UT Neutral citation number: [2011] UKUT 57 (LC)

LT Case Number: LRX/43/2009

                            TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

LANDLORD AND TENANT – Service Charges – whether credits against service charges had been properly given

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

VALUATION TRIBUNAL FOR THE NORTHERN RENT ASSESSMENT PANEL

BETWEEN            (1) JOHN CRAMPTON and JEANETTE CRAMPTON                        

                                                            (2) JOHN SANPHER                                   Appellants

                                                                           and

                                                      PARK PLACE 96 LIMITED                            Respondent

                                                           Re: Park Place,

                                                                  Park Parade

                                                                  Harrogate

                                                                  HG1 5NH

                                       Before: HIS HONOUR JUDGE HUSKINSON

                                  Sitting at 43-45 Bedford Square, London WC1N 3DN

                                                              on 2 February 2011

Mr John Crampton (ie the first named Appellant) represented himself and the other Appellants

Mrs Sheila Harrop and Mr Donald Chapman (Directors of the Respondent) represented the Respondent with permission of the Tribunal

                                                                    DECISION

1.           This is an appeal from a decision of the Leasehold Valuation Tribunal for the Northern Rent Assessment Panel (“the LVT”) dated 20 January 2009.  The matter came before the LVT in the following circumstances. 

2.           The Appellants are lessees of flats in Park Place, Park Parade, Harrogate, which is a substantial block comprising 49 flats and a separate caretaker’s flat and extending to a ground floor and 12 upper floors.  More precisely, Mr Sanpher has at all material times been the lessee of flat 21, Mr Crampton was the lessee of flat 69 until 21 August 2007 when he sold that flat.  Mr and Mrs Crampton have been the lessees of flat 78 from their purchase of that flat on 12 September 2006.  The Respondent is a company in which each of the 49 tenants owns one share.  The purpose of the company is to hold the freehold of the building and to run the building for the benefit of all the lessees, who are the members of the company.  Effectively all the income of the Respondent is derived from lessees of the building. 

3.           On 4 July 2008 the Respondent issued proceedings in the Northampton County Court against Mr and Mrs Crampton and issued separate proceedings against Mr Sanpher and also issued separate proceedings against a Mr Bentley (with whom this appeal is no longer concerned).  These proceedings claimed money in the nature of unpaid service charge in the following sums:

(1)         As regards Mr and Mrs Crampton the claim was for £1,205.38 made up as follows, namely charge due at 25 March 2008: £876.49 plus balance of charge due on 29 September 2007: £517.87 less credit for surplus for 2007: £188.98.  There was also a claim for some interest and costs. 

(2)        As regards Mr Sanpher the claim was for £785.35 made up as follows, namely charge due on 25 March 2008: £756.97 plus balance of charge due on 29 September 2007: £191.59 less credit for surplus for 2007: £163.21.  There was also a claim for some interest and costs.

4.           The defendants in those proceedings put in defences and counterclaims disputing liability.  The matter came before District Judge Wood sitting in the Harrogate County Court on 5 September 2008 who ordered that the three sets of proceedings (ie including Mr Bentley’s proceedings) be consolidated and that:

“In the light of the issues raised in the defences the claims are transferred to the Leasehold Valuation Tribunal for those issues to be determined under Paragraph 3 of Schedule 12 to the Commonhold and Leasehold Reform Act 2002”

5.           Accordingly the issues for the LVT to decide were as to what if anything Mr and Mrs Crampton, Mr Sanpher, and Mr Bentley owed by way of service charge having regard to the claims advanced in the claim forms and the matters raised by way of defences and counterclaims.  By a decision dated 20 January 2009 the LVT decided that the sums claimed by way of arrears of service charge in the county court proceedings were payable in full by the defendants in those proceedings to the Respondent.  Thus the LVT found that Mr and Mrs Crampton were liable to pay £1205.38 as claimed against them and that Mr Sanpher was liable to pay £785.35 as claimed against him. 

6.           After the LVT had made this decision a separate appeal, between the same parties, came before me sitting in the Lands Tribunal (LRX/100/2007) and there was a hearing in Harrogate on 7 April 2009 as a result of which I issued a decision of the Lands Tribunal dated 1 May 2009. 

7.           The Appellants applied to this Tribunal for permission to appeal against the LVT’s decision of 20 January 2009.  By a decision of 19 February 2010 this Tribunal granted limited permission to appeal in the following terms.

“1.     Permission is only granted to the Applicants to enable them to challenge the decision of the LVT in the following two respects:

(a)        To argue that the LVT’s decision in paragraphs 13 and following (regarding the treatment of reserves carried over from year to year) is inconsistent with the decision of the Lands Tribunal (being a decision in proceedings between the same parties as in the present case) in case No.LRX/100/2007 dated 1 May 2009 so far as this Tribunal dealt in those proceedings with what was called the “Reserve Fund Issue”.

