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UPPER TRIBUNAL
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UT Neutral citation number: [2014] UKUT 6 (LC)
UTLC
Case Number: LRX/6/2013
TRIBUNALS,
COURTS AND ENFORCEMENT ACT 2007
LANDLORD
AND TENANT – right to manage – block of flats forming part of larger
development – whether premises a self-contained building - whether structurally
detached – appurtenant property – whether RTM acquired – whether point not
taken in counter-notice may be relied on in opposition to RTM claim - Commonhold
and Leasehold Reform Act 2002 ss 72 and 84 – appeal allowed
IN
THE MATTER OF AN APPEAL AGAINST A DECISION
OF
THE LEASEHOLD VALUATION TRIBUNAL FOR THE
LONDON RENT ASSESSMENT PANEL
BETWEEN ALBION RESIDENTIAL LIMITED (1)
ALBION
RIVERSIDE COMMERCIAL LIMITED (2)
ALBION
PROPERTIES LIMITED (3) Appellants
and
ALBION RIVERSIDE RESIDENTS RTM
COMPANY LIMITED Respondent
Main Building, Albion Riverside, 8 Hester Road, London SW11 4AR
Before:
Martin Rodger QC, Deputy President and P R Francis FRICS
Sitting
at: 43-45 Bedford Square, London WC1B 3AS
on
18
November 2013
Anthony Radevsky,
instructed by Hutchison Whampoa Properties (Europe) Ltd for the appellants
Phillip Rainey QC and James
Fieldsend, instructed by Albion Riverside Residents’ Management Co Ltd for
the respondent
The following cases are referred to in this decision:
Gala Unity v Ariadne Road RTM Co Ltd [2013] 1 WLR 988
Parsons v Trustees of Henry Smith’s Charity [1974] 1
WLR 435
Fairhold (Yorkshire) Limited v Trinity Wharf (SE16) RTM
Co Ltd [2013] UKUT 503 (LC)
No.1 Deansgate (Residential) Ltd v No.1 Deansgate RTM Ltd
[2013] UKUT 580 (LC)
DECISION
1.
Chapter 1 of Part 2 of the Commonhold and Leasehold Reform Act 2002
(“the 2002 Act”) created a statutory right to manage which is exercisable in
respect of premises to which the Chapter applies. By section 72(1)(a) of the
2002 Act the conditions which must be satisfied for the Chapter to apply to
premises include that “they consist of a self-contained building or part of a
building with or without appurtenant property”. That condition is supplemented
by section 72(2) which provides that a building is self-contained if it is
“structurally detached”.
2.
This appeal concerns the application of that apparently simple condition
to a visually striking and structurally complex modern building located on the
south bank of the Thames adjoining Battersea Bridge in central London. Referred to prosaically as “Main Building”, the subject of the appeal is one of
three buildings in a development known as Albion Riverside at Hester Road, London SW11; we will refer to it as “the Building”.
3.
The appeal is brought with the permission of the leasehold valuation
tribunal for the London Rent Assessment Panel (“the LVT”), against its decision
of 28 November 2012 that the respondent, Albion Riverside Residents RTM Company
Ltd was entitled to acquire the right to manage the Building following the
service of a claim notice under section 79 of the 2002 Act on 29 June 2012. The
claim notice identified the premises which are the subject of the claim as “Main Building, Albion Riverside, Hester Road, London” and asserted that those premises
“consist of a self-contained building”. The appellants are the owners of the
freehold interest in the Albion Riverside development and they contend that the
Building does not consist of a self-contained building because it is not
structurally detached from other parts of the development and hence it is not
premises over which the right to manage can be acquired.
4.
