[2024] UKUT 00300 (LC)

The appeal to this Tribunal is against the FTT’s refusal, on 18 December, to reinstate the appeal against the financial penalty which had been struck out on 15 December. There is no appeal against the strike out decision itself, and I have seen no document recording that decision or identifying who made it. It may simply be that the parties were informed that it had been made. It is understandable that an unrepresented party may not have appreciated that a separate right of appeal lay against that decision. In practice there is a substantial overlap between the two decisions and it is not necessary to maintain a very firm distinction, nor is it possible given the absence of any statement recording the reasons for the decision made on 15 December. If the appeal ought not to have been struck out, the application to reinstate it ought to have succeeded; but even if the decision to strike out the appeal was properly made, the question whether it ought to be reinstated was a separate one.

At paragraphs [33] of BPP Holdings, Lord Neuberger PSC emphasised the restraint which an appellate tribunal should adopt when asked to interfere with a debarring order and quoted the words of Lawrence Collins LJ in Walbrook Trustee (Jersey) Ltd v Fattal [2008] EWCA Civ 427, at [33]:

“[A]n appellate court should not interfere with case management decisions by a judge who has applied the correct principles and who has taken into account matters which should be taken into account and left out of account matters which are irrelevant, unless the court is satisfied that the decision is so plainly wrong that it must be regarded as outside the generous ambit of the discretion entrusted to the judge.”

The same restraint is necessary when considering an appeal against a decision not simply to debar a party from participation, as in Denton, but to strike out their appeal altogether and then to refuse to reinstate it.

It is a feature of the FTT’s decision in this case that it left in place a finding by the Council that Mr Deane had committed a criminal offence, without that conclusion ever having been subjected to judicial scrutiny. It also left him subject to a significant financial penalty for that offence. It could be argued that those considerations might justify a different approach by this Tribunal in considering an appeal from a procedural decision shutting Mr Deane out from a judicial determination of his guilt or innocence. But as no submissions have been made to that effect by Mr Deane, who is unrepresented, I will not consider it further and will apply the approach indicated by Lord Neuberger PSC in BPP Holdings. In doing so I also remind myself that Lord Neuberger acknowledged that “There must be a limit to the permissible harshness (or indeed the permissible generosity) of a decision relating to the imposition or confirmation (or discharge) of a debarring order” and that in an appropriate case an appellate tribunal could interfere where a debarring order has been imposed (BPP Holdings, at [34]).

The question is therefore whether the FTT applied the law correctly when it refused to reinstate Mr Deane’s appeal. It would only be right for me to interfere with its decision if I am satisfied that its reasoning was legally flawed and that it did not apply the relevant principles, or that it was so draconian that it exceeded the limit of permissible harshness to which Lord Neuberger referred.

There are two respects in which it seems to me that the FTT clearly misdirected itself in law, and a third instance in which its appreciation of the circumstances of the case was incomplete.

First, although the FTT referred in its survey of the relevant law to the Civil Procedure Rules, and specifically to rule 3.9 concerning relief from sanctions, it did not refer to its own Rules. In particular, it did not refer to the overriding objective of the FTT Rules, which is not expressed in the same terms as CPR 1.1, nor to the fact that the equivalent in the FTT’s Rules of CPR 3.9, rule 8(2), read together with rule 3, is couched in much more general terms and makes no specific reference to either of the considerations highlighted in CPR 3.9 which the FTT said were of particular importance at stage 3 of its assessment.

As the Court of Appeal pointed out in Denton (at [32]) the two factors to which specific attention is drawn in CPR 3.9(1) as relevant considerations when a court is dealing with an application for relief from sanctions are taken from the definition of the overriding object of the Civil Procedure Rules. Factor (a), the need for litigation to be conducted efficiently and at proportionate cost, is in substance included in the definition of the overriding objective in CPR 1.1(2).  Factor (b), the need to enforce compliance with rules, practice directions and orders, is specifically identified in CPR 1.1(2)(f) as a core component of the overriding objective. When the Court of Appeal explained that “particular weight” was to be given to these factors by courts, it did so by reference to their inclusion in CPR 3.9(1):

“If it had been intended that factors (a) and (b) were to be given no particular weight, they would not have been mentioned in rule 3.9(1). In our view, the draftsman of rule 3.9(1) clearly intended to emphasise the particular importance of these two factors.”

The same two factors do not appear in the definition of the FTT’s overriding objective in rule 3. Efficiency is not mentioned (although the need to deal with the case in ways which are proportionate to its importance and complexity, and to the anticipated costs and resources of the parties does feature in rule 3(2)(a)). Nor is enforcing compliance identified in rule 3 as a core component of dealing with cases fairly and justly. That does not mean that these considerations are unimportant, as BPP Holdings confirms. In particular, I have not lost sight of the guidance given by the then Senior President of Tribunals, Sir Ernest Ryder, sitting in the Court of Appeal in BPP Holdings ([2014] 1 WLR 3926) when he said this (at [37]):

“… I can detect no justification for a more relaxed approach to compliance with rules and directions in the tribunals and while I might commend the Civil Procedure Rules Committee for setting out the policy in such clear terms, it need hardly be said that the terms of the overriding objective in the tribunal rules likewise incorporate proportionality, cost and timeliness. It should not need to be said that a tribunal's orders, rules and practice directions are to be complied with in like manner to a court's. If it needs to be said, I have now said it.”

Notwithstanding this guidance, a complete assimilation of the approach taken in courts and tribunals would fail to recognise the distinctly different terms in which the overriding objectives of their respective procedural rules are expressed. In taking into account the need to enforce compliance that consideration should not be elevated to a status which the FTT Rules do not confer on it. In particular it should not be allowed to short circuit a proper assessment of the overall justice of the situation, as mandated by rule 8(2), when the FTT consider its response to non-compliance or relief from sanctions.

Nor should necessary considerations of efficiency and compliance be allowed to overshadow those aspects of the FTT’s overriding objective identified in rule 3 which are missing from CPR 1.1. It might fairly be said that these emphasise some of the less muscular features of dealing with a case fairly and justly, including the avoidance of formality, the search for flexibility and the importance of ensuring, so far as practicable, that the parties are able to participate fully in the proceedings.

Of course, it cannot be suggested that those same considerations are irrelevant to doing justice in courts, but that is not a reason to diminish or disregard their special significance for tribunals. CPR 1.1 and rule 3 of the FTT Rules lean in subtly different directions in describing how justice is to be achieved. The differences which appear on the face of the rules are not accidental and should not be forgotten.

The difficulty with the FTT’s approach in this case lies in the particular weight which it gave to the factors identified in CPR 3.9(1) at the third stage of its Denton assessment, and in the absence of consideration of the FTT’s own overriding objective and especially of those aspects of rule 3 which might have tempered the draconian approach which it adopted. By concentrating on CPR 3.9 the FTT lost sight of rule 3 and of rule 8(2), with its reference to “such action as the Tribunal considers just” and its helpful menu of responses to cases of non-compliance. These act as a reminder that the appropriate reaction, even in a serious case, need not always be to strike out the proceedings.

In Denton, at paragraph [37], the Court of Appeal warned against an unduly draconian approach to relief and emphasised that compliance was not to be regarded as an end in itself; rules and compliance with them were the handmaids not the mistresses of justice and could never be allowed to assume a greater importance than doing justice in any case. The menu of responses in rule 8(2) has been included by the Tribunal Procedure Committee to assist the FTT in finding the just and proportionate response to non-compliance in a particular case, and it ought always to be kept in mind whenever the consequences of non-compliance are being considered.

That menu includes, at rule 8(2)(e), the ability to bar or restrict a party’s participation in the proceedings. That is a lesser sanction than striking out the proceedings altogether. Where the burden of establishing that an offence has been committed falls on the Council as respondent, as it does in an appeal against a financial penalty, the lesser sanction of barring or restricting participation need not have the same decisive effect on the outcome of the appeal as an order striking it out. Where an appeal is struck out the proceedings are at an end and the financial penalty remains in place; in contrast, where a party is barred from participating, or restricted in how they may participate, the Council will be left to prove the offence before the penalty can be confirmed and the appeal may yet be successful.

