Housing and Property Chamber erred in dismissing case as ‘frivolous and vexatious’, Upper Tribunal rules

The FtT had rejected the application as “misconceived and hopeless”, having held that it did not have jurisdiction to hear the case because it did not consider that the dispute related to a “private residential tenancy” (PRT).

But the UT allowed the appeal and remitted the matter to the FtT after observing that there was an “arguable claim” based on a “personal guarantee” purportedly granted by the landlord in favour of the tenant, which related to the obligation arising under the tenancy.

‘Frivolous and vexatious’

The First-tier Tribunal has jurisdiction to hear a dispute under the Private Residential Tenancies (Scotland) Act 2016 only if the dispute is one which is “in relation to civil proceedings arising from a private residential tenancy”.

Sheriff Nigel Ross heard that the FtT had rejected the application as frivolous and vexatious in terms of rule 8 of the First-tier Tribunal for Scotland Housing and Property Chamber Rules of Procedure 2017, and that it did not have jurisdiction to hear the application.

But the appellant argued that it “wrongfully rejected” the application and that the tribunal did have jurisdiction. 

It was submitted that a guarantee which exists only to enforce rights under a private residential tenancy (PRT), and which is drafted by express reference to the PRT terms, and which creates a liability which is defined and identified by the PRT, properly creates a liability arising from a PRT.

‘Tribunal erred’

The sheriff agreed that the FtT “erred” in dismissing the application.                                                                         

In a written decision, Sheriff Ross said: “The FtT dismissed the application because it considered it ‘misconceived and hopeless’, which is one definition of ‘frivolous’, itself a ground for dismissing a case under rule 8 of the 2017 rules. This is not a claim which would satisfy that definition, because it involves an arguable claim based on a prima facie entitlement under a letter of guarantee. 

“The question of whether the FtT has jurisdiction to hear the case is a question of law, which requires a judicial answer. The FtT appear to have pre-judged that question and concluded that there is no jurisdiction, and then to have concluded that the claim must be frivolous for that reason.”

While the appellant’s argument may ultimately be unsuccessful, that did not make it frivolous.

Sheriff Ross continued: “It is an arguable question of law, which the FtT were not in a position to dismiss as misconceived and hopeless. The FtT could cite no precedent which would allow them to take such an absolute view. The FtT was obliged to consider this question of law, and give a reasoned opinion, unless the rules allow otherwise.

“If jurisdiction were the only issue in this case, then rule 18(1) of the 2017 rules might have allowed the FtT to make a decision without a hearing. Under that rule, however, the parties would have been entitled to make written representations which the FtT would have been obliged to consider. Rule 8 does not cover such preliminary legal issues. 

“The effect of using rule 8(1)(a) has been to make a decision in law without giving the parties an opportunity of making submissions. The effect was that the FtT, in taking that approach, breached rule 2 of the 2017 rules. They erred in doing so.”

‘Tribunal has jurisdiction’

The UT also held that the matter was a dispute arising from a PRT.

Sheriff Ross concluded: “Whether a dispute ‘arises from’ a PRT depends, in my view, on the individual circumstances of each case. It is a matter of fact and degree. It is unlikely to be enough simply to point to a tenuous causal connection, such as bankruptcy arising through the failure to pay rent and which is not covered. 

“This case involves a purported guarantee, and it is possible to envisage that such a claim might be tenuous, for example if the guaranteed debt arose mainly for reasons not connected to a PRT, or only loosely connected in time. The question is a mixed question of fact and law in each case.

“First, the purported letter of guarantee requests the grantee to enter into a proposed tenancy agreement, which is then identified as being between a named individual and over an identified property. The obligations to pay rent and other charges are all defined by the terms of the lease referred to, and endure only as long as the tenant remains bound by the lease. 

“The obligation is one of indemnity under that contract, not a free-standing liability, and the obligation increases according to the terms of the lease. The letter of guarantee is inextricably bound up with the terms of the lease. It appears entirely artificial to describe this guarantee as not arising from the PRT. It has no logical existence or purpose without it.

“Second, the natural and ordinary effect of the words “arising from” is unrestricted and imprecise, and invites a wide, inclusive approach. It is quite the opposite of a defined award. 

“Third, the particular lease form in this case is an adaptation of the ‘Scottish Government Model Private Residential Tenancy Agreement for the Private Rented Sector’ issued in October 2017. 

“Where wording is ambiguous, as it is here, my view is that this Model Tenancy Agreement is available as an aid to understanding the overall intention of the legislature. The Scottish Government passed the 2016 Act and provided the Model Tenancy Agreement to allow the 2016 Act to be implemented. 

“It follows that a guarantee of performance of the PRT was regarded as an integral part of the lease. It forms one of the clauses of the lease itself. It is difficult to conclude that an obligation, created within a standard clause of a Model PRT lease, was intended by the legislature to be treated as not arising from a PRT.

“For these reasons and on the facts of this case, the guarantee arises from the PRT within the meaning of the 2016 Act, and therefore the FtT has jurisdiction.”