Gell v 32 St John's Road (Eastbourne) Management Company Ltd

A tenant who relies on the statutory restriction on unreasonable service charges must plead the factual basis of that defence. Landlord and Tenant Act 1985, section 19 adjusts the parties’ contractual rights but does not require a court to investigate reasonableness where the tenant has not put it in issue.

The same applies, with greater force, to an alleged failure to comply with statutory consultation requirements. A defence must identify why the requirements applied, the alleged defects and their asserted consequences. After a defence has been struck out, a late and unmeritorious document does not permit a tenant to raise every conceivable objection. A transfer to the First-tier Tribunal requires an actual question falling for determination; it cannot be used to remit a general inquiry into service charges.

The landlord, a management company for a block of seven flats, claimed unpaid maintenance and service charges, contractual interest and costs from Mr Gell, a leaseholder. Most of the disputed sum represented advance charges for proposed major works.

In August 2017, Deputy District Judge Thompson struck out Mr Gell’s defence and counterclaim, while entering judgment for an amount to be assessed. In February 2019, she referred the reasonableness of the service charges to the First-tier Tribunal (Property Chamber). His Honour Judge Simpkiss allowed the landlord’s appeal, set aside that referral and entered judgment for the claimed sum and contractual interest.

Mr Gell appealed. The central issues were whether section 19 required the court to assess reasonableness despite the struck-out defence, and whether the 2017 order had nevertheless left that issue open.

Disposition

The Court of Appeal dismissed Mr Gell’s appeal. Edis LJ gave the judgment, with which Arnold and Lewison LJJ agreed.

1. Section 19 of the Landlord and Tenant Act 1985 limits a landlord’s contractual right to recover service charges. It does not impose a duty on the court to investigate reasonableness in every claim. A tenant who says that charges are unreasonable must plead that case, identifying the challenged items and the general nature of the objection. The court followed Yorkbrook Investments Ltd v Batten (1986) HLR 25 on that point.

2. A claim for unpaid service charges is a debt claim for a specified sum. Where the defence has been struck out, it is treated as though no defence had been filed. The court is not required to carry out the assessment applicable to unliquidated damages. Although a court may, at the point of strike-out, permit a confined and properly pleaded replacement defence, a party cannot later raise matters that required pleading.

3. An alleged breach of section 20 consultation requirements also had to be properly pleaded. The tenant would need to identify why the requirements applied, what had not been done, why it was defective and the legal consequence asserted. Passing references to consultation notices did not formulate such a case.

4. The 2017 order had in substance given Mr Gell an opportunity to identify a genuine issue concerning the amount recoverable. His late document was largely abusive, repeated matters already struck out and disclosed no meritorious challenge. There was nothing inherently unreasonable in estimating advance charges from a surveyor’s assessment pending tendering and an eventual adjustment under section 19(2). The surveyor’s commercial connection with the managing agent did not, on the pleaded material, make that approach unreasonable.

5. Section 176A of the Commonhold and Leasehold Reform Act 2002 permits transfer only of a question which falls for determination. It did not authorise a wholesale referral of general reasonableness where no properly triable question remained. Judge Simpkiss was therefore right to set aside the transfer and enter judgment for the landlord, with contractual interest and costs.

• Court of Appeal (Civil Division) — dismissed Mr Gell’s appeal in [2021] EWCA Civ 789 and upheld the order made by His Honour Judge Simpkiss.
• County Court at Brighton, His Honour Judge Simpkiss — on 27 August 2019 allowed the landlord’s appeal from the Deputy District Judge, set aside the First-tier Tribunal referral and entered judgment for £85,939.04, including contractual interest.
• County Court at Brighton, Deputy District Judge Thompson — in February 2019 referred the reasonableness of the service charges to the First-tier Tribunal (Property Chamber). In August 2017 she had struck out the defence and counterclaim and entered judgment for an amount to be assessed.