Case No. UKUT-27-(LC)-UTLC-Case-Numbers:-LC-2022-425

31.Ground 1 therefore proceeds on the basis of the FTT’s findings that the RTM company’s failure to give the appellant the claim notice was an oversight. The essence of ground 1 is that there were nevertheless one or more features in the facts of this case that distinguished it from Elim Court.32.Mr Bates began from the proposition that a landlord under a lease of the whole or part of the building “is entitled as of right” to receive a claim notice regardless of whether or not they have management functions under that lease, according to section 79(6). Second, he pointed out that the claim notice is central to the proper working of the statutory scheme. It confers the right to oppose the claim and to give a counter-notice. Third, the claim notice triggers the entitlement to costs of those listed in section 88(1), which are the same persons as those listed in section 79(6) (although I note that that entitlement is to “costs incurred … in consequence of a claim notice given by the company in relation to the premises”, and receipt of a claim notice is not said to be a pre-condition of the entitlement to costs). But at any rate, the appellant if it had received the claim notice would have been entitled both to take advice and to investigate its validity at the RTM company’s cost and to serve a counter-notice.33.Of course, those points apply equally to everyone to whom section 79(6) refers. They are all entitled to be given the notice, and for all of them receipt of a notice triggers the ability to object and to serve a counter-notice. Those points apply equally to the intermediate landlord who was not served in Elim Court. So they cannot be – and Mr Bates did not say they were – reasons why failure to serve invalidates the notice. They are useful as a reminder of the importance of the claim notice, which was one of the pointers given by Lewison LJ at his paragraph 52 (paragraph 19 above) in deciding whether failure to serve invalidates the claim.34.Moreover, Mr Bates acknowledged that prejudice to the individual parties is not a critical factor (Elim Court at paragraph 56). He did point out that the appellant had good reason to be aggrieved by the acquisition of the right to manage, because it puts at risk the ability of the management company to pay rent to the appellant. There was some argument as to whether it was open to Mr Bates to raise that point on appeal, but that does not matter because in any event it is not a ground on which the appellant could have opposed the claim, and Mr Bates did not suggest otherwise. It is impossible to see it as a reason why the failure to serve the appellant should invalidate the claim.35.Nor did Mr Bates rely on the difference in the area of the intermediate lease as a feature that distinguishes it from Elim Court. 36.The two factors Mr Bates relied upon in order to argue for a different outcome from Elim Court were:a.In Elim Court, the RTM company had tried to serve the intermediate landlord but through no particular fault of its own service had not been effective. A good faith attempt to serve is entirely different from a case where (for whatever reason) no attempt is made.b.Unlike in Elim Court, one of the other parties – namely the management company - had required the RTM company to produce evidence of service.37.As to that second point Mr Bates stressed the importance to the management company of ensuring that its own landlord knew about the claim since it does have management responsibilities which it will be unable to fulfil if the claim succeeds. I have difficulty in seeing that this is a relevant distinction. As Mr Jacob pointed out, the failure to serve one of the persons specified in section 79(6) is in all cases necessarily going to be raised in the counter-notice given by another party. And other parties will all have different reasons for wanting the missing party to have been served. I do not see any distinguishing feature in this point.38.Mr Bates I think accepted this at the hearing when he said that the difference between the two parties to the appeal was essentially whether in deciding whether the claim is invalidated by the failure to serve the reasons for that failure can be ignored.39.Mr Bates argued that they cannot. He said that the Court of Appeal’s decision in Elim Court was taken on the basis of the finding at first instance that the RTM company had attempted service and that the failure was inadvertent. That, he argued, was the essential backdrop to what is said at paragraph 74. He made the following important point, which I quote from his skeleton argument:“The FTT places great reliance on the fact that, as in Elim Court, the Appellant has no management functions under the 10-year lease. That may be so. But it was still entitled to receive a claim notice and then to make its own decision about whether its interests were best protected by serving a counter-notice. To elevate the importance of management functions in the way that the FTT does is to amount to a re-writing of s.79(6). If the absence of management functions is as critical as the FTT considers, in what circumstances can an intermediate landlord with no management functions ever object if no claim notice is served? The right it has under s.79(6) is rendered illusory. Elim Court is not authority for the proposition that a failure to serve a claim notice on a person or company who has no management functions will never