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Referee or goalkeeper? The Court of Appeal decides

The Court of Appeal recently considered the correct approach to be taken by a Court to the issue of reasonableness when the defence to a claim for service charges has been struck out. Ryan Kohli explains the outcome.

The case of Gell v 32 St John's Road (Eastbourne) Management Company Ltd [2021] EWCA Civ 789 was the first time the Court has considered that question in the 35 years since the Landlord and Tenant Act 1985 has been enacted.

The landlord contended that judgment should be entered for the specified sum on the Claim Form like any other debt claim. However, the tenant argued that the terms of section 19 of the Landlord and Tenant Act 1985 were such that the Court at first instance had been correct to transfer proceedings to the First Tier Tribunal (Property Chamber) under section 176A of the Commonhold and Leasehold Reform Act 2002 to determine the “question” of reasonableness notwithstanding that there was no pleaded case on the issue.

The Court of Appeal accepted the landlord’s argument that there was no “question” to be transferred after the defence had been struck out. The role of the Court was that of referee rather than goalkeeper: the tenant’s defence must raise the issue of reasonableness of service charges if it is to be placed in issue between the parties. In other words, service charge disputes are adversarial rather than inquisitorial.

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The Court held that section 19 of the 1985 Act does not place an onus on the Court to investigate the issue of reasonableness in all cases, whether they are defended or not. The same principle applies to section 20 of the 1985 Act: there is no independent obligation on the Court to consider the adequacy of compliance with consultation requirements before Judgment can be entered. Importantly, the Court held that a tenant’s status as a litigant-in-person does not affect this position. If Parliament had intended an inquisitorial process, the statutory language used in section 19 of the 1985 Act would have been very different and more akin to the mandatory requirement in section 84(2) of the Housing Act 1985 which prevents the Court from making an order for possession unless it is satisfied that it is reasonable to do so. 

The decision will come as a relief to freeholders across the country. If the tenant had been correct, further delay and uncertainty would have been inserted into the regime for the recovery of service charges. There would have to be a mechanism, whenever default judgment is obtained or a defence struck out, for the Court to consider the question of reasonableness and adequacy of consultation before Judgment could be entered. The Court of Appeal rightly recognised that this was wholly unworkable.

Ryan Kohli of Cornerstone Barristers represented the successful Respondent and was instructed by Kevin Lever of KDL Law.

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