[2023] UKUT 271 (LC)

The legislation

In the remainder of this decision all references to Sections and Paragraphs are, unless otherwise indicated, references to the sections of the 2022 Act and the paragraphs of Schedule 8.

Paragraph 9 provides as follows:

“(1)

No service charge is payable under a qualifying lease in respect of legal or other professional services relating to the liability (or potential liability) of any person incurred as a result of a relevant defect.

(2)

In this paragraph the reference to services includes services provided in connection with—

(a)

obtaining legal advice,

(b)

any proceedings before a court or tribunal,

(c)

arbitration, or

(d)

mediation.”

Mr Allison stressed in his submissions that the restriction in Paragraph 9 does not operate in a vacuum. It is one of the Paragraphs of Schedule 8 which is supplemented by Paragraph 10, which sets out the machinery by which service charges caught by Paragraph 9 are rendered non-payable. Paragraph 10(2) provides as follows:

“(2)

Where a relevant paragraph provides that no service charge is payable under a lease in respect of a thing—

(a)

no costs incurred or to be incurred in respect of that thing (or in respect of that thing and anything else)—

(i)

are to be regarded for the purposes of the relevant provisions as relevant costs to be taken into account in determining the amount of a service charge payable under the lease, or

(ii)

are to be met from a relevant reserve fund;

(b)

any amount payable under the lease, or met from a relevant reserve fund, is limited accordingly (and any necessary adjustment must be made by repayment, reduction of subsequent charges or otherwise).”

The “relevant provisions” referred to in Paragraph 10(2)(a)(i) are identified as Sections 18-30 of the 1985 Act. As Mr Allison pointed out, Paragraph 10 imposes a limitation on what is a relevant cost, as defined in Section 18(2) of the 1985 Act and thus what can be included in the relevant service charge. The limitation is upon the “relevant cost” of the thing which is incurred. It is not simply a limitation based upon an inability to demand the repayment of costs falling within the terms of paragraph 10(2). Paragraph 10(2) also prevents a landlord from circumventing this limitation by funding the costs incurred or to be incurred in respect of the relevant “thing” from a service charge reserve fund.

Section 18(2) of the 1985 Act defines the relevant costs in the following terms:

“(2)

The relevant costs are the costs or estimated costs incurred or to be incurred by or on behalf of the landlord, or a superior landlord, in connection with the matters for which the service charge is payable.”

As is apparent from the language of Paragraph 10, Paragraph 9 is not the only provision in Schedule 8 which restricts what can be recovered by a service charge. There are equivalent restrictions, in relation to other items of expenditure, in Paragraphs 2, 3, 4 and 8. Paragraph 10(1) states that Paragraph 10 supplements Paragraphs 2 to 4, 8 and 9. As it featured prominently in Mr Allison’s submissions, I set out the restriction in Paragraph 8, which is concerned with cladding remediation:

“(1)

No service charge is payable under a qualifying lease in respect of cladding remediation.

(2)

In this paragraph "cladding remediation" means the removal or replacement of any part of a cladding system that—

(a)

forms the outer wall of an external wall system, and

(b)

is unsafe.”

Returning specifically to Paragraph 9, it will be noted that Paragraph 9 is restricted in its effect to a service charge payable under a qualifying lease. A qualifying lease is defined in Section 119. For present purposes it is not necessary to go into the definition itself. I should mention that Mr Allison’s position was that not all of the leases of the Flats were qualifying leases. I note this position. For the purposes of this decision, it is not necessary for me to determine which Flats are held on qualifying leases and which are not, and I make no determination in this respect. I proceed on the assumption that at least some of the Flats are held on qualifying leases, so that Paragraph 9, if it applies at all to the Costs, is capable of affecting the ability of the Appellant to recover the Costs by the Service Charge.

Paragraph 9(1) uses the expression “relevant defect”. This expression is defined in Section 120, which I should set out in full:

“(1)

This section applies for the purposes of sections 122 to 125 and Schedule 8.

(2)

"Relevant defect", in relation to a building, means a defect as regards the building that—

(a)

arises as a result of anything done (or not done), or anything used (or not used), in connection with relevant works, and

(b)

causes a building safety risk.

(3)

In subsection (2) "relevant works" means any of the following—

(a)

works relating to the construction or conversion of the building, if the construction or conversion was completed in the relevant period;

(b)

works undertaken or commissioned by or on behalf of a relevant landlord or management company, if the works were completed in the relevant period;

(c)

works undertaken after the end of the relevant period to remedy a relevant defect (including a defect that is a relevant defect by virtue of this paragraph).

"The relevant period" here means the period of 30 years ending with the time this section comes into force.

(4)

In subsection (2) the reference to anything done (or not done) in connection with relevant works includes anything done (or not done) in the provision of professional services in connection with such works.

(5)

For the purposes of this section—

"building safety risk", in relation to a building, means a risk to the safety of people in or about the building arising from—

(a)

the spread of fire, or

(b)

the collapse of the building or any part of it;

"conversion" means the conversion of the building for use (wholly or partly) for residential purposes;

"relevant landlord or management company" means a landlord under a lease of the building or any part of it or any person who is party to such a lease otherwise than as landlord or tenant.”

The provisions of Schedule 8, including Paragraph 9, were brought into force by Section 170(3), which provides as follows:

“(3)

The following provisions come into force at the end of the period of two months beginning with the day on which this Act is passed—

(a)

sections 116 to 125 and Schedule 8;

(b)

section 134;

(c)

section 135;

(d)

section 146 and Schedule 11;

(e)

sections 147 to 155;

(f)

sections 157 to 159.”

The 2022 Act was passed on 28^th April 2022, with the consequence that Paragraph 9 came into force on and with effect from 28^th June 2022.

It will be noted that Section 170(3) contains no transitional provisions in relation to those parts of the 2022 Act which it brought into force on 28^th June 2022. So far as Section 170 itself is concerned, Section 170(1) brought Section 170 into force, as a provision of Part 6 of the 2022 Act, on 28^th April 2022. So far as I can see there are no transitional provisions, in relation to the application of Paragraph 9, either in Section 170 or elsewhere in the 2022 Act or in any of the statutory instruments containing transitional and savings provisions in relation to the 2022 Act.

The Appellant’s submissions

I have already set out the Appellant’s case, as set out in its Further Statement of Case in the appeal, in relation to the issue of whether the restriction in Paragraph 9 applies to the Costs. As I have noted, the Appellant’s case fell into two parts. In his submissions in the appeal Mr Allison expanded his argument in relation to one part of this case. For ease of reference, I repeat my summary of the Appellant’s case on Paragraph 9, with this expansion.

I find it convenient to take first the second part of the Appellant’s case. In determining the reach of Paragraph 9, in chronological terms, it seems to me that it is first necessary to consider what categories of services are brought within the scope of Paragraph 9, and in what way.

Are the costs of a dispensation application, as a matter of language, capable of falling within the terms of Paragraph 9?

Mr Allison’s principal argument on the construction of Paragraph 9, in support of the second part of the Appellant’s case, was that a dispensation application is not concerned with, or focussed upon the liability or potential liability of a leaseholder, within the terms of Paragraph 9. A dispensation order is not made against leaseholders. Nor is a dispensation order made in respect of the liability of any leaseholder. The focus of a dispensation application, as is clear from Daejan, is upon the question of whether prejudice has been suffered or will be suffered by leaseholders as a result of the relevant failure to comply with the consultation requirements. The focus is not upon prejudice suffered as a result of a relevant defect.

Further to this argument Mr Allison also raised the question of what is meant by the reference to “any person” in Paragraph 9(1). He submitted that these words were not apt to include a leaseholder. The liability referred to in Paragraph 9(1) was a liability to put things right, in terms of remedying relevant defects. The purpose of Paragraph 9 was to give the leaseholder protection in respect of having to pay for professional costs relating to such liability. The leaseholder could never be in the category of persons who might end up with a liability incurred as a result of a relevant defect. Mr Allison also pointed out that the driver for many dispensation applications was a desire to ensure that Building Safety Fund funding could be obtained and retained. Service charges needed to be payable as a condition of funding, and strict timetables had to be met in terms of contracting for the required works. All this created problems for landlords, in terms of compliance with the consultation requirements, and created the need for dispensation applications, as in the present case. It would be odd, so Mr Allison submitted, if the landlord’s ability to recover the costs of making such dispensation applications was cut off by Paragraph 9.

The starting point for considering these arguments seems to me to be the reference to “the liability (or potential liability) of any person incurred as a result of a relevant defect”. Whose liability or potential liability is being referred to? The answer to this question seems to me to be relatively straightforward. The relevant liability or potential liability is one which is incurred as a result of a relevant defect. The liability or potential liability can be the liability or potential liability of any person. This seems to me to mean what it says. Any person can include anyone subject to the liability or potential liability. Given however the definition of a relevant defect in Section 120, given the jurisdiction to make remediation orders against relevant landlords in Section 123, and given that Paragraph 9 is concerned with what is payable by a service charge, the person most likely to be subject to such a liability or potential liability is a landlord or management company. It is difficult to think of circumstances in which a leaseholder (in their capacity as leaseholder and not, for example, in a separate capacity as joint owner of the freehold) would be such a person. To that extent I agree with Mr Allison. I do not think however that it is right to say that a leaseholder could never be the person referred to in Paragraph 9. It seems to me that the words “any person” are capable of including a leaseholder, even though it is difficult to think of circumstances in which a leaseholder would be the person liable or potentially liable to deal with a relevant defect. I am however doubtful that this particular point matters much. What seems to me to be important is that the liability or potential liability is the liability or potential liability of the person who is liable or potentially liable to remedy the relevant defect. The most obvious example of such a person is a landlord who is obliged to remedy a relevant defect. Indeed, the Appellant may be said to be a good example of such a person.

One other point which arises in this context is whether the reference to a liability or potential liability in Paragraph 9(1) means, and only means, a liability arising under the 2022 Act itself, or extends to include other liabilities, such as a landlord’s contractual liability to remedy a relevant defect, arising pursuant to the landlord’s covenants in leases of flats in a building. In support of his arguments on the correct approach to the construction of Paragraph 9 Mr Allison referred me to the Explanatory Notes to the 2022 Act, and specifically to paragraphs 1756-1759, which are within the section of the Explanatory Notes which deals with Paragraph 9. I should mention at this point that Mr Allison’s position was that I was able to look at the Explanatory Notes, as an aid to the construction of the 2022 Act. It is clear that courts and tribunals do have the ability to look at explanatory notes as an aid to the construction of a statute; see the explanation of the correct approach to statutory interpretation given by Lady Arden and Lord Burrows JJSC in their joint judgment in Kostal UK Ltd v Dunkleyand others [2021] UKSC 47, at [109].

The Explanatory Notes comment on Paragraph 9 by reference to the liabilities of landlords under the 2022 Act, which might be said to support the argument that the liabilities referred to in Paragraph 9(1) are only those arising under 2022 Act. The reference to “any person” in Paragraph 9(1) may also be said to reflect the fact that a number of different categories of person can be liable to remedy relevant defects under the terms of the 2022 Act.

As against these considerations, the reference to a liability or potential liability in Paragraph 9(1) is open ended, in terms of its wording. As such, it may be said to include liabilities arising under the 2022 Act and liabilities arising from other sources. In the present case I do not think that the point matters a great deal, and I make no final decision on this particular point. I assume that the Appellant’s liability to carry out the Works arises or is capable of arising both from the Appellant’s contractual obligations under the leases of the Flats and from the provisions of the 2022 Act. In any event Section 123(1) defines a remediation order as an order requiring a relevant landlord to remedy specified relevant defects. Section 123(3) defines a relevant landlord in the following terms:

“(3)

In this section "relevant landlord", in relation to a relevant defect in a relevant building, means a landlord under a lease of the building or any part of it who is required, under the lease or by virtue of an enactment, to repair or maintain anything relating to the relevant defect.”

As can be seen, this definition ties the liability of a landlord to be made the subject of a remediation order to a landlord’s contractual or statutory liability to remedy a relevant defect.

This analysis of the second part of Paragraph 9 clears the way to considering the wording of the first part of Paragraph 9(1). The first section of this wording is straightforward. No service charge is payable under a qualifying lease in respect of legal or other professional services. The mechanism by which this is achieved is set out in paragraph 10, which deems the costs incurred or to be incurred in respect of legal or other professional services not to be relevant costs within the meaning of Section 18(2) of the 1985 Act, and thus irrecoverable by way of the service charge.

What remains is identification of the legal or other professional services referred to in Paragraph 9. They are not any legal or other professional services. The relevant services must be services “relating to” the liability or potential liability which I have discussed above.

The words “relating to” are very wide. All that is required is a relationship between the services and the liability or potential liability of the relevant person incurred as a result of the relevant defect. I find it difficult to see how such a relationship can be said not to exist between the costs of a dispensation application made by a landlord, in relation to works required to remedy a relevant defect, and the liability of that landlord to remedy the relevant defect.

It seems to me that one can test this by reference to the present case. The Costs are the Appellant’s costs of the Dispensation Application, representing legal and (it may be) other professional services rendered to the Appellant in relation to the Dispensation Application. As I understand the position, the Works comprise or, at the least, include works required to deal with a relevant defect or relevant defects, within the meaning of Section 120. There was no argument to the contrary from Mr Allison. The Appellant is the person liable or potentially liable to remedy the relevant defect or defects. I assume that such liability arises under the terms of the leases of the Flats and, at least potentially, also under the terms of the 2022 Act. The Appellant thus has a liability or potential liability incurred as a result of relevant defects, within the meaning of Paragraph 9. As I have already noted, it is not necessary, given that this liability or potential liability arises under the terms of the 2022 Act and as a matter of contract, to decide whether the reference to liability or potential liability refers only to a liability or potential liability arising under the 2022 Act or includes a liability or potential liability arising from another source.

In order to ensure that the Appellant’s ability to recover the costs of the Works by the Service Charge is not capped at £250 per Flat, the Appellant has been obliged to make the Dispensation Application. It seems to me that the legal or other professional services rendered to the Appellant in the Dispensation Application are quite easily and naturally described as services “relating to” the liability or potential liability of the Appellant incurred as a result of the relevant defects to which the Building is subject. The relationship seems to me to be an obvious one.

I take Mr Allison’s point that this construction of Schedule 9 is capable of causing problems for landlords making dispensation applications for the purposes of ensuring Building Safety Fund funding for works required to remedy relevant defects to buildings. I do not think however that this point is anywhere near sufficient to justify a reading of the words “relating to” in Paragraph 9 as excluding the professional services rendered to the Appellant in the Dispensation Application. Put simply, the words “relating to” are very wide, and were no doubt intended to be very wide. I also note that sub-paragraph (2) of Paragraph 9 contains a wide-ranging set of categories of services which are included in the reference to services in sub-paragraph (1). In particular, such services include services provided “in connection with…..(b) any proceedings before a court or tribunal”. It is hard to see how this is not capable of extending to services provided in relation to a dispensation application, in circumstances where the dispensation application is made by reason of the landlord having a liability or a potential liability to remedy a relevant defect or relevant defects.

As I have already noted, in support of his arguments on the correct approach to the construction of Paragraph 9 Mr Allison referred me to the Explanatory Notes to the 2022 Act, and specifically to paragraphs 1756-1759, which comment on Paragraph 9. I do not need to set out each of these paragraphs, but I note that paragraph 1758 states as follows:

“The terms of many leases will allow for landlords to pass legal and other professional costs through the service charge. The purpose of Schedule 8 is to protect leaseholders from costs associated with historical building safety defects. Where landlords incur costs in connection with their new liabilities under the Act, this paragraph prevents these costs incurred by landlords from being passed to leaseholders. Without these protections, it would be possible for landlords to pursue spurious or unrealistic legal claims and charge these costs to leaseholders; this paragraph mitigates against that and ensures incentives are aligned by requiring building owners and landlords to absorb the costs of their own legal and other professional advice.”

The language of this paragraph and the remainder of the commentary on Paragraph 9 in the Explanatory Notes does not seem to me to provide any support for the argument that the professional services rendered to the Appellant in the Dispensation Application are not services relating to the Appellant’s liability to carry out the Works incurred as a result of the relevant defects. The relevant words used in paragraph 1758 are “associated with” and “in connection with”. Both of these terms have a width similar to “relating to”.

I therefore conclude that the costs of a dispensation application are capable of falling within the terms of Paragraph 9, with the consequence that the Costs are capable of falling within the terms of Paragraph 9. This conclusion is however subject to the question, to which I now turn, of whether Paragraph 9, by reason of the date when it was brought into force, cannot apply to the Costs.

Can Paragraph 9 apply to the Costs, bearing in mind the date when Paragraph 9 was brought into force?

Mr Allison submitted that Paragraph 9 is not retrospective in its effect. Up to a point, I accept this submission. Paragraph 9 is not expressed to be retrospective in its effect, in the sense that it is not expressed to have effect prior to 28^th June 2022. The same is not true of the entirety of the 2022 Act. In this context I refer to Section 135 of the 2022 Act, which introduces a new Section 4B into the Limitation Act 1980. Section 135(3) specifically provides that this new Section 4B, in relation to an action by virtue of Section 1 of the Defective Premises Act 1972, is to be treated as always having been in force. It follows that the new limitation periods in the Section 4B are capable of applying to claims under the Defective Premises Act 1972 which had, prior to the coming into force of Section 135, already become statute barred. The potential human rights problem which this creates is managed by Section 135(5), which provides that where an action is brought which, but for Section 135(3) would have been barred by the Limitation Act 1980, the court hearing the action must dismiss the action in relation to any defendant if satisfied that it is necessary to do so to avoid a breach of that defendant’s Convention rights.

The provisions of Section 135 of the 2022 Act were considered by the Court of Appeal in URS Corporation Limited v BDW Trading Limited [2023] EWCA Civ 772. In that case BDW was seeking, by amendment, to introduce claims under the Defective Premises Act 1972 which took advantage of the longer limitation periods provided by Section 135. One of the arguments raised by URS in response to the application to amend was that the new limitation periods were not available because the retrospective amendments made by Section 135 did not apply in the case of parties involved in continuing litigation. As it was put in argument, the rules of the game could not be changed after the relevant action had been commenced. This argument was not accepted by the Court of Appeal. The principal judgment in the Court of Appeal was given by Coulson LJ. Asplin LJ gave a shorter judgment, agreeing with Coulson LJ. King LJ agreed with both judgments.

Coulson LJ recorded the submissions of counsel for URS in the following terms, at [158]:

“158.

Ms Parkin made a number of submissions in support of what seems, certainly at first blush, a rather odd result. She relied on what the House of Lords said in Wilson v First County Trust Limited (No 2) [2003] UKHL 40; [2004] 1 A.C. 816 about the need to construe any statute in a way that was compatible with Convention Rights. She referred to Lord Hope's speech at [98] and Lord Rodger's speech at [198], to the effect that there was a general presumption that legislation was not intended to operate retrospectively, such that accrued rights and the legal effect of past action should not be altered by subsequent legislation. Ms Parkin said that it could not have been Parliament's intention that the BSA changed the existing rights of the parties before the court. In addition, she argued that s.135 of the BSA "impliedly repealed" s.9 of the Limitation Act in so far as it affected claims under the DPA and that, in consequence, pursuant to s.16 of the Interpretation Act, where an Act repeals an enactment, the repeal does not, unless the contrary intention appears, "affect any right, privilege, obligation or liability acquired, accrued or incurred under that enactment."

Coulson LJ did not accept these submissions. In his view the wording of Section 135 was clear, in its retrospective effect. As he explained, at [160]-[162].

“160.

In my view, Mr Hargreaves' interpretation of s.135 of the BSA was correct. The section was retrospective in effect and, although there was an exception to that addressing claims which had been finally determined or settled (s.135(6)), there was no exception relating to the rights of parties involved in ongoing litigation. There are a number of reasons for my conclusion.

161.