(b)        To argue that the LVT may have been in error in paragraph 11 of its decision in omitting to make an adjustment to the service charge demanded of the Applicants in respect of contributions which were being sought from the Applicants but which were voluntary.”

The reason for the grant of permission in paragraph (b) was because of the text in paragraph 11 of the LVT’s decision which was in the following terms:

“11.   Credit of items disallowed as service charges

On careful examination of the documents provided, the Tribunal accepts that the Claimant has remitted to the Defendants and all other leaseholders the costs identified by the Tribunal in previous decisions as having been incorrectly included in the service charge accounts, together with some additional expenditure identified as non-service charge items.  In July 2007 the Defendant’s service charges were all fully paid up.  The disallowed costs having been incurred by the Claimant, a separate administration account has been set up and leaseholders have been asked to contribute to it.  Each leaseholder’s contribution to the administration account is voluntary, but was included in the March 2008 interim service charge demand for each flat.  The Claimant says that where any leaseholder objects to paying the voluntary contribution, it will be shown as a credit on his service charge account in September 2008.  In these circumstances, no adjustment of the service charge by the Tribunal is required.”

8.           It was originally envisaged that the appeal would be dealt with on written representations.  However despite the narrow ambit of the grant of permission to appeal the parties submitted substantial documentation to the Tribunal which ranged far more widely than the limited points on which permission to appeal had been granted.  The Tribunal wrote to the parties on 8 October 2010 drawing attention to this and pointing out that it was not possible to extract from this extensive documentation the matters relevant to the limited issues before the Tribunal.  Further directions were given.  The Tribunal also stated that it was considered the parties should be able to agree the matters outstanding.  However the parties were unable to agree the matters outstanding.  Also the further documentation submitted in response to the letter of 8 October 2010 once again extended well beyond the limited matters on which permission to appeal had been granted.  I decided that the matter must be listed for a hearing so that the issues could be clarified.  The hearing took place on 2 February 2011.  The matter proceeded by way of review.  No evidence was called but submissions were made by the representatives.  On the morning of 2 February 2011 there was provided to the Tribunal by Mr Crampton a single sheet which clarified the points which he sought to raise. 

9.           It is convenient first to take the point which was permitted to be argued under paragraph (b) of the grant of permission.  I have already set out paragraph 11 of the LVT’s decision.  The Appellants wish to challenge the LVT’s finding that the Respondent had credited to the Appellants the costs identified by the LVT in previous decisions as having been incorrectly included in the service charge accounts.  It was argued that further credits should be made for these items.  I refused to allow this point to be developed.  It was not a point on which permission to appeal had been granted.  The LVT found that the Respondent had remitted to the Appellants the costs identified by the LVT in previous decisions as having been incorrectly included in the service accounts, together with some additional expenditure identified as non-service charge items.  The point which was permitted to be argued under point (b) was whether the claims advanced by the Respondent in the County Court proceedings included a claim for money which was payable only on a voluntary basis.

10.        Having had the opportunity of hearing the representations from the parties and having considered these representations in the light of the documents before me the position is in my view as follows.  The Respondent did seek to recover from the various lessees a charge for items which it had been decided in earlier LVT decisions were not strictly properly recoverable under the terms of the leases.  However the Respondent sought to recover these sums by way of a charge called an administration charge – and this administration charge was shown separately on the statements of account sent to the Appellants.  Thus on 25 March 2008 the Appellants were invited to pay not merely the service charge but also an administration charge.  However when it came to issuing proceedings in the County Court for recovery of monies due and unpaid, the Respondent included the amount of the service charge due on 25 March 2008 but did not include anything in respect of the administration charge.  This appears from document CL-1 and it is also clear from the closing sentence of paragraph 2.3 of the Respondent’s statement of claim which states that the Respondent has not included the administration charge in the debt for which payment is being sought in the action. 

11.        Mr Crampton was unable to persuade me that the amount claimed for in the County Court proceedings included anything in the nature of a merely voluntary payment as opposed to something which the Respondent was contractually entitled to claim. 

12.        Accordingly I conclude that the appeal under paragraph (b) must fail and that nothing falls to be deducted by reason of point (b) from the sum claimed in the claim forms. 

13.        I now turn to the point permitted to be raised on this appeal under paragraph (a) of the grant of permission. 

14.        The argument that a credit should be given to the Appellants is based upon the findings in the earlier Lands Tribunal decision dated 1 May 2009, where the issue was referred to as the Reserve Fund Issue, see paragraph 24 and following of that decision.  I will not rehearse again the reasons for my finding in that decision.  In summary the claim for a credit arises from the fact that the Respondent has not returned to each tenant his/her share of any over payment made in a particular year (such overpayment should be repaid by the Respondent to the relevant lessee on 30 June next following the end of the relevant accounting year ending the previous 31 December), but the Respondent has instead retained these sums so as to give the Respondent money to draw on for the first three months of each calendar year.  This money has been retained in the accounts under the heading “provisions for liabilities”.  As at 31 December 2005 the amount so retained was £20,019.  Page 241 of the bundle shows the amount retained as provision for liabilities as being £22,000 as at 31 December 2007 and £30,751 as at 31 December 2008. 

