United Kingdom Upper Tribunal (Lands Chamber)

                                                              UT Neutral citation number: [2009] UKUT 290 (LC)

                                                                                                LT Case Number: LRX/89/2008

                            TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

LANDLORD AND TENANT – service charges – preliminary issue – whether tenant entitled to contend that credit for earlier years be set off against amounts claimed in subsequent years – held that he was – appeal allowed

IN THE MATTER OF AN APPEAL AGAINST A DECISION OF THE LEASEHOLD

            VALUATION TRIBUNAL OF THE LONDON RENT ASSESSMENT PANEL

BY

                                             ALTON ROGER CHARLES MORRIS                      Appellant

                                                           Re: Flat 4

                                                                  187 Goldhurst Terrace

                                                                  London NW6 3ER

                                                           Before: The President

                                                   Sitting at 43-45 Bedford Square

                                                            on 15 December 2009

Mr Bernard Cordell, solicitor, for the appellant

No cases referred to.

DECISION

1.      This is an appeal brought with permission of this Tribunal (Judge Mole QC) against a decision of a Leasehold Valuation Tribunal for the London Rent Assessment Panel on a preliminary issue.  The proceedings relate to a claim for service charges by the landlord, Pledream Properties Ltd, on the tenant’s flat.  (Pledream, the applicant before the LVT, does not respond to this appeal.)  The claim, which relates to service charges for the years to 31 March 2006 and 31 March 2007, was transferred to the LVT from the Willesden County Court.  The amount of the claim is £6,790.95.  The preliminary issue, as the LVT put it, was “whether service charges that had been demanded prior to 2005 could form the basis of a defence to a claim for service charges due in 2006 and 2007”.  The preliminary hearing had been ordered at the Pledream’s request to deal with its contention “that anything prior to 31^st March 2005 should not be in issue as the Applicant made no claim in respect of those years”.  It is clear that the dispute between the parties was as to whether, as Mr Morris claimed, there were sums representing overpayments by him up to 31 March 2005 (£801.29) and a payment made in April 2005 (£4,000) that fell to be offset against the amount claimed. 

2.      The LVT dealt with the preliminary issue on the basis of written representations.  Pledream’s contention was that, since Mr Morris had not made a counterclaim in the county court proceedings for repayment of the amounts that he said were repayable in respect of earlier years, the county court had no issue before it relating to years prior to 1 April 2005.  Accordingly it could only have transferred to the LVT issues relating to the two years ending on 31 March 2007.

3.      The county court proceedings transferred to the LVT were the second set of proceedings between the parties relating to liability for service charges.  The first set of proceedings were a claim by Pledream for non-payment of the balance of service charges for the years ending 31 March 2005 in the sum of £1,451.26 and for arrears of ground rent in the sum of £400.  In his defence, filed on 2 August 2000 Mr Morris asserted that Pledream had wrongly taken monies from his account to which it was not entitled in excess of the alleged debt in the action and had artificially created the debt by setting off his payments against debts which he had properly disputed.  In its reply Pledream accepted that the sum of £1,473.71 was available for allocation by way of credit for service charges due for the year ending 31 March 2005.  It said that the service charges for that year were £1,451.26, so that the balance of £22.45 was available for set-off against the amount of £400 due in respect of ground rent, leaving £377.55 due from Mr Morris.  Pledream subsequently agreed that the sum of £400 had in fact been paid by Mr Morris’s mortgagees, so that there was no claim outstanding in the proceedings other than costs.  The claim was accordingly dismissed without a hearing, and Pledream were ordered to pay 75% of Mr Morris’s costs.

4.      What had happened was that Pledream had credited the £4,000 that Mr Morris had paid in April 2005 against the amount, £3,977.55, that it claimed was outstanding up to 31 March 2005.  Mr Morris’s assertion has always been that so far from being in arrears at 31 March 2005 he was in fact in credit in the amount of £801.29.  In the second set of proceedings his defence was that as at June 2005 Pledream owed him £4,801.29 and he stated the amounts for which he claimed that he had been wrongly charged for the years ending 31 March 1999, 31 March 2000 and 31 March 2004. 

5.      In its decision the LVT referred to the parties’ written submissions.  At paragraph 6 it wrongly identified the defence to the second proceedings (which had been wrongly dated 29 October 2005 instead of 29 October 2007) as being the defence to the first proceedings.  It set out its decision as follows:

“12. The Tribunal have determined that although the claim brought in 2005 was not dealt with by the court by way of hearing, the Applicant admitted the matters in the Defence by implication by crediting the sum of £4000 to the service charge account in satisfaction of the outstanding service charges.

13. The Respondent could at that stage have issued proceedings for the remainder of the sum claimed by him in the sum of £801.29.  This was not done and no information was given to the Tribunal of how the sums claimed in paragraph 6 [of the defence in the second set of proceedings] were broken down.

14 The Tribunal have determined that as the outstanding service charges were resolved and that insofar as any amounts remain outstanding to the Respondent they have not been substantiated.  It was also clear to the Tribunal that as the sums of money referred to by the Respondent were relating to matters that occurred in 1999 and 2000 they would have been statute barred pursuant to the Limitations Act 1980.

15. The Tribunal determine that the matters in issue...will be limited to the reasonableness and liability to pay service charges for the service charge years ending 31 March 2006 and 31 March 2007.”

6.      It is clear to me in the light of the documents and having heard Mr Cordell for the appellant that the decision of the LVT exhibits a number of errors and cannot stand.  The issues relating to the service charges for the years up to 31 March 2005 were not resolved in the first set of county court proceedings.  What happened was that Pledream accepted that their claim should be dismissed.  There was no rejection of Mr Morris’s defence, that his service charge account was in credit.  The matter did not arise for determination.  The fact that Mr Morris did not issue proceedings for the £801.29 (or any other amount) does not prevent him from contending by way of defence to the present claim that his service charge account is in credit.  Moreover the LVT appears to have considered that there was no dispute between the parties as to the £4,000, whereas it has clearly always been a part of Mr Morris’s defence that Pledream had wrongly used this to offset service charges that were not payable.

7.      Mr Cordell contended also that the LVT was wrong to conclude that any claim in relation to the years 1999 and 2000 was statute-barred: the contract between the parties was a lease under seal where the service charge had not been reserved as rent, and the correct limitation period was 12 years under section 8 of the Limitation Act.  This appears to me to be correct.  In any event Pledream had not sought to rely on limitation, and the LVT accordingly had no jurisdiction to determine the matter on this basis.

8.      The appeal is allowed.  It is open to Mr Morris to raise as a defence his claim to be in credit.  It would clearly be appropriate, however, for him to make application to the LVT if he wishes the LVT to determine the reasonableness of the service charges up to 31 March 2005.

Dated 30 December 2009

George Bartlett QC, President