[2024] UKUT 155 (LC)

The FTT set out its calculation as follows:

There are two obvious puzzles about that calculation. The first is that 98.56 x11 = £1,084.16. The second is that the arrears have been deducted from the starting figure, before the division by two to mark the landlord’s low level of culpability. If the FTT intended to deduct the rent arrears from the amount payable it has not done so. It has only deducted half. The FTT did not explain why it did the calculation that way and Ms Yi argues that the deduction should have been made after the deduction of 50%, so as to give her credit, against what she had to pay, for the full amount of the arrears.

On receipt of the grounds of appeal the Tribunal gave the FTT the opportunity to provide further reasons for its calculation. In response the FTT identified the arithmetical error in the calculation of the amount payable for utilities, and acknowledged that if the rent arrears occurred outside the period in respect of which the order was made then “it perhaps should be a final reduction as suggested by the Respondent.” The FTT found as a fact that the arrears occurred outside the period in respect of which the order was made, at its paragraph 20.

Had the arrears accrued during the period of the order, then they would simply have been left out of account altogether because the order could relate only to the rent paid in respect of that period. As it was, Mr Hobbs paid his rent in full in the 11-month period to which the order relates, and then fell into arrears a few months later. How should the FTT have responded to that?

This is a matter of the tenant’s conduct, pursuant to section 44(4)(a). The FTT has a discretion as to how to respond to it and it is not a given that those arrears must be deducted, in whole or in part, from what the landlord has to repay.

In response to the grounds of appeal Mr Williams, in representations in response to the application for permission to appeal, made a number of points. First, he argued that because the arrears fell outside the period in respect of which the application was made the FTT had no discretion to take the arrears into account. That is manifestly incorrect. The Tribunal (the Deputy Chamber President, Martin Rodger KC) in Kowalek v Hossanein Ltd [2021] UKUT 143 (LC) agreed with the FTT that arrears accrued by the tenant outside the period relevant to the rent repayment order was a matter of the tenant’s conduct and relevant to the calculation of the order; it upheld the FTT’s decision to reduce the order made from £23,819.98 by 50% to £11909.99, where the rent arrears amounted to over £8,000. That decision was upheld by the Court of Appeal ([2022] EWCA Civ 1041).

Second, Mr Williams said that during the period in which the arrears accrued Ms Yi should have had no involvement in managing the property because she was outside the UK at the time and the local housing authority required a manager to be in the country. I fail to see any relevance of this point even if it is correct; in any event it was not argued before the FTT and it is too late to argue a new point about Ms Yi’s conduct.

Third, Mr Williams argued that in light of the sums involved, and since Ms Yi is not appealing against the finding that she committed an offence, it was not an appropriate use of the Tribunal’s resources to entertain the appeal. He added: “The Respondents further note that, insofar as the FTT June Decision made no reference to inflation, even if the nominal amount of the RRO award were to remain unchanged, the economic value of that RRO award will be lower than it was at the time of the FTT June Decision, and so the passage of time will have in any event brought about a reduction of the sort the Applicant seeks.” The latter point is obviously incorrect and in any event irrelevant. As to the general point about the importance of the appeal, in granting permission to appeal the Tribunal disagreed.

Mr Hobbs in his statement of case repeated those points, with some elaboration, and added allegations about the condition of the property which the FTT had rejected and which cannot be challenged in this appeal.

Reverting then to the arguments made by Ms Yi, was the FTT right to reduce the amount payable by only half the arrears, without explaining why? The lack of explanation is of course a problem in itself. But might there have been an available explanation for the decision? As I said above, it was clearly within the FTT’s discretion to allow only half the arrears against the amount payable, and indeed one can imagine circumstances where no reduction might be made to reflect arrears, in light of the conduct of the landlord. But this was not such a case; the only relevant matter of conduct of either party was the rent arears accrued by Mr Hobbs. The FTT’s decision to reduce the amount payable by only 50% of those arrears is inexplicable and I set the decision aside. I can see no reason why the whole of arrears should not be set against the amount to be repaid, since there is no dispute about the amount of the arrears and the FTT found that no satisfactory explanation had been given for the arrears.

The Tribunal substitutes its own decision, taking into account the rent arrears and correcting the arithmetical error identified in the deduction for utilities, that the amount payable is calculated as follows: