Howard De Walden Estates, R (on the application of) v London Rent Assessment Committee [2003] EWHC 1455 (Admin)

Case No CO/119/121/122/2003

[2003] EWHC 1455 Admin

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

THE ADMINISTRATIVE COURT

Venue Royal Courts of Justice

Date Friday, 6 June 2003

Strand

London WC2

B E F O R E:

MR JUSTICE ELIAS

Between

THE QUEEN ON THE APPLICATION OF HOWARD DE WALDEN ESTATESClaimant

-v-

Between

LONDON RENT ASSESSMENT COMMITTEEDefendant

Computer-Aided Transcript of the Stenograph Notes of

Smith Bernal Wordwave Limited

190 Fleet Street London EC4A 2AG

Tel No: 020 7404 1400 Fax No: 020 7831 8838

(Official Shorthand Writers to the Court)

MR J GAVAGHAN ( for JUDGMENT MR R DEW)(instructed by Speechly Bircham Sols, 6, St Andrews St, London EC4A ELX) appeared on behalf of the CLAIMANT

MR J KARAS ( for JUDGMENT MR R REED)(instructed by Treasury Solicitor) appeared on behalf of the DEFENDANT

J U D G M E N T

(As Approved by the Court)

[1]MR JUSTICE ELIAS: These are consolidated appeals brought by the appellant landlord against the determination dated 23rd October 2002 by the first respondent, the London Rent Assessment Committeee (the Committee). The Committee stipulated fair rents under the Rent Act 1977 for three flats owned by the appellant. Written reasons for the decision were given on 6th December 2002.

[2]The reasoning used by the Committee is essentially the same in each of these cases. The appeal raises issues of the proper approach to be adopted by a Committee when determining a fair rent for property under section 70 of the Rent Act, and also the approach which a Committee should adopt on application of Article 2(7) of The Rent Act (Maximum Fair Rent) Order (S.I. 1996 No.6) ("the Order"). The Order sets a cap in certain circumstances for the maximum rent increases that can be made.

[3]The Committee has been represented before me but not the individual tenants, who are also respondents to this appeal. One of them, however, Mr De Walden, did address me in person. Legislative History

[4]Before becoming embroiled in the detail of this particular case, it is useful to set this appeal in the context of the legislative history of regulating the rent of properties of this nature. I gratefully draw for this purpose upon the judgment of Lord Bingham of Cornhill in the case of R v Secretary of State ex parte Spath Holme Limited

[2001] 2 AC 349

, at 378 to 379:

"During the last century England and Wales suffered from a persistent shortage of housing. The demand, in particular for private rented accommodation, was greater than the supply. This enabled some private landlords to exploit the scarcity of what they had to let by exacting exorbitant rents and letting on terms disadvantageous to the tenant. A series of statutes, beginning in 1915, sought to address this problem, by controlling the rents which could be charged and affording security of tenure to tenants. This control, beneficial though it was in many ways, tended by its very effectiveness to exacerbate the problem: the financial return to the landlord was at times so modest that there was very little incentive to let accommodation to private tenants, with the result that the supply of accommodation available for private letting tended to shrink. Thus statutes were passed with the object of giving landlords a return sufficient to induce them to make accommodation available. The Rent Act 1965 was intended to revitalise the market in privately rented accommodation by introducing a new regime of what were called fair rents. These provisions were consolidated in the Rent Act 1968, extended in the Rent Act 1974 and consolidated in the Rent Act 1977, which remains in force. Section 70 of that Act governs the assessment of fair rents, which are to be open market rents adjusted to discount for scarcity and to disregard certain matters specified in section 70(3). While the statute does not in terms refer to open market rents, that has been held by the Court of Appeal to be the proper starting point in the process of assessing and registering a fair rent under the 1977 Act: see Spath Holme Ltd. v. Chairman of the Greater Manchester and Lancashire Rent Assessment Committee (1995) 28 HLR 107; Curtis v. London Rent Assessment Committee, above. In giving effect to this statutory regime, rent officers and rent assessment committees faced the practical difficulty that there was no open market in unregulated privately-rented property with which comparison could be made. The years following 1965 were also years of very high inflation. The result was that rents set by rent officers and rent assessment committees did not keep up with inflation, to the benefit of tenants but to the obvious disadvantage of landlords. So the problem which Parliament had sought to address in 1965 once more became acute, and the market in privately-rented accommodation declined. By the Housing Act 1988 it was again sought to stimulate a free market in such accommodation by providing for assured and assured shorthold tenancies, which (subject to a limited safeguard for some tenants) provided for rents to be negotiated and agreed between landlord and tenant. Regulated tenancies under the Rent Act 1977 continued to exist, but no new regulated tenancies were to come into existence. The 1988 Act had its desired effect of tempting private landlords back into the market. But it also had another effect, important for present purposes, of giving rise to rents negotiated between landlord and tenant in the market. Whereas rent officers and rent assessment committees had previously relied on other registered fair rents as the basis of comparison when setting new fair rents, there was now available a range of comparators, drawn from the market, on which they could rely (subject to making the adjustments required by statute) instead of the less factual basis of previously registered fair rents. In most areas, rent officers and rent assessment committees took advantage of this new basis of comparison in undertaking their statutory task, but in some areas (notably London and the North West) they were reluctant to do so. In these areas the gap between registered fair rents and open market rents increased, to the point where the former were at a level about half the latter, even in the absence of scarcity. In the two judgments already mentioned the Court of Appeal clearly laid down the correct approach to the assessing of fair rents, and at last even the rent officers and rent assessment committees who had previously been reluctant to do so gave effect to the basis of assessment prescribed by the 1977 Act. This had the unfortunate side-effect that tenants whose rents had previously been registered at levels well below the adjusted open market level at which they should have been set suffered very sharp and unexpected increases in the rent payable."

[5]Lord Bingham then set out the circumstances in which the government passed regulations in order to limit the increases that may be made in rental properties, that is the order to which I have just made reference. It was passed with effect from 1st February 1999. The effect of that order is summarised in Lord Bingham's judgment as follows:

"The Order was accordingly made by the ministers, "in exercise of the powers conferred upon them" by section 31 of the 1985 Act. It contained a formula set out in article 2 of the Order, the effect of which is best summarised. On the first application for registration after the Order had come into effect, the permitted increase in a registered fair rent would be five per cent, if the retail price index had increased by five per cent over the two year period since the last registration, plus 7.5 per cent. Thereafter any subsequent increase over a two-year period would be five per cent plus the difference in the retail price index. The Order would only apply where there was an existing registered rent when the Order came into effect, and it would not apply where, because of repairs or improvements carried out by the landlord, the fair rent exceeded by at least fifteen per cent the previous registered rent. Article 3 of the Order and the Schedule provided that The Rent Act 1977 should be modified by inserting a new paragraph into Schedule 11 of the 1977 Act. That is the Schedule which governs applications for the assessment and registration of fair rents by rent officers and rent assessment committees."

