England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
CIVIL DIVISION
ON APPEAL FROM BRENTFORD COUNTY COURT
(Miss Recorder Knowles)

		The Royal Courts of Justice The Strand London Wednesday 13 March 2002

Wednesday 13 March 2002

1. LORD JUSTICE CHADWICK: Longmint Ltd is the landlord of property known as Flat 15, Marcourt Lawns, Hillcrest Road, Ealing. The property is let under long lease, dated 10 June 1970, for a term of 120 years from 24 June 1969. The interest under that lease had vested in four members of the same family, Mehdi Azimi Azad, Amir Azimi Azad, Kamran Azimi Azad and Shahla Azimi Azad; although, as appears from the papers, Kamran Azimi Azad died some years ago. I have been told that the property is held beneficially in four equal shares.
2. On 6 April 1998 Longmint commenced proceedings in the Queen's Bench Division of the High Court, claiming payment of arrears of rent and service charge (a total of £9,300 or thereabouts). On 12 May 1998 judgment was entered in those proceedings in default of defence. An application by Mehdi Azimi Azad Mehdi and Shahla Azimi Azad to set aside that judgment was dismissed on 16 June 1998.
3. The present proceedings were commenced in the Brentford County Court on 8 February 1999. In these proceedings the landlord claims possession of the property on the basis, first, that the tenants have failed to remedy breaches of covenant and, secondly, that they have failed to satisfy the judgment in the Queen's Bench proceedings in respect of rent and service charge.
4. By way of defence to that claim in these proceedings Mehdi Azimi Azad, the first defendant, pleaded that the amount of the service charge had not been the subject of determination by a court or tribunal for the purposes of section 81 of the Housing Act 1996. The section is in these terms:

"(1) A landlord may not, in relation to premises let as a dwelling, exercise a right of re-entry or forfeiture for failure to pay a service charge unless the amount of the service charge –

is agreed or admitted by the tenant, or

has been the subject of determination by a court or by an arbitral tribunal".

