC should be estopped by convention from relying upon the strict application of the statute, and should be liable for LPM’s costs in any event.

After considering both Benedictus v Jalaram Ltd [1989] 1 EGLR 251 and Plintal v 36-48 Edgewood Drive RTM Co Ltd LRX/16/2007, the Deputy President determined that RC was not estopped.

Following Benedictus, had LMP accepted the validity of RC’s application, then if RC’s substantive application had failed, RC would then have been estopped from asserting that its application was made out of time to avoid costs liability.

Following Plintal, if RC had taken alternative positions – that (1) its application was valid, and it is entitled to acquire the RTM, but (2) if it is not entitled to acquire the RTM, is application was not valid – and the matter proceeded to a substantive determination by the FTT that RC was not entitled to acquire the RTM, then RC would have been estopped from arguing (2).

In both of the above cases, the parties proceeded to a substantive determination on a shared understanding that the underlying claim or application was valid, which formed the basis of an estoppel  by convention.

In this case, RC and LMP never proceeded on the basis that it was agreed that the application was valid. There was no consensus upon which an estoppel by convention could be founded. On the contrary, LMP always maintained that the application was invalid; LMP incurred its costs taking a position where the statute made clear that if LMP was correct, LMP would have to bear the lion’s share of its own costs.

Comment

An application to the FTT has minimum requirements that can be drawn from the wording of the statutory provision under which the application is made. Unless those minimum requirements are met in the application notice, that application notice will not be a valid application for the purposes of the statute.

However, if an application notice meets the minimum requirements of its relevant statute, but is defective in that it fails to comply with requirements under the Rules, it may be saved under Rule 8.

The Deputy President’s decision in respect of Section 88 costs was obiter, as no application was before him. However, landlords opposing the validity of an application under Section 84(3) of the 2002 Act should be wary; they are at risk of not being able to recover their costs from the RTM company if they succeed in establishing the application was not valid.

 

Newsletters

Sign up to our newsletter mailing list for the latest news.

Subscribe

Home