One of the issues in this case is whether the Committee was right to hold that the Order was applicable. The landlord contends that it ought not to apply because of the repairs and improvements, which, he submits, caused an increase in the fair rent exceeding by at least 15 per cent the previous registered rent. He also contends that the fair rent fixed independently of the maximum was too low and involved an error in the approach of the Committee to the calculations which it was necessary to make pursuant to section 70 of the 1997 Act. I deal with the substance of these submissions below. THE FACTUAL BACKGROUND

[6]The properties which are the subject of this appeal are Flats 1, 5 and 6 Crofton House, New Cavendish Street, Marylebone. They are held on Rent Act tenancies by the second to fourth respondents. Crofton House is a purpose-built block of flats. Each flat has an entrance hall, reception room, three bedrooms, a kitchen/breakfast area, a bathroom/WC and a boxroom. Flats 1 and 5 are 1320 sq ft and Flat 6 is 960 sq ft.

[7]Fair rents were registered of £7,000 in March 1997 for Flats 1 and 5, and £7,100 for Flat 6 in August 1997. A fresh registration of rents for Flats 1 and 5 was made on 20th May 1999, that was fixed at £7,400. The appellant became the landlord of the subject properties on 25th March 1999, that is shortly before the registration of rents for Flats 1 and 5 to which I have just made reference. After that registration of rent the appellant carried out works of repair and improvement to the common parts of the block of flats; this included recarpeting and redecoration in the common parts, work to the lifts, new boilers and a video entry system in the flats themselves. These works were completed in September 2000. The cost of the works was in the region of £135,000.

[8]Normally, a fresh application for a fair rent can only be made two years after the last registration. There is, however, an exception provided by section 67(3) of the 1997 Act. This allows an application to be made sooner in certain of the cases where there has been a change in circumstances. Here, in the light of the works to the common parts, an application was made on the basis that there had been such a change resulting from the repair and improvements. On 17th October 2000 the appellant applied for a fair rent to be set for all the subject properties, despite the fact that the two year period had not elapsed.

[9]The rent officer registered new rents on 22nd September 2000. He determined that the annual fair rents for Flats 1 and 5 should be £9,700 and for Flat 6 £8,900. In each case, however, those rents were capped at lower figures.

[10]The appellant appealed to the Rent Assessment Committee. On 3rd December 2001 it determined fair rents as follows: for Flat 1 £10,500 (capped at £8,159); for Flat 5 £10,150 (capped at the same figure); for Flat 6 £9,850 (capped at £8,340).

[11]The appellant appealed that decision to this court. I am told that the appeal raised similar issues to those that were addressed before me. By a consent order, dated 20th June 2002, made by Silber J, the decision was quashed on the ground that the Committee had failed to give adequate, proper or intelligible reasons as to why Article 2(7) of the Order did not apply. The matter was sent back to a differently constituted committee for a redetermination. In view of that, the appellant did not pursue other arguments which it would otherwise have advanced had the hearing taken place.

[12]The Committee determined rents on 23rd October 2002, that is the determination which is now challenged in this appeal. In respect of Flats 1 and 5 they held that the uncapped fair rent would be £15,561, but they applied the Order and capped that figure at £8,253. In respect of Flat 6 they held that the uncapped fair rent would be £13,513.50 but again applied the cap, and the figure fixed was £8,434.50. As I have indicated, the Committee produced two sets of written reasons but they are essentially identical.

[13]At the hearing of the redetermination the appellant relied on the expert evidence of Mr Kevin Patrick Ryan FRICS on the valuation of the subject properties. Ms Penelope Farr Leander (the second respondent) relied on the evidence of Mr Stephen Phillips FNAEA. THE LEGISLATION

[14]The principal legislation with which I am concerned is, as I have indicated, section 70 of the 1977 Act and Article 2(7) of the statutory order. As to the latter, it is accepted that if the Order applies then the maximum rent that can be imposed is indeed that awarded by the Committee. Section 70, so far as is material, is as follows:

"(1) In determining, for the purpose of this part of this Act, what rent is or would be a fair rent under a regulated tenancy of a dwelling-house, regard shall be had in particular to - (a) the age, character, locality and state of repair of the dwelling-house; and (b) if any furniture is provided for use under the tenancy, the quantity, quality and condition of the furniture, and (c) any premium, or sum in the nature of a premium, which has been or may be lawfully required or received on the grant, renewal, continuance or assignment of the tenancy. (2) For the purposes of the determination it shall be assumed that the number of persons seeking to become tenants of similar dwelling-houses in the locality on the terms (other than those relating to rent) of the regulated tenancy is not substantially greater than the number of such dwelling-houses in the locality which are available for letting on such terms. (3) There shall be disregarded- (a) any disrepair or other defect attributable to a failure by the tenant under the regulated tenancy or any predecessor in title of his to comply with any terms thereof; (b) any improvement carried out, otherwise than in pursuance of the terms of the tenancy, by the tenant under the regulated tenancy or any predecessor in title of his; (c) (d) ... (e) if any furniture is provided for use under the regulated tenancy, any improvements to the furniture by the tenant under the regulated tenancy or any predecessor in title of his or, as the case may be, any deterioration in the condition of the furniture due to any ill-treatment by the tenant, any person residing or lodging with him, or any sub-tenant of his. The relevant provision of the Order is Article 2(7), which is as follows: "

This article does not apply in respect of a dwelling-house if because of a change in the condition of the dwelling-house or the common parts as a result of repairs or improvements (including the replacement of any fixture or fitting) carried out by the landlord or a superior landlord, the rent that is determined in response to an application for registration of a new rent under Part IV exceeds by at least 15% the previous rent registered or confirmed." RELEVANT LEGAL PRINCIPLES

[15]There is extensive jurisprudence dealing with the interpretation of application of section 70. The principles have not themselves been the subject of significant dispute in this case but rather it is their application which has been the issue. I will not recite lengthy extracts from previous decisions. I will seek to summarise what seemed to me to be the important principles, drawing heavily upon three cases in particular. First, the decision of the Court of Appeal in Curtis v London Rent Assessment Committee

[1999] QB 92

, a decision which is referred to in the extract from the judgment of Lord Bingham, which I have already quoted, and two more recent first instance decisions, one by Richards J in Queensway Association v the Chilton Thames and Eastern Rent Assessment Committee 31 HLR 945, and a decision of Ouseley J in Yeoman's Row Management Limited v Chairman of the London Rent Assessment Committee [2002] EWCH 835 (Admin).

