[2024] UKUT 399 (LC)

The appeal is against the FTT’s decision, which mentioned only some of the points on which the respondent now relies.

Both the FTT and the respondent accept that the appellant was entitled to put the respondent to proof. In other words, it was not suggested that there was anything unreasonable in the respondent waiting for the RTM company to demonstrate that it was entitled to acquire the right to manage. That is clearly correct. The 2002 Act lays down a procedure which, if it applies and is followed by an RTM company, will have the consequence that the right to manage is acquired and rights, which may be valuable, will be transferred to the company without compensation. It is for the RTM company to show that the procedure applies and that it has been followed. The landlord or other party which receives a claim notice is not required to volunteer its agreement in order to hasten the process. Nor is it required to rebut the RTM company’s case, it is entitled to see if the RTM company manages to prove it. It is not unreasonable for the recipient of the claim notice to allow the statutory process of acquisition to play out according to the timetable set by Parliament and by the FTT.

But the appellant did not require the respondent to prove its whole case. It limited its grounds of opposition and then conceded all issues except that the Premises were self-contained. That was not unreasonable and the FTT did not suggest that it was. The Premises and the buildings in Fortess Grove were physically connected and it was not self-evident that the division between them was vertical. The appellant had acquired the freehold in September 2019 and was not and had never been in occupation. Putting the respondent to proof, meant putting it to proof that the property was a self-contained building or a self-contained part of a building.

The FTT’s first criticism of the appellant was of its “failure to engage in any dialogue or communication” with the respondent after 6 March. The FTT did not say what dialogue it had in mind and why it considered it unreasonable not to engage in it. It is necessary to consider this criticism in two parts, the first relating to the period of six weeks between 6 March and 17 April, and the second to the period of eight days from 17 April to 25 April.

The appellant had made its position clear in its counter-notice and in the further particulars of its original ground of objection supplied before the commencement of the proceedings. It had refined that case in its statement of case on 14 February. Although there was some confusion over which property was being referred to, it was made clear enough, so that it was understood by the respondent’s advisers, that the sole issue concerned the degree of connection between the Premises and the mews houses at the rear. There was no reason for the appellant to file a further response to the respondent’s statement of case in reply, although the FTT’s directions had given it the opportunity to do so if it chose. The appellant cannot reasonably be criticised for not making its formal position clear.

The FTT’s directions did not require the parties to engage in informal dialogue with each other and the respondent’s solicitors did not initiate any dialogue after 6 March. The FTT suggested that a lack of communication during this period was “not what would reasonably be expected from a respondent or its legal representative”. That statement is not true of litigation generally, when there are often lengthy periods when directions have been complied with when nothing passes between the parties. It is even less true of RTM proceedings, where one party has nothing to gain by dialogue except to incur expense and hasten its loss of control.

The FTT did not say that it considered the appellant had acted unreasonably by not conceding the right to manage after it received the respondent’s statement of case in reply on 6 March. A conclusion to that effect would be inconsistent with the FTT’s acceptance that the appellant had the right to put the RTM company to proof of its claim (the time for which was at the hearing on 29 April). But in any event, the material supplied by the respondent on 6 March was equivocal. The statement of case in reply included an assertion by the company’s solicitor that the statutory conditions were satisfied, but it referred to the wrong building. The documents it exhibited (a 2013 design and access statement, a planning permission for 22 Fortess Grove, and land registry entries) were all produced for different purposes and did not address the degree of connection between the buildings.

It was not until 17 April that the respondent filed evidence in support of its claim. Mr Weill was a surveyor and gave factual evidence about the constructions of the building and its relationship to its neighbours. Although his statement was not described as expert evidence it was just the sort of evidence the appellant had sought the FTT’s permission to rely on and had been refused. Two things are noticeable about Mr Weill’s evidence, namely, that he was the first professional on either side to say that he had inspected the Premises and that he did not mention or rely on the documents which had been supplied on 6 March with the respondent’s statement of case in reply. It can only be assumed that the respondent’s solicitors considered that it was necessary to support the claim with evidence of that sort and that the documents which had already been filed, and the explanation given of them, might not be sufficient to demonstrate that the Premises were premises to which the Act applied. If it was not unreasonable for the appellant to put the respondent to proof, it is very difficult to see how it could have been unreasonable for it to maintain that position at the very least until the respondent had supported its own affirmative case with evidence and a coherent explanation.

