ON APPEAL FROM THE UPPER TRIBUNAL
Martin Rodger QC and P. D. McCrea FRICS
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE LEWISON
LORD JUSTICE BRIGGS
| SHEFFIELD CITY COUNCIL
|- and -
|HAZEL ST CLARE OLIVER
Mr James Fieldsend and Miss Amanda Gourlay
(instructed by Bar Pro Bono Unit/Public Access) for the Respondent
Hearing dates : 23 March 2017
Crown Copyright ©
Lord Justice Briggs :
"In addition to the rent a service charge (hereinafter called "the Service Charge") to be determined and levied in accordance with the provisions contained in Part III of the said Schedule hereto".
By clause 3 the Lessee covenants to pay the rent and the Service Charge upon demand therefor by the Council and to observe and perform the provisions contained in Part III of the Schedule (which relate to the Service Charge).
"Subject (so far as applicable) to the provisions of paragraphs 16A to 16D and 18 of Schedule VI of the 1985 Act to pay to the Council from time to time as part of the Service Charge a reasonable part of the costs and expenses which the Council may from time to time incur or estimate to be incurred in carrying out repairs and improvements to the structure and exterior of the demised premises and the Building …"
"To keep in repair (the definition of repair where appropriate including decorative repair) and (if desirable in the opinion of the Council) to improve (a) the structure and exterior of the demised premises and of the Building (including drains gutters and external pipes) and to make good any defect affecting that structure PROVIDED that the obligation to repair includes an obligation on the part of the Council to rebuild or reinstate the demised premises of the Building if either of them is destroyed or damaged by fire tempest flood or any cause against the risk of which it is normal practice to insure (b) any other property over or in respect of which the Lessee has any rights by virtue of this Lease and (c) any installation connected with the provision of those services referred to in sub-clause (2) hereof and to maintain such services at a reasonable level."
"1. The Service Charge payable by the Lessee shall be a fair proportion to be determined by the City Treasurer or other duly authorised office of the Council (based upon a comparison of the rateable value of the demised premises with the rateable value of all the premises contained in the Building at the dates such payments shall fall due or in the event of abolition of such rateable values in accordance with such formula as the City Treasurer or other duly authorised officer of the Council shall determine) of all costs expenses and outgoings incurred or estimated to be incurred by the Council in respect of or for the benefit of the Building (such fair proportion representing that part of the said costs expenses and outgoings incurred or to be incurred by the Council in complying with their obligations contained or implied herein for the benefit of the Lessee insofar only as such costs expenses and outgoings may lawfully be recovered from the Lessee)."
"6. Each of the foregoing estimates of the said costs expenses and outgoings shall be adjusted by adding thereto any under-estimate (the amount by which actual costs expenses and outgoings have exceeded estimated costs expenses and outgoings) or by subtracting therefrom any over-estimate (the amount by which estimated costs expenses and outgoings have exceeded actual costs expenses and outgoings) calculated by comparing the actual costs expenses and outgoings recorded in or appearing from the accounts prepared for each financial year of the Council the end whereof last precedes the commencement of the accounting year in respect of which each such estimate is being prepared with the estimated costs expenses and outgoings (apportioned on a daily basis) of the accounting years so far as part or parts thereof are co-extensive with each such preceding financial year."
i) £7,224.47 for exterior cladding and associated works to the Property.
ii) £1,582.69 as a contribution of 1/27th of the cost of works to the Block.
iii) £371.56 as a contribution of 1/202nd of the cost of works to the super-block in which the Block was located.
iv) £200 administration fee.
The works to the Block were carried out between October 2011 and March 2012.
i) £1,885.44 in respect of external cladding.
ii) £317.97 in respect of the replacement boiler.
iii) £7 in respect of the thermostatic radiator valves.
"The Social Housing Provider agrees and acknowledges that the Funding shall only be used by it in accordance with their agreement and for the purposes of the Scheme. The Social Housing Provider undertakes not to use the Funding (or any of it) for any purpose other than for the provision of Physical Measures in Relevant Homes within the Area as part of the Scheme."
The Social Housing Provider was the Council and the Property was one of the Relevant Homes.
"… not all of the blocks on the Estates qualified for funding and the Council considered that it would be unfair to allow some leaseholders an allowance against their contribution, but not others. It was, Miss Sharpe said, "a political decision" not to attribute the CESP funding only to those blocks which were eligible for it."
Some blocks in which there were long leasehold residential units fell outside the CESP Scheme because they were outside the geographical area to which it related. Others fell outside it because the works done to those blocks were not carried out within the qualifying time period.
Statutory Control of the Recovery of Service Charges
"(1) An application may be made to the appropriate tribunal for a determination whether a service charge is payable and, if it is, as to –
(c) the amount which is payable,
(2) Subsection (1) applies whether or not any payment has been made.
(3) An application may also be made to the appropriate tribunal for a determination whether, if costs were incurred for services, repairs, maintenance, improvements, insurance or management of any specified description, a service charge would be payable for the costs and, if it would, as to –
(c) the amount which would be payable,
(4) No application under subsection (1) or (3) may be made in respect of a matter which –
(a) has been agreed or admitted by the tenant,
(b) has been, or is to be, referred to arbitration pursuant to a post-dispute arbitration agreement to which the tenant is a party,
(c) has been the subject of determination by a court, or
(d) has been the subject of determination by an arbitral tribunal pursuant to a post-dispute arbitration agreement.