[16]I shall consider the relevant principles under three headings. First, the method of calculation of the market rent. It is common ground that, in essence, subsection (1) of section 70 identifies the principles which are to be applied in determining the market rent. They have, however, been the subject of judicial exegesis. Second, I will look at the difficult question of the principles applicable when reducing the rent to take into account the scarcity of dwelling houses of the relevant kind. This involves the application of subsection(2) of section 70. Finally, I will summarise the principles which stipulate the nature and extent of the reasons which committees need to give in their determinations. One of the central criticisms of this case by the appellant is that the reasoning of this Committee was inadequate. DETERMINING THE MARKET RENT

[17]In the Queensway case Richards J set out the following propositions put forward by Mr Bonney QC in that case which, as the judge accepted, set out the broad principles to be derived from the authorities, albeit that they had to be applied with some caution. The principles are set out in the Queensway decision as follows:

"(1) A fair rent is a market rent for the property in its current state under s.70(1) of the 1977 Act, adjusted for any scarcity under s.70(2) and any disregards under s.70(3). It is not a "reasonable" rent in any other sense. It is to be fair to the landlord as well as to the tenant. (2) The starting point (and not just a starting point) for the assessment of a fair rent is the market rent for the property in its current state, which must be identified. (3) The method of determining a fair rent must be lawful and reasonable. The process is not only a question of experience of the rental property market in the area. It is a more mechanical exercise requiring a precision of analysis in using such experience to find the market rent by reference to comparables, valuing their individual differentials from the subject property in order to make appropriate adjustments, then fixing an allowance for any scarcity and the particular disregards where necessary. (4) Where close market rent comparables are available, they should be treated as the best evidence for the purpose of determining market rent; and in any event market rent comparables should be used, with adjustments, whenever they are capable of giving guidance, whether or not they are strictly "close" comparables. (5) Where adjustments are required, whether to reflect differences in the properties or for scarcity or disregards, the committee may use their knowledge and experience to assess these matters, but the exercise requires "working through" in the sense of requiring some sums, however few and approximate - some arithmetical markers, whether in percentage form or otherwise."

I would make the following additional observations. First, although the process of determining market rent is more mechanical than the judgment in relation to the reduction, if any, for scarcity, nonetheless it obviously does not mean that there is a single fixed answer which can be analytically derived in determining the market rent. Rent Assessment Committees are obliged to make discretionary judgments in which they can drawn on their own knowledge and experience. The assessment of fair rent is more an art than a science, as was recognised by the Court of Appeal in the Curtis case.

[18]Second, it was urged before me by Mr Gavaghan, counsel for the appellants, that in determining the market rent under section 70(1) the Committee should have regard to the fact that the respondents have security of tenure. This will increase the rental value of the properties. I accept that in principle the presence of security of tenure could be a relevant factor which will justify an increase in market rents. However, its effect in this context will be marginal, if it has any effect at all. The reason for this was explained by Lord Widgery, giving judgment for the Divisional Court in Palmer v Peabody Trust

[1975] 1QB 604

, in a case involving a predecessor of section 70, namely section 46 of the Rent Act 1968. He said this:

"However, it is, I think, clearly right, as Mr Slynn submits, that if as a matter of law the presence or absence of security can be a circumstance for consideration under section 46(1), the number of cases in which and the degree to which that circumstance is relevant must be very small indeed. I base that conclusion, as does he, in his submission on section 46(2). It must be right, in my judgment, to adopt Mr Slynn's approach that scarcity and security are closely allied matters, and the reason is that security of tenure is not important if there are plenty of houses and flats for the letting. If there is a glut of housing accommodation, no tenant is going to pay very much for security of tenure because if he is turned out by one landlord there are plenty of other flats to take. If, per contra, there is a shortage of accommodation so that the tenant who is turned out will be in a difficulty in finding another place to live, then surely one has the kind of situation in which a rent may be increased in practice if security is present, or decreased if security is not present. By section 46(2), however, we must assume a neutral market. We must assume neither glut nor scarcity of houses. If we assume no scarcity of houses, it seems to me very difficult on that assumption to imagine that any tenant is going to pay significantly more for his accommodation because he enjoys the security of the Rent Act. The Act of 1968 which requires us to make this somewhat artificial assumption of no scarcity in section 46(2) does, by a side wind, in my view also require us to regard presence or absence of security as a matter which can technically be taken into account as a relevant circumstance but one which in practice can have only minimal effects, if any, on the amount of the rent to be fixed."

[19]Accordingly, I do not accept that it was incumbent upon the Committee to have regard to this consideration. (Mr Gavaghan also submitted that the Committee should have had regard to the fact of security in the context of assessing the value of the improvements. I deal with these points separately below.) THE ISSUE OF SCARCITY

[20]There is a well recognised tension which exists between the increase in rent that results from the benefits of local amenities (such as shops, theatres or playgrounds) which is permissible under subsection (1), and such increases which result from the fact that the demand exceeds the supply, which is not permissible and is regulated by subsection (2). The existence of the amenities may themselves increase demand, thereby resulting in a scarcity of housing in the locality in question. Such scarcity is permitted to be reflected in the price. A Rent Committee has to distinguish from that element such rent increase as is attributable simply to the fact of a shortage in housing supply. The leading case is a decision of the Divisional Court in Metropolitan Property Holdings Ltd v Finegold

(1975) 1 WLR 349

. In that case property in St John's Wood was particularly attractive to Americans living in London because the American school was located there. The London Rent Assessment Committee considered that it had to reduce the rent under what is now section 70(2) because of the element of scarcity produced by the presence of the school. The Divisional Court held that they were wrong to do so. Lord Widgery expressed the relationship between the two sections as follows:

"I think that before one begins to consider the difficulties, and before one begins to consider the section in detail, one must have clearly in mind what parliament's obvious intention was in including this provision in the Act. It seems to me that what parliament is saying is this. If the house has inherent amenities and advantages, by all means leet them be reflected in the rent under subsection (1); but if the market rent would be influenced simply by the fact that in the locality there is a shortage, and in the locality rents are being forced up beyond the market figure then that element of market rent must not be included when the fair rent is being considered. Parliament, I am sure, is not seeking to deprive the landlord of a proper return on the inherent value and quality of his investment in the house, but parliament is undoubtedly seeking to deprive a landlord of a wholly unmeritorious increase in rent which has come about simply because there is a scarcity of houses in the district and thus an excess of demand over supply."

A consequence of this analysis, as Lord Widgery recognised, is that the concept of locality has a different meaning in subsection (1) and subsection (2). In the latter it embraces a much wider area. He continued as follows:

"I think that committees will find their consideration of section 46 of the Act of 1968 somewhat easier if they start with the proposition clearly in mind that amenity advantages which can increase the fair rent under section 46(1) do not result in a set off under section 46(2) merely because the amenity advantages of a particular house or district attract more people than can live there. The test on scarcity is to be taken over the locality as a whole, and that, as I emphasised, is a broad area. What area? We have been referred to Palmer v Peabody Trust [1974] 3 WLR 575 where, dealing with the word "locality" in section 46(1), I said, at p. 581, that the exact extent of the locality was something which was primarily for the committee to fix. I would repeat that with regard to the fixing of the locality under section 4(2), but, at the risk of repetition, I do emphasise that when the committee fix their locality for the purpose of deciding whether there is an overall scarcity or not they must pick a really large area, an area that really gives a fair appreciation of the trends of scarcity and their consequences."

He observed that committees would not go wrong if they looked at the area from which their work normally came.

[21]There is however a certain artificiality about this exercise. As Richards J pointed out in the Queensway case (at page 963) the dynamics of supply and demand are such that they cannot be isolated entirely from other elements, such as amenity. In some cases an entire area will have a higher than usual level of amenity which will result in scarcity, yet, as Richards J pointed out, that is the kind of scarcity which Parliament must have intended to fall under subsection (2). In that same case Richards J also made certain observations about the area which should be taken into account when analysing whether and to what extent there is scarcity. As he pointed out, there is no single approach and it is ultimately a matter for the Committee which area it chooses, provided it is sufficient to meet the legislative policy of depriving landlords of the wholly unmeritorious element in the market rent which is attributable simply to excess of demand over supply. One approach he recommended was to consider the area where potential tenants of the property could reasonably be expected to live. But he observed that a broader-brush approach would be acceptable:

"In general, much the same result is likely to be achieved simply by looking at a sufficiently broad area, without seeking to analyse the extent to which that or another area might represent a reasonable alternative to potential tenants of the subject property. If a broad-brush approach of that kind is to be adopted, however, then it seems to me that the area taken must indeed be "a really substantial area" or "a really large area", as stated in Finegold; and, although I acknowledge that the particular contrast in Finegold was with a few streets affected by the presence of the American School, I do not think that the expressions used by the court should be given a restricted meaning. "

Really large" means really large. To my mind that is emphasised by the court's suggestion that the committee should look at the area from which their work regularly and normally comes. Again, however, I stress that it is ultimately for the committee to judge how large an area needs to be taken for the purpose of assessing the issue of underlying scarcity under s.70(2), and that the court will not intervene unless it appears that the committee have misdirected themselves as to the purpose of the exercise or have chosen an area that is manifestly wrong. I would add that the very imprecision of the exercise makes it more rather than less important in my judgment that the committee should make clear how they have approached the matter and what broad area they have looked at."

[22]I would also respectfully adopt the following observation of Ouseley J in the Yeoman's Row case where he said (at paragraph 63) that whilst the basis of the area needs to be reasoned "the imprecision of the concept may restrict the detail or depth of reasoning which a committee can realistically be expected to provide."

[23]A related problem relating to the assessment of scarcity is how any deduction referable to it is to be quantified. It seems to me that this is classically an area where the Committee will have to rely upon its own experience and knowledge of its area. Moreover, as Ouseley J pointed out in the Yeoman's Row case, the imprecision involved in this exercise also precludes any expectation of detailed reasoning (paragraphs 75 to 76). At the same time, it is incumbent on the Committee at least to set out the factors which cause it to make the particular reduction which it does, identifying those factors by reference to the relevant area it has chosen for the purpose of assessing scarcity. Indeed, in the Yeoman's Row case Ouseley J expressed the view that it would be necessary to explain in that case why it chose a reduction of 30 per cent rather than some lesser figure of 10 or 20 per cent. I would not myself go that far; it seems to me very difficult to give such precise reasons for what is inherently an exercise of judgment based significantly on experience. But I do accept that, especially where there is a substantial deduction, some explanation is needed to identify why the Committee concluded that the reduction should be so significant. It is not enough, as Ouseley J observed, simply to pluck a figure out of the air, or to give the impression that that is all that has been done. REASONS

[24]The obligation relating to the giving of reasons was considered in some detail by Richards J in the Queensway case after a review of certain observations of Auld LJ in the Curtis case and other decisions. I gratefully adopt his analysis. His Lordship summarised the position as follows:

"There can be no doubt that committees must give reasons which are proper, intelligible and adequate. However, they need only be briefly stated and they need deal only with the principal controversial issues. Committees "are not required to articulate their reasons to the exacting standards and with the accuracy and precision required of a court" (Curtis at 867a-b). Their decisions, in common with those in the planning field (see Save Britain's Heritage v. Number 1 Poultry Ltd [1991] 1 WLR 153), should not be construed as statutes and should be read as a whole and with a measure of benevolence. They must have good reasons for, and explain, their various adjustments. They are not required, however to produce elaborate or detailed calculations of all the stages along the way to the final figure, or a quantification of all the differences between the comparables and the subject properties. All that is required is some explanation of the relevant factors, "some working through - some sums, however few and approximate - some arithmetical markers whether in percentage form or otherwise on the way to the final figure" (Curtis at 865b, emphasis added). The explanation and accompanying figures must in my view be sufficient to give one a reasonable understanding of the main steps in the analysis, but need go no further than that. Similarly, I do not think that any generalisation can be made to the effect that the court will "readily" infer, from the absence of adequate reasons, that a committee has erred in law. The court is no doubt readier to make such inferences than used to be the case (see the passage from Crake v. Supplementary Benefits Commission included in the above citation from Auld LJ's judgment in Curtis). The readiness with which such an inference will be made must depend, however, on the particular circumstances of the case."

I would only add that, as Auld LJ pointed out in the Curtis case, committees have to deal with many cases in the course of a day and the court should avoid imposing unrealistic burdens upon them. Moreover, they should not be criticised for failing to have regard to some matter which was not drawn to their attention, or otherwise naturally arose from the matters which were in issue between the parties. The reasons should deal with the matters in controversy; their adequacy therefore depends on the submissions and material placed before the committee by the parties. The parties are entitled to know in broad terms why their arguments on the substantial controversial issues were rejected, but the committee is not obliged to anticipate and deal with arguments which have not been advanced before them. I was referred by Mr Karas, counsel for the first respondent, to a decision of Stanley Burnton J on this point, R (On the Application of Ghani) v London Rent Assessment [2000] 2 EWCH 1167 (Admin)) and I respectfully concur with his observations in that case, albeit that they were made in a different statutory context. THE GROUNDS OF APPEAL

[25]As I have said, the appeal raises two broad issues. First, the appellant submits that the Committee wrongly applied section 70 of the 1977 Act when calculating the fair rent; second, they allege that it wrongly applied Article 2(7) of the Order. Strictly, the latter is logically the first question to consider since, if the tribunal properly analysed this Order and fixed a maximum rent in accordance with its terms, then it matters not whether it erred in fixing what would have been the fair rent, absent the order. Accordingly, I shall analyse this aspect of the case first. THE ORDER

[26]The appellant's claim that the Committee should have found that Article 2(7) applied so as to disapply the application of the Order. As I have indicated, they spent some £135,000 on works of repair and improvement to the common parts of the property. The appellant said that the effect of these improvements was to increase the rental value well in excess of the stipulated 15 per cent, and that accordingly the cap was not applicable. They should therefore have been entitled to charge the fair rent stipulated in accordance with section 70.

[27]The tribunal's analysis of this aspect of the case was as follows. First, they set out the contention of the appellant:

"Mr Ryan relied on Art. 3(7) of the Maximum Fair Rent Order to show that the fair rent on the subject property should not be capped. He pointed out that the increase from the registered fair rent of £7,400 at the previous registration on 20th May 1999 to the uncapped fair rent of £9,700 when the Rent Officer registered the new fair rent on 22nd December 2000 was 31%. He pointed to the FPD Savills Prime Central London Residential Rental Values Index which indicated that market rents had increased by only 9% over the same period. He then suggested that the difference between the market increase of 9% and the fair rent increase of 31% could not be put down to anything other than the effect of the works having been carried out by the Landlord. Therefore, the increase in rental value caused by the works was more than 15% within the meaning of Art 3(7) and so there should be no maximum fair rent."

The tenants' case was as follows:

"Mr Phillips accepted that the Landlord's works had improved the appearance of the common parts but asserted that the effect would be to increase the rental value of the subject property by no more than 7.5%. He pointed out that the Landlord's single largest expense appeared to be the repairs to the lift but that it was working anyway before the works were carried out. This would mean that the Maximum Fair Rent Order should not be disapplied. Somewhat in contradiction to his submission recorded in the paragraph above, he concluded that the fair rent "should remain at £8,159" per year."

The Committee then set out its own conclusions at paragraph 30 to 32:

"The last matter to consider is the application of the Maximum Fair Rent Order. If it applies then, in accordance with the formula applied under the Order, the fair rent for the subject property would be capped at £8,253 per year. The question is whether the works carried out by the Landlord have increased the rental value of the subject property to such an extent that the Order does not apply in accordance with Art 3(7) so that the uncapped figure of £15,561 applies instead. Mr Ryan's method of calculating the effect of the works is flawed and the Committee rejects it. He suggests comparing registered fair rents over the relevant period with an index of rent increases. This is not comparing like with like. Mr Ryan seeks to equate the movement of rent in the prime central London market with the movement in fair rent levels of dwellings which are not anywhere near the prime standard and which also incorporate allowance for scarcity. Fair rents are established by an individual consideration of a statutory definition that defies scientific precision. Committees are capable of reaching different conclusions because they differ on those elements which are based on opinion and/or because the evidence presented to them on any one hearing differs from that presented at other hearings. On the other hand, the FPD Savills index is an index of real market values in one part of the London rental market, namely that of prime properties. Mr Ryan further incorrectly assumes that all those factors reflected in the index are accurately reflected at all times in fair rent calculations, leaving only the effect of the works to be taken into account. He ignores, for example, an uplifting effect on the rent of the subject property of the fact that his client, the Landlord, has taken over the property from a previous landlord who apparently did not carry out their maintenance obligations properly. A better method of considering the effect of the works is not to compare registered fair rents over time but to calculate what the uncapped fair rent would have been if the works had not been carried out. This calculation is analogous t the one the Committee carries out when it ignores the effects of tenant's improvements. The Committee is not concerned with the value of the works, which is substantial in this case, but with the effect on the rental value of the subject property. The works can only have the effect of increasing the rental value if they increase the amenity of the individual flats. Certainly, the improvement in appearance of the common parts, externally and internally, would have some limited effect, as conceded by Mr Phillips on behalf of the Tenant. However, no evidence was presented to show that the other works had such an effect and the Committee came to the view that the expenditure was mostly aimed at preparing the property to provide a suitable setting for the vacant units as prime flats, rather than to increase the value of the unmodernised flats. The lift was apparently in adequate working order before the Landlord carried out the work and so it is difficult to see how the newly refurbished lift can increase rental values. The same could be said of the new mains services and the new front entrance door to the subject property itself. As for the provision of hot water, it is arguable that the former arrangements were actually preferable, being cheaper for the Tenant and providing more consistent water pressure. Also, the pipework installed by the Landlord within the subject property has been left in an unsightly, exposed position which would be more likely to reduce rental value than increase it."

[28]The appellant submits that this approach demonstrates a number of errors of law. Mr Gavaghan directed most of his fire power on the argument that the Committee did not adequately identify what caused the increase in rent from the earlier determination. He submitted that the Committee ought to have identified the factors which caused the rent to increase from the earlier stipulated fair rent. While Mr Gavaghan conceded that it could have been for reasons other than the improvements and the effect of inflation, he said that the Committee had erred in law in not seeking to identify what those reasons were in this case. This, it was submitted, rendered the reasoning inadequate.

[29]I do not accept this contention. The task of the tribunal is to fix a fair rent in accordance with the evidence before them. They are not starting from the premise that the earlier determination was correct, indeed they will not know what issues or evidence were before the Committee on that earlier occasion. It is not for them to speculate what they would have done had they fixed the original rent, and they are not in a position to do so. So the earlier registered rent is not relevant to them when assessing what they consider to be the proper rent, save, if they think it helpful, as a touchstone against which to check their own conclusions. They could only explain which factors led to the increase in rent if they took the original rent as their starting point in making their own determination. That is not how they should approach their task.

[30]I accept the submissions of the defendant that the issue here is simply how much of the increase is due to the improvements. In order to assess that, it is only necessary for the Committee to identify the aspect of the fair rent which it stipulates is attributable to the repairs and improvements and then determine whether that exceeds 15 per cent of the previous registered rent. That is precisely what it did here. It neither could nor should reach conclusions on the other factors which might have led to the increase in rent, as opposed to the rent itself. Of course it will have to have regard to the original fair rent when determining whether the amount referable to repair and improvements exceeds that figure by 15 per cent; but it is only at that point that the earlier rent becomes relevant.

[31]The appellant further submitted that the Committee erred in failing to give proper consideration to the evidence of the increase in market rents. This came close to submitting that the rise in fair rents was so high, and the increase in market rents was so low in comparison, that the Committee must have erred in failing to accept that at least 15 per cent was due to the improvements. Again, however, this involves accepting that the later fair rent is calculated on precisely the same set of assumptions, and in the light of essentially the same material, as the earlier one. That is not a legitimate assumption. The Committee sought to determine what effect the improvements of the common parts had had on the rental value of the particular properties in issue. In my view that is precisely what it needs to do when carrying out its task under Article 2(7) of the Order.

[32]A further argument was that the Committee erred in failing to take into consideration that since the tenants had security of tenure, they would particularly benefit from the improvements in the common parts. I do not think that the Committee can be said to have erred in this way. First, as I have already indicated, to the extent that there are benefits to be derived from security of tenure, these are effectively removed by the fact that there is a reduction for scarcity. It seems to me that the observations of Lord Widgery in the Palmer case apply as much to the benefits resulting from improvement as to the other elements of the rent. Second, the argument was never advanced to them in this way. They cannot be criticised for failing to deal with a point which was not addressed to them. It is true that the landlord did refer to the enhanced benefit of security of tenure but, as Mr Gavaghan concedes, in a different context to that in the argument he addressed to me. Moreover, it is not self-evident that it would be treated as a matter of such significance that it can be said that it was something which the Committee plainly should have considered of its own motion. In any event, to the extent that there were certain detrimental effects of the changes identified by the Committee, namely the unsightly pipework and the arguably at least detrimental effect on the hot water, these would equally be of greater significance to a secure tenant.

[33]A somewhat complex argument was advanced on the basis of the last sentence of paragraph 31. It was suggested that insofar as the Committee was saying that the rent would increase because they would honour their maintenance obligations, whereas the former landlords would not, this was already a factor taking into account by the improvement in the amenity of the properties. I do not accept this argument. There would be some, albeit I surmise relatively minor, increase in rental value if the landlords are known to repair fully in accordance with their obligations An alternative submission was that in any event this factor was irrelevant to two of the flats, namely 1 and 5, because there had not been a change in landlord since the last registered review. The change in landlord had taken place shortly before that review. If the Committee were intending in that paragraph to place real weight on this factor, this argument might have some force (although the argument would still depend upon whether this had been a factor considered at the previous review.) But I accept the submission of Mr Karas that the Committee was merely giving an example of why the basic approach of the appellant's expert was, in its view, flawed. It was an illustration in the defect in the methodology. The Committee was merely rejecting the argument that it must be assumed that the increase in the rental values should be attributed to a combination of the increase in the index of real market values and the landlord's improvements. The Committee took the view that the index was not faithfully reflected in the registered fair rents; and pointed out that variations in the fair rent could also reflect the fact that the later rent was fixed by a different committee with different opinions and based on different evidence. That seems to me plainly right and the Committee was justified in choosing not to follow the analysis of the appellant's expert on this matter and it gave clear reasons for not doing so.

[34]I should add that Mr Gavaghan further submitted that if the Committee had erred in its rejection of Mr Ryan's approach, then its own independent approach to the assessment of the value of the improvements could not stand. Even had I found in his favour on construction of this argument based on paragraph 31 I would not have acceded to this submission. The Committee gave cogent reasons for preferring a different approach to that advanced by Mr Ryan. It was an approach which was more fully in accordance with the statutory language. Even if it had in part erred in its analysis of Mr Ryan's approach, the substance of its objection was clear. I would not have been prepared to accept that such an error justified quashing the whole decision.

[35]It follows, in my view, the Committee's conclusion that the fair rent is fixed by the maximum permitted under the Order was lawfully reached. Accordingly, it is not strictly necessary to go further. However, I have heard argument on the other points and it is right that I should express my conclusions on them. THE DEDUCTION OF 30 PER CENT

[36]The Committee held that the market value of the refurbished property should be reduced by 30 per cent to take account of a number of differences between the terms of tenancy and the amenities of the comparable properties. The Committee identified the factors which led to this reduction. They were the lack of central heating, the lack of floor coverings and white goods in the subject property, which are provided in the lettings of the comparables properties, the lack of modernisation to the bathroom and kitchen (disregarding the tenant's improvements), and the difference in repairing and decoration obligations. The Committee considered that an alternative way of calculating this reduction, suggested by Mr Ryan for the landlords, involved an assessment of depreciation of the cost of making relevant improvements, but it rejected that approach and gave reasons for doing so. It then gave its conclusion that the proper deduction to reflect these matters should be 30 per cent.

[37]Mr Gavaghan's submission was that this was simply inadequate. The Committee had picked a figure out of the air. In particular it has failed, he says, to demonstrate the extent to which the reduction is referable to the difference in the terms of the lease, namely the repair and decoration covenant, and which is referable to the state of the properties. Mr Karas accepts that a committee could have broken down the elements of reduction in respect of each head, but he submitted that there was no need to do so as a matter of law. The Committee has given adequate reasons by identifying the factors which caused it to reach the figure it did.

[38]I confess that I have some concerns about the Committee simply fixing a figure in this way. I accept that it is not obliged to set out quantification for each of the physical differences from the comparables, although it seems to me that it would be desirable to do so in cases where they are relatively few and the reduction is significant. It will assist in focusing the minds of the Committee and is a useful check on the overall reduction which they make under this head. However, in my judgment the reduction to reflect the difference in the tenant's obligations under the lease involved a different exercise to assessing the reduction referable to the amenity of the property itself. That of itself is a powerful reason for identifying this reduction separately. Moreover - and I think this is important in this case - it was separately identified and assessed by both the experts. Mr Ryan said that it should reduce the rent otherwise payable by two per cent, whereas Mr Phillips put on a figure of seven-and-a-half per cent. So there was an issue specifically on that point, potentially of some significance to the overall level of rent. In these circumstances I consider that it was an issue which the Committee ought separately to have addressed.

[39]In my judgment, therefore, on this particular basis, I accept Mr Gavaghan's submission.

[40]Mr Gavaghan also submitted that in assessing the market rent under section 70 the Committee ought to have taken into account the fact that the tenants had security of tenure. For reasons I have already given, I do not accept that submission. THE REDUCTION FOR SCARCITY

[41]There are a number of arguments advanced under this head. First, Mr Gavaghan says that the Committee did not select a wide enough area when assessing whether and to what extent there was any scarcity. Second, he contends that it failed to explain how it reached the deduction of 25 per cent which it held to be the appropriate deduction for these properties.

[42]It is necessary to set out part of the Committee's analysis on this aspect. The Committee accepted that there had been an increase in the housing available since the Housing Act 1988. However, it also concluded that there had been a significant rise in demand. It identified certain reasons for this, namely increased immigration and the trend to more separate households. It rejected the submission of Mr Ryan that the market in central London was now in a state of equilibrium. It also specifically rejected an observation by him that the waiting list held by local authorities were not evidence of scarcity, since they consisted principally of the unemployed and/or homeless, who were not in the market even for accommodation at fair rent levels. The Committee pointed out that there were many people on such lists who were seeking social housing simply because they could not get accommodation at an affordable price. It considered that this need would affect the level of rents. Although it does not specifically say so, it seemed to have in mind, at least in part, the indirect effect which that demand would in turn generate on more desirable properties.

[43]In determining the appropriate area for assessing scarcity and in determining the quantification for such deduction, the Committee said:

"In considering scarcity, the Committee acknowledges the need to look, as Ouseley J put it (at paragraph 67 of the Yeoman's Row judgment), at "an area large enough, not just to eliminate the rental impact of the immediate area's particular attraction and amenity, but large enough for a broad and general appraisal of whether there is a shortage of similar accommodation which is affecting rents payable by potential tenants of the subject accommodation; the area to be examined is that over which reasonable alternatives are available to potential tenants of the subject property."

Mr Phillips referred a number of times to the amenity of Marylebone High Street but his is precisely the kind of error which Ouseley J's analysis is trying to avoid. Mr Ryan's proposed area of the whole of inner London is simply unnecessarily large - it is difficult to see the relevance, for example, of the London Borough of Lewisham, in south east London, to a consideration of the market in the area of London which encompasses the subject property. The Committee feels it can achieve a more accurate assessment by looking at the London Boroughs of Kensington & Chelsea and Hammersmith and Fulham, the City of Westminster and southern parts of the London Borough of Camden. There is no completely scientific or mathematical method for calculating scarcity. As Ouseley J also said (at paragraph 75), "the theoretical nature of the exercise and the imprecision inherent in establishing both the existence of 'scarcity' and its effect on rent in a theoretical world, preclude there being a realistic expectation of detailed reasoning." The Committee has used its own knowledge and experience of the factors listed above and concludes that the number of person seeking to become tenants of dwelling-houses similar to the subject property in the locality referred to in the paragraph above on the terms (other than those relating to rent) of the regulated tenancy is substantially greater than the number of dwelling-houses which are available for letting on such terms. The Committee consider the imbalance between supply and demand on the basis defined above would be very substantial in the locality identified, placing the deduction in the higher level of the range of such deductions for the London area, and would put the figure at 25%, thereby reducing the market rent figure of £20,748 per year to a fair rent figure of £15,561."

[44]Mr Gavaghan says that the area selected for the assessment simply is too small. It is not a "really large area" which is the only appropriate area, at least in the absence of some specific explanation as to why a smaller area has been chosen. He coupled this argument with a contention that the Committee had erred in failing to set out the purpose behind section 70(2). He suggests that the Committee may have been confusing amenity and scarcity, particularly given the exclusion of the London Borough of Lewisham. I do not accept this particular criticism. The Committee referred to the basic principle underlying section 70(2) by quoting in terms the analysis of Ouseley J in the Yeoman's Row case. It is true that it did not say in terms that the purpose of this exercise was to prevent landlords benefiting from unmeritorious increases but, in my judgment, it would be absurd to say that the failure to make express reference to this constituted an error of law. The only question is whether it applied the subsection properly.

[45]I have no real doubt that the area chosen would eliminate any scarcity resulting from the amenity of the immediate locality, but in addition the Committee must choose an area large enough to ensure that they can make a proper assessment of the trends in demand and supply for similar properties. The Committee chose three-and-a-half London boroughs. That does not on the face of it amount to a "really large area", to use the language used in the Finegold and Queensway cases. I accept that a smaller area can be used if, for example, it is defined by reference to the area where there are reasonable alternatives for the tenant in question. But the Committee has not sought to justify its assessment on that basis; nor do I think that I can properly conclude that it is implicit in its analysis that it did so. Moreover, it is not obvious that the reasonable alternatives to the tenant should be limited in this way.

[46]Mr Karas submitted that the area was one which the Committee properly choose, and that it is essentially a matter for the Committee. But, in my view, if it is to choose a limited area, it is necessary for it to spell out how it has been selected. In this case it is not clear why it was selected. The Committee has expressed the view that the whole of inner London is too large, but that is a far cry from justifying this much more limited area. Mr Karas submits that there is a broad range of housing in the areas, which may well be true, but that submission came close to suggesting that the area chosen was representative of a wider area. That could in principle be a justification for providing a smaller area, provided there was evidence to justify that conclusion, but that is not what the Committee has said here. Accordingly, although I do not say that this area could not properly be selected, in my judgment the Committee ought to have explained, albeit briefly, why it thought this was an appropriate area in the circumstances, particularly given that, on the face of it, it was a relatively small area to choose in order to identify the trends in scarcity.

[47]That finally leads to the analysis of the quantum reduction. Mr Gavaghan submits that there is an inadequate explanation of why 25 per cent is chosen. He submits that there is no evidence demonstrating the demand, save a reference to the potential impact of those on housing lists. He points out that there is no reference to any specific factors which demonstrate the dichotomy between demand and supply in the particular areas selected by the Committee. Mr Karas contends that the Committee has identified factors which create well-documented pressures on the housing market and has properly had regard to the waiting lists. I accept that the Committee could properly consider the impact of waiting lists. Nonetheless, in my judgment, Mr Gavaghan is correct in this challenge. The problem, it seems to me, is that the Committee itself has commented that changes in supply and demand have not been evenly spread over the whole of London, nor over all parts of the market. Accordingly, the general factors which affect demand, such as immigration and the move to separate households, does not identify the extent of the scarcity in the particular areas chosen. There is no evidence referred to by the Committee, such as considerations as to the length of time properties are left empty in their chosen area, or the speed and pattern of lettings, or matters of that kind. It is not clear, for example, whether the effect of immigration is felt more or less strongly in the particular area chosen by the Committee than in the wider community. If the Committee had identified such considerations, and given an evidential basis for concluding that in the chosen area the demand substantially outstripped supply, which was its conclusion, then I would not myself be inclined to question a judgment, based on their experience, that this merited a reduction of 25 per cent. But that is not what it has done. I am left with the impression that the figure has been determined more by broad considerations relevant to the housing market generally rather than by focusing on the particular extent of the scarcity in the area which the Committee itself has chosen. SHOULD THE CASE BE REMITTED?

[48]Mr Gavaghan says that on the assumption that I found for him in relation to the arguments addressed to section 70, but found against him on the argument addressed to the order, I should nonetheless refer the matter back to the Rent Assessment Committee for a new rent to be fixed. He submits that the order can be repealed at any time and the landlords would then be able to resort to the market rents, subject to a proper reduction for scarcity. He says that that rent, therefore, ought to be identified and properly identified.

