England and Wales Lands Tribunal

[2001] EWLands LRX_28_2000 (22 April 2001)

LRX/28/2000

LANDS TRIBUNAL ACT 1949

SERVICE CHARGES – Landlord and Tenant Act 1985, s 19 – whether lease provided for service charges –whether landlord estopped from saying it did not so provide – tenants' association certificate of recognition under s 29 – whether refusal to cancel set up res judicata estoppel on service charges issue – held lease did not provide for service charges, no estoppel.

IN THE MATTER of an APPEAL against a DECISION of the

LEASEHOLD VALUATION TRIBUNAL for the SOUTHERN and

SOUTH EASTERN RENT ASSESSMENT PANEL

BETWEEN MINSTER CHALETS LIMITED Claimant

and

IRWIN PARK RESIDENTS ASSOCIATION Respondent

Re: Holiday Chalet Park,

Irwin Park,

The Broadway,

Minster

Sheerness

Kent

Before: The President

Sitting in public at 48/49 Chancery Lane, London WC2A 1JR

on 23 and 24 April 2001

The following cases are referred to in this decision:

R v Clowes (No.2) [1994] 2 All ER 316

Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896

The Karen Oltmann [1976] 2 Lloyds Rep 708

Dickson v St Aubyn [1944] 1 All ER 470

City and Westminster Properties (1934) Ltd v Mudd [1959] 1 Ch 129

Hopgood v Brown [1955] 1 All ER 550

Bank Negara Indonesia v Hoalim (1973) 2 MLJ 3

Greaseley v Cook [1980] 1 WLR 1306

R v London Rent Assessment Panel, ex parte Trustees of Henry Smith's Charity Estate [1988]

1 EGLR 34

Lockyer v Ferryman (1877) App Cas 519

Carl-Zeiss Stiftung v Rayner & Keeler Ltd (No.2) [1967] AC 853

Re Racal Communications Ltd [1981] AC 374

Appearances: Guy Adams instructed by Tozers, solicitors of Exeter, for the appellant.

Stephen Jourdan instructed by Kent Law Clinic for the respondent.


 


