SINCLAIR GARDENS INVESTMENTS (KENSINGTON) LIMITED v OAK INVESTMENTS RTM COMPANY LIMITED LRX/52/2004

UPPER TRIBUNAL
LANDS CHAMBER
LRX/52/2004Case No LRX/52/2004
Between
SINCLAIR GARDENS INVESTMENTS (KENSINGTON) LIMITEDApplicantOAK INVESTMENTS RTM COMPANY LIMITEDRespondent
Before
by the PresidentDate 1 March 2005Property: 52 Station Road, London NW10Catchwords: LEASEHOLD ENFRANCHISEMENT – right to manage – failure to serve notice on qualifying tenant before giving claim notice – whether claim notice invalid – Commonhold and Leasehold Reform Act 2002 sections 78 and 79 – held claim notice not invalid – appeal dismissed
[1]This appeal, to be decided under the written representations procedure, raises a short point on the validity of a claim notice served by an RTM Company under section 79 of the Commonhold and Leasehold Reform Act 2002. Chapter 1 of Part 2 of the Act enables long leasehold tenants of flats in a self-contained building or part of a building in certain circumstances to acquire and exercise the right to manage the premises. They acquire and exercise the right to manage through the medium of an RTM company. Under section 74 those entitled to be members of the RTM company are the qualifying tenants of the flats and, after the date on which the right to manage is acquired, the landlords. A claim to acquire the right to manage is made by the RTM company (section 79). Section 78(1) of the Act provides for the service of a notice of invitation to participate:
“(1) Before making a claim to acquire the right to manage any premises, RTM company must give notice to each person who at the time when the notice is given – (a) is the qualifying tenant of a flat contained in the premises, but (b) neither is nor has agreed to become a member of the RTM company.”
[2]The claim notice in the present case related to a property known as 52 Station Road, Harlesden, London NW10 4UA, which comprises three flats, all of which are let on long leases. The claim notice was served on 28 January 2004 by the respondent, as an RTM company, on the appellant, the landlord of each of the flats. The appellant served a counter notice on 25 February 2004.[3]The tenant of two of the flats is Jane Asein, and she was a subscriber to the RTM Company. The tenants of the third flat, 52A Station Road, are Malaki Mallon and Cathleen O’Connell. Ms O’Connell applied for membership of the company and was elected a member on 12 January 2004. Under section 112(5) of the Act where two or more people jointly constitute the qualifying tenant any reference to the qualifying tenant is a reference to both or all of them. Consequently there was a requirement to serve notice inviting participation on Mr Mallon. No such notice, however, was served.[4]Section 79(2) of the Act provides as follows:
“(2) The claim notice may not be given unless each person required to be given a notice of invitation to participate has been given such a notice at least 14 days before”
. Under section 80(3) the claim notice must state the name of each qualifying tenant who is a member of the RTM company, and under section 79(8) a copy of the claim notice must be given to each qualifying tenant.[5]Before the LVT the landlord contended that failure to serve a notice of invitation to participate on Mr Mallon invalidated the claim notice so that it was not open to the LVT to 3 determine that the company was on the relevant date entitled to acquire the right to manage the premises in accordance with section 84(3). The LVT gave its decision in these terms: “12. It is clear that the notice of claim is flawed since it does not comply with Sections 78(1), 79(2) and 80(3) of the 2002 Act. However the Tribunal must look at the intention of the parties and the consequences of the error. The legislation provides for a notice inviting participation to be served on all parties who would have an interest to ensure that none of the qualifying tenants is disadvantaged either by being omitted from the RTM company or forced into a situation where they are obliged to participate without any input into the decision. In this case there are only three flats in the subject property, two of which are under the same ownership. Ms O’Connell has stated that Mr Mallon was aware of the application at all times and this is evidenced by the fact that he made an application to become a member of the Applicant on 13th April 2004, acknowledging that it was an oversight. The Tribunal is satisfied that Mr Mallon was fully aware of the proceedings and that his omission was inadvertent. The Applicant has claimed that this omission was covered by Regulation 4(c) of the Right to Manage (Prescribed Particulars and Forms) (England) Regulations 2003 which provides that the notice of claim will not be invalidated by any inaccuracies in the particulars. However, the Tribunal considers that the omission of one of the joint tenants is rather more than an inaccuracy and that this would not be covered by Regulation 49(c).