On 8 February 2024, the Supreme Court heard the appeal of A1 Properties (Sunderland) Ltd v Tudor Studios RTM Co Ltd. The appeal enables the Supreme Court to consider the proper approach to ascertaining Parliament’s intention as to the consequences of a failure to follow a statutory procedure for the acquisition of a property or similar right where Parliament has not expressly stated the consequences in the legislation.
The case concerns a claim to acquire the right to manage a block of student accommodation in Leicester pursuant to Chapter 1 of Part 2 of the Commonhold and Leasehold Reform Act 2002 (“CLRA 2002”). The long leaseholders of the block set up a right to manage (RTM) company and served statutory notices to enable it to acquire the right to manage. In doing so, the Respondent RTM company failed to serve a claim notice on the Appellant, which is an intermediate landlord with no management responsibilities.
Following a challenge to its claim to acquire the right to manage, the Respondent issued an application in the First-tier Tribunal for a determination that it had acquired the right. The Appellant was added as a party and disputed the Respondent’s entitlement. It was common ground that (a) s. 79(6)(a) of CLRA 2002 required the Respondent to serve a claim notice on the Appellant, (b) the Respondent had failed to do so, and (c) CLRA 2002 did not state the consequence of that failure. The Respondent argued that Parliament would not have intended that the failure to serve a claim notice on the Appellant invalidated the right to manage claim. It relied on the Court of Appeal decision in Elim Court RTM Co Ltd v Avon Freeholds Ltd [2017] EWCA Civ 89; [2018] Q.B. 571, in which the Court of Appeal decided that a failure to serve a claim notice on a single intermediate landlord with no management responsibilities did not invalidate the claim.
The First-tier Tribunal concluded that the facts were materially indistinguishable from Elim Court. It therefore held that Parliament would not have intended the failure to serve the Appellant to invalidate the claim to acquire the right to manage. The Upper Tribunal agreed and dismissed the Appellant’s appeal. The Appellant sought permission to appeal, arguing that Elim Court was wrongly decided; alternatively, that it could be distinguished on the facts.
The Upper Tribunal granted a leapfrog certificate, enabling the Appellant to seek permission to appeal directly to the Supreme Court. In doing so, Judge Cooke stated that the point raised in the appeal was of considerable importance because of the frequency with which the courts and tribunals have to determine the consequences of a failure to meet statutory requirements for the acquisition of rights relating to property, such as the right to manage.
Before the Supreme Court, the Appellant argued that Elim Court was wrongly decided and should be overruled. It argued that Parliament would intend that any failure to serve a claim notice on a landlord as required by CLRA 2002, s. 79(6)(a), would invalidate the right to manage claim, irrespective of whether the landlord had management functions.
In support of its appeal, the Appellant relied on Natt v Osman [2014] EWCA Civ 1520; [2015] 1 W.L.R. 1536. In Natt, the Court of Appeal held that the authorities on ascertaining Parliament’s intention as to the consequences of non-compliance with a statutory procedure could be divided into two broad categories: (1) those in which the decision of a public body is challenged, or which concern procedural requirements for challenging a decision whether by litigation or some other process, and (2) those in which the statute confers a property or similar right on a private person and the issue is whether non-compliance with the statutory requirement precludes that person from acquiring the right in question. The Court of Appeal held that in the second type of case substantial compliance with the statute could never be enough, and the court would not consider the actual knowledge of the parties, or the actual prejudice (or lack of prejudice) caused by the procedural defect when deciding whether Parliament would intend invalidity to follow.
The Respondent argued that Elim Court was correctly decided. It also argued that the Court of Appeal decision in Natt was wrong in creating a separate category for property statutes. Instead, in all cases, the court should consider the practical consequences of non-compliance, including the prejudice (or lack of prejudice) to the parties by the non-compliance in question. The Respondent invited the Supreme Court to overrule Natt v Osman.
Given the Supreme Court’s consideration of whether or not the separate treatment of property statutes required by Natt v Osman is correct, its decision is likely to have wide-reaching consequences. It is likely to affect the court’s approach to non-compliance with other property statutes; for instance, the leasehold enfranchisement provisions in the Leasehold Reform, Housing and Urban Development Act 1993.
Winston Jacob of Lamb Chambers represented the Respondent RTM company as its sole counsel both in the Upper Tribunal and in the Supreme Court.