The suggestion that Chapter 1 of Part 2 of the 2002 Act might not apply
to the Building, because it might not be structurally detached, had not
occurred to the appellants or their advisers when they served a counter-notice
under section 84 on 6 August 2012 disputing the respondent’s entitlement to acquire
the right to manage. A different point was taken in the counter-notice, which
is not now pursued, but the more fundamental point was not mentioned until after
the respondent had applied to the LVT under section 84(3) of the 2002 Act, on 20
August 2012, for a determination that it was, indeed, entitled to acquire the
right to manage the Building.
5.
The appellants were represented before us by Mr Anthony Radevsky, and
the respondent by Mr Philip Rainey QC and Mr James Fieldsend. We are grateful
to counsel for their comprehensive written and oral submissions.
The issues
6.
The appeal raises two distinct issues:
(1) Are the appellants entitled
to dispute the respondent’s claim to acquire the right to manage on the ground
that the Building is not a self-contained building, when that contention was
not mentioned in the counter-notice? (‘The counter-notice issue’)
(2) If the appellants succeed on
the counter-notice issue, is the Building a self contained building within
section 72(1) of the 2002 Act, and so capable of constituting premises to which
the right to manage provisions apply? (‘The premises issue’)”
7.
In its decision of 28 November 2012 the LVT determined the
counter-notice issue in the appellants’ favour, holding that they were not
precluded from raising the premises issue by reason of its not having been mentioned
in the counter-notice and adding further that, in the LVT’s view, the respondent
had not been prejudiced by that omission. The LVT then considered and
determined the premises issue in favour of the respondent and held that the
Building was within the description in section 72 of the 2002 Act of premises
over which the right to manage could be acquired. It reached that conclusion
after referring to a recent decision of the Court of Appeal in Gala Unity v
Ariadne Road RTM Co Ltd [2013] 1 WLR 988, which it drew to the attention of
counsel and which it considered was determinative of the premises issue in the
respondent’s favour.
8.
As a result of its conclusion on the premises issue, the LVT determined
that the respondent was entitled to acquire the right to manage the Building.
In responding to the appeal, Mr Rainey QC and Mr Fieldsend have not sought to
uphold the LVT’s decision by relying on Gala Unity in the way it was
deployed by the LVT. They agreed with Mr Radevsky that Gala Unity
was concerned with a different issue, namely the treatment of appurtenant
property utilised by two self-contained buildings. Nonetheless they contend
that the LVT’s conclusion on the premises issue was correct and that the appeal
should be dismissed. They also assert that the LVT was wrong to allow the
appellants to raise the premises issue and ought to have determined the
counter-notice issue differently by holding that on an application brought by
an RTM company under section 84(3) of the 2002 Act a landlord is confined to
points specifically raised in its counter-notice.
The statutory provisions
9.
Chapter 1 of Part 2 of the 2002 Act makes provision for the acquisition
and exercise by an RTM company of rights in relation to the management of
premises to which the Chapter applies which are referred to in section 71(2) as
“the right to manage”. The premises to which the Chapter applies are
identified in section 72 which, so far as is material to this appeal, provides:
“72(1) This Chapter applies to premises if –
(a) they consist of a
self-contained building or part of a building, with or without
appurtenant property,
(b) - (c) …
(2) A building is a self-contained building if it is structurally
detached.
(3) A part of a building is a self-contained part of
the building if –
(a) it constitutes a vertical division of the
building,
(b) the
structure of the building is such that it could be redeveloped independently of
the rest of the building, and
(c) subsection 4 applies in relation
to it.
(4) This subsection applies in relation to a part of a
building if the relevant services provided for the occupiers of it –
(a) are
provided independently of the relevant services provided for occupiers of the
rest of the building, or
(b) could
be so provided without involving the carrying out of works likely to result in
a significant interruption in the provision of any relevant services for
occupiers of the rest of the building.
(5) Relevant
services are services provided by means of pipes, cables or other fixed
installations.”
The expression
“appurtenant property” which is used in section 72(1)(a) is defined in section
112(1) to mean, in relation to a building:
“… any garage, outhouse, garden, yard or
appurtenances belonging to, or usually enjoyed with the building…”
10.