Although, on one reading, the FTT’s assessment or evaluation of all the circumstances of the case might appear to have been restricted just to the factors in CPR 3.9(1), I have no difficulty in assuming that it had the whole of the procedural history in mind, as well as the poor impression which Mr Deane himself obviously made at the hearing, as those were all spelled out in the decision before the FTT reached the three stage Denton test. The FTT was quite entitled to take a dim view of the excuses it was offered, but it ought not to have directed itself by reference to the wrong procedural rules. In doing so it erred in law.

The second respect in which the FTT misdirected itself was in its reliance on the Tribunal’s decision in Haziri without looking beyond the bare proposition that the merits of a dispute are not generally relevant to case management decisions. That proposition was supported in Haziri by reference to the decision of the Supreme Court in Global Torch, in which it was stated by Lord Neuberger (with whom Lord Sumption, Lord Hughes and Lord Hodge agreed). But, as I indicated in Haziri, Lord Neuberger qualified the general rule in one important respect. The relevant passage from his judgment is at [29] to [31], as follows:

“29.

In my view, the strength of a party's case on the ultimate merits of the proceedings is generally irrelevant when it comes to case management issues of the sort which were the subject matter of the decisions of Vos J, Norris J and Mann J in these proceedings. The one possible exception could be where a party has a case whose strength would entitle him to summary judgment. Both the general rule and the exception appeared to be common ground between the parties, […]. In my view, the general rule is justifiable on both principled and practical grounds.

30.

A trial involves directions and case management decisions, and it is hard to see why the strength of either party's case should, at least normally, affect the nature or the enforcement of those directions and decisions. While it may be a different way of making the same point, it is also hard to identify quite how a court, when giving directions or imposing a sanction, could satisfactorily take into account the ultimate prospects of success in a principled way. Further, it would be thoroughly undesirable if, every time the court was considering the imposition or enforcement of a sanction, it could be faced with the exercise of assessing the strength of the parties' respective cases: it would lead to such applications costing much more and taking up much more court time than they already do. It would thus be inherently undesirable and contrary to the aim of the Woolf and Jackson reforms.

31.

In principle, where a person has a strong enough case to obtain summary judgment, he is not normally susceptible to the argument that he must face a trial. And, in practical terms, the risk involved in considering the ultimate merits would be much reduced: the merits would be relevant in relatively few cases, and, in those cases, unless the court could be quickly persuaded that the outcome was clear, it would refuse to consider the merits. Accordingly, there is force in the argument that a party who has a strong enough case to obtain summary judgment should, as an exception to the general rule, be entitled to rely on that fact in relation to case management decisions. For present purposes, I am prepared to assume in the Prince's favour that that is indeed correct.”

If the proper outcome of a case is clear at an early stage a court will deal with it summarily, without a full trial. That is the basis of Lord Neuberger’s exception to the general rule that the strength of a party’s case is irrelevant when case management is being considered. The same applies in a case involving an allegation of criminal conduct (albeit in the context of the imposition of a quasi-criminal financial penalty). If the prosecution case is so weak that it is bound to fail, justice demands that the innocent party should be entitled to rely on that fact in support of an application for relief against procedural sanctions.

In this case the FTT took the view that Mr Deane’s involvement in the control or management of the property was a fact sensitive issue and that the late service of his documents necessarily meant that the hearing could not have proceeded. But it reached that conclusion without asking itself whether the evidence relied on by the Council provided a basis on which it could properly be concluded that a criminal offence had been committed by Mr Deane. It justified that approach by reference to the principle in Haziri, but without considering the exception in favour of a party who is entitled to summary judgment in their favour. That was its second error.

The burden of demonstrating that an offence had been committed rested on the Council. It sought to discharge that burden by the evidence which it filed on 29 September 2023. That evidence showed that the financial penalty had been imposed because Mr Deane was understood by the Council to be the “managing person of the property at 86A Hatherley Gardens”.

The offence to which the Council referred was the offence in section 72(1), 2004 Act, of being “a person having control of or managing an HMO which is required to be licensed … but is not so licensed”. The definition of a person having control, in relation to premises, is provided by section 263(1), 2004 Act, as follows:

“In this Act “person having control”, in relation to premises, means (unless the context otherwise requires) the person who receives the rack-rent of the premises (whether on his own account or as agent or trustee of another person), or who would so receive it if the premises were let at a rack-rent.”