The starting point – and, in some ways, the end point – must be the ordinary linguistic meaning of the words used in s.135(3): see Bennion, Bailey and Norbury on Statutory Interpretation, 8th Edition, at paragraph 10.4 and R (Jackson) v Attorney General [2005] UKHL 56; [2006] 1 A.C. 262 at [29]. The amendment which, by way of s.135 of the BSA, adds the extension to the relevant limitation position "is to be treated as always having been in force".

162.

In my view, that could not be any clearer: the amendments to the DPA , and therefore the longer limitation periods, are to be treated as always having been in force. To put the point another way, since 1972, there was never a time when those extended periods did not apply. Ms Parkin accepted that the provision plainly had retrospective effect. Thus the remarks of Lord Hope and Lord Rodger in Wilson are inapplicable, because this is a situation where Parliament plainly intended that the extended limitation periods would have retrospective effect.”

Returning to the present case I accept the submission of Mr Allison that Paragraph 9 does not contain provisions, of a kind which are to be found in Section 135, which give Paragraph 9 retrospective effect. In his further written submissions Mr Allison elaborated on the point that, in the absence of express provision to this effect, legislation should not be construed so as to have retrospective effect. It is not necessary for me to go through Mr Allison’s submissions and further submissions on this point in detail. I accept, indeed I am bound to accept that there is a general presumption that legislation is not intended to operate retrospectively, and that this general presumption is based upon concepts of fairness and legal certainty; see the references to the speeches of Lord Hope and Lord Rodger in Wilson v First County Trust Limited (No. 2)[2003] UKHL 40 [2004] 1 AC 816 (at [98] and [198]) given by Coulson LJ in his judgment in URS, at [158] (quoted above). I accept that this general presumption applies to Paragraph 9, to the extent that the express language of Paragraph 9 does not require a contrary conclusion.

The problem with these submissions is that they seem to me only to take matters so far. They leave unanswered what seems to me to be the critical question in this context, which is how, in chronological terms, Paragraph 9 takes effect. Paragraph 9 provides that no service charge is payable under a qualifying lease in respect of legal or other professional services referred to in Paragraph 9. I will use the expression “the Qualifying Services” to refer to services of the kind referred to in Paragraph 9 (but without prejudging the question of how, in chronological terms, Paragraph 9 takes effect). As from 28^th June 2022, no service charge is payable under a qualifying lease in respect of the Qualifying Services. This restriction is clear enough, in itself. What however is less obvious is how the restriction works where some or other component of the Qualifying Services predates 28^th June 2022.

As I have explained above, Mr Allison’s submissions on this question, as finalised in his further submissions, fell into two parts. The first part comprised Mr Allison’s primary submission on this question. If Mr Allison’s primary submission was not accepted, the second part comprised his alternative and fallback submission on the question. I will start by giving a more detailed summary each of these primary and alternative submissions.

Mr Allison submitted, by way of his primary submission, that the costs of services otherwise falling within the terms of Paragraph 9 were not caught by Paragraph 9 if those costs were incurred prior to 28^th June 2022. As can be seen, this first part of Mr Allison’s submissions proceeds on the basis that what matters, for the purposes of the application of Paragraph 9, is when the costs of relevant services were incurred. Mr Allison sought to support this argument in two principal ways.

First, Mr Allison drew my attention to the provisions of Paragraph 10. These provisions, so he submitted, meant that the limitation in Paragraph 9 was a limitation on what qualified as relevant costs, for the purposes of Section 18(2) of the 1985 Act. Read with Paragraph 10, Paragraph 9 did not in fact provide that a service charge was not payable in respect of Qualifying Services. Instead, Paragraph 10 prevented the costs of Qualifying Services from being treated as relevant costs. Given that the form of limitation in Paragraph 9 is a limitation on what qualify as relevant costs, coming into effect as from 28^th June 2022, it would be wrong to treat the costs of services incurred prior to 28^th June 2022 as being subject to this limitation. Such costs were not incurred at a time when Paragraph 9 was available to treat such costs as non-relevant costs.

Second, Mr Allison pointed to the injustice which he said would result from treating costs incurred prior to 28^th June 2022 as being subject to Paragraph 9. He drew my attention to Paragraph 8, which I have set out above, and which provides that no service charge is payable under a qualifying lease in respect of cladding remediation works. Mr Allison pointed out that if costs of services incurred prior to 28^th June 2022 could be treated as subject to Paragraph 9, Paragraph 8 must work in an equivalent fashion. If Paragraph 8 did operate in this fashion, a landlord who had incurred costs, which might easily run to millions of pounds, on cladding remediation works prior to 28^th June 2022, could find himself prevented from recovering those costs from his tenants by the service charge, as from 28^th June 2022. This would, so Mr Allison submitted, be a highly unjust result which Parliament cannot have intended. It would also allow Paragraph 9 to have a retrospective effect which, again, Parliament cannot have intended, in the absence of express wording in Paragraph 9 which achieves this result.

Turning to the alternative submission, and on the assumption that I did not accept the primary submission, Mr Allison submitted that Paragraph 9 does not apply where the costs of the relevant services were demanded/became payable, I assume by way of service charge, prior to 28^th June 2022. As can be seen, this alternative submission proceeds on the basis that what also matters in this context is the date on which the relevant service charge, by which the costs of the relevant professional services are sought to be recovered, becomes demanded/payable. It should be noted that Mr Allison used the expression “demanded/payable” in his submissions, which is why I am using this expression. Provided that the relevant service charge is demanded or becomes payable prior to 28^th June 2022, so the argument goes, Paragraph 9 does not apply.