The statutory procedure for the acquisition of the right to manage is
initiated, as far as the landlord of premises is concerned, by the service of a
claim notice under section 79(6) of the 2002 Act by the RTM company asserting
the right. The recipient of a claim notice may then give a counter-notice
under section 84, which provides:
“Counter-notices
84(1) A person who
is given a claim notice by a RTM company under section 79(6) may give a notice
(referred to in this Chapter as a “counter-notice”) to the company no later
than the date specified in the claim notice under section 80(6).
(2) A
counter-notice is a notice containing a statement either –
(a) admitting that
the RTM company was on the relevant date entitled to acquire the right to
manage the premises specified in the claim notice, or
(b) alleging that,
by reason of a specified provision of this Chapter, the RTM company was on that
date not so entitled,
and containing such other particulars
(if any) as may be required to be contained in counter-notices, and complying
with such requirements (if any) about the form of counter-notices, as may be
prescribed by regulations made by the appropriate national authority.
(3) Where the RTM company has been
given one or more counter-notices containing a statement such as is mentioned
in subsection (2)(b), the company may apply to a leasehold valuation tribunal
for a determination that it was on the relevant date entitled to acquire the
right to manage the premises.”
The premises issue
11.
The appeal proceeded before us as a review with a view to re-hearing,
the Tribunal (George Bartlett QC, President) having given permission for expert
evidence to be adduced on the premises issue. The LVT did not have the benefit
of expert evidence (and did not inspect the Building) but before us the
appellants called Mrs Deborah Lazarus MA FICE IStructE, a structural engineer
and Associate Director within Arup Advanced Technology and Research, a specialist
group within Arup Consulting Engineers. Mrs Lazarus produced a report
explaining the construction of the Building and gave oral evidence which was
helpful and largely uncontroversial. We were also provided with a
comprehensive set of A3 floor plans and elevations, various engineering reports
and a portfolio of photographs.
12.
Although the parties had been unable to agree a statement of facts, there
were no significant factual disputes, and having considered the report of Mrs
Lazarus and the other material included in the hearing bundle, and having
carried out an inspection of Albion Riverside on 21 November 2013, we base our
consideration of the issues on the following facts.
Facts
13.
Albion Riverside comprises an imposing and modernistic mixed commercial
and residential development located on the south bank of the River Thames in Hester Road, Battersea, London SW11 immediately due west of Battersea Bridge Road. The
principal part of the development comprises the Building and “Building 1” which
lie on the north side of Hester Road.
14.
The Building has a “C” shaped footprint and is of predominately concrete
framed construction with an impressive ground floor core entrance lobby
accessing lifts and stairs to 185 residential units on 7 floors of luxury apartments
and two further penthouse floors above. It is these units, together with
basement car parking spaces allocated to them and a ground floor swimming pool
complex, gymnasium and other common areas, to which the RTM application
applies. There are, in addition, office units at ground and a small part of
the first floor within the western part of the Building (having their own
separate entrances); to the east are the development’s administration offices,
further commercially let office accommodation. The Building lies atop a very
large basement car park which extends well beyond its own footprint to include
the area below Building 1 and below a large part of the contiguous piazza,
walkways and lawned grounds surrounding the buildings. The car park area also
incorporates the plant rooms and the base of the service and lift cores for Main Building, the commercial areas and for the adjacent Building 1 lying to the west.
That building has commercial units at ground floor with five storeys of housing
association flats above.
15.
Building 2 (Hutchison House), which lies on the south side of Hester Road, is entirely commercial and it is common ground that it is completely separate
from the Building and Building 1.
The LVT’s
approach
16.
The evidence before the LVT included a letter from Arup (the engineering
consultancy responsible for the technical aspects of the building’s
construction) dated 10 October 2012 which confirmed that:
“… the Main Building and Building 1
together with the underground car park were constructed at the same time as a
single structural entity. The common basement parking structure is integral
with that of the Main Building and Building 1 above, that is monolithic across
both the ground floor and basement floor slab structures.
17.
The LVT said, at paragraph 32:
“32. The
Tribunal accepted the evidence contained in the letter from Arup but had the
question of structural detachment been vital to our decision, we would have
invited the parties to consider adducing expert evidence on the matter. As it
is, we make no finding on whether or not the Main Building was structurally
detached from the car park but we proceed to determine the case on the
assumption that it was not structurally detached from the car park.”
They continued:
“33. In
our view all previous cases must now be looked at in the light of Gala [Gala
Unity v Ariadne Road RTM Co Ltd [2013] 1 WLR 988] where Sullivan LJ states:
‘In my
judgement, the wording of section 72(1)(a) is clear; there is no requirement
that the appurtenant property should appertain exclusively to the
self-contained building which is the subject of the claim to acquire the right
to manage.’
34. On the basis of Gala
our view is that this case is now clear cut. The underground car park is
appurtenant property being a ‘garage’ – which is specifically referred to in
section 112 of the Act and the Main Building is a self-contained building (with
the car park being appurtenant property) within section 72(1)(a) of the Act.”
The expert
evidence
18.
Mrs Lazarus said that she had been instructed to express her
professional opinion on whether or not the Building is structurally detached
from the basement car park beneath it, and from Building 1. When the Building
was under construction, her firm, Arup, had been appointed as engineers for the
structural and building services design together with wind, fire and acoustic
engineering matters for the development, and she therefore had access to all
relevant documentation including scheme design and engineering reports and detailed
construction plans. She had also undertaken an inspection of the development
in April 2013.
19.
In construction terms, Mrs Lazarus confirmed that the basement car park
and plant rooms are constructed as a single “box” with a waterproof perimeter
wall which is propped by the basement and ground floor slabs. The buoyancy
effect which would occur due to ground water pressures is countered by the
self-weight of the superstructure to the two buildings that lie above it. It
was noted that there are no vertical or horizontal movement joints in the area
of the basement between Main Building and Building 1 which would suggest any
form of structural interdependence between them. Access to the basement by
vehicles is from a single ramp below Building 1; pedestrian access is by four
separate cores providing lifts and staircases together with lateral support to
the structures above,
20.
The distinctive V pillars which are exposed externally and form a
significant architectural feature of the building are load bearing and generate
tie-forces that transfer through vertical pillars passing through the car park
onto the supporting piles beneath.
21.
Having described the detail and technical aspects of the construction,
Mrs Lazarus concluded that “the basement is a single structure within the
Albion Riverside development and is both structurally and functionally integral
with the buildings above it.” The stability of both buildings relies upon the
transfer of forces into the basement structure at ground level. The development
was, she said, planned, designed and constructed as a single integrated
structure. The Building could not be described as independent of the basement
and whilst it is separated from Building 1 above ground level, they are
integral at, and below, ground level.
22.
In cross-examination Mrs Lazarus said that her statement that the
buildings are “functionally integral” was a reference to the pipework, service
ducts, fire control systems and other common services that are integral to both
the Building and Building 1 and, in some respects, to Hutchison House also.
Submissions
on the premises issue
23.
Mr Radevsky submitted on behalf of the appellants that the LVT erred in
law in deciding the premises issue in favour of the respondent. It was, he
submitted, manifestly wrong to determine that the Building was a self-contained
building within the meaning of section 72(1)(a) of the 2002 Act. By paragraph
72(2), a self-contained building is one which is structurally detached; the LVT
proceeded on the assumption that the building was not structurally detached,
sitting as it did on top of part of a large car park which gives it support and
which also serves Building 1. The only proper conclusion open to the LVT had
been that the Building was not structurally detached, and that therefore it was
not a self-contained building to which the right to manage provisions of the
2002 Act applied.
24.