By specifying in its final notice that Mr Deane was alleged to be the “managing person” it is clear that the Council was not alleging that he was a “person having control”.

The definition of “person managing” is in section 263(3), 2004 Act; so far as it applies to HMOs it is as follows:

“In this Act “person managing” means, in relation to premises, the person who, being an owner or lessee of the premises—

(a)

receives (whether directly or through an agent or trustee) rents or other payments from—

(i)

in the case of a house in multiple occupation, persons who are in occupation as tenants or licensees of parts of the premises; and

(ii)

…; or

(b)

would so receive those rents or other payments but for having entered into an arrangement (whether in pursuance of a court order or otherwise) with another person who is not an owner or lessee of the premises by virtue of which that other person receives the rents or other payments;

and includes, where those rents or other payments are received through another person as agent or trustee, that other person.”

The concepts of having control of, or managing an HMO are both related to the receipt of rent. In the case of a person having control the rent must be a rack-rent. In contrast, a person managing need not receive a rack-rent; receipt of any amount of rent or other payments is both necessary and sufficient.

Nothing in section 263(1) requires that the person having control should have any interest in the property itself. That is in contrast to a person managing, who section 263(3) requires must be “an owner or lessee” of the premises.

The meaning of the word “owner” is provided by section 262(7):

“In this Act “owner”, in relation to premises –

(a)

means a person (other than a mortgagee in possession) who is for the time being entitled to dispose of the fee simple of the premises whether in possession or in reversion; and

(b)

includes also a person holding or entitled to the rent and profits of the premises under a lease of which the unexpired term exceeds 3 years.”

The expressions “lease” and “tenancy” have the same meaning in the Act and include a sub-lease or sub-tenancy and an agreement for a lease or tenancy (or sublease or subtenancy) (section 262(1)-(2), 2004 Act).

In this case if it relied on section 263(3)(a), it was for the Council to demonstrate, to the criminal standard of proof, that Mr Deane was an owner or lessee of No.86A, and that he received (whether directly or through an agent or trustee) rents or other payments from the people in occupation of the property. Alternatively, it could prove that he received those payments as an agent or trustee on behalf of the owner or lessee.

If the Council relied on section 263(3)(b), it was required to prove that Mr Deane was an owner or lessee of No.86A, who would have received (directly or through an agent or trustee) rents or other payments from the people in occupation of the property, but for the fact that he had entered into an arrangement with another person who was not an owner or lessee of the premises by virtue of which that other person received the rents or other payments.

The evidence filed in support of the Council’s case comprised a witness statement by one of its environmental health officers with supporting exhibits. The exhibits included the following:

The Council’s evidence did not show that Mr Deane was the owner of No.86A. The freehold proprietor was Ms Raujackdine and no registered lease was shown on the title. By section 27(2)(b)(i) of the Land Registration Act 2002 leases granted out of existing registered titles for a term of more than seven years are compulsorily registrable. Mr Deane could therefore only have been an owner, within the meaning in section 262(7)(b), if he held a lease granted for a term of less than seven years, the term of which had more than three years left to run.

Although Mr Deane was not shown to be an owner, he might nevertheless still have been a person managing if he was a lessee. There was no evidence that Mr Deane had been granted a lease by Ms Raujackdine or by anyone else.

Nor was there evidence that Mr Deane was the recipient of rent or any other payment from those in occupation of No.86A, whether on his own account or as trustee or agent for anyone else. Mr Zartoni had not responded when asked whom he paid rent to and did not provide a name either for his landlord or for an agent. A second unidentified person stated that the agent was Tantum Properties but did not name the landlord. Both statements said that the maker had had no contact with the landlord for more than three years. The only other document which might have confirmed the identity of the landlord was the tenancy deposit certificate, but it was so poorly reproduced in the Council’s bundle that the name of the landlord could not be made out. The Council’s officer did not refer to the certificate in her witness statement.

