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!