Mr Rainey QC submitted that the words “building” and “structurally
detached” are not defined in the 2002 Act and should be given their ordinary
meaning. We agree. There was no doubt, Mr Rainey went on, that the Main Building at Albion Riverside was a building within the meaning of section 72(1) of the
2002 Act. When he referred to “Main Building” Mr Rainey clarified that he meant
that part of the structure which is at or above ground level, and suggested
that “building” ordinarily means “a built structure above ground”. He
suggested that would not ordinarily call “the subterranean concrete box of the
car park below the Main Building” a “building”. Mr Rainey’s case was therefore
based on the premise that the subject of the claim to acquire the right to
manage was so much of the structure as was visible above ground, and did not
include that which was below ground. Everything below ground was categorised
by him as appurtenant property (including the four service cores and the plant
rooms).
25.
It was no part of the case advanced on behalf of the respondent that the
Building could be regarded as a self-contained part of a building within
section 72(3) of the 2002 Act and no evidence was adduced going to that
question.
26.
Mr Rainey submitted that the car park at basement level was not part of
the Main Building but was rightly regarded by the LVT as appurtenant property, and
should therefore be left out of consideration when asking whether the Main Building itself was structurally detached. Gala Unity (and the Tribunal’s
recent decision in Ninety Broomfield Road RTM Company Ltd v Triplerose Ltd [2013] UKUT 606 (LC)) were relevant in that they demonstrated that the existence of
shared appurtenant property and the prospect of overlapping management
functions was not an obstacle to the acquisition of the right to manage.
27.
Mr Rainey referred to the use of the expression “structurally detached”
in section 2 of the Leasehold Reform Act 1967, which had been considered by the
House of Lords in Parsons v Gage (Trustees of Henry Smith’s Charity) [1974]
1 WLR 435. Lord Wilberforce thought that the meaning of the expression was
reasonably plain saying (at page 439) ““Structurally detached” means detached
from any structure”. The context of section 72(1) of the 2002 Act, and in
particular the identification of a “self contained part” of a building in
section 72(3) as one which constitutes a “vertical division”, demonstrated that
structural attachment was concerned only with vertical division i.e. with
whether a building was detached from other buildings on either side, and not
with its footings and foundations.
28.
In Mr Rainey’s submission section 72 of the 2002 Act should be given a
purposive construction consistent with Parliament’s apparent intention that
residential premises which are self contained and capable of being managed as a
discrete unit should be so managed by the long leaseholders of flats in the
premises.
Discussion
and conclusion
29.
The principal issue for us to determine is whether or not the premises
in respect of which the right to manage is claimed comprise a self-contained
building. To satisfy that description the building in question must be
“structurally detached” within the meaning of section 72(2) of the 2002 Act.
That is an issue of fact which depends on the nature and degree of attachment
between the Building and other structures.
30.
We agree with Mr Radevsky that the statutory language speaks for itself
and that it is neither necessary nor helpful for a tribunal considering whether
premises are structurally detached to reframe the question in different terms.
The decision of the House of Lords in Parsons v Gage was not concerned
with the 2002 Act and did not purport to lay down a test of general application
wherever the expression “structurally detached” is employed in a statute; on
the contrary Lord Wilberforce was considering a specific submission made in the
context of a particular set of facts. In No.1 Deansgate (Residential) Ltd v
No.1 Deansgate RTM Ltd [2013] UKUT 580 (LC) the Tribunal (Judge Huskinson)
has recently dismissed an appeal based on the proposition (said to be derived
from Lord Wilbeforce’s dictum in Parsons) that any degree of connection
between the building in question and any other structure would be sufficient to
prevent it from being structurally detached.
31.
In order to consider whether premises are a building which is
structurally detached, it is first necessary to identify the premises to which
the claim relates. Until the premises have been clearly identified one cannot
begin to consider whether they are a building or part of a building or whether
they are structurally detached.
32.