In support of his alternative submission on this question Mr Allison reiterated his argument that Paragraph 9 does not have retrospective effect. If Paragraph 9 could catch service charges which were demanded or became payable prior to 28^th June 2022, this would be to give Paragraph 9 a retrospective effect which it was not intended to have, in addition to creating undesirable and anomalous results.

A further, and simpler alternative to Mr Allison’s primary and alternative submissions is that Paragraph 9 does, so it may be argued, what it says on its face. If the relevant professional services are Qualifying Services, no service charge is payable in respect of those services as from 28^th June 2022. Questions of when the costs of the relevant services were incurred or when the service charge was demanded or became payable are irrelevant. As from 28^th June 2022 any such service charge is not payable. This alternative was resisted by Mr Allison, again on the basis that this would give Paragraph 9 a retrospective effect which it was not intended to have, in addition to creating undesirable and anomalous results.

In summary therefore Mr Allison’s primary submission was that the applicability of Paragraph 9, in chronological terms, depends upon when the costs of the relevant services were incurred and when the relevant service charge is demanded/becomes payable. If the costs of the relevant services were incurred prior to 28^th June 2022, their recoverability by the service charge is unaffected by Paragraph 9. If I was to reject this primary submission, Mr Allison’s alternative submission was that if the costs of the relevant services were demanded/payable prior to 28^th June 2022, their recoverability by the service charge is unaffected by Paragraph 9.

Before considering Mr Allison’s submissions, there are some decisions of the FTT and some other legal materials which bear on the questions I am considering, and to which reference should be made.

In Adriatic Land 3 Limited v Residential Leaseholders of Waterside Apartments (MAN/30UG/LSC/2021/0044) the FTT (Judge Holbrook) had to consider the question of whether the provisions of Schedule 8 restricted a leaseholder’s liability for service charges which were otherwise payable before the provisions of Schedule 8 came into force. Judge Holbrook decided, by a decision dated 27^th June 2023, that the answer to this question was no. The question was determined by the Judge as a preliminary issue in the proceedings. The proceedings were concerned with an application by the applicant landlord for a determination of the service charge liabilities for the 2019 and 2020 service charge years of the respondents, who were the long leaseholders of the flats in the relevant building. In particular, the applicant sought a determination that each respondent was liable to contribute towards costs incurred by the applicant in 2019 and 2020 in relation to fire prevention works. Service charge demands in respect of this sum were issued to the respondents in 2019 and 2020. One of the issues which arose in the proceedings, which was dealt with by the preliminary issue, was whether the protections in Schedule 8 were available to the respondents.

In answering this question in the negative the essential reasoning of the Judge can be found in paragraph 13 of his decision, in the following terms:

“13.

Now that the provisions in Schedule 8 have been enacted and have come into force, their effect is clearer, and I have no doubt that the interpretation contended for by the Applicant is to be preferred. The provisions were brought into force, without transitional provision, by section 170(30(a) of the Act itself, and the language of both section 122 are [and] of Schedule 8 is in the present tense: “certain service charge amounts...are not payable” and “No service charge is payable” and “No service charge is payable….” etc. This is language which is apt only to affect liability for service charges which would otherwise become payable after the new provisions came into force, and nothing about it suggests that the payability of past (pre-commencement) service charges may be revisited by reference to the new provisions in Schedule 8.”

It appears to be the case, from information contained in paragraph 11 of this decision, that the costs in issue had been incurred, and the resulting service charges demanded and paid before 28^th June 2022. The fact, if fact it was, that the relevant service charges had been paid would not necessarily have affected the ability of the FTT to determine the payability of those service charges; see Section 27A(5) of the 1985 Act.

I should also mention that the decision in Waterside was made without a hearing, and that the respondent leaseholders had ceased to be represented as from January 2023; that is to say some months prior to the decision.

The decision in Waterside was one of the FTT cases which was the subject of my invitation to the parties to make further submissions. In his further submissions Mr Allison suggested that it had been touched upon in the oral submissions in the appeal hearing. My notes from the appeal hearing do not disclose this, but they were not of course a verbatim note, and in fairness to Mr Allison I am content to accept that this case was referred to in the appeal hearing. In any event, the decision in Waterside, at least so far as the reasoning in paragraph 13 of this decision is concerned, supports Mr Allison’s argument that Paragraph 9 only applies to service charges which become payable as from 28^th June 2022.

The next case is Batish and others v Inspired Sutton Limited and others (LON/00BF/HYI/2022/0002). This was a decision of the FTT (Judge Siobhan McGrath, President of the Property Chamber, and Judge Timothy Powell) on an application for a remediation contribution order pursuant to Section 124. The application was made by the long leaseholders of the relevant building on the basis that they had made service charge payments for the remediation of relevant defects. The long leaseholders sought, by the remediation contribution order, to have those payments returned. They contended that the service charges fell within the limiting provisions in Schedule 8 and that it was just and equitable to make a remediation contribution order in their favour. The first respondent to the application was the freeholder and developer of the building. The remaining respondents were named as the parent company of the freeholder and the directors of the freeholder. It should be noted that the parties were not represented in the proceedings.

