[2024] UKUT 41 (LC)

In Al Rawi v Security Service [2010] 3 WLR 1069, at [18], Lord Neuberger MR said that the common law had developed a fundamental rule of natural justice that:

“… a civil claim should be conducted on the basis that a party is entitled to know, normally through a statement of case, the essentials of its opponent’s case in advance so that the trial can be fairly conducted, and, in particular, the parties can properly prepare their respective evidence and arguments for trial.”

Peabody’s first ground of appeal is that this fundamental rule was not observed by the FTT.

The basis of Peabody’s case was that what Ms Osler referred to in her skeleton argument as “the quantum of the managing agent charge” was raised as an issue by the FTT itself at the hearing, having not previously been raised by Miss Welstead, and that Catalyst was thereby “denied the opportunity to address the point”. It is said additionally that the FTT erred in not permitting either party to address the point or adduce evidence in relation to the management charge, either at the hearing or after it.

Before addressing this submission it is necessary to clarify what was being referred to by the FTT as the “management charge” or “management fee” and by Ms Osler as “the managing agent charge”. It is clear from the FTT’s decision, where the sum in question is quantified at £30.88 per week, that it is the same figure as appears in the service charge statement, without further explanation, as “managing agent block”. No evidence was provided to the FTT to explain what that charge was for and neither of the landlord’s employees who participated in the hearing was able to explain how it had been calculated.

Ms Osler submitted that before the FTT hearing Miss Welstead had raised “a general point regarding increasing service charges” but she had not raised any issue concerning any specific element of the service charge. For the FTT then to identify a specific component of the charge and to make a determination concerning it was, Ms Osler submitted, “in direct contravention of the requirement to ensure that the parties were fully able to participate in the proceedings”.

There are at least two answers to this submission.

The first is that it overlooks what Miss Welstead actually said in her reply form. The form itself is not a complicated document. In hardly more than a single page of text, Miss Welstead first made four short points about disrepair and building defects, then explained her concern about service charges. Almost all of what she said about service charges is reproduced at [31] above, and as can be seen it is concise and to the point. She set out the quantum of the increases in the charges levied by Catalyst and acknowledged a general increase in the cost of living before stating twice that that it was “unclear how and why service charges should be so significantly increased at this time” before concluding with “I would ask for justification of the significant increase in service charges at a time that most people can ill afford to incur more costs in living”.

It is quite true, as Ms Osler emphasised, that Miss Welstead did not pick out individual items from the service charge statement she had received with the notice of increase, but it is impossible to suggest that it was not obvious what she was concerned about. The total charge of £45.06 was the sum of eight individual items. One of these was an administration fee representing a proportion of the sub-total of the other items. One of the remaining seven items had not risen at all, and one had reduced compared to the previous year. That left five items which had increased. The aggregate increase in four of these items totalled 75 pence per week. The weekly increase in the fifth item, “managing agent block”, was £9.14. That single item accounted for 86% of the total increase in the weekly service charge, including the administration fee.

It is therefore difficult to take seriously the suggestion that Catalyst was not put on notice, well in advance of the hearing and before it prepared its own case, that it was being asked by Miss Welstead to explain and justify the substantial increase in service charges, 86% of which was represented by a single item. It is clear that Catalyst gave some consideration before the hearing to the case it wanted to present in relation to service charges, as its counsel came prepared to argue that the FTT had no jurisdiction to investigate them. That was not a point raised by Miss Welstead, but it seems likely, as the FTT suggested when it refused permission to appeal, that it explains why Catalyst was so woefully unprepared to address the service charge issue. It is disingenuous for it now to be suggested that its lack of preparedness was due to a failure on the part of Miss Welstead to identify the point or a breach by the FTT of the rules of natural justice.

The second answer to the submission that Catalyst was not put on notice of the case it had to address is that it simply misunderstands the process of determining a new rent under section 14. As I have explained, that process does not require that the tenant disprove the landlord’s entitlement to the increase it has proposed. Whatever material the parties put before it, and whatever issues they choose to contest, the FTT is under a statutory duty, imposed by section 14(1), to determine the rent at which it considers the property might reasonably be expected to be let on the statutory assumptions. The FTT is relieved of that obligation only if the landlord and tenant give notice in writing that they no longer require a determination or that the tenancy has come to an end (section 14(8)).

The determination of a rent is not simply the resolution of a dispute between private individuals; it also touches on matters of public administration and the FTT’s functions are, in part, concerned with the determination of entitlement to housing benefit and universal credit. A duty is imposed on the FTT by section 41A, Housing Act 1988 to assist in connection with housing benefit and universal credit by noting in every determination under section 14 the amount (if any) of the rent which, in its opinion, is fairly attributable to the provision of services. The Chamber President of the Property Chamber of the FTT is required by section 42A to make information publicly available with respect to rents determined by the FTT (including as to the amounts attributable to services).

For these reasons it is probably unhelpful to think of rent determinations in terms appropriate to adversarial litigation or to import the principles and conventions of party and party dispute resolution, but if there is an “evidential burden” on either party in connection with a determination under section 14, it can only be on the landlord seeking an increase in rent. It might be preferable to see that as a matter of practicality rather than as a rule of evidence. But whatever material the parties put before it, the FTT is still obliged to determine the rent according to the statutory directions; it could not determine, for example, that since (as often happens) the landlord had not attended the hearing or provided any information the rent could not be increased at all.

In this case Catalyst knew why it wanted to increase Miss Welstead’s rent from £171.03 to £191.78 a week, and it was for Catalyst to explain its reasons to the FTT. To the extent that the total increase was attributable to higher costs of services, the only party in a position to explain what those costs were and why they had gone up by so much was Catalyst. It would therefore have fallen to Catalyst to provide the necessary information to the FTT whatever Miss Welstead had said in her reply form (unless she indicated that she was happy to agree a particular item). As it was, she had said more than enough to alert Catalyst to the real issue in the reference, it was not ambushed by the FTT with a new point and its failure to prepare to meet that point involved no procedural irregularity or breach of natural justice.

As for the suggestion that the FTT acted unfairly by not allowing the parties an opportunity to deal with the issue of the “management charge” after the hearing, the short answer to that is that Catalyst was professionally represented at the hearing and did not request the opportunity which Peabody now claims it was denied. Miss Welstead explained during the appeal hearing that the FTT had been concerned about the magnitude of the increase in the “managing agent block” charge and that it had asked each of Catalyst’s employees if they could assist with an explanation, but neither of them could. This is inconsistent with the application for permission to appeal prepared by counsel who appeared for Catalyst at the hearing in which it is stated that “so far as the landlord can recall, the issue of management charges was not subject to any discussion during the hearing”. That is an odd way for someone who was present at the hearing to refer to what they do or do not recall, but whether the point was specifically raised or not, counsel confirmed in her application for permission to appeal that neither Mr McFarlane nor Mr Shulver was able to provide “any information to the FTT about the service charges”. Having asked the witnesses whom Catalyst had chosen to provide what they knew and having obtained no useful information, the FTT was under no obligation to adjourn the hearing or await the provision of further information at a later date.