[49]I do not accept this submission. I do not think that the mere possibility that this could occur in the next 12 months, when a fresh application can be made in any event, justifies the matter being considered afresh now. It is not suggested that it is a likely scenario; any repeal may in any event not take immediate effect but could provide for time to enable tenants to adjust to their new obligations. In my judgment, it would involve an unnecessary use of public time and cost as well as putting the tenants to the burden of what, in all probability, would turn out to be quite unnecessary cost in resisting the application. CONCLUSION

[50]Accordingly, although I found for the appellant in some of the submissions that have been advanced, the actual determination by the Committee of the fair rent stands because it was made in accordance with the Order. It follows that I dismiss this appeal.

[51]MR REED: My Lord, I appear on behalf of the respondent, my learned friend Mr Richard Dew for the appellant. My Lord, given the nature of the judgment, I wonder if it would be possible for your Lordship to rise for five minutes so we can take instructions and discuss matters amongst ourselves?

MR JUSTICE ELIAS: Yes. (Short Adjournment)

[53]MR REED: My Lord, could I address you on the matter of appeal first. It is my understanding that pursuant to the CPR Part 52.13 that, in fact, as this is an appeal from an appeal that permission has to be obtained from the Court of Appeal?

MR JUSTICE ELIAS: I think that is right.

[55]MR REED: In those circumstances, and given the seriousness of the decision for both sides, but certainly in respect of the respondent, it raises issues in respect of, first of all, the quality of evidence, that is the reasons that committees will have to give in respect of scarcity and, in particular, reasons identifying the reasons of scarcity in respect of those particular areas, and also in terms of tenants the quality of expert evidence that they will be required to obtain. There are, in my submission, very serious issues of public policy.

MR JUSTICE ELIAS: You will have to convince the Court of Appeal.

[57]MR REED: We ask for sufficient time to make a proper assessment of whether (inaudible) leave and also presenting our application for leave. In those circumstances, given that a transcript will be produced, we would ask that there be a period of 28 days from your approval of the transcribed judgment, for that application for permission to the Court of Appeal to be made?

MR JUSTICE ELIAS: Can I give an extension of time for the Court of Appeal?

[59]MR REED: Yes, you can. Part 52.4 specifies the time for filing appellant's notice, and time is such period as may be directed by the lower court or where the court makes no direction 14 days after the date of the decision.

MR JUSTICE ELIAS: I will give 28 days from the date of approval of the transcript.

[61]MR REED: My Lord. On costs there are two approaches that your Lordship could take. The first is the more traditional approach, that is to say that you won, the appeal has been dismissed but the determination of the Rent Assessment Committee stands. Insofar as we won on what was, in effect, realistically the first issue, the second and third issues were obiter and that, therefore, we should have the costs of this appeal.

[62]My Lord, I would obviously urge upon you that analysis and say that in all the circumstances we should have the costs of the appeal. I say further in respect of that analysis, that there are issues that if the institutional landlords are not given some deterrent to raising -- sort of lodging appeals that we see year in and year out in respect of Rent Assessment Committee decisions, then the burden, both on the Rent Assessment Committee and also on the Treasury Solicitor in defending them, is going to become more substantial, in a way some form of real deterrence is needed to be sort of lengthy----

[63]MR JUSTICE ELIAS: That is a rather harsh observation in view of the fact that I found there was some merit in some of their points.

[64]MR REED: My Lord, I accept that. But I simply make that point that the issues have been ventilated at some length in the existing cases. Your Lordship found that the principles were, to some extent, clear in those earlier cases. In those circumstances, I say that there has to be some deterrence to these sort of appeals, and there has to be some sort of realistic encouragement to the large and wealthy institutional landlords not simply to bring these appeals as a matter of course.

[65]My Lord, the second approach would be an issue-splitting approach, which has, to some extent, been encouraged under the CPR. On that I would simply make the point that, in effect, on my counting, there were around 12 to 15 individual grounds of appeal, when you breakdown the three into 1A-D, 2A-E et cetera, they may have succeeded on three, as I count them from your judgment, but that, in effect, they raise a plethora, a whole host of additional tangled thicket of additional grounds of appeal which have largely, apart from those three, been rejected. In those circumstances, it may be that a discount on a robust percentage basis is justified, but I still say that it should substantially be an order that the successful respondent has its costs.

[66]MR DEW: My Lord, in answer to that I would suggest to you that the appropriate order is in fact no order as to the costs. The reason I say that really is for two reasons. First of all, that in this case, according to your judgment, the Committee have, to a substantial extent, got it wrong. Their reasons were incorrect in a number of matters, and really they have only got through because they were correct in the application of the cap. It is worth you remembering also that this is not the first time that this Committee has been wrong in respect of this issue.

MR JUSTICE ELIAS: That is neither here nor there.

[68]MR DEW: I think that point really rather goes to Mr Reed's point in respect of this being a deterrent. What the landlord would, I am sure, say in answer to that is that there should not be in that way a deterrent from applying from these wrong decisions----

MR JUSTICE ELIAS: I am not too persuaded by the deterrent factor.

[70]MR DEW: No. The simple point is that if the landlord can see that there are real things wrong with the decision, and if you so find there were real things wrong with the decision, then he has every reason to appeal.

[71]The second point is that, in any event, your decision, your ruling in respect of the other issues on which the landlord succeeded, was a very real benefit to this landlord. As you may be aware he is obviously the owner of a number of regulated tenancies, and decisions on, for example, the application of the scarcity test, are a very real benefit to this landlord. Equally, it is a very real benefit to the Committee for it to have explained to it that it ought to set out its reasoning on particular issues.

MR JUSTICE ELIAS: I am not sure it will quite see it in that way.

[73]MR DEW: It may not see it in that way. Whatever Mr Reed says, the more decisions there are which set out the manner in which the Committee should make its (inaudible) the less likely it is that there will be future appeals.

MR JUSTICE ELIAS: I am not sure about that either.

[75]MR DEW: Well, as one avenue closes perhaps another opens.

[76]MR JUSTICE ELIAS: I think the fairest order in this case, recognising the fact that the landlords have won on certain points, but nonetheless they must have appreciated they had to win on the Order as well in order for this appeal to succeed, is that I will require the appellant to pay 50 per cent of the costs of the first respondent.

[77]MR DEW: Could I briefly identify the fact that the whole of the first day of this appeal was taken up with matters on which, in effect, you found for the landlord, whereas only a short amount of time----

[78]MR JUSTICE ELIAS: I have considered all that. I think 50 per cent is an appropriate figure in the circumstances, given that you did have to win on all these points in order to succeed on the appeal and must have recognised that. I found very clearly for the Committee in relation to the Order.

[79]MR DEW: Thank you.