Summary

An order giving judgment for a landlord on its action for arrears of ground rent and service charge payments was set aside in circumstances where the trial judge had, effectively, summarily struck out the tenant's defence as disclosing no reasonable grounds for defending the claim when in fact it did disclose an arguable defence.

Facts

The appellant tenants (K) appealed against an order of the county court giving judgment for the respondent landlord (C) on its action for arrears of ground rent and service charge payments. K were the tenants of a flat under a 125-year lease, which provided for the payment of ground rent and a service charge. C was a company that had been formed by the residents' association of the building in which the flat was situated in order to acquire the previous landlord's leasehold interest. Before C was incorporated, the residents' association had published a newsletter indicating that one of the benefits of acquiring the headlease would be that no ground rent would be payable. Shortly before C acquired the headlease it wrote to the residents. Though it did not refer to the issue of ground rent it did refer to "the reasons for proceeding with the purchase". K paid neither the service charges nor the ground rent due under their lease. They defended the action on the basis firstly that C had adopted the residents' association's representation that ground rent would not be payable and was therefore estopped from recovering it. Secondly, they argued that the service charge was not reasonable, pleading four specific incidents of poor service. The hearing of the action took an unconventional course. Time was tight and, instead of adjourning, the judge decided to hear the matter speedily. There was no opening, no witnesses were called, there were no submissions and there was no formal judgment. There were instead what the judge described as "colloquys" with the parties' legal representatives, at the end of which he gave judgment for C. Though he did not say so expressly, what he did in effect was to strike out K's defence as disclosing no reasonable grounds for defending the claim. K submitted that (1) the judge's decision should be set aside because he had failed to give reasons for it; (2) the judge had been wrong to conclude that their defence as to both the ground rent and the service charge had not been made out.

Held

(1) The judge had given no formal judgment setting out his reasons for his decision and the only way to ascertain what his reasons were was to attempt to extract them from his exchanges with the parties' legal representatives. That task was not assisted by the fact that the quality of the transcript was poor and contained numerous gaps. Overall, it was not possible to undertake a meaningful review of the judge's reasons because it was wholly unclear what they were. The court was disposed to allow the appeal on that ground alone, unless it was clear that the judge had in fact reached the right conclusion. (2) In relation to the issue of ground rent, the questions were whether C had made any relevant representation and whether K relied on it. Firstly, the judge did not deal with the question of whether or not C had made any representation, and although the issue was primarily one of the construction of the letters in question, those letters had to be read against the factual background. It was not appropriate for the court to express any conclusion other than to say it was well arguable that C had adopted and impliedly repeated the representation made by the residents' association about ground rent. Secondly, the appellate court was in no better position than the judge to resolve summarily the issues about reliance. C's claim for ground rent therefore had to be remitted to a different county court judge for trial. (3) As to the service charge, the specific instances of poor service pleaded by K provided an arguable basis for disputing its reasonableness. Even if that conclusion was wrong, it was common ground that C was required to prove the reasonableness of each and every element of the service charge. In order to determine whether it had done that it was necessary at least for there to be cross-examination to resolve the conflicts of evidence and for the judge to make findings of fact. C's claim for the service charge also had to be remitted to the county court for determination.

Appeal allowed