DECISION

1. This is an appeal by the landlord against a decision of a leasehold valuation tribunal of the Southern and South Eastern Rent Assessment Panel on an application under section 19 of the Landlord and Tenant Act 1985. The application was made by the Irwin Park Residents Association on 20 March 1998 and related to holiday chalets at Irwin Park, Minster-on-Sea, Sheerness, Kent. On 5 December 1997 the Association had been granted a certificate by a member of the rent assessment panel under section 29 of the Landlord and Tenant Act 1985, recognising it for the purposes of the service charge provisions of the Act. The application sought a determination of the reasonableness of service charges for the period 1 March 1998 to 31 December 1998 and a limitation of services charges arising from the landlord's costs in the proceedings.
2. The landlord was of the view that the chalet leases made no provision for service charges, and it applied to the rent assessment committee for the cancellation of the Association's registration certificate. On 24 November 1998 a hearing was held for the members of the rent assessment committee present to determine the landlords' application to cancel the certificate and for the same persons, as local valuation tribunal, to give directions on the application under section 19. A single decision was issued on 15 January 1999 dealing with both matters. It concluded that the leases did make provision for service charges and it refused the application to cancel the certificate. It proceeded to give directions on the further conduct of the proceedings.
3. The hearing into the section 19 application was held on 21 February 2000. Although the application made by the Association had not specified the individual properties to which it related it was treated at the hearing as an application in respect of just one of the chalets, 7 The Lilacs, the tenants of which are Mr E J Scanlon, the chairman of the Association, and his wife. The hearing proceeded on the basis that the question whether the lease of the chalet made provision for service charges had been determined in the decision of 15 January 1999. The landlords made clear, however, that they contested the correctness of that ruling and would seek leave to appeal against the LVT's decision on that ground. At the hearing the LVT heard evidence from Mr Scanlon, and a surveyor, Mr Ford, who acted for the Residents Association; and from Mr M P Irwin, the managing director of Minster Chalets Limited and Mr Bruce Epsley FCMA, ATII, the company's accountant. In its decision issued on 19 April 2000 the LVT determined that the aggregate service charges for Irwin Park were reasonable up to a figure of £40,600 but that the excess above that figure was not reasonably incurred.
4. The LVT granted the landlord leave to appeal, and the appeal is pursued on the ground that the LVT were wrong to conclude that the lease made provision for service charges so as to make possible an application by the tenant under section 19 of the 1985 Act. Evidence was given by Mr Irwin and Mr Epsley for the appellant and by Mr Scanlon. From that evidence and the agreed documents, I find the following facts.
5. In September 1983 Michael P Irwin Developments Limited bought the former Warners Minster Camp on the Isle of Sheppey, where they were already operating two caravan holiday parks. (The company later changed its name to Irwin Park Limited and then to Minster Chalets Limited.) There was planning permission to redevelop the camp with 280 static holiday caravans, but the company decided that, rather than demolishing the existing chalet blocks, it would be better to refurbish them. Other parts of the site were developed for the use of touring caravans, and a new bar, café area, ballroom and stages, known as the Tavern Club, and a swimming pool were constructed. In 1984 the park became known as Irwin Park. In 1985 planning permission was obtained for a 50-bedroom motel on part of the park, and the ownership of this area was transferred to a company called Abbey Motel Limited.
6. The existing chalet blocks were progressively redeveloped during the 1980s and early 1990s, with the new chalets being sold on 20 or 22 year leases. At total of 115 chalets (or cottages, as they are also referred to) were constructed. The planning permission for the chalet redevelopment contained a condition that each chalet must only be occupied from 1 March to 31 October in any year. In 1984 the occupancy period was extended to 10 months for a limited time and in 1987 this variation of the earlier condition was made permanent. Under an agreement under section 52 of the Town and Country Planning Act 1971, the company agreed strictly to enforce covenants in chalet leases limiting occupation to the period 1 March to 2 January.
7. In 1987 the touring caravan field was purchased from the company by Mr Irwin and his wife and son, although the company continued to manage it and received the income from it. In March 1998 the company ceased running the Tavern Club and swimming pool and leased these off.
8. The lease of 7 The Lilacs is in the same form as the other chalet leases. It is dated 10 September 1992. Mr and Mr Scanlon paid a premium of £35,000 for it, although no mention of this appears in the lease. It provided as follows:

"1. In consideration of the site fees and covenants hereinafter reserved and contained and on the part of the Tenant to be paid observed and performed the Landlord hereby demises to the Tenant ALL THAT property known as:-

No.7 THE LILACS

situated on Irwin Park. (Title No.K503344) The Broadway, Minster-on-Sea. Sheerness in the County of Kent, together with the area of garden fronting the entrance door. Together with a full right of access to and from the Site and the neighbouring roads TO HOLD the same unto the Tenant for a term of lease of Twenty Years.

(Lease to be deemed to take effect from 1^st day of January of the year of Signing the Lease) and expiring 20 years from that first day of January.

PAYING THEREFORE:-

(i) The yearly site fees of £853.60 + 17% VAT

payable yearly in advance. The first of such payments to be made or deemed to become due on the first day of January

One Thousand Nine Hundred and Ninety Two

and every subsequent annual site fee to become due and payable and recoverable in advance on the first day of January in every succeeding year.

(ii) By way of additional site fees during each (except the first) year of the said term such further sum (if any) as shall be determined (in default of agreement) from time to time by the Landlord's valuer (whose opinion shall be final and absolutely binding on the Tenant) as when aggregated with the said yearly site fees of £

shall amount to the fair site fees value of the Cottage Site for any of such years.