The FTT decided that remediation contribution orders should be made in favour of the applicant long leaseholders. For present purposes the relevance of the decision, which is dated 13^th January 2023, lies in the fact that the FTT did not see any objection to making a remediation contribution order in relation to sums which, it appears from the decision, were incurred by the landlord and paid (or paid in part) by the long leaseholders by way of the service charge prior to 28^th June 2022. In this context I note that application for the remediation contribution order was made in August 2022. The FTT thus accepted that a remediation contribution order under Section 124 could be made in relation to service charge costs incurred and paid prior to Section 124 and Schedule 8 coming into force. The most relevant part of the decision for present purposes seems to me to be found in paragraphs 48-50 of the decision, where the FTT stated as follows:

“48.

We can only make a remediation contribution order if we consider it just and equitable to do so. We take the view that in order to satisfy the condition in this case we must be satisfied that the lessees paid for the cost of works which ought to have been met by Inspired Sutton Limited.

49.

Paragraph 2 of Schedule 8 to the Act provides that no service charge is payable for defects for which the landlord is responsible. The paragraph applies in relation to a lease of any premises in a relevant building and has effect in respect of a relevant measure (i.e. the remediation works) if the landlord (or an associate) is responsible for the relevant defect.

50.

Inspired Sutton Limited was the developer and the landlord under the lease at the qualifying time. Accordingly, by reference to paragraph 10 of Schedule 8, the costs are not to be regarded as relevant costs to be taken into account in calculating the amount of the service charge. The Tribunal are satisfied that there are no mitigations or other matters to be taken into account in the exercise of its discretion in this case. The Applicants are therefore entitled to a remediation contribution order in their favour.”

If Section 124 can have the retrospective effect which it appears to have been given by the FTT in Sutton, this might be said to support the argument that Paragraph 9 can have a similarly retrospective effect, in terms of applying where the costs of the relevant services were incurred prior to 28^th June 2022 or service charges were demanded or became payable prior to 28^th June 2022.

The third case is Waite and others v Kedai Limited (LON/00AY/HYI/2022/0005 & 0016). This was a decision of the FTT (Judge Timothy Powell and Mrs Helen Bowers MRICS) on two consolidated applications for a remediation order pursuant to Section 123. The applications were made by the long leaseholders of two blocks of flat in the relevant development. The respondent was the freeholder owner of the blocks. The parties were represented by counsel at the hearing of the applications.

As I read this decision, it does not engage directly with questions of retrospectivity. There is some commentary on Part 5 of the 2022 Act in paragraphs 66-71 of the decision, where the FTT comment on their approach to Part 5, but there is nothing specific on the retrospectivity or otherwise of the provisions of Part 5 or Schedule 8. That said, paragraphs 66-71 of the decision seem to me to contain some useful general observations on Part 5. I quote paragraph 67 of the decision, in particular:

“67.

Sections 116 to 125 of Part 5 of the BSA 2022 relate to the “remediation of certain defects”. They constitute a self-contained code, containing its own specific definitions in sections 117 to 121 and its own statutory test for the making of a remediation order in section 123. As paragraph 957 of the Explanatory Notes to the BSA explains, the leaseholder protections in sections 116 to 125 “are a one-off intervention designed to deal with the current safety defects in medium- and high-rise buildings.” The statutory definitions are intended to be clear, simple and straightforward.”

Paragraph 9 is referenced in this decision, at paragraph 153, but only in the context of a Section 20C application made by the leaseholders. The FTT observed that, by virtue of Paragraph 9(1), qualifying leaseholders would not have to pay the landlord’s costs of the applications, independent of any Section 20C order. The consolidated applications for the remediation order were however both made after 28^th June 2022. I therefore assume that the costs being considered by the FTT were costs which were incurred after 28^th June 2022, so that the question which arises in the present case did not there arise.

This leaves the article by Professor Bright. The article is a short article (an alternative description, so I was told, is blog post), to which my attention was drawn, which considers the decision in Waterside. Mr Allison submitted, while making it clear that he intended no disrespect to the author by this submission, that no weight should be given to the article which, so he submitted, was not and was not intended to be a detailed consideration of the provisions of the 2022 Act. I accept this submission, in the sense that I accept that the article comprises academic commentary, as opposed to any kind of authority, although I am not sure that the commentary loses anything, as commentary, by being commendably brief. I also accept that I should concentrate my attention on the arguments of the parties in the appeal, and on the authorities to which my attention has been drawn in the appeal. The real relevance of the article seems to me to be twofold. First, the article makes reference to Waterside and Sutton, to which I have already referred. Second, the article makes reference to the Explanatory Notes to the 2022 Act, to which I have of course already been referred by Mr Allison.