In this case it is submitted by the respondents that the claim relates
only to so much of the structure as is at or above ground level and does not
include the car park or service cores beneath. Nonetheless it is submitted
that the claim does not relate to a structurally detached part of a building.
On the facts of this case we regard those submissions as quite inconsistent
with each other. We have described the Building in some detail above and it is
clear to us that as a matter of ordinary language the “building” with which
this claim is concerned does not begin at ground level. It includes the
entirety of each of the four reinforced concrete cores which rise from basement
level to the tenth floor; it includes the plant and service rooms clustered
around the two central cores at basement level and which extend south towards
Hester Road beyond the ground floor footprint of the Building; it includes the
structural “V” columns between the ground and second floors and the vertical
continuation of those columns below ground level into the car park which create
a “Y” shape; it includes at least that part of the continuous concrete slab at
ground floor level which lies within the ground floor footprint of the Building
itself; the same concrete slab forms the external piazza over part of which the
Building arches or overhangs and eventually forms the ground floor of Building
1; finally, the Building includes part of the continuous concrete raft at
basement level on which its supporting columns stand and which forms the floor
of the four cores and the service and plant rooms.
33.
The next step in the inquiry is to ask whether the building which has
been identified as the subject of the claim is self-contained i.e. is it
structurally detached? The Building, as we have described it above, is not structurally
detached at ground or basement level from the continuous concrete slabs which
form the floor and ceiling of the underground car park. We agree with Mr
Rainey that the car park itself would not ordinarily be regarded as part of the
Building (although that part of it which lies beneath the structure of the
Building probably would be); but that is not the issue. The issue is whether
the Building is structurally detached from the car park and from any other
structure. In circumstances where continuous concrete structures - the ground
and basement floor slabs - are major and integral components both of the
Building and of the car park, the piazza and Building 1, it is not possible in
our judgment to regard the Building as structurally detached.
34.
We do not accept Mr Rainey’s submission that, as a matter of ordinary
language, a building comprises only so much of a built structure as is visible
above ground level; the ordinary householder whose property includes a
basement, or the flat owner who has the use of storage or refuse areas beneath
a block of flats would be equally surprised by the suggestion that the basement
was not part of their building. But even allowing the respondent to define the
subject matter of its claim in that way, the Building so defined includes the
upper part of the four concrete cores (from ground to tenth floor level), the
upper part of the “Y” shaped struts which appear above ground as a “V” between
ground and second floor level), and so much of the continuous concrete slab at
ground level as comprises the ground floor itself. These are all vital
building components which are firmly attached to that which is below and around
the building as the respondent chooses to define it. The building cores are
continuous elements which cannot be divided in structural terms at ground floor
level, nor can the massive struts which support the upper floors and which
depend for their structural integrity on the supporting leg descending into and
through the car park into the pile foundations beneath and invisible at ground
level.
35.
We accept Mrs Lazarus’ evidence. As was clear to us from our
inspection, the Building cannot not, by any stretch of the imagination, be
considered to be structurally detached. Nor is it functionally detached. The
car park, which acts as support for the Building which, in turn, acts as a
counterweight to stop the car park “box” rising out of the ground, extends far
beyond the Building’s footprint and is used to accommodate vehicles for the
commercial premises in both buildings and for the housing association flats.
The core services are also, obviously, communal and inseparable which, although
not relevant to the issue of structural detachment explains (we assume) why it
has not been argued that the Building is a self contained part of a larger
building.
36.
We do not consider that the respondent is assisted by the adoption of a
purposive approach to the construction of section 72(1) and (2). The question
of structural detachment is a question of fact and having identified the manner
in which the Building has been constructed we can see no more benevolent
approach to the statutory language capable of producing a different outcome.
