The appeal
27.Ms Sherratt advanced four grounds of appeal. They were:(1)that the appellants had been denied the opportunity to participate fully in the proceedings;(2)that the FTT had adopted an inappropriately formalistic approach to the appellants’ failure to comply with the direction requiring the service of witness statements and had failed to proceed with any degree of flexibility;(3)that it had unjustly denied the appellants the opportunity to rely on the material in the hearing bundle filed by the respondents; and(4)that it had erred in holding that the appellants had failed to prove beyond reasonable doubt that an offence had been committed.28.The target of the first three grounds of appeal is the FTT’s decision to refuse to permit the appellants to give oral evidence in support of their application. As Mr Wand pointed out, that was a case management decision. Mr Wand therefore relied on the undoubted principle that an appellate tribunal should rarely interfere with the exercise by a first instance tribunal of its case management function and will only do so if it was plainly wrong.29.In Broughton v Kop Football (Cayman) Limited [2012] EWCA Civ 1743 the Court of Appeal reiterated the importance of supporting first instance judges who make robust but fair case management decisions. Lewison LJ explained how an appellate court or tribunal should approach appeals against such decisions, at [51]:“Case management decisions are discretionary decisions. They often involve an attempt to find the least worst solution where parties have diametrically opposed interests. The discretion involved is entrusted to the first instance judge. An appellate court does not exercise the discretion for itself. It can interfere with the exercise of the discretion by a first instance judge where he has misdirected himself in law, has failed to take relevant factors into account, has taken into account irrelevant factors or has come to a decision that is plainly wrong in the sense of being outside the generous ambit where reasonable decision makers may disagree. So the question is not whether we would have made the same decisions as the judge. The question is whether the judge's decision was wrong in the sense that I have explained.”30.When she explained to the FTT that two of the appellants had sublet rooms in the property to persons who were not themselves applicants, Ms Sherratt had intended to reduce the amount of rent for which a repayment order was sought. It is nevertheless apparent from paragraph 9 of the FTT’s decision reproduced at [24] above, and in particular from its reference to “further fundamental evidence that went to the substance of the application”, that the FTT considered that the application could not succeed to any extent without the appellants correcting the impression given by their statement of case that they, and they alone, had lived at the property for the whole of the year in question. It had the same point in mind when in paragraph 11, reproduced at [25] above, it described the additional evidence which was proposed to be given as going “to the substance of whether and when an offence was being committed”. The FTT’s view that it would be unfair to the respondent to allow new evidence to be given seems to have been based on its belief that the evidence was essential to the success of the application. 31.The appellants’ fourth ground of appeal, which complains that the FTT was wrong in finding that they had proved beyond reasonable doubt that an offence was committed, engages the same point. It raises the question whether it was necessary for the FTT to investigate the identity of those in occupation or the periods of occupation before it could be satisfied that an offence had been committed.32.The FTT made no reference in its decision to the fact that Mr Jahanghir admitted that for the whole of the period in question the house was an HMO. The appellants had asserted that in their grounds of application and in their statement of case, and in his statement of case, drafted by Mr Wand, Mr Jahanghir had admitted it. It was a necessary inference from that omission that Mr Jahanghir accepted that for the whole of the year in question the house had been occupied by five or more persons (see Article 4 of the Licensing of Houses in Multiple Occupation (Prescribed Description) (England) Order 2018 (the 2018 Order). 33.Because their statements of case showed that the parties agreed that the house was an HMO, that was not something which the appellants were required to prove in order to be entitled to a rent repayment order. The FTT did not appreciate that.34.I do not think that the revelation on the morning of the hearing that two of the appellants had sublet their rooms in the house each for a period of six months made any difference to the facts which the appellants were required to prove. The offence which the appellants relied on as the basis of their application was that contrary to section 72(1) of the 2004 Act, Mr Jahanghir had had the control or management of an HMO which was required to be licensed but which was not so licensed. Whether a property is an HMO does not depend on whether the people in occupation are tenants or subtenants, or a mixture of the two; it depends only on the number of people in occupation and their living arrangements. The standard test in section 254(2), 2004 Act focusses on the use being made of the accommodation, whether those who are in occupation form a single household, and whether two or more of the households who occupy the accommodation share one or more basic amenities. Similarly, the type of HMO which is prescribed by the 2018 Order as requiring to be licensed does not depend on the status of the people in occupation. All that is required is that the HMO is occupied by five or more persons, living in two or more separate households, and that it meets the standard test under section 254(2).35.It was therefore irrelevant to the offence on which the application depended that, for part of the period under consideration, some of those in occupation of the house were sub-tenants, rather than direct tenants of the respondent. It was equally irrelevant that those who were in occupation were not the same people at all times.36.Of course, Mr Jahanghir complained in his statement of case that there may have been people other than the appellants in occupation of the house. But that complaint was made at the same time as he admitted that the house was an HMO. It was not Mr Jahanghir’s case that the number of persons in occupation had fallen below five at any time in the relevant period. 