15.        In my decision of 1 May 2009 I concluded in respect of Mr Sanpher (who I take first because his position is more straightforward) that he was entitled to repayment as at 30 June 2006 of his relevant percentage (1.9% of £21,019).  By 31 December 2007 the provisions for liabilities figure had climbed to £22,000.  The Respondents confirmed that no credit in this respect had been allowed to Mr Sanpher against the service charges which were claimed from him.  Accordingly I conclude that as at the date that the present county court proceedings were issued, namely 4 July 2008, Mr Sanpher was entitled to a credit in the sum of £418 (ie 1.9% of £22,000 in place of the previously slightly smaller credit to which he was entitled of 1.9% of £21,019). 

16.        The position is less straightforward for Mr and Mrs Crampton because as at the date when a repayment of the relevant percentage of £21,019 fell due (see paragraph 27 of my previous decision) Mr and Mrs Crampton were not yet the lessees of flat 78 – they did not purchase this until 12 September 2006.  However as at 30 June 2006 Mr Crampton was (or Mr and Mrs Crampton were) the lessees of flat 69, because they had not yet sold that flat – they sold it on 21 August 2007.  Accordingly I concluded that Mr Crampton was entitled to a credit as at 30 June 2006 of the relevant percentage (1.9% for flat 69) of £21,019, but that Mr and Mrs Crampton were not entitled to any reduction in the service charge for the year ended 31 December 2006 in respect of flat 78 (because they were not the lessees on 30 June 2006 when the repayment was contractually due under the terms of the lease).

17.        Mr Crampton argues that as against the county court claim for unpaid services charges for flat 78 he is entitled to two separate credits, namely the credit in respect of flat 69 (which had not been paid to him by the date the proceedings were issued) and separately a credit for flat 78 on the basis that he and Mrs Crampton should be treated as stepping into the shoes of the outgoing tenants of flat 78 and thereby becoming entitled to the refund which was due to them on 30 June 2006.  I suggested there was an apparent inconsistency in this approach in that it appeared Mr Crampton was arguing that as regards flat 69 the entitlement to repayment was personal to the lessee and did not flow into the hands of the successor in title but as regards flat 78 the entitlement to repayment was not personal to the lessee and did flow into the hands of the successor in title.  Mr Crampton did not accept there was any such inconsistency. 

18.        In my judgment the proper analysis is as follows:

(1)        As regards flat 69, Mr Crampton became entitled to a credit of £399.36 (being 1.9% of £21,019) which should have been repaid to him on 30 June 2006.  It is common ground that this sum has not been repaid to him. 

(2)        As regards flat 78, Mr and Mrs Crampton are not entitled to any credit for any sum held as “provisions for liabilities” as at 31 December 2005 (the sum then held being £21,019).  This is because (a) this point was expressly decided against Mr and Mrs Crampton in paragraph 27 of my decision of 1 May 2009, and (b) in any event the position was that this relevant repayment became contractually due on 30 June 2006 when Mr and Mrs Crampton were not the lessees and accordingly it became due to the person who was then the lessee and not to them – there is no evidence before me that the entitlement to recover this was assigned to them.

(3)        However the amount showed as at 31 December 2007 as being held as “provisions for liabilities” was £22,000 rather than £21,019.  Accordingly as regards the increase of £981 I conclude that Mr and Mrs Crampton did become entitled to repayment of their appropriate percentage (2.2% in respect of flat 78) of this sum on 30 June 2008.  The relevant amount is £21.58. 

(4)        In total therefore Mr and Mrs Crampton are entitled to credit for the sum of £399.36 plus £21.58, ie £420.94. 

19.        It follows from the foregoing that I allow the Appellants’ appeal to the following extent, namely in place of the LVT’s decision that the Appellants were liable to make payment in full to the Respondent of the amounts claimed respectively against them in the County Court proceedings I substitute the following finding:

(1)         As regards Mr and Mrs Crampton the amount properly payable by them as at the date of issue of the County Court proceedings was not the sum of £1205.38 claimed but was instead that figure less £420.94, ie the amount payable was £784.44.

(2)        As regards Mr Sanpher the amount properly payable by him as at the date of the issue of the County Court proceedings was not £785.35 but was instead that sum less £418, ie the amount payable was £367.35.

20.        It will be seen that the amounts at stake in these proceedings and the amounts by which the Appellants have succeeded in showing that the amounts claimed should be reduced are both very small when viewed in the light of the amount of documentation and dispute which the disagreement has generated.  During the course of the hearing Mr Crampton appeared to suggest that there were further outstanding disputes in respect of periods with which the present appeal is not concerned.  The parties are all encouraged to use their best endeavours to reach some sensible compromise so as to avoid putting what might be thought a disproportionate demand upon their own time and resources and those of the LVT or this Tribunal. 

Dated 10 February 2011

His Honour Judge Huskinson