On 24 May 2021 the Court of Appeal handed down its judgment in the case of Keith Vernon Gell v 32 St John’s Road (Eastbourne) Management Company Limited [2021] EWCA Civ 789.
The Facts
Mr Gell occupied Flat 3, 32 St John’s Road, Eastbourne (“Flat 3”) under the terms of a lease which was granted on 4 May 2001 by means of a deed of surrender and re-grant (which effectively varied an earlier lease for Flat 3 from 1963).
The lease for Flat 3 dated 4 May 2001 contained a clause stating that the leaseholder of Flat 3, being Mr Gell, had to pay 22.5% of the total maintenance charge payable by all leaseholders of all flats in the building to the landlord. Further, and in reliance on this clause in Mr Gell’s lease, the landlord issued a claim for unpaid service charges totalling some £73,163.98, which mainly related to prospective major works which had not been carried out but were said to be necessary to maintain the building, particularly regarding concerns about the fire escape, the roof and asbestos.
Mr Gell acted as a litigant-in-person (being to represent himself) and in defence to the landlord’s claim he admitted that he signed the lease for Flat 3 dated 4 May 2001 but denied the same was binding on the basis that his signature had been obtained by duress and in bad faith. Mr Gell also stated that he should only have to pay the sum which the DWP had agreed to pay for service charges as part of his sickness benefit, being £44.81 per week.
Nowhere in his defence did Mr Gell raise any issue of the reasonableness of the amount of the service charges being claimed by the landlord and neither did he seek to contest the section 20 consultation procedure as being defective.
The landlord successfully applied for Mr Gell’s defence to be struck out on the basis that it had no merit or real prospects of success and sought judgment for the specified sum on the Claim Form like any other debt claim. However, the Deputy District Judge, who remained concerned that the consequences of her making an order relating to the service charges being claimed were that Mr Gell could lose his property, made a subsequent order referring the issue of the amount of the service charges which were payable by Mr Gell to the First-tier Tribunal (Property Chamber) (“F-tT”) for them to investigate the matter.
The landlord successfully appealed that order of the Deputy District Judge, however Mr Gell then appealed the judgment of the Circuit Court Judge with the matter going to the Court of Appeal.
The Court of Appeal
Before the Court of Appeal, the landlord contended that judgment should be entered for the specified sum on the Claim Form because there were no remaining issues in dispute which should be transferred to the Ft-T following Mr Gell’s defence being struck out. Mr Gell argued that the terms of section 19 of the Landlord and Tenant Act 1985 (“the 1985 Act”) meant that the Deputy District Judge had been correct to transfer proceedings to the Ft-T 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 on the basis that the role of the Court was that of referee rather than goalkeeper. Accordingly, and because Mr Gell’s defence failed to raise the issue of reasonableness of service charge, this was not an issue between the parties for the Court to make judgment on.
The Court of Appeal also held that section 19 of the 1985 Act does automatically require the Court to investigate the issue of reasonableness of service charges in all cases brought before it, and this is especially the case if a service charges claim is not defended and/or if the defendant leaseholder has not pleaded a reasonableness challenge and/or if the defence has been struck out.
Similarly, the Court of Appeal also held that the same principle should be applied to section 20 of the 1985 Act, being that the Court was not obliged to consider compliance with the section 20 consultation procedure as a matter of course and before judgment on a service charges claim could be entered. Finally, the Court of Appeal also held that Mr Gell’s status as a litigant-in-person did not in any way affect its decision.
Comment
Landlords, freeholders and management companies will be breathing a collective sigh of relief after the Court of Appeal’s judgment in this case, and many people will say that common sense has prevailed. The Courts are there to make decisions and pass judgment after considering and assessing the parties’ pleaded cases and evidence.
The Courts are not there to protect people from themselves and in particular litigants-in-person who may have failed to plead their position fully or properly.
This judgment is also a stark warning to any leaseholders who intend to defend a claim for unpaid service charges to seek proper legal advice as early as possible because it is clearly important to present a fully and properly particularised defence which challenges reasonableness and compliance with the section 20 consultation procedure (if applicable) so that the Court then has the ability to consider the same.
The above is accurate as at 16 June 2021. The information above may be subject to change during these ever-changing times.