[13]The Tribunal has come to the conclusion that the Respondent has not been prejudiced in any way by the failure to serve a notice inviting participation. The Respondent did not state specifically the nature of their objection in the counter notice and did not respond to a number of letters from the Applicant’s solicitors inviting them to proceed without the necessity of an application to the Tribunal. The application is in respect of a small property with effectively only two qualifying tenants and the Tribunal is satisfied that Mr Mallon, being aware of the application, has not been prejudiced in any way by the Applicant’s failure to serve notice of invitation to participate. He made an application to become a member of the Applicant as soon as practicable and has acknowledged in writing that the omission to give him notice was a mistake. The Tribunal has concluded that it would not be in the interests of the parties to refuse the application and accordingly has determined that on the relevant date the Applicant was entitled to acquire the right to manage the subject property.”[6]The landlord now appeals against that decision. It says that the LVT erred in law in deciding that a failure to observe the requirements of section 78(1) and 79(2) can be ignored by the Tribunal if there is no prejudice to the landlord. It says that if prejudice is a factor which can lawfully be taken into account it would be argued in every decision as to service of a flawed notice. Prejudice is only a factor to be taken into account if it is expressly mentioned in a statutory requirement. Certain statutory provisions, it says, enable an LVT to dispense with requirements if no prejudice would be caused but, it says, there is no such provision in relation to these particular statutory provisions. In any event, it says, there is prejudice to the landlord if it loses the right to manage its own building in circumstances in which the RTM company is not entitled to exercise the right to manage. 4[7]I do not accept these contentions. It is not the case that the failure to comply with a procedural requirement has the consequence of nullifying all subsequent steps unless there is some saving provision in the statute enabling the question of prejudice to be taken into account. The effect of procedural irregularities is explained in the Court of Appeal decision in R v Immigration Appeal Tribunal, ex parte Jeyeanthan [1999] 3 All ER 231. At 235c-e and 235j-236a Lord Woolf MR said this:
“What should be the approach to procedural irregularities? The issue is of general importance and has implications for the failure to observe procedural requirements outside the field of immigration. The conventional approach when there has been non-compliance with a procedural requirement laid down by a statute or regulation is to consider whether the requirement which was not complied with should be categorised as directory or mandatory. If it is categorised as directory it is usually assumed it can be safely ignored. If it is categorised as mandatory then it is usually assumed the defect cannot be remedied and has the effect of rendering subsequent events dependent on the requirement a nullity or void or as being made without jurisdiction and of no effect. The position is more complex than this and this approach distracts attention from the important question of what the legislator should be judged to have intended should be the consequence of the non-compliance. This has to be assessed on a consideration of the language of the legislation against the factual circumstances of the non-compliance. In the majority of cases it provides limited, if any, assistance to inquire whether the requirement is mandatory or directory. The requirement is never intended to be optional if a word such as ‘shall’ or ‘must’ is used… Because of what can be the very undesirable consequences of a procedural requirement which is made so fundamental that any departure from the requirement makes everything that happens thereafter irreversibly a nullity it is to be hoped that provisions intended to have this effect will be few and far between. In the majority of cases, whether the requirement is categorised as directory or mandatory, the tribunal before whom the defect is properly raised has the task of determining what are to be the consequences of failing to comply with the requirement in the context of all the facts and circumstances of the case in which the issue arises. In such a situation that tribunal’s task will be to seek to do what is just in all the circumstances (see Brayhead (Ascot) Ltd v Berkshire CC [1964] 1 All ER 149, [1964] 2 QB 303 applied by the House of Lords in London and Clydeside Estates Ltd v Aberdeen DC [1979] 3 All ER 876, [1980] 1 WLR 182).”