PROVIDED ALWAYS:

(a) That the Landlord shall give to the Tenant three months previous notice in writing of his intention to charge any such additional site fees and in the event of such notice being given the said additional site fees shall be payable yearly in advance on the first day of January in the year next following that in which the notice is given.

(b) That is, notice shall be given requiring payment of the said additional site fees as hereinbefore provided the same shall continue to be payable for the succeeding years of the term hereby granted until the giving of further notice by the Landlord varying the amount payable."

9. Clause 2 contained the tenant's covenants, starting with: "(i) To pay the site fees reserved in the manner aforesaid." Covenant (v) included prohibition on the use of the cottage as the only or main residence of the tenant or other person or otherwise than as a holiday residence or in any manner which might cause the tenancy to become a protected tenancy. It also restricted occupation for living purposes to the period 1 March to 2 January. The Landlord covenanted in clause 3 as follows:

"3. THE Landlord hereby covenants with the Tenant:

(i) So far as is practical to keep or cause to be kept the grounds of Irwin Park in a clean and in proper condition.

(ii) That the Tenant paying the site fees reserved and observing the covenants and conditions on the part of the Tenant herein contained shall peaceably enjoy the demised premises without any interruption by the Landlord or any person lawfully claiming under the Landlord."

10. When the sales of chalets began, anyone interested was shown round the Park and into the chalets and was then shown into the Park Office and given a copy of the lease to read. Someone from the company was available to answer any questions that they had. It soon became clear, however, that purchasers were asking the same questions, and two documents were prepared by Mrs Irwin and were shown to prospective purchasers. They were shown to Mrs Scanlon before she and her husband entered into their lease.
11. The first document was headed "Thinking of buying a cottage on 'Irwin Park'?" It contained the following:

"Q. ARE THERE ANY EXTRA MONIES TO FIND?

A. Site fees – as the cottages are sold on leasehold an annual charge is raised for the general upkeep of the park and services supplied.

Insurances – The Park has a 'block' insurance. You will be billed annually for both the structure and the contents. The cost of the structure insurance is index-linked and therefore increases to keep up with the cost of rebuilding the property at current prices. Contents insurance (minimum value £6,000) is based on what each client requires.

Water and Sewerage Rates – again you will be billed annually but the charge made by us is considerably less than you would have to find if you were charged by the Southern Water Authority.

The above charges are included in our invoice to you which becomes payable on 1^st January each year."

12. The second document was headed "Park Rules" and it contained 15 rules. It said:

"These rules are made for the purpose of ensuring the comfort and well being of ALL TENANTS and for the harmony of tenants and management alike.

The management of IRWIN PARK reserve the right to amend these rules and conditions without notice.

1. The Company insist that ALL COTTAGES MUST BE INSURED through the N.F.S.O. recommended insurance as used by IRWIN PARK MANAGEMENT.

2. All persons using IRWIN PARK do so at their own risk.

3. THE SPEED LIMIT IS 10 m.p.h. MAXIMUM and cars may only be driven around the road network of the park space. One car per Cottage will be allocated a corresponding number for a car parking space. Please park only in your own bay. All visitors to use the communal car park.

4. Your Cottage must be kept in a sound condition and kept clean and tidy…" and so on.

A number of the rules (including the requirement to keep the cottage in a sound condition and clean and tidy) were to the same effect as tenant's covenants in the lease. Others (like the speed limit) related to particular aspects of conduct, and had no equivalent in the lease. The lease said nothing about insurance.