37.Once it was admitted by Ms Sherratt on behalf of the appellants that two of them had not been living at the house for part of the year, Mr Jahanghir might have wished to withdraw his admission that the house had always been an HMO. He might have wanted instead to put the appellants to proof that there had been five people living there at all material times. If there had been part of the year when there were fewer than five people in occupation, no offence would have been committed during that period. But the FTT’s decision contains no reference to a withdrawal of the admission and Mr Wand did not suggest that he had sought to do so. If he had asked the FTT for permission to withdraw the admission he could, of course, have been given it. But where a gap in the evidence is created by the withdrawal of an admission, fairness requires that the other party be given the opportunity to fill that gap by calling additional evidence, as the appellants wished to do in this case.38.The FTT was therefore wrong, in my judgment, to regard the identity of those in occupation as fundamental to the question of whether and when any offence had been committed. The only issues between the parties identified in their statements of case were whether Mr Jahanghir was the person managing or in control of the HMO, and whether he had a reasonable excuse for not having a licence. The burden of proving the defence of reasonable excuse was on Mr Jahanghir, and nothing in the appellants’ evidence was relevant to that question. The question whether he was the person in control or managing the HMO was a question of law which fell to be determined on the basis of the undisputed fact that Mr Jahanghir was in receipt of the rent for the premises which, on any view, was a rack rent (see section 263(1), 2004 Act).39.I am therefore satisfied that when the FTT decided that the appellants should not be permitted to give further evidence about the periods of subletting of the property, it was mistaken in regarding that material as “fundamental evidence that went to the substance of the application”.40.The FTT’s refusal to permit the appellants to give oral evidence was also based on the absence of any witness statements. But that overlooked the other formal documents in which the appellants had explained their case, namely their grounds of application and their statement of case, both of which contained statements of truth signed by each of the appellants. The FTT’s directions required that a witness statement should identify the case, be arranged in numbered paragraphs and end with a statement of truth and the signature of the witness. The appellants’ grounds of application and statement of case satisfied those minimal requirements. Nothing more elaborate in terms of the form of the document was required. It is quite true that two of the appellants would, at least, have had questions to answer about the period of their occupation of the house. But those questions were already prepared for them and highlighted in the respondent’s own statement of case which included the names of nine persons suspected by the respondent of having some connection with the house. The FTT might, after hearing the evidence, have considered that it was so unsatisfactory that it would reduce the amount of any rent repayment order it would otherwise have made, but what it could not fairly do was exclude any evidence from the appellants on the grounds that they had not provided a witness statement. They clearly had.41.I agree with the appellants that the FTT’s approach to the additional evidence they wished to rely on (to reduce the amount of their claim), and to the form in which their original case was presented, was misconceived and formulaic. In the face of the admissions made by Mr Jahanghir the FTT was clearly wrong to consider that the appellants had failed to provide material capable of proving beyond reasonable doubt that an offence had been committed. The only question was whether the statutory defence of reasonable excuse could be made out, and the evidential burden on that issue lay on the respondent. Far from being fundamental evidence which went to the substance of the application, the additional evidence on which the appellants wished to rely was unnecessary, because of the admissions. If those admissions had been withdrawn, it would have been necessary for the appellants to have been given the opportunity to adduce additional evidence. There was nothing unfair in expecting the respondent’s counsel to cross-examine the appellants on the basis of his own case that people other than the appellants had been in occupation.42.If the FTT had considered and rejected the statutory defence of reasonable excuse it would have been obliged to find on the basis of Mr Jahanghir’s admission that an offence had been committed during the whole of the relevant year and that it had jurisdiction to make a rent repayment order. It would then have had to consider whether the fact that some of the appellants had sublet their rooms for part of the time was material to the amount of the rent repayment order which could be made. The five appellants were joint tenants, each of whom was liable for the whole of the monthly rent. As joint tenants they were entitled, jointly, to make an application under section 41(1) 2016 Act for a rent repayment order. One proper order which the FTT could have made would have been an order in favour of all five appellants for payment to them of a single sum. It was not necessary for the FTT to be concerned about the proportions in which the appellants had contributed towards the monthly rent nor even whether one or other of the appellants had been out of occupation for part of the year. The FTT could of course have taken into account the conduct of the appellants if it was satisfied that any subletting was in breach of the tenancy agreement. It could also, in its discretion, have reduced the amount of the rent repayment order to reflect the fact that the source of some of the rent was money received by the appellants from their sub-tenants, but it certainly was not obliged to do so. The rent repayment regime is not compensatory, it is intended to act as a deterrent to “rogue” landlords, and often involves a windfall for tenants who have occupied property without experiencing any disadvantage or inconvenience from the fact that an HMO licence has never been granted to their landlord.43.For these reasons I consider that the FTT was wrong in its approach to the case management decision whether to permit the appellants to adduce further oral evidence supplementing and correcting their grounds of application and statement of case. The appellants were advised by unqualified lay representatives who failed to take proper instructions and who delayed in correcting errors. But even a professionally represented party can make mistakes, as Mr Jahanghir did when he signed a witness statement suggesting that they house had been let for only one year. The appellants should have done what Mr Jahanghir was advised to do, which was to submit a second statement correcting errors that he had made in his own original account. There was nothing in the errors themselves which stood in the way of the FTT determining the application on the day which had been appointed for it and it should have done so. For these reasons I set aside its substantive decision. 44.The FTT’s orders for costs made against the appellants and their lay representatives cannot survive the setting aside of its substantive decision. The orders were based on the proposition that the appellants had behaved unreasonably by coming to the tribunal unable to prove the serious offence they alleged against Mr Jahanghir. That proposition was unsound and I also set aside the costs orders.45.There has been no determination of the reasonable excuse defence, nor any investigation of the facts relevant to the amount of rent which it would be appropriate to order should be repaid if an offence was committed. For those reasons, as both parties agreed, it is necessary for me to remit the application to the FTT for further consideration by a differently constituted panel.46.I was asked by both parties to give initial directions so that progress could be made towards a resolution of the application. I direct that the Estate file an amended statement of case making clear the extent to which the admissions previously made are intended to be withdrawn. That can be done within 21 days. The appellants should then file any additional evidence on which they wish to rely in support of the application within a further 21 days. The parties should also consider whether they would be assisted to an earlier and more economical resolution of this dispute by a mediator. If they are attracted by that suggestion, they will find the FTT itself is in a position to provide a mediation service.Martin Rodger QCDeputy Chamber President25 July 2022