Dear All,
This note is specifically about the First Tier Tribunal case which has its first meeting next Tuesday 16th Oct at 10:00 at the Civic Suite next to Wandsworth Town Hall. I will of course be there to represent those of you who have nominated me and it would be good for a large turnout (of leaseholders – the Council is pursuing a ‘divide and conquer’ approach to all this to try to split leaseholders and tenants from each other even though I know you are all equally worried) to demonstrate how angry people are about the Council’s high-handed knee-jerk reaction to the Grenfell tragedy.
THE FIRST TIER TRIBUNAL – an outline
As I am not a lawyer I have been rather feeling my way towards understanding the legal issues surrounding the Council’s application to the First Tier Tribunal. This is the situation as I currently understand it.
WHAT IS THE TRUBINAL CASE ABOUT
The Council has been rather clever in its application to the Tribunal. It has sidestepped the questions of whether the sprinklers are a reasonable response to the current situation regarding fire risks or non-risks in high rise buildings and whether there has been a proper level of consultation with residents (especially leaseholders) about it. It has done this by restricting the scope of its application to the First Tier Tribunal (FTT) to a single question:
“whether, under the terms of the leases, the service charges can include the relevant proportion of the costs of installation of sprinkler systems”.
In the words of the Council’s submission, “this question depends on the terms of the leases.” The case is in effect a legal and semantic argument about the meaning of certain words. The Tribunal will decide what these words mean in the context of the proposal to impose sprinklers on all properties in 10+ storey buildings.
In a sense this ought not to matter. If the Council wins this case it could still be challenged by residents at another hearing of the FTT on the grounds of unreasonableness or lack of consultation if the Council announced it was going ahead with the scheme. At that point all our ongoing work on the wider case would become relevant. However, as the Council has demonstrated, it intends to use as much of your money as necessary to get its way; in effect residents may find that even if they can raise money now for legal advice and support on the present FTT case, were they to lose they would face the prospect of having to find more to fight a substantive case, while the Council would simply dip once more into the Housing Revenue Account and, possibly, leaseholder service charges.
Be that as it may, we are where we are today.
THE KEY ISSUES
The current Tribunal case is a relatively straightforward one: do the clauses referring to ‘maintenance’, administration’ and/or (for later leases) ‘security’ give the Council powers to impose sprinklers on residents and recharge leaseholders for them (presuming that the Council could show that the sprinklers are a reasonable response to the current situation and that it had carried out proper consultation, in accordance with the Landlord and Tenant Act 1985).
The Council is arguing that these words do give it those powers. It refers to three types of lease: Type 1; Type 2A, Type 2B. All leases contain a list of items of expenditure in relation to the Block for which the Council can (and therefore must) recover service charge from leaseholders. The relevant phrases in the various lease types are as follows:
· Type 1 Leases: the Council can “… do such things as the Council may decide are necessary to ensure the efficient maintenance and administration of the Block …”;
· Type 2 Leases: the Council can “… do such things as the Council may decide are necessary to ensure the efficient maintenance and administration and security of the Block …”.
The Council ultimately has to show that the installation of a sprinkler system is within its obligations [my emphasis] in relation to the relevant Blocks within which each flat is situated.
The Council believes it has a right, under all leases, to amend (in whatever way it wants) the ‘conduction media’ (basically the layout) in relation to water courses and pipes. It is arguing that the installation of a sprinkler system in each Block is simply such an amendment to the pipes and water courses. The Council is further arguing that it has the right to do ‘anything it decides is necessary’ to ensure the efficient maintenance and administration (and security for Type 2 Leases) of the Block and that since it has decided that installing sprinklers in each Block [it does not say each flat here] is necessary then it can do it. It gives its reasons as follows:
“the installation of sprinkler systems are necessary for the efficient maintenance of each Block because in the absence of a sprinkler system there is a risk that any Block may sustain fire damage and in the worst case burn down and hence require rebuilding or other repair and maintenance;”
“the installation of sprinkler systems are necessary for the efficient administration of each Block because in the absence of a sprinkler system there is a risk that any Block may sustain fire damage and in the worst case burn down and hence require rebuilding or other repair and maintenance which has an impact on the following matters of administration
· the amount of the insurance premium tat si payable in respect of the Block;
· the rehousing of the tenants and lessees resident in the Block whilst the Block is rebuilt;”
(for Type 2 Leases) “the installation of sprinkler systems are necessary for the security of each Block because in the absence of a sprinkler system there is a risk that any Block may sustain fire damage and in the worst case burn down and thereby cause insecurity to the occupants of the Block.”
THE LEGAL SITUATION
I am told that a key case which has framed discussion about matters of interpreting the meaning of leases was known as Arnold v Britton (2015) – see https://www.supremecourt.uk/cases/uksc-2013-0193.html. The case, which happened to be about service charges (in a chalet park) but had wider implications, looked at how the terms of a lease should be interpreted, or ‘constructed’ (as in how they were to be construed, not how they were put together). In coming down on the side of the leaseholders, perhaps the important statement from the Supreme Court (para 15) was:
“When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to ‘what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean’ [my emphasis]. It does so by focussing on the meaning of the relevant words in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party’s intentions.”
