Judge criticises First-tier Tribunal over decision to raise point of own initiative in service charges dispute

The Chamber President of the Upper Tribunal (Lands Chamber) has issued points for the First-tier Tribunal (FTT) to “keep firmly in mind” when deciding whether to raise a point of its own initiative.

Describing it as “an unfortunate case” and one that involved alleged “eye rolling” by a tribunal judge, Mr Justice Edwin Johnson said in Sovereign Network Homes v Hakobyan & Ors [2025] UKUT 115 (LC) that he recognised that the question of whether the FTT should raise a new point of its own initiative is one which calls for the exercise of the FTT's judgment and discretion. 

The Upper Tribunal judge added: “There can be no absolute rules.  Much depends upon the facts and circumstances of the particular case.”

He added that the facts and circumstances of the case were unusual, which is why he had concluded that he was entitled to interfere with the FTT’s interim decision and the interim decision directions. Mr Justice Edwin Johnson also gave his decision on both grounds advanced by the appellant.

The case was taken to the Upper Tribunal (Lands Chamber) by Sovereign Network Homes against the FTT’s interim decision in what was originally a dispute about service charges, led for leaseholders by Shoghik Hakobyan and the Cudweed Management Company, concerning properties owned by Sovereign on the Cudweed estate, on London’s Isle of Dogs.

Leaseholders complained that service charge demands had been incorrectly issued by Sovereign and the case was due to proceed on that basis.

But Johnson J said the FTT raised, on its own initiative, whether the payments demanded were due at all as a matter of contractual liability. 

Sovereign protested it had no notice of this being introduced and said the FTT was wrong both to raise the issue and to give directions for its determination, and should have confined itself to the pleaded issues over the reasonableness of the service charges. Sovereign also said the FTT hearing was conducted unfairly and created the appearance of bias.

The case came before Judge Robert Latham and Antony Parkinson at the FTT. No transcript was available to the Upper Tribunal.

On the first day, the FTT questioned whether the applicants were contractually liable to pay the service charges and indicated that it wished to be addressed on this.

Sovereign’s counsel protested that she was not in a position to do this, and it was not open to the FTT to raise this issue, but she was then required to address the issue at 24 hours’ notice. 

The housing association’s first ground of appeal was that the FTT went wrong in raising the contractual liability issue on its own initiative and was further wrong to adjourn it and to give the interim decision directions. 

Johnson J said: “…the circumstances of the present case are striking.  For the reasons which I have set out, it seems to me that the contractual liability issue lay well outside the scope of the applicants' case.”

He noted: “It seems to me that the FTT, in raising the contractual liability issue, stepped outside its arbitral role and effectively took on an inquisitorial or investigative role.”

The judge added: “In my view the FTT should either not have raised the contractual liability issue at all or, having raised the contractual liability issue, should have accepted the argument of [counsel for Sovereign] that it was not appropriate to allow [it] to be brought into the application.”

Sovereign’s second ground concerned unfairness and bias in the hearing. Johnson J said he should deal with this as Sovereign’s case was a concerning one. 

“It is alleged that there was judicial bullying of the appellant's counsel…. by the FTT; specifically by Judge Latham.  It is alleged that this created a situation where the hearing was unfair and gave rise to the appearance of bias on the part of the FTT.”

Allegations of unfair conduct put to the Upper Tribunal were: 

(1)     The FTT, by Judge Latham, asked how long the appellant's counsel had been doing her job and appearing before the FTT; this statement was inappropriate and sought to undermine counsel's professional abilities.

(2)     The FTT gave counsel only until 10am on the second day of the hearing to secure instructions and provide copy demands, despite having been told that the relevant officer/employee was unavailable and that counsel was instructed under a watching brief only.

(3)     The FTT, by Judge Latham, communicated that the appellant should consider any appeal carefully because, as a social landlord, it would not be good for their reputation.

(4)     The FTT, by Judge Latham, frequently referred to the fact that counsel was instructed on a watching brief in a negative tone and with eye-rolling, despite this being flagged well in advance in the pleadings.

(5)     The FTT, by Judge Latham, consistently addressed counsel for the appellant in a negative tone, accompanied by eye-rolling.

(6)     The FTT, by Judge Latham, frequently stopped counsel for the appellant from answering his questions and instead directed his questions to counsel for Cudweed.

(7)     The FTT was inconsistent in its approach throughout the hearing, so that it prevented the applicants from taking matters on reasonableness, which were not pleaded, but did not take the same approach with respect to the contractual position. This appeared to be because, as Judge Latham is alleged to have said, he considered that the contractual argument was the best point for the Applicants.

(8)     The FTT, by Judge Latham, expected counsel for the appellant to understand the position on the contractual liability issue, despite the absence of any pleaded position by the applicants. When counsel for the appellant indicated that she felt disadvantaged, as a result of being on a watching brief and quite properly not having instructions because it was not a pleaded point, she faced both explicit and implicit criticism.  In contrast counsel for the applicants was not criticised when she conveyed a similar constraint.

Johnson J said in the absence of a transcript of the FTT hearing “I do not think that I am able to make a decision on all the allegations of unfair conduct relied upon by the appellant.”

But he said he did not need to because “it seems to me that, for the purposes of reaching a decision on whether there was unfair conduct, leading to the appearance of bias, one can form a sufficiently clear picture of what happened at the hearing simply by looking at the agreed or undisputed facts and, most important, by looking at the terms of the interim decision and the interim decision directions”.

He said it was clear the contractual liability issue was brought into the hearing, on the first day, by the FTT and counsel for Sovereign was given only 24 hours for her response. 

“I am satisfied that Judge Latham, when informed of the appellant's intention to appeal, stated that the appellant should think carefully about an appeal, as it had its reputation as a social housing provider to consider.”

Johnson J said it was also clear that the argument over the contractual liability became “an argument between the FTT, principally it appears by Judge Latham, and the appellant, represented by [counsel], which at times “became acrimonious”.

He continued: “For reasons which I find impossible to understand, the appellant, by [its counsel], was treated as being at fault for not being ready or able to deal with the contractual liability issue at the hearing…on a substantive basis. 

“The FTT was insistent that [counsel] deal substantively with the contractual liability issue and was acutely critical of her stance that she was not in a position to do so and should not be required to do so. 

“Given that the contractual liability issue had been raised for the first time, at the hearing and by the FTT, it seems to me that [counsel for Sovereign’s] stance was a reasonable one which, at the very least, did not justify the criticism which it received from the FTT.”

He concluded the FTT “crossed a line and allowed its interest in an unpleaded issue to get the better of it. 

“It seems to me that the FTT descended into the arena, and became the advocate of the applicants' case on the contractual liability issue. This rendered the hearing unfair. “  

Johnson J added: “In my view a fair-minded and informer observer, having considered all the relevant facts, would have concluded that there was a real possibility of bias.”

Should any similar case arise Johnson J advised FTT hearings should bear the following in mind:

1. The process in an application under Section 27A is an adversarial one. It is not inquisitorial.
2. The primary and, in most cases at least, the sole task of the FTT is to resolve the dispute which the parties have brought before the FTT for determination, on their pleaded cases.
3. The circumstances in which the FTT can and should intervene to raise a new point are limited; see in particular the guidance in Keddie, Admiralty Park, and Moustache.
4. In raising a new point the FTT should not descend into the arena or give the appearance of descending into the arena. 

Mark Smulian