Sleepwalking into error

I’ve posted before about the vexed issue of s.81, Housing Act 1996 and default judgments (see here for the most recent county court case; note also the comments to that post which explain that Woodfall has changed its mind). Well, we now have another (minor) comment on the issue from Lord Justice Kitchin in Faizi v Greenside Properties Ltd [2013] EWCA Civ 1382 (only on Case Track from what I can see).

Mr & Mrs Farzi appear to have been the leasehold owners of a flat in a building owned by Greenside. In April 2009, Greenside issued proceedings in the court court for service charge arrears and interest, totaling just over £3,000. A “Statement and Skeleton Argument” was filed in opposition to the claim and, inter alia, requested transfer to the LVT (as it was then). That does not seem to have worked and, in May 2010, Greenside obtained judgment.

In September 2011, Greenside served notice under s.146, Law of Property Act 1925, specifying the breach of covenant as failure to pay service charges as determined by the May 2010 judgment.

Proceedings for possession were issued in April 2012. The Deputy District Judge rejected an argument that the service charges could still be determined by the LVT (which he was plainly right about) and made a possession order. The Circuit Judge rejected an appeal.

Mr & Mrs Faizi sought permission to appeal to the Court of Appeal. They argued that the judgment of May 2010 was not a default judgment, even though it had been described as such in the s.146 notice. Kitchin LJ considered (quite rightly again) that this was a duff point. It clearly was not a default judgment and the misdescription was irrelevant.

The interesting (and wrong) bit is the obiter statements. His Lordship concluded that s.81, 1996 Act can be satisfied either by way of a final determination in the court or the Tribunal (which is right), but it did not matter whether that was by way of contested hearing or judgment in default. That is wrong. At the risk of repeating myself from the earlier post:

(a)  a default judgment is not a “determination” but is an administrative act arrived at without any judicial input: see Ostra Insurance Public Co. Ltd v Kintex Shareholding Company [2004] EWHC 1599 (Comm), per Cooke J at [7];

(b) s.81 can be satisfied by court determination, or Tribunal decision or arbitration. Neither Tribunals not arbitration permit for default judgment. How can it be that the nature of the case, evidence (and rights of the parties) depends on what forum is used;

(c) s.81 has to be seen with its sister provision, s.168, CLRA 2002 which is, in effect, s.81 but for all other breaches of covenant – how would one obtain default judgment for a determination that the tenant was in breach of covenant by keeping a cat? You can’t;

(d) there is no way of appealing a default judgment, but s.81 clearly contemplates that the decision becomes final only when the time for an appeal has passed.

Now, on the facts of this case, there clearly had been a proper determination as there appears to have been a fully contested hearing, so I accept that s.81 was satisfied.

What worries me is the statement that “… it matters not whether the judgment was obtained by default or following a contested hearing. In either case the requirements of s.81 are fulfilled.” (at [7]).

The Learned Lord Justice does not appear to have been addressed at all (let alone at any length) on why that is wrong, but has stated it as law nonetheless. And, to make matters worse, this decision (although only an application for permission to appeal) is probably citeable as the only CA “decision” on point. Which means that most District and Circuit Judges are simply going to go alone with what Kitchen LJ has said.

So, to our judicial readers (yes, we do have some), I urge you not to be hoodwinked by this decision! And, for our tenant lawyer readers, please, please, please let me get what I want and find a case to argue properly and establish that I’m right!

 

 

About J

J is a barrister in London. He loves service charges and all things leasehold law related. He also likes beating rogue landlords and mortgage companies.
Posted in Housing law - All.

8 Comments

  1. By failing to acknowledge service, the defendant admits all the allegations in the claim form: that is the foundation of the court’s power to grant a default judgment (Cribb v. Freyberger [1919 WN 22).
    So the question of whether a default judgment is a “determination” for the purpose of s.81 may be off the point. The landlord can rely on it to prove that the tenant has “admitted” the amount payable instead.

  2. I thought that originally. But isn’t CPR 16.5(4) a problem.

    CPR 16.5(5) provides that subject to subject to 16.5(4) a defendant who fails to deal with an allegation is taken to admit that allegation.

    16.5(4) provides, however, that

    “Where the claim includes a money claim, a defendant shall be taken to require that any allegation relating to the amount of money claimed be proved unless he expressly admits the allegation.”

    So the defendant does not actually admit the allegation in a money claim if he fails to file a defence.

    • I think CPR 16.5(4) is an exception to the rule in CPR 16.5(5) that if you do not deal with an allegation in your defence, it will be read as if you have admitted it. I don’t think it has any application to a case where you have not acknowledged service or served a defence at all. But it is a fair point that CPR 12 does not say expressly, that a deemed admission is still the basis for granting a default judgment.

    • We’ve also done some research into Cribb v. Freyberger and it seems to be treated (certainly in Malaysia) as a decision on the (then) rules of court, rather than a rule of general law

    • But O.27 r.2 (which was in force when Cribb was decided) did not say that the power was based on a deemed admission either. And CPR 12.4 is a direct descendant of that rule, through RSC (1962) O.19 r.2. And the notes to the last White Book before the CPR (1988 – 19/2/2) treated Cribb as good law.

  3. I have spent all trying to find inspiration in my quest to help a friend who may be prevented from taking her case to the Property Tribunal on a disputed service charge on the basis that the County Court made a ‘determination’ She defended a possession hearing in person and the District Judge adopted an unusual approach. He refused to hear argument about liability of the service charge saying ‘ it is not for this court’; , gave the claimants judgement, and suggested she take the case to the Property Tribunal where he said she would be refunded service charges if they found in her favour. Duly the application to the Tribunal has met with a Respondents application to strike out on the basis that there was a ‘determination’ in the County Court. Whilst its different to the case described by J (which was a determination by virtue of a default judgement) it may well be regarded as a ‘determination’ even though neither the Particulars of Claim nor the Judgement mention the word ‘service’ charges and state only ‘rent arrears’ and not even anything generic like ‘other charges’ . My feeling is that there coiuld be a distinction in this case because if an obtained transcript was to show that the Judge did not in fact try the issue of liability but ‘assumed’ he either did not have jurisdiction or competence but still gave judgement then a determination of the issues (despite the judgement) was not made, only a determination of an amount .

    I quiver at the thought at what a Property Tribunal would do faced with a case where its clear that the county court judgement is without reasons and doesn’t mention service charges (even though service charges were the debt)

    My friend was unsuccessful in applying for leave to appeal against the District Judge and will go before the circuit judge to try in person and argue that she was denied a hearing of her service charge dispute because the Judge wouldnt hear it, entered judgement and recommended she go to the tribunal and his judgement itself inadvertently (possibly) precluding the tribunal from jurisdiction

    I think it may well be the first case of its kind ! I think my friend needs a transcript or she wont have a chance before the circuit judge

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