Even without evidence from Mr Deane himself, the Council’s case was therefore very weak. It had drawn its conclusions after the most cursory investigation and had presented them to the FTT in a form which was part incomplete and part illegible. Its officers had not obtained a statement from any occupant of No.86A concerning the identity of the person they understood to be their landlord or to whom they paid rent. They had not approached the agent named by one of the tenants (assuming the incomplete statement was made by a tenant). They had not interviewed Mr Deane or, as far as appears from the material it supplied to the FTT, Ms Raujackdine, nor asked either of them or the agent to explain how Mr Deane’s name appeared on the unsigned tenancy agreement. The Council’s case therefore depended on an inference that Mr Deane must have held a lease or tenancy and must have received payment from the tenants occupying No.86A because his name appeared on the agreement.

Receipt of rent is a necessary condition of being a person managing property (unless an arrangement has been entered into under which another person receives it, and there was no evidence of any such arrangement). In the absence of any suggestion by the tenants that they paid rent to Mr Deane, and in the face of the repeated denials of involvement addressed to the Council by Mr Deane’s office, when it made its decision of 18 December 2023 the FTT ought to have considered whether the mere existence of the unsigned agreement provided evidence from which they could be sure beyond reasonable doubt that Mr Deane had received rent or had any interest in No.86A at all. If there was insufficient evidence on which to discharge the burden of proof, the FTT should have taken that into account in determining whether to accede to Mr Deane’s application to reinstate the appeal.

In any event, the material before the FTT was not limited to the statements filed by the Council. Mr Deane had asserted in his notice of appeal (which he supported with a statement of truth) that he was not the owner or manager of the property and had no connection with it. It was not for Mr Deane to prove any of those matters, but his supporting statement filed on 20 December 2022, a year before the FTT hearing, was accompanied by an email from Stonehenge acknowledging that they had indeed made a mistake concerning the tenancy agreement for No.86A. The FTT’s decision to strike out the appeal, rather than imposing some lesser sanction, and its refusal to reinstate the appeal, meant that it never had to consider that explanation.

The final respect in which the FTT’s decision is open to serious question is related to the second. At the first stage of its Denton assessment the FTT said that Mr Deane’s failure of compliance was “very serious”; this was his appeal and, the FTT said, the late service of documents by him necessarily meant that the hearing on 18 December could not have proceeded if the appeal had been reinstated. It is true that this was Mr Deane’s appeal but, as the FTT’s directions recognised, the burden of establishing that a criminal offence had been committed lay on the Council. The FTT’s assessment of the seriousness and consequences of the breach ignored the material which had already been filed by Mr Deane a year earlier and paid no regard to the weakness of the Council’s case.

The FTT’s directions required Mr Deane to file an appeal bundle in pdf format containing a further copy of his original notice of appeal and supporting documents. But the FTT already had the notice of appeal and the documents which accompanied it in electronic form. To strike out the appeal for failure to supply them again would be to require compliance for its own sake and would cross the line into impermissible harshness.

The other requirements of the directions were optional. Mr Deane was to file an “expanded statement of reasons for the appeal” including any additional grounds on which he wished to rely, together with the statements of any witnesses to be relied on and any other documents to be used. But the single ground of Mr Deane’s appeal was that he had no connection with No.86A and he did not need to expand that ground of appeal. Nor was there any obligation on Mr Deane to rely on other witnesses or documents, as the directions themselves made clear. Once again, I do not consider that it would be permissible to strike out an appeal which has been properly commenced simply because a party has failed to file documents which are not necessary to identify the ground relied on and which the FTT has indicated are optional.

If the FTT considered that some sanction was required because no additional material had been filed in time, or because the documents had not been included in a single pdf file, it could have restricted Mr Deane’s case to the contents of his notice of appeal and documents served with it and denied him the opportunity to rely on any other material. It might have considered denying Mr Deane the right to make any submissions in support of his appeal, leaving it to the Council to prove that he had committed the offence in respect of which the penalty had been imposed, but it is difficult to see how that would be consistent with the overriding objective. Either of those responses would have enabled the hearing to proceed on 18 December. Instead, distracted by CPR 9.3 and misunderstanding Haziri, the FTT did not consider either of those options. In my judgment its decision not to reinstate the appeal was flawed and was not within the boundaries of its discretion.