PARTAN COMPANY LIMITED LRX/37/2002

UPPER TRIBUNAL

LANDS CHAMBER

LRX/37/2002

Case No LRX/37/2002

Between

PARTAN COMPANY LIMITEDApplicant

Before

P R Francis FRICS

Venue 48/49 Chancery Lane, London, WC2A 1JR

Date 20 February 2003

Hearing 29 January 2003

Property: Flat 1, Winston Rose Court, 15 Sheendale Road, Richmond,, Surrey, TW9 2JL

Catchwords: SERVICE CHARGE – Reasonableness - jurisdiction of Leasehold Valuation Tribunal to determine in respect of service charges already paid – held no such jurisdiction – Landlord and Tenant Act 1985 s 19 2(A) – appeal allowed in part

[1]This is an appeal by Partan Company Limited (“the appellant”) heard under the Simplified Procedure (Rule 28, Lands Tribunal Rules 1996) from a decision of the Leasehold Valuation Tribunal for the London Rent Assessment Panel (“the LVT”) dated 31 May 2002 following an application by Ms P. Gifford, the lessee of Flat 1, Winton Rose Court, 15 Sheendale Road, Richmond, Surrey (“the subject flat”), that related, in part, to a challenge as to the reasonableness of service charges that had been charged and paid for the accounting years 1997, 1998 and 1999. The LVT had also been asked, at the commencement of the initial hearing, to consider the reasonableness of the service charges that were due to be paid for the year 2000.

[2]In its decision, the LVT determined that charges under a number of headings during the first three years were unreasonable, and set out those figures considered to be appropriate on the basis of the evidence presented to it. As to the charges for the year 2000, the LVT said that it was not clear that service charge demands had been issued to all the lessees and, if they had, what amounts had been requested. Nevertheless, at the hearing resumed on 23 March 2001 for the purpose of determining that issue, Mr Casey, for the respondent, had produced a schedule showing the amounts he considered due. The LVT determined that the amounts he was intending to claim in respect of management, gardening and electricity were unreasonable and set out the amounts that it considered were. As to a proposed provisional accountancy fee, it determined that it was unreasonable to make any charge prior to costs actually being incurred; the proposed charge for preparing the accounts and other claimed excess administrative charges should be subsumed within the management fee and the cost of a condition survey prepared on the instruction of the respondent, having no value to the lessees, should not be charged. Finally, proposed charges for gutter clearance for which there were no supporting receipts were considered unreasonable. A schedule setting out the LVT’s definitive determination of all the proposed year 2000 charges was included in the decision

[3]In its grounds of appeal, the appellant said that the LVT had no jurisdiction to determine the reasonableness of the costs because the charges relating to them had already been paid by the tenant. Mr Casey referred to the Court of Appeal decision in Daejan Properties Ltd v London Leasehold Valuation Tribunal

[2001] EWCA Civ 1095

, in which it was held that to accord the tribunal jurisdiction to inquire into the reasonableness of service charges already paid would give rise to a multiplicity of proceedings, a waste of time and money and a need to examine the reasonableness of service charges extending back for an unlimited period, and that since there were compelling policy reasons against it, the words of section 19 (2)(A) would not be construed so as to extend the tribunal’s jurisdiction to service charges already paid. In the light of that appeal, Mr Casey said that this appeal should be allowed.

[4]Daejan was a landlord company’s appeal against the order of Sullivan J on 3 October 2000 dismissing its judicial review challenge to an interlocutory decision of the London Leasehold Valuation Tribunal dated 21 December 1999 ruling that it had jurisdiction under s.19(2A) of the Landlord and Tenant Act 1985 (as amended) to determine whether service 3 charges had been reasonably incurred by the landlord, irrespective of whether or not they had already been paid by the tenants.

[5]S.19 of the 1985 Act provides, so far as is relevant: “(1) Relevant costs shall be taken into account in determining the amount of service charge payable for a period –(a) only to the extent that they are reasonably incurred, and

(b) where they are incurred on the provision of services or the carrying out of works, only if the services or works are of a reasonable standard; and the amount payable shall be limited accordingly. (2) Where a service charge is payable before the relevant costs are incurred, no greater amount than is reasonable is so payable, and after the relevant costs have been incurredd any necessary adjustment shall be made by the repayment, reduction or [sic] subsequent charges or otherwise. (2A) A tenant by whom, or a landlord to whom, a service charge is alleged to be payable may apply to a leasehold valuation tribunal for a determination – (a) whether costs incurred for services, repairs, maintenance, insurance or management were reasonably incurred, (b) whether services or works for which costs were incurred are of a reasonable standard, or

(a) has been agreed or admitted by a tenant……

[6]In dealing with the specific question of paid and unpaid service charges (the subjects of limitation and service charges paid on account were also being considered), Simon Brown LJ said: 4 “15. As to the language of s.19, whilst certainly the phrase “is alleged to be payable” suggests an element of futurity and, therefore, a temporal pre-condition to the LVT’s jurisdiction, one cannot but note that s.19(1) – which unarguably allows the county court to investigate the reasonableness of service charges already paid – also uses the word “payable”, although not, one notes, linked to “is alleged to be”, nor in a context which expressly envisages applications being made sometimes by landlords. Ultimately, of course, everything depends on the context – see the speeches in the House of Lords in Charter Reinsurance Co Ltd v Fagin

[1993] AC 313

, a case which concluded that the words “actually paid” did not in the particular context arising there in fact require there to have been any disbursement.

[16]Obviously, as Mr Dowding [counsel for the appellant] accepted in argument, the legislation could have been made absolutely clear, for example by adding to section 19(2C)(a) words such as “or after payment has been made by the tenant”. There seem to me, however, a number of compelling interlocking policy considerations for giving the words “is alleged to be payable” their natural meaning and for not giving the LVT jurisdiction over service charges already paid.

[17]The first of these considerations, as already indicated, is because the contrary conclusion would involve a multiplicity of proceedings: first an investigation into past charges by the LVT and then, if the tenant is successful, a restitutionary action in the county court. If, of course, the LVT’s jurisdiction is restricted to unpaid charges, as I would hold, then its determination (subject only to appeal to the Lands Tribunal) would ordinarily be final and conclusive. Furthermore, if the LVT’s argument were right, a problem could arise as to overlapping evidence. Suppose a tenant asserts that the standard of cleaning had been unreasonable low for several years. Whether or not he had complained as to that in the past could well be of evidential importance before the LVT. The same issue, however, could also arise in any subsequent restitutionary claim advanced on the basis of mistake.

[18]Another consideration is that the prospects of a successful restitution claim are often slender….” He continued:

“22. For all these reasons, I would hold that the LVT’s jurisdiction under s.19(2A) of the Act extends only to service charges still unpaid (subject always to payments made under an interim contractual arrangement for repayment if the charge is found excessive). I would accordingly allow this appeal.”

[7]The position in Daejan is clear and therefore, in my judgment, the LVT in this case did not have jurisdiction to determine the reasonableness of the paid service charges for the years 1997, 1998 and 1999. It is a fact that the judgment in Daejan was not handed down until 12 July 2001, some 3 months after the LVT’s decision and there can, therefore, be no criticism of it for coming to the conclusion that it did.

[8]I indicated to Mr Casey at the hearing that I thought it likely he would succeed in the appeal, but in accordance with the Lands Tribunal’s normal practice, my decision would be reserved whilst I had time to consider all the evidence. Whilst I have, as indicated, no 5 difficulty in finding for the appellant in respect of the three years charges referred to above, the question of the LVT’s jurisdiction in respect of the year 2000 service charges needs, in my view, separate consideration. I had asked Mr Casey whether all the service charges relating to year 2000 had been paid, and he confirmed that they had. However, I think that he may have assumed I meant by the date of the Lands Tribunal hearing, whereas my question related to the situation as at the date of the LVT’s resumed hearing in March 2001.

[9]It is clear from the evidence presented that, at that date, the service charges for 2000 had not been paid. Indeed, the LVT’s decision stated, at para 27 “The respondent said that the demands for the period January – June 2000 had been made out but that he was awaiting the tribunal’s decision before issuing those for June – December 2000”. The situation is further evidenced in a letter from the appellant’s accountants, Edwards and Hartley dated 7 February 2002 which included a schedule of service charges due to/from the lessees for the four years in question following the LVT’s determination. It was apparent from that that whilst the previous years service charges had been paid, and the lessee was due a refund following the LVT’s decision, those for 2000 were outstanding, and an amount would be required from the lessee in settlement.

[10]I explained to Mr Casey that, in that case, the LVT would indeed have had jurisdiction and, with no evidence presented to me as to why the LVT’s decision may have been wrong on the subject of reasonableness of any of the disputed items, I would not be in a position to deal with anything other than the jurisdiction aspect.

[11]The result is that I allow the appeal in respect of the 1997 – 1999 service charges but not in respect of those for 2000.

[12]This appeal was heard under the simplified procedure and there was no respondent. There is no question of exceptional circumstances having arisen in terms of costs, and therefore I determine that there shall be no order as to costs. Dated: 20 February 2003 (Signed) P R Francis FRICS