The specific paragraph of the Explanatory Notes which is referenced in the article is paragraph 986, which is part of the commentary on Section 122. Section 122 introduces the provisions of Schedule 8 into the 2022 Act. Paragraph 986 is rather lengthy, but I should set it out in full:

“The Schedule sets out that, in relation to historical building safety defects, “no service is payable” in certain circumstances, and in other circumstances that the service charge is only payable if it “does not exceed the permitted maximum”. These provisions in the Schedule apply from commencement (two months after Royal Assent of the Act, or 28 June 2022): from that date, the service charge protections apply. The protections apply equally irrespective of when any service charge demands were issued by landlords or managing agents. This means that, even if a valid service charge demand was issued prior to commencement, provided that the service charge had not already been paid by the leaseholder, the demand is no longer valid after commencement insofar as it does not comply with the provisions set out in the Schedule. In practice, this means that managing agents and landlords will need to rescind service charge demands issued prior to commencement where they relate to historical building safety defects. Where landlords are entitled to recover some costs from leaseholders according to the Schedule, they will need to issue new service charge demands which comply with the provisions set out in the Schedule.”

This paragraph would appear to support the argument that Paragraph 9 is capable of applying to service charges demanded prior to 28^th June 2022 and the consequential argument that what matters, in terms of the application of Paragraph 9, is when the relevant service charge comes to be paid, as opposed to when the relevant service charge is demanded or become payable, or when the costs comprising the relevant service charge were incurred.

The article also makes reference to an extract from Hansard and to a letter from the Secretary of State for Levelling Up, Housing and Communities dated 27^th June 2022. I accept the submission of Mr Allison that I should not give weight to the letter from which, in any event, only a short extract is included in the article. In relation to the Hansard extract the point has been made by Mr Allison that the parties have not, in the present case, carried out the substantial undertaking of conducting their own searches of Hansard for material admissible pursuant to the principles set out in Pepper v Hart [1993] AC 593. In these circumstances it does not seem to me that it would be right or fair to take the extract from Hansard into account. If there is to be investigation of Hansard, assuming the existence of admissible material, that will have to be for another case.

I now return to consider directly Mr Allison’s submissions on the question of how, in chronological terms, Paragraph 9 takes effect.

The starting point and, as it seems to me, the overriding point in relation to my analysis of this question is a point well made by Mr Allison in his further submissions. In interpreting statutory provisions, the start point and the end point of the process, lies in the words of the relevant Act. Mr Allison’s point has the solid support of Coulson LJ in URS. It is convenient to repeat what Coulson LJ said at [161]:

“161.

The starting point – and, in some ways, the end point – must be the ordinary linguistic meaning of the words used in s.135(3): see Bennion, Bailey and Norbury on Statutory Interpretation, 8th Edition, at paragraph 10.4 and R (Jackson) v Attorney General [2005] UKHL 56; [2006] 1 A.C. 262 at [29] . The amendment which, by way of s.135 of the BSA, adds the extension to the relevant limitation position "is to be treated as always having been in force".

Looking at the wording of Paragraph 9, I find it difficult to see how Paragraph 9 can be said not to apply where the costs of the relevant services were incurred prior to 28^th June 2022. This is not how Paragraph 9(1) is drafted. Paragraph 9(1) is drafted on the basis that no service charge is payable under a qualifying lease in respect of Qualifying Services. As I have already decided, the liability or potential liability referred to in Paragraph 9(1) is the liability or potential liability incurred as a result of the relevant defect. It is not a liability or potential liability to pay the costs of the relevant services. If the relevant services qualify as services “relating to” to the relevant liability or potential liability of any person incurred as a result of a relevant defect, that is to say (using my definition) if the relevant services qualify as Qualifying Services, I find it difficult to see why it matters when the costs of the relevant services were incurred. Paragraph 9 is not framed by reference to the incurring of the costs of the relevant services.

Mr Allison’s answer to this point was that Paragraph 10 explains what is meant by the reference to no service charge being payable, in Paragraph 9(1). Paragraph 10 ties this expression to costs incurred or to be incurred in respect of the Qualifying Services, as opposed to focussing on the date when the relevant service charge is demanded or becomes payable.

I am not persuaded by this argument. It seems to me that Paragraph 10 contains the mechanism by which the result is achieved that no service charge is payable. I do not think that it actually changes or affects the opening words of Paragraph 9(1), which are that no service charge is payable.

In addition to this, it is to be noted that paragraph 10(2) refers to costs incurred or to be incurred in open ended terms, not in terms which suggest that such costs can only have been incurred or can only achieve the status of costs to be incurred as from 28^th June 2022.

I can see Mr Allison’s point that if Paragraph 9 is capable of applying to costs incurred prior to 28^th June 2022, that could produce a result which might be said to be unfair to a landlord who expended large sums on items of expenditure caught by the terms of Schedule 8 prior to 28^th June 2022. It seems to me that the blunt answer to this point is that this is how the relevant provisions of Part 5 of the 2022 Act and Schedule 8 work. As the FTT explained in their decision in Kedai, at paragraph 67, Sections 116-125 of the 2022 Act constitute a self-contained code, containing its own specific definitions in Sections 117-121 and its own statutory test for making a remediation order under Section 123 or, it can be added, a remediation contribution order under Section 124. They are, to quote from the Explanatory Notes at paragraph 957, “a one-off intervention designed to deal with the current serious problems with historical building safety defects in medium- and high-rise buildings”.