No doubt, as Mr Rainey emphasised, the right to manage could be exercised for
most practical purposes in relation to the Building either as we have defined
it, or as the respondent’s prefer to regard it. Nonetheless Parliament has
decided that in this, as in other statutory contexts, it is important for
practical reasons to confine the acquisition of the relevant right to buildings
which are structurally detached. In that way disputes or uncertainty will be
avoided in the event that repairs to shared structural elements are required,
or redevelopment is contemplated. It is not fanciful to speculate that during
the 999 year terms of the leases of flats in the Building major building
elements may have to be the subject of extensive work, including the floor and ceiling
slabs in the car park.
37.
The LVT determined the case on the assumption that the Building was not
structurally detached from the car park which surrounds it at basement level,
and stated expressly that is accepted the evidence of the Arup letter which
described the extent of the attachment. It was entitled to proceed on that
basis; even without undertaking an inspection it had sufficient material
available to it to enable it to have made a clear finding of fact that the
Building was not structurally detached. Unfortunately the LVT was then distracted
from the relevant question by its consideration of the issue of appurtenant
property to which attention had been drawn by the Court of Appeal’s very recent
decision in Gala Unity. The LVT considered that the car park was
appurtenant property within the meaning of section 112 (which, no doubt, to
some extent it is) but it also clearly regarded that designation as sufficient
to render irrelevant the fact that the Building is not structurally detached
from the car park. It was at that point that the LVT deviated into error.
38.
For premises to come within the right to manage provisions of the 2002
Act they must consist of a self contained building or part of a building with
or without appurtenant property. In most cases the application of the
statutory condition is likely to produce an obvious answer, but in cases
involving complex or unusual buildings, such as those at Albion Riverside, the
issue may require systematic consideration which begins by identifying the
premises which are said to constitute the building or part of a building to
which the claim relates, before considering whether those premises are
self-contained in the sense that they are structurally detached. The
identification of other property which is appurtenant to the self-contained
building or part of a building is a separate exercise which will not arise if
the principal subject matter of the claim is not self-contained. If the only
case being advanced is that the subject of an RTM claim is a self contained
building (and not a self contained part of a building) the existence of another
structure which is not itself part of the building but to which the building is
structurally attached will be fatal to the claim, and that will be the case
whether the attached structure is appurtenant property or not.
39.
Even if the respondent is entitled to define the premises to which the
claim relates as only so much of the Building as is visible above ground, it
cannot satisfy the requirement that the premises must be a self-contained
building by designating the structures below ground level to which the building
is clearly attached as appurtenant property.
40.
We are therefore satisfied that the LVT was wrong to decide that that
the Building was a self-contained building within the scope of section 72(1)(a)
of the 2002 Act. The Building is not self-contained for the reasons we have
given above. It has never been suggested by the respondent in this application
that the Building might alternatively qualify as a self-contained part of a
building for reasons which were not explored before us in any detail. The only
remaining question, therefore, is whether the appellants were entitled to raise
the premises issue at all, having not identified it in their counter-notice.
The counter-notice issue
41.
In a decision published after the LVT’s decision in this case, Fairhold
(Yorkshire) Limited v Trinity Wharf (SE16) RTM Co Ltd [2013] UKUT 503 (LC),
the Tribunal (Sir Keith Lindblom, President) determined the counter-notice
issue in the same way as the LVT had done. The Tribunal rejected the
submission made on behalf of an RTM company that it is incumbent on the recipient
of a claim notice given under section 79(6) of the 2002 Act to raise in its
counter-notice every challenge to the claim which it wants the LVT to consider.
That is substantially the same case as is advanced on behalf of the respondent
in this appeal. The Tribunal’s reasons for rejecting it were explained by the
President at paragraphs 34 to 36 of his decision, as follows:
“34. In
the first place, there is no statutory requirement to that effect. Section 84
does not provide that if an application is made by the RTM company under
section 84(3) a counter-notice is to be treated by the leasehold valuation
tribunal as delimiting its jurisdiction. Section 84(3) effectively defines the
scope of a tribunal’s jurisdiction as being to determine whether the RTM
company was “on the relevant date entitled to acquire the right to manage the
premises”. That is its statutory remit. There is no provision in section 84, or
elsewhere in the 2002 Act, whose effect is to confine that jurisdiction to the
contents of the counter-notice that has prompted the RTM company to apply for a
determination of its entitlement to acquire the right to manage.