(5) But the tenant is not to be taken to have agreed or admitted any matter by reason only of having made any payment.
(6) An agreement by the tenant of a dwelling (other than a post-dispute arbitration agreement) is void so far as it purports to provide for a determination –
(a) in a particular manner, or
(b) on particular evidence,
of any question which may be the subject of an application under subsection (1) or (3)."
"Pay a fair proportion (to be determined by the Surveyor for the time being of the Lessors whose determination shall be final and binding)".. of various relevant expenses and costs.
He concluded that this provision fell foul of s.27A(6). He said, at paragraph 40:
"The prohibition in s.27A(4) on re-opening matters which have been agreed must, however, be considered in the light of s.27A(6). This renders void any agreement by the tenant in so far as it "purports" to provide for the determination of any question which could be the subject of an application under subss.(1) or (3) "in a particular manner" or "on particular evidence". The purpose of the provision is clearly to avoid agreements excluding the jurisdiction of the first-tier tribunal on questions which could otherwise be referred to it for determination."
He noted, at paragraph 45, that the apportionment of service charges can be a complex matter, and that there may be more than one fair or reasonable method which may be adopted. At paragraph 47 he noted the submission by counsel for the landlord that it would only be if the LVT was satisfied that the Surveyor's apportionment was not fair that it could substitute its own view of what was fair. At paragraph 48, he continued:
"I cannot accept Mr Gilchrist's submission. Section 27A deprives the landlord's surveyor of his role in determining the apportionment. Paragraph (2) is to be read as if the method of ascertaining a fair apportionment was omitted altogether. Mr Pogson's conclusions cannot therefore have any contractual effect. That being the case, it was for LVT to decide what was a fair proportion of the expense of communal services payable by the respondents. It is not suggested that the method it preferred was unfair, and the fact that the alternative method, which it rejected, may also have been fair does not undermine its conclusion."
"It was submitted by Ms Black that the only effect of s.27A(6) was to render void the words "whose determination shall be final and binding" and that the roles of the Landlord's surveyor in determining the fair proportion of the service costs remained intact. I do not accept that. The statutory anti-avoidance provision renders void so much of the agreement as has the effect of providing for the determination in a particular manner of any question which could be referred to the appropriate tribunal under s.27A(1). A determination of proportions by the landlord's surveyor is such a provision, whether it is said to be final and binding or not. The Tribunal said as much in Windermere …"
After quoting from the Windermere case, he continued, at paragraph 74:
"As is apparent from this passage, where a provision for determining an apportionment is rendered void by the operation of s.27A(6) of the 1985 Act, and the parties cannot agree what is fair, the consequence is that the fair proportion falls to be determined by the appropriate tribunal. That is a fundamentally different exercise from the one undertaken by the First-tier Tribunal in this case, when it asked itself whether the respondent's method of apportionment was fair rather than asking itself what the fair apportionment should be."
The Proceedings Before the LVT and Upper Tribunal
"In principle we do not think it is open to the Council to calculate the service charge without reference to the receipt by it from a commercial third party of funds specifically intended to meet the cost of part of the works. We do not consider that the Council has "incurred" those costs within the meaning of the lease in circumstances where in the course of the contract, it reached agreement with a third party which bound that party to reimburse part of the cost. The fact that the CESP funding was not limited to properties let to the Council's own secure tenants, but was equally applicable to work done to those belonging to its long leaseholders, prohibits the Council from treating the funding as if it was part of its general revenue. If the Council had not carried out the specific items of work which it now seeks to charge to the leaseholders it would not have received the CESP funds. In those circumstances for it to retain the CESP funding while recovering the leaseholders' contributions towards the cost of the work in full would amount to double recovery."
At paragraph 127 the Upper Tribunal left open the possibility that the Council might wish to reconsider its decision not to charge Ms Oliver for the cost of the boiler replacement, radiator valves and professional costs, expressing no view on whether the Council could lawfully do so.
The Parties Submissions on this Appeal
i) Giving a particular meaning to the phrase "cost and expenses which the Council may in time to time incur" (in clause 3(29)) and the phrase "costs, expenses and outgoings incurred … by the Council" in the Schedule; or
ii) Treating "actual costs, expenses and outgoings" in paragraph 6 of Part III of the Schedule as limited to those which leave the Council out of pocket; or
iii) Treating the avoidance of double recovery as a matter to be taken into account when determining a "fair proportion" of the Council's incurred costs, expenses and outgoings to be paid by the Lessee, under paragraph 1 of Part III of the Schedule.
Lord Justice Lewison:
"One speaks of something being "actually" the case to point a contrast; perhaps with what appears to be the case, or with what might be the case, or with what is deemed to be the case. The effect of the word therefore depends upon the nature of the distinction which the speaker is wanting to make. This can appear only from the context in which the phrase is used. "
Lord Justice Longmore: