UT Neutral citation number: [2010] UKUT 270 (LC)

LT Case Number: LRX/87/2009

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

LANDLORD AND TENANT – service charges – proceedings transferred to LVT from county court – LVT remitting case to county court on basis that it had no jurisdiction – whether demand on which claim based was in respect of service charges – held that it was – held that LVT had jurisdiction – whether failure to give notice of landlord’s name and address – held no such failure – consultation requirements – dispensation granted – Landlord and Tenant Act 1985 s 18, Landlord and Tenant Act 1987 s 47, Commonhold and Leasehold Reform Act 2002 Sch 12 para 3 – appeal allowed

IN THE MATTER OF AN APPEAL AGAINST A DECISION OF THE

LEASEHOLD VALUATION TRIBUNAL FOR THE NORTHERN

RENT ASSESSMENT PANEL

BETWEEN MICHAEL STANLEY STAUNTON Appellant

and

NORMA KAYE AND ALFRED TAYLOR Respondents

Re: 13 Barracks Square,

Macclesfield,

Cheshire SK11 8HF

Before: The President

Sitting at Manchester Civil Justice Centre, 1 Bridge Street West,

Manchester M60 9DJ

on 3 August 2010

James Fieldsend instructed by Goodman Derrick LLP for the appellant

The respondents in person

No cases referred to.

DECISION

1.           This is an appeal against a decision of a leasehold valuation tribunal for the Northern Rent Assessment Committee on a claim referred to it by Macclesfield County Court.  The decision of the LVT was that it had no jurisdiction to determine the claim, and it remitted the case to the county court.

2.           The claimants (the respondents in the appeal) own the freehold of the subject property, 13 Barracks Square, Macclesfield, and the present appellant holds the property under a lease dated 22 February 1982 for a term of 999 years from the date.  Barracks Square consists of residential properties, some in the converted barracks buildings which were constructed for the Cheshire Regiment in the 19^th century and others that have been purpose built in the last twenty years, set around the old parade ground.  The subject property is a flat in the barracks buildings, and there is a flat above it.  At the time of the grant of the lease, it appears, the lessor owned other parts of the land now in residential use and also the parade ground.  The respondents acquired the freehold of the subject property, and certain other Barracks Square freeholds in 1986, and together with Peter Malcolm Dykstra and Beverley Jane Dykstra they acquired the freehold of the major part of the old parade ground in 2001.

3.           Beneath the parade ground is a sewer, to which the drains of 28 of the properties are connected, 15 of them via a further length of sewer serving only those 15 properties.  The respondents told the LVT that in 2005 and 2006 a company called Genie Developments that owned buildings on the northern side of the square had commissioned surveys from Jet Rod Drainforce and Dyno Rod Drain Services.  The surveys showed considerable tree root incursion into the sewers and suggested that rehabilitation was urgent.  Genie Developments called several meetings of residents, encouraging the formation of a management company to raise funds and carry out the works that were needed, but they lost interest, and in November 2006 an informal committee called the Barracks Square Renovation Committee was formed by residents.  Having obtained estimates from two companies for the remedial works the committee initially decided to accept the higher quotation on the basis that the specification was better.  They divided the amount relating to the part of the sewer serving the 15 properties equally between those properties, and the rest they divided equally between the 28 properties.  The total attributable to the subject property on this basis was £1,227.47.  In the event the contract was let to another company that carried out the work in November 2007 and charged less.  The amount attributable to the subject property on this basis was £999.32.

4.           A demand for the sum of £1,222.47 was sent to the appellant on 21 January 2008.  It did not state the name of the landlord.  It included the note: “Payee details: Barracks Square Renovation Committee”.  The appellant was sceptical about the need for repairs to the sewer, since his drains had never been blocked during the 20 years that he had lived at the property, and he told the LVT that regarded the repairs as designed to enhance the value to other developers of the unsold parts of Barracks Square, including the present respondents.

5.           Because the appellant refused to pay the sum demanded proceedings for its recovery were commenced in Macclesfield County Court in the name of the Barracks Square Renovation Committee.  The respondents were subsequently substituted as claimants.  In his amended defence the appellant said that, if the demand was intended to be a demand for payment under the covenants and obligations of his lease, it was invalid and of no effect because it did not contain the name and address of the landlord, as required by section 47 of the Landlord and Tenant Act 1987, and because the consultation requirements of section 20 of the Landlord and Tenant Act 1985 and the Consultation Regulations 2003 had not been complied with.

6.           On 13 August 2008 after a hearing at Macclesfield County Court District Judge Swan ordered as follows:

“1. The Claim is transferred to Leasehold Valuation Tribunal for determination of the following issues:

2.       Whether the service charges which are claimed herein are payable by the Defendant.

3.       Whether the amount of those charges is reasonable.

4.       Whether the consultation requirements under section 20. Landlord and tenant act 1985 and schedule 3 of the service charges (consultation etc) Regulations 2003 have been complied with.

5.       If not complied with whether an order under section 20za(1) of the Landlord and Tenant act 1985 should be made dispensing with the requirements.”

7.           The LVT hearing was held on 24 February 2009.  The parties appeared in person.  In its decision of 8 April 2009 the tribunal reached the following conclusions.  Firstly it concluded that the sum claimed was not a service charge within the meaning of section 18 of the 1985 Act.  It reached this conclusion for four reasons, which it expressed as follows in paragraph 36 of its decision:

“(1) There is no provision in the Lease for the creation of a fund by means of a service charge to cover items of repair to the common parts.

(2)        Although there is provision for the tenant to contribute to the costs of repairing the sewer, there is no corresponding obligation in the Lease on the part of the Landlord to repair the sewer nor to keep it in repair.

(3)        Proceedings were initially issued in this case on behalf of the Barracks Square Renovation Committee.  That committee is not the Landlord, nor the superior landlord within the meaning of the Act.  It is unclear from the proceedings why Mr and Mrs Kaye were substituted as Claimants.  It is probably because they arranged the collection of the funds from the other tenants to cover the costs and for the work to be done, but it is clear that they are not the Landlords, nor the superior landlords within the meaning of the Act.  Mr and Mrs Kaye and Mrs and Mrs Dykstra jointly are the Landlords.  Mr and Mrs Dykstra are not parties to the proceedings.

(4)        No evidence was submitted that the costs of repairing the sewer were incurred on behalf of the Landlords.”

8.           The LVT went on to hold that section 47 had no application because the amount demanded was not rent or a service charge or an administration charge and that for the same reason the consultation requirements under section 153 of the Commonhold and Leasehold Reform Act 2002 did not apply.  It said that the appellant, being entitled to use the sewer, was liable on equitable principles to contribute to the cost of repairing it when necessary.  Moreover there was a clear covenant in the lease to contribute to the costs of repairing the sewer, but it was for the county court to decide on that issue.

9.           The LVT then said that, in case it had erred in law in reaching these conclusions, it would proceed to consider the other issues.  On the reasonableness of the charges it said that, having considered the Jet Rod and Dyno Rod reports and the quotations for the remedial works, it found that the amount claimed, £1,222.47, was not reasonable but that a reasonable amount would be £999.32.  On the consultation requirements it said that no evidence had been produced that these had been strictly complied with.  On dispensation it found that a considerable amount of information had been supplied to the appellant notification of meetings to discuss works, suggestions as to the recovery of costs from insurance companies, and minutes of meetings at which the problems had been discussed – and as a result he had had the opportunity to comment on the proposals.  The tribunal found that he had suffered no significant prejudice through the failure to comply with the consultation requirements and it said that accordingly it would have granted dispensation under section 20ZA.

10.        Since the LVT had concluded that the amount claimed was not a service charge within the meaning of section 18 it remitted the case to the county court for further determination.  It later refused permission to appeal.

11.        The appellant sought permission from this Tribunal to appeal on five grounds.  I granted permission in relation to three issues – whether the respondents are the appellant’s landlords; whether the service charge claimed is in respect of a relevant cost; and whether the amount due is made not payable by sections 47 and 48 of the 1987 Act and section 153 of the 2002 Act.  I refused permission in relation to the issue of whether the appellant is liable to the respondent on equitable principles and on the issue of dispensation under section 20ZA.

12.        On the first matter that now falls to be decided, whether the respondents are the appellant’s landlords, it is clear that they are.  They hold the freehold under Land Registry title number CH273247.  The lease to the appellant is registered under title number CH189512.  It has never been the contention of the respondents that they are not the landlords of the subject property.  Indeed they assert that they are.  The LVT were in error in saying that it was “Mr and Mrs Kaye and Mrs and Mrs Dykstra” who were jointly the landlords.

13.        The second matter is whether the LVT was wrong to conclude that the amount claimed was not a service charge.  For this purpose it is necessary to consider the provisions of section 18 and those of the lease.  Section 18 provides:

“18. Meaning of ‘service charge’ and ‘relevant costs’.

(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, improvements 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.”

14.        The lease includes the following tenant’s covenant in clause 2:

“(ix)  At all times hereafter to contribute and pay a proportionate part of the expense of maintaining repairing or renewing a) the gutters pipes and other things for conveying rain water from the demised premises b) the gas and water pipes drains conduits and electric wires and other gas water and electric installations in under or upon the upper flat or the reserved property or any part thereof enjoyed or used by the Lessee in common with the Lessor or other the owners and occupiers of the upper flat of the other reserved property …”

Under clause 2(iii) “the reserved property” includes “so much of the Barracks Square as is coloured brown” on the plan annexed to the lease and other land over which there are rights of way.  The land coloured brown is the old parade ground.

15.        The landlord’s covenants in clause 3 include the following:

“4) Not to cause or permit obstruction of any drain or pipe used in common with the Lessee for the passage of water or soil in connection with the reserved property.

 5) Not to do or permit or suffer to be done in or upon the reserved property anything which may be or become a nuisance annoyance or cause damage or inconvenience to the Lessee or neighbouring owners or occupiers …

 9) To pay a proportionate part of the expense of maintaining and repairing so much of the Barracks Square as is shown coloured brown on Plan Number 1 annexed…”

16.        For the appellant Mr James Fieldsend submits that the tenant’s liability to pay an amount under clause 2(ix) is plainly a liability to pay a “service charge” within the meaning of section 18(1)(a).  The sum is payable directly or indirectly for services, repairs, maintenance or improvements.  Furthermore the amount payable is not fixed but varies depending on the cost incurred in providing the service, repair, maintenance or improvement.  The cost on which the sums under clause 2(ix) is claimed, says Mr Fieldsend, is based upon a cost incurred by or on behalf of the respondents as the appellant’s landlords: firstly because the payment of a sum under clause 2(ix) operates as an indemnity or contribution to the landlords’ obligation to make payment under clause 3(9); and secondly because in incurring the cost of the works the respondents fulfilled the covenant under clause 3(4) not to cause or permit the obstruction of any drain and avoided a breach of clause 3(5) (not to permit or suffer something that is or may become a nuisance or annoyance).

17.        I need say no more about these submissions of Mr Fieldsend than that I accept them.  There is no doubt in my judgment that the claim in this case is for service charges as defined in section 18 of the 1985 Act.  The respondents did not contend otherwise before the LVT.  On the contrary it appears that they wanted the LVT to determine their claim, not to decline jurisdiction.  The LVT was plainly in error in my view in remitting the case to the LVT.

18.        This leaves the contention of the appellant that the landlords in serving the demand had failed to comply with sections 47 and 48 of the 1985 Act and section 21B of the 1987 Act, with the result that the sum demanded is not payable.  Although these are in essence purely technical points they must nevertheless be addressed.  The relevant provisions are as follows:

“47. Landlord’s name and address to be contained in demands for rent etc.

(1) Where any written demand is given to a tenant of premises to which this Part applies, the demand must contain the following information, namely –

(a) the name and address of the landlord, and

(b) if that address is not in England and Wales, an address in England and Wales at which notices (including notices in proceedings) may be served on the landlord by the tenant.

(2) Where –

(a) a tenant of any such premises is given such a demand, but

(b) it does not contain any information required to be contained in its by virtue of subsection (1),

Then (subject to subsection (3)) any part of the amount demanded which consists of a service charge or administration charge (‘the relevant amount’) shall be treated for all purposes as not being due from the tenant to the landlord at any time before that information is furnished by the landlord by notice given to the tenant.”

“48.  Notification by landlord of address for service of notices.

(1)        A landlord of premises to which this Part applies shall by notice furnish the tenant with an address in England and Wales at which notices (including notices in proceedings) may be served on him by the tenant.

(2)        Where a landlord of any such premises fails to comply with subsection (1), any rent, service charge or administration charge otherwise due from the tenant to the landlord shall (subject to subsection (3)) be treated for all purposes as not being due from the tenant to the landlord and any time before the landlord does comply with that subsection.”

“21B  Notice to accompany demands for service charges

(1)        A demand for the payment of a service charge must be accompanied by a summary of the rights and obligations of tenants of dwellings in relation to service charges.

(2)        The Secretary of State may make regulations prescribing requirements as to the form and content of such summaries of rights and obligations.

(3)        A tenant may withhold payment of a service charge which has been demanded from him if subsection (1) is not complied with in relation to the demand.

(4)        Where a tenant withholds a service charge under this section, any provisions of the lease relating to non-payment or late payment of service charges do not have effect in relation to the period for which he so withholds it.”

19.        As I have already noted, in his amended defence in the county court proceedings, the appellant asserted that the purported demand failed to comply with section 47 of the 1987 Act and that the consultation requirements of section 20 had not been complied with.  It was not asserted that there had been a failure to comply with section 48 or with section 21B.  Having heard the parties, the district judge transferred the proceedings to the LVT, identifying particular issues for decision.  While the asserted failure to comply with the consultation requirements (and whether dispensation should be granted under section 20ZA) were among the issues identified, the asserted failure to comply with section 47 was not.

20.        The provisions relating to the transfer of proceedings from a county court to an LVT are contained in paragraph 3 of Schedule 12 to the 2002 Act.  This provides:

“Transfers

(1)        Where in any proceedings before a court there falls for determination a question falling within the jurisdiction of a leasehold valuation tribunal, the court –

(a)        may by order transfer to a leasehold valuation tribunal so much of the proceedings as relate to the determination of that question, and

(b)        may then dispose of all or any remaining proceedings, or adjourn the disposal of all or any remaining proceedings pending the determination of that question by the leasehold valuation tribunal, as it thinks fit.

(2)        When the leasehold valuation tribunal has determined the question, the court may give effect to the determination in an order of the court.

(3)        Rules of court may prescribe the procedure to be followed in a court in connection with or in consequence of a transfer under this paragraph.

(4)        Procedure regulations may prescribe the procedure to be followed in a leasehold valuation tribunal consequent on a transfer under this paragraph.”

21.        It does not appear that any procedure has been prescribed under sub-paragraph (4).  It is clear that the power of the LVT in determining the questions in the transferred proceedings is no wider than that of the court.  The court is limited by the terms of the parties’ pleadings, although it can, of course, give permission to a party to amend.  The powers of the LVT in transferred proceedings are necessarily limited in the same way, but the LVT has no power to permit the pleadings to be amended and thus to widen the scope of the questions that it is required to determine under the transferred proceedings.  The amended defence averred that the demand was invalid and as a consequence the amount claimed was not due for two reasons: firstly because of a failure to comply with section 47 and secondly because of a failure to comply with the consultation requirements.  It was not part of the defendant’s case in the county court that the amount was not due because the requirements of section 48 of the 1987 Act and/or of section 21B of the 1985 Act had not been complied with.  It would not have been open to the LVT therefore to determine that the service charge was not payable because of either of those provisions, and it is not open to this Tribunal to do so either.  The only potential bars to the appellant’s liability are thus those related to section 47 and the consultation requirements.

22.        The fact that the order of the court does not refer to the asserted failure to comply with section 47 does not mean, in my view, that the LVT had no power to consider this question.  What the LVT had to determine (paragraph 2 of the order) was whether the service charge was payable, and the contention that it was not payable because of the provisions of section 47 was raised in the defence.  It was not necessary for the county court order to identify this as an issue, therefore.  The question of compliance with the consultation requirements, on the other hand, was, understandably, referred to because of the question relating to dispensation that followed it.

23.        The LVT found (in paragraph 32 of its decision) that the claimants had provided no evidence that section 47 had been complied with.  (It also found the same in relation to section 48 and found that the relevant summary required by section 21B had not been provided.)  It seems to me quite clear, however, that by the time of the LVT hearing (indeed by the time of the county court hearing) the appellant had been given notice of the landlord’s name and address.  He was in no doubt that the claim was being pursued by the respondents and he had received correspondence from them as landlords.  Since, therefore, the information had been furnished, under section 47(2) the amount demanded was no longer to be treated as not due.

24.        There is no dispute that the consultation requirements were not complied with.  However, the LVT concluded that, if the amount in issue was a service charge so that it had jurisdiction to determine whether it was payable, it would have granted dispensation under section 20ZA.  It set out its reasons for this in paragraphs 45 to 47 of its decision.  I refused permission to appeal on this matter.  I am satisfied, therefore, that dispensation should be granted.

25.        Accordingly I allow the appeal and determine as follows:

(a)        Dispensation is granted under section 20ZA in respect of the drainage works to which the claim transferred to the LVT related.

(b)        A service charge is payable by the appellant to the respondent in respect of those works.

(c)        The service charge is limited under section 19 to £999.32.

Dated 9 August 2010

George Bartlett QC, President