Applying Sir Thomas Bingham MR’s acid test to the period between 6 March and 17 April, the absence of dialogue is readily explicable on both sides. The FTT had not required the parties to take any formal steps; the respondent’s solicitors had not initiated any communications; the appellant was entitled to put the respondent to proof of the entitlement to the right to manage, and there was no incentive for the appellant’s solicitors to initiate communication, at least until some evidence had been supplied. In my judgment nothing which happened between 6 March and 17 April amounted to unreasonable conduct on the part of the appellant.

The period between 17 April, when the respondent’s evidence was filed, and 25 April, when the counter-notice was withdrawn, was very short and, as the FTT accepted, was a period of religious holiday. Despite appearing to accept that the witness statement had been directed to the appellant’s agent, which was not instructed, and that action on it had been delayed for religious reasons, the FTT did not accept that these provided a good reason for the respondent not deciding to withdraw the counter-notice until 25 April.

The FTT appears to have misunderstood the relevance of the facts relied on to explain the short period of delay. It referred to difficulty it had in accepting that the appellant could not have “found means by which to alert the respondent” or arranged for communications to be forwarded “or dealt with in its agent’s absence”. There are two difficulties with this reasoning. First, the appellant’s explanation had nothing to do with any absence of its agent but was because of the observance of the Passover period by the appellant’s directors. The relevance of the agent’s involvement was that the witness statement was addressed to it, notwithstanding that it was not instructed in the proceedings, which delayed the information reaching the directors. The second is the assumption that it was consistent with the relevant religious observance for the appellant’s directors to take business decisions during the holiday period or for others acting on their behalf to do so, or to communicate decisions on their behalf.

I do not accept that the FTT was entitled to conclude that there was no reasonable explanation for the appellant not withdrawing its opposition to the right to manage until 25 April. The explanation given was a perfectly reasonable one. The respondent’s sent the witness statement to the wrong person, which delayed its consideration, and the period of religious observance caused a further delay. Since the period in question was one of only eight days, during which the appellant’s directors needed to receive, consider and be advised on the consequences of the new evidence, before making a decision and communicating their instructions, I do not think it is possible to say that they were guilty of unreasonable delay.

The FTT’s third criticism of the appellant was directed at its “last minute and equivocal email concerning its withdrawal of its objection to the claim” which was said to have necessitated the respondent’s attendance at the hearing. But the timing of the withdrawal was the result of the respondent supplying its evidence so late. If, as I have found, it was not unreasonable in the circumstances for the appellant to take eight days to decide how to respond to the new evidence, it was not unreasonable to communicate its decision at the end of that period whether or not it was at the “last minute”.

The FTT’s finding that the withdrawal of the objection to the claim was “equivocal” suggests that it considered the email of 25 April was capable of more than one interpretation. What alternative meaning the communication might have been capable of bearing is not explained either by the FTT or by the respondent and in my judgment the email was clear. It communicated the appellant’s instructions to its solicitor that the counter-notice was withdrawn, and it invited the respondent to withdraw its own application. It did not say, in terms, that the appellant agreed that the respondent was entitled to acquire the right to manage, but in a communication between solicitors who understood perfectly well what they were doing, that was the information which it undoubtedly conveyed. The withdrawal of the counter-notice in writing can only have meant that the appellant was agreeing that the respondent was entitled to acquire the right to manage. Similarly, the invitation to withdraw the application was only explicable if the application was no longer necessary because the right to manage would now be acquired without a determination.

In short, looked at objectively, none of the conduct on the part of the appellant or its solicitors relied on by the FTT was unreasonable. It follows that the FTT did not have discretion to order the payment of the respondent’s costs and its decision to do so must be set aside.