13. Invoices for site fees, insurance and water and sewerage rates were sent to tenants in the autumn of each calendar year. They related to the 44 week period from 1 March in the following year up to 2 January in the year after that. There were no increases in the level of site fees from 1984 to 1987. In 1988 fees were increased for the first time and they have been increased annually since then. They were increased by 4% in each of the years from 1 March 1995, 1 March 1996 and 1 March 1997. Tenants paid, apparently without demur, the amounts for which they were invoiced. In 1997, however, the increases were between 12% and 14%, and it was because the tenants felt that this increase was excessive that the section 19 application to the LVT was made. The tenants had also felt for some time that the quality of the services provided by the company had been declining. There had, however, been no negotiations between the parties on the level of increase and the matter had not been referred to the company's surveyor.
14. The company derived its income from a number of sources including the sale of chalets, site fees for chalets, the touring caravan field, the running and subsequent letting of the Tavern Club, swimming pool and other business activities, and short stay clients. A detailed breakdown of how much expenditure was incurred by each element of the business was not made, and there was no apportionment of the total expenditure. Only an analysis of income was maintained. The company – in the persons of Mr Irwin, his wife and son – decided each year on the level of site fees after a meeting with Mr Epsley to review the financial position. An estimate was made on the basis of the previous year's accounts how much income was required from the company's activities for it to remain solvent. A business decision was then made on how large an increase could be made in the charges for each element of the company's activities. As far as chalets were concerned particular account was taken of the general level of site fees on other holiday parks in the area. Finally the size and type of chalet was taken into account, with the larger detached chalets paying more than smaller terraced chalets, although there was no fixed ratio.
15. Section 18 of the Landlord and Tenant Act 1985 provides as follows:

"(1) In the following provisions of this Act 'service charge' means an amount payable by a tenant of a dwelling as part of or in addition to the rent –

(a) which is payable, directly or indirectly, for services, repairs, maintenance or insurance or the landlord's costs of management, and

(b) the whole or part of which varies or may vary according to the relevant costs.

(2) The relevant costs are the costs or estimated costs incurred or to be incurred by or on behalf of the landlord, or a superior landlord, in connection with the matters for which the service charge is payable.

(3) For this purpose –

(a) 'costs' includes overheads, and

(b) costs are relevant costs in relation to a service charge whether they are incurred, or to be incurred, in the period for which the service charge is payable or in an earlier or later period."

16. Section 19 provides as follows:

"(1) Relevant costs shall be taken into account in determining the amount of a 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 incurred any necessary adjustment shall be made by repayment, reduction or 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

(c) whether an amount payable before costs are incurred is reasonable.

(2B) An application may also be made to a leasehold valuation tribunal by a tenant by whom, or landlord to whom, a service charge may be payable for a determination –

(a) whether if costs were incurred for services, repairs, maintenance, insurance or management of any specified description they would be reasonable,

(b) whether services provided or works carried out to a particular specification would be of a reasonable standard, or

(c) what amount payable before costs are incurred would be reasonable.

(2C) No application under subsection (2A) or (2B) may be made in respect of a matter which –

(a) has been agreed or admitted by the tenant,

(b) under an arbitration agreement to which the tenant is a party is to be referred to arbitration, or

(c) has been the subject of determination by a court or arbitral tribunal.]

(3) An agreement by the tenant of a dwelling (other than an arbitration agreement is void in so far as it purports to provide for a determination in a particular manner, or on particular evidence, of any question –

(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

(c) whether an amount payable before costs are incurred is reasonable."

17. For the landlord Mr Guy Adams submits that the lease is unambiguous in its terms. It provides that the site fees reserved are the consideration for the demise. In other words they are an inclusive rent for the premises. As such it is inevitable that they are payable for more than the mere use of the land, and thus in a sense they include sums indirectly payable as the price of the landlord's obligation in clause 3(i) to keep the grounds of Irwin Park in a clean and proper condition and possibly to cover other services which the landlord may choose to provide. However, says Mr Adams, the amount payable does not in any sense vary "according to" the relevant costs. The site fees are not a variable rent, but rather consist of a fixed basic rent together, in the second and subsequent years, with an additional fixed rent, which on annual review is the difference between the fair rent and the basic rent. The cost of the services provided by the landlord will be one of the relevant facts in any valuation carried out by the landlord's surveyor, where the parties fail to agree, but the increase above the basic rent is not made dependent in any mechanistic way on that cost.
18. For the tenants Mr Stephen Jourdan submits that the site fees are "service charges" as defined in section 18 of the 1985 Act on three bases. Firstly he says that site fees are service charges on the true construction of the lease, set against the relevant matrix of fact, which includes the document entitled "Thinking of buying a cottage on 'Irwin Park'?" Referring to R v Clowes (No.2) [1994] 2 All ER 316, he says that in construing a document one may have regard to an explanatory document provided by one party. One should start with the assumption that the explanatory document is accurate: Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 913H. He also relies on The Karen Oltmann [1976] 2 Lloyds Rep 708, where at 712 Kerr J said:

"If a contract contains words which in their context are fairly capable of bearing more than one meaning, and if it is alleged that the parties have in effect negotiated on an agreed basis that the words bore only one of two possible meanings, then it is permissible for the Court to examine the extrinsic evidence relied upon to see whether the parties have in fact used the words in question in one sense only, so that they have in effect given their own dictionary meaning to the words as a result of their common intention."

19. Mr Jourdan says that the word "rent" is universally used in leases where what the parties intend is a payment for the use and occupation of the demised premises. That word is not used in the lease. Instead, the lease uses the expression "site fees" and provides that the additional site fees are to be determined by reference to "the fair site fees value of the Cottage Site". The additional site fees which, with the fixed fees, are to equal the "fair site fees value" must have been intended to produce a figure calculated on the same basis as the original fixed "site fees" but having regard to the altered circumstances at the start of the relevant year. Given the landlord's covenant to keep the park in a clean and proper condition, and the fact that the tenant pays a substantial premium for the grant of the lease, the most sensible interpretation is that the "site fees" are the recompense to the landlord for the costs of complying with his covenant to keep the park in a clean and proper condition.
20. Mr Jourdan says that the lease gives no guidance as to the meaning of "fair site fees value". However, the "Thinking of buying a cottage on 'Irwin Park'?" explanatory document clearly states that the site fees are an annual charge raised for the general upkeep of the park and services supplied. In accordance with the authorities cited, the lease should be construed in accordance with the explanatory document. Even in the absence of the explanatory document, an ambiguous expression in a lease produced by the landlord must be construed against the landlord: Dickson v St Aubyn [1944] 1 All ER 470.
21. Mr Jourdan's second argument is that the explanation in the "Thinking" document of what site fees were was a representation acted upon by the tenant in entering into the contract and the landlord was bound by it. He put the case both on the basis of collateral contract, relying on City and Westminster Properties (1934) Ltd v Mudd [1959] 1 Ch 129, and estoppel – estoppel by representation (Hopgood v Brown [1955] 1 All ER 550 at 559), promissory estoppel (Bank Negara Indonesia v Hoalim (1973) 2 MLJ 3), and estoppel by convention. Given that the representation was made, the assumption was that the person to whom it was made acted upon it: Greaseley v Cook [1980] 1 WLR 1306. He said that estoppel by convention is to be spelled out of the "Thinking" document, the list which Mr Irwin had produced in response to a letter from Mr Scanlon of 20 October 1997, the accounts (which showed that site fees were not treated as rent), Mr Irwin's evidence that the basic site fee (in clause 1(i)) was calculated on the basis of what it would cost to maintain the unit for a year, and Mr Irwin's letter of 17 November 1997 to the Rent Assessment Panel, in which he had said that site fees were paid for management and site maintenance, not property rental.
22. The task for the Tribunal in this case is not to construe the terms "site fees" or "the fair site fees value of the cottage site" so as to produce a complete explanation of what they mean, but to construe them to the extent necessary to determine whether they provide for service charges as defined in section 18 of the 1985 Act; and, if the conclusion is that, so construed, they do not, to decide whether such a result nevertheless arises from a collateral contract or through estoppel.
23. Service charge as defined in section 18(1) has three elements. It is an amount payable as part of or in addition to the rent. It is payable directly or indirectly for services, repairs etc. And the whole or part of it varies or may vary according to the relevant costs. The relevant costs are defined in subsection (2) to mean the costs or estimated costs incurred or to be incurred on behalf of the landlord or the superior landlord in connection with the matters for which the service charge is payable. There is a point to be noted on the second element. Mr Adams submits that "indirectly" is included to cover costs incurred by the superior landlord (as referred to in subsection (2)) and has no wider significance. That appears to me to be correct. The crucial element is the third one. The amount payable by the tenant is one which varies or may vary "according to" the relevant costs. What this means, in my judgment, is that the calculation of the amount is to be derived from the costs so that it is those costs that determine the amount that is payable as provided for in the lease. The provisions of the lease in the present case require to be construed to determine whether this element is present.