In other words, the FTT will need to decide if a reasonable person, knowing the background against which leases were being issued between 1982 and 2018, would when the leases were issued have read the words ‘maintenance’, ‘administration’ or (for Type 2 leases) ‘security’ to include the possibility or likelihood of the Council fitting sprinklers in all flats at some point in the future. The main consideration the Tribunal will use (i) is in thewords’ normal usage, i.e. what these words mean – would any reasonable person entering into a lease in 1982 say have been aware that at some point in the future the Council might impose sprinklers on them and charge them for the privilege. They will also consider (iii) what the overall purpose of the clause containing the words might have been. So was the ‘maintenance’ clause mainly meant to refer to work necessary say to prevent the roof failing or windows falling out or becoming intolerably draughty, or did it have a much wider meaning? Was ‘security’ a reference to entrycall systems and other such measures – entrycall was introduced in around 1986, the introduction of Type 2 leases in 1990 – or did it include a particular response to fire safety issues; and (iv) would both sides of the arrangement – Council and lessee – know or assume that the fitting of sprinklers was a likelihood or possibility. (However, the Tribunal will not consider evidence from any leaseholder or the Council as to what was actually in their minds at the time the lease was issued.)
[Interestingly the Leases do make a specific reference to fire in the following clause concerning the Council’s obligations:
“To insure and keep insured the Block against loss or damage by fire and such other risks as are usually covered by a comprehensive policy of insurance in the full reinstatement value thereof (including Architects and Surveyors fees) in the name of the Council with the interest of the Lessee the lessees of the other flats in the Block and their mortgagees noted thereon in an insurance office of repute and whenever required to produce to the Lessee a copy of or a suitable extract from the policy or policies of such insurance and written confirmation that the last premium has been paid and in the event of any part of the Block (including any common parts) being destroyed or damaged by fire or other insured risk as soon as reasonably practicable lay out the insurance monies in the repair rebuilding or reinstatement of the Block.”
One might wonder why, if at the time when the Lease was issued the Council meant the terms maintenance, administration and security to include fire prevention, the Council did not make this explicit as it had done with respect to the insurance situation.]
The Supreme Court finding in Arnold vs Britton also states:
“The exercise of interpreting a provision involves identifying what the parties meant through the eyes of a reasonable reader, and, save perhaps in a very unusual case, that meaning is most obviously to be gleaned from the language of the provision.”
“When interpreting a contractual provision, one can only take into account facts or circumstances which existed at the time that the contract was made, and which were known or reasonably available to both parties. Given that a contract is a bilateral arrangement involving both parties, it cannot be right, when interpreting a contractual provision, to take into account a fact or circumstance known only to one of the parties.” [So even if the Council had in its mind in 1990, say, that it might want to impose sprinklers at some point in the future, this would only be relevant if a ‘reasonable’ new leaseholder would also have access to that fact.]
“The Court should not bring within the general words of a service charge clause anything which does not clearly belong there.”
[So for example if the words ‘maintenance’, administration’ or ‘security’ do not naturally include the concept ‘imposing sprinklers’ then the Court, or FTT, should not decide that they do.]
“When it comes to considering the centrally relevant words to be interpreted, the less clear they are, the more ready the court can properly be to depart from their natural meaning. That is simply the obverse of the sensible proposition that the clearer the natural meaning the more difficult it is to justify departing from it. However, that does not justify the court embarking on an exercise of searching for, let alone constructing, drafting infelicities in order to facilitate a departure from the natural meaning.” [I think this means that had the Council been precise about including ‘fire measures’ within the definition of the words ‘maintenance’, ‘administration’ or ‘security’ then it would be in a much stronger position. The fact that it did not, even if that was what it meant at the time – itself very dubious – does not mean that the FTT should in effect rescue the Council from its own vagueness.]
OCTOBER 16TH
The ‘Case Management Hearing’ for the Council’s application will be heard on October 16th at 10:00 at the Civic Suite next to the Town Hall, Wandsworth High Street, SW18 2PU. This hearing will not take any direct evidence about the matters outlined above: it will be about topics such as what matters will the Tribunal take into account (as noted, almost certainly not arguments about the reasonability of the Council’s position or whether they have consulted residents appropriately); whether the Council should contribute to legal costs of the residents via the Housing Revenue Account (it is after all your own money!) rather than the Council just funding its own case against the residents; whether residents should be able to contact absentee leaseholders the way the Council can; whether the Tribunal will be taking expert witnesses and if so how many etc. the substantive hearing will not be held until the New Year and possibly Easter time.
THE CAMPAIGN
Residents are putting together seven ‘working groups’ to look at aspects of the campaign. They are:
· legal;
· technical;
· fundraising;
· press & publicity;
· contact list;
· petitions;
· the overall case (with respect to reasonableness and consultation).
If you would like to take part in any of them let me know and I will put you in touch – each group will be led by a resident with a Councillor acting as a link to the political side.
Best wishes,
MALCOLM GRIMSTON
Councillor (Independent), West Hill