render the claim notice invalid. That was the outcome on the facts in Elim Court, but it should not be the outcome here.”40.Accordingly, Mr Bates argued, paragraph 74 of the Elim Court decision (paragraph 23 above) is not to be read as a statement of principle; that would be to re-write the statute as if it said “(a) landlord under a lease of the whole or any part of the premises unless it is an intermediate landlord with no management responsibilities…”so that in every such case failure to serve would be excused. Instead it is to be read in its factual context where the reason for the failure to serve was explained by the RTM company and where a reasonable attempt to serve had been made.41.Mr Jacob argued that the reasoning of Lewison LJ from paragraph 69 onwards in Elim Court demonstrates that the key to the decision is the absence of management responsibilities. And, he says, if that renders illusory the right under section 79(6) of landlords who have no management responsibilities, then that is what the Court of Appeal has decided. 42.I agree with Mr Jacob. Lewison LJ gave no indication whatsoever that the reason for the failure to serve, or the fact that a decent attempt had been made, or the fact that the RTM company had provided an explanation for the failure to serve, played any part at all in his decision. His reasoning springs from his paragraph 52 where he identified three important features; and indeed the first of those features – the importance of the missing action or material – trumped the rest. In Elim Court as in this case, the requirement to serve the intermediate landlord is in the statute and not in a statutory instrument, and the RTM company could immediately start again if its claim is found to be invalid. But Lewison LJ was wholly swayed by the lack of importance to the intermediate landlord of the claim notice. It is not losing any management functions. The purpose of the claim notice is to inform everyone who has management functions that they may be about to lose them, and in the absence of those functions the failure to serve the notice did not invalidate the claim.43.It follows from that that there is no reason to suppose that the outcome would have been any different if the failure to serve the notice was deliberate. The reason for failure is irrelevant. 44.What of the FTT’s other point, that it was not arguable that the appellant would have had any grounds to serve a counter-notice? Mr Bates objects that this was not a finding the FTT could have made; he suggested that had it received a claim notice the appellant might have discovered flaws in the process that no-one else had found. I think that is an unrealistic suggestion. The counter-notice served by the management company alleged invalidity by reason of no less than 14 provisions of the 2002 Act. Only three points remained in issue by the date of the FTT’s decision, and neither of the other two points were relevant to the validity of the claim relating to Tudor Studios. The FTT was undoubtedly right to say that the appellant could not have opposed it. 45.But that is likely to be a factor in all cases like the present. The failure to serve a person entitled under section 79(6) is almost always going to be raised by a party who was served, in a counter-notice in which all possible avenues of challenge are explored. Given the limited range of possibilities for objection to the claim it is likely that any failing by the RTM company will be exposed at that stage and will by itself be fatal to the claim; failure to serve a person without management responsibilities will generally be an issue only where there are no other grounds of challenge. 46.So the fact that the claim was otherwise perfectly in order was relevant, but is likely to be present in any similar case. 47.Of course, the courts cannot re-write statutes. It would be possible to say that the Court of Appeal in Elim Court has done so by diluting the “must” of section 79(6)(a) by adding “but failure to serve an intermediate landlord with no management responsibilities will not matter”. The effect of Elim Court here is different from what happened in Spire House RTM Company Limited v Eastern Pyramid Group Corpn SA [2021[ EWCA Civ 1658, where the Court of Appeal had to consider the effect of failure to comply with section 86 of the 2002 Act. That section states that a claim notice is withdrawn by giving notice of withdrawal, and that the notice of withdrawal “must” be given to a range of persons. The Court of Appeal found that failure to give that notice to the qualifying tenants in the building did not invalidate the withdrawal notice; any other finding would have made it impossible for a landlord to know if a claim notice is withdrawn on the date on which it receives the withdrawal notice (paragraph 49). In that case the approach taken in Elim Court made the statute workable. In Elim Court itself and in the present case the Court of Appeal’s approach avoids a pointless waste of time and resources, which is a different sort of assessment of “what Parliament intended”.48.Be that as it may, the authority of paragraph 74 of Elim Court and the absence of any indication by the Court of Appeal that any other factors were relevant to its decision other than the fact that this was an intermediate landlord with no management responsibilities, means that the FTT had regard to all the relevant matters in light of the decision in Elim Court and the appeal fails on this point.