24. The structure of the agreement is on the basis of the demise of the cottage in consideration of the site fees and the covenants reserved. The site fees are a fixed yearly amount, but additional site fees, to be agreed between the parties or, in default of each agreement, to be determined by the landlord's valuer, are payable in the second and subsequent years so as to bring the annual payment up to "the fair site fees value of the Cottage Site." There is nothing in the lease itself to suggest, in my judgment, that site fees are related to the cost of services or that any increase in site fees is payable according to any increase in such cost. Indeed reference to "the fair site fees value" appears to be an express statement that is value and not cost that determines the increase in site fees.
25. The meaning of the terms "site fees" and "the fair site fees value of the Cottage Site", however, is what the parties, using those words against the relevant background, would reasonably have been understood to mean (see Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, per Lord Hoffman at 913C). There are parts of the relevant background here, in my view, that have, or may have, a bearing on the meaning of the words. Firstly there is the payment of the premium. The reality is that, although not mentioned in the lease, this was the principal consideration for it, and it is at least possible, therefore, that the lease might make no provision for any additional profit on the part of the landlord. Provision for a payment to reflect only the cost of services would not be inconsistent with the nature of the transaction in the light of this feature of the relevant background.
26. Secondly there is the fact that this was a lease of a holiday chalet on a holiday park, and not the lease of a residential dwelling on a residential estate. The services and facilities provided could well go beyond merely keeping the grounds of the Park in a clean and proper condition (the obligation of the landlord under clause 3(i) of the lease), and indeed they did extend to other things, including for a time the use of the swimming pool and clubhouse. The plots were small, and other parts of the Park contained caravans. The lease itself appears to have been based on the standard form of agreement for mobile homes (see Walker v Badcock [1997] 42 EG 180, to which Mr Jourdan referred) and the term "site fees" to describe the annual payment for the chalets, instead of "pitch fee", is in the circumstances an unsurprising one to use. It does not seem to me to carry the implication that it excludes any element of profit rent. On the contrary a site fee might be expected to reflect the value of the site and its surroundings and the facilities provided on the Park.
27. Thirdly there is the "Thinking" document and the single short statement about site fees, that "as the cottages are sold on leasehold and annual charge is raised for the general upkeep of the park and services supplied." This, in my view, is properly to be regarded as part of the background in seeking to understand what the parties meant by the term site fees in the lease. The whole of the case for the tenants hangs on this single sentence. In my judgment, however, it does not assist them. It is not in terms saying that the annual charge is fixed on the basis of the cost of providing the services, and it carries no such implication, in my view. It is telling prospective tenants that the park will be kept up, and services will be supplied, and the site fees will be payable for this. In terms of section 18(1) it is saying that site fees are payable for services and maintenance (paragraph (a) of the subsection) but not that they will vary according to the costs incurred by the landlord in connection with them (paragraph (b)). The distinction between these two elements of what constitutes a service charge is clear. It is not sufficient that charges should be payable for services. It is necessary also that such charges should vary according to the costs incurred in providing the services.
