Firstport Property Services Ltd v Settlers Court RTM Co Ltd & Ors  UKUT 243 (LC)
2nd April 2020
Gala Unity Ltd v Ariadne Road RTM Co Ltd  EWCA Civ 1372 was not decided per incuriam, nor was the Court of Appeal’s reasoning leading up to that decision demonstrably wrong. Difficulties certainly can arise from an RTM Company acquiring a right to manage appurtenant property in conflict with the existing management company, but these arise from the Commonhold and Leasehold Reform Act 2002 itself and not the court’s interpretation of the Act.
The Respondent to the appeal (Settlers Court RTM Company Ltd) exercised its right to manage a block of flats known as Settlers Court in November 2014. The Appellant (Firstport Property Services Limited) is the named management company under lease of flats on an estate including Settlers Court. Firstport is still obliged to provide estate service due to its obligations to lessees and freeholders in other parts of the estate. However certain lessees refused of Settlers Court refused to pay their portion of the charges incurred by Firstport, arguing that by virtue of s.97(2) of the Act Firstport was no longer entitled to payment for their proportion of their service charge as that entitlement had passed to the RTM Company.
The RTM Company applied to the FTT for a determination of the payability of the service charges said to be due from leaseholders for estate management costs relating to appurtenant property shared with another block not itself managed by the RTM company.
Was Gala Unity wrongly decided to the extent that it determined that an RTM Co acquires the right to manage a wider estate where there is more than one block on a development?
Per Morelle v Wakeling  2 QB 379, the UT could only determine this issue on the basis that the decision in Gala Unity should be held to have been given per incuriam, i.e. that the Court of Appeal’s reasoning in reaching the decision had been demonstrably wrong.
The FTT found service charges were payable to the RTM Company and not Firstport, being bound by the Court of Appeal’s decision in Gala Unity. Permission to appeal was granted by the Deputy President.
Judge Siobhan McGrath found that the Court of Appeal in Gala Unity had not reached their decision in ignorance or forgetfulness of a binding authority. Neither was the reasoning leading to the decision demonstrably wrong notwithstanding that the implications of that decision were far-reaching and able to cause real difficulty. Difficulties “result from the legislation itself” . Nor was the statutory interpretation of sections 72(1)(a), 96 and 97 of the Act manifestly wrong.
The judgment records that the parties had together produced a draft agreement for the existing management company to continue to provide the estate services and collect service charges for the same. The FTT determined that the parties had not ultimately agree binding terms, and that part of the decision was not appealed.
An agreement between the old and new management companies for the old to retain entitlements that would otherwise pass under the Act is expressly permitted by s.97(2). In practice this is the clearest way of avoiding the consequences of a conflict of the sort occurring here: both Gala Unity and this case indicate that the legal remedies available in the absence of such contract are unclear.