The tenant occupied a flat in a converted building made up of seven flats under a lease which provided for the payment of service charges in advance of maintenance works being carried out on the building. The charges were increased substantially in 2015 and 2016 in anticipation of major works. The landlord (management company) issued proceedings against the tenant for unpaid services charges. The tenant, who suffered from mild cognitive impairment, served a defence in which he claimed that his signature to the lease was obtained by fraud or under duress. In a counterclaim, the tenant also complained that the landlord was in breach of sections 21 and 22 of the Landlord and Tenant Act 1985 by failing to provide details of contractors’ estimates for the proposed works. In 2017 the defence was struck out because the tenant had not raised the allegations of duress and fraud in earlier proceedings in which he had been found liable for pre-March 2013 service charges. The counterclaim was also struck out as disclosing no reasonable grounds. However, the judge was concerned about the amounts claimed by the landlord and entered judgment “for an amount to be assessed” upon the filing of further evidence. She did not say that she intended to assess the reasonableness of the maintenance charges under section 19, which limited the amount of service charges payable to what was reasonable. The tenant served a new statement repeating many of the fraud allegations and claiming that the action had been dealt with in an unfairly discriminatory way because of his impairment. At a hearing in February 2019, the deputy district judge made the decision subsequently, in August 2019, set aside on the landlord’s appeal; and on the latter date judgment was entered against the tenant. Accordingly, the instant appeal was an appeal against a decision of 21 August 2019 when a judge allowed an appeal against an order made by a deputy district judge on 26 February 2019. In the instant appeal the tenant submitted, inter alia, that: (1) section 19 of the 1985 Act required the court to adjudicate on the reasonableness of all claims for service charges before any monetary judgment could be entered; and (2) the requirement to plead that service charges were unreasonable would exclude from the protection of the 1985 Act tenants who suffered from a disability and could not afford legal representation.
On the tenant’s appeal—
Held, appeal dismissed. (1) It was incumbent on a tenant who contended that service charges were irrecoverable in part by reason of section 19 of the Landlord and Tenant Act 1985 to plead that case in the defence: section 19 did not place an onus on the court to investigate the issue of reasonableness in all cases, whether defended or not. The general rule was that a party wishing to rely on legislative provisions had to invoke them. Section 19 adjusted the contractual rights arising under a tenancy as between the parties to that tenancy, preventing the landlord from demanding unreasonable service charges under a lease provision; but it did not direct the court how to proceed in the event of a challenge to the amount claimed. If a defence was raised that the debt was not properly due because of the terms of the contract between the parties, as adjusted by the 1985 Act, the court would adjudicate on that issue. Otherwise, it would not. The CPR could not be abrogated simply because there were some tenants who could not afford legal representation and who might be unable to articulate their case: the court had a wide discretion to ensure fairness in procedural matters and would make reasonable adjustments for a tenant who appeared in person or was disabled in a relevant way. However, it was not a reasonable adjustment to conduct the litigation on the basis that the landlord was required to deal with the case without any notice of the tenant’s objections to the service charge. On the facts, the documents produced by the tenant showed that he had understood the need to set out his case and had done so. The documents also showed a knowledge of the relevant law and procedure, but did not show any substantial challenge to the reasonableness of the service charges (paras 42, 44, 64–67, 69, 71, 85, 86, 87).
(2) Once the judge had struck out the defence in its entirety in a claim for a specified amount, she should have considered what issues remained open to the tenant in relation to the amount of that sum; and it was open to her to direct a proper defence addressing only the amount of the recoverable services charges. However, instead, the judge had adjourned to enable the service of further evidence. She should have struck out most of the tenant’s new statement as a further abuse of the court’s process and then made a judicial determination of what remained. The judge had erred in her analysis of the situation and in failing to identify which issues arose for determination: she had approached the matter on the basis that any conceivable defence to the service charges was open to the tenant. The proposal to transfer the whole case to the tribunal was also not a solution that was properly open to the judge: section 176A of the Commonhold and Leasehold Reform Act 2002 required the court to identify a “question” which “falls for determination” which it might then transfer to the tribunal. However, the judge had in substance allowed the tenant the opportunity to raise a defence to the reasonableness of the service charges. The further statement failed to set out a case, and at that point the only proper course open to the judge was to decline to have regard to it and to enter judgment for the landlord in the sum claimed (paras 74, 78, 81–85, 86, 87).
James E Petts (instructed by Weil, Gotshal & Manges (London) LLP) for the tenant.
Ryan S Kohli (instructed by KDL Law) for the landlord.