28. In my judgment, therefore, the lease, whether construed by itself or in relation to the relevant background, does not provide for the payment of a service charge. It follows from this conclusion that the arguments based on collateral contract, estoppel by representation and promissory estoppel also fail, because they are founded on the contention that the "Thinking" document contained a representation that site fees were charges for services and that any increase in them would be in accordance with the cost of those services. The "Thinking" document, however, is only one of the matters relied on by Mr Jourdan in the argument he advances on the basis of estoppel by convention. Nevertheless I do not think that the other matters on which he relies establish estoppel by convention. The list of services Mr Irwin provided was no more than that. Its provision did not imply that site fees were limited to the cost of providing those services. Nor was there any such implication in the letter he wrote on 17 November 1997 to the rent assessment panel, in which he said "SITE FEES paid are for Management and Site Maintenance's NOT property rental NOT Leasehold Property Maintenance." Although he said in evidence that the initial site fees of £853.60 were costed on the basis of what it would cost to maintain the unit for a year, he went on to say that it was in fact impossible to work out the cost for an individual chalet. That it was impossible was indeed evident from the fact that no records were kept, and no analysis was done, of what it cost to provide services to the chalets. Records of receipts and expenditure for the Park as a whole were kept, but that is all. The process by which the company fixed the annual increase in site fees was also clear from his evidence. It was a judgment that took into account what Mr Epsley advised was needed by way of income and his, Mr Irwin's, feel for what the market would sustain.
29. Mr Jourdan raises a further contention in the event that his other arguments were to fail. He says that there is a res judicata estoppel that arises from the decision of the members of the rent assessment committee not to cancel the Association's certificate of recognition under section 29. The issue whether the lease provided for service charges was the basis of the landlords' application to have the Association's certificate cancelled. A certificate under section 29 may be given and may be cancelled by a member of a rent assessment committee panel. In determining the issue, Mr Jourdan says, the rent assessment committee were exercising their powers as members of a rent assessment committee and not as a leasehold valuation tribunal or as a rent assessment committee. They determined the issue in the Association's favour. No appeal lies from the decision of a member of a rent assessment committee under section 29, but it could be challenged by judicial review (see R v London Rent Assessment Panel, ex parte Trustees of Henry Smith's Charity Estate [1988] 1 EGLR 34). No challenge was made, however. Therefore, Mr Jourdan says, a res judicata estoppel applies. The issue – whether service charges are payable under the lease – is the same; the parties are the same; and the decision of the members of the rent assessment committee was a judicial decision. The three ingredients of res judicata estoppel are there.
30. It has to be said that the argument is one without merit and that Mr Jourdan accepts this. It is without merit because it is apparent that the parties throughout regarded the issue as being relevant both to the certificate question and to the application under section 19; that it was dealt with at the same hearing as directions relating to the section 19 application; that it was only raised in relation to the certificate because of the section 19 application; and that throughout the landlord indicated its intention to appeal on the point to the Lands Tribunal.
31. Mr Jourdan accepts that the point is a technical one and without merit. The concept of an estoppel which is devoid of merit is, it has to be said, a difficult one to grasp. Mr Adams did not seek to deal with the argument in his submissions. It was not, however, withdrawn by Mr Jourdan, and I must address it.
32. The principle underlying res judicata estoppel was stated by Lord Blackburn in Lockyer v Ferryman (1877) App Cas 519 at 530 in a passage cited by Lord Reid in Carl-Zeiss Stiftung v Rayner & Keeler Ltd (No.2) [1967] AC 853 at 909:

"The object of the rule of res judicata is always put upon two grounds – the one public policy, that it is in the interest of the State that there should be an end of litigation, and the other, the hardship on the individual that he should be vexed twice for the same cause."

33. The requirements are (1) that the same question has been decided; (2) that the judicial decision which is said to create the estoppel must be final; and (3) that the parties to the judicial decision were the same persons as the parties to the proceedings in which the estoppel is raised (see per Lord Guest in Carl-Zeiss at 935). It should be noted that the second requirement imports both that the decision should be that of a judicial tribunal and that the decision should be a judicial decision: see Spencer Bower, Turner and Handley on Res Judicata 3^rd edn paras 20-32.
34. Section 29 of the 1985 Act bears the side-note "Meaning of 'recognised tenants' association'". It provides as follows:

"(1) A recognised tenants' association is an association of qualifying tenants (whether with or without other tenants) which is recognised for the purposes of the provisions of this Act relating to service, charges either –

(a) by notice in writing given by the landlord to the secretary of the association, or

(b) by a certificate of a member of the local rent assessment committee panel.

(2) A notice given under subsection (1)(a) may be withdrawn by the landlord by notice in writing given to the secretary of the association not less than six months before the date on which it is to be withdrawn.

(3) A certificate given under subsection (1)(b) may be cancelled by any member of the local rent assessment committee panel.

(4) In this section the 'local rent assessment committee panel' means the persons appointed by the Lord Chancellor under the Rent Act 1977 to the panel of persons to act as members of a rent assessment committee for the registration area in which the dwelling let to the qualifying tenants are situated, and for the purposes of this section a number of tenants are qualifying tenants if each of them may be required under the terms of his lease to contribute to the same costs by the payment of a service charge.

(5) The Secretary of State may by regulations specify –

(a) the procedure which is to be followed in connection with an application for, or for the cancellation of, a certificate under subsection (1)(b);

(b) the matters to which regard is to be had in giving or cancelling such a certificate;

(c) the duration of such a certificate; and

(d) any circumstances in which a certificate is not to be given under sub-section (1)(b).

It appears that no regulations have yet been made under subsection (5), which was in its present form substituted by the Landlord and Tenant Act 1987.

35. Subsection (1), which is couched in terms that define what a recognised tenants' association is, only obliquely and by implication confers a power to grant a certificate. The power to cancel a certificate is explicit. No indication is given as to what matters are material to the grant or cancellation of a certificate, and the Secretary of State has not specified any. No procedure either for applications or for cancellations has been prescribed. No provision is made for notifying the landlord that a certificate has been applied for or may be given or for enabling him to object. The function of granting and cancelling a certificate is given, not to the rent assessment committee but to any member of the rent assessment committee. No restriction is imposed on the number of times a member may decide whether or not to issue or to cancel a certificate.
36. In my judgment it is clear in the light of these features of the statutory provisions that the member of the rent assessment committee is not a judicial tribunal, and the function of issuing and cancelling a certificate is an administrative and not a judicial one. There is no lis inter partes. The member deciding whether to issue or cancel a certificate is not deciding a dispute between two parties, and there is no right to a hearing. Moreover the refusal or cancellation of a certificate by a member would not be a bar to a subsequent grant of a certificate by that member or another member, although in the absence of relevant new material it is in practice unlikely that this would be done: see Re Racal Communications Ltd [1981] AC 374 (a case relating to the issue of a search warrant) per Lord Diplock at 390. That the decision is an administrative and not a judicial one is a consequence of the nature of the statutory provisions, and the member of the rent assessment committee does not turn himself into a judicial tribunal or his decision into a judicial one by holding a hearing, as happened in the present case.
37. That is sufficient to dispose of the res judicata argument. It is possible that there may be other reasons why there is no estoppel here – and ones which reflect the absence of merit that Mr Jourdan recognises – but there is no need for me, in the light of the conclusion I have come to on the nature of the tribunal and its decision, to explore them.
38. The appeal is accordingly allowed. The tenants were not entitled to make their application to the LVT. On the question of costs, both counsel agreed that costs should follow the event. The respondent must therefore pay the appellant's costs of the appeal, such costs if not agreed to be the subject of a detailed assessment by the Registrar of the Lands Tribunal on the standard basis.

Dated 27 April 2001

George Bartlett QC, President