5. On 22 April 1999 the district judge ordered that there be tried as a preliminary issue whether, by virtue of the judgment in the Queen's Bench proceedings to which I have referred, there had been a relevant determination for the purposes of section 81 of the 1996 Act. That issue required consideration of two matters: first, whether a default judgment (which had not been set aside on an application to set aside) was a determination by a court for the purposes of section 81 of the 1996 Act; and, secondly, whether a judgment in the Queen's Bench Division could be a determination for the purposes of section 81, having regard to the exclusive jurisdiction provisions contained in section 95 of that Act.
6. Those issues came on for trial before Miss Recorder Knowles, sitting as a Deputy Judge of the County Court. On 26 July 1999 she decided the preliminary issue in favour of the landlord. She gave permission to appeal against her decision; but limited to the question whether, having regard to section 95 of the 1996 Act, a "determination by a court" for the purposes of section 81 could only be a determination made in the county court. She refused permission to appeal on the other question: namely whether or not a default judgment, coupled with a refusal to set aside that judgment, could amount to a determination at all for the purposes of section 81 of the 1996 Act.
7. Notice of appeal dated 23 August 1999 was filed in this Court. The notice sought to raise, in addition to the matter for which permission had been given by the Recorder, the additional grounds as to the status as a determination of a default judgment. Skeleton arguments were filed in November 1999 by the appellant and in March 2000 by the respondent landlord. The appeal was listed for hearing on 13 or 14 June 2000.
8. The appeal was not heard when it could have been heard in June 2000. It was stood out at the request of the parties on the basis that terms of compromise were imminent so that the appeal could be dismissed by consent. But, on 9 August 2000 -- before the appeal could be disposed of -- a bankruptcy order was made against Mehdi Azimi Azad. On 13 September 2000 the solicitors acting for him, Messrs Merriman White, informed the Civil Appeals Office of that development. By December 2000 the Civil Appeals Office had learned from the appellant's trustee in bankruptcy that he took the view that the bankruptcy did not prevent the appellant from pursuing the appeal if he were minded to do so. That view was (if I may say so) plainly correct. The leasehold interest in the property was vested in the three joint tenants, the fourth having died, as trustees for sale. Property held by a bankrupt as trustee is not part of the bankrupt's estate and does not vest in the trustee in bankruptcy under section 306 of the Insolvency Act 1986. It was the appellant's beneficial interest in the property -- that is to say, his one-quarter share in the proceeds of sale -- which vested in the trustee in bankruptcy. There was, therefore, no reason why Mehdi Azimi Azad should not pursue the appeal in his capacity as one of the surviving trustees for sale.
9. No progress was made towards relisting the appeal for hearing. It was placed in the dismissal list for 13 June 2001. It was not dismissed on that date, for reasons which are unclear on the correspondence but which were, I think, prompted by representations made by Merriman White, who have continued to act without fee for Mehdi Azimi Azad. The appeal was taken out of the dismissal list. On 2 July 2001 Merriman White wrote to the Civil Appeals Office suggesting that the appeal should be stayed under section 285(2) of the Insolvency Act. That suggestion was, in my view, misconceived for two reasons. First, the appeal is an appeal by Mehdi Azimi Azad in his capacity as trustee and is not affected by the provisions of the 1986 Act at all. Second, the proceedings to forfeit the lease are not proceedings in respect of which a court would be at all likely to order a stay under section 285(2) of the Act. That section is intended to ensure that claims which could be made in the bankruptcy – bankruptcy debts -- are made in the bankruptcy rather than in separate litigation. A claim to forfeit a lease held upon trust for sale is not a claim for which the landlord could prove in the bankruptcy.
10. Be that as it may, an inconclusive correspondence -- between solicitors acting for the respondent landlord, Messrs Juliet Bellis & Co, solicitors acting for the trustee in bankruptcy, Messrs Pothecary & Barratt, the court and Merriman White – was carried on during the last six months of 2001. The correspondence was inconclusive in that no progress was made towards relisting this appeal for hearing. It was, however, confirmed by the trustee in bankruptcy that he did not himself intend to pursue the appeal. That appears from a letter of 1 November 2001. As I have said, he would not in my view have had standing to do so; although he might obtain permission to pursue the appeal on behalf of Mehdi Azimi Azad in the circumstances that, as trustee in bankruptcy of an estate which includes as an asset Mehdi Azimi Azad's beneficial share in the property, the trustee in bankruptcy has an interest in preserving that property.
11. On 16 January 2001 this appeal was referred to Tuckey LJ, as supervising Lord Justice. He directed that it be listed for directions. So it is that the matter comes before the court today for directions. Having heard from Mehdi Azimi Azad through Mr Koussari (an associate in Merriman White acting without fee on his behalf) and from the respondent landlords through counsel, I am satisfied that this is an appeal which should now be heard and determined at an early opportunity.
12. There are three reasons for that. First, there seems to me to be no impediment in the way of an early hearing of the appeal. The skeleton arguments have already been filed; the point is a relatively short point of law (although not, perhaps, an easy one); and if there have been any developments in the law since the skeleton arguments were filed some two years ago or more, that can be accommodated shortly by the filing of supplemental arguments. Secondly, Mehdi Azimi Azad continues to reside in this property with his wife and children without paying any rent or service charges; as he has done for the past three or more years. That is a situation about which the landlord is entitled to be concerned; although the probability is that it is secured, in effect, by the value of this long lease. Nevertheless, the failure to pay service charges in the meantime will clearly have an effect on the resources available for the maintenance of this block of flats in the interests of other tenants. Thirdly, this is an appeal which has now been outstanding for over two and a half years and which was only stood out on the basis that negotiations for a compromise were close to fruition. I am told that Mehdi Azimi Azad, with the assistance of funds to be provided by his wife, is anxious to reinstate negotiations for compromise. Those are negotiations which, as it seems to me, will have to include the landlord and the trustee in bankruptcy, and possibly the other members of the family who are interested in the property. I have no confidence that those negotiations are likely to bear fruit within any reasonable time. The experience of the past suggests otherwise. Experience suggests, also, that unless there is a date for the hearing of this appeal the negotiations are likely to drag on indefinitely. It must be recognised that it is not in Mehdi Azimi Azad's interest to hasten negotiations if he can continue to occupy the property without payment in the meantime.
13. In those circumstances, I propose to direct that this appeal be listed for hearing on the first available day on or after 7 May 2002, with a time estimate of not more than one day. In making that time estimate, I have in mind that the point for which permission to appeal has been granted is unlikely to occupy the Court for more than an hour or so but that there is an application for permission to appeal on other grounds. That application has not been before me today. It should be listed for hearing with the appeal, with appeal on those grounds to follow if permission is granted. I can see little advantage in the present case of requiring a separate application on the paper in relation to those other grounds, or of providing for a separate hearing for permission in advance of the appeal. I am satisfied that the matter is more conveniently dealt with at the hearing of the appeal for which permission has already been granted.
14. Subject to any representations the parties wish to make, I would propose to direct that the costs of this directions hearing be costs in the appeal.
ORDER: This appeal be listed for hearing on the first available day on or after 7 May 2002 with a time estimate of not more than one day. The application for permission to appeal on other grounds be listed for hearing with appeal on those grounds to follow if permission is granted. The costs of this directions hearing be costs in the appeal. (Order not part of approved judgment)