[8]Later in his judgment, having referred to the words of Lord Hailsham of St Marylebone LC in his speech in London and Clydeside Estate Limited v Aberdeen DC [1979] 3 All ER 876 at 882 to 883 on the categorisation of statutory requirements into mandatory and directory, Lord Woolf went on to say (at 238j-239b):
“Bearing in mind Lord Hailsham LC’s helpful guidance I suggest that the right approach is to regard the question of whether a requirement is directory or mandatory as only at most a first step. In the majority of cases there are other questions which have to be asked which are more likely to be of greater assistance than the application of the mandatory/directory test. The questions which are likely to arise are as follows: Is the statutory requirement fulfilled if there has been substantial compliance with the requirement and, if so, has there been substantial compliance in the case in issue even 5 though there has not been strict compliance? (The substantial compliance question.) Is the non-compliance capable of being waived, and if so, has it, or can it and should it be waived in this particular case? (The discretionary question.) I treat the grant of an extension of time for compliance as a waiver. If it is not capable of being waived or is not waived then what is the consequence of the non-compliance? (The consequences question.) Which questions arise will depend upon the facts of the case and the nature of the particular requirement. The advantage of focusing on these questions is that they should avoid the unjust and unintended consequences which can flow from an approach solely dependent on dividing requirements into mandatory ones, which oust jurisdiction, or directory, which do not. If the result of non-compliance goes to jurisdiction it will be said jurisdiction cannot be conferred where it does not otherwise exist by consent or waiver.”
[9]The appellant relies on five decisions, three in the Court of Appeal and two in county courts, in support of its contention that considerations of prejudice are not relevant to the issue of validity. All related to notices served under the Leasehold Reform, Housing and Urban Development Act 1993. None of them in my judgment would tend to suggest that the approach set out by Lord Woolf in the passages I have quoted is not properly to be applied in the present case. Cadogan v Morris [1999]1 EGLR 59 related to the requirement in section 42(3)(c) of the 1993 Act that the tenant’s notice must specify the premium which the tenant proposes to pay. The court held that a notice that specified an unrealistically low premium was invalid. The tenant was not required to specify the final figure that he might be prepared to go to, but the figure had to be a reasonable one. It is clear (see 60H and K) that prejudice to the landlord would be likely to arise if an unrealistically low figure were specified, in that it could reduce the prospects of a negotiated settlement and would unfairly reduce the amount of the deposit payable by the tenant. In Keepers and Governors of John Lyon Grammar School v Secchi [1999] 3 EGLR 49 the Court of Appeal held to be invalid tenants’ notices that specified as the date for the service of the landlord’s counternotices a date one day short of the minimum two-month period prescribed by section 42(5). There was clear prejudice to the landlord because, as the court held, it was impossible to treat the notices so as to give the landlord the minimum two-month period for serving counternotices. Burman v Mount Cook Land Ltd [2002] Ch 256 concerned a landlord’s counternotice that failed to contain a statement that the landlord did or did not admit that the tenant had the right to acquire a new lease of the her flat or a statement of which (if any) of the proposals contained in the tenant’s notice were accepted by the landlord as required by section 45(2) and (3). Clearly a notice that did not tell the tenant these things prejudiced her in any decision she might make about proceeding with her claim. In each of these cases the failure to comply with the statutory requirements was one that had adverse consequences for the other party. The two county court cases, Viscount Chelsea v Hirshorn [1998] 2 EGLR 90 (another case in which the tenant’s notice specified less than two months for the counternotice) and Mutual Place Property Management Ltd v Blaquiere [1996] 2 EGLR 78 (where no plan accompanied the notice), do not seem to me to provide the appellant with any assistance.[10]In my judgment, in the light of the considerations referred to by Lord Woolf in Jeyeanthan, the LVT was entirely correct in approaching the question of the effect of the failure to comply with the statutory requirements in the way that it did. The purpose of 6 requiring notice of invitation to participate to be served on a qualifying tenant who neither is nor has agreed to become a member of the RTM Company is clearly to ensure that the interest of that tenant is protected. Under section 79(8) a copy of the claim notice must be given to each person who on the relevant date is the qualifying tenant of a flat contained in the premises. The provisions are thus designed to ensure that every qualifying tenant has the opportunity to participate in the RTM Company and is informed that a claim notice has been made by the RTM Company. In determining the effect of the failure to comply with one or other of these requirements the principal question for the Tribunal will be whether the qualifying tenant has in practice has such awareness of the procedures as the statute intended him to have. The LVT considered this question and expressed itself as satisfied that Mr Mallon was fully aware of the proceedings and that his omission had been inadvertent. It also concluded that the landlord had not been prejudiced in any way by the failure to serve a notice inviting participation, and, given the purpose of the section 79(8) requirement, it was undoubtedly correct to do so. The appeal must be dismissed. Dated 1 March 2005 George Bartlett QC, President 7