35. In
my view it is a perfectly legitimate point for a landlord to take in opposing a
claim to acquire a right to manage its premises that the procedures prescribed
in the 2002 Act and the 2010 regulations have not been correctly followed. This
may include the contention that either the notice of invitation to participate
required by section 78 or the claim notice required by section 79, in
accordance with the requirements in section 80, is materially defective and
thus invalid. It is, of course, desirable that such a point should be taken at
the earliest opportunity and should, if possible, be raised in the
counter-notice given under section 84. But this is not to say that a tribunal
can avoid the task of satisfying itself that the statutory procedures have been
correctly followed if the point is taken only after the counter-notice has been
served, as it was in this case – in the appellant’s statement of case.
36. I
would add that, in my view, a tribunal may consider the procedural integrity of
the right to manage process, whether or not this has been raised by any of the
parties active in the process. There is nothing in the statutory provisions to
suggest that a tribunal may not act on its own initiative in that way,
provided, of course, that its procedure is fair throughout and, therefore, that
the parties are given a reasonable opportunity to present any relevant evidence
or submissions.”
42.
Mr Rainey QC was moderate and realistic in his submission that the
Tribunal ought not to follow Fairhold. It is of course open to the Tribunal
to depart from its own decisions, even very recent decisions delivered after
receiving full argument, but it will not do so unless it is satisfied that the
earlier decision was wrong.
43.
Mr Rainey argued that the Tribunal in Fairhold had not given sufficient
consideration to the position where no counter-notice is given at all and that,
had it done so, it would have recognised that the right to manage can be
acquired in the absence of a counter-notice, even where the building does not
qualify as premises to which Chapter 1 of Part 2 of the 2002 Act applies. He
suggested that as the right to manage interferes with the rights of third
parties, it is essential for the extent of any dispute to be identified as soon
as possible, and that it is the function of the counter-notice to define the
parameters of the dispute. Rather than require an RTM company which receives
no response to its claim notice to seek a determination from the court or
tribunal that it is entitled to exercise the right to manage, Parliament has
enacted that in default of a counter-notice which identifies valid grounds of
challenge the right will be acquired. It follows, Mr Rainey submitted, that if
a counter-notice is served the only challenge which stands in the way of the
acquisition of the right to manage is the specific challenge identified in the
counter-notice.
44.
We do not accept these submissions, and intend to follow the Tribunal’s
decision in Fairhold. We do not accept that inaction on the part of the
recipient of an invalid claim notice can result in the acquisition (and
deprivation) of rights in circumstances which do not come within those to which
Chapter 1 of Part 2 of the 2002 Act applies. If a claim notice is invalid
because it relates to a building which is not self-contained, or because it is
given by leaseholders who are too few in number or who are not qualifying
tenants, or if for any other reason the qualifying conditions set out in
section 72 are not satisfied, none of the provisions in the remaining sections
of Chapter 1 have any application. The satisfaction of the qualifying
conditions is essential to the jurisdiction of the LVT to make a determination
of entitlement under section 84(3). Where an issue going to the jurisdiction
of a first instance tribunal is raised in proceedings before it, or where the
same tribunal itself identifies such an issue, it is entitled to investigate it
and to determine it subject to the safeguards identified by the Tribunal in
paragraph 36 of Fairhold.
45.
For these reasons we conclude that the LVT was right to permit the
premises issue to be raised before it despite the fact that it had not been
identified in the appellants’ counter-notice.
46.
The appeal is therefore allowed.
Martin Rodger
QC, Deputy President
Paul Francis
FRICS
14 January
2014
